Category Archives: Supply Chain

Bringing Up the Rear: Mark Usher, Jason Busch, and Doug Hudgeon

The Seven Grand Challenges for Supply and Spend Management cross-blog series has come to an end. We had some great posts, including those from front-runners Bob Ferrari of Supply Chain Matters and the Strategic Sourceror of The Strategic Sourceror, but participation was low this time around, compared to back in January when I gave everyone a chance to jump on the Sustainability band-wagon and I could barely keep up with the submissions that came fast and furious. And yes, I’m a little disappointed. It’s our job as bloggers to help define the future, and I thought doing so was something all of us bloggers liked to do. But anyway, back to the matter at hand.

Jason Bush of Spend Matters decided to tease us in hist post and only give us his top three challenges last week, and make us wait for the rest. His top three were:

  1. Procurement Integration
    According to JB when it comes to true integration with the business such as enterprise level involvement in budgeting and planning (a favorite Hackett Group KPI), most procurement organizations are still coming up woefully short. Based on my own experience, I’d have to agree. But is this a supply management challenge, a broader operational challenge, or an education challenge?
  2. Risk Management
    Couldn’t agree more. I think we’ve both had lots to say on this topic over the past few years.
  3. Spend Management Led Innovation
    As proof that supply can drive innovation throughout the business, JB gives us the automotive case of how Honda and Toyota helped redefine the basis of innovation through working more collaboratively with their supply base to engineer out cost as an example. But I don’t think this is the challenge, I think the challenge is educating the rest of the organization about the innovation that spend management can bring, as there are a growing number of examples of leading procurement organizations becoming the innovation leaders in their company.

Mark Usher of 1 Procurement Place went all out in his post and laid his seven challenges on the line for our critique. They were:

  • The Strategic Elevation of Procurement
    Mark, like almost every other contributor, also insists that procurement strategy must be an integral component of corporate strategy. I’ve been saying that for years, so I have to agree.
  • Achieve a Truly Seamless Cross-Functional Strategic Sourcing Process
    Considering that many organizations still don’t get that it’s Sourcing AND Procurement, I definitely agree with mark that we DO NOT need another seven-step consulting methodology. ( If you think we do, maybe you need a twelve-step program! ) Mark’s right when he says that procurement in any given organization needs to reach a state where the right organizational players are facilitated smoothly into the strategic sourcing process at the exact time that their respective value-adds are required.
  • Optimize the Outsourcing of Indirect Materials
    Well, I definitely like the word optimize. But I think the goal should be to optimize the outsourcing of those tasks that can be better done by someone else and to optimize the insourcing of those tasks that can be better done in-house. No need to be discriminatory.
  • Pursue Enterprise-Wide Spend Visibility
    Definitely! This fits right in with my challenge of Opportunity Analysis – and you certainly can’t identify opportunities without good visibility into what they are.
  • Pragmatically Manage All Elements of Supply Risk
    Mark says that Personally, I see a little too much talk of virtual reality dashboards and not enough about what is really important! Hear, hear! Glad someone got my message that dashboards are dangerous and dysfunctional!
  • Maximize the ROI of Sourcing and Procurement Technology
    Well, this is definitely a challenge, but I think it’s too broad to be useful. We need to identify what can be done to maximize the Sourcing and Procurement ROI, and then solve those challenges.
  • Make Procurement “Chill” or “Tight”
    According to Mark, who’s lingo is probably a bit behind the times since I understand it, the supply management profession must make itself attractive to young, degreed job seekers who would typically shun a career in Procurement for something more Generation X/Y such as, well, almost anything really. Well, that’s why we have to talk about Corporate Social Responsibility and Sustainability and why only Procurement can truly achieve it, since Procurement is the part of the company that spends the money, and, plain and simple, Money Talks.

