Monthly Archives: August 2009

Supply Management is NOT a Joke

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Over the past couple of weeks, two attempts at humor have emerged in this space that, quite frankly, scare me. One is Ariba’s Spendman, covered recently on Spend Matters (It’s a Bird, It’s a Plane, It’s Spendman), and the other is Kinaxis’ Entertainment Center with Married to the Job, Sensei Bob, and the Late Late Supply Chain Show.

Whether you call it Purchasing, Procurement, Spend Management, or Supply Chain Management; Supply Management, the one area that is guaranteed to help any business in these troubled times, has been struggling to be taken seriously for over a decade. And, by and large, it’s still not at the table in most companies. And, as far as I am concerned, this is not a laughing matter … but yet we have a late late show I couldn’t watch more than 59 seconds of, a set of Second City skits that left me scratching my head wondering just what I was watching, and a comic book character?

You know what this says to me? And more importantly, what I think it’s going to say to the executives that still don’t get supply management? It says supply management is nothing but entertainment for low-level tactical purchasers (the late late supply chain show), that we’re nothing but back tactical office desk jockeys (married to the job), and that we’re not grounded in the real world (Spendman). After all, talk shows talk about irrelevant fodder, comedy skits make fun of that which is silly to begin with, and comics are fiction read only by losers who live in their parents’ basements while dressing up in costumes and speaking made-up languages. And while these generalized statements may not be entirely true, you have to admit they are the stereotypes … and I can’t see how supply management can benefit in any way from these stereotypes, with nothing but negative connotations, that will be applied by anyone who doesn’t get Supply Management and stumbles on the Kinaxis entertainment center or Spendman.

Maybe I’m overreacting, but what if I’m not the only one?

Five Risks for @Risk

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Yet another vendor, namely Aravo, launched another blog recently, namely @Risk, and, just like the many vendors before who launched blogs, they got some press out of it. But are you going to get anything out of it?

I think it’s a fair question. Over the past three years, dozens and dozens of blogs have come and gone in this space, or lingered on in such a tragic state of decay that you have to wonder why they weren’t put out of their misery months and, in some cases, years ago. Just check the blog directory on the Sourcing Innovation Resource Site. There are 92 blogs listed in the Sourcing category as I write this post … and 30 of them are dead (with no posts in the last 3 months), 17 are taking their last breaths (less than 1 post a month), 26 are fading away (with less than 1 post a week), leaving a mere 19 in stable condition, with 9 of these only managing an average of a post or two a week. That leaves a mere 10 blogs posting regularly, with 5 posting less than 5 posts a week, and only 5 posting more than 5 posts a week.

Needless to say, unlike some of my colleagues, I don’t get very excited when I see yet another vendor launching yet another blog, because there’s well over an 80% chance it won’t be around long, especially if it hasn’t been alive for three months. (When it comes to blogs, the 3/3/3 rule, as comically depicted in the third pane of this xkcd strip, applies.)  Many blogs don’t survive beyond 3 days / 3 posts, many more don’t survive beyond 3 weeks / 3^2 posts, and many more still don’t survive beyond 3 months / 3^3 posts. And in this space, looking at the stats I laid out above, even if it is still pumping out content beyond 3 months, there’s almost a 75% chance it won’t be here in 3 years. Why not?

Well, that’s where the Five Risks, which apply to any vendor blog, come in.

  1. Lack of Time / Resources
    Maintaining a blog that posts regularly enough to attract, and maintain, readership takes a lot of time and effort. Many companies don’t understand this and pile the responsibility on a communications or marketing person who already has a full time job without lightening his or her load. Eventually, especially in recessions where everyone collects more work as time goes on, the person just doesn’t have time to do everything and the “least critical” activity w.r.t. revenue, i.e. the blog, gets dropped.
  2. Lack of Internal Support
    Sometimes the communication, marketing, or services/support person starts it on his or her own as part of a new initiative to build better relationships with the company’s potential customers through regular communication, agreeing to take on the extra workload and overtime until it proves out. But since blogs aren’t overnight successes, and generally take years to get to the level of following and support that is required for the company to label it as a success, the support doesn’t come before the blogger gets disillusioned and either abandons it or …
  3. Burnout
    Sometimes the blogger continues on despite lack of support, working overtime until he or she just burns out. At this point, he or she totally turns against blogging and the blog stops cold.
  4. Repetition
    This is a big risk for blogs narrowly focussed on one topic. After a while the blogger finds that he or she has nothing new to say and starts recycling content. At this point, the readers go away and the blogger, now disillusioned with the power of the blog as he or she watched his or her stats plummet into the toilet, just gives up.
  5. Writer’s Block
    Sometimes, when the blogger has reached a point where he or she realizes she said everything he or she has to say for now, writer’s block kicks in. So the blog gets abandoned for a few days while he or she takes a “vacation”. But that vacation turns into weeks … then months … and then, well, the blog is history.

I’m not saying that @Risk isn’t going to make it. After all, 2Sustain, written by Aravo’s CEO, has survived for almost two years, but that there is a big risk that it won’t, and since it is focussed on Risk Management, I’m going to pick on it … especially since risk #1 is a big risk for @Risk. Aravo isn’t a big company … can they support two blogs when most vendors can’t manage one?

