Monthly Archives: March 2009

Cutting the Right Costs with Technology

A recent article in Industry Week, which advocated that you “cut the fat, not the limb”, reminded us that there are a number of strategic projects, based on appropriate supply chain technology, that can provide a far greater internal rate of return than merely slashing costs. After all, companies that layoff employees, consolidate suppliers, reduce product offerings, and halt key projects may inadvertently get rid of the very things that made them successful in the first place!

As Jim Thompson pointed out, in his Supply Chain Brain article, cut, cut, cut is NOT a cost reduction strategy. The only real strategy for cost reduction is the strategic reduction of fat in capital and operating costs … which is easily exposed by technology designed to root out inefficient and redundant processes. Now, more than ever, managers need to look at innovative and aggressive technology projects that will provide increases in operational efficiency.

And, as per the Industry Week article, three great places to start are:

  • Excess Inventory
    Synchronizing actual inventory to recorded inventory provides the data necessary for sound purchasing decisions based on good forecasts.
  • Manual Processes
    Unnecessary manual processes lead to errors and wasted time. Error-handling, re-processing, and lost productivity costs add up, especially if these costs can be affordably eliminated.
  • Supply Chain Weak Links
    Vendor Managed Inventory and longer-term collaborations offer opportunities for both parties.

And when you’ve mastered these, you can move on to the ideas chronicled in Dead Company VII: Even More Ways to Avoid the Graveyard.

The Value of AfterMarket Service in a Down Economy

MCA Solutions recently released a white-paper entitled “The Value of AfterMarket Service in a Down Economy” by Morris A. Cohen, the Panasonic Professor of Manufacturing and Logistics at The Wharton School of the University of Pennsylvania. In it, the author puts forward initiatives for your service business that he, and MCA, believes will generate revenue and profit for your business in 2009.

Aftermarket service presents some unique opportunities that make it a prime candidate for delivering value in the current financial climate. When you consider that many companies have slashed their budgets for new product and service acquisitions, it should be obvious that many companies will be looking to get more life out of their current products and services and looking to aftermarket service providers to help them.

According to the white-paper, increasing your market share of aftermarket parts and services will allow your company to generate a more predictable, high-margin revenue stream that will also increase customer satisfaction and retention. In addition, leading enterprises such as Cisco Systems, KLA-Tencor, Boeing and Tellabs have proactively undertaken strategic service management initiatives and have seen ROI benefits (in as little as two months) that include:

  • Cash flow improvements of 10%
  • Inventory reductions of 15% to 50%
  • Service level improvements of 5% to 20%
  • Customer retention through new and differentiated service offerings
  • Dramatically increased service revenues
  • Higher levels of global coordination

So what are some of the areas of opportunity?

  1. Reconfigure the Service Supply Chain to Respond to Changing Costs and Customer Requirements
    Best-in-class companies view inventory as a competitive weapon
    and typically employ multi-echelon inventory optimization and other resource deployment strategies to achieve superior product and service availability.     However, these days, service
    providers must also look to optimize the design and configuration of their service support network (locations, repair capacities, customer assignments, etc.) as a key strategy for achieving the lowest total cost and maximized customer service solution    .
  2. Reduce Overhead and Increase Time-to-Value Through Outsourcing and SaaS
    Service providers can expand their capability with a lower cost structure by outsourcing non-core capabilities to their suppliers. Logistics, warehousing, IT services, etc. can all be outsourced to low-cost, high-quality providers — freeing you up to focus on what you do best.
  3. Reduce Cost Through Optimization of Service Value Chain Resources
    Companies who use traditional planning tools developed for finished goods supply chains often hold far too much inventory with the wrong mix of parts. Getting the right mix of parts in the right places can lower overhead costs, improve service, and increase overall service profitability.
  4. Increase Revenue Generation with Customer-Focussed Service Offerings
    In a downturn, customers demand higher levels of performance from aftermarket service providers. This can be achieved through appropriately designed differentiated service offerings on a pay-per-performance model that will set you apart from the competition.

