Category Archives: Top Three

The Top Three VII: A Great Line-Up

As I indicated in a recent post, I have lined up a number of leading bloggers to bring you their top three. In anticipation of the great posts to come, here is a partial list of bloggers lined up for next week, in addition to the sourcing and procurement regulars (and possibly a few more guest bloggers):

I’m sure when we contrast their top three with the issues that sourcing bloggers like myself, Tim Minahan of Supply Excellence, David Bush of eSourcing Forum, and Jason Busch of Spend Matters regularly blog about, we’ll be able to paint a detailed picture of what Spend/Supply Management 2.0 really needs to address.

The Top Three VI: Straight to the Bottom Line

Today I’m thrilled to bring you a guest post from Doug Smock, editorial director of GlobalCPO.com and co-author of On-Demand Supply Management and Straight to the Bottom Line.

First I’d like to thank Michael for the invitation to participate in the blogathan. I’ve spent most of the last three years since I left Purchasing magazine writing two books about what I consider to be the biggest issues in the procurement world, and have already vented my spleen about such critical issues as CEO involvement/buy-in as well as world-class metrics (since 99.9% of all procurement departments I’ve visited have terrible metrics).

For this, I’d like to touch briefly on the need in American companies for greater cross-functional collaboration between procurement and engineering. The primary goals need to be reduction of specifications’ complexity, introduction of new ideas throughout the supply base, better understanding of “could” costs, improved management of products through their entire lifecycle, and dramatically improved product quality and user-friendliness.

When I first joined the staff of Purchasing magazine in 1977, we used to run a special issue called Value Engineering in which we ran reports of how teams of purchasing and engineering professionals met to reduce costs or improve performance of existing, or even brand new, products. I once visited Buell Motorcycles in East Troy, WI, and saw how product development began with a talk by founder Erik Buell on his vision for a new sports bike: the cost target, speed, look, and feel. Engineers and purchasing professionals then broke into platform teams and met with key supplier partners to develop components. One team replaced a 21-part front section of assembled metal pieces with a sleek-looking, stronger and cheaper single made through an outsourced metal molding process. When I returned to Purchasing as Chief Editor in 2000, I couldn’t really understand why the Value Engineering issue had disappeared. It also seemed to disappear at many companies in the blitz of wonders related to dotcomism.

That’s a shame because what suppliers bring to the table is incredibly powerful in this process. I saw it recently in the newly designed Cabrio and Duet line of laundry products from Whirlpool, where suppliers proposed solutions to technical problems that internal engineering teams felt were irresolvable. I hate to kick a dog when it’s down, but this to me is the most lamentable of all of the problems with the American automobile industry. Bob Lutz, currently chairman of GM North America and former head of Chrysler, once famously commented: “I was amazed (and a bit appalled) at the lack of functional integration at the companies I worked for.”

I know the blogs focus a lot on software, but I’d like to see a little more emphasis on blocking and tackling at the company level.

Editor’s note. Bold was introduced to help draw out Doug’s key ideas. Also, our blogs do occasionally tackle more than just software, and two posts in particular I’d like to point out are Jason Busch’s Selling the Value of Procurement to the Business and Tim Minahan’s Selling Supply Management to the C-Suite: Make it Personal. Also, keep your eyes on the eSourcing Wiki. More content is on its way, including a wiki on perfecting your pitch for a procurement project to pointmen.

The Top Three V: Learning to Communicate

As indicated in my last post, here is Kevin Brooks contribution to the Top Three. He takes a different spin, focussed on internal communication, but it is valuable insight nonetheless.

3 Ways To Get Buy-In

As a marketing guy, you’re required to be something of a corporate voyeur in
order to put your finger on the real pain facing your customers. In darkened
rooms, behind one-way glass partitions, I’ve watched focus group after focus
group of procurement executives complain about how they can’t get buy-in
from their organizations. “We communicate all the time, but it doesn’t seem
to make any difference!” I recall one harried CPO of a multi-billion dollar
company telling his nodding colleagues around the table.

While I’m sure every corporate function shares this perspective from time to
time, procurement teams seem uniquely saddled with difficulties making
themselves understood to their organizations. So, in the spirit of this
blogathon, I’d like to offer three rules that can help the struggling
procurement executive communicate more effectively.

Rule #1: Listen To Your Audience

You may think you’re simply putting out information, but your audience views
things differently. The best communications start with listening, and an
understanding that you’re always engaged in a dialogue – not a monologue —
with your audience.

There are formal and informal ways of listening to your audience. The
easiest is to simply talk with them. How do people like to receive
information? What format is best for them – email, snail mail, voicemail,
instant messaging, carrier pigeon? What makes them read or listen to
something now versus saving it for later? What kinds of messages do they
ignore completely? Why?

Do this regularly, and make adjustments to your approach based on what you
hear. Basically, just give your audience the same attention you’d give an
important supplier, and the simple fact that you took the time to ask them
their opinions will cause your next email or presentation to be “heard”
louder and clearer.

Rule #2: Repeat, Repeat, Repeat

It would seem logical to put out information that builds on what you’ve said
before. If last week you talked about the new travel spend policy, there’s
no need to rehash that old news when you want to let people know about the
new p-cards, right? Wrong.

