Category Archives: Miscellaneous

Best Cost Country Sourcing

BrainNet recently released a mini white-paper on “Best Cost Country Sourcing The Evolution of Low Cost Country Sourcing” that had an interesting take on Low Cost Country Sourcing. According to the author, cheap labor is better suited to cheap products and cheap services and not necessarily an advantage for the premium products that industrial countries are known for. Personally, as I succinctly stated in a comment over on Supply Excellence, I believe the answer is Home Cost Country Sourcing. Finding a way to to get the best value from a total value management perspective (where total cost of ownership is taken into account alongside quality value metrics such as on-time delivery, reliability, etc.) while sourcing from suppliers in your own country. But I digress.

I particularly agree with the seventh and ninth paragraphs (the third paragraph on the second page and the second paragraph on the third page):

Decision makers often decide too easily that new markets such as India and China are going to be the ultimate attractive sales markets and that a local production plant is the best approach to capture the labor cost advantage there quickly. buying power is still limited in these regions but will definitely increase over time, so it is a “no brainer” that everyone can agree to quickly. The CPO is happy too because every product produced and sold is declared as low cost country volume. In other words, nothing has changed fundamentally in the organization but the so-called shifted purchasing volume has increased. Curiously, even the raw material and components may be sourced from high cost countries and assembled abroad. The right terminology for this approach would be “High Cost Country Sourcing” instead of “Low Cost Country Sourcing”.

It all started with the buzz words “Low Cost Country Sourcing”. This wording, put politely, misses the point by a long shot. Criteria such as quality, logistic risks, intellectual property risks among others, have to be considered and evaluated thoroughly to assure that these measures are successful. Establishing innovations on the supplier side as a competitive advantage and managing your new suppliers actively are only two from many important success factors.

In other words, LCCS alone is not the answer, not a quick fix, and not a saving grace to a flailing company. In order for a company to be assured of value in their global sourcing initiatives, they at least need to progress upward to a BCCS initiative, understand the advantages and disadvantages of each of their options, and understand that such initiatives will take considerable time and effort. It’s not just the flick of a switch.

Collaborate, Collaborate, Collaborate, Collaborate – Part IV

I know I’m taking the risk of sounding like a broken record (or for those of you too young to remember such a contraption, the effect produced can be mimicked by putting a mini audio clip on infinite loop), but the fact that articles continue to surface on the topic, and the fact that there appears to be a need for these article, leads one to believe that the message still needs to be spread. To this end, here is the fourth installment. (Need to catch up? Here are the links to C4 I, C4 II, and C4 III.)

So how can one foster collaboration? A recent issue of Computer Business tells us that “IT Makes Collaboration Easy”. This is important because a collaborative approach changes how people relate to each other and people to tend to resist change. Therefore, a collaborative culture cannot be forced on staff, and must be delivered in a way that allows them to become converts after experiencing the benefits for themselves.

The article points out that IT-based tools, if implemented effectively, allow collaboration to be built into everyday business processes, and carried out with the minimum of effort. These collaboration tools must deliver simple user experiences no matter how complex the implementation and underlying processes are.

“Looking Ahead: Faster, Brighter Technology”The importance of collaboration, and of technology that supports that collaboration, is echoed in by John Kerr, Contributing Editor of Supply Chain Management Review. In the article, he notes that Collaboration is Now the Rule and that new technology developments, such as SOA, will continue to accelerate collaboration among supply chain participants. These tools will help extend collaboration further out to functions that have only recently become part of supply chain management thinking, such as new product development and supply chain finance.

Finally, we find yet another perspective on the importance of technology in a recent European Leaders Network article that illustrates “How I.T. shows the way upward”. The article points out that communication is the key and technology is the key to global communications, essential in today’s global marketplace.

However, we can use more than technology to improve collaboration. A recent issue of Supply & Demand Chain Executive brings us an article by Nilesh Anand that gives us one direction for collaborative performance enhancement. In “Collaborative Performance Enhancement = Successful Supply Chain Management”, we are reminded that a supply chain is only as strong as its weakest link and told that the key to collaborative performance enhancement is collaborative benchmarking.

According to the article, a collaborative benchmarking effort starts by choosing effective performance indicators. Efforts are then made to measure them effectively. These indicators are identified by researching best practices and peer organizations that are doing above average. Make sure to cover delivery performance, flexibility and responsiveness, logistics cost, and asset management.

