Category Archives: Miscellaneous

Great Supply Chain Partners Have What Customers Want

This summer, as reprinted on the companion Supply Chain Brain site, Global Logistics & Supply Chain Strategies ran a special report on the “100 Great Supply Chain Partners” that also included an overview of what customers want from their partners that is worth reviewing. According to the article, the 10 most common qualities that buyers looked for in their vendors were as follows:

  • Reliability
    A buyer’s customers will not accept excuses for service failures, so neither should the buyer. Furthermore, when a vendor has proved itself to be rock-solid, an enduring partnership can ensue.
  • Repeatable Excellence
    While good performance is expected, vendors who go above and beyond what is required are the ones getting accolades – and repeat business.
  • Value and Cost Savings
    The key motivation these days for any new technology or outsourced service is cost savings and the most important financial measure is value in terms of increased sales, production, or other revenue-related metrics.
  • Expertise and Knowledge Base
    Manufacturers and retailers increasingly look to their technology and logistics providers for best practices specific to their industry, market or product. Vendors that have this expertise quickly become trusted advisers.
  • Problem-Solving Ability
    Partners able to deal effectively with unexpected events without missing a step earn the eternal gratitude of their customers.
  • Continuous Improvement
    Buyers want to see a plan for product development, so they know their needs will be met in the years ahead.
  • Support
    Rampant industry downsizing means that most companies must rely on their vendors to implement, train, maintain, and support the technologies and services provided.
  • Positive Culture
    Companies want to do business with vendors that are positive about what they can accomplish.
  • Global Capabilities
    Companies of all sizes are looking for technologies and services that allow them to operate with trading partners all over the world.
  • Strong Management
    Nothing can damage a relationship between a company and its partners faster than an erosion of commitment from the partner’s management.

All of these capabilities can be easy to forget at one time or another, but all of them are important and all of them must be consistently applied in order to win and retain your customer’s business through the ups and downs of the market.

Knowing is half the battle … and we’ll use it to win the war!

The 2nd Sourcing Innovation Series – Let’s Get Analytical!

Spend Analysis. Decision Optimization. Cost Modeling. Almost since the beginning, these have been the six dirty words of strategic sourcing. Study after study has found that these techniques easily save 8% to 15% for just about any organization that spends more than 500M a year, but yet, on average less than one fifth of companies out there have tried these technologies, and less than one tenth are using them. It’s like they’re taboo. Well, in the not too far off future, the tables are going to turn, and instead of being the six dirty words, Spend Analysis Based Cost Modeling Decision Optimization are going to be the seven words of saving grace for tomorrow’s sourcing organization that wants to survive beyond the next decade. But the technology of tomorrow is not going to be the technology of today. But first …

Why? There are numerous reasons that this will happen, including negative returns from reverse auctions from early adopters, the forthcoming fall-out of the majority of first-generation supplier networks and marketplaces that still remain, and the eventual realization that contract management is not the holy grail if you don’t have a good contract in the first place, but the primary reason this will happen is the G-Word. Globalization. The effects we’re starting to see now are nothing like what’s going to come, especially since the majority of companies are unprepared!

Tactical job loss to outsourcing, rampant inflation in raw materials due to skyrocketing demand from developing countries, quality issues, and CSR (Corporate Social Responsibility), or should I say CSI (Corporate Social Irresponsibility), issues are only going to compound in the coming years. And, without recourse, this is only going to push costs, as they say, through the roof of the nearest skyscraper!

The only way companies are going to be able to maintain costs, yet alone achieve savings, is by getting a firm handle on costs and, more importantly, by identifying and achieving savings opportunities not previously explored. This is going to require an improved understanding of the cost drivers of what you are buying (cost modeling), and understanding of where variability exists, either within past buys or against market indices (spend analysis), and what the best award scenarios are (optimization).

