Monthly Archives: August 2009

Some Tips on Formulating an FCPA Compliance Effort

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A recent article in CFO that noted that the “Feds (are) Oil(ing) Up Their Antibribery Machine” had some great tips for those of you looking to put a rigorous FCPA compliance effort in place — and minimize the chances that you, like Mr. David M. Pillor of Invision, will be slapped with a 65,000 civil penalty merely for being in charge of internal controls that failed to spot violations. (That’s right … you don’t even have to make, approve, or be aware of bribes to be charged! If you’re responsible for financials or compliance, and if the financials are found to be incorrect or your company found to be in non-compliance, thanks to recent acts, like SarBox, you can be prosecuted civilly.)

So if you want to avoid a dire, and expensive fate, be sure that your rigorous efforts to be compliant include:

  • background checks on business partners and third parties
  • a code of conduct for employees, suppliers, & agents
  • compliance training
  • effective internal controls
  • record-keeping systems that properly account for all overseas transactions
  • a hotline for whistle-blowers to anonymously report possible violations

And if a possible violation is discovered, working with your legal counsel, voluntarily disclose the violation as soon as possible. This will allow you to distance yourself from the responsible parties as soon as possible, avoid prosecution, and mitigate penalties. Considering that you could be slammed with a 1.6 Billion settlement, like Siemens AG, if the Feds find violations and prosecute, you want to do everything you can to minimize damages.

Are Your Customer Support Services Creating Risk?

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Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archives.

Outsourced supply chain services are very common these days. Freight forwarders, logistics providers, warehouse services, data integrators (especially those involved in Electronic Data Interchange), and the like all provide valuable skills in their respective specialty areas.

And they’ve all got to handle customer support communications (calls and e-mails) from their clients.

Whether or not it’s the nature of customer support personnel to be friendly and helpful, it’s certainly a (big) part of their job function. But when the desire to provide assistance crosses the line of expertise, the customer support person — and the company they represent or work for — can place the client at risk.

Often the role of the customer support person is one of objective knowledge, such as how to use a software application from a functional standpoint or to provide information about how their company’s products and services are utilized.

But when customer support advice crosses the line to be subjective, this is where trouble can occur.

Interpretation of a trading partner’s vendor compliance guidelines, knowledge of import/export laws, etc. are not typically areas of expertise that a customer support person is qualified to address. The passing along of bad advice can cause vendor compliance chargebacks or regulatory fines (if not worse) for their customers.

It’s very important that service-related companies educate and train their customer support personnel on exactly what questions they can and cannot field, and what answers they can and cannot provide. Front-line customer support personnel must also be informed that the kind refusal to answer questions not directly related to their company’s core products and services might evoke a harsh attitude from the calling customer, and in these cases the call should be transferred to a supervisor or manager.

Service providers would also do well to educate their customers as to realm of areas of information their customer service support staff are qualified to answer. Proactively informing customers in the sales contract and on the company web site what information the service provider is (and even is not) responsible for should help to mitigate calls in the first place.

It’s important to try and remove the burden of being forced to provide an answer from the shoulders of the front-line customer support personnel; these people should not feel pressured by an irate customer to provide unqualified answers, nor should they be made to feel or believe that they are not providing quality professional services by kindly refusing to answer questions outside their realm of expertise.

By educating their customers, the service provider is able to lower operating costs of customer support by reducing incidences of customer support calls outside of the knowledge area. This reduces the time customer support people spend on non-value-added phone calls and e-mails, and, if the service provider has a toll-free help line, reduces the phone bill by decreasing the number and length of calls they are paying for. The same level of customer support staff is now able to provide a higher-level of qualified service to customers in both faster response time and being able to stay with the customer longer to ensure their questions have been answered.

The desire to be helpful should not come at the price of increased risk for the service provider or the customer. Knowing where certain lines are drawn, and ensuring those lines are not crossed, helps mitigate risk for all parties involved.

