Category Archives: Sourcing Future

A Futuristic Look at High Definition Sourcing

Sourcing Innovation would like to officially welcome its newest sponsor, BravoSolution.

Normally SI would include a review of the vendor’s primary offering in the welcome post, but since Bravo’s new Collaborative High-Definition Sourcing platform was just covered extensively by SI in High Definition Sourcing … with the Business Center … and Category Sourcing (as well as in Making Spend Analysis More Useful, Part I and Part II), SI would instead like to offer BravoSolution’s perspective on how a new sourcing paradigm could change Supply Management in the years ahead.

To this end, I have asked Paul Martyn (VP of Marketing), who can be reached at p <dot> martyn <at> bravosolution <dot> com and who recently penned a guest post on Achieving Category Excellence with High Definition Sourcing, to look ahead three years when High Definition Sourcing and Next Generation Sourcing Techniques (which include the Value Focussed Supply Techniques described in last week’s posts) are commonplace in the leading Supply Management organizations and put together a picture of what e-Sourcing might look like.

It’s 2014. I’m a senior sourcing professional at a large multi-national company and I’ve got major sourcing programs planned for categories that share the following characteristics:

  • Large amounts of spend
  • International, operational, marketing and/or finance stakeholders
  • Complicated cost models
  • The category leader is frustrated with traditional sourcing techniques
  • The category is avoided by the faint of heart
  • Dynamic corporate, supplier, and market conditions

Sound daunting? Maybe even impossible to succeed? Three years ago, I would have shared your skepticism and been completely frustrated by the sheer complexity of tackling these challenges. When I look back, there was a lot holding me and my team back, including:

  • A one-size-fits-all approach to sourcing:
    For successful sourcing of complex categories, what my team really needed was the ability to define the world of their particular category. A flexible framework would allow us to state the opportunity/problem, gather the necessary inputs to evaluate possible reactions, make a decision, and track the implementation and monitor the changing conditions around the decisions we’ve made to constantly take advantage of changing realities — all while staying consistent across the organization.
  • Silos, silos everywhere and not a bridge in sight:
    The conventional approaches I used created nonsensical boundaries across functions. I couldn’t get engineering, distribution, supply chain, and customer service aligned or more importantly — involved in the decisions. Worse, we weren’t really in problem-solving mode, these were merely sequenced ‘events’ executed with no ability to create and manage a ‘process’ that ended up as a ‘system’ to manage key categories. All we created were more damn task lists. My category leaders didn’t need more “to-do’s”, they needed laboratories for research and testing, board rooms for decision-making, and a ship’s bridge from which to monitor and control.
  • Drowning in useless data:
    We made great use of data at first, but wrestling with it was so manual and there was no way to easily refresh it. It very quickly became like a can of soda: when first opened, it’s great, but the longer it sits, the flatter — and less useful in providing relief — it gets.

So what’s changed? I’ve used ‘High Definition’ Sourcing with category specific ‘Business Centers’ for complex categories. With this sophisticated approach:

  • Category managers have a panoramic view that allows them to manage their categories, end-to-end with regards to
    1. defining new opportunities/problems
    2. gathering a full spectrum of metrics to use in evaluating potential solutions,
    3. establishing, monitoring, and tracking of key decisions to highlight deviations from expectations

    These three (3) parameters form our ‘system’ for managing complex categories, where the stakes are high and the opportunities for value, even higher.

  • With a category management Center of Excellence we have two critical resources for successful management of high-definition sourcing:
    1. A Data Management Guru (DMG) responsible for the data capture and informatics. The DMG establishes connections to gather baselines; refreshes usage and capacity details; links to spend sources for up-to-date consumption figures and arranges performance data aggregation and design.
    2. A Business Intelligence Management Professional (BIMP) responsible for configuring the new analytics necessary to analyze key categories within an initiative. Every problem is a little different, and the right analytics are crucial to making the right decision.

As a result, my sourcing tools can

  • Flexibly define the problem opportunity for a specific category
  • Utilize robust data sources to feed the evaluation and performance processes
  • Allow creative scenarios to complete the evaluation process
  • Support the determination of specific decisions and actions
  • Establish KPIs for tracking ongoing performance
  • Effectively report the impact of our initiatives in terms (EPS/Profit Contribution) the entire organization understands

All in the context of a given category.

And the return on investment for the staff augmentation and additional tools? An additional 5-8% savings in my most strategic categories, an overall improvement in my supplier performance post-contract, and an overall reduction in organizational risk by involving all of my stakeholders, their key data inputs, and constraints.

My only regret: I didn’t do it sooner.

Thanks, Paul!

