Category Archives: Market Intelligence

Claro’s Crown Jewels

Last year, I blogged about how you could achieve Clarity with Claro in your sourcing projects. Since then, Claro has been named one of Seven Small Jewels for 2008 by Consulting Magazine. I was in Chicago recently, so I decided to catch up with Bart Richards, who is now a Managing Director of the Sourcing Group.

Over the past year, their sourcing practice has been growing by leaps and bounds as more and more companies are trying to find savings opportunities in an inflationary market where cost pressures on all sides are causing financial hardships across the board. The good news is that they have been successful as there are still savings to be found when the right categories are addressed, but the better news is that they understand that, in today’s market, cost avoidance is king as simply holding prices static can provide you a significant advantage over a competitor who sees their costs rise 10% to 30%.

The truth of the matter is that if your organization is still focussed on cost savings, and you are focussed only on strategically sourcing those categories you know you can save on, you’re actually losing money. How can this be? Let’s pretend that you source steel and services (or petroleum and travel, or energy and telecom, etc.). Let’s also say that you spend 10 Million on each category and that it is your expectation that you can only save on services. If put all of your effort into strategically sourcing services, you could probably save 20%. But steel prices have more than doubled over the past year. If you simply delegated steel to an e-Auction, you’re likely to find your steel prices increase 90%. Although that would be good compared to the market, that would be very bad if focussing all of your efforts on this category could have resulted in a price increase of only 60%. By focussing on savings, you saved 2M on savings only to lose 3M on steel — for a net result of a 1M loss. Not very smart. Today, it’s more important to focus on those categories that have substantially increased in price since your last sourcing event, or that are rapidly rising in price, than it is to focus on the few remaining categories that might yield savings. Because if you don’t, you find that you save a dime only to lose a dollar.

This is also why it’s critical that an organization’s sourcing performance metrics, as well as incentives and bonus plans, revolve around cost avoidance and not cost savings. After all, as I have said before, there’s no such thing as savings, because if you really can save money, it simply means that you shouldn’t have been paying that much in the first place, and that you are paying a price that should have been avoided! Now, I know it is more work to define avoidance metrics than it is to define savings metrics, but the payoff is worth more than the price. Furthermore, there are a number of on-line resources, such as the article archives and blog entries provided by Next Level Purchasing (now the Certitrek NLPA) and the wiki paper on the e-Sourcing Wiki, that you can use to guide your efforts, standard pricing indexes that you can use to precisely define average raw material price increases since your last sourcing event, and a number of consultants (including the doctor) who can help you define the right metrics as well as the right sourcing sourcing program.

With this knowledge, Claro has been successful both at finding savings for their clients in categories such as services, travel, and benefit plans as well as controlling cost increases and keeping them to a level that is usually significantly less than market average by focussing on those categories that the client can buy in bulk, hedge against, or lock in longer-term preferential agreements. They’re still saving an average of 10%+ in a number of categories for their average client, but more importantly, they’re reducing expected cost increases in key categories by 10% to 20% or more, which provides for better overall cost containment across an organization than simply focusses on the low hanging fruit.

A number of examples of their success stories can be found in the numerous case studies on their web-site, and if you want to know whether or not they have sourced a particular category recently, and what sort of results you could expect, you can contact them for more information and additional case studies relevant to your situation at any time. They’re more than happy to take your call, or your e-mail, and Bart Richards can be reached at brichards <at> theclarogroup <dot> com.

Our next post on Claro will talk about the other services Claro offers as well as some of their particular areas of expertise.

Junket Junking with James Jin

While I was visiting MFG headquarters in Atlanta yesterday, I had the pleasure of sitting down for a few minutes with James Jin, who runs MFG’s Shanghai office (which covers all of Asia at the moment). James, who hosted last year’s webinar on Surviving China’s Rapidly Changing Sourcing Tides is a rare character who not only deeply understands both the North American business world and the Chinese business world, but who also sees what’s needed to bridge them into a more seamless global marketplace, which is something he does on a daily basis through MFG. It was a pleasure to discuss both what he thought were the most critical areas of focus for MFG, and other companies doing business in China, as well as what his biggest challenges were, because it not only highlighted the differences in doing business with China, but also the similarities – which I don’t think enough people spend enough time on.

