Category Archives: Miscellaneous

Supply Chain Humor This Week III

Scrap Metal prices are so high, that thieves are getting a lot bolder!

The scrap metal value of catalytic converters has gotten so profitable that thieves are getting braver. In the Twin Cities area, thieves have been targeting large groups of cars in places such as Car Dealerships, Park & Ride locations, and even the Police Impound lot! According to this article from SunCountry.com, reports of catalytic converter thefts from parking lots, car dealerships and street corners have been steadily coming into police departments. Catalytic converters contain small amounts of platinum, palladium and rhodium as well as stainless steel and iron and a scrap metal dealer may buy one converter for up to $100, depending on make and condition. Not to mention the fact that they are becoming valuable auto parts on the used parts market due to the increasingly high costs of new ones.

It really makes me wonder why we still have scrap yards in North America. If I had a scrap yard, I’d be hiring recent graduates and college kids looking for work year round to rip my cars apart and sell the scrap metal for a huge profit. Sell the more valuable metals locally to electronics shops and custom manufacturers and cart the cheaper steel and iron by the container to China where they’re buying everything they can get their hands on.

Hat Tip: Tony Poshek, The Cynical Sorcerer

Tired of losing all those sales taxes to the government? Then Utah might have the answer for you! Convince 99 of your closest relatives, friends, and employees to join you and you could have your own town – and keep the taxes!

As per this article in the New York Times, featured on The Colbert Report almost as soon as it hit the presses, Mr. Rod Syrett became mayor of Utah’s newest town, Bryce Canyon city, that consists solely of the 2,300 acre resort – which includes two hotels, souvenir-filled gift shops, a rodeo arena, restaurants, gas stations, a grocery store, and camping areas – owned by My. Syrett. My. Syrett, tied of paying for the largest private water and sewer system in the state, as well as plowing in the winter, took advantage of a new state law that stripped counties of discretion in deciding petitions from property owners for township or city status and allowed any property owner with property where there are at least 100 year-round residents to apply for township status. Now the corporation gets to keep about $300,000 worth of sales taxes that are paid annually by the hundreds of thousands of tourists instead of forking it over to the county.

Hat Tip: Stephen Colbert, The Greatest Living American

How to transport a $1.9M dime after purchase.

A man travels from Oakland to New York, with a dime worth $1.9 million dollars in his pocket, to deliver it to the new buyer. Using a red-eye commercial flight and wearing a t-shirt and flip-flops. According to this article from SFGate.com, a rare coin dealer from San Jose delivered a very rare 1894-S dime worth $1.9M dime from a seller’s vault in Oakland to a buyer’s vault in midtown Manhattan. This proves that you don’t need to shell out huge bucks for supply chain security, as long as no one knows you have something worth stealing. Maybe the distribution method of a certain prominent cell phone maker of using unmarked boxes through regular package delivery services for low-cost delivery of small shipments in certain countries makes sense after all!

Hat Tip: Tony Poshek, The Cynical Sorcerer

Catching up with Global Data Mining: Don’t Underestimate Trade Compliance

Last October, while discussing Global Trade Data Management, I introduced you to Global Data Mining (acquired by CUSTOMS Info which was acquired by Descartes), a company that specializes in helping high-volume, high-value global trade businesses build effective trade databases for extensive trade reporting and comprehensive auditing to significantly improve their processes, reduce their error rates, and save time and money in their global trade endeavors.

Even though one of my interests is understanding how you can improve your global strategic sourcing processes with better trade data, it’s clear that the most pressing issue today for most companies is just trade compliance. Today, Trade Compliance goes well beyond just assigning the proper Export Control Classification Number (ECCN) and the proper Harmonized Tariff Schedule (HTS), but also involves making sure you are paying the proper duties, qualifying for Value Added Tax rebates, and taking advantage of Foreign Trade Zones. It also means that, before you ship your goods to their destination, you make sure they are complaint with any local regulations such as the EU RoHS, WEE, or REACH directives, the HAZMAT requirements, or the EC ELV directive. (Don’t know what these are? Keep checking the e-Sourcing Wiki [WayBackMachine] – a wiki-paper defining the basics of Global Trade is forthcoming.)