CPO Agenda’s Skills for the Future

A recent article in the Winter 2009-2010 issue highlighted the results of a recent Human Capital in Purchasing workshop on “Skills for the Future”. According to the article, a buyer will need the following skills in the Supply Management world of tomorrow:

  • risk management
  • financial management
  • working capital management
  • cost management
  • functional strategy management
  • profit management
  • innovation management
  • product (composition) & service management
  • flexible production management
  • team management
  • change management
  • negotiation management
  • supplier (relationship) management
  • corporate social responsibility management
  • sustainability management

as well the following skills:

  • market intelligence
  • leadership
  • communication skills
  • cultural skills
  • personal professional development

In other words, if you want to survive in the Supply Management world of tomorrow, you have to be ready for the New Renaissance coming in the supply chain, get back to the classroom for your true Renaissance education, strive to be The New Polymath, and hope that today’s Leonardo da Vinci takes an interest in supply management, because even if you’re a Mensan, that’s a tall order!

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Why Supply Chains in 2015 Will Be Substantially Different Than Today

A lot of supply chain 20xx lists are produced each year, and while many aren’t worth a second glance, Dan Gilmore over on Supply Chain Digest has one of the best top 10 lists on what supply chains will look like in 2015 that you’re going to find. But what’s even more important than the items on his Supply Chain 2015 is why supply chains are being forced to change. I’ll attempt to answer that a bit in this post.

  • Fuel Prices Will Spike Again … to $200 a barrel
    Global demand is increasing daily. Emerging markets want their western lifestyle and the developed world is doing a very poor job of latching on to renewable sources (like wind, water, and solar … combined, these sources could easily power the Global Grids, but it will take a significant change in mindset as well as a very significant up-front investment for them to do so).
  • Generation Y Will Boycot You With Their Wallets if You’re Not Corporately Responsible
    In most surveys, your CSR policy is a greater concern to most job candidates than the size of the paycheck you’re offering. That’s because environmental consciousness is part of who they are and if they have a choice between two products and one is from a company that is not known for its environmentally friendliness, regardless of cost, guess which one they are likely to choose?
  • Product Lifespans will Compress Further
    As we haven’t reached the limit yet, our market induced appetite to always have the latest and greatest will continue to push manufacturers to innovate faster to keep their marketshare. If you can’t keep up, you will be pushed out.
  • Time-to-Market in Emerging Markets will be King
    The economies of Brazil, India, and China are poised to take off like a rocket … and they want what we got. The first company to identify a need and offer an affordable product to fill it will make the $2B in revenue P&G made in its first year on the launch of Tide ColdWater (the first detergent designed for cold water) look like petty cash. (Remember, there are 1.2 Billion people in India and 1.3 Billion people in China and the middle class population in both of these countries will soon exceed the total U.S. population, if they haven’t already given the current state of the U.S. economy and the real jobless rate of 17.5% [CNBC].)
  • Inventory Costs will Continue to Increase
    Not because raw overhead costs will increase, but because inventory-related losses due to theft (which costs retailers alone 33.7B in the US) and obsolescence (which will force you to sell or dispose of inventory at a significant loss).
  • SaaS Will Be Better, Faster, Cheaper in Every IT Domain
    While there may still be application domains where it’s not there yet, you can count on that not being the case for much longer. Furthermore, even if you need your own single-tenant instance or data on site, you’ll soon see full-service completely hands-off managed SaaS where the application self-updates and self-replicates because your “instance” is part of the cloud on which it resides.
  • Real Time Information Will Be Ubiquitous
    Cheaper-than-dirt RFID and the emergence of web-based SaaS will quickly take us from an age where we don’t have enough visibility to where we almost have too much. Will you be ready to deal with it?
  • New Breakthroughs in Automation Will Emerge Globally
    Japan is already giving us robot secretaries and robot cats to keep them company. New production technology improvements can’t be far behind!
  • Emerging Markets Are On Their Way to Becoming the Dominant Global Markets
    As noted above, Brazil, India, and China will soon be three of the top five global economies. (China already is, but it will soon be #2.) Germany, France, and the UK will be dwarfed in comparison. If you’re not aligning your supply chains to serve the new GDP super powers, you won’t be a major player this century.
  • Everything will be Digitized
    iTunes has already killed the CD star; even BlockBuster understands that high-speed broadband will kill the DVD star; and when every smartphone has a 10 MP camera …

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Change By Design, A Book Review

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Although he was the engineer’s engineer, Brunel [who designed the Great Western Railway] was not solely interested in the technology behind his creations. While considering the design of the system, he insisted upon the flattest possible gradient because he wanted passengers to have the sense of “floating across the countryside”. He constructed bridges, viaducts, cuttings, and tunnels all in the cause of creating not just efficient transportation but the best possible experience … Brunnel was one of the earliest examples of a design thinker.

