Category Archives: Miscellaneous

Do Common Scorecards Help (with Supplier Management)?

One of the presentations at the 6th Annual International Symposium on Supply Chain Management was on Performance Management in Buyer-Supplier Collaboration Programs. It focussed on the implementation of a common scorecard between a buyer and supplier and described the impact of the implementation.

A common scorecard, which extends the traditional balanced scorecard, was selected because the parties believed that it would lead to mutual success since it would clarify performance measurements, which in turn would align partnership goals, link strategic objectives to day-to-day tactical execution, and communicate the overall effectiveness of the partnership. Once the performance indicators are mutually agreed upon, a common scorecard can be implemented by way of regular data exchange between the parties.

The presentation described a case study on custom packaging materials where consignment stock (VMI) was used. In this particular example, where goods were being transported from Asia to Western Europe, the lead time was eight weeks, the demand viability on the buy-side was high, and the goods had to be expedited by air on a regular basis due to regular stock-outs. The motivation behind the implementation for the buyer was to decrease shortages and increase forecast accuracy and the motivation for the supplier was to improve operations efficiency and overall customer service.

The parties chose to monitor production cycle time, transit time, consumption vs. forecast, stock-outs at the buyer site, number of expedited shipments, the value of stock on hand for the next eight weeks of forecast, and the value of stock materials without demand. To enable these measurements, the buyer shared stock, consumption, minimal target stock, and consumption vs. forecast data on a weekly basis and the supplier shared its dispatch (supply) plan and stock levels with the buyer on a weekly basis.

After implementing a common scorecard, supplier production cycle time decreased 60%, consumption vs. forecast accuracy improved 40%, the number of expedited shipments in a month dropped from an average of 7 to 1, and the value of stock on hand decreased 25%, while the other measures remained constant or improved slightly. Thus, when properly implemented, common scorecards appear to do quite well. This is what one would expect if both parties enter into a collaborative partnership, share data, and work toward a common goal. More information will be released in an upcoming special issue of the Journal of Operations Management next March in a paper by Barros et. al.

Dumb Company

Two weeks ago I brought you CIRCUIT, “Corporate Intelligence Rating Calibration Under Inflationary Times”, where, I’m sure, many of you (who work for, and run, intelligent companies gifted enough to recognize the genius you display as a regular reader of Sourcing Innovation) asked “Can a company really be that dumb?”. The answer is, an unfortunate, yes. And in recessionary times, dumbness spreads like a disease. (Although it’s a meaningless statistic, it is interesting to note that a search for “dumb company” in Google brings up 16 Million hits. That’s almost Christina Aguilera level of popularity … in fact, it’s only dwarfed by the popularity of Britney Spears and the Circus she is due to unleash on the world on December 2.)

So today, helped by Google, I decided to bring you a starting list of other things that dumb companies do. Feel free to add your own in the comments, to help your fellow reader stay on the straight and narrow.

  • Brochure Mania
    As highlighted in this Remarkable Communication article, you can’t afford to print 10,000 brochures and then dump 9,950 in a toilet. (And the environment can’t afford it either!) If you feel you need a brochure, this there’s neat little technology called word processing that can generate industry standard formats, like PDF, that every computer can read.
  • N-Tuple Opt-In Everyone who E-mails You
    Just because someone emails you to say they like, or don’t like, your product, that doesn’t mean they want to be added to every single e-mail list your company has.
  • Assuming all of your customers are hip 25 year-old caucasians who listen to i-Pods, drink Starbucks, and hug trees in their Gap outfits.
    Chances are the majority of your customers aren’t who you think they are. In the enterprise space, assuming all of your customers run SAP and think it’s the greatest gift to man since sliced bread isn’t a great assumption either.
  • Lawyering Up …
    And suing everybody who might be infringing one line of a 100-page patent that should never have been issued in the first place. Only money-grubbing lawyers win in patent wars. If you were smart, you’d lobby for the US to go the way of the EU and abolish software and business process patents. They’re just stupid. There are laws for copyright. There are laws for espionage. There are laws for theft. Beyond that, if you can’t compete fairly, maybe you shouldn’t be competing at all.
  • Forgetting the Customer
    Maybe the customer doesn’t know the best way to solve his problem, but he knows more about it than you do. Don’t assume that only you can solve it, or that you know more about it than he does.
  • Forgetting Value
    Cost matters when money is tight, but so does value. If it sucks, it doesn’t matter how cheap it is. Once word gets out it’s a piece of trash, very few people will buy your product.
  • Cutting back on Customer Service
    When a customer is irate because you sold him something that doesn’t work … putting him on hold for hours or promising a solution “in next year’s release” isn’t going to win you any brownie points. It’s going to make him look for an early exit from your relationship.
  • Forgetting Your Employees are People, not Chattle
    They’re not resources to be reallocated, or liabilities to be released … they’re your dedicated employees who are there to help you through tough times.
  • Forgetting Sustainability
    You can always afford to go “green. Maybe you have to be creative. Maybe you have to do it in baby-steps. But you can always afford to go green.
  • … and many, many more.

