How Do You Identify Tomorrow’s Supply Chain Paupers?

They still use paper today.

Although I don’t understand how any supply chain focussed business, and a logistics carrier in particular, could still be paper-based. It blows my mind that the WT 100, in their recent article on “Rounding the Optimization Curve”, reports that there are still a significant number of carriers that keep their records on paper. How can you survive in today’s cost-competitive, just-in-time, value-conscious supply management landscape and work on paper?

And while we’re at it, let’s talk about how you can identify the dead men walking of the day after. They use Excel. We’ve known for years that errors in spreadsheets are pandemic. Needless to say that it boggles my mind that Microsoft Excel continues to be the application of choice for supply chain and logistics management around the world. Fidelity lost 2.6 Billion as a result of a spreadsheet error, Fannie Mae made a 1.13 Billion honest mistake, and RedEnvelope lost more than a quarter of their value in a single day after they warned of a fourth-quarter loss due to a budgeting error that resulted in an overestimate of gross margins. How long is it going to be before someone accidentally uses a plus sign instead of a minus sign in a profit formula and forgets to uncap an inventory calculation and instead of ordering 100,000 units of a profitable product, instead orders 1,000,000 units of a product that actually results in significant losses at the target sale price, for which the market demand is weak, ties up all of the organization’s working capital, and essentially bankrupts the company? My guess, with the steadily increasing complexity of S&OP, JIT inventory management models, and supply chains, not much longer. But, maybe after a few companies are brought to their knees from spreadsheet errors, we’ll see the day when Excel is sh!tcanned along with the dinosaurs who still think it has any more use than a HP or TI calculator.

It’s time for anyone still on paper or Excel to wake up and realize we don’t live in Walt Disneyland and that the story of the prince and the pauper is a fairytale. A pauper is not going to become the benefactor of princely riches just by looking like a bigger, richer, company. In today’s uber-connected world, appearances don’t account for much. It’s not long before someone digs deep and uncovers the truth.

There’s a reason why customers are demanding end-to-end visibility of their supply chains, including those of their supply chains logistics’ partners. And a reason customers ow expect all of their suppliers and business partners on the supply chain (including logistics providers) to participate in a supply chain social network. It’s because they know that the only way they can accurately manage their supply chain is to keep on top of it, that the only way they can build accurate models is with accurate data gathered from partners, and that the best reports they are going to get are going to come from supply chain visibility and planning software plugged into these “social networks” (where, in reality, these are “enterprise communities” that allow the necessary collaboration, not “consumer networks” where you can poke, prod, and shake your buddy for no apparent reason).

In other words, paper is dead, and Excel will be the new paper, and then, someday, it too will be dead. So if you don’t want to be the pauper, move off of these technologies and onto solutions designed for your supply management needs. With a plethora of Best-of-Breed solutions on the market, designed for large and small providers, it’s extremely likely that there’s at least one solution that meets your needs almost exactly with minimal tweaking. If you look hard enough, the doctor would bet that there’s at least three, or will be before you can look twice.

Know What Makes an Urban Forest Master Plan Good?

I’m not 100% sure, but I am sure what makes an Urban Forest Master Plan bad. Very bad. And this wasting of 465 pages to say that saving forests is good is very, very bad. Check out the draft of the “Halifax Regional Municipality Urban Forest Master Plan”. It really does clock in at 465 pages! When this is printed and distributed to council, there goes another tree.

Sears’ Deadly Sins

By now, everyone knows the story of K-Mart, and its bankruptcy that was well chronicled in Marcia Layton Turner’s book on Kmart’s Ten Deadly Sins: How Incompetence Tainted an American Icon, which was summarized in a recent article by Vivek Sehgal on why Business Strategy Should Design and Determine Supply Chains over on the Supply Chain Management Review this spring.

