Maybe I made the right move after all when I bought my Compaq Presario … after all, I don’t want my laptop bursting into flames, doing an impersonation of a flamethrower, or spontaneously combusting (reghardware.co.uk no longer in operation)!
I guess this makes a good case for supply chain visibility.
Aberdeen Group’s “Global Supply Chain Benchmark Report: Industry Priorities for Visibility, B2B Collaboration, Trade Compliance, and Risk Management” report, released in June, contains an alarming statistic, especially in today’s information technology driven networked world. An astounding 90% of all enterprises report that their global supply chain technology is inadequate to provide the corporate finance organization with the timely information it requires for budget and cash flow planning and management.
Furthermore, 79% of large companies say that the lack of supply chain process visibility is their top concern. Considering that, as we pointed out in yesterday’s post, understanding your supply chain is key to success, this is a serious concern. After all, if you have no visibility into your supply chain, how can you map it out and understand the real impact of any decision you might make with respect to your supply chain?
Fortunately, this excellent report also contains some solid recommendations for action to get you started.
Of course, before you can improve collaboration, and identify key milestones, you need to know where to begin. This is where next generation spend analysis systems that provide true visibility into your spend and the inter and intra organization and product relationships, often referred to as spend intelligence systems, and described in Aberdeen Group’s “The Spend Intelligence Benchmark Report: Turning Data into Action” that also came out in June, play a significant role.
This report also had some solid recommendations to get you started on the road to improved visibility.
Support has to come top down, everyone needs to be involved, and you have to start small and work your way up. But the effort is worth it. After all, the report found that best in class companies reduced sourcing cycles by 19 to 25% while increasing contract compliance rates by 31 to 35%.
Back in May, Jaume Ferrer and Johan Karlberg of Accenture published “Supply Chain Management: How to Build a Successful Global Operations Model” in the Accenture Outlook Journal where they noted that despite the facts that 93% of respondents to a recent survey reported global operations to be a central component to their business strategy and 97% were attempting to upgrade their global operations, only 50% of respondents reported successful implementation of critical capabilities. (The results were based on 305 online interviews with sales, marketing, and supply chain executives and almost equally split between the United States and Europe, and are thus statistically significant.)
According to the article, the reason for the lack of success was that most companies have been attempting to establish a global footprint by working through functional or regional silos when they should be taking an integrated, global approach. Brining together the worlds of product, market growth and operations strategy is a prerequisite to success in both new and existing markets. Companies that attempt to penetrate new markets without a specific product portfolio redesign and without rethinking channel approaches, make-or-buy strategies and back-office capabilities are in for a rough time.
In addition, the article notes that although there is non one-size-fits-all approach to global supply chain management success, there are six key capabilities that are required at the foundation level.
In brief, integrated sales and operations planning, procurement-based manufacturing and distribution R&D network, tight-linkages with partners up and down the chain, logistics partnerships, effective supplier management programs, and a go-to market strategy. It certainly sounds like it covers all of the bases, right?
Not really. Although each and every one of these elements is necessary for a successful global supply chain, just like each and every one of these elements is necessary for a successful regional, or even local, supply chain, there is one implicit, core foundation, element that is missing.
Understand your supply chain.
Before you begin any transformation process, you should fully understand your supply chain. And by this I mean that you should have your supply chain fully mapped out from sources (suppliers) through to sinks (retailers and customers) at multiple levels of detail and from multiple viewpoints. For example, you should have a distribution map that maps the primary routes and transportation methods from your suppliers to your plants and from your plants to your customers. You should have a process map that maps the flow of materials as they enter your facilities to finished products. Etc. The distribution map should detail the third party logistics carriers used and usual transportation times. The process map should detail the equipment used, the business units involved, and the process times.
This way, you can fully determine the ramifications of a potential change before you make it and insure that every affected party is appropriately dealt with. For example, before you switch to a new supplier, you could determine that production is going to need more lead time, you are going to have to find a new third party carrier, and the impact on your cost models. You could get change specific feedback from sales and marketing with respect to the expected lifetime of the product. You can much more easily work out the impacts and required changes with respect to the six core elements of success outlined in the Accenture article. After all, they key to reaching your destination efficiently is to know where you are starting from.
Seventy-two percent of companies worldwide will increase spending on innovation in 2006, and 41 percent will increase spending significantly, according to a recent survey of senior management conducted by The Boston Consulting Group (BCG) as summarized in “Innovation 2006” and “Measuring Innovation 2006”.
The study was based on responses from more than 1,000 senior executives from 63 countries and all major industries, so the results are statistically significant.
However, despite plans to raise spending, the study determined that nearly half of the companies are unhappy with their returns on innovation spending. According to James Andrew, Senior Vice President and report author, These findings highlight the paradox we see all the time in practice. Innovation is such an important priority for companies, and although they continue to spend ever-increasing amounts on it, half of all companies remain unsatisfied with the returns they generate. Furthermore, he also stated that This is a critical issue because the costs are even greater than most companies realize. The costs include not only the money invested, but also the opportunity cost of not generating the growth and returns from innovation that are possible and that companies need to meet the demands of the stock market.
This report highlights the need not only for innovation, but management of the innovation process. Contrary to popular belief, the process can be managed and there are techniques that can be used to jump start the process and significantly increase your chances of success.
