Category Archives: Best Practices

The Procument Game Plan – The Missing Chapter

Back in March / April, SI did a detailed review of Charles Dominick and Soheila Lunney‘s recent book, The Procurement Game Plan. This review was in-depth and spanned eight posts, which are indexed at the end of this post.

Astute readers will note that the doctor never finished the review. There were a couple of reasons for this, but one of the reasons was that he felt that something was missing from the final chapter of the book, on how to become a perennial Procurement all-star. It was good, but becoming an all-star is harder than you think, and if you’re only going to write a chaper on the subject, you better hit the nail on the head – fast. The chapter didn’t entirely do it for me.

Turns out, they were saving some of their best material on that point for the interviews. A few weeks (or so) ago they did a Q&A with Buyers Meeting Point that I bookmarked but didn’t bother to read closely until today. Answering a seemingly unrelated question on what place that traditional associations have in today’s social media environment, Soheila gave the best piece of advice a seasoned veteran can give a new entrant to the Procurement Game, especially if such entrant wants to be a Procurement All-Star. Soheila said you tend to get as much out of these opportunities as you put in – either a little or a lot. If you want to be a Procurement All-Star, you have to give it your all. Just memorizing the tips and techniques isn’t enough, you have to put your heart and soul into them. You can’t just go through the motions, you have to make them part of you. They have to be natural and instinctual because the Procurement Game is, in reality, as unpredictable as you can get. You could have an IT problem. You could have a market fluctuation that totally changes the supply-demand balance or projected exchange rates halfway through a negotiation. Your shipment of fig paste could be mistaken for hash by an untrained, inept cargo inspector and destroyed. (It has happened.) Every day presents a multitude of opportunities for your game plan to be turned inside out, upside down, and outside in (simultaneously) and you have to be able to react and take a reasonable course of action in real time. You might not even have time to wait for your boss to return from lunch. But if you’ve put all you got into it, you’ll have all you need to get it all back, and then some.

Anyway, check out the Q&A with Buyers Meeting Point. It offers some great insights into the book. (And Charles’ recommendation for Managing Indirect Spend by Joe Payne and William Dorn of Source One, also reviewed in depth on SI earlier this year, is dead on.) (Soheila’s recommendation for Charles Poirier‘s The Supply Chain Manager’s Problem Solver is a good one too. Although the nature of technology and the internet have changed in the last decade, most organizations are still making many of the 12 mistakes covered in the book.)

To be concluded???

Procurement Game Plan: A Review Part 1.1
Procurement Game Plan: A Review Part 1.2
Procurement Game Plan: A Review Part 2.1
Procurement Game Plan: A Review Part 2.2
Procurement Game Plan: A Review Part 2.3
Procurement Game Plan: A Review Part 3.1
Procurement Game Plan: A Review Part 3.2
Procurement Game Plan: A Review Part 3.3

What Elements Are Truly Necessary To Prevent Missing Links in Your Supply Chain?

A recent article in Canadian Transportation & Logistics that asked “where the missing links in your supply chain are” did a great job of of pointing out that when it comes to supply chains, what you see is what you get. And it often is the situation that the more you can see into the chain, the more benefits you can receive.

It also hit the nail on the head when it noted that the ability to view timely, accurate information from the beginning of the chain to the end is essential for:

  • reliable forecasting
  • accurate decision making
  • minimizing risks
  • optimizing inventory turnover
  • reducing days and costs in supply chain cycles
  • healthy cash flow and profits
  • customer satisfaction
  • competitive advantage

But when most companies rely on a patchwork of systems and software to address supplier management, purchase order processing, receipt of goods and inventory management, did it have the right checklist of critical system and software capabilities required to avoid the critical missing links that are currently present in most enterprises that are not Supply Management Leaders?

