Monthly Archives: July 2011

Is Your Supply Management Organization Ready for Gen-Y?

Hopefully, now that you understand that Supply Management is the solution to the woes of the company as well as the country, your organization is ramping up, hiring, and looking for new talent. At approximately 70 Million strong, Gen-Y, also known as the Millennials, will soon become the largest generation in the workforce. As a result, they will soon represent the largest talent pool available to your organization. But is your organization ready?

The Millennials are not like the Baby Boomers, who looked for long term job stability and growth. Whereas your average baby boomer might take a job with the intention of staying with the same company for her entire career, a recent survey conducted by the Australian Experimental Learning Centre found that 64% of Gen-Y employees intend to stay less than two years with their employer. Current estimates are that most members of Gen-Y will have 20 to 25 jobs in their lifetime.

This poses three major challenges for your organization:

  • Recruitment
    Gen-Ys are always looking for the next great opportunity. Why is your opportunity the next great opportunity?
  • Training
    Given the average lifespan of a Millennial in your organization, you will need to get Millennials up to speed quickly and efficiently in order to maximize the value you get from them before they move on.
  • Knowledge Capture
    You will need a great Knowledge Management Program that captures, indexes, and makes available all the knowledge they bring to, and create for, the organization. Otherwise, each new Millennial will have to start the cycle anew.

Is your organization ready?

Is Supply Management the Economic Cure Everyone is Looking For?

In a recent article over on the ISM site that asks “[if] your supply chain [is] ready for stagflation”, the authors state that the current economic outlook for the long-term is stagflation, which they also state is practically unavoidable because the drivers are difficult to reverse. However, they also state that it may be shortened if the right actions are taken.

What are the right actions? According to the authors, the period of stagflation may be shortened if investments are geared toward revamping and improving supply chains, a task which falls under the purview of Supply Management. Why will this help?

Consider the situation, as summarized by the authors:

  • we’re in a recession that is the deepest since WWII,
  • the NIA thinks we are headed toward hyperinflation, but the US Federal Reserve believes otherwise; regardless
  • a long recession builds pent-up demand for consumer goods, at a time when
  • interest rates are at a historical low,
  • unemployment is still high, and
  • the Federal Reserve Bank has pumped significant capital into the economy.
  • Historically, increased consumer spending pulls the economy out of recession, but
  • consumer confidence, and spending, usually improves with expectations of (near) future improvements in the economy. When this occurs
  • if companies cannot meet demand, we’ll see “demand-pull” inflation and
  • if inflation occurs, the Federal Reserve will likely increase interest rates.
  • Right now, inventories are too low and
  • manufacturing is experiencing significant cost pressures. Thus,
  • the outlook is low profitability for manufacturers and
  • low profitability and inflation will result in slow, or no, economic growth — stagflation!

Now consider what will happen if Supply Management is allowed to invest considerable dollars in revamping supply chains.

  • Increased efficiency and optimally balanced inventories will prevent the “demand-pull” inflation that is predicted to occur and
  • as a result, interest rates will likely stay reasonable.
  • Cost pressures will decrease as a result of re-balancing of production to minimize logistics costs, increase efficiency, and use more affordable materials which will result in
  • profitability for manufacturers increasing.
  • A resurgence of corporate faith in the economy will lead to more hiring,
  • which will renew consumer confidence, and since they will have more dollars to spend as a result of decreased unemployment levels,
  • spending will increase, releasing the pent-up demand for consumer goods, and then the
  • economy will rebound.

No stagflation. I think the authors of the piece over on the ISM site that asks “[if] your supply chain [is] ready for stagflation” are brilliant. Because, with a careful analysis, it really does look like better Supply Management, with investments in supply chain improvements across the board (which result in more job creation immediately), can pull the economy out of the funk it is in.

