Spend Analysis
Auto-Classification is NOT the Answer
Analytics
Don’t Exclude Natural Disasters from Continuity Planning
Even though the probability of certain events may only be once every one hundred years, the reality is that they’re going to happen eventually, and now that your supply chain is global, the chances of being affected by a natural disaster, even half a world away, are many times greater than they were even twenty (20) or thirty (30) years ago. Plus, as per this recent article over on the ISM site on being “in the eye of natural disasters”, the Emergency Events Database (EM-DAT), managed by the Centre for Research on Epidemiology of Disasters (CRED), recorded 3,770 natural disasters worldwide recorded between 2000 and 2009 with an economic impact of over $863 Billion. In other words, on average, there are 377 natural disasters a year costing the supply chain 229 Million each — more than enough to bankrupt even your average large company if it is operating on a razor-thin margin and unprepared for the disaster!
You need a plan for major disruptions caused by natural disasters, be they local to your operations or halfway around the world where they are local to your raw material / component / contract manufacturing suppliers. A natural disaster in either location, or anywhere in between along your normal distribution routes, will knock out your supply chain for an indeterminate amount of time. Thus, as suggested by Bernie Hart, an Executive Director of J.P. Morgan, supply management professionals should be assigning weights to specific transactions of components and products in the supply chain and planning appropriately. What-if scenario simulations are imperative for anything with a significant weight, such as high-volume shipments, high-value shipments, customer-critical components or shipments with delivery penalties associated with them. These simulations should include participants throughout the supply chain to ensure a uniform understanding of what is critical for the business, where the key process triggers are and how suppliers will meet your commitments in the event of a mass-scale interruption.
You need to be planning proactively and putting plans in place for contingencies when your operations get knocked out by a natural disaster — especially considering disasters of all types (hurricanes, tsunamis, volcanic eruptions, etc.) seem to be increasing in recent years. You don’t necessarily have to spend money preparing for execution until the need arises, but you have to spend money creating and fleshing out the plans that will allow you to act fast when a disruption does occur. And, as the article suggests, you should invest in the appropriate analysis technologies to help you identify the biggest risks upon which your contingency plans should focus.
The article is very well written and I would suggest you check it out — it also has some good ideas for contingency plan components. If you are unsure where to start, consider bringing in some outside help who are experts at continuity and disaster recovery planning who can bring with them additional benefits. After all, consultants are cheap.
The Procurement Renaissance is Here
… and regardless of what function you need to perform …
There’s An App for That!
The Economy: Has Anything Changed in the Last Thirty Months?
Since I’m not a professional economist, I don’t regularly comment on the economy. But if it wasn’t for the Bear Stearns reference, I would have thought this Mad TV Sesame Street parody video on the economy was just a few months old, not two and a half years old. (It premiered on May 17, 2008.)
What do you think?
How Important is Local Language?
English is the language of business in most of the world, and in some countries, like India, at least 1 in 10 people speak it as a second or third language. So if you speak English, you can theoretically do business the world over. But is it enough?
A recent article over on the Harvard Business Review on “bridging the cultural divide” asked if learning Hindi is the key to creating business connections in India. According to one of the individuals being interviewed, you have thousands of entrepreneurs blooming in every region, in every city and in every town. It is no longer a few large industrial groups that control the Indian economy. Many of these young entrepreneurs feel comfortable [doing business] in Hindi. And this is true in many countries where English is fairly widely spoken for business (including China).
Plus, every language has words that are not easily translatable into English, just like many words (and phrases) in English are not easily translatable into some foreign languages. For example, the article mentions the translation of ‘chhatra latak, vaayu jhatak’ for ‘ceiling fan’, which means ‘that which hangs from the roof and sweeps the air’ and a recent article on Matador Abroad gave us 20 awesomely untranslatable words from around the world. So there are numerous advantages to knowing a local language.
Of course, if you’re not doing local business, and mainly outsourcing to the region, you probably don’t need to know the local language, but if you’re trying to sell into the region, there can be significant advantages.