Monthly Archives: June 2010

Are You Ready For Change?

Take this short 3-question quiz to find out!

1. Is Management Ready for Change?

Management must be ready and willing to demonstrate their commitment to change and keep their resolve through good times and bad. If the rank and file don’t see commitment, they will believe it’s just the fad of the month and ignore the effort as they expect it will be forgotten in a few months anyway when the next fad is announced.

2. Is Talent Ready to Step Up?

Management has to be ready, but the rank and file have to be willing and able to implement the change. If your employees aren’t committed, aren’t trained, and aren’t capable of implementing the change, you’ll be stuck at square one until they are.

3. Are You Ready to Communicate?

Regular and consistent communication is key to success. Efforts will need to be carefully coordinated, and this won’t happen without crystal clear communication. If you’re not ready to communicate, you’ll be stuck at square two indefinitely.

The reality, as clearly pointed out in “driving a turnaround in tumultuous times”, the case study on PolyOne Corporation that we will cover in our upcoming post on coming back from the brink to cash in the bank, if you can’t answer yes to these questions, you won’t have the basic building blocks for change and any change management initiative you undertake will just be a waste of time. Sorry, but that’s just how it is.

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What are the Obstacles to Supply Strategy Implementation?

Late last year, CAPS Research released a report on “Supply Strategy Implementation: Current State and Future Opportunities 2009” that was based on data from 130 supply organizations across 26 industries. The data contained over 1,000 short-sentence responses that were analyzed to come up with this list of the top eight obstacles to supply strategy implementation:

  • Lack of Executive Engagement and Resource Support
  • Inappropriate Organization and Governance
  • Business / Manufacturing / Operations / Technology / Supply Strategies Not Aligned and Integrated
  • Limited External Economic Environment Impact
  • People- and Culture-limiting Change
  • Lack of Information Systems and Data Availability
  • Internal / External Communications
  • Inadequate Measurement and Evaluation

So how can you fix this and implement much needed supply strategies?

  • Follow the twelve steps to purchasing fire (on the e-Sourcing Wiki) and define the value proposition, get the right credentials, perfect the pitch, address the big nos, build the case, and sell the solution.
  • Task the CPO/CSCO with a supply chain re-organization. If you don’t have a CPO/CSCO, get one.
  • Form a cross-functional team, headed by a neutral (and possibly external) party, and task them with a strategy and process alignment.
  • If your organization hasn’t been hit hard, either because you are selling a required resource or commodity, such as energy or food, or because your sound supply management strategies did their job, focus on future threats to get the support required to take your supply management strategies to the next level.
  • If cultural conflicts are standing in the way, enroll your team in a cross-cultural training program, such as the custom program offered by the Global Procurement Group or Global Supply Training.
  • Adopt modern e-Sourcing, e-Procurement, and Trade Management systems.
  • Adopt a collaborative approach and work on streamlining communication channels. Also, develop a crisis management plan, just in case.
  • Create a balanced supply chain scorecard and track the key metrics at least monthly, if not weekly.

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How Will McKinsey’s Five Reshaping Forces Affect Your Global Supply Chain? Part II

Our last post overviewed a recent article in the McKinsey Quarterly that discussed the “five forces reshaping the global economy” that every executive has to grapple with, which left the reader with as many questions as answers. This post will attempt to shed some light in the directions the answers may lie.

The following are the forces that were identified:

  1. Growth and Risk Management in Emerging MarketsMultinationals will have to get in on the ground, attract local management talent, and let the local management talent craft an appropriate strategy for the local market. The multinationals that don’t do this will likely miss out on most of the growth opportunities that are available as the current economic climate, coupled with declining population growth, will significantly limit growth opportunities in developed markets. As a result, your supply chain leaders will be working considerably with local talent in analyzing product costs and sourcing for remote developments.
  2. Labor Productivity and Talent ManagementMultinationals will have to look to developed countries for R&D talent, engineering capability, and innovation and focus on grooming talent in emerging markets to manage the new breed of talent available to them. In addition, management will have to double down on new technology, process innovation, and alternative delivery models to maintain productivity levels with a decreasing workforce in developed economies. Sourcing teams will continue to become global. At first, the team leaders will be in the developed world, and the supporting analysts, with the technical and mathematical skills, will be in emerging markets. (A couple of big consultancies are already very successfully applying this model today.) As time goes on, your leaders will move to emerging markets (following IBM’s example), and the leaders of tomorrow will be just as likely to be in Shanghai as Chicago or London.
  3. Global Flows of Goods, Information, and CapitalMultinationals will have to learn how to maximize efficiencies in existing trade flows as current global economic conditions will likely slow down the introduction of new channels and opportunities. They will need to adopt trade management software to automate manual processes, decision optimization to optimize carrier and route selection, and “spend” analysis to analyze trade data to identify emerging trade patterns that they can take advantage of. Your supply chain will increasingly see solutions developed by Asian multi-nationals, like Algorhythm and Zycus, implemented by local consulting powerhouses, like InfoSys and Wipro.
  4. Natural Resource ManagementCompanies will have to design new products with resource and environmental management in mind, or risk incurring additional costs, and bad press, in the future. Even if the up-front costs are higher, decisions not to use more environmentally friendly materials and processes will have to be very carefully considered. In addition, identifying the effects of forthcoming regulations in India and China will become a top priority.
  5. The Increasing Role of GovernmentsCompanies will have to continually analyze the potential impact of major government programs on the economy and GDP and determine the best markets in which to pursue not only new product introductions (NPI) but new product development (NPD).

