Why You Need a Master Data Strategy to Properly Do Supplier Information Management

Supplier Information Management is more than just buying a Supplier Information Management (SIM) solution and plopping it into your data centre. Much more. But yet, it seems that some people — anxious to deal with the visibility, risk management, and supplier performance issues facing them — believe that merely obtaining a SIM solution will solve their problems. A proper solution properly acquired, properly implemented, and properly used will go a long way to increasing supply chain visibility, enabling risk management and mitigation, and providing a solid foundation for supplier performance management, but the mere presence of such a solution in your supply management application suite is about as useful as a drill in the hands of a carpenter holding a nail.

You see, Supplier Information will never be restricted to the SIM system. Supplier information will always be present in the ERP system used for resource planning and manufacturing, the accounts payable system, the transactional procurement / procure-to-pay system, the sourcing suite, the contract management system, the risk management solution, the performance tracking and scorecard system, the sustainability / CSR solution, and other systems employed in your organizational back-office to manage the different supply management AND business functions. Supplier data is everywhere, and without a strategy, just shoving it into the SIM system won’t help.

In order to get a proper grip on supplier information, the organization needs a master data strategy that dictates the sub-records that define a supplier record and which system holds the master data for each sub-record. What do we mean by this? For example, the ERP may hold the core supplier identifier sub-record that defines the unique supplier number in your system, the supplier name, the supplier’s tax number, and your customer number in the eyes of the supplier and be the system of record for this information. The accounts payable system, referencing the supplier by it’s supplier number, may be the system of record for the headquarters address and payment address. The contract management system may be the system of record for the list of employees authorized to sign contracts on behalf of the supplier. The CSR system may be the system of record for the suppliers’ carbon rating, third party CSR rating, and your internal sustainability rating. And so on.

If this is the case, the SIM system, to truly be a SIM solution for your organization, needs to integrate with all of these systems and encode the proper rules to resolve data conflicts as required. Specifically, three things need to happen. First of all, whenever a system of record updates data, that data must be pulled into the system and overwrite the existing data. Secondly, anytime data is updated in the SIM system for which it is the system of record, that data must be pushed out to all systems that use it. Thirdly, and this part is sometimes overlooked, whenever data is updated in a system of record, the data not only needs to be pulled into the SIM system, but it then needs to be pushed out to any system that also uses that data. The SIM solution is the centre of a hub-and-spoke data architecture — all updates flow in, and all updates flow out.

This can only be properly accomplished with an appropriate Master Data Strategy. Don’t overlook it. Otherwise your SIM solution will turn out to be a Stuck In Muck solution. An SI is not kidding about this.

It’s the 75th Birthday of the Civil Aeronautics Authority!

That’s right. Seventy-five (75) years ago today, the Civil Aeronautics Act was signed into law and the Civil Aeronautics Authority was formed. Responsible for determining the routes that air carriers can serve, and regulating the fares, the Civil Aeronautics Authority, later split into the Civil Aeronautics Administration (CAA) and the Civil Aeronautics Board (CAB) by Roosevelt in 1940, the two authorities split from the Civil Aeronautics Authority collectively oversee air traffic control, safety programs, airway development, safety rule-making, accident investigation, and economic regulation of the air carriers you depend on everyday to get your air freight to or from its US destination.

With air travel and air shipping an integral part of everyday life, it’s sometimes tough to imagine that the first controlled, powered, and sustained heavier-than-air human flight occurred only 110 years ago (on December 17, 1903) and that the first attempt to move freight by air occurred only 103 years ago on November 7, 1910, when Phil O. Parmalee carried two bolts of silk on his Wright Model B from Dayton to Columbus, Ohio. The first round-the-world shipment was only 74 years ago when Kellog’s Corn Flakes sponsored the first air express round-the-world shipment that departed Battle Creek, MI on February 22, 1939 and arrived back on March 22, 1939. Furthermore, the first commercial airline dedicated to cargo did not emerge until two years later, in 1941, when the big four airlines banded together to create Air Cargo Inc. Civil aviation and commercial air cargo hasn’t been around all that long. The only shipping mainstay that is younger is the freight container, which revolutionized ocean shipping in 1956 and has done more for global trade than any government or treaty ever did.

So let’s all wish the Civil Aeronautics Authority a happy 75thbirthday and drink a Keith‘s*. It’s clear they did something right!


* 75 is a Keith number, after all!

Are You Prepared for a Transient-Advantage Economy?

In our three-part series this week on The End of Competitive Advantage, we described the reality facing many companies in industries where the concept of a sustainable competitive advantage has went the way of the dodo. We also noted that for these companies to survive, they had to learn to adapt to a new model where they competed in arenas, built up and tore down opportunity teams as the need arose, and gave up on the classical idea of persistent organizational structure. However, what we didn’t note was what it meant for you.