Norman Katz, Katzscan

Simulation and Modeling Can Help You Go Lean AND Save

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As regular readers know, I’m a strong proponent of analysis, modeling, and optimization because I know from experience the significant cost reductions these technologies can bring to any procurement department when properly applied. That’s why I was delighted to see this recent article in Industry Week on “leveraging lean designs” that illustrated the effectiveness of 3-D models.

The article noted how Chrysler Group LLC used 3-D simulation software to model it’s Toledo North Assembly plant during the design phase and came up with a model that cost only $54 per square foot, about 30% less than the industry average (at the time) of $75 per square foot. Not only can modeling software help you find plant designs that are more efficient and that allow your workers to be more productive, but it can help you save considerable dollars in their construction.

Best Practices For Your Demand Driven Network from the Economist Intelligence Unit

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Last year, Oracle sponsored the Economist Intelligence Unit to produce a report on “the demand-driven supply chain: a holistic approach” which was released early this year. The report, which noted that businesses must improve the efficiency of their supply chains in order to maintain competitive advantage, that the principles of lean manufacturing and inventory control may no longer (be) enough, and that today’s demand-driven networks must enable companies to be flexible in applying the full array of levers at their disposal didn’t really tell us much that we didn’t already know, primarily thanks to all the research that AMR provided us a few years back, but it did have a good list of best practices in the conclusion that could use repeating.

  • Create solid, base-level demand forecasting tools, fine-tuned to eliminate anomalies and other “noise” before incorporating larger deviations and less predictable variables. You need to understand the base drivers of demand. Promotions, seasons, and unique events only serve to alter this base demand, not create it.
  • Integrate new forecasting and demand management tools with existing supply chain and logistics systems to allow visibility of supply and demand all along the network in real time. The ultimate key is to be able to detect changes in near real-time and make adjustments to adapt to them before they become problems.
  • Develop a collaborative sales and operations planning process that extends from customer-facing sales, marketing and service departments through fulfilment, procurement and logistics all the way into product development, to allow customer insight to inform all aspects of the business. Everyone needs to work off of the same set of numbers.
  • Prepare a comprehensive change management plan to foresee and deal with organisational, cultural and technological obstacles. You don’t have time to trip over your two left feet in the middle of a change.
  • Make profitability the prime objective, above simple cost cutting or revenue enhancement. Effective demand shaping helps companies to target their most profitable customers and promote their most profitable products and services, boosting the bottom line from both sides. It’s not about cost, it’s about value. It’s not how much you pay, it’s how much you make.
  • Maintain real-time demand visibility. Companies can shape demand towards more profitable business only if they have timely and accurate information on customer behaviour. You need to see the trends and adapt to them.

Want Better Forecasts? Tie Your Key Stakeholder’s Performance Bonuses To Them!

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A recent article on CFO.com on “imperfect futures”, which discussed the great deal of uncertainty in today’s economy and how hard forecasting has become, contained a novel and often overlooked idea for creating more accurate forecasts (on average). See how much your people will bet on them!

Betting, often administered through on-line prediction markets, has famously foretold the results of recent elections and Super Bowl match-ups. and is now being used by some companies to try and create a window into their corporate futures. Some companies, like Ford, have achieved good results with the methodology in preliminary applications in NPD. (Perhaps Ford should have used the methodology more broadly, given the current state of the American automotive sector? But I digress.) Electronic Arts has used it to gauge future release popularity within 2%, four times as good as the usual results achieved from in-person polling.

But I’d take it one step further. I’d make it a key factor in the determination of the bonus of each key stakeholder (who should be coming together from the various business units in the creation of a consensus forecast which combines all of your organizational intelligence) — and penalize them for each percentage point the forecast is off, either-way. You’d get more cooperation that way, since no one would want someone else deciding their fate when they could do something about it. You’d also see more scenarios analyzed in the construction of the forecast, since it would take repeated iterations before you came to a majority agreement. Thoughts?