Category Archives: Best Practices

Ten Tips To Top TMS

Inbound Logistics just published a good piece on “how to choose the right TMS for your company”. Almost makes me want to forget about that double play I recently scored against them.* Almost. 😉

Anyway, most of the tips in this article were dead on, even if some were a little obvious. By now, where Supply Management Systems are concerned, we all know that you definitely want to pick the right size provider, check references, try before you buy, check off all of your-must haves, and consider ongoing upgrades. The good tips were the following:

  • Time It
    Bring a stop-watch to the demos, and keep it by your side when you try it. Does it improve efficiency? If it doesn’t, what are you paying for?
  • Call Support Before You Buy
    If you can’t get through now, do you think you’ll get through later?
  • EDI is Essential
    Whether it’s EDI, XML, API, etc., you need to be transmitting and receiving all your documents electronically. If you have to pay by the bit, watch out! There shouldn’t be transmission fees when internet connectivity costs are fixed. You can be damn sure your provider isn’t paying by the bit, they’re paying a fixed cost for a dedicated 100 MB feed to their data centre. The cost for EDI should be a low, flat rate per month (up to a certain GB limit, because if the provider goes over their dedicated transfer rates, they will pay overage charges and have to pass them on).
  • Count the Cost in Money and Time
    It’s not just the cost of the TMS — it’s the cost of the TMS, the hardware, the connectivity, the integration, the training, the support, etc., etc., etc. as I have outlined repeatedly (and given you a spreadsheet for). But that’s just the hard cost. If the system takes a long time to set up, a lot of manpower to maintain, and decrease efficiency when compared to the current system, then the ownership costs will continue to pile up over time.
  • Can it Be Customized?
    This may not be that important for you, but if it is, and the system can’t be customized effectively and cost efficiently, find a new system – ASAP.

For the rest of the advice, see the article on “ten tips to choosing the right TMS for your company”.

*We’re not mysterious. We’re Canadians!
The Best Way to Insure Routing Guide Compliance

Wait!

That’s right, don’t make that big decision today, Wait and use the art and science of delay to your advantage.

With summer came heat and a new book by Frank Partnoy, Professor of Law and Finance at the University of San Diego and the Co-Director of the Center for Corporate and Securities Law. In Wait, Frank proposes a contrarian perspective on decision making that suggests that slowing down your response time can yield better results as per a recent review over on S+B.

According to Frank, decisions of all kinds, whether “snap” or long-term strategic, benefit from being made at the last possible moment. The art of knowing how long you can afford to delay before committing is at the heart of many a great decision. This is a great maxim for Supply Managers to live by. There’s a reason that sales people often want you to “act now” and have you “take advantage of this deal before it’s too late” is they know that if you don’t act now, and do your homework, you’ll probably figure out the merchandise is over-priced, over-represented, or not quite what you’re looking for and that you can get the same deal, with a bit of patience and negotiating, from a hungrier supplier down the street.

And this goes double for software sales. If the sales-person is paid a variable commission based on total sales for the quarter, or year (which is a stupid way to implement an incentive model, by the way*), at certain times of the year he’s going to be very pressured to just make a sale, any sale, and all too eager to over-promise what he knows the IT department will likely under-deliver on.

This maxim should also be applied in the selection of new logistics providers, supply chain designs, and operating procedure changes. While it is imperative that your supply chain be as lean and mean as possible, it often happens that rushing to meet the goal only results in a whole lot of running as rushed implementations often end up with holes that require a whole lot of rushing to fill. And while it’s likely that you are losing money every day you don’t implement that new supply chain design that is expected to save you millions, if you don’t take the time to do a proper risk assessment, you could lose your savings five times over when a new tariff scheme gets approved in six months (that everyone who did their research saw coming) or a trade agreement expires.

So while you should be exploring new technologies, processes, and innovations that could enhance your Supply Management organization as soon as you discover them, you shouldn’t rush a final decision until you’ve given yourself some time to re-examine all the findings. (But then, once you’re sure, jump in with both feet. If you hold back, in Supply Management, even the best laid plans will fail.)

* While a software company should incentivize it’s sales team to sell more, it should not do so at the cost of customer success. There are better ways to implement an incentive model which will allow both goals to be achieved.

SCD’s Seven Habits of Highly Effective Supply Chains

A recent article over on Supply Chain Digest touted The Seven Habits of Highly Effective Supply Chains 2012 in honour of Stephen Covey, who noted that too many people focus on “urgent” and not what is “important” and that changes are required to reduce the need for “urgent” activities so that more time can be spent on the “important” ones. According to SCD, these are the seven habits of highly effective supply chains.

  1. A written strategy that is regularly updated
  2. Alignment with the business is a constant priority
  3. Focus on Talent Management
  4. Fact-based Cultures
  5. Savvy Users of Technology
  6. Smart about Collaboration
  7. Organized for Innovation

While it’s hard to whittle down supply chain best practices to seven, these are a great start. In fact, if you asked the doctor what the top seven priorities were for your supply chain, you’d get:

  1. Talent Management
  2. Innovation in Process and Product/Service Offerings
  3. End-to-End Technology Platforms
  4. Mid-Term and Long-Term Strategy
  5. Organizational Alignment
  6. Data-Driven Fact-Based Decision Making
  7. Cultural & Emotional Intelligence

The only real difference, besides the order of priority, is that the doctor thinks cultural & emotional intelligence (given the global nature of supply chains) takes priority over collaboration, because CQ and EQ will enable the necessary collaboration.

