Category Archives: Best Practices

Tried-and-True Strategies on the Road to CPO-dom

e-Side Supply Management recently published an article on “The Road to CPO — and beyond” that chronicled advice from David Nelson (of TRW, Honda of America, and Deere & Company) and Maureen Corcoran (State Street) for up-and-coming procurement professionals who aspire to take on the CPO role.

  • Be Curious, Ambitious, and Open to Change
    A willingness to go anywhere and do any job in order to advance shows initiative and helps you stand out. It also helps you think beyond ‘the way we’ve always done it‘ mentality, which is a trait of successful C-suite executives.
  • Develop Strong Successors
    Always hire a younger, smarter backup person so you are easy to promote. You’re not going to get promoted if there’s no one to assume your present job.
  • Learn the Organization Inside and Out
    There’s immense value in having broad knowledge and a wide skill-set. CPOs know the enterprise and how to execute, negotiate, manage and mitigate risk, and do deals and this adds up to general business effectiveness that can be applied in many other situations.
  • Understand the Efficiency/Risk Dynamic
    CPOs must do more than understand the close relationship between supply chain efficiency and increased supply risk; they must also have the tools to analyze, prioritize and act on these risks.
  • Collaborate with Suppliers for Competitive Advantage
    The ability to collaborate with suppliers for competitive advantage is one of the most critical CPO traits. Although it may seem counterintuitive to expect gains from a ‘softer’ approach to supplier negotiations, there are lessons to be learned from the Japanese experience.
  • Aim Even Higher
    The bottom-line value of an effective CPO can’t be overemphasized. A CPO is a natural fit for the corner office.

Not bad. Not bad at all.

Good Advice for CEOs, Good Advice for CPOs

Chief Executive recently posted a good article on why you should “simplify and clarify your business”. According to the article, knowing where to concentrate the effort is critical. A business should focus on where it earns money now and, even more importantly (in the doctor‘s view), where it will earn money in the future (as business, and demand, is constantly changing). To help you do just that, the article presented an approach to Keep it Short and Simple (KiSS) that it believes will help a CEO do just that:

  1. Clarify and communicate what the business is, does, and delegate down the line.
  2. As CEO, aim to remove yourself as much as you can from the dayt-to-day operational business and concentrate on strategic areas.
  3. Aim to reduce meetings and have a clear (and simple) outcome for those that do take place.
  4. Reduce the number of people involved in those meetings.
  5. Communicate, communicate, communicate.

This is also great advice for CPOs.

  1. A good CPO clarifies what procurement does for the business and how it meets the strategic objectives.
  2. A good CPO empowers her people to do their jobs and focuses on the big picture.
  3. A good CPO doesn’t waste her days in meetings … she spends them charting paths to procurement success.
  4. A good CPO only includes people who need to be there in meetings … and empowers those who are there to disseminate the information as required.
  5. Not only does a good CPO communicate, communicate, communicate, she also collaborates, collaborates, collaborates.

Fine-Tune Your RFPs for Streamlined Performance (Software Acquisition Insider Tips VII)

A recent article over on Supply Management . com on “going faster” pointed out many of the problems with RFXs that cause unnecessary process delays. Fixing these problems will enable your RFX process, which you now know how to construct in an unbiased fashion, to flow smoother and faster.

  1. Poor Scope
    The scope is not clearly defined at the start of many RFP processes. “A solution to automate our purchasing” is extremely vague as is “50,000 boxes”, which a quick trip to cBoxBid will quickly point out. (Dimensions? Style? Weight/Flute? Glue Tab? Printing? Color? etc.) The scope needs to cleary define what is required (automation of purchase order creation, invoice collection, and e-payments or 12″*12″*8″ boxes that can hold at least 45 lbs) and the desired outcomes (automated tactical processes with m-way matching and manual review only required on discrepancies and purchases over administrator defined thresholds or 5,000 boxes per shipment with 21 days notice).
  2. Lack of a Performance Regime
    The long-term success of a major contract will depend on a mix of “hard contractual” and “soft behavioural” factors. It is imperative to define success via a comprehensive performance regime with a simple hierarchy of performance measures and targets, and a mechanism for rewarding good service and deterring underperformance.
  3. No Team Empowerment
    Like every other sourcing and procurement activity, a successful RFX (process) requires a dedicated and fully supported team. A core team, authorized to make the necessary decisions, is required throughout the process and beyond to ensure consistency and clarity with the bidders.
  4. The Contract is an Afterthought
    The RFX should be presented in a format that matches the product or service being requested and should fully explain the selection process, the evaluation criteria, the rules of engagement, the delivery schedule, and the terms and conditions. In other words, the contract (template), which should clearly specify what is and is not negotiable, should be drafted up front and presented to all participants. Otherwise, you might work through a long, laborious RFX process only to find out that the winning bidder(s) can not, or will not, agree to your terms and have to go back to the drawing board.
  5. The Process is Not Managed
    The largest risk in any RFX process is a misunderstanding, and the sad thing is that this is very likely if sufficient information is not made available to the bidders and the process is not managed. It’s important to manage the process and communicate with the bidders at each step to make sure they have received all of the materials, understand all of the requirements, and have all of the information they need to craft their responses. The process should include regular briefings, review meetings, and question and answer sessions to insure that it flows smoothly.