Collaborative benchmarking is important because it requires understanding between all participating members who are more likely to collectively take the whole supply chain into account, and not just one or two segments.

Once you have measurements, focus on identifying and implementing the appropriate best practices to improve them. Set goals for improvements and strive for continuous improvement – collaborating each step of the way.

So in conclusion, you can start to foster collaboration by way of the application of the right technology, the right measurement process, and in the identification and implementation of new and improved best practices and methodologies where everyone works together. Of course there’s more that you can do, but this is a great start!

Critical Supply Strategies for Succeeding in a Dynamic World

As close followers of SpendMatters, where I tend to comment regularly (after all, it is the only other Spend/Supply Management blog that you have to read daily), will have observed, on average, I’m not overly impressed with what comes out of ISM more often than not. However, the recent article “Succeeding in a Dynamic World”, which was jointly compiled by the ISM, CAPS Research, and A.T. Kearney, was quite good. (After all, both A.T. Kearney and CAPS in particular are known for putting out great work.)

One of the most interesting sections of the 10-page report (which is worth reading) was section three on critical supply strategies. In a world where it seems that risk and cost is increasing daily, good supply chain strategies are more important than ever. Even though none of these strategies are new, which should be obvious as they have been discussed on the blogs, including this one, countless times, it is nice to see them collected all in one place AND endorsed by the ISM which,  whether or not it deserves to be (as described in “Revamping ISM: A Perspective from Anonymous”* on Spend Matters [WayBackMachine]) is the largest and most influential supply and spend management association in the United States.

The seven critical supply strategies presented in the article were:

  • Category Strategy Development Consolidate your supply base for each category into a small number of preferred suppliers that can be efficiently managed while mitigating risk. The strategy for each category should focus on the overall value chain over a three-to-five year time frame.
  • Supplier Development and Management Effective supplier development and management should deliver a competitive advantage in cost, quality, delivery/responsiveness, technology, and innovation achieved.
  • Multiple Supply Networks The tail of the supply chain needs to be tailored to each developing market and this will require domestic partners to help execute fulfillment and delivery. In addition, good risk mitigation requires flexibility and diversity in your supply chain and supporting networks.
  • Internal & External Collaboration In order to extract the significant gains that collaboration can bring, companies will need to enable best-practice multi-lateral collaboration between supply partners, achieve integrated product development, and employ “customer of choice” positioning.
  • Talent Attraction & Retention A supply chain is not an abstract network driven by processes and machines, but a real network driven by people. Good supply chains run on good people. Supply Chain Success will be impossible without the right talent, which is becoming rarer every day thanks to the global talent war. Any organization that does not have a good process in place to identify necessary skills, evaluate organizational gaps, and identify, recruit, develop, and maintain talent is doomed to become a second class citizen in the emerging international marketplace.
  • Enablement of the Supply Management Organization Although center-led organizations will continue to dominate for the next decade, as global operations become more complex, hybrid center-led models will begin to emerge to maximize value based upon the right mix of responsiveness and centralized control. Successful organizations will need to adopt and utilize appropriate supply chain technologies that integrate functional management and track appropriate metrics.
  • Enabling Technology Technology is key in the supply chain organization of the future. The right technology will enable enterprise-wide supply management, external supply chain visibility, and internal and external collaboration.

Although this obviously is not a complete list, as it makes no mention of the emerging importance of Global Trade Management, Supply Chain Finance, or Right-Cost Country Sourcing, just to name a few disciplines, it is still a great starting point and areas that any successful supply chain operation will need to have fully figured out to succeed.

Now That Your Recession Is Over …

In addition to buying your significant other a Diamond-Tini, you can buy yourself a Gundam Fixed Platinum. A 13 cm, 1,400 gram miniature of Japan’s famous animated robot “Gundam”, this little fellow is made of pure platinum and at today’s prices would go for over $41,000.

Actually, with today’s steadily increasing mineral and metal prices, this may not be a bad investment …

Web 2.0 Redefined

MC Hammer, probably better known for his golden sparkle shirt and parachute pants (and squandering through his thirty million dollar fortune) than his pop-rap, got a new job earlier this month: Web 2.0 Expert! TechCrunch20, the conference which alleges to put a sense of merit back into startup conferences, has declared MC Hammer a Web 2.0 Expert and put him on the panel of judges.

While good news for Hammer, it could be bad news for Web 2.0. After all, Hammer-Time came with an expiry date.

More Kudos to The Cynical Sourcerer for another assist!