Category Archives: Miscellaneous

Centralize or Not?

Badly judged centralization can stifle initiative, constrain the ability to tailor products and services locally, and burden business divisions with high costs and poor service. However, insufficient centralization can deny business units the economies of scale or coordinated strategies needed to win global customers or outperform rivals.
McKinsey Quarterly, “To Centralize Or Not To Centralize”

So how do you answer the question? Especially when none of the executives interviewed in 30 different global companies volunteered an orderly, analytical approach for resolving centralization decisions when interviewed. After all, benchmarks, politics, and fashion — the usual approaches — are not the answer.

In the above referenced article, McKinsey put forward a decision making framework based on three questions. According to the framework, centralization should only occur if at least one of the following questions can be answer affirmatively.

  1. Is it mandated?
  2. Does it add significant value?
  3. Are the risks low?

For the most part, SI agrees. The only disagreement is with the explanation of value. According to McKinsey, it should add 10% to the market capitalization or profits or be part of a larger initiative that will add 10%. Significant value is not always immediately quantifiable, especially where innovation is involved. Thus, SI would also recommend centralization if the following question can be answered affirmatively:

  1. Will it increase the chances of innovation without significantly reducing any of the benefits decentralization provides?

If, for example, the only downside to centralizing a certain buy is that you have to add more users to your online supply chain platform and buy a few more licenses, this would likely be a case where you would centralize the buy as it would provide opportunities to innovate in network design and inventory management.

You Can Search, Search, Search … or Just Read SI!

In 2008, Google had indexed One Trillion Web Pages. And many, many more have been added since then. According to Rick Skrenta, co-founder of blekko, there are now more web pages than there are things in the world. And while it’s likely not the case yet, as there are probably 10.5 Sextillion bugs in the world (as it is estimated that there are 1.5 Billion Bugs per person, and there are close to 7 Billion people), and we could count each individual bug as a thing, at the rate the web is growing –especially when each post, each comment, and each tweet can be its own web page — it might not be long before this is true, especially since predictions put the size of the web at 600 quintillion web pages, or one for every 17.5 bugs, by 2020 (which puts us at one page per bug by about 2021).

With content proliferating faster than even the fastest computer virus, it’s getting almost impossible to find what you’re looking for through a web search. Good luck coming up with an initial query that returns less than 100,000 pages. I tried three random combinations of unlikely words in Google, and the best I got was 190,000 pages. (Dodo, apollo, elvis – 961K; Risk, canary, electricity – 1.43M; Poppins, Hamlet, vikings – 190K.) There’s a reason that Googlewhacking died a long, long time ago. There is no one result anymore.

And that’s why blogs, which have been proclaimed dead by the twits who think tweets are the future, are going to return to the glory days. You need someone to sift through the noise and find the useful content to get you through your day, because it’s now beyond the power of even the most powerful search engines to do most of the time. So keep reading SI, and you’ll have one fewer (time-consuming) search to do each day.

Manufacturing Bliss: The Making of the Swiss Army Knife

This summer, while many of you were on vacation, CNet ran a great Geek Gestalt article on “where the swiss army knife gets made” that is a must for any supply chain geek as it shows that even in an age of increasing outsourcing and mechanization, sometimes the best products are still made by hand in a small factory in Ibach, Switzerland – even if the required volume exceeds 17 million.

Rather than spoil the grandeur of the article, I’m just going to recommend you check it out, and the YouTube videos it contains. It truly is Geek Gestalt.

Finally, A Good Consumer Use for RFID!

I’m sure many of you will have arguments to the contrary, but this is the first use of RFID to enable the end consumer that I have to outright applaud.

Who doesn’t want to pour their own draft, when, how, and in the amount they want? It’s Frackin’ Awesome!

For details, check out this great article over in the RFID Journal about how the “wall of beer lets patrons draw their own drinks”. It’s … wait for it … Le-gen-dar-y!

How to Deliver Superior Customer Service

A recent article over on Chief Executive had some great tips on How to Deliver Superior Customer Service that apply equally well to Supply Management as Service Delivery. These tips are important because if you figure out what your customers want and how you can adapt your offerings to best serve their needs, you will raise your profile in their eyes. Since the lifetime value of their support is much more than that of your average supplier, this is a good thing. So what was their advice?

  1. Always Ask What You Can Do Better
    More feedback means more opportunities for improvement, from the first consultation to the final delivery of product. Remembering that the best way to reduce spend and increase value is to be involved from the time of product or service design, and not after the requirements have been locked in leaving you nothing to do but run a bid between the only two suppliers who can meet the demand, you need to figure out how you can provide value as early as possible — just like a consultant trying to maximize an engagement who knows that a smart customer only keeps her around as long as she provides value. For some customers who understand your value, it might be introducing them to multi-round bids and optimization as an alternative to auctions. For those new to Supply Management, it might be showing them how to speed up information gathering with RFIs. And for those who think Supply Management only comes into play when the need is met, it might be educating them on cost and how you can take cost out. And for those who need to work with a preferred supplier (do to long term contracts or very special needs), it might be teaching them the basics of SRM so they can get more out of the relationship.
  2. Bottoms Up
    Customer driven organizations understand and embrace the idea that their success depends solely on the customer’s satisfaction and must be willing to do whatever it takes to deliver on the promise. This means listening, and responding, to the needs of the client organization. If a certain organization makes a request for help on an RFx every six months, have it at the ready when they come back to you at the expected time.
  3. Win Back At-Risk Customers
    Sometimes a business unit is going to have a “bad experience” no matter how much good effort you put into helping them. They might come to you with expectations of double digit cost savings in a market where commodity costs are skyrocketing and suppliers hold all the power. They might get the rug yanked out from under them because the new supplier you helped them find suddenly goes out of business when a natural disaster wipes out their primary plant. And so on. Even if this only happens one in one hundred events, these internal customers are at risk because the bad experience will be ten times as memorable as the best experience to date. So even if the overall value the business unit gets is high, there’ll still be some animosity due to the failure if you don’t go the extra mile to make them extra happy on another equally important project. As long as there is lingering animosity, you risk resistance on any future project that brings back memory of the failure. This could hinder your success in the future.
  4. Make Your Intentions Clear
    Let them know that even though corporate has given you a mandate to cut cost, your number one concern is to provide them with value, and that since you understand total cost and total value models, you know that if you don’t at least maintain quality and service, overall costs will go up year-over-year even though unit costs go down. As a result, you are there to get them value first and any actions you take or requests you make will be to help the organization get that value, even if sounds like you may be putting your organization or goals first.

It’s great advice, and it only missed one important point (which is as true from a Supply Management perspective as it is from a Customer Service perspective), and that’s:

  • Your definition of value is not necessarily your [internal] customer’s definition of value.
    As Lamar Chesney, CPO of SunTrust pointed out in his presentation on Value Perspectives at the Next Practices Xchange* this spring (as summarized in SI’s post that wanted to know whether you are really focussed on value), what often takes place is an exchange, but never an interchange, of words [that] is fragmented and restricted [in] expression because both sides talk past each other because our view of value (as Supply Management Professionals) is not their view of value (as Finance, Manufacturing, Logistics, Marketing, etc. Professionals). Make sure you understand their definition of value before promising that you can help.

* The Fall Next Practices Xchange takes place at the Oak Brook HIlls Marriott, in Oak Brook, Illinois on Friday, November 4, 2011.