Category Archives: Sustainability

A New War for Talent in the Supply Chain Future

It looks like the relevant media is finally starting to accept that the talent crunch will soon be upon us and that they have to start making a lot more noise if the business world is going to accept that it’s not just a top ten issue for the organization as a whole, it’s a top three issue! (The other two being corporate social responsibility and business sustainability, both of which will only be solved if the organization has the right talent.) I think I’ve stumbled across more articles in the past month or so than I have in the past year, including “The Future of Supply Chain Management – Part 3: Organization + Talent” in the Supply Chain Management Review, “The New War for Talent” over on ZDNet technology news, The Global Fight for Top Talent in Fortune, and “It’s More Than Just Money” in Knowledge @ Wharton China.

This is a good thing, because the reality is that we’ve been starving for talent in the developed world for over a decade. Technology has progressed so rapidly in this information age of ours (because Shift Happens) that even many individuals with University degrees more than a decade or two old are having significant problems keeping up – so imagine where that leaves the majority of the workforce without one! And now that the vast majority of the baby boomers are within a few years of retirement, at most, we’re in for some serious workforce shortages, especially since the number of young workers in the US alone will decline by 1.7M next year. Recent predictions are that the US will face a 10 million workforce shortage within 2 years and a 35 million workforce shortage by 2030! (Where will they be? In India of course! Already, HCL technologies, a mega-player in offshore software development is finding that new employees are seeing India as the most compelling source of opportunity and do not want to be sent on overseas assignments to North America!)

But the war is about to intensify. To date, the talent war has mostly been fought in the U.S., Western Europe, and Japan, but with the rapid rise of developing nations across the globe (and the BRIC block in particular), along with the resurgence of other key players like Canada and Australia, the war is now truly global. Furthermore, even rich nations like Saudi Arabia know that their future relies on talent (as even their oil reserves will dry up some day). To this end, King Abdullah is spending 12.5 Billion ( yes, that’s Billion with a B ) to found a new graduate research university to attract the best researchers in science and technology in the world!

And anyone without the right talent today is pretty much guaranteed NOT to be here tomorrow. The average business life-span may have been 14 years in the past, but we’re marching to a future where 14 months may be closer to the norm. With 70% of the value of companies in the S&P 500 now in intangibles, compared to 20% back in the 1980, almost all of the value in an average company lies in it’s people, their knowledge, their goodwill, and their ability to manage and capitalize on those intangibles.

So you better get your talent strategy ironed out quick, because if you don’t, you might wake up one morning to find that you have none and that you’re out of business.

Supply Management in the Decade Ahead III: The Eight Major Forces – Part II

In Part I of our review of “Succeeding in a Dynamic World: Supply Management in the Decade Ahead”, we overviewed the various external forces that will impact a company’s supply chain as identified by CAPs, AT Kearney, and the survey respondents. We then concluded with the eight major forces that were identified specifically by supply managers who took part in the study. In Part II, we dove into the details of the first four of the eight major forces. Today, we dive into the last four of the eight major forces and explain not only why they are important, but what can be done about them.

Customer & Channel Dynamics

The downstream supply chain will change rapidly due to economics and government policies in some industries. In other industries, supply chain dynamics will be influenced by the poor financial condition of major trading partners in the chain. The impact of private equity firms will also be significant, who will continue to take public companies private, slash costs, raise prices, and change business relationships.

In other words, the only difference between conducting business today and conducting business in the next ten years with respect to channel dynamics is that these changes will continue to come at an accelerating pace and you will have to adapt faster than you do today. This means that the winners will be those companies that have good visibility into their supply chains – the ones that can identify when an impending regulation or buy out will affect them before it happens and have a contingency plan ready to go the instant it happens.

Increased Product Variety & Shorter Life Cycles

Variety will continue to mean more models, brands, and products tailored to different geographies and price points. Consumer tastes in emerging economies will be new and different from traditional markets. Traditional lines of competition will blur as companies try new products and markets.

True, but eventually someone will realize that you don’t want to browse the web on the screen the size of a credit card, you don’t want your fridge to tell your local grocery store that you consumed six litres of rocky road this week, and that you don’t want the ability to cut yourself seven times in a jagged fashion simultaneously while shaving. Amongst the big winners will be the companies that realize sometimes you just want a phone, a fridge, and a straight razor – and not all the garbage hallucinators are trying to shove into these products today. And, oh yeah, there comes a point where it doesn’t matter how many fractions of an ounce less it is than the previous product, how many extra cubic inches you squeezed into the door, or how fast it vibrates (at least in the case of the razor).

