Monthly Archives: February 2009

Cross Blog Challenge: (Supply Chain) Anti-Trends for 2009

A week and a half ago I alerted you to Vince Kellen’s Technology Duds for 2009 which highlighted five “anti-trends” for 2009 that stand out as a brilliant counterpoint to the rose-colored predictions of the laissez-fair wannabe analysts that tend to dominate the technology landscape.

After writing the post I started thinking about how great it would be if there were more voices like Vince’s that spoke the truth and opened our eyes to reality and not marketing fantasy. Thus, I have decided to make anti-trends the focus of the next Sourcing Innovation Cross-Blog series, which I will kick-off with this post.

My first two and a half trends echo Vince Kellen’s. My last two and a half diverge into the space.

1. Social Networking Will Unravel
As Kellen says, “at the risk of offending Web 2.0 enthusiasts, most firms, especially those hardest hit in this recession, consider social networking speculative and in some cases frivolous. And as I said in my last post, there’s a reason why “facebooked” has become an urban slang slam, “myspaced” has become a synonym for a late-night booty call, and why the blogger elite (including the doctor and Loren Feldman of 1938 Media) slam Twitter on a regular basis (as the only thing you can do with it is say nothing in only 140 characters). There’s no real value in these technologies, and no commercial value to a productive business. Businesses will drop these efforts to focus on projects with value.

2. Web 2.0 will soon be Web 2.Done
Similarly, mash-ups, fancy portals, and other web 2.0 projects are going to be axed because speculative ROIs or projects not directly assisting with significant savings are going to be difficult for IT leaders to advance. While mashups can be a useful component of B2B 3.0 platforms if they focus on enhancing content, community, and connectivity, on their own they are just useless eye-candy.

3. Traditional “Spend Analysis” will Lose Luster
Although a sound spend analytics package (you know the one) in the hands of a true expert (you know who they are) will find you limitless savings opportunities, the reality is that most of the offerings on the market are just static data warehouses with static reports in the hands of recent grads with little real-world experience and almost no training. As a result, as early adopters come to the end of their maintenance agreements, which came with six figure (plus) maintenance fees, you’ll see a lot of movement towards modern low-cost B2B 3.0 data analysis packages or spend analysis as-a service offerings.

4. Home Country Sourcing finally comes back in vogue
Regular readers will know that I’ve been pushing not just for best-cost, but home-cost country sourcing for a while now. Giving the skyrocketing transportation costs from mid 2007 to mid 2008, the repeated product safety scandals with imported products, the current recessionary environment, the low dollar, and fears of protectionism with the new US administration, more companies will finally start looking for strategic sourcing opportunities close to home — which will also come with more predictable costs, and savings, over the long term.

5. Sustainable green catches on, despite the recessionary environment
Although green initiatives that cost more than they return will be scrapped faster than unburied copper cable, as my fellow bloggers on Supply Excellence and 2 Sustain are pointing out, more and more companies will be looking at sustainable initiatives to save them money, and those green initiatives that save money as well as improve the corporate social responsibility image will catch on.

Now it’s time for my fellow bloggers to join in with their anti-trends in and help you understand where supply and spend management is headed.

Recent Additions to the Resource Site

The recently redesigned Sourcing Innovation Resource Site, always immediately accessible from the link under the “Free Resources” section of the sidebar, continues to add new content on a weekly, and often daily, basis. Unlike many “resource”, “best of”, or “portal sites” that are abandoned almost as quickly as they are thrown together, the resource site is actively maintained (and dead links are removed on a regular basis).

In fact, there have been over 80 resource additions in the past week alone, including:

  • 41 conferences, bringing the total number of conferences to 203
  • 8 upcoming webcasts, bringing the total number of upcoming and archived webcasts to 285

The total number of unique, active resources now exceeds the 2,000 mark, which breaks down as follows:

  •   18 Analyst Firms
  • 150 Blogs
  •   20 Centers of Excellence
  • 621 Companies
  • 203 Conferences
  •   24 Job Sites
  •     4 Journals
  • 315 Linked-In Groups
  •   28 On-Demand Classes
  •   57 Podcasts
  •   47 Publications
  •   10 Roundtables
  •   71 Seminars
  •   78 Societies
  •   56 Training
  •   34 Webcasts
  • 251 Webcast Archives
  •   17 Workshops

And includes the following recent additions, among many others:

Dates Conference Sponsor Updated
2009-Mar-3 to

2009-Mar-3

The Supply Chain Forum

Whittlebury, England, UK (Europe)

