Category Archives: Best Practices

Want More C-Suite Support? Change Your Message!

Cost Reduction and Value Enhancement are important messages, but if the CEO/CFO aren’t smart enough to understand the message, or don’t believe the message, start by focussing on their vanity. Specifically, as this recent CPO Agenda article on “the multiplier effect” points out, a CPO should focus on how the CEO and CFO can use Supply Management as a growth and career-enhancement ‘lever’. Money saved through the traditional tactics of aggregation, rationalization, negotiation, and optimization — core tools in the Supply Management toolkit — drastically increases profitability. And since increased earnings lead to market rewards, the CEO and CFO can look forward to accolades, and commiserate rewards, in their annual review. With little effort on their part.

Remember to point out that, without solid supply management, the company will be giving away 30 cents on every dollar that it could be keeping, and using to fund market expansion efforts in developing economies. Expansion efforts that will be key to continued corporate success given the stagnant sales environment in most of the developed economies. So appeal to their vanity. The important thing right now is to get the support the organization needs to take its supply management to the next level.

SIRI: Not Just for Radio Anymore

Over on the Purchasing Certification Blog, Charles’ just penned a great post on why “your procurement resume needs to have more of these four words”: Saved, Increased, Reduced, and Improved.

Charles’ is right when he notes that these are the result-oriented words that hiring managers and CPOs want to see, read, and hear. CPOs don’t want to hear what they already know you did. Every Procurement Pro manages, negotiates, analyzes, and contracts. They want to hear that when you managed, you improved efficiency. That when you negotiated, you saved big money. That when you analyzed, you reduced demand for indirect goods and services. And that when you contracted, you actually improved supplier relations.

If you’re looking for more tips on what you should be saving, increasing, reducing, and improving, check out this post from 2009 on how to get noticed and keep your sourcing or procurement job.

How to Deliver Superior Customer Service

A recent article over on Chief Executive had some great tips on How to Deliver Superior Customer Service that apply equally well to Supply Management as Service Delivery. These tips are important because if you figure out what your customers want and how you can adapt your offerings to best serve their needs, you will raise your profile in their eyes. Since the lifetime value of their support is much more than that of your average supplier, this is a good thing. So what was their advice?

  1. Always Ask What You Can Do Better
    More feedback means more opportunities for improvement, from the first consultation to the final delivery of product. Remembering that the best way to reduce spend and increase value is to be involved from the time of product or service design, and not after the requirements have been locked in leaving you nothing to do but run a bid between the only two suppliers who can meet the demand, you need to figure out how you can provide value as early as possible — just like a consultant trying to maximize an engagement who knows that a smart customer only keeps her around as long as she provides value. For some customers who understand your value, it might be introducing them to multi-round bids and optimization as an alternative to auctions. For those new to Supply Management, it might be showing them how to speed up information gathering with RFIs. And for those who think Supply Management only comes into play when the need is met, it might be educating them on cost and how you can take cost out. And for those who need to work with a preferred supplier (do to long term contracts or very special needs), it might be teaching them the basics of SRM so they can get more out of the relationship.
  2. Bottoms Up
    Customer driven organizations understand and embrace the idea that their success depends solely on the customer’s satisfaction and must be willing to do whatever it takes to deliver on the promise. This means listening, and responding, to the needs of the client organization. If a certain organization makes a request for help on an RFx every six months, have it at the ready when they come back to you at the expected time.
  3. Win Back At-Risk Customers
    Sometimes a business unit is going to have a “bad experience” no matter how much good effort you put into helping them. They might come to you with expectations of double digit cost savings in a market where commodity costs are skyrocketing and suppliers hold all the power. They might get the rug yanked out from under them because the new supplier you helped them find suddenly goes out of business when a natural disaster wipes out their primary plant. And so on. Even if this only happens one in one hundred events, these internal customers are at risk because the bad experience will be ten times as memorable as the best experience to date. So even if the overall value the business unit gets is high, there’ll still be some animosity due to the failure if you don’t go the extra mile to make them extra happy on another equally important project. As long as there is lingering animosity, you risk resistance on any future project that brings back memory of the failure. This could hinder your success in the future.
  4. Make Your Intentions Clear
    Let them know that even though corporate has given you a mandate to cut cost, your number one concern is to provide them with value, and that since you understand total cost and total value models, you know that if you don’t at least maintain quality and service, overall costs will go up year-over-year even though unit costs go down. As a result, you are there to get them value first and any actions you take or requests you make will be to help the organization get that value, even if sounds like you may be putting your organization or goals first.