It has been said that on average it takes people 6-9 times to receive
information before they “get” it. One email, or a single team presentation
won’t cut it. Repeat, repeat, repeat. Even when you’re sick to death of
telling people about the travel spend policy, grit your teeth and keep
mentioning it. It takes discipline, sure, but if you want to get a message
across, this is how you do it. There are no shortcuts.

Rule #3: Keep It Simple

This rule is tough, especially if your organization is filled with
detail-oriented gurus from the Pierre Mitchell school of PowerPoint. And, to
give them their due, complexity surrounds us in the business world and you
would think people could deal with a few extra bullet points or paragraphs
here and there.

Sorry, but they can’t. Your audience isn’t illiterate, but they are busy and
distracted professionals. If you can’t make your point efficiently, they
tune out. It is far better to get one message across clearly, than to get 10
messages across muddled.

Keep things simple by limiting your message to one idea per communication.
And remember: shorter is always better.

 

So there you have it. Three simple rules that can improve your
communications and help you gain buy-in for procurement across the
organization:

  1. Know Your Audience
  2. Repeat, Repeat, Repeat
  3. Less Is More

Good luck!

P.S. Jon Miller’s post on Lean Sourcing: The Top Three is up now as well!

The Top Three IV: Never Give a Blogger Two Weeks …

Never give a blogger two weeks if you want some of them to post in one week. Being perfectionists, they’ll all wait until the second week given the choice. Considering I have commitments from about twenty bloggers, I was hoping that the two week window combined with the law of averages would result in their contributions being roughly evenly spaced out over the next two weeks, but I’m getting the feeling that the majority are going to wait until next week.

On the bright side, Jon Miller of the Gemba Panta Rei, a kaizen blog posted his teaser post on Lean Sourcing yesterday, and there’s a good chance Kevin Brooks will have his guest post ready today. Keep checking. This week might be a little slow, but next week is going to be great!

The Top Three III: The First Guest Blog

With at least eighteen confirmed bloggers and guest bloggers, the big question was, who will go first? Well, I’m happy to report that Lisa Reisman, Managing Director of Aptium Global Inc, has volunteered to go first. Today, I’m pleased to present her “Top Three”.

Maximizing the Savings Potential of Global Sourcing Strategies

In the past few years, we have observed a range of companies that leave tremendous dollars on the table because they have not formalized or streamlined global sourcing or LCCS processes. Why? Organizations who regularly source from low cost regions may have already implemented less than lean global sourcing practices. Lean sourcing practices encompass all of the processes around global trade but exclude the actual item(s) themselves. Cost savings opportunities exist for better global logistics practices, better negotiated trade finance terms and banking deals, and optimization of various international trade agreements, tariffs and treaties as they relate to the items sourced.

Companies with significant overseas sourcing volumes often have accumulated a whole host of costs not necessarily part of the original cost savings analysis. These costs can be in the hundreds of thousands if not millions of dollars, depending on the size of the organization and volume sourced globally. Missed savings – and added costs – have a direct negative impact on the bottom line.

There are ways to address these costs. The first is to examine the largest elements that comprise total cost outside of product cost. In the case of global trade the largest cost areas include: freight/consolidation, harmonized code classification and duties, payment terms and international trade finance arrangements, brokerage and associated customs fees.

There are enough risk factors affecting global sourcing decisions (e.g. currency volatility, political risk, loss of flexibility etc) that companies should be managing all costs that can be controlled.

Managing Volatile Commodities

Companies are struggling to maintain margins and plan their purchases for a full range of metals, metal services and semi-finished products with high metal content due to the ever fluctuating metals markets. Copper, steel, nickel, stainless steel and aluminum all have significant price volatility.

Volatility does not appear to be going away any time soon. The greater the volatility and uncertainty, the greater likelihood that a company may engage in practices counter to running a lean operation (e.g. buy and hold unnecessary inventory)

Companies can deploy many strategies to mitigate commodity pricing volatility which may include commodity indexing and bidding out of the value-add portion, deploying price escalator/de-escalator clauses, allocation of spot, forward, and averaging along with fixed index pricing to smooth peaks and troughs.

Enterprising companies may choose to develop commodity management strategies as a means of not only mitigating risk but also creating competitive advantage (think Southwest Airlines as an example of a company that created a competitive advantage due to advanced commodity management strategies).

Implementing Savings

This is the age-old sourcing conundrum … savings is identified but for whatever reason it is not implemented. It’s significant because many of the savings not taken include incumbent savings, which, of course, is the simplest of all savings to implement. The not-invented-here syndrome is a major impediment to savings implementation.

Many companies do not fully appreciate the opportunity cost of not realizing savings earlier as opposed to later. An annual savings of $130,000 might not be interesting to a Fortune 500 company but in middle market manufacturing, that contribution to EBITDA can be quite significant!

Larger companies talk about change management but we prefer to look at incentive programs. If you structure the incentives correctly, the right behavior will follow. Without allowing employees the opportunity of a little upside for saving money (and savings should be “net” savings), companies will continue to implement less than they could.