Category Archives: Miscellaneous

Don’t Get Your Procurement Project Cut — Ask For Help From Your CFO

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A recent article on the “Disciplinarians’ Dilemma” in CFO Magazine noted that nearly all CFOs today have a mandate to conserve cash and that a recent McKinsey study found that 40% of companies surveyed are actively seeking to reduce research-and-development costs as well as the number of research-and-development projects they are funding. This is, of course, quite troubling because, as I have said over and over again (in my “dumb company” and “dead company” series), slashing research-and-development budgets in the near term will place companies in precarious competitive positions when the economy does turnaround. More specifically, they’ll struggle even more to maintain their existing client base while those companies that did innovate and develop more valuable solutions in the downturn will not only get most of the new customers, but lure some of their competition’s customers away.

However, as the article notes, instead of acting as the enemy of innovation, a CFO can play a critical role in fostering research-and-development. Given that the biggest weaknesses most companies have when it comes to innovation revolve around sticking to timelines, earmarking funds, and balancing the innovation portfolio, and that these are the strengths of the finance department, a CFO can play a critical role in the development of innovative new solutions by doing what she does best.

Furthermore, the same logic applies to procurement. While some less-than-visionary CFOs will look upon Procurement as a Cost Center, and try to freeze budgets, delay the acquisition of new technology, and freeze hiring even when you lose your staff due to attrition to more generous competitors, innovative CFOs will instead embrace the value, and substantial savings, Procurement can bring and help them balance their projects, funding, and available resources for maximum return to the company. And the best way to fall into the latter camp is to not only tell them what you can do, but let them know how they can help make your savings plans a reality and ask for their help. After all, which project are they likely to kill first — one they know nothing about or one in which they see, and are contributing to, the value?

Social Networks ARE a Disruptive Scourge

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… and despite what Phil Fersht says, we should not embrace them. I could write a five page essay on why we should outlaw them, but since they’ve given all of you ADD (Attention Deficit Disorder, if you’ve gotten this far), I’ll get to the point.

If you and your employees are checking your tweets every five minutes, how much work are you getting done? The answer: very little … at a time when your smart competitors who have banned MySpace, FaceBook, and, most especially, Twitter, from the workplace are running circles around you. There’s a place and a time for Web 2.0, and where most of today’s instantiations are concerned, the office is not one of them. It’s one thing to incorporate the useful components of the technology to allow your global workforce to come together, collaborate, and share ideas like RollStream did (which I do recommend) … but it’s another to allow your employees to follow sockington the cat on Twitter on work time. Think about it.

Some Project Management Basics from SupplyManagement.com

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The one thing supply management has in common with IT is this: projects are never easy, and project management skills are becoming increasingly important if you want your project to be successful. To this end, a recent article in SupplyManagement.com, that claims you should “rule with an iron triangle” (referring to the parameters of time, cost, and quality that must be maintained in a constant balance), attempted to outline the key issues at each stage of a project that must be managed for project success. And while it’s impossible to sum up all the intricacies of project management in a single article, a few good tips never hurt — especially if you want to avoid the “seven stage syndrome” that is all too common in mismanaged and unmanaged projects (wild enthusiasm –> disillusionment –> confusion –> panic –> search for the guilty –> punish the innocent –> glory for the non-participants).

The following are some key issues, and tips, for each of the five main stages of a basic project life-cycle:

  • InitiationThe project needs to be appropriately defined. Create a “project initiation document” that captures and documents key issues, key risks, project structure, and authority levels.
  • PlanningIf not controlled, “padding” can escalate out of control. It’s important to collectively break down the project into a set of manageable tasks that can be reasonably estimated without the need for excess “padding” by an individual outside of their comfort zone.
  • Resourcing & Cost-EstimationCosts can spiral out of control without a plan, and they will spiral out of control without a good plan backed by diligent homework that assigns (reasonably) accurate costs to each component.
  • ExecutionIf not closely monitored, you’re likely to find out at 500 feet that your parachute lines are tangled … leaving you essentially no time to untangle them. But if you monitor closely, you can find out that they’re snagged at 5,000 feet, when you still have time to untangle them.
  • CompletionThis only happens if your project is well planned, well executed, and monitored closely. Otherwise, while you will end up somewhere, it won’t be where you want to be.

Is Trouble Ahead for the Purchasing Profession?

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A recent report by Loudhouse, sponsored by BravoSolution and covered in Industry Week in their article on “Purchasing Officers: Confident Now, But is Trouble Ahead?”, found that 69% of the CPOs surveyed had not examined the impact of the last six months on their supply management strategy, which leaves them exposed to potential long-term problems.

This is problematic, especially since the research study found that many purchasing professionals are currently following short-term strategies that could lead to long term problems. As the article states, CPOs can deliver cost savings today by hard negotiation, however tomorrow’s efficiencies must be realized through evolving business strategies and addressing the top three procurement challenges of ‘cost saving,’ ‘speed,’ and ‘visibility’. But this hard negotiation can backfire. After all, as per a recent CPO Agenda study, which quantified the doom and gloom in the market today, half of the respondents have already experienced the bankruptcy of at least on key supplier since the year started, and over three quarters of CPO respondents are (very) concerned about the prospect of other key suppliers going out of business before the year is over.

So if you want to avoid trouble ahead, be sure to insure that you leave your suppliers some margin, that you pay on time, and that you monitor your suppliers health.

Nine Hundred and Forty Three Thousand Five Hundred and Eighty Four

Nine Hundred and Forty Three Thousand Five Hundred and Eighty Four words later (including the words in this post), or Thirteen Hundred and Eighteen posts later (which does not count the dozens of guests posts on other blogs, including e-Sourcing Forum, Supply Excellence, Procurement Leaders, and Deal Architect), and Sourcing Innovation (SI) officially turns three. Although not that long of a time, even in net-time, it is extremely significant in blog-time, especially for a blog that posts every day, twice a day on work-days.

It has been a great year. Growth has continued to the point where not only is Sourcing Innovation undisputedly (at least) the second most trafficked blog in the space any way you want to look at it, with well over 10,000 unique visitors a month (from thousands of organizations), but it’s reach on the search engines is, on average, three times that of any other blog or publication in the space. And, of course, it’s reach and influence is still growing … globally … without any signs of slowing down, especially now that a few of the thought leaders like Kevin Brooks, Norman Katz, and Dick Locke, who have posted regularly on SI since day one, have decided to take on regular contributor roles.

However, I still contend that the best has not been written. Even though this blog has covered the full range of the sourcing and procurement cycles, from spend analysis to contract management through requisition to e-payment and reconciliation, and branched further into enterprise cost management, supply chain risk and fraud management and prevention, and global trade with the help of some guest authors and contributors, and continued to keep green, sustainability, talent management, supply chain finance, and other best practices in the forefront, it’s still only scratched the surface. There is still more to tell, and even though the Sourcing Maniacs made a herculean effort, still many more vendors to cover — and with our understanding of supply chain, and the world in general, increasing by the day, you can never stop learning — and never, ever, stop innovating. And that’s what Sourcing Innovation is all about.

(So if you’d like a piece of this action, at a cost less than your average Google ad-words or trade publication e-mail blast campaign on a per eyeball basis [because, when you get right down to it, it’s impressions that matter], check out the Open Pricing Model and contact us using the contact information in the FAQ. You won’t be disappointed.)

[Of course, this also means that Sourcing Innovation will reach the 1,000,000 word mark next month. This puts Sourcing Innovation in a very exclusive club. To find out how this value can benefit you, again, please contact us.]