Category Archives: Best Practices

Take Lean to Your Customers

A while back, the Supply Chain Management Review ran an article entitled “Lean: The Antidote to Cost and Variation” that focussed on lean as a lever to do just that because it can reduce waste and improve customer service. The article identified eight enablers of lean distribution in global supply chains that tie into customer demand and reduce variability and costs. These are:

  • Formal Service Policies
    Establish formal policies that articulate customer needs and how service is enabled with internal capabilities throughout the entire supply chain. This will keep the organization on track.
  • Support for Pull
    This will reduce variation caused by hedging, planning, policies, and other factors.
  • Isolate Variability
    Strategically place and manage inventory and capacity buffers. This will reduce the amount of safety stock required.
  • Cost trade-offs
    Assess and decide cost trade-offs on a structural level as this will enable systematic cost elimination based on capabilities.
  • Linkage for Pull
    Pull is a the philosophy of replenishment, not forecasting. It prevents over-ordering and under-ordering.
  • Reduced lead times
    Reducing lead times will improve flexibility and increase responsiveness.
  • Reduced variability
    Quantify the current variation to enable the operation of distribution processes based on capability limits.
  • Reduced lot sizes
    Larger lot sizes may lower sourcing or production costs, but can increase distribution costs, decrease profits due to overstock clearance, and reduce services.

These enablers are important because a well designed supply chain should deliver product quickly to the end customer with minimum waste, as per “The Goal of the Lean Supply Chain”, an article that ran in Industry Week not that long ago.

The article over-viewed the seven steps to lean supply chains, and the number two step was understand customer value, second only to the development of a systems perspective, since everyone suffers in the long run if each element in the supply chain tries to optimize its own operations in isolation. The article points out that a successful organization will make an attempt to understand any volatility that exists in customer demand, rectify it, and, in effect, take lean to the customer.

The Seven Savors of a Sourcing Sensei

Everyone likes to talk about sourcing leaders and the great jobs they do – but try finding an article that talks about the fundamental qualities of a great sourcing leader, and that’s a whole different ball game. While it’s almost ridiculously easy to find dozens of articles on what a sourcing leader does, it’s very hard to find even a single article on what a good sourcing leader is.

It could be because everyone is assuming that the qualities that make a good leader are universal and the particular domain irrelevant. While there are some good arguments to be found that great leadership is a unique skill irrespective of problem domain, sourcing is not like any other business function. I believe it takes more than just being a great leader to be a great sourcing leader.

So what does it take? It takes a well-rounded individual with seven special skills, above and beyond what you’ll find in your average highly effective person. These skills are:

  • Experience
    First and foremost a great sourcing leader is experienced in sourcing. She’s spent time in the trenches, knows what sourcing is all about, and is more than capable of making the right call in tough times.
  • Customer Focus
    A great sourcing leader always has the customer in the back of her mind. Sourcing, like leadership, is essentially a service function and a great sourcing leader knows that.
  • Team Builder
    A great sourcing leader understands that the days of the lone warrior corporate hero who could carry an organization to fortune 500 lists with his charisma and genius are finally over and that the key to success lies not with her, but her team. She does her very best to make her team the best that they can be, constantly enables them, and gives them every opportunity for improvement.
  • Market Zen Master
    A great sourcing leader is in tune with the market and understands where it’s been, where it’s at, and where it’s going. Leader’s don’t react to market fluctuations, they predict them – designing and implementing strategies that allow the organization to not only align itself with the market, but keep slightly ahead.
  • Innovator
    A great sourcing leader is an innovator. She knows the name of the game is change and she can adapt to the situation as required.
  • Collaborator
    A great sourcing leader is a true collaborator. Not only does she know that success lies with her team, but that success will require her team to work with other groups in the organization, in partner organizations, and in supplier organizations. To this end, she’s constantly reaching out to improve relationships and create opportunities for the teams to work together.
  • Communicator
    A great sourcing leader is a great communicator. She knows that for sourcing to succeed, its goals, processes, and roles have to be understood and accepted by everyone and takes it upon herself to spread the word. She creates a shared vision that people are motivated to work towards.

For more information on The Seven Savors of a Sourcing Sensei, I strongly encourage you to check out the new Sourcing Leadership wiki-paper over on the e-Sourcing Wiki [WayBackMachine] which was (co-)authored by yours truly. Besides diving deeper into each of the skills, with references as to their effectiveness and criticalness, it also discusses The Seven Scruples of a Sourcing Sensei – or the seven things sourcing leaders do that set them apart.

Collaborate, Collaborate, Collaborate, Collaborate V

Recently, Computer Sciences Corporation (CSC]), Supply Chain Management Review (SCMR), and Michigan State University (MSU) released the “Fifth Annual Global Survey of Supply Chain Progress”.

The report measured the performance of firms along eight dimensions of supply chain competence:

  • Alignment with Business Strategy
  • Strategic Customer Integration
  • Strategic Supplier Integration
  • Cross-Functional Internal Integration
  • Supply Chain Responsiveness
  • Planning & Execution Process & Technology
  • Supply Chain Rationalization / Segmentation
  • Risk Management

The report found that the less mature companies needed to focus on greater collaboration with business partners and pay more attention to areas of weakness. Another mark of leaders was greater strategic alignment and significant, positive, involvement of top managers.

But I think it’s pretty obvious that collaboration is the ultimate key. What better way to mutually identify and improve the areas of weakness? What better way to improve strategic alignment? What better way to maximize the positive involvement of management? Furthermore, without collaboration, you’ll never truly achieve strategic integration between customers, suppliers, or internal departments.