But it won’t be three applications at three different stages of the sourcing process, it will be one, and it will be at the beginning, center, and end of the sourcing process. Think about what CoExprise is doing for the management of contract manufacturing – integrating the important PLM, Sourcing, and Procurement aspects of complex assembly sourcing – it will be something like that. But instead of an Aravo-Iasta*1-Ketera*2 union for a specific domain, it will be an Apriori–CombineNet–BIQ–Akoya union for the generic product domain. And it will look like nothing you’ve seen before. Sourcing tomorrow will be quite different than sourcing today. The only question is, who are the brave souls that are going to lead the way?

*1 Iasta was acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric
*2 Ketere was acquired by Deem

The future’s coming hard and fast … and I’m gonna be on the freight train that meets it head on!

Sustainable Procurement Supply Management Style: Part II

In June, SupplyManagement.com ran a special supplement on Sustainable Procurement that had a number of good articles. In this post, I’m going to summarize some of the more relevant points from the rest of the articles.

This is because sustainable procurement is part of corporate social responsibility – and corporate social responsibility (CSR) contributes positively to a company’s bottom line. According to a recent survey by Sirota Survey Intelligence, if employees are satisfied with their employer’s CSR commitment, then 86% have high levels of engagement, 82% feel their organization is highly competitive, 75% feel their employer is interested in their well being, and 71% rate senior management as having high integrity.

In “Sustain or be obsolete”, Shaun McCarthy points out that sustainable procurement can boost the economy and bring wider benefits to society. Furthermore, it can build – and sustain – your brand.

In Making a Difference”, Siobhan Cameron overviews how five organizations – including HSBC, the Department for Work and Pensions, the Environment Agency, and Legal & General – are tackling corporate social responsibility.

HSBC, by requiring its suppliers to adhere to socially responsible and sustainable business practices, providing them with a code of conduct, encouraging diversity, adopting new technology, and switching to clean energy was the first major bank to become carbon neutral in 2006.

The Department for Work and Pensions obtains 45% of its electricity from renewable sources, made an upfront investment of £1.68 million in 2004-5 to improve energy and water efficiency in order to obtain an estimated annual savings of £966,000, recycles 51% of office waste, and uses fair trade and organic food in its staff restaurants and catering outlets. Furthermore, it was able to make all of these changes without any additional costs to taxpayers, illustrating that sustainability can be a benefit and not a cost.

The Environment Agency, which launched its CSR program in 2002, has been focussed on improving the green performance of its suppliers. In 2006, it audited its top 20 suppliers and found that not only have its suppliers made energy savings, but they have also seen an increase in business as a result of new and improved CSR credentials. Not only has this effort reduced carbon dioxide emissions by 220 tons, but it has resulted in £19.8 million cash savings in one financial year.

As a result of changes made to paper used in marketing material, together with the 210 tonnes of 100 per cent recycled copier paper they buy every year, Legal & General annually saves: 11,000 trees from being cut down, 2 million Kwh of electricity, 22 million gallons of water, 1,800 barrels of oil and 122 tonnes of waste going to landfill.

In “Green building blocks”, Emma Crates note that the building sector is lagging with respect to sustainable procurement, even though it has a huge opportunity to make a difference.

According to the article, construction is responsible for 52 per cent of the world’s CO2 emissions. In the UK, 17 per cent of all waste is created by building work, with a further 10 per cent coming from manufacturers of building products. And it soaks up 16 per cent of the country’s water.

However, in order to make change, the industry has to stop looking at upfront costs and instead look at the long term savings that sustainable options will generate. For example, biomass boilers are initially more expensive, but are expected to have lower running costs in the long run.

The article also overviews some best practices that the construction industry can deploy to improve their operations. This includes the use of consolidation centers to streamline logistics and reduce the need to store materials on work sites where they can be damaged, the use of video conferencing to reduce the need for managerial travel, the use of eco-friendly site cabins that reduce energy use by up to 40%, and the selection of products using environmental performance.

The article also lists some resources that professionals in the sector can adhere to, including the code for sustainable homes, energy performance certificates, and site waste management plans.

Finally, in “A worldwide view”, Helen Walker and Stephen Brammer report that sustainable procurement is becoming increasingly encouraged in countries around the world. There’s still a wide degree of variation in the extent to which different countries are adopting particular aspects of sustainable procurement, such as procurement from local suppliers, buying from SMEs, and ensuring the safe movement of a purchased product, but at least it’s a start.