It’s a lot more costly than most organizations think it is. According to their whitepapers, error rates in global trade processes approach 10% to 20% and effective control of global trade processes is often 100 to 200 times worse when compared to accounts payable processes within a company. And the savings opportunities often go well beyond the 2.5% to 10% that previous Aberdeen research studies have indicated it to be. In conjunction with the Aberdeen Group, in preparation for their upcoming benchmark study, GDM analyzed the actual trade data for five organizations with 66B in revenue and found direct-compliance related savings opportunities of $261.2M alone. It might not sound like much, but it’s likely just the tip of the iceberg as the savings came only from non-compliance, self-filing, and free trade zone savings that could be identified on data analysis alone. Imagine what better sourcing that considered trade compliance and import / export rates, free trade zones, and automatic e-filing opportunities from day one could accomplish!

With complex cross border transactions expected to account for more than 10T this year, according to the McKinsey quarterly, with many companies still struggling to adapt to the HTS reforms in January, with pre-arrival e-manifests almost the norm now for cross-border trucking into the USA, with the recent elimination of many VAT rebates in China, and with the rapid multiplication of foreign trade zones in dozens of countries around the world, each with their own laws and benefits, it’s a given that billions of dollars are being lost by businesses around the globe just on Trade Compliance alone. So take it seriously, and if you need help, seek it out.

I’d be comfortable starting with Global Data Mining or their partner, the International Trade Bureau. They’re open about their tools, capabilities, and results, and will happily work with other vendors if you need a solution they can’t supply on their own. As to whom else plays in the trade management space, there’s Bearing Point Consulting, Core Solutions, Management Dynamics, Integration Point (acquired by Thomson Reuters), QuestaWeb (acquired by Descartes), and Tradebeam (acquired by CDC Software). As with PLM, I’m not an expert in the Global Trade Management space when it comes to all the players and their capabilities, but I do think a few of capabilities of Global Data Mining, along with a few of the reports, are unique and certainly worth investigating if you do a significant volume of global trade and have never analyzed your compliance or cost efficiency. Having them audit your data and prepare a summary will not cost you much, but could identify millions in savings. In one $3B apparel company alone they found $161.5M in potential duty and free trade savings – 5% of revenue – not cost, revenue! It’s something to think about.

Archstone Actualizes

Continuing in my effort to overview the smaller specialty service firms in the sourcing and procurement space in addition to the product companies with some of the more innovative offerings, even though I wasn’t able to connect with Archstone in their San Francisco office last month, I made a point to track Bob Derocher, partner and head of their operations and procurement practice, at my earliest opportunity.

Archstone Consulting (acquired by The Hackett Group) was founded in June 2003 by senior, experienced, consultants from the likes of A.T. Kearney, BearingPoint, Booz Allen, Cap Gemini, Deloitte and PWC who wanted to form a different kind of consulting company that focussed on high value independent advisory services from a technology-agnostic and partner-agnostic viewpoint. In less than four years, they’ve grown to 235 consultants, 7 global offices, and have served over 25 of the Fortune 100 and 65 of the Fortune 500.

Like Denali, whom I overviewed a couple of weeks ago, they primarily hire experienced sourcing professionals with deep expertise in the service areas they practice in, and deep process and category expertise in strategic procurement practices. This is to ensure that they can maintain a flat organizational structure where all of their professionals, including their most experienced principals and partners, are able to work with clients on a day-to-day basis and consistently deliver value.

What I like about Archstone is that they take a client-centric viewpoint on each project and understand that good category sourcing is a combination of strategic sourcing, cost management and control, and supplier relationship management. They don’t have a set solution for their service, like a good consulting firm they work with the client to figure out what the client really needs, and they know that one approach doesn’t fit all when it comes to getting the maximum value on a category. They’re also comfortable on a wide range of projects, anything from helping you with your one-off category project to helping you build a global strategic sourcing function from scratch. I also like the fact that, like many of the good specialty firms popping up these days, they focus on making their clients self-sufficient and continually work on knowledge transfer and change management so that when the sourcing project ends, the client will continue to succeed. And they are comfortable on small to mid-size projects that only require 3-5 consultants and 3-5 months.

For those of you looking for a specialist consultancy in sourcing and procurement, the industry segments in which they have expertise are the automotive, industrial, and high-tech manufacturing sectors; the apparel, CPG, and food and beverage industries; life sciences, pharmaceuticals, and biotech; and financial, consumer and entertainment services. They also have deep category expertise in dozens of categories, which include IT Hardware, Software, and Services, Marketing and Advertising, Overhead and Support, Retail Specific Items, Capital Expenditures, Facilities, Outside Services, and Direct Materials, and on hundreds of commodities within those categories. Furthermore, they’ve sourced over $15B to date with an average savings of 13% ( as they’ve saved over 2B ).

