Category Archives: Best Practices

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.

What’s the Easiest Way to Save Another 220K or Even 498K per Person?

Get Certified!

According to the most recent Next Level Purchasing Association Purchasing & Supply Management Career & Skills Report, 2014 Edition, the average cost savings and avoidance per person per supply management department among the survey respondents was:

  • $1,175,319 per person if they were not certified
  • $1,396,972 per person if they were certified
    with a certification other than the SPSM
  • $1,673,096 per person if they were certified with the SPSM

The fact of the matter is simple. Certified people are trained people. Trained people have the knowledge and skills needed to apply the tools and resources they have at their disposal to the greatest extent possible. And, because they are trained, they get results.

But don’t take my word for it. Download the 2014 Purchasing & Supply Management Career and Skills Report today!

To download the 2014 Purchasing & Supply Management Career and Skills Report,

  1. Login to the NLPA,
  2. select the library tab, and
  3. the 2014 Purchasing & Supply Management Career and Skills Report is the 2nd report available for download.

The 2nd NLPA Conference: Tackling Topics that Matter!

On September 15th to 17th, the Next Level Purchasing Association is hosting its 2nd Procurement Conference in Pittsburgh, Pennsylvania. The agenda is almost final, and the topics being covered in the workshops are important ones. Unlike most conferences, the NLPA conference is focused on education — education that you need to do your job better (which is what conferences should be about, and not full-time speakers blowing their horns or vendors pitching their products, as you’d know what you had to buy without being told with the right education).

The workshops being offered are the following:

There’s No ‘I’ In Team: Collaborative Sourcing in a Decentralized Organization
Procurement success depends on collaboration — because procurement success depends upon consistent category management. Proper needs identification, vendor selection, contract creation, and compliance! Because, without compliance, maverick spend runs rampant — maverick spend with can only be eliminated when everyone is collaborating and on the same page.

Who’s on First? Strategies for Management and People Changes
Sourcing Innovation is always saying it’s technology, talent and transition for a reason. You need good technology to do your jobs effectively, technology that requires trained skill (talent), and technology that requires you to change your ways and transition to a better way of doing things. This is one type of management. But some people will be resistant to change, this is where transition management comes in — because they will need to be guided to the better way of doing things.

Charting Your Path to Victory: How to Successfully Manage Procurement Projects
Procurement is a lot more complicated than the 3-bids and a buy it was in the not-so-good ol’ days. In fact, some projects will require multi-phase vendor identification and pre-selection before you even begin the multi-phase negotiation and analysis that will lead to an award — which is where the real (multi-year) Procurement process begins! Which will have to be executed as plan, or you will have a lot of maverick (and expedited) spend.

Where is the Playbook: Hidden Risks of Terms & Conditions
Terms and conditions are the concealed weapons of the legal world. Concealed weapons that will be pulled on targeted upon you at the worst possible time. For example, Force Majeure, while seeming fair and innocuous, when combined with sole-source requirements, is a Masamune blade guaranteed to cut you every time. While it’s fair for a supplier to not be expected to deliver when a typhoon shuts down their factory, it’s not fair to have a non-breakable sole-source clause for the contract duration which could force you to shut your production line down if you are unable to get your parts in time.

Segmentation Strategies for Success

In their IdeaBook 2014, the editors of DC Velocity and Supply Chain Quarterly published a piece on Supply Chain Segmentation: 10 Steps to Greater Profits that stated that segmentation lets companies boost profitability by tailoring their supply chain strategy to each customer and product in their portfolio. The paper aimed to outline 10 key practices that would ensure success.

The purpose of segmentation is to align supply chain policies to the customer value proposition as well as to the value proposition for the company as a whole.
A company that adopts segmentation will develop multiple virtual supply chains that run against each physical supply chain and move towards a portfolio management approach where they have a portfolio of customers and channels, a portfolio of products, and a portfolio of suppliers and supply modes.

Success depends on doing it right. The ten keys to successful segmentation presented in the paper are good ones.

1. Regular Demand and Cost-to-Serve Analysis.
The goal is to tailor service agreements and supply chain policies in order to raise the overall profitability of the portfolio. It also helps you to provide value to the business by highlighting both profitable and unprofitable product and service lines. A truly valuable Supply Management department can guide the organization down a more profitable path in addition to saving coin.

2. Differentiated Demand Policies in Core Functions.
Not all products are as equally profitable, or equally critical to business operation. While a company can’t stock-out on critical pats to keep a production line running and shouldn’t stock-out on the products that are in the highest demand by its customers, there will be little or no detriment to occasionally running out of office supplies or forcing a customer to wait an extra few days for a part that is rarely bought. Thus, expedited orders should not be placed promptly when (potential) stock-outs are detected for non-critical products but should be when a critical part is out of stock and production or profit will be impacted considerably.

3. Differentiated Inventory Policies.
Just like non-critical parts and products should not be unnecessarily expedited, stock-levels of non-critical parts and products shouldn’t be unnecessarily high. An occasional stock-out on a non-critical product is worth the shipping savings obtained by buying an appropriate volume that generates the appropriate product and shipping discounts.

4. Differentiated Customer Replenishment Programs.
Just like some products and services will be much more valuable than others, some customers will be much more valuable than others. In addition, your contracts will dictate that some customers receive higher service levels (and, if the person executing the contract did her job right, the service level each customer receives corresponds to the value of the customer).

5. Differentiated Supplier Allocation Programs.
Just like some customers will be much more valuable than others, some suppliers will be much more valuable than others as each supplier has different capabilities. For example, nearshore facilities will provide opportunities for quick replenishment, but offshore facilities will often provide opportunities for low-cost high-volume replenishment. Use the right supplier for the right order at the right time.

6. Regular Total-Landed-Cost Sourcing Analysis.
As SI continually insists, it’s important to do a total cost analysis before making a sourcing decision because it’s not what you pay per unit, it’s what the buy costs you overall! If you’re having difficulty, obtain a real strategic sourcing decision optimization solution.

7. Differentiated Allocation and Order Processing.
Allocation is the process of reserving inventory and/or capacity for certain customers or groups of customers. The intention is to make sure that the needs of preferential customers are always met. Similarly, orders are processed in order of customer preference.

8. Incorporate Monthly and Weekly Tradeoffs into S&OP.
S&OP once a month isn’t enough — demand patterns change weekly, and in some fast-moving verticals, even daily. Be sure to update forecasts, inventory levels, and allocation strategies at least weekly.

9. Business Optimization Centre for Continuous Learning.
In order to progress to the next level on your Supply Management journey, your organization will need a Supply Chain Center of Excellence whose mission includes establishing, implementing, and monitoring segmentation policies, and then continuously learning as such policies are executed over time.

10. Automated Policy Management.
Not only is the supply chain centre of excellence responsible for policy analysis, deployment, and management but it is also responsible for ensuring that the various policies related to promising, fulfillment, inventory, transportation, manufacturing, and sourcing are coordinated, aligned and synchronized in time. In order to succeed in any strategy, segmentation or otherwise, it’s critical that the organization continuously improve.

Furthermore, even if your organization isn’t looking to apply (much) segmentation, it’s all good advice for any Supply Management operation.