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It’s Time To Re-evaluate Your Supply Strategies

Late last year, CAPS Research released a report on “Supply Strategy Implementation: Current State and Future Opportunities 2009” that was based on data from 130 supply organizations across 26 industries. In this survey, the respondents rated the overall importance and implementation importance of 23 different strategies. The results are a little scary: the six lowest rated strategies (where the lowest rated strategy is deemed to be only 77% as important as the highest rated strategy) are the strategies that should be given the highest importance. While the following six strategies, that were ranked highest, are arguably important:

  • Vision, Mission and the Strategic Plan
  • Commodity & Supplier Strategy Process
  • Strategic Cost Management
  • Engagement by Corporate Executives & Business Unit Leaders
  • Human Resource Development
  • Procurement & Supply Organization Structure & Governance

not a single one addresses how you will actually contain costs during a sourcing project. While each of these organizational enablers will improve the capabilities and efficiency of your team, they don’t address the proper way to tackle strategic or high opportunity categories. What’s needed are the following six strategies, which were, unfortunately, ranked lowest:

  • Collaborative Buyer/Supplier Development & Continuous Improvement Collaboration will enable the identification of additional opportunities.
  • Standardization of Systems, Components & Processes Standardizing on parts reduces category management complexity and associated costs.
  • E-Sourcing & Supply Chain Strategies This is where the cost savings really kick in. A well executed e-sourcing project will generally save between 5% and 15% above and beyond what will be obtained with traditional methods. And if advanced techniques, like strategic sourcing decision optimization, are applied, you’ll save an additional 12%, on average. Plus, a well defined supply chain strategy will generally deliver better results than a project undertaken without a strategy.
  • Strategic Insourcing/Outsourcing Identifying those categories you are best equipped to handle and those categories that you are least equipped to handle can result in significant cost reductions as you will be able to outsource those categories you are least equipped to handle to specialists.
  • Environmentally Sustainable Supply Chain Management The times they are a changing’ and you have to be green to save green. Seriously. Run afoul of regulations or ignore your social responsibility, and your supply chain financial statements will soon be covered with red.
  • Supplier Integration into Customer Order Fulfillment A business exists to serve its customers. Integrating the supply chain end-to-end will improve service levels while decreasing associated costs.

So rethink your strategies — and maybe you’ll see your bottom line improve.

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More Headlines You Hate To See

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

Your supplier’s employees are committing suicide. News articles are showing up mentioning your company’s name as a major customer. Your actions are being tracked carefully. (Apple and Dell investigate Foxconn plant)

Headlines like: Foxconn Makes Employees Promise Not to Kill Themselves [DailyTech.com], “Plenty of Foxconn shame to go around”, and Foxconn suicides: capitalism and Marxism treat men like animals cover articles that name Apple, HP, Nokia and Dell as key customers. The term fair trade electronics gets increased currency.

What went wrong here? It would be professional malpractice to even venture a guess without talking to any of the principals involved. Instead I’ll write about electronic industry practice and ask a question or two.

The electronic industry has an Electronic Industry Code of Conduct that major buyers require suppliers to agree to follow. You can download a copy from the EICC site. You can also see the logos of their members, which include Foxconn. It looks like a good specification to me. It covers the key issues of employee relations and environmental responsibility and requires that signers require at least their first level suppliers to comply.

Of course, a key question is whether Foxconn actually complies or just agreed to comply. I don’t think anyone not directly involved can answer that.

So here are my questions:

  1. What do others think of the EICC specification?
  2. And do other industries have similar, cooperatively developed codes of conduct (on a global scale)?

Let’s get some discussion going.

Dick Locke, Global Procurement Group and Global Supply Training.

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