A purely technocentric view of innovation is less sustainable now than ever, and a management philosophy based only on selecting from existing strategies is likely to be overwhelmed by new developments at home or abroad. What we need are new choices — new products that balance the needs of individuals and of society as a whole; new ideas that tackle the global challenges of health, poverty, and education; new strategies that result in differences that matter and a sense of purpose that engages everyone affected by them.

Only gradually did I come to see the power of design not as a link in a chain but as the hub of a wheel. … I also noticed that the people who inspired me were not necessarily members of the design profession; engineers such as Isambard Kingdom Brunel, Thomas Edison, and Ferdinand Porsche, all of whom seemed to have a human-centered rather than technology-centered worldview.

The natural revolution from design doing to design thinking reflects the growing recognition on the part of today’s business leaders that design has become too important to be left to designers.

So begins Tim Brown’s new book Change By Design (available September 29) that tackles the myth of innovation that brilliant ideas leap fully formed from the mids of geniuses while exposing the reality that most innovations stem from rigor and discipline … the kind that comes from the application of proper design thinking. Design thinking, a process for practical, creative resolution of problems or issues, attempts to match necessity to utility, constraint to possibility, and need to demand to meet end-user need and drive business success. The ultimate challenge for a design thinker is to help people articulate the latent needs they don’t even know they have. Fortunately, the search for insight — in contrast to the search for hard data — is that it’s everywhere and it’s free. You just have to open your eyes and look at what people are doing.

For example, when IDEO was hired by Zyliss to design a new line of kitchen tools for the home, they started out by studying children and professional chefs. While neither was the intended market, both yielded valuable insights. A seven-year-old struggling with a can opener highlighted issues of physical control adults have learned to disguise and the shortcuts used by a professional chef yielded insights into cleaning requirements. The exaggerated concerns of people at the margins of the market led the team to abandon the idea of a “matched set” and create a line of products with the right handle for each tool. The end result was a product line that flew off of the shelves. [Proving one of my favourite points: just because you’ve been doing it that way for years, it doesn’t mean you’ve been doing it right!]

The Zyliss success story happened because the willing, and even enthusiastic, acceptance of competing constraints by the design team is the foundation of design thinking. The first stage of the design process is often about discovering which constraints are important and establishing a framework for evaluating them. Constraints can best be visualized in terms of three overlapping criteria for successful ideas: feasibility, viability, and desirability. A competent designer will resolve each of these three constraints, but a design thinker will bring them into harmonious balance. The popular Nintendo Wii is a good example of what happens when someone gets it right.

For those trying to wrap their minds around design thinking, the basic innovation rules that Tim outlines in chapter 3, A Mental Matrix, are a great place to start because they’ll put you in the mindset required to grasp the key tenets of design thinking.

  1. The best ideas emerge when the whole organizational ecosystem has room to experiment.
    And room to fail! The greatest successes will often emerge after you get the false starts and failures out of the way (and make an effort to understand why you failed).
  2. Those most exposed to changing externalities are the ones best placed to respond
    and the most motivated to do so.
    Furthermore, if you have someone who thrives in that sort of an environment, make sure she’s on the team!
  3. Ideas should not be favoured based on those who create them.
    The most successful individuals are often those who latch on to, and promote, good ideas.
  4. Ideas that create a buzz should be favoured.
    Nothing’s better than viral marketing!
  5. The “gardening” skills of senior leadership should be used to tend, prune, and harvest ideas.
    Not to create them.
  6. An overarching purpose should be articulated.
    You’re looking for new ideas to solve a problem that people want solved.

And you want to grasp design thinking, because it works. Probably the best example is that of “Cool Biz“, the imaginative program from the award-winning Japanese advertising agency Hakuhodo designed to help the Ministry of the Environment in Japan get people moor involved in meeting Japan’s commitment to the greenhouse gas reduction goals of the Kyoto Protocol. Within a year of the launch of this program, the slogan “Cool Biz” was recognized by a staggering 95.8% of the Japanese market. Can you imagine the boost to your corporate brand if 95.8% of your potential market recognized your corporate offerings?

For more information on design thinking, which is becoming more necessary by the day in a world where constant change is inevitable and everything is a prototype, see the Design Thinking blog, IDEO’s website, the The Harvard Business Review article on Design Thinking, the Innovation 100 Interview with Tim Brown on YouTube, the Design Thinking video (extended version) on YouTube, and the Global X Interview with Tim Brown on YouTube.

And if you’re still not convinced you should buy the book, consider the following quote which literally made my day:

Business school professors are fond of writing learned articles about the value of brainstorming. I encourage them to continue to do so (after all, some of my best friends are business school professors, and it keeps them busy and out of my way).