Category Archives: Miscellaneous

How Do You Identify Tomorrow’s Supply Chain Paupers?

They still use paper today.

Although I don’t understand how any supply chain focussed business, and a logistics carrier in particular, could still be paper-based. It blows my mind that the WT 100, in their recent article on “Rounding the Optimization Curve”, reports that there are still a significant number of carriers that keep their records on paper. How can you survive in today’s cost-competitive, just-in-time, value-conscious supply management landscape and work on paper?

And while we’re at it, let’s talk about how you can identify the dead men walking of the day after. They use Excel. We’ve known for years that errors in spreadsheets are pandemic. Needless to say that it boggles my mind that Microsoft Excel continues to be the application of choice for supply chain and logistics management around the world. Fidelity lost 2.6 Billion as a result of a spreadsheet error, Fannie Mae made a 1.13 Billion honest mistake, and RedEnvelope lost more than a quarter of their value in a single day after they warned of a fourth-quarter loss due to a budgeting error that resulted in an overestimate of gross margins. How long is it going to be before someone accidentally uses a plus sign instead of a minus sign in a profit formula and forgets to uncap an inventory calculation and instead of ordering 100,000 units of a profitable product, instead orders 1,000,000 units of a product that actually results in significant losses at the target sale price, for which the market demand is weak, ties up all of the organization’s working capital, and essentially bankrupts the company? My guess, with the steadily increasing complexity of S&OP, JIT inventory management models, and supply chains, not much longer. But, maybe after a few companies are brought to their knees from spreadsheet errors, we’ll see the day when Excel is sh!tcanned along with the dinosaurs who still think it has any more use than a HP or TI calculator.

It’s time for anyone still on paper or Excel to wake up and realize we don’t live in Walt Disneyland and that the story of the prince and the pauper is a fairytale. A pauper is not going to become the benefactor of princely riches just by looking like a bigger, richer, company. In today’s uber-connected world, appearances don’t account for much. It’s not long before someone digs deep and uncovers the truth.

There’s a reason why customers are demanding end-to-end visibility of their supply chains, including those of their supply chains logistics’ partners. And a reason customers ow expect all of their suppliers and business partners on the supply chain (including logistics providers) to participate in a supply chain social network. It’s because they know that the only way they can accurately manage their supply chain is to keep on top of it, that the only way they can build accurate models is with accurate data gathered from partners, and that the best reports they are going to get are going to come from supply chain visibility and planning software plugged into these “social networks” (where, in reality, these are “enterprise communities” that allow the necessary collaboration, not “consumer networks” where you can poke, prod, and shake your buddy for no apparent reason).

In other words, paper is dead, and Excel will be the new paper, and then, someday, it too will be dead. So if you don’t want to be the pauper, move off of these technologies and onto solutions designed for your supply management needs. With a plethora of Best-of-Breed solutions on the market, designed for large and small providers, it’s extremely likely that there’s at least one solution that meets your needs almost exactly with minimal tweaking. If you look hard enough, the doctor would bet that there’s at least three, or will be before you can look twice.

Supply Management and Investor Relations

This summer, e-Sourcing Forum ran a three part series on Procurement’s Role in Investor Relations (Part I, Part II, and Part III) that was quite interesting. In the series, the author, David Henshall of Purchasing Practice outlined the four essential roles played by procurement in investor relations. In a nutshell, these roles are:

  1. Ensuring the Investor Community has a Timely and Accurate Picture of Supply Side Activities
  2. Helping the Investment Community Comprehend how Supply Markets Impact Strategic Decisions
  3. Delivering Shareholder Value by Maximizing Opportunities and Minimizing Risk
  4. Supporting Senior Management in Making Strategic Decisions

And they must be fulfilled in the terminology and metrics understood by the investment community – EBITDA, ROIC, EPS, etc.

And these are key roles, but in today’s profit-focussed economy, the importance of the following roles should not be de-emphasized

  1. New Market Identification
    Supply Management is likely already sourcing from the markets the company wants to expand into to spur growth, the investor’s holy grail.
  2. New Product Design & Introduction
    While engineering and marketing can come up with great ideas, they are typically not the most cost effective ones in their initial instantiations. Supply Management can suggest alternate materials, components, and services to lower costs and suggest value-adds to increase revenue. Profit margins can often be doubled or tripled and everybody wins.
  3. Brand Development
    Sometimes, the best way to get a quick boost to the brand is to partner with another brand that already has a great brand. For example, we’re all familiar with “Intel Inside”.

The importance of Supply Management cannot be understated, especially given the centrality of supply management to value creation.

To Solve the Talent Crisis, Think Different!

We have a talent crisis across the board in Supply Management and Supply Chain. We shouldn’t have a talent crisis, but because of continual short-sightedness in industry and government, we do.

