It’s Easy To Move Beyond Spreadsheets and Improve Operational Decisions

All you have to do is survive the uprising that results when you ban spreadsheets from the organization.

Industry Week recently published a very nicely thought out and written piece from SAP on “how to move beyond spreadsheets to improve operational decisions” using business intelligence that sounds wonderful in theory but doesn’t work in practice. Why not? Because the first thing a user does when they get a new system is dump the data to a spreadsheet they can play with because

  1. they are used to the spreadsheet environment and
  2. the vast majority of BI tools don’t have the capabilities the average analyst needs to do the analysis she needs to do because they all work off one version of the data that cannot be altered in any way.

Thus, an average BI system only worsens the problem as users create and share more and more spreadsheets in an effort to get around the limitations of yet another system with yet another version of the truth. There are only two ways to move beyond spreadsheets. They are:

  1. Ban Spreadsheets
    and force your users to work within the limitations of the BI tool or
  2. Adopt a Real Analysis Tool that Supports a Spreadsheet Interface
    and allows your users to continue to use the interface they are comfortable with in a productive, value-creating, manner

Spreadsheets are not going to go away just because you’ve introduced yet another system. It’s delusional to think otherwise. Your only choices are to ban them or embrace them in a manner that is actually helpful.

What Do You Want?

One thing is for certain, the CPO Agenda knows how to get your attention these days. As soon as I saw the headline for their recent executive debate on “what comes first, quick bucks or big changes”, all I could say is “well, that depends on what you want“. Are you just in it to make a buck, or are you in it to make a career. A career requires long term viability, and that requires the willingness to make big changes when big changes are necessary. Continue to do it right, and the market, with its money, will come.

But I guess the answer is not that easy when management is divided, or you want to keep your job (though I personally don’t see why you would want to keep a job at a company with no vision of the future, as it won’t likely survive this economy without one, but I have to respect a healthy fear of the current job market, or lack thereof). To this end, you could take the advice of Laurence Laroche of Saint-Gobain Packaging — quick wins are a means to gain this credibility [with purchasing] and then transform the function, and do a few quick wins to get respect and then start the long-term transformation.

The real question is whether you can pursue quick wins and long term transformation at the same time. As Xavier Cassignol of FCI points out, it is difficult to do both at the same time, especially when purchasing needs to be constantly in tune with the broader challenges facing the organisation. Especially when product lifecycles are shrinking along with average management tenure. For better or worse, a manager is not likely to survive four years if she doesn’t show increasing returns in each of the first three years, which is difficult when real transformation efforts often take two years in a multi-national.

But you still need to constantly improve. We’re in a perform or perish culture, and it’s not always easy to keep up, so getting ahead of the game can be a real challenge. And you can’t ignore your long term supplier relationships, even if another supplier tries to woo you with lower costs, because quality, reliability, and fit is important too — so you have to continually improve in supplier relationship management too.

And, as Mohamed Marfouk of LVMH notes, if you do continuous improvement right, each step is going to happen faster and faster, because you are building on success, you are building credibility. As you build success in marketing then R&D will want to be your customers and so on. You must carry out your own marketing internally so that other people know what you did and that it worked. This will drive more customers, which, in turn, means you get greater resources and you deliver more. It is continuous. Especially if you start with getting the right team, as I pointed out in step 1 to building a world class supply management organization.

Want to Cut Cost? Focus on Quality!

I’m glad I read all the way to the bottom of a recent article in CPO Agenda on “cutting it fine”, even though I became a little discouraged about half-way through, because the response from Willem F van Oppen, owner of Provoque Consulting in The Netherlands, succinctly summarized the problem with continuously focussing on the non-strategic activity of cost cutting.

As long as companies only play to shareholder value and its myopic dynamics, procurement will not be able to successfully drive a strategic agenda of value sourcing.

