Category Archives: Best Practices

Have You Mastered the 4th T of Tracery?

Regular readers will know that the time of PPT — People, Process, Technology — has long passed. In today’s fast paced world where product life-cycles are sometimes over as soon as they hit the market, and where your competitors are constantly striving to outpace you in both sales and supply management, you can’t live on processes anymore — they go stale almost as soon as you’ve got them figured out. And in a knowledge economy, just having a butt in a seat or a worker at an assembly line isn’t enough to succeed — you need a worker who, at the very least, is smarter than the average worker and, preferably, smarter than the worker employed by your competitor. And your technology cannot get out of date.

That’s why SI has been promoting the 3 T’s for years — Technology, Talent, and Transition. You need a solid, regularly updated, technology foundation upon which to build your modern Supply Management Organization. You need talent to put together good operating procedures, properly use the technology, and to constantly identify new opportunities for cost reduction or value generation. And you need great transition management as even best six sigma process today won’t cut it tomorrow when you need to upgrade your product offering, switch suppliers, change distribution methods, and make sure your product is Designed for Recycling from the get-go as new regulations are forcing you to take back your product at end of life and recycle it as you are using chemicals and / or rare earth minerals that are heavily regulated.

But while these are necessary conditions for Supply Management success, they are not necessarily sufficient. While it is true you will not succeed without a mastery of technology, talent, and transition management, as per our first post on Project Assurance, organizational success also depends on selecting a superior strategy and seeing it through until the desired results are achieved (or the organization changes its strategy, which hopefully wasn’t done arbitrarily on the whim of a CXO after talking to a buddy on the golf course). However, in order to properly implement a strategy, you have to not only see it through from start to finish, but you have to make sure all of the process streams necessary for success are both completed and properly synched. Just like the key to a good weave, as one might find in Egyptian Cotton, is a skillful interleaving of the thread, the key to a good strategy, is a skillful interleaving of the process strands into an effective transition plan from where you are to where you need to be.

And this, dear readers, is Tracery — the “delicate, interlacing, work of lines as in an embroidery”, or, more modernly, “a network” — the glue that not only binds the Technology, Talent, and Transition Management that your Supply Management organization needs to succeed, but that interleaves these threads in a way that causes each of them to reinforce each other and make a stronger whole.

Could You Be Doing It Right? Part I: Category Management

In last Friday’s post, we asked if you were doing it wrong. In particular, we mentioned category management, supply chain risk monitoring, and big data, and asked if you were doing these three thing wrong. We noted that even though a number of companies have jumped on these runaway bandwagons, most have yet to grasp the reigns and take control of the wagon and get it on the right track.

Why is that?

Fundamentally, it’s the same reason that there are no world class Procurement Organizations in Asia Pacific — the classic Triple-T problem.

  • Talent
    the organizations don’t have the right talent to properly manage the initiative
  • Technology
    the organizations don’t have the right platforms to capture the right data and support the right processes
  • Transition Management
    the organizations don’t have the right processes in place to handle the necessary organizational shift to properly manage the initiative

Once the talent, technology, and transition management is in place, the organization has what it needs to fully embrace the initiative and take it to the next level. And do it right.

Where should your Supply Management Organization start? By identifying the core capabilities that are required in each “T” category and finding the right talent, technology, and transition management plan to support the initiative, the organization will be well on its way.

In the rest of this post, we’re going to talk about the requirements for an organization to get on the right category management track.

Talent for Category Management

Good category managers need at least the following hard and soft skills:

  • Analysis
    to determine the volume and spend in the category
  • Modelling
    to determine the major cost components, and cost drivers, of the major products or services in the category
  • Commodity Market Expertise
    in the major raw materials and commodities used in the production of the major products in the category
  • Stakeholder Management
    as savings and performance improvement will usually come from consolidating related items with a smaller set of suppliers, which is going to ruffle some feathers when some departments lose their coveted suppliers and supply relationships.
  • Negotiation
    since not only will the individual need to consolidate a set of commodity purchases with a single supplier, but the individual will also need to cut a good deal and maybe even convince the supplier to take some business it normally wouldn’t want
  • Change Management
    since good category management typically requires changing the way the organization conducts business today

Technology for Category Management

Appropriate technology platforms for category management will have at least the following features:

  • Spend Analytics
    with extensive aggregation, cubing, and filtering capability
    as the category manager needs to not only extract volume and spend, but identify related products and services based on components, raw-materials, and sub/related services
  • Should Cost Modelling
    which allows the category manager to understand not only what the product should cost but the primary cost components and the appropriate inputs to an optimization model
  • (Real-Time) Market Data
    which allows the category manager to track historical market trends and predict future prices to time the market if prices are volatile
  • Supplier Performance Management
    which allows the category manager to track and manage supplier performance
  • RFX
    to manage the data collection and track supplier bids and responses before and during negotiations

Transition to Category Management

In order to transition to proper category management, the organization needs to hire someone with good change management skills and give that person the tools he or she needs to get it done. That person also needs to be a natural born leader and someone who can work with teams to get it done.