Social Responsibilities

Companies in developed economies will continue to be held to high standards wherever they do business in the world. Companies will have to monitor working conditions in their supply chains all the way back to basic extractive and farming practices. Supply management will have to ensure that the supply base meets environment standards. Commitments to a diversified supply-base will become more important in developed economies.

This is true, but it misses the point that it won’t be Green Peace and PETA that you worry about in the years to come – it will be your customers, who, greater informed about your supply chain practices than ever before, will start to boycott your products even before Green Peace and PETA gets their campaigns against you off the ground. Industry self-regulation will require you to exceed government standards, or be barred from cooperative partnerships and organizations that could help you survive in the dynamically changing marketplace to come. And, oh yeah, today’s “social networks” will have nothing to do with the solutions.

Environmental Responsibilities

Continuing the social responsibility theme, customers, consumers, shareholders, non-govermental organizations, and governmental bodies will all increase their scrutiny of corporate environmental practices in all regions of the world and demand that companies take environmentally friendly actions. Companies will be forced to meet the environmental expectations of the general populace. Environmental issues will become brand-related issues and influence how companies are viewed in the marketplace. To meet environmental commitments, companies will put together cross-functional teams with executive leadership to monitor environmental concerns in the extended supply base.

All this is great, but I believe that sometime in the next decade, carbon offsets will start to peak out in the developed nations as consumers smarten up and realize that some of the larger companies with the deepest pockets are using them as an out to avoid every doing anything to decrease their environmental footprint. When their only other options are to make the hard choice of investing hundreds of millions, if not billions, to upgrade your factories or re-invent yourself around less harmful products, most executives are just going to take the easy out and buy the carbon credits. These are the same companies that today are content with buying innovation whenever they need it, as they are pseudo-monopolies due to the high cost of market entrance and / or the time it takes to build up the sizable customer base they’ve acquired. Fortunately, when the impending commoditization is combined with consumer revolt, there’s a good chance that their currently unchallenged position at the top will not remain unchallenged for much longer.

the doctor Thinks Your Brand Is A Terrible Thing To Waste

I know that some of you, especially those of you that only read the intro and / or first chapter to books like Your Marketing Sucks, don’t really believe in the value of the brand – instead believing that what really matters is sales, and marketing efforts that directly impact sales. And if you work in a company where marketing does suck, I can understand why you might think this way. But, as hard to measure and intangible as brand is, it does have value – and for some companies, a lot of value. Do you think Coca Cola is the largest beverage company in the world because it has the best cola? Do you think Microsoft is the largest software company because it has the best operating system? Do you think GM is the largest auto company because they produce the best cars? If so, then I’ll have what you’re having!

A lot of people might prefer coca cola, but if you didn’t know what coca cola was and did a blind taste test with half a dozen no name colas, I doubt you’d get a 9 out of 10 cola consumers agree – or anywhere close to that. Microsoft hasn’t been able to solve basic multi-threading problems in its OS that mainframe systems, such as the Compatible Time Sharing System, solved as far back as 1962. And in terms of quality, I’m not alone in thinking Toyota and Honda have surpassed GM in quality. Lots of industry rankings agree.

But these companies are still #1 in their game – and all Fortune 100 (GM = 3, Microsoft = 49, Coca Cola*1 = 94). In each of these cases, it’s because of their brand. In Coca Cola’s case, it’s because it continues to have the best brand in the world, as per BusinessWeek’s Interbrand rankings. In Microsoft’s case, it’s because it continues to have the second best brand in the world. And in GM’s case, it’s because it was the best car brand for an entire generation – a generation that will likely be loyal to that car manufacturer until they die! That’s brand power.

Furthermore, there are ways to calculate the effect of “brand” value. It’s true that they all have disputable elements, but I think that any method that starts by deducting operating costs (including sales and marketing), taxes, and capital charges from projections based on five years of earnings and then uses standard methodologies (such as those employed by VC firms) to assess and subtract intangibles such as patent portfolio (and associated license revenues), such as what Interbrand does, is on the right track. If after all these deductions from revenue you still have a positive amount, it’s an extremely good bet that a large percentage of this is attributed to brand. In Coca Cola’s case – that’s 67B. In Microsoft’s, that’s 57B. And in Toyota’s and Honda’s case, the brands for the new car buying generation, that’s 28B and 17B, respectively. I don’t know about you, but I think that’s an awful lot of value – value which will dissipate, and quickly dissolve your current Fortune 500 status, if the value of your brand goes away.