The article identified these necessary elements, which we’ll take one by one:

  • Real-time detailed visibility into every key juncture
    i.e. demand, procurement, production, transportation, and inventory and accounts payable (to make sure the invoices match the order), market data (to make sure quotes are reasonable), risk data (to detect potential volatility or issues as soon as the signals appear), and trade data (to inform you on issues of regulatory and customs compliance)
  • portals connecting the entire supply chain from order through deliver
    what year is this? 2002? there has to be e-integration all the way down through you supplier, and their suppliers, to raw material providers for key or scarce raw materials, but it doesn’t have to be a portal; heck, it could be as simple as the pull of a daily update EDI file from a secure FTP server or as complex as real-time asynchronous communication between multiple databases in a replication configuration
  • collaboration capabilities that allow stakeholders of the chain to readily share information on supply and delivery
    and communicate with each other, in real time, when they are both online
  • ability to integrate varying information formats from various supply chain partners
    which is a given and should be automatic; again, it’s 2012, not 2002
  • open-endedness with flexibility
    enabling easy modifications and integration with other systems and this is a definite must — avoid any system with proprietary integration methods
  • capability of generating alerts of events that require attention
    throughout the supply chain as most day-to-day management should be exception based, with the exceptions defined on your rules (and not the vendor’s)
  • ability to create “dashboards” that enable consolidate viewing of information from multiple sources
    in a manner that focuses on problem areas identified by missed metrics, bad data, missed data, or declining trends — generally speaking, you don’t care about the green, only the red

These were quite good, but it’s also very important not to overlook:

  • sourcing, procurement, logistics, and global trade solutions
    this could be one solution with dedicated sourcing, procurement, logistics, and global trade modules (or views) or multiple solutions that are interconnected — you need end-to-end sourcing to identify the right deal, procurement to secure it, logistics to get it delivered on target, and global trade to make sure there are no costly, disruptive snags
  • an analytic solution
    that lets you analyze trends and predict demand levels, market cost changes, and potential disruptions
  • out of the box ERP support
    because chances are that a number of supply chain partners are going to have one of the big ERP solutions and be relying on it at least partially
  • security
    as there will be a lot of sensitive data flowing back and forth — make sure it is encrpted and only accessible by authorized parties
  • adoption
    how many companies are currently using the solution, how big are they, how much third party support is there and what is the long term outlook for the solution

But if you can meet all of these requrements, and the collaboration flows, the the solution is probably going to prevent many of the critical missing links in many of today’s supply chains.

Looking for Something to Read this Weekend? Download Chris LaVictoire Mahai’s ROAR for FREE today only!

Chris LaVictoire Mahai, managing partner at AVEUS, a global strategy and operational change (consulting) firm, has made the e-book / Kindle version of his new book ROAR available for FREE on Amazon (at this link) TODAY (and Monday through Wednesday of next week) for anyone who wants it.

The book, which uses the animal kingdom as a metaphor for building peak performance, and includes interviews with several executives to explore what drives peak performance, was written in an effort to help companies adopt a systematic approach to strengthening their performance chain. A good performance chain must be fast, flexible, predictable, and leverageable — and simultaneously balancing these requirements to achieve better customer outcomes can be tricky. As Chris implies, it’s like trying to combine the best qualities of the cheetah, elephant, coyote, and ant into one animal. (The Greeks found it difficult to combine the Lion, Goat, and Snake into a Chimera. So imagine the challenge we’re faced with!)

the doctor hasn’t made it through the whole book let, but the lessons learned summarized in the 4-Lens Profile are good ones:

  • speed at any cost becomes a negative
  • predictability delivered too late or for something that has lost market appeal is of little value
  • flexibility that extends every process, decision, or outcome is more harmful than helpful
  • leverage of every resource to the nth degree will deteriorate performance and increase risk

So, anything you can take away from Rashida Cheetah, Oralee Elephant, Ace Coyote, or Rickie Ant, or, better yet, the many executives that Mr. Mahai interviewed, is definitely worth your time.

Who’s in Worse Shape? The USPS or Royal Mail?

According to this recent article on Accounting Madness in the Economist, Royal Mail has racked up a £10 Billion deficit in unfunded pension liabilities alone. Wow! The USPS, which is about $15 Billion in debt, only racked up 5 Billion in underfunded pension liabilities. And we thought they were doing well, as they saved over 300 Million pounds in the first phase of their Procurement Transformation and expect to save over 600 Million pounds in the second phase. Too bad they don’t understand that contingent liabilities are still liabilities and that, if ignored, will just come back to bite you in the thigh, repeatedly, like your friendly neighbourhood boghog.