This isn’t a complete (laundry) list of what is required for proper category management, but it’s a good starting point. Get the right talent, technology, and transition management in place, and your organization will be well on its way to category management success.

The Intersection of Talent, Technology, and Transition – How Do You Balance It?

Supply Chains run on talent, technology, and good transition management — but it’s a difficult recipe to get right because it not only requires the right mix, but the right execution because, just like a soufflé, the perfect mix can still fall flat. So how do you get the right mix? And how do you execute it properly?

Let’s step back a bit. For years, consulting companies and project managers said it is all about people, who do the work; process, that people follow; and technology, that people use to execute the process. And they were right. That’s a basic requirement for success in any company. But it’s not enough in today’s supply chains. And there’s two big reasons for that.

First, we’re not in the industrial revolution where economic growth depends on manufacturing which runs on a production line where you need a lot of workers who do well defined, easy to teach tasks. We’re in the knowledge economy where you need educated, innovative, self-reliant growth leaders who can do a wide variety of tasks, dependent on the situation at hand. Warm bodies in seats are not enough anymore — you need talent.

Second, with supply chains global and the participants many and dynamic, processes are no longer static as they were in the late stages of the industrial revolution where one company controlled the goods supply chain end-to-end and processes were well defined and relatively static. Now they are dynamic and have to constantly adapt as parties change, trade routes become temporarily inaccessible, raw materials and components become (temporarily) unavailable, and consumer demands and market availability changes. Static processes are not enough anymore, you need dynamic processes and transition management to manage them.

The only component that hasn’t changed is the technology component, because technology is constantly changing and you still need the most advanced technology, just like you needed during the industrial revolution to keep up with your competition. However, the technology is always in transition and if your technology is too far behind, you may not be able to compete even with the best talent and transition management to throw into the mix.

So we definitely need the right mix of talent, technology, and transition management to succeed — but how do we balance it in our supply chain to make sure the supply chain rocks (because we are the rock stars of the resource revolution)?

The answer is simultaneously ridiculously easy and insanely complex.

Alignment.

Your talent, technology, and transition management game plan must all be aligned.
What does that mean? We’ll tackle that in an upcoming series of Sourcing Innovation white-papers this fall, and offer a few hints over the summer. So, keep your eyes here!

The (Board) Gamer’s Guide to Supply Management Part XXVI: Interlude or Why You Need to Game More to Add More Game To Your Sourcing Skills, Part II

In our last post we noted that Sourcing, like many facets of Supply Management, is not as easy as it seems. The skills required are numerous and sophisticated, not easy to come by, and not easy to advance. For example, analysis and trend identification requires advanced mathematical skills; logistics, resource management, and project management requires the ability to not only apply the mathematical skills acquired for analytics to evaluate trade-offs with respect to quantitative and qualitative advantages but to model physical, financial, and information supply chains; and needs identification and negotiation requires sophisticated collaborative skills.

We also noted that these skills need to be practiced if they are to be honed and improved, but that, outside of the job, you have limited opportunity to practice these skills. And while it’s okay to practice these skills on low-dollar, non-strategic categories where a few extra points is not going to add much to the total cost of the buy, you don’t want to be honing your skills on a large multi-million dollar strategic category where a few points translate into hundreds of thousands of dollars, or more, in losses.

That’s where gaming comes in. Strategic European worker placement / pick-up and delivery / tile placement / economic / resource management games give you a great opportunity to practice your skills in a competitive, but non-threatening, forum where the worst that can happen is you come in last in a friendly game with your peers and maybe have to pick up the tab for the “refreshments” consumed during the game as your punishment. Then you get to sit back and think about where your strategy failed, analyze your choices versus the alternatives, and develop new insights and new strategies for the next game.

Moreover, if you’re willing to track down your local Euro-Gaming store, or patronize one or more of a dozen plus online storefronts*, you can acquire games that can help you work on just about any sourcing, procurement, and logistic skill that you can think of. Even if we limit ourselves to the handful of games already covered in this series, we can see how we can improve each of the skills identified in our last post.

  • Analysis
    Agricola and Le Havre in particular require considerable analysis. There are a multitude of options but in each step you can only take a limited number of actions, which is the best one?
  • Logistics
    The Village and The Settlers of Catan require complicated logistics — you have to acquire goods to reach cities or trade them at the market in the former and build roads, and ships, to reach new locales in the latter.
  • Needs Identification
    In Agricola, All Creatures Big and Small, Le Havre, and the Inland Port you need specific resources to acquire animals, buildings, etc. which represent more value to you than the resources you trade.
  • Negotiation
    in Munchkin, you get to choose whether you help or hurt your opponent, and that usually depends on negotiation. Furthermore, you have to collectively decide in Castle Panic the best course of action.
  • Project Management
    In addition to The Village, Camelot, Carcassone, and Upon a Salty Ocean require significant project management skills as The Village is taking place over generations of workers and each worker can only complete so many tasks before his or her time is up (literally), Camelot is building a castle with a limited set of tiles over multiple rounds, and if projects (roads, towns, and farms) aren’t completed quickly enough in Carcassone, then you lose everything you put into the project.
  • Resource Management
    In Agricola, Le Havre, The Village, and similar games, the same resources are needed to acquire buildings, equipment, and livestock that contribute to your overall wealth and determine whether you win or lose the game.
  • Supplier Identification
    In OddVille and The Builders, you have to draft your workforce, and the skills required are similar to the skills required to identify good suppliers.
  • Trend Identification
    What are your opponents doing? What resources or buildings are they focussing on? What are they likely to do next? What does this leave for you? And what can you do to make the most of this?

