Monthly Archives: May 2011

What’s the Right Portfolio View of the Supply Chain IT Investment?

A recent article over on the SCRC site on The Supply Chain IT Investment Enigma promoted a portfolio view of the IT investment, in line with Hackett Group recommendations, that appropriately balances the sustainment of current capabilities with the development of new capabilities. The question is, for an average organization, what’s the right balance?

It’s difficult to say as it depends on where the organization is on the technology curve, how long since it has acquired the solutions it has, what types of solutions it has, and what the gaps are between the organization and world class organizations in its peer group. Furthermore, it’s often hard to differentiate sustainment technologies with new capabilities, since upgrading certain solution suites, such as the sourcing suite, will not only sustain the organization’s capabilities but add new ones to the mix.

And the article, which ran through the laundry list of Supply Chain Technologies — DM, PLM, PP, APS, SCEM, SRM, WMS, etc. — wasn’t very helpful in terms of describing what that portfolio should be. Analytics needs to be there. World class sourcing and SRM needs to be there. And PLM needs to be there. But what else needs to be there depends upon the current state and specific needs of the organization. And so does a solution that integrates all of the solutions onto one backbone. But it might not be possible to determine more than this without a gap analysis by an appropriately experienced supply chain IT professional. Any other thoughts on the issue?

Lessons Learned from Best-in-Class, Part III

The following are some more of the lessons learned shared by some of the participants at this year’s Hackett Best Practices conference in no particular order.

09. Data is King
Cost savings reports are good, but savings reports backed up by hard data are better. Forecasted savings are good, but detailed projections backed up by proven models and years of hard data are better. Targetted spend categories are good, but spend categories known to have considerable overspending backed up by a data-rich spend analysis are better. Any which way one chooses to look at it, data is king.

10. Demonstrate an interest in your client’s business
Just like the most successful service companies in the consumer space put the interests of the customer first, the most successful Procurement organizations put the needs of the client’s business first. But they go beyond that and develop, and demonstrate, an interest in the business of the client and try to understand what the internal client organization — be it Engineering, Marketing, or Legal — will need before even the client organization understands what it needs.

11. Do not minimize country specific needs
It might be tempting to globalize successful sourcing and procurement practices as is, but each country will have specific needs with respect to its culture, language, and accounting systems. As a result, it may not be possible to globally deploy certain systems or processes with respect to transaction management and global trade documentation management if the systems do not have customizations for those regions.

12. Empower the Global Teams
If the organization uses global teams for Procurement or Sourcing, be sure to empower them to do the jobs they need to do. Don’t outsource invoice processing without the authority to resolve discrepancies. Don’t outsource categories without the authority to contract on the award decision. Otherwise, the teams will not feel like they are a critical part of the organization and, once the team members get the skills and experience they need, they will depart for greener pastures.

13. Establish common methods of approach
Even though there may be category or country specific needs, generally speaking, the 80/20 rule is in play and 80% of processes, methodologies, and technologies can be standardized across the entire Global Procurement organization, which should be center-led.

14. Everyone wants the benefits, but no one wants the risk
The category owners will want the benefits of lower cost and higher quality that can come from a new supplier, but will want not the risk of the unknown. The users will want the advertised benefits of a new IT system, but will not want the risk that it will cost more and take longer to be deployed than advertised, or the risk that it might not even meet the big audacious goal that was advertised.


Our next post will continue our overview of the lessons learned that were shared by some of the participants at this year’s Hackett Best Practices conference.

Is Great Leadership Culture Independent?

There’s a very interesting post over on the HBR blogs on “Leading Across Borders” that suggests that if you want to get it right, you don’t change a thing. The author, who has managed in India, the U.S., Europe, and Asia, states that while he was always advised that you don’t live in <blank> anymore, and the quicker you figure out the differences, the better, experience taught him that their warnings were totally misguided.

The author states that regardless of geographic location or culture, what drives people to the highest level of engagement is innately human and universal and that great leadership looks the same wherever you are because the most effective executives are the ones who draw energy from a clear sense of purpose and a set of deeply held personal values. Furthermore, they also energize their employees by ensuring that their expectations about three overarching elements of work — the nature of the role, the work environment, and their professional development (RED) — are in line with the organization’s purpose. (In fact, the blog post author wrote a book on this theme: “Too Many Bosses, Too Few Leaders”.)