Doug “The Blogging Thunder from Down Under” Hudgeon took a cue from an old-classic and gave us his challenges in-line with the 7 deadly sins. In his post, he defined the challenges as follows:

  • Lust: Demand Management
    No matter how good you are at negotiating, you’ll still never beat the buyer who figures out how to achieve their business ends without buying the product at all.
  • Gluttony: Lean
    The challenge for procurement professionals is to master existing methodologies such as lean to influence demand for products and services.
  • Greed: Fair Play
    Greed can manifest itself in a supplier taking advantage of a buyer … or it can manifest itself in a buyer with significant market value tearing the throat out of their supplier’s margins. The challenge for the procurement professional is distinguishing one situation from the other and managing the stakeholders on both sides.
  • Sloth: Contract Management
    The most valuable skill that a supplier can cultivate in its relationship managers is the skill of getting a customer to roll a contract over.
  • Wrath: Supplier Relationship Management
    When a relationship has soured to the point where either the buyer or the supplier is willing to risk supply disruption to extract their pound of flesh, a procurement professional can play a role in keeping the relationship on life support long enough to either revive the corpse or replace the supplier.
  • Envy: Lack of Respect for the Purchasing Profession
    Procurement professionals, as expert purchasers, can assist the business in differentiating true opportunity from fear-driven me-too opportunities.
  • Pride: Talent Management
    The core challenge that must be met to meet the previous 6 challenges is attracting and keeping people who are capable enough to meet these challenges.

So where does this leave us? With a lot of work to do!

Thanks again to:

  • Bob Ferrari of Supply Chain Matters for his posts
    The Seven Grand Challenges for Supply Chain Management – Part One
    The Seven Grand Challenges for Supply Chain Management – Part Two
    The Seven Grand Challenges for Supply Chain Management – Part Three
  • The Strategic Sourceror of The Strategic Sourceror for his post Challenges in Supply Chain Management
  • Jon Miller of Gemba Panta Rei for his post
    The Seven Grand Challenges for Supply and Spend Management in the Next 25 Years
  • Ron Southard of Safe Sourcing for his post
    Where technological focus can improve retail procurement
  • Randy Littleson of The 21st Century Supply Chain for his post
    Seven grand challenges for spend and supply chain management
  • Justin Fogarty of Supply Excellence for his post
    Spend Management 3.0 and Beyond …
  • Jason Busch of Spend Matters for his post
    Spend Challenges – Today and Tomorrow
  • Mark Usher of 1 Procurement Place for his post
    Seven Grand Challenges for Supply and Spend Management
  • Bernard Gunther of Lexington Analytics for his post
    Opportunity Analysis: The Challenge is Having Accurate and Usable Spend Information
  • Doug Hudgeon of Vendor Management for his post on the
    Seven Deadly Challenges

Influencing Value Movement Through the Supply Chain

Industry Week recently ran an interesting article by Daniel Flint, Professor of Marketing at The University of Tennessee about “moving value through the supply chain”. The article, which starts off by noting that it’s not just value that moves through the supply chain, but perception of value, notes that you have to deal with both if you want to influence value movement through the supply chain.

Furthemore, the author is correct when he notes that value management begins with understanding that value is in the eye of the “customer” and not inherent in any product, service, or system. If you don’t understand what the customer wants, there’s no way that you can provide value. Although a significant amount of research states that all customers value functional benefits, relational benefits, service benefits, and brand reputation and that they evaluate each distinctly, they also evaluate both the monetary and non-monetary sacrifices, which includes the difficulty of doing business with a vendor. Thus, in order to move value, a company must constantly improve the value perceptions immediate and downstream customers perceive they are getting. After all, customers are constantly refining their interpretations about the value of specific products, services, and relationships.

So what can you do to influence value movement throughout the supply chain? According to Daniel Flint, you can:

    • Start by operating under the assumption that your competition knows 10% more than you do.
      Dig deep and outwork your competition.
    • Then assume the most critical aspects of the desired value propositions are changing 10% faster than your current nightmare.
      And do your best to stay ahead of the game. Be vigilent for opportunities to influence changes in value perceptions anywhere along the supply chain.

 

    • Ignore emotional bonding through superior brand management at your own peril.
      Quality is critical, but ultimately, it is emotional bonds that solidify customer relationships and facilitate higher margins.
    • Develop relationships that enable significant and frequent information sharing.
      You’ll need the help of your supplier chain partners to succeed.
    • Learn by thinking out of the box.
      Don’t hire only from within your industry. Top talent from outside can also help you find the way.