From James’ perspective, the three most critical aspects that MFG (and other businesses entering or doing business in the Chinese marketplace) needs to focus on are:

  • Any international business can’t afford to miss the China market
    Low cost country sourcing might be going away, or changing in nature, but China is here to stay as not only a huge supply base, but an economic development opportunity.
  • There is a huge buy-side demand, growing larger by the day.
    Not only does China have one of the largest emerging middle-classes in the developing world, but they already have one of the largest middle-classes in the world. (Think about it, they have over 1.3 Billion people!) China is not just a large supply-side opportunity, but they are a large sell-side opportunity for any company that can offer the right products at the right prices.
  • The key to success is to think globally, but act locally.
    Doing business in China requires a balance and an understanding of local culture and geography.

However, James’ answer to my inquiry on the three biggest challenges to doing business in China was even more revealing on what it takes to do business successfully in China than the three most important areas on which you need to focus. In short, the three biggest challenges are:

  • People
  • People
  • People

Despite the cultural and language differences, the reality is that doing business in China is just like doing business with most developed countries. They’re very mature about their approach to business (they understand that business ebbs and flows in a repeated cycle, and that just because they’re getting a lot of business today, that doesn’t mean they’ll be getting a lot tomorrow and that they’re going to have to work to get and keep new business), they have new plants with industry leading technology (in fact, some suppliers have the most modern plants in the world for what they produce due to recent investments to keep up with Western demand), the leaders understand that it’s all about the people (as almost everything but the human equation can be automated these days), but, even with 1.3+ Billion people, it’s a constant struggle to find the right people with the right education and the right skills for the job. Especially when they have to play in a global marketplace.

As for what’s going on with the rest of MFG, you’ll be hearing a lot more from them next quarter, and I’ll have more to discuss at a future time as well, but for now, I need to hit the road again and wonder just what Willie was thinking. (Obviously, he didn’t drive his own tour bus!!!)

Are Your Managers Sabotaging Your Business?

At the recent Enterprise 2.0 Conference there was a presentation by Don Burke and Sean Dennehey from the CIA that’s been making a lot of buzz in the blogsphere (on sites such as Joho and Boing Boing). It seems that, as part of their presentation, they cited a page from the (now declassified) 1944 Simple Sabotage Field Manual on General interference with Organizations and Production. This section had eight tips on organization and conference sabotage, seven tips for office workers, ten tips for employees, and fourteen tips for managers.

But the section for managers is the best. It says:

  1. Demand written orders
  2. “Misunderstand” orders. Ask endless questions or engage in long correspondence about such orders. Quibble over them when you can.
  3. Do everything possible to delay the delivery of orders. Even though parts of an order may be ready beforehand, don’t deliver it until it is completely ready.
  4. Don’t order new working materials until your current stocks have been virtually exhausted, so that the slightest delay in filling your order will mean a shutdown.
  5. Order high-quality materials which are hard to get. If you don’t get them, argue about it. Warn that inferior materials will mean inferior work.
  6. In making work assignments, always sign out the unimportant jobs first. See that the important jobs are assigned to inefficient workers of poor machines.
  7. Insist on perfect work in relatively unimportant products; send back for refinishing those which have the least flaw. Approve other defective parts whose flaws are not visible to the naked eye.
  8. Make mistakes in routing so that parts and materials will be sent to the wrong place in the plant.
  9. When training new workers, give incomplete or misleading instructions.
  10. Hold conferences when there is more critical work to be done.
  11. Multiply paper work in plausible ways. Start duplicate files.
  12. Multiply the procedures and clearances involved in issuing instructions, paychecks, and so on. See that three people have to approve everything where one would do.
  13. Apply all regulations to the last letter.

I don’t know about you, but that sounds like your average manager to me!

What I Learned From Conference Season II

In my last post, I covered the lessons proffered up to you by Jason “The Prophet” Busch of Spend Matters (Three Lessons from Conference Season), Vinnie “The Deal-Maker” Mirchandani of Deal Architect, and Brian “Service Master” Sommer of Services Safari. Today, I’m going to share with you the top three lessons I learned from Conference Season. They are:

  • Big Names Definitely Don’t Mean Big Ideas
  • You Don’t Have to Go to that Many Conferences to Tap Into the Buzz
  • Kill the Left-Suckers!

