Category Archives: Training

With Global Trade, Training is Only the First Step

A recent article over on Supply Chain Brain by Wayne Slossberg of QuestaWeb on what can global trade management technology do for importers and exporters made a great point when it noted that with regard to the complexity of global trade, training is only the first step.

Keeping up on the latest requirements and regulatory changes looming on the horizon is one thing, but you have to do something about it. After all, there are now 106 discrete steps to global trade in the average transaction, and things are probably only going to get worse before they get better. And with the 10+2 Importer Security Filing now a requirement, and massive fines looming for those who do not comply, a single mis-step can be financially devastating.

You need tools to manage global trade, and spreadsheets (which are costing you billions) are not the answer. They never were, and never will be. You need a platform. Moreover, the savings will pay for itself. I could understand not wanting to be an early adopter, but this is a relatively mature technology now and there are a number of Global Trade Companies with products that can help you. There’s no excuse to wait any longer.

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If You Really Want a Renaissance Education …

then Get Back To The Classroom!

While I was pleased with the fact that the recent article on Supply Chain 2010 noted that a Renaissance education was needed in the supply chain because, in many ways, it is … I was very displeased to see that “employers are finding short term education most attractive as it doesn’t keep employees out of the office as much” and “can’t justify them being out of the office even for a full day”.

I’m sorry, but these are among the most imbecilic statements I’ve ever read. The cost of an employee being out of the office for a day is nothing with respect to the value a better educated employee brings to your organization, especially in supply chain. In fact, the cost of an employee being out of the office for three months is still literally nothing with respect to the value a much better educated employee will bring to your supply chain organization.

For example, let’s say that employee, who is well paid and makes 100K a year, is about to renegotiate a 10 Million dollar buy. Let’s say the price of the primary raw component is 10% higher than last year and you usually end up accepting price increases that equal 50% of the rise in the raw material index. This says you would be expecting a 10.5 Million contract renewal. Now let’s pretend that there’s a one day class on supply chain finance where your employee learns how, in some situations, companies can save big by financing supplier’s raw material costs. Let’s also pretend this smart employee comes back, does some research, and finds out your supplier is constantly carrying a credit line at 24% to finance the raw materials for the 60 days it typically takes to produce and ship the product and the 60 days it typically takes your accounts payable to pay. And let’s pretend that the raw material is 40% of the cost and that the supplier’s margin is only 10%. This says that the supplier is financing 40% of roughly 9M for 120 days at 24%. Doing some simple math, this says the supplier is paying roughly 288K (0.4 * .24/3 * 9M) in finance fees, or almost 3% of the sale, to service you.

Now, if your buyer figured out that if you bought the raw material on behalf of the supplier and charged them 0% interest that you would be saving them 3%, she could go back to the supplier and say “we know that your raw material costs went up 10% and that you’d normally expect a 5% price increase to cover this cost, but we also know we could take 3% off of your bottom line by buying the raw material for you and charging you 0% interest.” “So, since we also need to keep costs down, we’ll do this for you if you hold prices steady for another year. Your margin will be unaffected and we get better prices that allow us to outsell our competition. It’s win win.” The supplier, who we’ll assume is also well educated, agrees, and your buyer saves you almost 5% with respect to what you expected to pay, which equates to about 500K. Let’s assume this was an expensive one day seminar that cost 2K and tack that on to the 400 in salary and 150 in benefits it cost you for that employee to be out of the office for one full day. That says that the return on your employee being out of the office for one whole day was approximately 196:1. This says the author is purporting to tell me there are still managers out there who can’t justify a 196X return. Ouch! I was hoping their sorry asses would have been the first to be shown the door Fresh Prince style* because you can’t afford managers like that now that we’re returning to the old normal.

Now, this isn’t to say that I’m not a big fan of focussed half-day workshops or online self-study courses, because I am, but that you can’t overlook the value of a classroom education which cannot be equalled. While you can learn a fair amount from self-study, and should learn as much as you can to supplement and enhance your classroom education, you’re only going to learn so much from an on-line class. They’re great for learning the basics and will help you get the most from your classroom experience, as you’ll go to class prepared to engage in a real discussion and learn the advanced applications and deep concepts behind the material (and know what questions you really need to be asking), but they’ll never replace the education you get from a true sensei (which literally means “one who has gone before”). Plus, how much are you really going to learn at work, where you are interrupted with another “fire” or “emergency” every 5 minutes? To really learn something, you have to get out of the office, turn off all your electronic gadgets, and focus on the material. Then, you need to go back to the office and apply what you learned under the guidance of an old pro or a mentor. It’s as simple as that.

