Category Archives: Supply Chain

Strengthen Your Supply Chain

In yesterday’s blogologue I told you that your brand was a terrible thing to waste – and that the strength of your company’s brand ultimately lay in its supply chain, and not the latest fad dreamt up by your company’s marketing mogul. This means that, unfortunately, it’s up to you to protect the brand, and not the apathetic advertisers who lounge around all day being “creative“.

So how do you do that? The Industry article “Strengthen Your Supply Chain” that I referenced yesterday has some good starting points. It tells you to focus on five key elements that cover most of the basis. It’s key elements were:

  • traceability
    you should be able to track all products, components, and raw materials backwards and forwards through the manufacturing process
  • measurement
    basically, testing; identify the components and risk points (start with the hand-off points) and then have internal quality assurance personnel or an independent auditor test each component and at each risk point
  • certification
    certification programs set guidelines and involve an additional process of checks and balances: these usually fall into regulatory, industry self-regulation, and third-party certification
  • efficiency
    be sure to adopt a traceability and testing program that works with day-to-day supply chain operations
  • organizational buy-in
    successful supply chain management depends on the cooperation of employees at each and every level

To this I’d also add, at a minimum:

  • Visibility
    It’s important to not only know what goes into your products, but where each raw material, component, and product is at all times. Could they have been tampered with? And, if you are dealing with consumables, how long did they sit on the truck? Could they have gone bad?
  • Modeling
    In order to be sure you have the right process, including the right checks and balances, you need to be able to model the supply chain as it is, as it should be, identify the differences, identify what could go wrong, and insure an appropriate test is included for each hand-off point, risk, and exception.
  • Supplier Management
    You ned to insure that your suppliers understand the importance of the process, are following the process, and are reporting any and all problems that arise, including those that they are able to detect internally. (If too many problems arise internally, even if they are corrected before defective or contaminated goods are shipped, then they need help with their process as the risk of something slipping through the cracks is too great.)

Finally, I’d like to point out that as important as certification is, checking out the certifications is even more important. In some parts of the world, it’s quite easy to buy a faked certification document. Just because a new supplier sends you a certification document, that doesn’t mean they are actually certified. Be sure to check with the organization that issues the certification that the supplier in question was actually certified AND that the certification is still in effect. But don’t stop there – if the certification is one that is actually done by third parties, check out the reputation of the third party conducting the audits. Are there any complaints against them? If so, how many and how recent. In some places, it’s even easier to buy a successful audit then it is to buy a fake certification.

When Going Global – Don’t Forget the Context!

Even though it has, like many articles these days, a China-centric focus, the article Context and Complexity by Edward Tse over on Strategy + Business had some great advice for any multinational thinking that they can enter a new market and immediately see dramatic, exponential, expansion in their reach and consumer base.

The article points out that if you’re an executive of a multinational company looking to enter a new market in a new country as a means of achieving growth, then in addition to the classic “three Cs” of customers, company, and competition, you also need to consider “context”. Without a deep understanding of the “context” of the country in question – the nature of its social, regulatory, economic, and infrastructure environments; how they’re changing in a period of (explosive) dynamism; and how they affect one another, then you will not be able to tap the true potential of the market you plan to go after.

In a new market, you could be dealing with a heterogeneous consumer market that is changing fast, as you have in India and China, a regulatory environment under reform, as in China and parts of the EU, and a distinct culture that impacts what the consumer will, and will not, want and be attracted to. (This last comment is especially true in food service. Those who think the cow is sacred will not eat beef burgers just like those who only eat kosher will not eat pork.) Chances are you will not be able to run your business like you do in your home country, if you can even get in to run your business at all!

Furthermore, it might be necessary to extend beyond just the biggest demand centers of a country to achieve a sales volume that makes it all worth while. In other words, just opening a store or channel in the 50 biggest cities might not cut it if you have a niche, or expensive, product. In developing countries, expanding beyond the tier one markets can be difficult due to lack of infrastructure, channels, customer sophistication, consumer disposable income, and regulation. Just like developed countries often have requirements at the national, provincial, and municipal level, so do developing countries. In nations as large and complex as China and India, opening multiple retail channels in each of the major cities in each of the provinces can be quite daunting from a regulatory perspective. Plus, in a developing economy you’ll have stark cultural contrasts between a major city that is attempting to play in the global marketplace and the rural areas just a few miles beyond the municipal line.

In summary, expanding into a new market in a new country probably won’t be quick, easy, or at all what you might expect and will take a lot of work, research, and cooperation with those who have been there and done it before to pull off. It’s doable, but not overnight.

Richter’s Key Features and Directions for Supply Chain Software Solutions

In the spirit of our recent cross-blog series on The Future of Sourcing (recap I and recap II), I’m going to wrap up coverage on the 5th International Symposium on Supply Chain Management with a presentation from RSM Richter Consulting on key features and directions for supply chain software solutions.