These are all great suggestions and each of them will help you save money while increasing the value you can bring to your customers. For more suggestions, as well as insight into how to approach each of these areas of opportunity, I recommend checking out the full white-paper that dives into these opportunities in detail. It’s worth a read.

10+2 Is In Effect. Are Your Trade Programs Ready?

The requirements of the Importer Security Filing, 10+2, took effect on January 26. The clock is now ticking, and there are only eleven months left in the CBP informed compliance period to achieve full compliance before full enforcement and (significant) monetary penalties take effect.

Under the Importer Security Filing initiative, the electronic transmission of 10 data elements from an importer (or its freight forwarder), and 2 from the vessel, must be executed no later than 24 hours prior to the loading of cargo onto a vessel destined for the US, shifting data transmission to an earlier stage of the supply chain distribution process.

If a company does not comply, it can be fined a minimum of $5,000 for each violation. If you do a lot of importing, that will add up fast.

Are you in compliance? Are you sure? If you don’t have good trade visibility, and don’t verify the 10+2 submissions filed (on your behalf by your freight forwarder and broker), you might not be … and you won’t know it without good trade visibility. Moreover, you might be risking other non-compliance losses. For more insight, check out the latest Sourcing Innovation Illumination on Why You Need Trade Visibility.

Six Ways Companies Mismanage (Supply Chain) Risk

A recent Harvard Business Review article by Rene M. Stulz dives into “six ways companies mismanage risk” (membership required) that are just as applicable to supply chain operations as they are to financial operations. As the article points out, these missteps are just as likely to occur in good economic times as they are in the rough economic times we are currently experiencing, but rough times will magnify the impact of the mistakes considerably.

The six mistakes highlighted in the article are:

  • reyling on historical data
    Historical data is a starting point, not a destination. For example, look at how well real estate investment managers who assessed risk on the basics of statistics over the past three decades did in 2007. Closer to home, consider how well you would have done in your fuel hedges in early 2008 (before the price of oil dropped over 60%) or with your logistics hedges in late 2007 (before global shipping volumes were cut in half).
  • focussing on narrow measures
    Focussing only on-time deliveries misses the point. It’s about the perfect order — the right product of the right quality shipped using the right method with the right carrier at the right price delivered to the right customer at the right time. If you ship the wrong product, or the quality is insufficient, or you have to expedite it and it costs three times as much, you’re losing money and your metric will never capture the losses.
  • overlooking knowable risks
    Meticulous review and careful thought allows one to identify almost every possible risk, including risks in the instruments used to measure the risk. For example, if you are using an index to hedge against cost increases, and that index lags reality by three months, you could be cut off-guard by rapid cost increases or decreases due to unexpected supply or demand disruptions (caused by natural disasters, for example).
  • overlooking concealed risks
    Risk takers in your organization may deliberately hide risks that they feel are unlikely, and jeopardize an entire sourcing plan or production line. For example, if you’re in food, and your supply manager decides to source all of your tomato crop from coastal Florida because of volume-based cost savings, you’re at risk of an immediate supply disruption every time a hurricane sweeps up the cost.
  • failing to communicate
    If you can’t clearly explain the risks in your plan, systems, and organization, chances are they’ll be ignored, or at least severely underestimated. For example, if you’re assuming uninterrupted supply from a single-source supplier, and that risk goes overlooked, that could be a real problem in this economy.
  • not managing in real time
    Unless you’ve been hiding under a rock in a cave, you’ve probably noticed the volatility of the global markets lately, including supply volatility (as suppliers go out of business) and demand volatility (as customers reduce their spending).

All these mistakes will cost your dearly in the current economic climate, so its worthwhile reviewing your risk management strategy to make sure you haven’t made any of them. For more information on risk management, and best practices, see the risk management posts here on Sourcing Innovation.

Recent Additions to the Resource Site

The 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, usually weekly, basis).

In fact, there have been over 75 resource additions in the past week alone, including:

  • 8 new conferences,
  • 29 new archived webcasts, and
  • 37 new upcoming webcasts.

