Monthly Archives: March 2011

Six Questions To Ask Yourself When Outsourcing

A recent article over on the Sourcing Interests Group Site on “Rocks to Turn Over in Outsourcing Arrangements” contained a number of questions an organization could ask when looking to maximize value from the relationship. The following six are especially pertinent.

  1. Do we share information the other party needs to be successful?
    One cannot outsource an activity and expect the outsourcing organization to be successful unless all of the information the outsourcing organizations needs to be successful is also shared. For example, if an organization outsources customer support, it must provide the third party with all of its policies, product details, available resolutions and average wait times (for repair, replacement and refund).
  2. How can we encourage more active planning for, and achievement of, innovation?
    An organization that outsources a function and does it right does a process analysis and redesign so that the outsourced organization implements an efficient desired state of the process in place of the inefficient current state. However, while this will be an improvement, it will not necessarily be an optimal implementation of the process. There should be a constant quest for process improvement and innovation.
  3. Is there commitment and follow-through when decisions are made?
    Decisions are ineffective if not acted on.
  4. Are key leadership roles understood and filled?
    Consistent leadership and executive support are necessary for any organizational initiative to be effective.
  5. Are adequate incentives in place to motivate collaborative behaviour and effective performance?
    Chances are that there will be metrics up the wazoo but very little motivation in place to improve them. In order to insure success, there should be incentives in place for the organization to go above and beyond the committed service level.
  6. Do we trust our counterparts to meet their commitments effectively?
    If you don’t trust the outsourcing provider, the outsourcing provider won’t trust you and instead of thinking about how to improve service to your organization, they’ll be thinking about how to make sure they don’t get screwed out of any money they were expecting to get. And instead of spending time trying to innovative and improve a process, they’ll be spending all their time documenting activity and compiling metrics and monthly reports to verify that they met performance commitments and are due to receive (additional) payment.

Outsourcing is not a guaranteed success. In fact, to see any improvement at all, it’s a lot of work. The rewards can be there, but it has to be done right. These are six great questions to ask if an organization wants to determine whether or not it is on the right tracks.

Have You Lost Your Mojo?

According to a recent article over on Industry Week on “Putting Creativity on the Company Agenda”, Josh Linkner, founder and chairman of ePrize, claims that due to a constant focus on cost-cutting, efficiency gains and top-down control, too many organizations have lost their mojo.

 

Yes, Austin, if true, that’s not a good thing, especially given the ever-increasing arms race for competitive edge. But Linkner is correct about one thing, when the dust settles, the only thing that can’t be commoditized is creativity. So the last thing your organization wants to lose in its quest to become a next-generation supply management organization is its mojo.
So how can your organization get its mojo back if its lost it? Screw up. Seriously. Sometimes a dose of humility is the best medicine.

Why Imitation may be the Best Form of Supply Chain Innovation … For Many

A recent article over on Forbes on how imitation with innovation reduces risk in startups had some great reasons why imitation with innovation is often superior to pursuing disruptive technology — reasons which are just as applicable to supply chain for the average company. While its true that some companies will need a next generation disruptive supply management strategy to get a performance gain, this is only true of the roughly 10% of companies that have been applying leading supply chain practices for close to a decade. Until a company has maximized value from current supply chain practices, it is likely that the company is not going to be ready to maximize value from next level supply management techniques.

Plus, as per the article, for an average company, imitating the leaders:

  • avoids large initial investments until the ROI is there
    which is important as Supply Management is not going to look good if it spends Millions of dollars before it realizes the savings to justify the investment
  • and reduces the cost of Supply Management innovation
    as the costs to be the first inventor are always a third higher statistically and any attempts to patent just make imitation easier due to disclosure requirements (as a smart technologist can work around any patent using techniques such as innovation on demand)
  • while learning from competitors and early adopters
    who will be the first to encounter the gotchas associated with implementation screw-ups and perfect the techniques
  • who are actively progressing the state of the art
    because once a couple of big players prove a new technique has value, they will find more and quicker ways to extract maximum value from the technique

Plus, initially it will be easier to get funding for the technology and resources you need to make Supply Management a success if you can point to a respected competitor and say that this technology or methodology saved them millions. And then, when Supply Management has proven itself, it will be much easier to get investment for next generation disruptive Supply Management technologies and methodologies. Just don’t lose site of the ultimate goal — Next Generation Supply Management — and the organization will eventually reach its goal with persistence and smart, initial, application of imitation with innovation.

3 Tips for Better Product Sourcing

A recent article over on Supply & Demand Chain Executive on “The New Product Shape Up” had three great tips that will help any Supply Management department improve its product sourcing efforts. Simply put, these are:

  • Focus on the Differences
    What makes your offering distinct from your competitions and, thus, what are the most important supplier and product/component characteristics to focus on when sourcing. Not everything is relevant — and focussing on the wrong characteristics and/or issues will just help the supplier’s sales person pull the wool over your eyes (with the misdirection ploy).
  • Implement Your Customers’ Ideas, Not Yours
    Don’t start with a supplier solution and end with an end product — start with the end product your organization’s customers want and work back to the appropriate supplier capabilities. And if the customers want something that is more expensive it’s not a problem if they are willing to pay a premium!
  • Conduct Interviews
    Mail, telephone, e-mail, and website surveys are great, but nothing is more informative than actually talking with current and potential customers, especially if they want to talk to you. So get out there and understand what they really want. It will not only make your organization more successful, but knowing exactly what they want will make your job that much easier in the long run.