And that’s precisely what will happen if you don’t properly manage your supply chain, as pointed out by a recent article in Industry Week that tells you to Strengthen Your Supply Chain, Protect Your Brand. Every recall that you’re associated with decreases the value of your brand at least a little in the eyes of a consumer*2. Every time your product is not on the shelf when someone wants to buy it, the value of your brand diminishes a little more. And every time you produce a product that is of poor quality your brand diminishes a little more still. Each of these issues negatively impacts your brand, and not one of them has anything to do with marketing. The sad reality is that even though marketing and advertising may still get most of the credit when it comes to brand building, it’s really supply chain that ultimately determines the value of the brand. Because if supply chain doesn’t deliver, any perceived value created by marketing evaporates like the morning dew on a hot summer day.

So no matter how good you think your supply chain is running, take another long, hard, look. Statistics say you can expect at least one major disruption in the next two years. And if you don’t figure out what that is now, it’s going to happen. And I wouldn’t want to be in your shoes when it does!

Remember, if it’s your brand, I don’t care what contracts you have in place with your suppliers – it’s still ultimately your problem! Passing the buck won’t save your brand – or your ass when the CEO has to take drastic action in an attempt to satisfy shareholders. That’s why I also talk about the larger context of visibility and supply chain management on this blog – so that you know where strategic sourcing fits in the larger picture of supply chain management and have the knowledge you need to do it right. So next time you think you don’t need to read one of my longer essays on the subject, think twice. There might come a day where You might just find that you’re glad you did.

*1 I know Pepsi is 63, but it’s not just a soft-drink company anymore – it’s a snack food company. This move, and associated acquisitions, which started back in 2003-2004 may have moved it up the Fortune 500 list relative to Coca Cola, but Coca Cola is still the largest from a pure soft drink perspective, as well as having the best brand in the world, as per the Business Week Top 100 Brands.
*2If you happen to be a food producer or provider and people became very ill and / or died because of a supply chain failure, your brand value will be impacted very significantly.

Sustainability Should Be Soldered Into Your Platform

I think we can all agree that sustainability is important – very important. You might be in business to make money, but the only way you’re going to make money is if you stay in business. The only way you’re going to stay in business is if you’re sustainable, because, otherwise, you risk running out of resources, money, or, and I’m not kidding, customers. The earth is finite, so it stands to reason that there is only a finite amount of any resource. A company has a finite amount of money, and wasting it is the quickest path to going out of business. Today’s consumer is concerned about the environment – harming it will drive them away, and with no customers, you have no business.

So how do you achieve this magic of sustainability? Well, you can achieve it the same way you achieve everything else in business – hard work, perseverance, and ingenuity. But the real trick comes in sustaining sustainability – and the best way to do that is to have not only supporting processes and methodologies, but a supporting platform as well.

A supporting platform can help you keep track of your initiatives which can range from your office recycling program to your global waste reduction initiative. Recycling efforts within a single large office building can save hundreds of thousands of dollars. As noted in “Building the Green Supply Chain”, the Boulder Community Hospital reduce, reuse, and recycle program saved the hospital $600K a year. On a global scale, Walmart saved 2.4M in shipping just by reducing packaging requirements. And Interface Inc, in their effort to move to a zero environment footprint, have saved more than 260M in the first decade of their sustainability program.

More importantly, it can also help you get control of your global sustainability initiatives when it comes to environmental impact reduction, social responsibility, and prevention of animal cruelty. Unlike internal waste reduction initiatives, which often do not exceed the complexity of making sure the used toner cartridges were shipped back to the manufacturer, global sustainability initiatives require you to also insure your supply chain does not violate the initiatives you commit to. Just because you don’t have a sweatshop, pump out toxic emissions in excess of the Kyoto protocol, or skin cows alive does not mean that your suppliers do not.

In order to insure that you have a supply chain in compliance with your initiatives, you have to track relevant information from your suppliers and have them track the corresponding information from their suppliers. This is an insurmountable challenge unless they can provide you with the information you need directly into your systems, as the average large company has dozens, if not hundreds of essential tier 1 suppliers and thousands of less critical suppliers. This requires a web based platform capable of securely collecting, storing, indexing, aggregating, and unifying all of the relevant information from each supplier.

Furthermore, depending on where you want to do business, sustainability might be more than just an initiative – it might be a fact of life. If you want to do business in the EU, you need to comply with REACH and RoHS, and possibly half a dozen other directives. California has introduced its own green legislation, and parts of Asia, suffering from severe pollution as a result of the rapid build up of manufacturing capability over the last few decades to meet the demands of American and European multinationals focussed on low cost country sourcing, may not be far behind. You have to not only maintain all of the documentation necessary for compliance purposes, but have to be at least 99.999% certain you are in compliance before making a shipment into the region. If even the tiniest removable part of your electronics system, such as the removable power cord, is not in compliance, your entire shipment could be blocked, seized, or destroyed.