Now it’s your turn. What are the dumbest things you had the opportunity to experience in the corporate world (and that led you on the path to your current job, where your intellect and dedication is appreciated). Alternatively, if you are among the unlucky few who joined a company that masterfully hid its ineptitude during the recent mini-boom, and that is now showing it’s true colors (and causing you to search for a smarter company), what dumb things are you seeing?

Who’s up for Brews in Boston?

the doctor will be in the Boston Area for most of next week, and currently has a fair amount of free time (particularly later in the week when many of you Americans take your 4-day weekend). If anyone would like to meet, and brief, the doctor, please drop a note.

The Replicators are Coming!

Check out RepRap and then tell me something … are these guys geniuses, or are they completely bonkers? I don’t know … but I would think it would be impossible to not know about Star Trek (the Borg), StarGate (the Replicators), or the Matrix or every other variant of self-replicating automaton that exists for the sole purpose of taking over the earth, the galaxy, and, ultimately, the universe? There’s a difference between innovation and self-elimination. I’m not sure these guys get it. Your thoughts?

How Dumb is Your Company?

Although it is likely that the majority of my regular readers — who strive to improve their knowledge, capabilities, and skill-sets by the day — work for above average companies who are reasonably intelligent at their core, it’s a recession out there, and your average company is getting dumber by the day. Moreover, many companies don’t even seem to realize how dumb they’re getting or the bad precedents they’re setting for good companies who will be pressured by investors and Wall Street to follow their lead. Thus, in my quest to keep your company on the straight and narrow, I bring you CIRCUIT: the “Corporate Intelligence Rating Calibration Under Inflationary Times”. I hope you don’t need it, but if you do, I hope it persuades your managers, and investors, from doing dumb things.

In recessionary times, companies have a tendency to execute one or more of the following 10 dumb mistakes. To determine your corporate intelligence, start with a score of 10 and subtract 1 for each act of corporate omission.