Supply Chain Performance Improvement For the Beginner

Industry Week recently ran an article on “supply chain performance improvement for the rest of us” that is a good read for any organization just starting down the supply chain improvement path. The article outlined four strategies which can be used to jump-start a performance improvement initiative in an organization that is not best-in-class, or, in layman’s terms, your average organization. (Less than 20% of organizations are truly best-in-class, and the reality of supply chain improvement is that you need to do it in stages and trying to bite off too much too fast will just lead to failure.)

  1. Stop Obsessing Over Six Sigma
    It’s not the methodology, but where you apply it and how you use it to better your operations. It’s about leveraging the chosen process life-cycle improvements to focus on customer-visible process improvements, not about the processes themselves. Eventually you’ll want to optimize every process to the nth degree, but not when you’re starting out. An 80% improvement across the board is much better than a 98% improvement on one process that only affects 10% of production. After all, would you rather be 1.8 times as productive as a whole or 1.198 times as productive?
  2. Forget About “The Perfect Order”
    The “Perfect Order” is Supply Chain Nirvana, and every budding Buddhist knows that this is a lifelong journey. You need to start by improving your basic processes, which will minimize errors, and managing the mistakes (or order exceptions) better when they do happen. Install visibility systems that allow you to identify and deal with exceptions as soon as possible and the process improvements this will inevitably lead to will result in a significant drop in errors almost overnight.
  3. Pay Your Suppliers Better
    This will save your company money. Not only will it strengthen vendor relations, which could lead to happy suppliers willing to share insights and best practices and go the extra mile, but it will reduce the amount of capital the supplier has to borrow, which usually comes at a high cost. This reduces the supplier’s cost of capital, which reduces the supplier’s overhead, which decreases the mark-up the supplier has to charge, which enables the supplier to offer early payment discounts or charge you less (at renewal time).
  4. Don’t Talk to Customers
    Stop wasting time haggling over credit and other meaningless disputes. Automate the dispute resolution process and spend time listening to your customers’ product and service interests and business process priorities instead. That way you can find out what your customers really want and improve your offerings accordingly.

Tips on Drafting a Truly Unbiased RFP (Software Acquisition Insider Tips VI)

It’s not hard to draft an unbiased RFP, even though you might think otherwise when you consider the truly large numbers of RFPs that hit the wire every day. Many of them are biased toward a specific provider. The fact of the matter is that it doesn’t take much to bias an RFP, and it often happens without the intent of the author. But it doesn’t have to happen to you. Here are some tips to keep your RFPs unbiased.

  • Don’t use a (free) RFP template
    I’ve told you again and again. These are created by vendors to achieve one goal, and one goal only: to make their product, and only their product, look good.
  • Ignore the feature lists
    This is a free RFP template favorite; namely, features selected for their “differentiating” capability, that you’ll never use. It’s not the features that matter, it’s the functions. Specifically, the functions you need the product to perform for you.
  • Don’t use an interested party.
    That means no vendors, no solution providers who’ll be bidding on the business, no consultancies with partnerships or known relationships with vendors or solution providers who’ll be bidding on the business, and no one with an obvious agenda that’s not yours.
  • Describe the process you need to automate or support in your own words.
    The minute you use a vendor’s terminology is the minute you give them the edge to exploit the RFP and, in the public sector, ramrod the solution down your throat, whether or not it’s right for you.
  • Describe the goal state, not the current state
    You get what you ask for, and if you ask for a solution that supports the current state, which you presumably want to improve, you’re not going to end up with much of an improvement.
  • You’re probably not a technology expert, so don’t put technology in the RFP.
    Don’t make the error of assuming that you know what technology would be best.
    If it’s software you’re buying, be wary of opinions from your IT department.
    IT people are most likely not
    software developers, so they have at best a limited understanding
    of the technologies that software developers use. Even software developers tend
    to know only the technologies with which they are currently working, and they are
    often deeply biased toward a particular technology, for no rational reason. You are looking for a solution, not
    a technology. So spend your time focusing on the solution and what it does for you.
  • Make sure you control your data.
    If it’s software you’re buying, then no matter what solution you choose,
    make sure part of your RFP includes a requirement to get
    the data that you pumped
    into the product, back out of the product, easily and quickly, in a format that’s understandable to you (not
    XML or a proprietary database file, or some other idiosyncratic format that will cause pain — rather, an ordinary flat file,
    or set of related flat files). Your relationship with the vendor is not likely to be “until death do us part.” The
    software world moves extremely quickly, and a much better solution could present
    itself down the road. You want the ability to jump on it without a backwards glance.
  • Unbundle all the extras.
    Vendors will almost always muddy the water by “including” A with B, proposing some special deal that’s available
    for a limited time only, and so on. Make sure that your RFP unbundles maintenance from license fees or purchase price; clearly spells out the cost to upgrade; and clearly disambiguates services from product.
  • Demand multiple sources for services.
    Just because you’ve committed to Oracle ERP, for example, doesn’t mean that you have to use Oracle resources to
    implement the system. The same is true for other software products, and for many other commodities as well.
    The cost of services can dwarf the cost of the product; and the best deal for services is achievable
    when there are multiple services providers. When vendors are bundling services, and no matter who you choose it’s a one-stop shop,
    you will be helpless the moment you sign the deal. Would you buy a car that could only be serviced at one
    dealership?