Who came up with the National Accounts rules anyway? The pension liabilities of unfunded pension plans are contingent liabilities and are therefore not recorded as liabilities in the National Accounts or public sector finances. How can you count the assets, and say you have a £16.5 Billion Surplus, but not count the liabilities, especially when the reality is that you are in a deficit of £10 Billion? It’s just insane.

How much credibility would your Supply Management organization have if you only counted savings and not cost increases? Specifically, if you counted the $10 Million you saved on temporary labour on the balance sheet when reporting your successes to management but ignored the extra $20 Million you spent on oil because you didn’t lock prices in for the long term? Not much. Nor would it be wise to do so. Ignoring losses takes the focus away from where the organization, and cost management, should be focussed. It’s time for good GAAP to be accepted around the world, and, in particular, a GAAP standard that doesn’t allow such big gaps to go unnoticed for so long!

Best Practices of Trade Compliance

A recent article over on the ISM site entitled “A Steel Thread”, which discussed how import/export compliance management is part of the fabric of today’s global business world and how ignoring it could result in your shipment being flagged for intensive investigation, seized, or destroyed, did a good job of pointing out how federal trade compliance regulations have increased dramatically over the past several years. But this is not why SI liked it. It also did a good job of pointing out the roadblocks to compliance for an average Supply Management organization, starting from the fact that the sourcing and compliance teams often have different definitions of supply chain security. But this isn’t why SI liked it either. The reason SI likes it is because it summarizes six best practices of trade compliance that will significantly help an average Supply Management organization get its global trade processes and policies under control.

The six best practices it focusses on are:

  • Education and Training
    Let’s face it. The average supply management professional is probably not aware of the myriad of compliance and security legislations that an average category could be subject to when sourcing internationally. Training, which overviews the major legislations, the common sourced categories that might be covered under those legislations, and best practices to maximize the chances of compliance is a great place to start.
  • Senior Management Commitment
    We all know nothing takes root without senior management sponsorship, so making sure senior management understands the importance of a good trade compliance initiative and supports it is a great place to start. If you’re having trouble getting support, SI recommends that you start by pointing out the 88 Million Dollar Fine JP Morgan got for failing to comply with trade compliance legislation.
  • Written Policies and Procedures
    Once you’ve identified your best practice processes that minimize the chance of non-compliance, you need to write them down, create checklists, and make sure they are followed. The reality is that if you are found in non-compliance, you will be fined, even if it was 100% unintentional and you did everything you could to be in compliance, but if you can show you did your best, the severity of the fine and punishments levied will likely be minimal. The government agencies responsible for monitoring compliance aren’t out to shut businesses down or make trade unduly difficult, they are just trying to do their job and enforce the law. However, most of the acts only define maximum fines, not minimum ones, and it’s not common practice for them to severely punish good corporate citizens who have a process, follow the process, and do their best to ensure compliance for a small slip-up.
  • Connectivity with Business Units
    Not only is it impossible to do compliance in a vacuum, as the article points out, but it is the business units who often have the detailed data on products and services that you need to make proper compliance assessments. Working with them can eliminate issues before a shipment is even made.
  • Internal Assessment
    As the article points out, an internal self-assessment of compliance practices should be performed to gauge how well regulations are being met and how compliance is connecting with logistics, supply management, sales, shipping and receiving — and it should be done as soon as possible if you haven’t done one, and reviewed annually to see if all bases are still being covered. And it should be very well documented. This will help you if you are ever investigated for possibly running afoul of trade legislation.
  • Third Party Assessment
    In addition, as the article points out, once or twice a year, a “second set of eyes” should evaluate how trade compliance is being handled throughout the company to make sure you didn’t miss anything. This can turn the tide in your favour if non-compliance occurred someone along the supply chain as you not only did your best to make sure you were in compliance, but had a third party that has expertise in supply chain audits do their best to verify that you are in compliance as well.

About the only critical best practice that they missed is:

  • Implement a Trade Compliance Platform
    The reality is that you can’t do all of this manually, or even attempt to track all of the relevant data manually. You need a technology solution to help you — one that centralizes all of the data and makes it all available to all of the people in your organization that need it, as well as to trusted partners that need, and are authorized to use, it.

There are other best practices, but if you start with this list, you will get most of the way there in short order.