So you want to achieve collaboration, but aren’t sure how to sell it? A recent CAPS Research study by Stanley Fawcett, Gregory Magnan, and Jeffrey Ogden, as summarized in “How to Manage Supply Chain Collaboration”, puts forward a three step process to identify and compare the benefits, barriers and bridges to assess and communicate the viability of pursuing a path toward collaborative advantage. The three stages are as follows:

  • Introspection
    A company’s orientation and philosophy consists of two building blocks: customer orientation and systems thinking orientation.
  • Supply Chain Design
    A five step process: scan, map, cost, manage competency, and rationalize
  • Supply Chain Collaboration Relationship alignment, information sharing, performance measurement, people empowerment, and collaborative learning.

By figuring out where your company is, and then working your way through a proper supply chain design planning exercise, you’ll be in a position to align your relationships, share information, measure your performance, and progress collaboratively.

Are Your Team’s Procurement Skills Up To Snuff?

Are you a supervisor, manager, or executive struggling to get the same performance out of your team that leading purchasing departments appear to be getting out of theirs? Are you wondering why this is the case? Then maybe you should consider getting your team profiled.

Although there could be a dozen reasons why your team is not performing at the level you think they should be (skyrocketing raw material and energy prices are significant components of your spend, inappropriate unbreakable multi-year agreements, lack of proper tools to get the job done, etc.), the reality is that you’ll probably never know which is the right reason until you start investigating different hypotheses. And the hypothesis that you should start with is that your team may not have the skills they need to compete against the leaders in today’s procurement landscape.

The skills an average procurement professional needs today are not the skills that an average procurement professional needed ten years ago. It’s not anybody’s fault, but that doesn’t mean you get to sweep the potential problem under the rug. It means you investigate the possibility that maybe your team, including you, could use a bit of polishing and, if it turns out to be the case, do something about it. The leaders are leaders for a reason – they recognize that in today’s world, you can’t ever stand still and you can’t ever stop learning, and they take steps to identify their weaknesses and improve them all the time.

So start by getting an independent third-party skills profile to find out where you are and where you should improve. One possibility is Next Level Purchasing’s [now the Certitrek NLPA] “Purchasing Assessment of Skills for Success” (PASS) Program, which they offer for free to qualified companies. Although it is, of course, based on the seven dimensions their “Senior Professional in Supply Management” (SPSM) program is based on, it’s still a good measure of whether or not your staff have the basic skills they need to do well at their jobs.

The PASS program uses a Web-based skills assessment based on 56 multiple choice questions designed to assess competence in seven key skill areas:

  • Purchasing Fundamentals
  • Analysis & Spreadsheets
  • Contract Law
  • Project Management
  • Purchasing Best Practices
  • Sourcing
  • Negotiation

Once your team completes the test, Next Level Purchasing creates a color coded report for each employee across the seven competency areas that indicates whether each employee is highly skilled in the area (green), moderately skilled in the area (yellow), or under-skilled in the area (red). From this, you can put together a custom improvement plan for each employee, which can be based upon standard SPSM courses or custom courses developed for you specifically by Next Level Purchasing. Considering the SPSM is a very affordable industry certification, chances are you’ll be able to upgrade your team’s skills in a very cost effective manner if it turns out that is the appropriate thing to do.

Winning Strategies for Vendor Engagement

By far the best presentation that I attended at the 5thAnnual International Symposium on Supply Chain Management was Jon Hansen‘s presentation on Winning Strategies for Vendor Engagement, part of his Chaning Face of Procurement Series.

Even though there was nothing revolutionary in his talk, Jon did a great job of hitting home on the core message, spelling out the basics, simplifying the core messages which a lot of people focussed on new e-Procurement and e-Sourcing efforts still overlook, and delivering a presentation the way a presentation should be delivered. Simply put, the key to success still ultimately lies with your vendors, and if they don’t participate, or participate 100%, you’re going to lose out in the end. Basically, unless managed properly, your e-Procurement initiative, instead of being a benefit, could be a threat to your supply base. And this is not just theory – it’s fact. Consider a recent statistic from the Wall Street Journal (in February, 2005) which noted that 73% of all implementations result in partial or total failure.

It’s not hard to win suppliers over – often all you have to do is meet their needs and take the time to work with them to explain why the new system is better and why they won or lost the bid. Basically, suppliers are looking at (most at) six factors when being asked to use a new technology:

  • Ease of use
  • Non-invasive technology
  • Convenience and speed
  • Business Intelligence
  • Chance to maintain or increase revenue
  • Non-adversarial environment

Meeting these factors is not hard to do. For example:

  • Ease of use
    • Use technologies not limited to largest / most sophisticated suppliers
    • Communicate the initiative via multiple avenues of communication
    • Proper tool alignment
  • Non-invasive technology
    • Does not increase work
    • Increases opportunities
    • Reduces the cost of sale
  • Convenience and speed
    • Automated and intelligent engagement
    • Minimal Administrative Requirements
  • Business Intelligence
    • Proper spend alignment
    • Real-time reporting capabilities
    • Orientation sessions
    • Project and quarterly Reviews
  • Chance to maintain or increase revenue
    • Create an equal opportunity environment
    • Greater opportunity
  • Non-adversarial environment
    • Fair competition with clearly defined rules
    • Proper spend alignment
    • Proper technological alignment

Basically, vendors are the key to your success and will want to help you succeed if you take the time to help them succeed. It’s not hard. Just do it.