In addition, the resource site now tracks on-line (free and paid) press release services that you can use to distribute your press releases that advertise your offerings, (human-edited) web directories that will assist you in finding resources outside of the supply chain that may be helpful with other aspects of your business, and (human-edited) blog directories that track blogs with a business, but not necessarily supply chain, focus. And it just introduced a new glossary that currently contains over 20 detailed definitions, and discussions, of common supply chain terms and technologies. This glossary, whose entries act as a starting point in your search for additional information, will grow in size and content over time, but right now you can dive into:

 

Contract Management
Cost Reduction
Decision Optimization
e-Sourcing Software
Global Sourcing
Global Trade
Green Supply Chain
Inventory Management		 Logistics Management
Procurement Process
Purchasing Best Practices
Reverse Auction
RFX (RFB/RFI/RFP/RFQ)
Risk Management
Service Management		 Strategic Sourcing
Supplier Management
Supply Chain Finance
Supply Chain Forecasting
Supply Chain Management
Supply Management
Sustainable Supply Chain
Talent Management

 

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

 

  •   18 Analyst Firms
  • 153 Blogs
  •   20 Centers of Excellence
  • 625 Companies
  • 179 Conferences
  •   24 Job Sites
  •     4 Journals
  • 315 Linked-In Groups
  •   28 On-Demand Classes
  •   62 Podcasts
  •   49 Publications
  •     9 Roundtables
  •   72 Seminars
  •   84 Societies
  •   51 Training Classes
  •   49 Webcasts
  • 292 Archived Webcasts
  •   12 Workshops

 

And includes the following recent additions, among many others:

Supply Chain Conference Listings

Dates Conference Sponsor
2009-Mar-1 to

2009-Mar-3

 SCCE Utility and Energy Conference

Houston, Texas, USA (North-America)

 SCCE
2009-Apr-29 to

2009-May-1

 Demand Planning & Forecasting: Best Practices Conference

Las Vegas, Nevada, USA (North-America)

 IBF
2009-Apr-29 to

2009-May-1

 Gartner Risk Management and Compliance Summit

Chicago, Illinois, USA (North-America)

 Gartner
2009-May-18 to

2009-May-20

 World Conference on Quality and Improvement

Minneapolis, MN, USA (North-America)

 ASQ
2009-Jun-18 to

2009-Jun-19

 21st European Forum for External Trade, Excise and Customs

Linz, Austria (Europe)

 EFA

Archived On-Demand Supply Chain Webcasts

Original Date Webcast Sponsor
2008-Jan-1

00:00 GMT/WET

 Closed Loop Spend Management Management Dynamics
2008-Jan-1

00:00 GMT/WET

 Service Part Smarts: Profit-Driven Strategies for Service Parts Supply Chains Logility
2008-Apr-1

00:00 GMT/WET

 Roadmap to Profitable Cross-Channel Allocation and Order Management Manhattan Associates

Upcoming Supply Chain Webcasts

Date & Time Webcast
2009-Mar-3

11:00 GMT-08:00/AKDT/PST

 Enterprise Efficiency and Mitigating Risk. The Procurement and Outsourcing Professionals’ Contribution through Records and Imaging

Sponsor: SIG
2009-Mar-4

11:00 GMT-08:00/AKDT/PST

 The Cost Cutting Conundrum

Sponsor: Coupa
2009-Mar-6

11:00 GMT-05:00/CDT/EST

 The Smarter Supply Chain of the Future

Sponsor: SCC
2009-Mar-11

14:00 GMT-04:00/AST/EDT

 Sourcing Best Practices in Today’s Economy

Sponsor: Purchasing
2009-Mar-24

8:00 GMT-07:00/MST/PDT

 Coping With The Economic Downturn: How Contract Management Automation Can Deliver Savings

Sponsor: IACCM

which are all readily searchable from the comprehensive 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!

And continue to keep a sharp eye out for new content and even more new content categories which will be coming on-line in the near future!