Only You Can Prevent The Sky From Falling

Last week in The U.S. Bureau of Labor Statistics is Wrong. Dead Wrong!, I alerted you to a recent discovery of Tim Minahan’s that the U.S. Bureau of Labor Statistics latest report on the sector is that overall employment for purchasing and supply managers is expected to grow slower than the average for all occupations through the year 2014 and that demand for purchasing workers will be limited by improving software.

This is, of course, wrong. Now, Tim did note that the report states it was based on 2004 assessments, but it’s still a travesty to make future projections on stale data, especially data that does not represent the trends that are being corroborated by all of the major societies, publications, and research organizations in the sector, including the ISM, Purchasing Magazine, and Next Level Purchasing (now the Certitrek NLPA). Specifically, the demand is increasing, and new software is not limiting the demand for educated professionals – although it may be decreasing the demand for tactical purchasers – as it is significantly increasing the demand for strategic supply management professionals.

But the most interesting outcome was that even though Jason Busch and I whole-heartedly agreed with Tim, Charles Dominick had a different perspective, which he stated in “Read Yesterday’s Purchasing Blogs? Don’t Panic!” and “The Purchasing Talent Crunch Paradox” on the Next Level Purchasing blog (now the Certitrek NLPA blog), the first of which drew commentary from Tim and the second of which drew commentary from yours truly.

In his first post, Charles states that the BLS report, which states that demand or purchasing workers will be limited by improving software, and that Tim’s post, that quotes numerous real-world examples of executives not being able to find the talent to fill their needs, are not in contradiction, because tactical purchasing jobs, which he associates with the BLS report, will decline as new procurement software is implemented and strategic purchasing jobs, which he associated with the talent crunch described in Tim’s post, will continue to increase. He’s right, but that doesn’t address the fact that the BLS report states to cover the industry as a whole, and if strategic purchasing jobs are increasing faster than tactical purchasing jobs are decreasing, than this means that the overall demand for professionals will continue to increase, as reported by the numerous surveys by the ISM, Purchasing Magazine, and others over the three years (or so) that have passed since the Bureau collected it’s statistics.

This at least partially invalidates Charles’ claim that the BLS was not incorrect in it’s statement that demand is expected to grow slower than the average. Charles correctly points out that “grow slower than average” does not mean decline, but, as Charles notes, this puts growth in the 0-8% rate, and every recent study I’ve read clearly puts growth overall above 0%!

Of course, the only way to answer this question precisely is to know the percentage of tactical jobs being lost to technology (and, as Charles points out, global outsourcing) and the number of jobs being created to tackle strategic sourcing. However, with the growing complexity of global trade (countless new regulations, security acts, regulatory acts, foreign trade zones, special economic zones, preferential trade agreements, etc, etc, etc), rising commodity prices almost across the board, corporate social responsibility, and continuing price pressure, about the only way left for a company to not only increase profits but remain profitable is through better sourcing and supply chain management. I believe this is going to cause a much larger spike in demand than the downward spike caused by the reduction of tactical purchasing jobs due to technology or outsourcing.

In Charles’ second post, he notes that even if he’s right, and the number of purchasing jobs being created is only slightly more than the number of purchasing jobs being displaced, there can still be a talent crunch. And even though we disagree on the magnitude of the talent crunch in the best case situation, this is one place we do agree. I’ve been bemoaning the talent issue for quite some time now.

Charles correctly points out that just because you’ve been in purchasing for years, that doesn’t mean that you are qualified for a higher level purchasing position. There is a big difference between the traditional purchase order processing of tactical purchasing and the modern strategic sourcing initiatives of strategic supply management. In some cases, the gap is so large that it’s not that large of an exaggeration (though it is an exaggeration) to say that, with the right rules-driven software, the first job could almost be done by a trained monkey whereas the second almost requires a candidate with a graduate degree.

To this end, Charles suggests that one of the reasons for the talent crunch is that some buyers are unwilling to invest in their own purchasing careers and are reluctant to advance their own capabilities. He bemoans the fact that he hears from professionals daily who complain that their employers will not fund training or certification. He also states that, considering the average salary, they should invest in themselves since they will likely earn that money back in a hurry. (And when you consider that professionals with a recent certification or degree are very attractive in the current market where an average qualified buyer can often get a 10% to 15% raise just by switching jobs, that’s no joke.)