But not everyone knows that Sears, part of the Sears Holding Company, may not have learned the lessons K-Mart failed to learn and may be going down the same path, at least North of the Border. Consider the following sins in particular:

  • Brand Management
  • Underestimating Walmart
  • Ignoring Store Appearance
  • Supply Chain Disonnect
  • Repeating the Same Mistakes

Let’s take them one by one. It hasn’t made a top 100 brand list in 3 years, since it made the virtue 100 in 2009, and 24/7 Wall St (.com) predicted it would vanish this year. It’s still around, but it’s not a household name. In fact, the only good rankings it is getting are for its mobile site, but we all know how limited mobile sales still are, and one has to wonder how long it is going to fare well in the online world now that you can get most of its products through Amazon Supply. There was a time when Sears was a household name, and would always be in the top 50 brands. Not anymore, although Lands End was recently recognized, but Lands End is not Sears. Just an apparel line.

Like every other big average consumer retailer, Sears underestimated, and North of the Border, continues to underestimate Walmart in my estimation. In the Great White North, Walmart is expanding like mad while Sears is barely holding the few locations it has in many places. While many of you are likely aware that Target is about to expand rapidly into Canada through its acquisition of the leasehold interests of over 125 stores from Zellers Inc., what many of you do not know is that many of the remaining stores that are (in the process of) being closed are being scooped up by Walmart. the doctor can’t remember the last time a Sears location opened in his province.

While Sears store appearance generally isn’t that bad, it generally isn’t that good. While Walmart stores are kept new, clean, and shiny, some of the Sears stores the doctor has been in lately are starting to look run-down, dusty, and drab. And many of the displays, which may have been attractive in the 80’s and 90’s, are looking dated. What’s going to happen when Target bursts onto the scene?

And the Supply Chain Disconnect is still there. Consider the fact, as reported in the SCMR article, that in 2010, four years after the merger, only 4 distribution centres out of 39 were shared between Sears and Kmart, while others continue to serve Sears or Kmart stores exclusively. Walmart is going to eat Sears alive!

Sears is repeating the same mistakes that Kmart made, and focussing in the wrong areas. Brands (like Lands End) are not going to save it. A good mobile site is not going to save it. The only thing that is going to save it is a renewed focus on supply chain (to get its operational costs in line with Walmart’s) and a focus on brand rebuilding. It has to be a household name again. Otherwise, it may not make it’s 200th anniversary, which is a mere 8 years away! I hope I’m wrong, but we’re in an age where billion dollar enterprises can go bankrupt almost overnight.

Supply Management and Investor Relations

This summer, e-Sourcing Forum ran a three part series on Procurement’s Role in Investor Relations that was quite interesting. In the series, the author, David Henshall of Purchasing Practice outlined the four essential roles played by procurement in investor relations. In a nutshell, these roles are:

  1. Ensuring the Investor Community has a Timely and Accurate Picture of Supply Side Activities
  2. Helping the Investment Community Comprehend how Supply Markets Impact Strategic Decisions
  3. Delivering Shareholder Value by Maximizing Opportunities and Minimizing Risk
  4. Supporting Senior Management in Making Strategic Decisions

And they must be fulfilled in the terminology and metrics understood by the investment community – EBITDA, ROIC, EPS, etc.

And these are key roles, but in today’s profit-focussed economy, the importance of the following roles should not be de-emphasized

  1. New Market Identification
    Supply Management is likely already sourcing from the markets the company wants to expand into to spur growth, the investor’s holy grail.
  2. New Product Design & Introduction
    While engineering and marketing can come up with great ideas, they are typically not the most cost effective ones in their initial instantiations. Supply Management can suggest alternate materials, components, and services to lower costs and suggest value-adds to increase revenue. Profit margins can often be doubled or tripled and everybody wins.
  3. Brand Development
    Sometimes, the best way to get a quick boost to the brand is to partner with another brand that already has a great brand. For example, we’re all familiar with “Intel Inside”.

The importance of Supply Management cannot be understated, especially given the centrality of supply management to value creation.