 

 

Centering the Pack: Ron Southard, Randy Littleson, Justin Fogarty

Slowly but surely, the Seven Grand Challenges of Supply and Spend Management cross-blog series is lumbering along. Since my last post, Ron Southard of Safe Sourcing, Randy Littleson of The 21st Century Supply Chain, and Justin Fogarty of Supply Excellence have offered us their (introductory) posts on the subject.

Ron starts off with a tale of technology, noting that to some extent, too much thought leadership in these technologies is being invested in games, consumer gadgets and the like instead of less sexy tools focused on reducing the cost of goods which will instantly improve profitability and foster economic growth creating new jobs. Especially when the technology exists today to attack the problem of escalating costs of raw materials, shipping, retail price increases and other associated supply chain costs, as it has for years. And it’s only getting better. As I am attempting to illuminate in my B2B 3.0 series, innovative companies have been, and still are, introducing technologies that put buyers on even footing with consumers — and the only thing standing in the way of a better business model is adoption. (I urge you to check out the inaugural Sourcing Innovation Illumination Introducing B2B 3.0 and Simplicity For All as well as the upcoming Illumination on why Simplifying B2B for Suppliers Enables Buyers, to be released next Tuesday.) You can be sure, based on his initial post, that his contribution is going to be a good one.

Randy decided that five challenges alone were enough to fill your plate, and gave us his list, which contain a couple of doozies:

  • Connecting Outsourcing and Lean
    Lean requires synchronization, and outsourcing, at least today, makes synchronization a challenge.
  • Controlling That Beyond Your Control
    A huge challenge for brand owners will continue to be balancing the issues of being in control when they are not directly in control of all aspects and to continually adjust to changing conditions “on the ground” that impact costs.
  • Sustainability
    This is a real and serious issue that will only increase in priority on a global basis. Since it fits in with one of my seven grand challenges, I have to agree!
  • Identifying Supply Chain’s Role
    Too many companies are taking far too tactical a view on their supply chains. I agree, and so does Bob. So what are we going to do about it?
  • Volatility
    … things are moving at a faster pace and customer expectations continue to climb while their loyalty is less. Volatility is on the rise …

Justin decided to skip the challenges get all prophetical, but at least he took a page out of my B2B 3.0 handbook. Noting that it’s obviously difficult to envision exactly how the medium will look from a UI or feature/function standpoint on the 30 year time frame … I think it’s safe to say that finding potential suppliers will be easier via powerful discovery tools and networks. And that’s just the start. Starting with communities like MFG.com and CustomPart.Net, and moving on-to custom mash-up search engines like the Supplier Search Engine, the movement is already starting. As for suppliers … they’ll have a greater ability to evaluate their buyers and potential customers. Tomorrow’s B2B 3.0 will be interactive, and will allow for true collaboration, not just data-push. Companies like Co-exprise and Apriori are starting to make that happen in new and innovative ways for direct and custom-part manufacturers. And the new world provides tremendous opportunity for buyers and suppliers who embrace discovery and discussion, as Vinimaya is demonstrating with its new enterprise search technology. The opportunity is there, but, more importantly, as Justin astutely points out, those companies that fail to adapt to increasingly connected world, the challenge may be staying afloat.

Also, in addition to Bernard Gunther’s commentary on Opportunity Analysis that went up Monday, Bob Ferrari has posted parts two and three of his series as well!

Out in Front: Jon Miller, Strategic Sourceror

As per my last post, Bob Ferrari was first out of the gate with his initial contribution to the Seven Grand Challenges to Spend and Supply Management. Hot on his tail-pipe were Jon Miller of Gemba Panta Rei with his Seven Grand Challenges and the Strategic Sourceror of the Strategic Sourceror with his introductory post on the topic.

The Strategic Sourceror, who’s keeping his final list a secret for now, started off his post by noting that the shift has already left the harbor is the perfect metaphor for the globalization of a peak functioning supply chain. International supplier integration has gone from innovation to a competitive necessity in what seems like the blink of an eye in a global marketplace where overseas shipment costs are rising by as much as 170% and some carriers are slowing speed by 20% to conserve fuel. But the effect of petro-economics is only one component of the international sourcing equation. Other challenges are rising fast and furious, and, as noted by Strategic Sourceror, these include:

  • Currency
    Certain currencies, like the US Dollar, have been up-and-down faster than a yo-yo in the hands of a master.
  • Quality
    How many more PR disasters and deaths have to happen before people wake up as to how important this issue is?
  • Redress
    All you have to do is leave the state and the laws that your supplier are subject to might be different than the laws you are subject to. This only magnifies as you leave the country – and continent.
  • Trade Barriers
    It’s not even as simple as the import and export documentary requirements anymore … you have burgeoning denied party lists to deal with now.
  • Political Instability
    Political instability exists in numerous Asian and Euro-zone countries – not just in the Middle East and Venezuela.