Although he’s right, I think we need to lay a little more blame on the employer who states he can’t find qualified talent but will not invest in the talent he already has. When you consider Hackett’s recent findings that top-quartile talent management companies generated an average EBITDA of 16.2% vs 14.1%, a 22% improvement in net profit margin, a 49% improvement in return on assets, and a 27% improvement in return on equity, there’s no reason not to invest in your talent. So before we pass the buck to the professional, let’s make sure we pass it to the corporation that lays off a group of tactical purchasers instead of retraining them and then bemoans the fact that there isn’t a strategic supply professional to be found. After all, when you’re an executive, the buck always stops with you!

So, if you want to stop the sky from falling in the purchasing profession and escape the worst of the coming talent crunch, you, and your company, need to invest in career development now – before it’s too late. The talent crunch is coming! Almost 76M baby boomers in the US will soon be eligible for retirement – over 25% of the US population and over 35% of the US workforce, 25% of the world’s population reaches retirement age in the next 3 years, there are significant population declines underway in many first world economies, and, current studies indicate that employers estimate that 39% of their current workforce and 26% of new hires will have basic skill deficiencies. There’s just no avoiding it. But proactive planning and skills development can definitely minimize it and prevent the sky from falling.

What Got You Here Won’t Get You There

As a good follow up to last week’s piece on Managerial Delusions, Knowledge @ Wharton recently ran a piece titled on “To Marshall Goldsmith: Thank You for Writing This Book” that reviewed Marshall’s Goldsmith new book What Got You Here Won’t Get You There.

The article states that the power of the approach, and the book, lies in its simplicity, and the basic insight that good manners is good management. The review states that the book is built around the bad habits that keep highly successful people from succeeding even more. Basically the hypothesis is that, once a certain professional level is reached, neither intelligence nor skill accounts for the fact that some people continue to advance while others plateau. According to Goldsmith, the secret lies in behavior, identifying the hidden behavioral tics that are preventing you from succeeding and eliminating them, and, furthermore, recognizing the delusion that the behaviors that allowed you to advance to a certain point will continue to serve you.

The article then goes on to outline the “twenty habits that hold you back from the top” that Goldsmith discusses in detail in his book, but before we get to those, I’d like to point out that this philosophy mirrors the philosophy I have for successful companies – that what served you well yesterday is not enough to serve you well tomorrow. That’s why you need to continually improve, and innovate. This is what Goldsmith is telling you. He’s saying that, at a personal level, you must continually improve as a person in order to continue to achieve. I agree, but whereas he believes all of the answers are behavioral, I’m not sure I entirely agree. But it’s definitely part of the puzzle, and all of his insights are true, and one should definitely work to eliminate the bad habits he identified.

The bad habits, as summarized by the McKinsey article, are:

  • Hyper-competitiveness
    The need to always best others.
  • Adding too much value
    The need to always improve an idea, even those that are quite good.
  • Passing Judgement
    It’s not always required.
  • Destructive Comments
    Too much criticism, and not enough constructivism.
  • Starting with “No”
    Start with “Yes”, then modify.
  • Constant Bragging.
    Or, constantly flaunting your greatness.
  • Speaking when angry
    Good rarely comes of it.
  • Negativity
    Try to be positive instead.
  • Withholding information.
    As I continually try to impress, Collaborate, Collaborate, Collaborate, Collaborate
  • Failing to recognize.
    Others in the organization can succeed too. Recognize when they do.
  • Claiming unjustified credit.
    As with “failing to recognize”, it’s important to give credit where credit is due.
  • Making excuses.
    If you’re management, it’s important to remember the buck stops with you.
  • Clinging to the past.
    It’s important to learn from the past, but it’s also important to let it go.
  • Playing favorites.
    Rewarding suck-ups creates hollow leaders.
  • Refusing to express regret.
    There are times to say “I’m sorry”.
  • Not listening.
    Just not good. Not good at all.
  • Failing to express gratitude.
    There are times to say “Thank you” as well.
  • Punishing the messenger.
    Remember, as a manager, the buck stops with you.
  • Passing the buck.
    “The buck stops with you” means no passing!
  • Excessive need to be “me”.
    Well, as much as you want to be, you’re not perfect. Recognizing that and continually striving to improve is the best way to build commitment and loyalty.

There’s also a bonus bad habit, but you’ll have to read the book, or at least the McKinsey article for that one, just as you’ll have to refer to the book for his advice on overcoming the bad habits.