The two worst presentations, and two I walked out on in disgust, that I attended this year were put on by … wait for it … representatives of SAP (at SCL Canada) and Infosys (at reSource). Just because you have ready-made decks, that doesn’t mean that you have a ready made presentation. First of all, the decks have to be good (they weren’t). Secondly, the presenters have to understand the material (and in at least one case, the presenter did not appear to), and, thirdly, the presenters have to be good (they really, really weren’t). I’ve said it before, and I’ll say it again, only Pierre Mitchell can get away with cramming two-dozen concepts on a slide and still have it make sense. And Pierre Mitchell is also one of the few who can get away with, when he chooses, ignoring the slide completely, or saying the exact opposite of what’s on the slide. If you’re a (p*ss) poor presenter, you can’t. So please, please, please — DON’T TRY!

Any more than three conferences per season, and you’re wasting your time (unless you’re just going to meet up with colleagues and sit in the lobby and network). I’ve only been to two so far, and even before I got through the first, I was thinking “didn’t I just hear this”? Multiply that by three, and you get tired — fast. The buzz, which has a life of its own, travels fast, and you don’t have to go to that many events to be sure of getting it. The key, as Jason and Vinnie pointed out, is to make the most of them when you’re there.

Finally, the best piece of advice offered up this conference season was by Jim Tompkins of Tompkins’ Associates in his presentation on Bold Leadership for Organizational Acceleration where he came right out and handed out the best piece of advice for organizational success that I’ve heard a management guru utter — Kill The Left-Suckers. (Yes, contrary to popular opinion, the best piece of advice one can get is not to kill all the lawyers, because, even though the majority of lawyers are left-suckers, not all lawyers are left-suckers and, more importantly, not just lawyers are left-suckers.) For those of you who happened to miss the original post, a left-sucker is a person who can’t do his (or her) job, and pulls his (or her) manager away from doing what the manager is supposed to be doing to help the individual who can’t do his (or her) job. A left-sucker is bad because when managers are consistently pulled away from their jobs, they don’t get their work done and then their directors have to step in to pick up the slack. When the directors get consistently pulled away from their jobs, they don’t get their work done and then the C-Suite has to pick up the slack. When the C-Suite has to pick up the slack, they aren’t getting their work done, and then the CEO gets pulled into fire-fighting on a daily basis — and instead of the CEO leading the C-Suite in setting strategic direction, he’s bogged down in tactical execution while the company starts burning down around him.

So there you have it. As Jason said, the innovation is there for those who look for it, but as Vinnie would attest, it’s not always where you would expect it; the buzz has a life of its own and you don’t have to go to a dozen conferences to tap into it; and you shouldn’t be afraid of using the axe. (Alternatively, there are hired guns you can bring in if you’re too timid to do it yourself.)

Success Breeds Failure (Unless You Are Constantly Re-inventing Yourself)

As I indicated last week, the best presenter at this year’s 41st Annual Supply Chain & Logistics Canada Conference on Creating a Resilient Supply Chain was Jim Tompkins’ (CEO of Tompkins’ Associates) who gave the keynote and a presentation on Bold Leadership for Organizational Acceleration.

In addition to his great advice to Kill the Left-Suckers, he also made another great point – that success breeds failure. Peak-to-valley is the natural order in business, and if you think you’re going to stay at the top by doing what you did to get there, you’ve got another thing coming. If you want to stay at the top, you have to re-invent yourself the minute you get there – and not one minute later.

He also exposed some of the great myths of leadership – of which there are quite a few. These myths include:

  • Leaders create organizations that run like clock-work
    Only old analog clocks run like clockwork – and how many of those do you see these days?
  • Leaders are renegades that do things differently from others.
    Renegades tend to be loners – kind of contradictory when you think about what a leader is supposed to do.
  • Leaders are interested in immediate results and not the long term.
    No, that would be short-sighted wall street.
  • Leaders can predict the future.
    Not even futurists can predict the future on a small scale.
  • Leaders are machines that process and analyze spreadsheets.
    No, that would be misfit managers.
  • Leaders don’t rock the boat.
    Uhmm … have you ever been on a boat?
  • Leaders are compelling and fascinating people who can charm people into doing anything and everything.
    Just because some of our leaders today are sleazier than con-men doesn’t mean that they’re all grifters.
  • Leaders are into command and control.
    Leaders are into success … and that doesn’t come from hoarding.
  • Leaders lead from ivory towers.
    No, that would be academics … and considering no one in industry tends to listen to them anyway, are they really leading?
  • Leaders are among the few.
    Maybe, but it doesn’t have to be that way.

Although it’s hard to define a true leader, you can define what leaders do, and they:

  • challenge the process
  • inspire a shared vision
  • enable others to act
  • model the way
  • encourage the heart as well as the head