Five Keys to Supply Chain Success in India

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I enjoyed the recent short article on “five keys to supply chain success in India” in Industry Week. Not only was it not another article about China, but it tackled the issue of manufacturing supply chains in India — instead of the usual focus on service opportunities (Call Center, IT, BPO, etc. outsourcing).

Noting that India’s economy, unlike many other economies, is continuing to expand (with 6.8% growth in 2008 and a projected growth of 5.5% in 2009), the article notes that there is significant opportunity due to increased demand — provided, of course, you can make your operations efficient. The article offered the following five strategies:

  • Ensure a clear understanding of local principles, customs and barriers.
    Knowing the limitations of India’s transportation infrastructure is critical in adjusting distribution strategies and having the flexibility to adapt to the varying restrictions and needs that exist within India.
  • Establish constant communication.
    India’s communications infrastructure is still inadequate for [most] global companies doing business there. As a result, many large manufacturing companies are allowing their partners, vendors and dealers to have direct access to their internal supply chain management systems in order to increase visibility.
  • Develop comprehensive procedures and processes.
    By synchronizing the multiple dynamics of demand planning and production planning, companies will have the ability to reduce over-stocks and stock-out situations.
  • Ensure the quality of input information.
    Companies need to invest in collaboration, planning, forecasting and replenishment (CPFR) and sales & operations planning (S&OP) solutions, which provide a link between disparate information and allow companies to create plans based on actual demand data.
  • Identify and integrate the right professionals and insist on teamwork.
    The scarcity of a skilled, knowledgeable and committed workforce is a challenge facing Indian companies.

A Perspective on Global Risk Management and the Supply Chain

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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.

Aon has released their 2009 Global Risk Management Survey which lists, in order of priority, the top ten global risks, which are:

  1. Economic slowdown
  2. Regulatory/legislative changes
  3. Business interruption
  4. Increasing competition
  5. Commodity price risk
  6. Damage to reputation
  7. Cash flow/liquidity risk
  8. Distribution or supply chain failure
  9. Third-party liability
  10. Failure to attract or retain top talent

Aon reportedly surveyed 551 companies around the world in a variety of sectors; the respondents included government agencies, private enterprises, and public companies.

I don’t want to quibble about what should or should not be on the list, but I think I take a little issue with the order of things, namely that supply chain failure is ranked so low when the report recognizes that supply chain failure is linked to higher-ranked risks. Granted, I’m quite partial to supply chain issues, but that’s because I also recognize that the holistic (internal/external) supply chain touches so very much of an enterprise’s operations, and I often wonder if executives and other professionals consider the internal nature of their supply chains when they look at their operations, whether local or global.

So, what are the impacts to supply chain failures in regards to other higher-ranked risks?

  • Any supply chain failure will result in a business interruption at any point in the supply chain. The severity of the interruption will depend on the seriousness of the failure.
  • Supply chain failures can enable competitors to gain footholds with your customers. The failure to deliver first-quality products on-time in the needed quantity to the right destination can have your customers looking elsewhere to supply them the goods you’re selling.
  • Buyers may not have as much control over the prices of the goods they are buying, but through better forecasting and planning, contracts that lock in commodity prices can be secured and create a hedge against price fluctuations. This requires detailed knowledge of the supply chain from sales back through purchasing, and must balance sales forecasts with manufacturing & distribution throughput, and inventory storage capabilities and carrying costs.
  • The failure to perform quality checks through the supply chain can result in injury or death to those who consume or otherwise use your products, causing reputation damage and possibly allowing a competitor to gain a foothold against you with a customer. Why would a company pay for substandard raw material or components, and why would a company want to distribute similarly other-than-first-quality goods?
  • Cash flow can be severely constrained by holding too much raw material or finished goods inventories, especially when they go obsolete. Here again, detailed knowledge of the supply chain, from sales forecasting back through purchasing, can prevent excessive purchases and wasteful assembly or manufacturing efforts.

The supply chain is not just a homogeneous area of an enterprise, separate and distinct from the others. Whether looking at risk, fraud, or efficiencies, start with the supply chain and examine it in detail for what it is: a holistic overview of an enterprise comprised of interconnected links, where interruptions can travel and manifest themselves into something far worse than what they started out to be.

Norman Katz, Katzscan

Training is Cheap!

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I was overjoyed to see a recent piece in Procurement Leaders that said “if you think education is expensive, try ignorance”. Because, in spend management, where most professionals don’t have at least a decade of experience in every category they have to manage (and often don’t have all the tools and technologies they should have to help them), a lack of training ultimately results in a lack of critical skills and best practices that end up costing many large organizations millions of dollars annually. This is because the potential cost reductions are just left on the table by procurement professionals who didn’t have the skills to identify and negotiate them.

Furthermore, with many courses, and even certifications, available today for just a few thousand dollars, not providing your staff with training at least semi-annually is just ridiculous. (See the training and on-demand resource guides on the resource site for some examples.) Not only is the cost less than 10% of your average salary for a mid-to-high end procurement professional, but it’s less than 1% of the savings that person can generate off of one high-end procurement alone. If it helps them shave another 200K, or more, off a multi-million dollar procurement … it’s paid for itself twenty to one hundred times over. That’s a greater ROI than even industry leading spend analysis and decision optimization can deliver. (Furthermore, only trained professionals can maximize the ROI from these tools.)

So train your people TODAY. And maybe, just maybe, this recession will be the best thing that ever happened to you as your skilled and educated staff helps your organization blow your competition away.