*This is how you show Maury the Management Moron the door, Fresh Prince style:

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Dick Locke on “Training Supply Management Personnel on Quality Assurance Basics”

Well, I’m glad the Doc is publishing his material on cultural differences. I’ve promised a blog entry on international topics every two weeks, but I’ve been suffering from blogger’s block. I’m tired of debating whether China is manipulating currency or not. I’m sure the ‘cultural differences’ series will generate lots of comments. This gives me a chance to write something on a more general topic: training supply management personnel on quality assurance basics.

What brought this to my attention was a discussion over on Strategic Sourcing and Procurement’s discussion board. It struck me how many KPIs (Key Performance Indicators) referred to quality as a KPI. It also struck me that many of them were phrased in terms of “good enough” quality. A few got it. No one should see incoming material with any quality defects as “good enough”. Intermediate standards other than zero defects may be necessary steps on the road to perfection, but they should be improving annually, and the performance measurement should count all defects, not just abnormally high defect levels.

I wonder though, if quality is so important, why there is so little training on the topic in the various training and certification companies. ISM has a two hour course on basics, and a two day course on six-sigma. APICS seems to have nothing. Neither does Nahabit and Associates or Next Level Purchasing. That’s probably why HP resorted to an in house-developed training program when I worked there.

Our director of corporate procurement had his quality engineers write an eight hour training program that he attended with all his senior staff. It had almost no math in it, but relied on drawings and concepts. Lots of us were engineering undergrads and that helped. In my case it almost offset the 6AM start time that my morning-person boss insisted on. I even remember the basic take-aways. Here they are:

  1. You’ll never get better than about 1% defective if you rely on inspection. You need statistical process control to get better than that.
  2. AQL inspection plans have a very high probability (like 90%) that you will accept a lot with the specified defect level. Some entire industries still use AQLs. (Shame on them.) LTPD plans are better if you are using sample inspection.
  3. Never let your supplier use a sampling plan that allows a lot that had a defect in inspection to be shipped without 100% re-screening. (Jargon version: use c=0 plans.)
  4. Know what a control chart is and how to make one.
  5. Insist that your suppliers control chart key processes. That will define their process variation.
  6. Compare your specification limits to the suppliers process variation. If the supplier’s variation isn’t a whole lot less than your specification, you and the supplier are in trouble. The supplier is going to build scrap and some of it will find its way to you. This comparison is called Cp or CPk. Higher numbers are better.

OK, it’s not really that simple. But I wonder why training programs are so scarce? Are the quality wars over and quality won? It did in some countries and some industries but not others. What does your company do about training its procurement professionals?

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Talent, Training, and Transition: Three Emerging Themes from the Best Practices XChange

Last week, I attended the Best Practices XChange (BPX) hosted by The MPower Group in Chicago. This quarterly, one day BPX roundtable, event brings together senior procurement professionals (director and above) from BPX members and interested organizations.* The event was well put together, and I’ll be diving into the presentation by Dr. Lloyd Rinehart in a later post, but I wanted to start by summarizing the emerging themes from the roundtable discussion.

As pointed out by Brian Sommer in his post last week on The New Sourcing Concerns, one of the big concerns is transition management, both in terms of knowledge transfer and change management. Not only will a large number of baby boomers be bolting for the bay doors by the boatload as soon as the economy rebounds and their 401K will allow them to, but most companies don’t have any processes in place to capture their knowledge while they are still here and transition the knowledge to their new employees. Furthermore, they are starting to recognize the need for advanced sourcing systems to help them with their global strategic sourcing projects, but don’t have any processes about how to go about selecting, implementing and switching over to those systems in a risk and hiccup-less free manner. And while many companies still don’t have good answers, it’s nice to see the senior level recognition of this problem because the solutions are out there, and any company that gives this issue priority will find them.

The next major concern is talent availability. Even though the unemployment market has reached a high, averaging over 10% in North America (especially when you take into account all the underemployed “self-employed” and the “discouraged workers” who are conveniently left out of the US statistics to make the situation look better than it really is), there is still a dearth of talent in the sourcing marketplace, which is only going to get worse when the market recovers. Sourcing needs highly skilled workers, and with falling levels of graduates in science and engineering programs, economics, and other programs that train us to think logically and analyze complex situations, these people just aren’t out there in great numbers.