The SCD article, penned by Dan Gilmore, is a good one. Check it out.

All Models Still Lead to Total Value Management

Not that long ago, Sourcing Innovation released “Taking the First Step on Your Next Level Supply Management Journey”, a white paper sponsored by BravoSolution that defined a simple 3-level maturity model that an organization can use to determine where it is on it’s Supply Management organizational journey. Noting that your organziation is either below average, above average, or best-in-class*, SI did not see any point in trying to be more complex (even though many industry associations, consulting firms, and analyst powerhouses will often proffer four and five level models).

And while the acronyms and acclamations — including VFS, Hi-Def Sourcing, Next Level Supply Management, Next Practices, and Value Chain Creation — will fly fast and furious, there is still one commonality among all leading models, including Gartners Global Trade Management Maturity Model, which is nicely summarized in this free white paper from Amber Road that offers “A Model for Value Chain Transformation”.

That commonality is something that the doctor has been prescribing for over five-years — Total Value Management (TVM). When you get right down to it, that’s what Strategic Business Enablement is all about. Maximizing value across the orgnization, end-to-end. In the sourcing process, the organizational model, the finance operation, the (information) technology platform(s), product management (& marketing), risk management, asset management, and relationships — the eight directions of the supply management navigator’s compass. QFD (quality function deployment), maximization of SUM (Spend Under Management), and end-to-end transportation management is all about extracting maximum total value for the organization. Demand creation, joint innovation, and new market entry is all about creating maximum total value for the organization.

And that’s why, if you’re not already there (above average and on the road to best-in-class), and more than half of you are not, you need to be moving to an advanced sourcing platform that supports in-depth spend-related analysis, decision optimization, collaboration, and market-informed category-based sourcing. These tools allow you to identify, maximize, extract, and retain value in your operations. For more information on these technologies, check out SI’s other recent white-paper, also sponsored by BravoSolution, on the “Top 10 Technologies for Supply Management Savings Today”.

*but not average as average can only be defined as an organization that is dab-smack in the middle of every other organization

Sound, Conventional Financial Management is NOT Good for Supply Chains

And it’s not good from a cost of capital perspective either!

While skimming through Purchasing Insight’s recent white-paper on “Supply Chain Finance: A Procurement Strategy” (after stumbling upon their recent “Supply Chain Leakage” post that got them a Sourcing Innovation Thumbs Up, I stumbled on the following paragraph:


By extending payment terms to suppliers (paying them as late as possible) DPO is maximized and by being efficient at collecting from customers (getting the money in as soon as possible), DSO is minimized. This is sound, conventional financial management. It’s all about keeping hold of cash for as long as possible, minimizing the need to borrow and providing an opportunity to earn interest on cash deposits. Poor management of DPO and DSO increases the need to borrow and, in an economic environment where credit is scarcely available to some, borrowing can be very expensive indeed.

It may be sound conventional financial management, but, in reality, maximizing DPO is just another name for screwing your supplier, and all that does is increase your costs while decreasing the overall value you are able to extract from the relationship.

All I can say is that I’m glad the next section went on to say that:


For the procurement community, payment terms can be a double-edged sword. While it’s good to contribute to the reduced cost of working capital by extending payment terms, this doesn’t always support healthy supplier relationships and it can put an inordinate strain on the finances of the supplier, which is in the interests of neither party.

Finally, someone else who realizes that screwing suppliers is a bad thing! (I’ve lost count on how many times I’ve had to rant on this subject over the last six years.) Because, as the white paper goes on to state:


There is another, more compelling reason why the traditional approach to working capital management doesn’t make sense from a procurement point of view. It costs a fortune! The fact is that the traditional, siloed, adversarial approach adopted by most buying organizations toward their suppliers has a huge supply chain cost especially in the current economic climate.

Hear, hear! In order to extract a 0.1% return by holding on to your cash an extra 30 days, you’re risking a rise in costs of 1% to 3% as your supplier passes on their high cost of factoring to you!

However, when trying to improve your working capital practices in such a way that they benefit you and the supplier to take cost out of the entire supply chain, don’t limit yourself to early payment discounts as the sole tool at your disposal. It can be a great tool, as cash strapped suppliers get cash early and you get a better return, but it’s not the only tool. Another option could be to buy the raw materials or components on behalf of your supplier. You might have more leverage with a supplier that you are doing business with on another category and be able to get a better price. A third option, especially in this economy, could be to barter services for better prices. Maybe they need help with their back-office functions. Maybe you have a great relationship with a GPO that could help them and your weight could get them better pricing, or, your technical experts, who recently oversaw the implementation of good back-office accounting and P2P software in your firm could oversee the implementation of the same software in their firm in exchange for free value-added services from them. Be creative. There are many ways to win-win.