Monthly Archives: July 2010

Three Easy Steps to Winning a Recession

    1. Get Operationally Efficient This is not about cutting costs, but cutting fat and spending strategically on quality and performance. If a product, service, or piece of software improves productivity by 30% and reduces operating costs by at least 3X its annual cost, you buy it, even if it costs six or seven figures. But if all a product does, like an online T&E application that your employees rarely use, is save you 50,000 a year for it’s 30,000 price tag, you eliminate it and invest the 30,000 somewhere else where you’ll get a return.
    2. Increase the R&D Budget Your prosperity depends upon your ingenuity. That will require innovation, which requires top talent and the resources they need to break through traditional barriers. That requires that R&D have enough money to support pure research in addition to product development and day to day support. And in R&D, a little investment can go a long way. It only takes one breakthrough product to make tens, if not hundreds, of millions (or billions) of dollars of revenue down the road.
    3. Invest for the Long Term as well as the Short Term

This is the real reason most companies fail. Simply put, failure to invest for the long term means that when a new innovation is needed to maintain or secure new market share, it’s not there. Failure to invest beyond the next quarter means that instead of working on new products, the company is focussed on extending the life-cycle of existing products which have sold well, trying to eek out every last penny. The problem with this strategy is that as the market gets closer and closer to full saturation, the profit per sale drops exponentially. In comparison, if the company shifted focus to a new, promising, product, around the 70% saturation point, by the time the market reached the point where the profit per sale was unattractive (which usually happens around the 80% saturation point), the new product would be well into it’s growth curve and profits would hold steady.

That’s it. If you don’t believe me, you can read the very well written, but very lengthy, article on “roaring out of recession” in the Harvard Business Review, but winning a recession is very simple. Stop focussing on cutting costs and start focussing on improving the value you bring to the market. Even in a recession, people still want, and need, to spend. The only difference is that they’re more reserved and willing to hold out for products and services that provide great value at a great price. The first company to offer them the first great product or service they want at a great price typically wins. It’s as simple as that. (And that’s one of the main reasons why 85% of market leaders get dislodged during a recession … they fail to understand that value trumps even long term loyalty when money is tight, giving you an opportunity.)

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AMR Reads the Supply Chain Tea Leaves …

… and probably proves that that they have not yet mastered the art of tasseomancy because, if I was going to bank on any predictions on who will rise in the coming year, I’d rather take my advice from a cartoonist than bank on their supply chain top 25 predictions.

Of their seven “rising” predictions, I wouldn’t bet on the following four:

  • Research in Motion (RIM)Apple & Droid are both taking the market by storm, taking turns leading the monthly sales numbers … and neither are fans of Microsoft (Apple is a direct competitor and Google has banned windows from its campuses), who continues to take a beating in the marketplace; in contrast, RIMs back-office integration is Microsoft (Exchange) heavy
  • Hewlett-Packard (HP)HP might be doing well in the enterprise (server) market, but it faces tough competition from IBM, Dell, and Sun, which now has the financial clout of Oracle behind it; on the consumer side, it’s Windows-centric, and Apple keeps rising while Microsoft keeps falling
  • NokiaWith six of the top ten cell phone manufacturers in Asia (3 in China, 2 in Korea, and 1 in Japan), and with the output of the Chinese manufacturers rising rapidly with a rapidly increasing local market size, how much longer do you think Nokia is going to retain top spot?
  • Johnson Controls (JC)This kind of says it all: the company dropped like a stone this year, as the weak economy hammered its financials. It’s unlikely this US-based company is going to see a quick recovery.

And while I expect the following two to hold rather steady, I don’t see a rapid rise:

  • KraftKraft is solid, but given their primary vertical, I don’t see a rapid rise in demand for their products.
  • General MillsGeneral Mills is also solid, but given their primary vertical, I don’t see a rapid rise in demand for their products either.Plus, both these companies are heavily dependent on retailers, whom AMR expect, as a group, to fall this year!

In fact, the only “rising” prediction I’d agree with is:

  • LG Electronics (LG)This Korean electronics giant is currently the third largest producer of mobile (smart) phones in the world and is aggressively pushing its way across the electronics vertical(s), backed up by a serious effort to revolutionize its supply chain.

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Upcoming Webinars from the #1 Supply Chain 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 — and it will continue to do so.

The following is a short selection of upcoming webinars over the next two weeks that you might want to check out:

Date & Time Webcast
2010-Jul-6

 

15:00 GMT/WET

 The Hidden Risks and Benefits when Implementing and Managing a Shared Services Center in LATAM

Sponsor: SSON
2010-Jul-7

 

11:30 GMT-05:00/CDT/EST

 What Makes Best-in-Class Retail Supply Chains?

