Category Archives: Best Practices

Is Decision Making Really a Seven Step Process?

While some decisions are difficult, I always thought the process of decision making was itself pretty straight-forward:

  1. Identify the Decision that Needs to Be Made
  2. Identify the Alternatives
  3. Select the Best Optionconsidering the advantages, disadvantages, facts, and goals

but according to a recent article in the Supply Chain Management Review, “putting the structure in decision making” is a complex seven step process:

  1. Frame and describe the situation about which a decision is to be made.
  2. Define the objective(s) of the decision and the criteria that define the objectives.
  3. Extract obligatory criteria.
  4. Creatively identify decision options that meet all obligatory criteria.
  5. Gather information on decision alternatives, and develop the judgment table.
  6. Assign weights to the obligatory criteria.
  7. Rank alternatives.

Wow! No wonder some organizations can never make a decision! If they even make it to step for, they’re too exhausted to continue!

Identifying the alternatives and figuring out which is best overall against multiple criteria is often hard enough — don’t make it harder than it has to be!

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Another Reason to Use Plain English in Your Contracts

In addition to the fact that you will have an entire state on your side, as Dick Locke points out, and the fact that not using plain english can land you in some dire consequences, as Tim Cummins points out over on “Commitment Matters”, there is the fact that obscure language increases the risk of failure. If no one understands what they are meant to be doing, a dispute is more likely. Contracts need to be clear, so write them in plain English.

Three Easy Steps to Winning a Recession

    1. Get Operationally Efficient This is not about cutting costs, but cutting fat and spending strategically on quality and performance. If a product, service, or piece of software improves productivity by 30% and reduces operating costs by at least 3X its annual cost, you buy it, even if it costs six or seven figures. But if all a product does, like an online T&E application that your employees rarely use, is save you 50,000 a year for it’s 30,000 price tag, you eliminate it and invest the 30,000 somewhere else where you’ll get a return.
    2. Increase the R&D Budget Your prosperity depends upon your ingenuity. That will require innovation, which requires top talent and the resources they need to break through traditional barriers. That requires that R&D have enough money to support pure research in addition to product development and day to day support. And in R&D, a little investment can go a long way. It only takes one breakthrough product to make tens, if not hundreds, of millions (or billions) of dollars of revenue down the road.
    3. Invest for the Long Term as well as the Short Term

This is the real reason most companies fail. Simply put, failure to invest for the long term means that when a new innovation is needed to maintain or secure new market share, it’s not there. Failure to invest beyond the next quarter means that instead of working on new products, the company is focussed on extending the life-cycle of existing products which have sold well, trying to eek out every last penny. The problem with this strategy is that as the market gets closer and closer to full saturation, the profit per sale drops exponentially. In comparison, if the company shifted focus to a new, promising, product, around the 70% saturation point, by the time the market reached the point where the profit per sale was unattractive (which usually happens around the 80% saturation point), the new product would be well into it’s growth curve and profits would hold steady.

That’s it. If you don’t believe me, you can read the very well written, but very lengthy, article on “roaring out of recession” in the Harvard Business Review, but winning a recession is very simple. Stop focussing on cutting costs and start focussing on improving the value you bring to the market. Even in a recession, people still want, and need, to spend. The only difference is that they’re more reserved and willing to hold out for products and services that provide great value at a great price. The first company to offer them the first great product or service they want at a great price typically wins. It’s as simple as that. (And that’s one of the main reasons why 85% of market leaders get dislodged during a recession … they fail to understand that value trumps even long term loyalty when money is tight, giving you an opportunity.)

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U of T Has Some Great Tips for Successful Outsourcing

A recent report from U of T, Georgia Southern, the Cranfield School of Management, and the IACCM titled on Unpacking Oliver: Ten Lessons to Improve Collaborative Outsourcing that was based on the Nobel Prize winning work of Oliver Williamson had ten great tips for successful outsourcing. The following five are particularly relevant:

  • Outsourcing is a continuum, not a destination

    To Outsource or Not to Outsource is an eternal question that never has a final “yes” or “no” answer. It’s a never ending trade-off of cost, quality, risk, and value. The best answer today might not be the answer tomorrow and probably won’t be the best answer in five years. It’s a constant re-evaluation.

  • Understand the transaction attributes and their impact on risk and price There’s product cost — which is a composition of raw material, labour, and overheads, transportation cost, import and export costs, storage costs, losses due to transit times, disruption costs associated with higher or lower risks, and so on. Any decision that increases or decreases one of these costs will likely increase or decrease risk.
  • Use a contract as a framework – not a legal weapon

    Contracts don’t have the same meaning in many countries as they have in the US or the UK. In many countries, the relationship means a lot more than the contract, which only serves to define an outline of the responsibilities of both parties.

  • Your style of contracting matters; be credible

    If you use “muscle” for a quick win, you’ll lose in the long term as the supplier will not be inclined to go beyond the minimum requirements of the agreement.

  • Build trust; leave money on the table

    Good faith will go a long way to insuring that the supplier not only adheres to the agreement, but works with you to find new ways to save cost and go beyond the mandated service levels.

For a summary of the other five tips, see this great summary over on Supply Chain Brain.

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Great Tips for Supplier Performance Management

A recent article from ChainLink Research noted how never before have companies been so dependent on the performance of their suppliers as a result of today’s companies becoming so lean, fast, and outsourced that monitoring and responding quickly to deal with and continually improve suppliers’ performance has become a key determinant of success or failure. This article on “Supplier Performance Management” had a number of great tips for managing supplier performance, including the following:

  • Automatic Initiation of Corrective Action WorkflowsNot only must metrics be tracked rigorously, but they must be fed into monitoring systems that immediately notify the responsible individuals and start a corrective action workflow as soon as an issue is detected or a downward trend is identified. Hiccups must be addressed before they balloon into major supply disruptions, not after.
  • Reverse RatingJust thinking you’re a great customer doesn’t make it so. You might think that your performance exceeds the performance you expect from your supplier, but it might be the case that nothing could be further from the truth. The delivery might be late because your people kept the driver waiting for two hours while they prepared to accept the delivery. The shipment might be late because you only gave two days notice of significantly increase demand and not the two weeks you agreed to in the contract. Sometimes your processes are just not best practice … and sometimes your supplier knows ways you can improve them. Etc. Take your medicine and your overall supply chain health will improve.

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