Richmond Events Last Week
2009-Mar-4 to

2009-Mar-5

5th Annual North American Summit on Food Safety

Toronto, Ontario, Canada (Europe)

Strategy Institute Last Week
2009-Mar-15 to

2009-Mar-17

International Trade & Customs Conference

San Antonio, Texas, USA (North-America)

APICS Last Week
2009-Apr-27 to

2009-Apr-30

The Logistics & Supply Chain Forum

New York, New York, USA (North-America)

Richmond Events Last Week
2009-Jun-1 to

2009-Jun-3

Biotech China

Shanghai, Guangdong, China (Asia)

Biotech China Last Week
2009-Sep-23 to

2009-Sep-26

The Procurement Forum

Southhampton, England, UK (Europe)

Richmond Events Last Week
Date & Time Webcast Updated
2009-Feb-18

13:00 GMT-05:00/CDT/EST

An Invoice is a Demand on your Cash

Sponsor: ImagiTek

Last Week
2009-Feb-18

12:00 GMT-05:00/CDT/EST

Workforce Planning in a Recession: Plan Now for the Future

Sponsor: Infor

Last Week
2009-Feb-19

2:00 GMT-05:00/CDT/EST

Complete Operating Expense Control

Sponsor: Expense Watch

Last Week
2009-Feb-25

14:00 GMT-05:00/CDT/EST

10+2: Finding a Way Forward

Sponsor: American Shipper

Last Week
2009-Mar-5

13:30 GMT-05:00/CDT/EST

Supply Chain Transformation: How to Compete in the New Global Arena

Sponsor: Forte

Last Week

Which are all readily searchable from the new Site-Search page. So don’t forget to review the resource site on a weekly basis. You just might find what you didn’t even know what you were looking for!

The Art of Procurement Mastery

Now more than ever, procurement leaders have enormous responsibilities on their shoulders. Not only are they expected to drive even larger cuts in costs of goods sold but they are under fierce pressure to make every business process as efficient as it can possibly be. So notes Gregory Spray in a recent Supply Chain Management Review article on “The Art of Procurement Mastery”.

The article also notes that not many companies are using the downturn as an opportunity to radically rethink their activities and strategies. A downturn is a great opportunity to snap up top talent, apply business analytics to develop sharper insight, collaborate closely with suppliers to drive product innovation, and outsource effectively.

The article examines the performance gap between “procurement masters” and their lesser performing industry peers that was highlighted in a recent Accenture survey across more than 600 procurement executives from Asia, Europe, and North America which found that procurement masters achieve 30% higher savings with costs that are 50% lower, procurement masters outsource at a frequency that is two to four times higher than low performers (depending on the function), and procurement masters are leaders in supplier relationship management. I have to say that these results are not unexpected, given that Hackett has been logging similar results for almost three years now.

The study defined a “procurement master” as one with superior performance in the following five metrics:

  • Total-Cost-of-Ownership (TCO) savings
  • Spend Under Management (by Procurement)
  • Ratio between TCO Reduction and Procurement Operating Costs
  • Percentage of NPD/NPIs where Procurement has a Material Role
  • Percentage of Suppliers Managed Under a Formal Process

So what do procurement masters do that their industry peers don’t?

  1. More Thoughtful and Pragmatic Procurement Strategy
    Masters look and think three to five years out when planning purchases for critical business categories and they do a more innovative job of measuring procurement performance.
  2. Better Guidance for Sourcing and Category Management
    Masters employ a center-led organizational design that cuts across organizational entities and employ best-practice sourcing processes that emphasize

    • common processes
    • wide-spread usage of cross-functional procurement teams
    • formally tracked activities
    • tight focus on TCO
    • end-to-end supply chain orientation
  3. Greater Innovation in Procurement Processes
    For example, 83% of masters (compared with 8% of low performers) excel at providing clear and documented buying channels to end users and 87% of masters use LCCS for value creation.
  4. More Assertive Supplier Relationship Management
    Supplier Relationship Management is a leading practice of procurement masters with 84% employing a supply-base segmentation approach (compared to 1% of low performers), 83% employing automated tracking and reporting of supplier performance (compared with 1% of low performers), and 80% employing central logging and proactive management of contracts (compared with 8% of low performers).
  5. Supplier Workforce Management and Organization
    Masters excel in workforce management with 78% (compared to only 3% of low performers):

      • Objectively measuring existing competencies
      • Frequently adjusting organizational skills to align with procurement strategy
      • Emphasizing ongoing training
      • Blanketing competency development strategies across the procurement network

    In addition, 86% of masters use variable pay schemes (that compensate high performers).