The presentation overviewed seven major directions for supply chain software solutions, which started, peaked, and ended with some of my favorite topics:

  • Collaboration Among Trading Partners
    • Systems that will integrate with supplier, customer, and other provider systems
    • Transactional integration and visibility / inquiry
  • Demand Planning
    • Inventory requirement forecasting tools
    • Detailed planning by market, by customer, by location, etc.
    • Support for more complex lead time configurations and optional supply sources
    • Incorporation of customer sales history and forecasting
    • Dynamically updates as customer information is updated
  • Inventory Visibility
    • Inventory visibility from cradle-to-grave: on-order, in-transit, received, in-process, on-hand, on-delivery, etc.
    • available-to-promise at point of order entry or earlier
  • Logistics & Freight Management Tools
    • Planning and coordination of transportation with providers
    • Generation of all required documentation
    • Visibility of, and status on, the movement of goods from supplier to customer
  • Complete Integration of Functionality
    • An ideal integration of depth and breadth
    • Elimination of “islands of information”
  • Vertical, Industry-Specific Applications
    • A shift from generic tools to deep industry functionality
    • Without losing the underlying fully integrated suite
  • Optimization of Business Processes
    • tools for workflow and collaboration
    • geared to provide standardization and efficiency
    • automation for business processes
    • consistency in documentation

These are all great topics – and right now companies like Arena, Blinco [rebranded 3rdwave], Co-exprise [rebranded DirectWorks, acquired byIvalua], Enporion [acquired by GEP], Iasta [acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric], MFG.com, Provade [acquired by Smart ERP Solutions], TrueDemand [acquired by Acosta], and VerticalNet [acquired by BravoSolution, acquired by Jaggaer] are cheering – since they’ve understood at least some of these points for quite a while now. (It’s unfortunate for some of them that it’s not coming through loud and clear in their messaging.)

However, regardless of which points you agree with and which points you don’t, the proper implementation and use of more advanced supply chain software comes with some significant benefits, including:

  • increased supply chain efficiency through improved information flow
  • reduced inventory, and related costs, through better management of demand, purchasing, production, and delivery
  • faster and more accurate visibility on inventory and availability
  • improved collaboration with trading partners with whom information can be shared for better decision making

… and all of this leads to improved efficiency and cost savings!

Keynotes: The Good, The Bad, and the Horrific

As those who have been paying attention will know, I was at the 5th International Symposium on Supply Chain Management last week in Toronto. This conference simultaneously had one of the better keynotes I’ve heard in a long time and what is definitely the worst keynote I’ve ever attended. Before I cover the content of the good keynote, I’d like to take a stab at differentiating what makes a good – or great – keynote from what makes a bad – or awful – keynote.

In a good keynote, the speaker is, simply put, energetic, engaging, and engaged. She is passionate about what she’s speaking about, allows her energy to flow from her to the audience, makes eye contact, moves around, and speaks from her head and her heart. Her notes and slides are merely centering points, not the focus. You want her to stay on the stage.

In contrast, in a bad keynote, the speaker is as lifeless as a lump of clay, as unappealing as a puddle of mud, and as uncommitted as today’s pop star is to sobriety. He is passionless about the subject matter, cold as a lump as ice, and as monotone as a metronome. His eyes are glued to his prepared speech, his stance as a rigid as a statue, and his words as disembodied as whispers in the breeze. His paper is also his paperweight, and all you can hope for is that someone has the energy to lift up the vaudeville cane and yank him from the stage.

IBM’s David Swiggum, who had the first keynote, did a great job of demonstrating what a good keynote is all about. It wasn’t the best keynote I’ve ever heard, but it was unarguably pretty damn good and compared to the other keynotes, it was a blinding ray of light in an otherwise dark, dank, and gloomy cave deep in the earth. (The only other speaker that matched David in energy and heart was Jon Hansen. This isn’t to say that there weren’t other great speakers at the conference this year, but that just about every presentation I decided to attend this year was at least a bit of a letdown, at best.  There were three parallel tracks, and I think I picked the wrong one just about every time since I was more impressed with the speakers last year.)

In his keynote, David discussed IBM’s supply chain transformation over the last decade where IBM has transformed itself from a laggard to leader, bringing a company that was barely surviving in 1993 (profit at about 4.5% and dropping) to a company that is thriving, largely in part to the 6.2B in cost savings the integrated supply chain practice saved IBM last year.

David’s presentation was jam packed with great facts, great statistics, and great advice – too much to cover in a single blog post – so instead I’m going to share three key takeaways: IBM’s shared measurements for success, IBM’s rules of change sustainability, and IBM’s list of “Cost Takeouts” that you should be focussing on daily.