There’s a limit as to how much cost can be cut. That’s why, by the third reverse auction on a category, costs actually go up. At some point, all of the margin is squeezed out of a supplier and the costs are not going to go down without a sacrifice in quality or service unless value is improved. This might take the form of increased quality (since a product that lasted longer or sold at a higher price would, relatively speaking, cost less) or better service (since service has a cost too) or it could take the form of raw material substitution or production process upgrades (since reduced production time would lower production costs). Either way, value is being added.

As Rod Wood pointed out, a key role of the Procurement function is cost management. Cost cutting is a knee-jerk reaction to a problem that often introduces more problems than it solves (when quality, service, and/or on-time delivery decreases) whereas cost management is done according to a strategic plan that balances quality, risk, security of supply, product development, and logistics. The odds of the success of the former aren’t much better than a roulette table while the odds of success of the latter are about equal to the house winning.

What Your Supply Chain Can Learn from Starbucks

A great post over on the HBR blogs on “Why I Appreciate Starbucks” summarized some of the fundamental differences about Starbucks when compared to other multi-national corporations. These differences are part of its success story and contain best practices that can be used to improve your supply chain.

The author identifies the following fundamental differences between Starbucks and your average corporation as follows:

  • it sees itself as part of a larger community,
  • it tries to balance profit with social responsibility,
  • it creates a “third place” between home and office where people can connect comfortably,
  • it trains its employees to brew the perfect espresso in order to insure the quality of its signature product is not sacrificed,
  • it doesn’t let major disruptions delay important actions and events that need to be done,
  • it understands that employees feel far more committed to companies whose values and mission they find inspiring, and
  • it understands that customers and clients increasingly prefer to support companies whose values are consistent with their own.

These lessons can be easily translated into supply chain organization success.

  • The supply management organization must see itself as part of a larger company.
    In a successful business, all of the individual units cooperate and act as one larger business unit.
  • The supply management organization must balance cost reduction with social responsibility.
    The media and consumer backlash that can result if the organization cuts cost by buying from third world factories that employ child labor, for example, can cost way more than the amount the organization will save.
  • The supply management organization must create an atmosphere of collaboration
    and provide a comfortable meeting area where cross-functional teams can meet and work together towards success.
  • The supply management organization must train its employees to source the perfect bill of materials,
    where cost, quality, reliability, and all other important factors to the business unit that needs the product or service are appropriately balanced and the end result is overall better than what the organization would have negotiated on its own.
  • The supply management organization must be able to work through major disruptions quickly and without significant impact to overall commitments to its end customers.
    The supply management organization should regularly be gathering market intelligence and updating its contingency plans and be ready to get the job done no matter what, even if it means a lot of extra elbow grease now and then.
  • The supply management organization must hire an A-Team that believes in the mission and values of the organization.
    A team that is not committed will never achieve the level of success as a team that is.
  • The supply management organization must put the needs of the organizational units they serve between their own.
    The needs of the many outweigh the needs of the few, or the one.

Follow this advice and your supply management organization is on its way to becoming world class.

Does Your Supply Chain Have An Audit Trail?

A recent article in Industry Week on “Lessons Learned from High-Profile Product Recalls” had a number of good tips on what to do to prepare for a recall before it happens, but one tip in particular stood out. Specifically, the need for audit trails. Every risk management article these days talks about being prepared, identifying key stakeholders and information requirements, developing communication plans, preparing reverse logistics and fulfillment operations, and evaluating risk vs. cost, but few point out the need for good audit trails down to the component, and sometimes raw material, level.

Without a good audit trail, if a serious defect is discovered across a product line, or one or more food products you are selling is tainted with E. Coli or salmonella, you will have no choice to recall the entire product line because you will have no way to trace the defect back to the source and forward to only the affected units. For example, if all of the tainted soup cans came from a cannery in Michigan, then there is no need to recall the cans from Nebraska and Georgia. And if all of the overheating batteries came from one plant in China, and they were only used in two specific lines of laptops, and you have six, at most you will be recalling one third of the units.

So make sure you can trace each product back through each supplier, component manufacturer, and, in the case of food products, each grower. Otherwise, when a recall does happen, it could be financially devastating.