Doing Away With the Perks
Usually the first thing to go when money gets tight are the employee perks. If perks at your company happen to be box seats at the game, and a box costs your company 100K a year, then it’s a justifiable call. However, at most companies, “perks” are usually limited to refreshments in the break room, the odd meal out, and the odd office party which, when combined, account for a total cost that is a negligible rounding error on the balance sheet. The pennies you save is not worth the loss of morale, and productivity, that will result from taking away your employee’s 25 cent coffee or soda. 		-1
Delaying that Technology Purchase
Companies that win do more with less. They do that by deploying technology that increases the productivity, and capability, of their staff. Look at the Hackett numbers. Leaders spend more — way more — on technology.
I’m not saying that you should go out and spend millions on a new ERP, since some traditional enterprise solutions on the marketplace are way overpriced, but if you’ve identified a need for a system, do your homework, find a low-cost (SaaS) solution that meets your needs, and license it on a pay-as-you-go basis. 		-1
Postponing New Product Development
Recessions do two things. They break (and sometimes bankrupt) losers and they make leaders. In strong markets, the leading companies are always — ALWAYS — those companies that emerge, lean (which means cost-conscious and not cost-focussed) and mean, from a recession with new products and services to meet the needs of the market. This also means that leading companies continue to innovate new products during a recession (as well as new ways to produce or deliver them more cost effectively). 		-1
Freezing the Marketing Budget
Companies that succeed in recessionary times are companies that conduct business-as-usual. Although this doesn’t mean spending millions on a Super Bowl ad, it does mean a continued advertising presence on the web and at intelligently selected trade shows. Companies that conduct business-as-usual show their (potential) customers that they run their business responsibly, in good times and bad, and are more than capable of riding out some rough waters here and there. (And there’s a difference between responsibly getting a booth at a trade-show and irresponsibly hiring expensive magicians, professional athletes, and bikini-clad super-models to staff it when you have real-world budgets.) 		-1
Strangling the Travel Budget
Global business requires global travel — plain and simple. It’s true that you can do a lot by tele-conference and video-conference, and also true that you should be doing as much as you can with these new technologies, but this will never replace the connection formed by being there in-person, as any good sales person will tell you. Sometimes you need to visit customers, sometimes your remote teams need to come together to form a bond, and sometimes you need to go to trade shows. If you were managing your travel budget responsibly, and only traveling when you needed to, you can’t cut a single penny without negatively impacting your business. 		-1
Cutting 10% Across the Board
A responsible business doesn’t have more employees than it needs to get its work done, and doesn’t retain employees who are not capable of adequately performing the job they were hired to do. This means that every single employee is needed and productively contributing to the business and that, logically, cutting employees must seriously cut into productivity and threaten a business’ ability to continue business-as-usual.
Furthermore, in reality, cutting 10% of your employees is equivalent to cutting 30% to 50% of your operating capability. The first thing that happens is that morale and drive, which greatly impacts an employee’s productivity, tanks across the board. Then your employees get scared and start looking for new jobs — but since most companies aren’t hiring, only your best employees get new jobs. End result: cutting 10% across the board ensures that your top 10% take their leave as well, and the 80% who are left are operating at maybe 2/3rds capacity as they spend a lot of their time worrying about what they’ll do if they lose their job and looking for a new job. Net effect, you lose up to 50% productivity for what you thought was a 10% cost savings. 		-1
Killing the Training Budget
Not only do top companies spend more on technology than their peers, they spend more on training. Why? This allows them to do more work with fewer employees. This allows them to keep their salary expense lean-and-mean relative to their peers, and to earn more per employee, for a total cost that is usually a small fraction of the lean-and-mean salary expense. 		-1
Shifting Focus from Growth-Planning to Cost-Cutting
The leaders, innovative to the core, always find a way to grow slowly in a recession. Always. Always. Always. Maybe it’s only a few percentage points compared to the tens of percentage points they grow when the recession ends, but they grow. The losers switch to cost-cutting and, more often than not, cut themselves out of existence. 		-1
Stifling Innovation to Reduce Risk
Three words: INNOVATE OR DIE! Your choice.		 -1
Retreating into your Moated Castle
This has become my new personal favorite! Often the first thing to go these days after the employee perks is the consulting budget — and it’s often by far the dumbest thing your average company can do. Often the only way of introducing significant, meaningful, cost-saving revenue-generating improvements into your average company is to bring in an outside consultant who specializes in one or more types of business innovation. A consultant who can tell you what technology is right for you. A consultant who can help you define the right new product development roadmap that will result in products customers want to buy, even during a recession. A consultant who can help you maximize your marketing budget. A consultant who can help you save money and avoid unnecessary costs in an intelligent, non-destructive, fashion. And a consultant who can keep you on the innovation path and out of the cost-cutting abyss that ultimately spells a cruel demise to what could have been a very successful business model with just a few tweaks. 		-1

What’s your Corporate Intelligence Rating? If your score is:

  Rating Comments
10 Genius Congratulations! You are a true market leader.
9 Intelligent Quite Good! You’re best-in-class.
8 Smart Not Bad. You’re above average and on the road to stardom.
7 Average You’ve got some work to do, but if you set your mind to it, a bright future awaits.
6 Dull You’ve got your work cut out for you.
5 Deficient You’re handicapped, but if you’re handi-capable, with hard-work, perseverance, and a devout focus on change, you can be average in no-time!
4 Feeble You’re seriously lacking in corporate know-how, but if you open your heart to innovation, and bring in some expert consultants, you can get back on the right track.
3 Dumb You’re going to need a corporate make-over to survive.
2 Moron Find a Leprechaun! You’re betting on Lady Luck at this point!
1 Imbecile Start writing your corporate obituary. It’s just a matter of time.
0 Complete Idiot Congratulations! The Sourcing Maniacs lay their bells at your feet. It should be impossible to be this idiotic and still be alive, but you’ve proven that nothing’s imposible. Have some bubbly before the money runs out.