And at this point I should probably end the post because by now the average person who stumbles upon this post is probably screaming that it’s not our fault, because we value talent, we have great education systems, and we’re trying hard to fix it, etc. etc., but it is our fault. Why?

Every year we rank talent in the top 3 issues. And every year, as our hopes and dreams that strong growth and stability will return get slashed by reality, the first thing we do is cut the training budget. And then, when we realize that there’s too much to do with too little people, we cut professional development time and ask people to work overtime on tactical tasks that add nothing to their skill set. And the cycle continues. So, in the corporate world, we cause our own chaos.

And then, when we have millions of people out of work, with thousands willing to retrain for better jobs, we limit unemployment benefits and make it almost impossible to get money for professional and degree programs. And I’m not just talking scholarships or sponsored training, I’m talking loans that many of these people would be willing to take, and carry for years, just for the opportunity to acquire a skill set that will see them working again. So the government is doing nothing to actually fix the situation. Governments have to guarantee loans for education and they have to subsidize living costs for workers who need retraining if their future earning benefits will limit the ability to repay very high loans. But that’s another issue for another post.

The point that needs to be harped on is that, as an industry, we’ve created our own mess, and we perpetuate it every day. As the job of Supply Manager gets more and more demanding, the response I’m seeing is “We need a talented, educated, skilled individual with a Masters Degree in Supply Management, who speaks three languages, has experience with MRP, ERP, and best-of-breed technologies, has sourcing expertise in three categories across five verticals, has managed 100 Million dollar projects, is trained in negotiation, etc. etc. etc.”. And, in the end, we have a set of requirements that maybe 6 people in the world can fill because ( a) it’s way too much for one person and ( b) the company has never bothered to train anyone internally with even half the skills it wants.

If a company instead took care to appropriately define a set of reasonable job descriptions that would cover all the necessary skills, and then identified internal candidates and trained them for those positions, they would have half the battle solved. Then, if instead of looking for someone for the role who had all of the skills, looked for someone who has the education and experience to quickly learn all of the skills with the mentorship of the people trained internally and a few focussed professional development courses, I’m convinced half of our talent crunch issues would magically disappear over night. (The logistics half would still be an issue because we have the image problem associated with warehouse and trucking jobs in this economy. Because we don’t view those jobs as highly important and an honour to hold, as the Mexicans do [which is why I’m okay with giving them our trucking jobs], convincing people to even consider those jobs will continue to be difficult.)

And then, as this recent article over on the HBR network on how workers with disabilities solved Gitanjali Gems’ talent problem, we never take the time to realize that someone else’s island of misfit toys might actually be filled with the resources we need to do the job. Now, I agree with Charles’ that Supply Management has traditionally been the island of misfit toys in an organization, and that is a big problem, but the reality is that if someone is skilled in X when organization Z needs Y, that person will be a misfit toy in organization Z. The best candidates for a Supply Management job are often people in engineering, high tech, medicine, (bio) chemistry, etc. who know the details of the category that need to be sourced, and the challenges that are involved, but who are not necessarily the best people to be building the projects or doing research. Just like some of the best sales and marketing people in high tech are people with CS degrees who learned to code, figured out that they weren’t very good at it and/or didn’t like it very much, but that they understand inherently what could and could not be done and the relative amounts of effort different commitments to a customer would carry. In IT, many R&D misfits became marketing marvels.

In the case of Gitanjali Gems’, they needed cutters. This is a skill that takes training and time to acquire, and a big money commitment from an employer. So they need to find people with interest, aptitude, and loyalty, as they’d lose big financially if they lost people to the competition as soon as they reached their productive potential. So they looked to people with real disabilities, and found that the attrition rate was 10 times lower, the productivity was 30% higher, and the overall working atmosphere became one where people “felt good” when they went to work, making them want to work even more. In my book, this far outshadows the additional benefits they received from the government (which ends up paying about 15% of the salaries), and the good press they get for the initiative. Because the company found people who wanted to work, and gave those people the training and tools they needed to be successful, the people enjoyed working for the company, worked 30% more productively, and stayed around a lot longer. Which shows that the talent crunch is solvable, if you just get up and actually do something about it.

While We’re All Remembering September 11

Let’s not forget September 16. While the scope of the tragedy was much less severe, the Wall Street Bombing of 1920, which took place 82 years ago today, is an indication of what can happen at home if social unrest gets too high. It was the deadliest act of terrorism on U.S. soil up until the day it occurred.

Given the anti Wall-Street resentment, the state of unemployment, and the dire straits America could find itself in if the Federal Reserve does not keep it on track, this, unfortunately, is an event that could conceivably reoccur. In our haste to not forget, let us not forget.