For example, I described a couple of approaches to innovation in my Purchasing Innovation Series over at e-Sourcing Forum [WayBackMachine]. If you have a clearly identified problem, a great approach is Teoriya Resheniya Izobretatelskikh Zadatch, the Theory of Inventive Problem Solving, or TRIZ for short. The foundation for invention on demand, it can be used to create completely new products to perform a given function or solve an existing function. Another methodology is crowdsourcing, the process of delegating various tasks for which you do not have the manpower or expertise from internal production to external entities or affiliations of networked persons with the expertise, access to, or raw capabilities that you require.
Building on crowdsourcing, you can take advantage of companies, research networks, and laboratories that exist primarily to help you with your innovation needs. One example is Innocentive, an exciting web-based community matching top scientists to relevant R&D challenges facing leading companies from around the globe, can help you with your chemical, biological, and other scientific problems. Another example is YourEncore, a service provider connecting the technology and product development opportunities of member companies with world class talented individuals whose motto is People don’t retire anymore, they just go on to do other things. Yet another is NineSigma, a company that enables organizations to amplify internal resources and capabilities by tapping a global network of innovators for new solutions, technologies, products, services and opportunities.
Some of these organizations will even help you turn your product idea into a prototype. One example is Nytric, a company that exists to create revolutionary new products, using an advanced mode of thinking, spanning initial idea to market conquest; and by using a business model that shares front end risk so as to ensure a maximum mutual return on investment. Another example is Big Idea Group, an organization that brings together creative inventors and innovation-driven companies.
Furthermore, if you need just need help automating and tracking the process, you could always start BrightIdea’s On Demand Innovation Management Software, which gets you up and running immediately. Of course, this isn’t the only choice. You could also try Jenni’s Idea Management Software, Centric Software‘s Product Intelligence software, or Imaginatik’s Idea Central Software.
In other words, there are companies, products, and methodologies out there to help you ensure that each and every innovation effort you undertake is a success because, simply put, innovation matters.
As pointed out in e-Sourcing Forum’s [WayBackMachine] post on Green Suppliers back in May, Interface Inc., the world’s largest carpet manufacturer, was able to save $260m from waste reduction initiatives, as pointed out in a Purchasing Magazine article. But the story continues.
As pointed out by Lindsey Parnell, the CEO and President of Interface Europe, in her article “A Sustainable Future” in CPO Agenda, Procurement leaders need to play their part in overcoming the many hurdles to environmentally friendly business.
The article points that sustainability is about driving enterprises towards maximum resource efficiency, maximum responsibility for any actions and maximum return on investment. It’s about doing well both commercially and in an environmental and social sense and that the development of consistent definitions of industry-specific drivers would increase focus while the establishment of a return feed of used and end-of-life products would allow suppliers to close the loop and view lifecycle costs, not just one-off purchase costs.
Furthermore, even if companies looked only at what could be achieved with the resources readily available to them, the impact would be significant. Consistently demanding the most sustainable products and services available would also help the market’s development, and I believe gravitation in that direction is inevitable.
As I pointed out in staying green, I too believe this trend is here to stay. After all, when you consider Sprott Asset Management‘s recent report “Investment Implications of an Abrupt Climate Change”, which forecasts far-reaching and “dire” impacts of rapid climate change, businesses who do not adapt may go extinct. And, as described in BusinessWeek’s Business on a Warmer Planet, some companies are already adapting. After all, as CIO Insight points out in “The Greening of the CIO”, environmental questions matter more and more for corporate IT, not as feel-good programs but business issues with a direct impact on the bottom line. After all, as pointed out by a recent Supply Excellence [WayBackMachine] post, the European Union’s Restriction of Hazardous Substances (RoHS) has triggered shortages for both compliant and non-compliant electronic components, challenges which will need to be overcome by innovative sourcing professionals. Fortunately, some manufacturers are stepping up to the challenge. Zebra Technologies has fully converted its thermal printers to be in compliance with the EU’s RoHS directive, as described in a recent Supply & Demand Chain Executive article (that is no longer available).
Green issues have an impact on everything from product marketing to employee morale to profit margins, and many of them are closely interwoven with the everyday work of IT organizations and the departments, including procurement, that IT supports. The article suggests that you should think of environmental consciousness as the next level of alignment, an enterprise-wide phenomenon that procurement must lead.
And your job is only getting easier. With companies like new startup SolFocus and Energy Solutions Alberta, you’ll soon be able to run your corporations on 100% renewable green energy from the ultimate renewable energy resources — the sun and the earth themselves. (And some researchers are even looking into ways to capture the energy we waste with each foot step, by taking the science of piezoelectrics, that powers your SEIKO kinetic perpetual timepieces, to the next level.)
Furthermore, it may not be too long before we’ll be able to stop wasting paper and silica and write on water itself as a result of some recent developments at the Akishima Laboratory in Japan. (English article no longer available.) At the very least, we should be able to replace those neon signs with a new generation of technology. (While we wait for that day to come, we will soon have e-paper to tide us over.)
To answer David’s Question in a recent e-Sourcing Forum post, I think Kermit will soon be singing about how easy it is to be green.