  6. More Effective Use of Technology
    As the article astutely points out, technologies and technology-based solutions have advanced considerably in being able to support innovations in procurement and leading procurement executives are looking to new technology solutions to help digitize the entire supply chain.

As this echoes many of the messages my fellow bloggers and I have been conveying for the past few years, I’d say that this is good advice across the board.

Green CAPS and the Triple Bottom Line (of Sustainability)

In one of its final “critical issues report” from 2008, CAPS addressed the topic of Green Corporate Strategies and how green issues will increasingly influence the actions of consumers, politicians, and other societal stakeholders as we move further into the 21st century.

In addition to highlighting key issues in the establishment of green strategies, internal strategies, and external strategies, the report also addressed the Triple Bottom Line (TBL) framework and how one may use it to measure the green-ness of a given approach or strategy. Incorporating economic performance, environmental performance, and social performance, the TBL assesses a given initiative in terms of the “business case”, the extent to which environmental harm is minimized, and the extent to which the company fulfills its social obligation to be a good corporate citizen — as a truly sustainable initiative is one that succeeds on all three counts.

More specifically, an economically sound green strategy will address energy and water costs, waste disposal costs, maintenance costs, operational costs, and / or health costs; an environmentally sound green strategy will address emissions and pollution, greenhouse cases, natural resources, and / or waste disposal; and a socially sound green strategy will address the corporation’s planet stewardship, it’s recognition that it is a global citizen, and future generations.

The report also offers some suggestions on how to start:

  • Smart small, but do something.
  • Insure proposed strategies are aligned with overall corporate strategies and goals.
  • Incorporate green into your purchasing processes and RFXs.
  • Be proactive.
  • Make sure you’re not just greenwashing.
  • Form a cross-functional team to scale your efforts company wide.

This is probably the most useful contribution of the entire report, which doesn’t really say anything that hasn’t been said before. The biggest problem most companies have with green is where to start, so anything that provides advice on this issue is certainly worth a few minutes of your time.

No Love for the Oompa Loompas this Valentine’s Day

I thought that maybe, just maybe, things would turn around for the oompa loompas, who had a very tough time last year, with the emergence of the biggest chocolate holiday of the year. But the truth of the situation is that all the news has been bad news since I last reported on their tough time last October.

All we have to do to see that their situation has not improved is take a stroll through the headlines from the past three months:

  • Oct 05, 2008: Melamine in Cadbury Products (CNN)
    When we last checked in, trace amounts of melamine were found in Cadbury chocolate, but further investigation revealed that two products in particular had (dangerously) high levels of melamine.
  • Nov 13, 2008: Kraft Foods to Shut Down Romanian Chocolate Factory
    Kraft, recently caught up in a bribery scandal (SFGate), announced that it is closing down its Brasov, Romania factory and terminating the roughly 440 oompa loompas who work at the location.
  • Jan 02, 2009: Sydney Chocolate Factory Ravaged By Fire
    The Meeks road, Marrickville location of Praline Choclates was gutted by a ravenous fire, putting more oompa loompas out of work, at least temporarily.
  • Jan 28, 2009: Hershey Co. closing West Berkeley Scharffen Berger and San Francisco Joseph Schmidt Plants (SFGate)
    The shutter of two more Hershey factories will put at least another 150 oompa loompas out of work.
  • Feb 02, 2009: Massive Cocoa Spill on the I-79 (WOWKTV)
    A truck carrying 47,000 lbs of cocoa spilled across the I-79. Such a waste. Probably brought tears to the eyes of oompa loompas everywhere. Let’s just hope that the owner of the cocoa does not claim that this spill led to a steep rise in costs, an associated steep decline in profits, and use then use this as justification for even more oompa loompa layoffs.
  • Feb 02, 2009: Private Selection Chocolate Products tainted with Salmonella
    Kroger’s Private Selection and store brands don’t escape the recent salmonella discovery in peanut products and Private Selection Peanut Chocolate Chunk Cookies and Private Selection Chocolate Trios are recalled.
  • Feb 04, 2009: Chocolate Stowaways at Mars Factory
    Fifteen chocolate covered stowaways were arrested after they were found buried in more than 20 tons of cocoa power that was delivered to the Mars factory in Slough, Berkshire.

The continued plight of the oompa loompas is very unfortunate considering that recent studies have found that chocolate and wine improve memory. We should be rewarding them for their hard work, not cutting their jobs and ruining their reputations. So, on this Valentine’s Day, I urge you to think of the oompa loompa plight and buy an extra box of chocolates. They deserve a little love.