Sponsor: Supply Chain Digest
2010-Jul-7

 

14:00 GMT-04:00/AST/EDT

 Using Surety Bonds to Protect your Company

Sponsor: Federation of Credit and Finance Professionals
2010-Jul-7

 

14:15 GMT/WET

 Environmental strategies for cost reduction in pharmaceutical facilities

Sponsor: WTG
2010-Jul-8

 

10:00 GMT-04:00/AST/EDT

 Align International Payroll Outsourcing with Your Global Strategy

Sponsor: SSON
2010-Jul-8

 

14:00 GMT-04:00/AST/EDT

 Reliability and Quality Planning: a QLM Framework

Sponsor: PTC
2010-Jul-13

 

2:00 GMT-05:00/CDT/EST

 eSourcing – Automate your Sourcing Process

Sponsor: EC Sourcing Group
2010-Jul-13

 

14:00 GMT-04:00/AST/EDT

 Tired of Working With Cumbersome Spreadsheets?

Sponsor: Silico
2010-Jul-13

 

13:00 GMT-04:00/AST/EDT

 Best-in-class Strategies for EHS Compliance and Sustainability

Sponsor: Environmental Leader
2010-Jul-14

 

14:00 GMT-04:00/AST/EDT

 External Economic Risk Measurement

Sponsor: FICO
2010-Jul-14

 

14:00 GMT-05:00/CDT/EST

 Trade Promotion Management Takes on Microsoft Excel

Sponsor: MEI
2010-Jul-14

 

11:00 GMT-04:00/AST/EDT

 2010 Risk Management 101 Webcast: Basics of Property

Sponsor: Marsh
2010-Jul-15

 

8:00 GMT-07:00/MST/PDT

 Asset Disposition Strategies to Eliminate Excess Maintenance, Repair and Operations (MRO) Inventory

Sponsor: IHS
2010-Jul-15

 

14:00 GMT-04:00/AST/EDT

 Using EPCIS Data Sharing for Full Supply Chain Visibility

Sponsor: RFID Journal
2010-Jul-15

 

11:30 GMT-04:00/AST/EDT

 Industry Trends in Compliance Training 2010

Sponsor: Brandon Hall
2010-Jul-16

 

10:00 GMT-07:00/MST/PDT

 Strategic Account Planning

Sponsor: Relationship Economics

They 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 you were looking for!

And continue to keep a sharp eye out for new additions!

Eight Things Good Bosses Do

A recent article over on the HBR blogs covered the “12 things that good bosses believe” which, while important, don’t necessarily help a new boss understand what she has to do to be a good boss. So, in this post, I’m going to tell you the eight things that good bosses do. In time, you’ll understand why and adopt the same beliefs, but when you’re new, sometimes actions have to come first. So, without further ado, here they are:

  • Human ShieldThey protect their people from intrusions, distractions, and idiocy of every stripe and shade.
  • EmpowerThey empower their people to make decisions and take charge, they don’t micro-manage every little detail.
  • Manage the MundaneThey do the distractive busy work and fire fighting that would keep their people from accomplishing their jobs.
  • Give Away the GloryNot only do they enable their people to win, but they credit their people with the win.
  • They ListenThey don’t assume they have all the answers. Moreover, they assume that the answers they do have come with an expiry date — an expiry date that activates as soon as a subordinate gives them a better answer.
  • They Accept MistakesThey know that sometimes their direct reports will make mistakes and use it as a learning opportunity to create a better employee.
  • They Take, and Encourage, Managed RisksThey know you can’t win big if you don’t take a risk once in a while.
  • They Make Decisions and Follow ThroughThey understand that their employees will come up with a number of approaches to solve a problem, some good, and some not so good, and that they will have to make the final decision. They do it with confidence, and, for better or worse, follow through and get it done. And if they make a mistake, they admit it, post-mortem it, and use it as a learning opportunity.

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U of T Has Some Great Tips for Successful Outsourcing

A recent report from U of T, Georgia Southern, the Cranfield School of Management, and the IACCM titled on Unpacking Oliver: Ten Lessons to Improve Collaborative Outsourcing that was based on the Nobel Prize winning work of Oliver Williamson had ten great tips for successful outsourcing. The following five are particularly relevant:

  • Outsourcing is a continuum, not a destination

    To Outsource or Not to Outsource is an eternal question that never has a final “yes” or “no” answer. It’s a never ending trade-off of cost, quality, risk, and value. The best answer today might not be the answer tomorrow and probably won’t be the best answer in five years. It’s a constant re-evaluation.

  • Understand the transaction attributes and their impact on risk and price There’s product cost — which is a composition of raw material, labour, and overheads, transportation cost, import and export costs, storage costs, losses due to transit times, disruption costs associated with higher or lower risks, and so on. Any decision that increases or decreases one of these costs will likely increase or decrease risk.
  • Use a contract as a framework – not a legal weapon

    Contracts don’t have the same meaning in many countries as they have in the US or the UK. In many countries, the relationship means a lot more than the contract, which only serves to define an outline of the responsibilities of both parties.

  • Your style of contracting matters; be credible

    If you use “muscle” for a quick win, you’ll lose in the long term as the supplier will not be inclined to go beyond the minimum requirements of the agreement.

  • Build trust; leave money on the table

    Good faith will go a long way to insuring that the supplier not only adheres to the agreement, but works with you to find new ways to save cost and go beyond the mandated service levels.

For a summary of the other five tips, see this great summary over on Supply Chain Brain.

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