Given these challenges, I’m anxious to see what the Strategic Sourceror’s seven grand challenges shape up to be!

Jon Miller decided to jump right in with his seven grand challenges, which, and this should come as no surprise given Gemba Panta Rei’s focus, had a distinctively lean orientation, with a smattering of green. Getting right to the point, Jon’s seven challenges were:

  • Putting Safety First
    It’s not just about price.
  • Getting Serious About Zeppelins
    Are they the 200 mph method of travel and transport of the future?
  • Waiting For It
    Do we really need new laptops and cell phones in 2-3 days from the day we make the decision?
  • Eating Fruits in Season
    Eat local when you can.
  • Paying to Waste
    Overpacking is costly as well as wasteful. Why do we do it?
  • Spacing Out
    Do we really need warehouses in space?
  • Beaming It Over
    The internet changes anything.

 

It’s quite an interesting list, and I highly recommend that you check out Jon’s post for the details, and rationale, behind his decisions.

Inventory Reduction Tips

Inventory is expensive. Often very expensive. In addition to the storage costs that result from having to maintain extra space, it ties up working capital, which can cost you dearly. Therefore, unless you’re getting a deal too good to pass up on a plastic or metal that is currently skyrocketing in cost, you want to get your inventory as lean and mean as possible. How can you do this? A recent article in Industry Week, inspired by Cornerstone Solutions, had a fairly exhaustive list of what you can do to reduce inventory. The suggestions were:

  • Reduce Demand Variability
    Get a better handle on what you are using, when, and make sure that you order consistently from your suppliers.
  • Improve Forecast Accuracy
    Combine your improved insight into your current usage with upcoming marketing campaigns and market projections to forecast better. Then alter your order sizes and intervals as appropriate.
  • Re-examine Service Levels
    How fast do you really have to service a customer if something breaks. If you’re selling a key component in a production line, then you definitely have to do next day, if not same day, servicing and must have the part(s) in stock. But if you’re selling tractors, and Farmer Joe’s breaks down on a Friday, I’m sure that, even if he is a little disgruntled, he can wait until Monday. And if you’re selling iPods — guess what, your user can go without a replacement for a couple of days.
  • Address Capacity Issues
    Make sure your low-lead time suppliers can produce enough products to meet unexpected demand spikes (that you sense on the front-end because you’re carefully monitoring your sales data with amalgamated nightly feeds through your supply chain visibility solution).
  • Reduce Order Sizes
    If you only use 100 a month, don’t order 1000, even if the discount “looks” attractive — chances are, after you factor in the holding cost and the working capital cost, you’re losing money.
  • Reduce Manufacturing Lot Sizes
    Find a supplier who can produce smaller lot sizes economically, especially for items that you have low volume requirements for.
  • Reduce Supplier Lead Times
    The faster you can get a product, the less of it you have to keep in stock. Work with your suppliers to reduce lead times as much as possible.
  • Reduce Manufacturing Lead Times
    Select manufacturers who can quickly re-configure their production lines and who have short lead-time relationships with their raw material suppliers.
  • Improve Supply Reliability
    Make sure that you either dual-source or have a back-up plan ready to go if something should happen to your primary supplier or its primary facilities.
  • Reconfigure the Supply Chain
    Revise your distribution network to be as efficient as possible. Don’t be afraid to deploy strategic sourcing or distribution network optimization solutions.
  • Reduce the Number of Items
    Standardize on common components across your product lines and across your business units. One type of memory, one type of power supply, and one type of paper when one will do.
  • Eliminate Questionable Practices
    Given that certain types of questionable practices can land you in jail under SarBox, this should be a no-brainer.

Great advice (even if the article itself was a little too brief).