It’s a very interesting post, especially when he draws the similarities between Tony Fernandes, founder of Air Asia, and Howard Schultz, founder and CEO of Starbucks, and their companies and how similar styles have led to success. I think I agree with the first commenter though — the what is definitely the same across cultures, the “how” probably does varies with local norms and values. For example, in Japan, the “role” is very dependent upon what the “group” wants, but in America, the “role” is very dependent upon what the boss wants. The environment needs to be very well defined in some eastern cultures, but can be wild west in some western cultures. And professional development desires vary too. Some people want to become “manager” as soon as possible to impress the future father-in-law, and some just want to cut code until the day they croak. It’s definitely worth reading and thinking about as you transition to a global operation in your quest to be a true Next Level Supply Management organization.

Lessons Learned from Best-in-Class, Part II

The following are some more of the lessons learned shared by some of the participants at this year’s Hackett Best Practices conference in no particular order.

05. Be approachable
Remember that the ultimate goal is 100% of spend under management, and this will only ever be achieved if the Procurement organization is trusted to at least advise on all spend categories. But for an Procurement organization to even dream about getting to this point, it first has to be trusted with spend categories by each business unit — and no business unit is going to ask for Procurement’s advice if Procurement isn’t approachable.

Procurement has to be willing to help with any category and any challenge at any time and be excited to do so.

06. Be realistic about how things get done
The vast majority of processes, procedures, and relationships in an organization will be inefficient and Procurement will have to live with them for a while as established processes don’t change overnight. Procurement might know that a more efficient process will complete in half the time and get results that are at least as good, if not superior, but the business unit may not have that experience or willingness to trust a new process, especially if it is the first time it is bringing Procurement in for advice. Procurement needs to respect the existing processes and work with them until the business units are ready to change.

The same goes for relationships. Even though a relationship may not be optimially managed, or a supplier not the best possible choice for the business, if it’s a long standing supplier with which the business unit personnel have a deep relationship, Procurement will have to tread carefully and slowly introduce new management styles and new suppliers to the business, starting with less critical categories in the beginning.

07. Constantly evangelize the message and direction
This was one of the most common themes across all of the presentations I attended. Procurement needs to “comunicate 7 different ways” to the point where it “overcommunicates” and constantly spreads the message about its capabilities and successes. Remembering that it’s seat at the table is, in most companies, still a seat at the kiddie table, Procurement still has to build credibility and respect, and, most importantly, continue to get noticed.

08. Continual service expansion and innovation is critical
No matter how great of a success story Procurement is able to achieve on a category, in a business unit, or for the organization as a whole, it’s never enough. Everyone always wants more, and Procurement always reaches a point where that “more” will not come from cost reduction and avoidance alone. Procurement will have to find additional ways to offer value in the form of reduced risk, reduced complexity, and process and product innovation to the rest of the business.


Our next post will continue our overview of the lessons learned that were shared by some of the participants at this year’s Hackett Best Practices conference.

Delphi’s Advice for Successful Supply Management

While we’re on the theme of best practices and lessons learned, there is a good article over on SupplyManagement.com that chronicles the advice of Sidney Johnson, VP of Global Supply Management at Delphi, who tells us that we should “Focus on Three Things to Ensure Success”.

A. Understand your business beyond supply chain.
Most Procurement organizations spend too much time on the function and not enough time on the business. It’s also important to have staff who can walk in to any business and have credibility. That’s why a great Procurement team needs to have diversity of thought and experience across the business.

B. Build your brand for the profession.
This starts by building a team who knows how the rest of the business operates but also includes understanding how the organization produces its goods and services and how quality and reliability is checked and mainained. Remembering that, in most organizations, Procurement is responsible for over 50% of the organization’s cost, the organization won’t make it if it doesn’t perform. Be sure to have a vision, set the mission, and be the suppliers’ customer of choice.

C. Focus on things that help you today and tomorrow.
This should include a focus on emerging markets as the BRIC will soon account for 40% of the population of the world’s top 10 economies. And it should include a focus on sustainability as the next level of consumers will be more green. The moving target of sustainability may have taken a bit of a setback in the recession, but you can be sure that it will be back with a vengeance.