Furthermore, even when you find the talent, they still need to be trained since even most “supply chain” programs don’t prepare students for the complex sourcing environments present in most multi-nationals — which brings us to our third challenge. The fact of the matter is that there is no mass-market training program out there that will produce an advanced sourcing professional, yet alone a senior leader. (The NLP SPSM and the ISM CPSM, in particular, don’t come close enough. While I am a big fan of the SPSM certification program, because it captures the basics that every sourcing and procurement professional should know, but still doesn’t, and, through the SPSM2, introduces them to the world of international sourcing, on the doctor‘s scale of basic beginner – intermediate – advanced – senior expert, it still only gets you to intermediate. Better than the majority of the offerings out there, but still not where you need to be on a technical, EI, or cultural level if you want to be a senior professional at a major multi-national handling 8, 9, and sometimes 10 figure categories in today’s very challenging global sourcing marketplace.) The only answer is to find the best talent you can, augment them with advanced training from one of the leading consultancies who have been doing this in the field day-in and day-out for decades (after you have insured they have the basics), and then put them under the wing of a senior sourcing professional who needs to transition her knowledge to your rising superstar before she retires (because, when you get right down to it, what really makes a sourcing expert an expert can’t really be taught in a [n on-line] class, and can’t be learned until you have the advanced tools, techniques, and processes at your fingertips to learn from a master).

The story I’ve been pulling together lately, reinforced by this event, is that unless you can

  • find, and hire, talent while unemployment is high (and some of these individuals are available),
  • train them on advanced tools and techniques, and
  • use this new talent to lead your knowledge capture and transfer efforts
    while working under the guidance of a mentor
    (as they will be more comfortable with new systems and processes than your in-house experts)

you could be, to coin a colloquialism, up sh*t creek without a paddle.

I wish you the best of luck in your endeavours. You might just need it.

*In order to ensure best practice sharing amongst peers, each quarterly BPX roundtable is limited to 35 participants. As a result, BPX members get first priority. Remaining slots are then opened up by MPower to senior procurement professionals that are considering membership or interested in finding out more about the value BPX could offer them. For more information, feel free to contact Nicolas Hummer ( nicoh <at> thempowergroup <dot> com ) at any time.

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Educating to Reduce Risk (in Your [Retail] Supply Chain)

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Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archive.

Being just a little past my mid-40s I realize I’m at risk (how appropriate or rather inappropriate is that in this blog!) of dating myself, but does anyone remember the phrase “The Three Rs”?

This phrase represents the basic foundation of education: reading, writing, and arithmetic.

Still to this day, and probably emphasized by all the standardized testing done which grades the performance of schools, I don’t think the necessity of this trio of core skills is any less important. However, I’d like to throw in a fourth (and actually fifth) R in regards to the benefits of education: risk reduction.

Of all the supply chains in the world, the retail supply chain in the United States is arguably the toughest and most sophisticated of them all. The smallest disruptions can result in profit losses and missed sales. Timeframes are very tight and the drive towards 100% perfection is relentless.

Retail suppliers invest heavily in technology, automation, and business processes to ensure they are complimentary collaborators with their retail trading partners, all with the goal of reducing the risk of not shipping the right products in the right time at the right quantity to the right destination in order to ensure their products are on the shelf when the consumer wants to buy them.

But what about investing in education to reduce risk? Can technology and automation eclipse the need for some sound, basic education on how to participate in a supply chain, retail or other? I would argue that such education is absolutely necessary. Without a good educational foundation, enterprises run the risk of incorrectly investing in technology and business processes that fail to truly address the root-cause of problems or don’t enable growth, planned or otherwise.

Selecting the right education provider can be tricky in-and-of-itself. There are plenty of companies who offer quality training. Do your due diligence and investigate the company and its trainers for experience and depth of knowledge. Keep in mind that anyone can offer training classes and that slick sounding company names may be just that and offer little in terms of training that will have any substance or credentials in daily business activities.

Certifications and training courses are often provided by trade associations. This is good because trade associations often carry a “name” or brand with them so there should be confidence in the quality of the education and that it will be recognized through one or more industry verticals.

Some associations are independent and are thus self-certifying. For these independent associations some have grown quite large and are well-recognized such that their certification is accepted and respected. Look at who is backing the certification and whether the backer has respect and visibility throughout one or more industry verticals. Is the training endorsed by outside entities? And just because a list of well-known companies is provided does not necessarily mean that the training is recognized as a standard or is widely respected. Do your homework! How long has the association been around and how many members does it have?

What this boils down to is that fraud can be perpetrated by training and education organizations too. Knowingly misrepresenting goods and services is fraud.

Buyer beware. Trust but verify. Due diligence.

Not just catchy phrases but ones to live by.

Norman Katz, Katzscan