Cost Leaders Do Not Sacrifice Quality or Customer Focus, Part II

Yesterday’s post talked about the principles of cost leadership and how cost leaders do not compromise quality and customer focus. It’s only low cost if quality, service, and other factors stay equal. Otherwise, it’s low cost up-front, higher cost (and loss) later on. If an organization is not on the cost leadership track, it should be. However, like any other initiative, there are a number of show stoppers and initiative killers that can prevent the organization from becoming a cost leader if they are not identified and addressed as soon as they materialize. As per the recent article on why businesses should shift from cost management to cost leadership in Chief Executive, these include:

  • Complexity
    If the initiative is not easy to explain and not easily understood by the stakeholders, it may stall before it starts.
  • Lack of Cross-Functional Support
    If there is no buy-in by key stakeholders across the board, failure is likely eminent.
  • Impatience
    Stakeholders will want to see actionable recommendations from any initiative quickly, and these actionable recommendations will need to be capable of being implemented in the near term.
  • Under-Resourcing
    Don’t attempt to build equity or buy-in by under-resourcing the initiative (to keep costs low); as the authors of the article note, this is equivalent to crippling the racehorse at the starting gate
  • Education
    Training will be critical for the success of a cost leadership initiative. A training component will need to be included. Moreover, training is often the best tool to reduce the fear and apprehension that goes with any new initiative.
  • Under-Communication
    Communication is critical for any initiative, and early wins must be publicized and recognized to maintain the support necessary for success.
  • Over-Hyping
    No initiative is perfect and all-encompassing. Don’t overestimate the potential impact of the initiative, and never, ever, say that the new system will fix everything.

Project Assurance: Pre-empting ERP/SCM System Failure

ERP/SCM projects fail all the time. The reasons include, but are not limited too, lack of top management commitment, unrealistic expectations, poor requirements definition, improper package selection, gaps between software and business requirements, inadequate resources, underestimating time and cost, poor project management, lack of methodology, underestimating impact of change, lack of training and education, and, last but not least, poor communication. In other words, human factors cause these projects to fail much more often than they should.

However, as per a recent article in Supply & Demand Executive on “preempting ERP/SCM failure through project assurance”, there is a way to minimize the risk. It begins with a blueprint of strategic project assurance at critical points in the implementation project’s evolution. It establishes clear understanding of expectations among all people involved — from the executives, to the business and IT management, to the software vendors and end users.

A Project Assurance plan, that

  • identifies the real issues,
  • sets realistic timeframes,
  • aligns the work streams
  • looks beyond the indicators for early warning signs,
  • manages the expectations,
  • seeks objectivity,
  • communicates the expectations, and
  • measures progress regularly

reduces the risk of failure by

  • trakcing milesontes,
  • controlling costs, and
  • minimizing surprises.

It requires a lot of up-front planning, and a willingness to be realistic at all times, but is worth the effort. For details on how to create one, see Rob Prinzo’s No Wishing Required that will hep you identify six critical points in every project and get you on your way.

Cost Leaders Do Not Sacrifice Quality or Customer Focus, Part I

I was pleased to see that this recent article over on ChiefExecutive.Net on why businesses should shift from cost management to cost leadership, that emphasized the need to control cost in the current economy, clearly stated that cost leaders do not compromise quality or customer focus. Every time I see a headline or article on cost management that emphasizes the need to identify low-cost producers, I get worried because, as many manufacturers who jumped on the outsourcing bandwagon have learned, low cost does not always translate into cost savings if quality is not maintained.

The article defines cost leadership as the:

  1. recognition as the lowest cost producer in one’s industry, without compromise in quality or customer focus
  2. realization of a long-term cost-centric culture where cost consciousness is a strategic and leadership preoccupation across functional lines
  3. dissemination of cost information with regard to customer, product, distribution channel, and the like that is timely, understandable, credible, and actionable to fuel continuous improvement
  4. establishment of aggressive and balanced performance targets across the value chain

And it’s a good definition. With costs rising across the board, cost control is very important, but cost control must take into account quality, customer needs, and continuous innovation. If quality is bad, costs will add up in repairs and returns and profits will drop as customers leave for your competitor. If the focus is not on the customer, market share will slowly decrease as your competitors begin to offer products and services that better serve the customer. And if continuous innovation is not employed, costs will creep back up.

The article also noted three practices of costs leaders that are worth diving into:

  • Less Is More
    Simplified products and services, even if they cost a little more up front, will usually cost a lot less over the lifetime of that product or service.
  • Customer Profitability
    Each customer should be profitable, and, more importantly, if you deliver a product or service to businesses, it should make them profitable.
  • New Formula
    If a product requires costly raw materials, or contains raw materials that are heavily regulated, or produces hazardous waste in its manufacturing, reengineering the product to use less costly raw materials, less regulated raw materials, or production processes that do not produce hazardous waste will significantly reduce costs while maintaining, or improving, quality in the process.

The article also highlighted a number of cost leadership initiative killers that you need to watch out for and address as soon as they are encountered. But that’s the subject of Part II.