It’s great advice, and it only missed one important point (which is as true from a Supply Management perspective as it is from a Customer Service perspective), and that’s:

  • Your definition of value is not necessarily your [internal] customer’s definition of value.
    As Lamar Chesney, CPO of SunTrust pointed out in his presentation on Value Perspectives at the Next Practices Xchange* this spring (as summarized in SI’s post that wanted to know whether you are really focussed on value), what often takes place is an exchange, but never an interchange, of words [that] is fragmented and restricted [in] expression because both sides talk past each other because our view of value (as Supply Management Professionals) is not their view of value (as Finance, Manufacturing, Logistics, Marketing, etc. Professionals). Make sure you understand their definition of value before promising that you can help.

* The Fall Next Practices Xchange takes place at the Oak Brook HIlls Marriott, in Oak Brook, Illinois on Friday, November 4, 2011.

Not All Best Practices are Created Equal

A recent article in Apparel outlined the responses from Sourcing Execs [Who] Reveal[ed] Best Practices which clearly demonstrated that not all best practices are created equal. Of the twelve (12) best practices outlined in the article, three (3) were good, six (6) were okay, and three (3) were out of left field and about as useful as < insert favorite euphemism here >.

Good:

  • Look at what is behind the costs. What influences can you have on each cost?
    Understanding what drives costs is the key to understanding what you may be able to do to reduce costs and/or increase value.
  • Innovate in product, technology, finishes.
    Innovation is not restricted to one area — products, services, and technology employed, are all valid areas where innovation can add value to you and your customer.
  • We’re trying to push a total cost of ownership.
    Always look at the big picture. A decision should not be made on one or two cost components or contributions to value.

Okay:

  • The reasons why we source in China remain valid and China will still be a huge part of our sourcing going forward.
    You should double check your decisions against your reasons and assumptions on a regular basis. Sometimes they will still be right, sometimes market conditions will have changed.
  • Vietnam and Bangladesh can be used for key items. But China will not be going away.
    Yes, these are two other sourcing destinations, but they are not the first destination for most companies for a reason. They are smaller, and there are only so many high quality products that can be sourced from these countries.
  • Use technology to mitigate risk.
    Technology can only mitigate certain types of risk. Certain political, natural, and societal risks cannot be predicted with any degree of accuracy.
  • We need to focus our human capital on the things that matter.
    Of course you have to focus on the right things, but how do you identify what those right things are?
  • The real question is who is the next best guy.
    Locale is only one component of outsourcing / best cost country sourcing. The supplier is the other component.
  • We feel strongly about Vietnam, and Colombia is of great interest. Pakistan will straighten itself out and come back.
    There is definitely a lot of interest in Columbia, Vietnam remains a strong contender in Asia, and Pakistan may be a good future option.

Out of Left Field:

  • We are also working with our suppliers in China to share the joy of sewing the company way. We are working with these suppliers to help promote the idea to their employees that sewing is cool.
    What does a job being cool have to do with sourcing?
  • Avoid interfaces and legacies.
    Legacies, yes. But interfaces? Your software needs to interface not only with what you have today, but what your suppliers and customers have today if you are to have visibility up and down the value chain. Interfaces are critical. While the software should not be restricted to interfaces to legacy technology, they must be supported — your suppliers and customers may not be as innovative as you!
  • I remain very interested in the Western Hemisphere, particularly on our intimates side.
    Uh, ok, why?