This dictates the need for a platform that tracks not only all information related to your sustainability programs, but all product related information from raw materials through final production. This is the only way to minimize your risk of non-compliance. That’s why Aravo is Sourcing Innovation’s Vendor of the Week. As one of the first companies to offer a Sustainability Management Solution (SMS) tightly integrated with a Supplier Information Management (SIM) solution, I think they deserve to be recognized for tackling such an important problem.

Coupa + Amazon EC2 = Energized Procurement!

One of the great things about the blogsphere is we don’t have to wait for them to stop the presses to get a great story in at the last minute. We just type, save, publish – and presto! – you get the latest news as soon as we get it, as it happens, and, when you’re really lucky, before!

Tomorrow, the latest press release from Coupa will blanket the wire, traditional e-Procurement companies will cringe, and new age technophiles will rejoice. For tomorrow, the world’s simplest e-Procurement system will be available on-demand to enterprises of all shapes and sizes at a fraction of the cost of traditional e-Procurement systems. Just like SalesForce.com revolutionized the CRM world, Coupa is revolutionizing the e-Procurement world – and then some! By basing their new services on Amazon’s EC2 Virtual Grid Computing Cluster, they are ensuring that they’ll always have the computing power required to ensure rapid response times, regardless of how many users decide to use the system at exactly 4:55 p.m. to get that last order of the day out before they leave.

Normally it takes a big merger, acquisition, or introduction of a brand-spanking-new technology to shake-up a market – but Coupa has achieved puree with nothing but open source and a revolutionary pricing model. They don’t know it yet, but I’d say at least three quarters of the e-Procurement companies I track over on the resource site are in dire straits once procurement professionals realize everywhere that it doesn’t cost in the high six, or even seven, figures for basic enterprise e-Procurement anymore – and that it doesn’t require a six month roll-out plan either! Specifically, I predict that any company trying to make a living just selling decade old order management, e-RFX, e-Invoicing, and catalog management technology is headed for extinction. Unless they are also providing advanced payment solutions, supply chain finance, inventory visibility, or other advanced service offerings – they’re going to have a very tough time competing with a true multi-tenant on-demand e-Procurement platform with unlimited scalability and exponentially decreasing costs on a per-user basis as your organization grows.

This brings us to their transparent four layer pricing model – the first of its kind – that is designed to make the Coupa e-Procurement system affordable to even the smallest 3-guys-in-a-garage start-up while simultaneously making it best-value for your large enterprise who’s still struggling to embrace the 21st century and just needs a basic e-Procurement system. How affordable? How valuable? Although the exact prices won’t be available until tomorrow, I have it on good authority that a 10-user organization can get started for as little as 3K a year (and maybe a little less)! And – you better be sitting down for this one – a 1000 user organization can get started for under 50K per year! That’s less than $50 / user / year! And the enterprise package also includes their new “Quick Start” program which gives you a dedicated solution delivery expert, guidance on collection of key company information, and assistance in configuring your Coupa-On-Demand instance – including chart of accounts, users, suppliers, contracts, catalogs, approvals, and integration advice.

Coupa has also been working hard since their last release to extend their functionality, and now supports a number of common office supplies and electronics vendors using punch-out and cXML order delivery (including Office Depot, Office Max, Dell, and VWR), direct quickbooks order import via Traxian for small businesses, and an integration web services layer that automates the movement of data in and out of Coupa-On-Demand using XML and an open API that supports seamless integration with accounting systems and ERPs.

And I’m sure there’ll be goodies aplenty on their newly designed web-sites that will be live tomorrow. That’s right – Sites! In addition to Coupa.com, there’ll also be a new Coupa.org site as well that will provide a dedicated home for Coupa Express, the world leading open source project for e-Procurement that has already surpassed 9,000 downloads and will probably pass the 10,000 mark before the month is up!

So watch the wire – and check out Coupa*! The e-Procurement revolution is at hand!

And, for those of you still wondering, this post fits in perfectly with the Sustainable Sunday theme : On-Demand e-Procurement that uses Amazon EC2 Virtual Computing Grid to only consume as much resources (and energy) as is required to support your needs and keep your costs low helps you sustain your procurement initiatives!

*Wouldn’t Coupa make a great sponsor of Sourcing Innovation? They’ve been pretty innovative lately.  Feel free to leave any comments – including dissenting ones! – below. I know they read this blog from time to time.