Supply Chain Humor This Week VII

Today I bring you three more spendalicious stories from the hat of The Satirical Sourcerer

Do you know where your components are?
While it’s nice to have a strategic sourcing effort to get you the best possible deal for your components, it would seem to be moot, if you end up “misplacing” the components. I would imagine the problem is that much worse, when your components are…. Ummmm… components for building Nuclear weapons.
Audit finds U.S. nuclear weapons parts misplaced (Yahoo News)

I feel sooooo safe now.

Mee liikee Beeere Awksions!
The importance of having a detailed and accurate RFQ/RFP when conducting an online auction was never more evident than in this story: “…a typing error of one person on eBay turned out to be a profit of $500,000 for another savvy eBay trader.”
Bonus: The auction was for a museum quality bottle of beer.
$500K EBay Typo – One Man’s Mistake Another’s Gain (BornRich.org)

Who needs quality control?

Labor rates, and the list you don’t want to be on:
Ten most overpaid jobs in the U.S.

High School Dropout doing basic data entry into a computer $136,000
PhD Blogger who toils to bring you great posts on a daily basis $      0

I think it’s time I give this up and take a job working with the longshoremen down in San Francisco. Seriously.

Is the End of the Big Box Retailer in Sight?

Not that long ago, Strategy+Business ran a very thought-provoking article entitled Big Impact in a Small Format that noted that small format retail stores are gaining popularity and traction in Europe and Latin America where the popularity of the big-box store may actually be on the decline.

According to the article, smaller stores that cater to the needs of local consumers, such as Beaumont in the U.K.’s East Midlands that offers takeout meals as well as traditional grocery and sundries in small(er) sizes and Oxxo’s in Mexico that caters to the local neighborhoods, are gaining popularity. This may be due to the fact that the consumer experience in massive retail establishments is becoming increasingly unattractive. The amount of time it takes to negotiate the seemingly endless aisles is a drawback to harried shoppers – a drawback only made worse by the checkout lines where line-ups are often long and slow.

Consider Chris J. Abraham’s recent post over on @ Supply Chain Management about why he will not shop at Walmart anymore. He’s fed up of Walmart not because he’s a fan of small business, not because Walmart treats their employees “poorly”, and not because Walmart imports most of its stuff from China and other oversees locations, but because a weekly trip now takes almost two hours (60 minutes to find everything and 45 minutes to check out), employees are scarce and not very knowledgeable when you can find one for a question, and customer responsiveness is downright poor.

I see his points – and I think a lot of people do. I dread going to Walmart when I only need two or three things – since they are usually located at three opposite corners and it takes me fifteen minutes at a very brisk walk to collect them if I know where they are, and double that if I don’t. And then there’s the wait – the self-checkout lines that rarely work, or the too few lanes always filled with customers who have a full cart. Convenience isn’t just about size and selection – it’s about the speed at which you can find what you are looking for. Maybe if Walmart divided up it’s store into multiple stores – one per item type – such as clothing, media, electronics, furniture, bed and bath, etc. Oh wait, someone already did that – it’s called a mall! And, unlike a Walmart, they often exist in urban areas – and you only need to go into the stores that have what you need. Furthermore, each store has it’s own checkout and, much more often than not, the staff will actually help you.

Now I know this isn’t a retail blog, and that I shouldn’t dwell on good retail store design, but the article is very relevant to supply chain, and sourcing. It contains a number of lessons that your sourcing team should take to heart. First of all, if you’re sourcing everything under the sun, you’re likely not doing anyone a favor. Besides the fact that you could be sourcing products that no one is going to use, you should probably be looking for ways to reduce SKUs, identify standard components, and reuse these components across product lines. Secondly, you should be identifying the differences in needs between the different groups you serve, and cater your strategies appropriately if your success is tied to their success. Thirdly, don’t be afraid to innovate – it just might be what you need to take your sourcing to the next level.