The last chapter of Rita Gunther McGrath’s book addressed the issue of what transient advantage means for you, personally, and it’s probably the most important chapter of the book for those of you where your working world is turning upside down.

What it means for you is that if you cannot adapt, you are vulnerable to losing not only your job, but your livelihood as your job might disappear. It happens. When was the last time you saw an elevator operator OUTSIDE of a classic-era hollywood movie? In order to help you figure out if you are vulnerable, and your level of vulnerability, the chapter presents you with 10 questions. If you answer no to any of them, you have some degree of vulnerability. If you answer no to five or more, look out – as the times they are a-changin’ for you!

If my current employer let me go, it would be relatively easy for me to find a similar role in another organization for equivalent compensation.
If the demand for your job is shrinking, then it might be the market is shrinking, or going away entirely, like the demand for physical film.

If I lost my job today, I am well prepared and know immediately what I would do next.
Even if you’re in the perfect job, are secure in that job, and have nothing to fear – disruptive innovations that eliminate entire industries pop up more often than you think.

I’ve worked in some meaningful capacity with at least five different organizations within the last two years.
This doesn’t have to be five different companies, but could be five different departments in your company. Adaptability is key.

I’ve learned a meaningful new skill that I didn’t have before in the last two years, whether it is work related or not.
The world is changing faster and faster and data is being produced at an unparalleled rate. A recent EMC study projects a nearly 45-Fold annual data growth rate by 2020. If you are not attempting to keep up, you will not keep up.

I’ve attended a course or training program within the last two years, either in person or virtually.
Training and education can expedite your learning process.

I could name, off the top of my head, at least ten people who would be good leads for new opportunities.
Networking is more than making, and poking, friends on Facebook.

I actively engage with at least two professional or personal networks.
Just like sole source is a recipe for supply chain disaster, a single focus could trap you in a dead-end network.

I have enough resources that I could take the time to retrain, work for a small salary, or volunteer in order to get access to a new opportunity.
Given the average amount of time to find a new job today, you should have a six month buffer. Just in case.

I can make income from a variety of activities, not just my salary.
If salaries are going away, you better have other options.

I am able to relocate or travel to find new opportunities.
You may not have to relocate permanently, but it’s a dynamic, shifting world, migrating to not just cities, but mega regions. As Richard Florida noted in Who’s Your City, talent, innovation, and creativity — are not distributed evenly across the global economy. They concentrate in specific locations. You may need to be there, at least for a time.

Now, if you answered yes to all ten (10) of these, and you aren’t already working in Supply Management – you should be, as this fits the profile of a go-getter up-and-coming Supply Management Professional. Source on!

Maintaining Competitiveness – Adaptable Supply Chain Structure

In our recent series on The End of Competitive Advantage, we noted that in many industries, there is no such thing as sustainable competitive advantage. The best a company can hope for is to deftly move from temporary advantage to temporary advantage in an effort to remain in the black.

In order to do this, it has to follow a new playbook with a new set of rules, which include the switch to competing in arenas and not industries, the requirement to get (out) while the gettin (out)’s good, the support of the C-suite, and the continual resource re-allocation to deftly move from one arena to another where temporary advantage can be obtained.

In order to do this, a company needs a supply chain that can keep up. Such a supply chain has an adaptable structure at its core, as per this article on the essence of supply chain flexibility. Such a structure allows a company to get back to business quickly following a disruption. Consider Nissan, the first Japanese car company to get back to business following the 2011 quake. And in the wake of the Thai floods, it was able to contain the issues locally by swiftly resourcing parts from China. It was able to do this because its low-cost “V” platform for vehicles in emerging markets allowed Nissan to extend its production base across the world using standardized parts in different production facilities.

So how do you get an adaptable structure? Start with the checklist presented in the article:

  • focus on risk management, not risk avoidance
    with a 98% chance of a disruption within 24 months no matter what you do, this only makes sense
  • develop a variable cost structure
    that can be applied on a node-by-node basis and ramped up and down as needed
  • launch flexible capacity initiatives
    to adequately handle peaks and troughs in demand
  • establish hedging strategies for critical components
    and put appropriate backup plans in place
  • acquire actual supply chain insurance policies
    and insure specific high-risk events are covered
  • explore shared services models
    and use them where they make sense
  • implement flexible pricing structures
    to support flexible capacity initiatives that allow demand to be rapidly aligned with supply
  • and form cross-functional teams, led by a C-suite officer, to get the job done!