IBM’s shared measurements for success fall into three categories: financial, operational results, and client-facing results. They are summarized as follows:

Financial Operational Client-Facing
Cost Reduction Demand/Supply Synchronization Client Satisfaction
Cash Generation Cycle-Time Ease of Doing Business
Quality of Installation Unleashing Sales Force Productivity

With respect to driving change and sustaining results, David offered up the following tips:

  • transform and strengthen the supply chain function while building end-to-end capability
  • reduce fixed costs and drive flexibility in infrastructure
  • implement truly global processes and technologies
  • apply governance, performance goals, and reporting disciplines
  • tend to the culture, emphasize talent, and improve skill-sets

With regards to the cost “take-outs” you should be focussing on each and every day, David offers up the following:

  • Parts & Services
    • year over year price mark downs
    • cost avoidance
  • Design Efficiencies
    • utilization of standard parts
    • common systems platforms
  • Manufacturing Effectiveness
    • outsource for flexibility
    • low cost / tax jurisdictions
    • process improvements
    • leverage fixed capacity
  • Services & Central Procurement
    • leverage software
    • supply base rationalization
    • focus on core suppliers
    • global leverage
  • Customer Fulfillment
    • common processes and tools
    • “touch-less” processes
    • free up sales reps for customer service
  • Integration of Acquisitions

In comparison, Ariba’s representative delivered the absolute worst keynote I’ve ever heard – with the utmost emphasis on the delivery. I have no idea what his keynote was about beyond the abstract that was given. I know he was speaking English … I know I understood all the words … but … it was just … so … so … stupifyingly comatose and exanimate, that all I wanted to do was drop into a coma and end my suffering. I tried to take a few notes … but … all I managed to jot down was a few meaningless phrases that aren’t even as meaningful as what the Dilbert Mission Statement Generator spits out. His delivery was every bit as lackluster as the textbook definition of a bad keynote and then some.

All I have to say is that next time anyone wants Ariba’s help in putting together a keynote is that they should go to the guy Ariba goes to when they want a good keynote at their conferences – Jason Busch of Spend Matters. You could sleep deprive this guy for a week, OD him on valium, and give him a set of cement shoes and I guarantee he’ll still have more energy and passion than anyone else in the room — and that’s what a great keynote is all about.

And if you’re curious about the other keynotes, they weren’t that great either. (Nowhere near as bad as the Ariba representative’s, but not great.) Mr. Mikell is a really smart guy and a great researcher, but ( a ) you can’t cram more concepts onto a slide than the average genius can understand and get away with it unless you’re Pierre Mitchell and ( b ) I kept wondering if he was really an accountant or tax lawyer when he was up there. As for Mr. Johnson’s, it was also half decent, but it was missing a hook – I just didn’t understand why it deserved keynote status and why it wasn’t relegated to a regular presentation.

“Supply Chain” Does Not Have to be a Dirty Word!

In a recent discussion with Kevin Brooks, the former marketing guru of Apexon, and of Ariba before that, who is now the Vice President of Marketing for TrueDemand (acquired by Acosta), what struck me most was not how useful the right technology can be in addressing the 7 Deadly Sales Suppressors, but how TrueDemand has noticed that sales folks – even the sales execution folks at big CPG companies whose careers depend on how many units they can move in a given timeframe – still view “supply chain” as such a low priority that it’s almost a dirty word and the domain of “procurement”, which many still believe has nothing to do with them. To them, it’s all about revenue … which is … well … wrong. Business is about profit and profit = revenue – costs. Thus keeping costs down is just as important in the pursuit of profit.

Furthermore, this apparently still holds true in the merchandising and sales execution teams at some of the world’s largest CPG companies … even those that have adopted the latest sourcing and procurement technologies and, at least within their supply chain divisions, understand just how important a smoothly operating supply chain is. When it comes right down to it, if you don’t have the right product, at the right place, at the right time, of the right quality, at the right price point – all the marketing and promotion in the world is not going to help you in the least.

This is where supply chain comes into play. Even if you call it logistics and distribution, operations, or sales execution – it’s still supply chain, and it’s still the proper application and use of supply chain technology that’s going to make the difference in a market where product life times are shorter every year and even a few days, or hours, can make a significant difference with regards to the impact of a newly launched promotion.

However, I will have to admit that it is a still a bit off a toss up as to what the right set of systems is – since there is no one system that tackles everything involved and since success depends on a system that you can use. Forecasting; Sourcing; Procurement; Logistics & Distribution; Inventory, Warehouse Management & Replenishment; Merchandising; Product Lifecycle Management (PLM); and Sales Execution – to name a few – are all important. And there is no one system that tackles more than a couple of areas. Now, it’s true that some of the bigger players, like Oracle and SAP, have modules that work off a central data store to tackle all of these issues to some degree, but no system tackles all of these issues to the extent that today’s best of breed players do, nor do any of the systems that support more than a handful of these modules have tight integration.

However, that’s not the point. These systems exist, and dozens of players in each area keep improving them, because they have value. They not only help supply chain do their jobs better, but they are capable of surfacing exceptions in near-real time that need to be acted on in days, or hours, to keep a product launch from going off-track. They’re effective, and for many companies, their day-to-day operations would be severely threatened, if not impossible without them. So don’t bicker about the terminology, or its value. You need the technology, and as globalization increases, you’re only going to need it more. Without it, you won’t be able to make sense of the data fast enough to make a difference. Supply Chain drives your company, its profits, and, ultimately, your compensation. Get used to it.

If you don’t accept reality, don’t expect reality to accept you.