In other words, its a great way to hone the skills you need to succeed in your Supply Management job without putting (millions of) dollars at risk. So that’s why, in addition to continuing to review relevant games that you can use to hone your skills (to make sure you find the game that’s right for you), SI is going to show you how to apply, and hone, your analytical skills to, and in, these games, starting with a multi-part series on a great Euro-game by Uwe Rosenberg that lends itself, with a few slight modifications, to solo-play, which allows us to test our theory that analysis will not only improve our game, but hone our skills at the same time.

That means the two-thirds of you who aren’t watching soccer up to 12 hours a day and who take the time to try and follow these long, in-depth, posts, will be a few yards ahead of your peers by the time the World Cup Ends next month, and maybe even a bit of a Dunny rat.

* If you live in Canada, there’s a list of on-line board game stores in the Great White North on the HRM Gamers Alliance. [Note: site is now archived and only the game store list is updated periodically]

The (Board) Gamer’s Guide to Supply Management Part XXV: Interlude or Why You Need to Game More to Add More Game To Your Sourcing Skills, Part I

Sourcing, like many facets of Supply Management, is not as easy as it seems. The skills required to identify the products and services required, identify potential suppliers, construct an appropriate RFI, evaluate that RFI, construct an appropriate RFP, evaluate that RFP, identify suppliers for negotiations/RFQ, assess the market, assess the RFQ responses against the market, select one or more finalists, negotiate, define the award, create a contract, and manage the whole process are quite numerous. Especially since that’s just the basic process. A determination of demand, of current market conditions, of expected cost, etc. will require spend analysis, (should-cost) modelling, and (statistical) trend projection. If multiple bids are competitive, and an auction is out of the question, then (strategic sourcing) decision optimization, and the mathematical modelling it entails, is also required. Plus, if the buy is strategic, then multiple stakeholders will be involved and cross-functional team-management skills will also be required. All this, and more, may be required just to get to a contract.

Then comes the actual Procurement. This will involve considerable skills in logistics, inventory, and global trade. When do you place the order? What is the best mode of transportation? Do you cross-dock or not? If the inventory is available too early, do you store it over-seas, before export, or locally, after import. If there are value-add components, do you take them or leave them, as they can considerably increase import or export tariffs? For example, sometimes the difference between shipping a cartridge in a printer and shipping it separately will save a few percentage points off of the total cost. (Check the HTS codes if you don’t agree.)

So, to re-iterate, you need the following skills at a minimum:

  • (Cost) Analysis / Market Analysis
    What are the current market conditions, what is the expected or best cost, etc.
  • Logistics
    What is the best method of transportation and how do you time it to optimize costs and revenues, etc.?
  • Needs Identification
    What do you need, when, and are there alternatives, etc.?
  • Negotiation
    What do you offer? What’s your minimal viable alternative? etc.
  • Project Management
    How do you balance your resources (time, money, talent) to achieve the goal? etc.
  • Resource Management
    What’s the best use of your limited resources? When do you buy and sell? etc.
  • Supplier Identification
    Which suppliers want to supply you? Which suppliers are acceptable to you? etc.
  • Trend Identification / Projection
    Are demands going to increase, decrease, or stay the course? etc.

These skills are not easy to come by and not easy to advance. For example:

  • Analysis
    requires mathematical skills and training
  • Logistics
    requires cost analysis and network modelling skills and training
  • Needs Identification
    requires the ability to elicit details from both analyses and stakeholders
  • Negotiation
    requires training and people skills
  • Project Management
    requires knowledge and training
  • Resource Management
    requires strong analysis skills and an understanding of the inherent value and limitations of each resource
  • Supplier Identification
    requires the ability to assess a supplier across multiple dimensions and know what those dimensions should be
  • Trend Identification
    requires analysis, statistical training, and an instinct for the right questions

But when do you practice them outside the job? About the only time you’ll practice analysis at any level of sophistication outside the job is when you are buying a house or a car, which is a rare occurrence. You don’t practice global logistics at home. Needs identification is limited to you(r family’s) needs, not a multitude of stakeholders across multiple departments. Negotiation is limited to bargaining with your kids to do their chores. Project Management is really time management to fit all the family activities in. Resource Management is practiced daily, but at a much smaller scale. Supplier Identification is limited to (online) store identification when you need something, and trend identification doesn’t really enter into the picture.

But gaming changes the scenario.