Within days of the Japan earthquake, the CEO of Nissan and a risk management team visited the plant, surveyed the damage, and determined what needed to be done to regain normal operations. The CEO. Take note of that.

The End of Competitive Advantage: A Review, Part III

In Part II of our review, we laid out the four rules for competing in the new landscape of temporary advantages when your organization has reached
The End of Competitive Advantage. In summary, they were:

  1. Compete in arenas, not industries.
  2. Get (out) while the gettin (out)’s good!
  3. Use resource allocation to promote deftness.
  4. Don’t try to tame temporary advantages without the support of a leadership team that believes in temporary advantages (and doing what is necessary to tame them).

Today we want to dive in to what is meant by gettin’ (out) while the gettin (out)’s good, how resources need to be viewed, and what defines a leadership team that will believe in, and support, the continuous pursuit of temporary advantages, according to the book’s author, Rita Gunther McGrath.

A company that gets while the gettin’s good focusses on continuous reconfiguration and healthy disengagement to constantly move from one temporary advantage to another. The reconfiguration process can be thought of as the secret sauce that allows a company to remain relevant in a situation of temporary advantages, because it is through (this) reconfiguration that assets, people, and capabilities make the transition from one advantage to another.

A company that is continuously reconfiguring is constantly morphing. Instead of (extreme) downsizing or restructuring, the plagues of companies that try to hold onto competitive advantages that aren’t sustainable, continually morphing companies shift resources from one wave of temporary advantage to another, as needed. Business units are replaced by opportunities managed by appropriate leaders, execution strategies are adapted to the situation, and the wave rises and falls with the transient nature of the competitive life cycle of the arena. In the beginning, resources are assigned to define and develop the product. When production begins, more resources are assigned. When it’s time to launch, support resources are assigned and added as needed until the product peaks and R&D resources are taken off to being work on the next wave. Once the peak is reached, resources are successively taken off of the wave and assigned to other waves where they can add more value. At some point, the product line, and support, is ended or sold off, the remaining resources are reassigned, and the leadership team is refocussed on other projects.

As the temporary advantage wanes, the leadership begins to look at disengagement strategies in an effort to identify the one(s) that it will pursue. The right strategy for disengagement is typically defined by the value of the capability and the time pressure. If the capability is in decline and there is little time pressure, the leadership team will probably choose to run-off and be well paid to maintain support for customers while decreasing investment. However, if the capability is core to the future of the business and the time pressure is intense, the leadership will have no choice but to pursue a hail mary and divest formerly core capabilities as part of an effort to find a new core to migrate too. For example, if you were in film processing when everyone went digital, you found a new core or you filed for bankruptcy. In between these extremes, the company may pursue an orderly migration, garage sale, fire sale, or last man standing disengagement strategy.

A company that competes in arenas can only win if it is innovative and deft. A company deft at resource allocation follows the new strategy playbook for resource allocation. This means the following:

  • It manages resources centrally, not in business unit silos.
  • It organizes around opportunities, not an organizational structure.
  • It aggressively and proactively retires competitively obsolete assets, and moves the talent that was supporting them to new opportunities.
  • It has a real options mind-set structured around variable costs and flexible investments.
  • It’s all about parsimony, parsimony, parsimony. It invests only when the time is right.
  • It knows that access trumps ownership.
  • It leverages what is available, wherever it is. Inside or outside, it doesn’t matter.

When it comes to innovation, it has more or less mastered the process. It has obtained a level of proficiency where innovation is ongoing, fueled by an ideation pipeline, and supported by the leadership team that spins up new operating groups as needed to explore potentially viable ideas, and that then spins them down, without negative repercussions to the team, if it is later determined that they are not sufficient to conquer the target arena(s). There are no failures, just learning experiences that guide, and increase the chances of success of, the next idea.

The book also summarizes a process for managing the ideation and innovation process, which was outlined in more detail in the author’s previous co-authored book on Discovery-Driven Growth, the core competencies required by the leadership team, and what transient advantage means for your, personally, but we’ll leave that to your review of the book.

This three-part review concludes with the statement that this book, packed with relevant examples and case studies, not only makes a great case for transitioning away from sustainable advantage strategies when the industry your organization was operating in no longer supports them, but also does a great job in laying out the rules and framework your organization will have to adopt if it wants to ride the waves of temporary advantage that will otherwise wash it out to sea if it’s not prepared. It is well thought out, well written, and a must read for anyone that wants to adapt to the constant change many business have to, and will soon have to, cope with. I recommend this for any business leader that wants to stay on top of her game (because even if she has a sustainable advantage today, it may wither tomorrow) and strongly recommend this for every Supply Management professional because history has shown that supply chain advantages (which depend on labour costs, the price of oil, global market dynamics, etc.) are always temporary.