Monthly Archives: August 2011

Your Browser Matters

While using Internet Explorer will not make you dumb, if you are using it, you probably are. That’s what a recent study by AptiQuant, that a gave more than 100,000 participants an IQ test while monitoring which browser they used to take the test, found. The results, nicely summarized in this CNN article that asks if Internet Explorer Users [are] Dumb, found that users of IE6 scored the lowest on the tests, with a score of just over 80, while users of Opera (the doctor‘s preferred browser by the way, using it since, believe it or not, 1997 when Opera 3.0 was released) scored the highest at well over 120. In other words, IE Users were at the bottom of the “dullness” range while Opera Users have “very superior intelligence” or, for the more technical, in order to include IE users, you have to go two standard deviations from the mean down, and in order to include Opera users, you have to go two standard deviations from the mean up.

Cheap shot at IE users? Oh yeah. Do they deserve it? Probably. There’s no excuse to be using IE, the most non-standards compliant browser on the market, when Firefox, Chrome, and even Safari are leagues ahead and cross-platform. Consider the recent HTML5 Browser Scorecard. IE9 Beta supports a mere 96 HTML 5 features, while Safari 5, Chrome 8, and Firefox 5 support over 200 features. So drop IE. Even if it doesn’t raise your IQ (as the doctor understands that correlation is not causation), at least no one will think you’re dumb.

If You Want to Attract Talent, Start with a Good Advertisement

As per SI’s blog on Friday that noted that you have a talent management problem if your job advertisement reads like carbon copy blah-blah-blah, if you want to attract talent your have to have an interesting job, an exciting career path, and an advertisement that conveys both.

So what makes a good advertisement? There are various theories out there, but, at a minimum, it must:

  • Be Specific
    From a clear and simple title or headline to a detailed job description to details of the company, specificity helps. “Sourcing Manager IV” means nothing outside your company, “buy goods and services” is part of every Sourcing Manager’s job, and “at a top tier CPG company” doesn’t differentiate you from Discount Dave’s trying to pretend they are bigger than they are.
  • Focus on the Role
    Remember, you are focussed on recruiting Gen-Y and they want a challenge, excitement, and an opportunity to advance their career. Not an opportunity to be stuck in a paper-based back office faxing POs to suppliers who haven’t heard of the internet yet. And if you don’t go into details, they are going to assume that your organization is a Supply Management laggard. Also, be sure to list the top five to 10 duties as well as normal working hours. If you expect the Sourcing Manager to be on the phone with China for 2 hours every day during normal working hours in Beijing, that better be clear.
  • Clearly Specify Minimum Experience and Education
    If you will not interview anyone with less than 3 years of relevant experience (which should include experience with the product or service in question and not just a Sourcing Role — who better to source a product than an engineer who used to make it who has had some financial and sourcing training), state that. Also, if your policies demand a bachelor’s degree or a professional certification, state that too. But don’t make ridiculous requests, especially if the pay is not on the high end or the locale is expensive. No Sourcing Manager with a Masters, 2 professional certifications, and 10 years of experience is going to accept a position for 90K in downtown Manhattan.
  • Sell the Culture
    Remember, Gen-Y is the most social, hooked-in, “hip” generation yet. They want a constantly communicating culture. (But don’t promise what you can’t deliver.)
  • Advertise the Benefits
    “Great Benefits Package” sounds like Used Car Larry’s “Solid as a Brick” sales pitch. Sure the frame is solid, but so is the engine. (And an engine that doesn’t turn doesn’t run.) Advertise the benefits. Health Plan. 401-K (or RRSP) matching. Gym membership. Show you put some thought into what prospective employees need.
  • Include FULL Contact Information
    Specifically, the company web-site and a link to a more detailed job description, the mailing address and fax number, and a contact number of someone to contact with questions.
  • Guarantee a Response
    And follow up. Guarantee receipt of application. Guarantee a time by which applicants will be notified of whether or not they will be interviewed. Guarantee a time by which selected applicants will be contacted to set up an interview. To find someone who will work hard and respect you, show that you respect them and their time.

Time to Shorten those Payment Cycles

If you want a sustained recovery, it’s time to start shortening those payment cycles. During the recession, the average payment cycle time in many companies shot up due to “cash flow issues”, and it’s already coming back to bite them in the rear end. As SI has said before, this is not the solution to cash flow and any “cost savings” that the business appears to benefit from (by having more cash in the bank that can potentially earn interest on short 60 or 90 day notes) is more than eaten up by the higher costs the suppliers have to charge to make up for the high interest rates they have to pay to obtain working capital.

It’s important to remember that late payments put extraordinary pressure on suppliers, especially small and medium sized suppliers, which often desperately need cash to purchase equipment, raw materials, and, most importantly, meet their payroll. Furthermore, in addition to cash flow problems caused by late payments, many firms incur significantly extra costs for the time and money spent chasing payments and securing interim financing, usually at exorbitantly high rates – which can often exceed 20% compared to your rate of borrowing, which can be as low as 5%.

All these costs do nothing but drive up the supplier’s cost of operation, and effectively, the price they will need to charge to maintain enough profitability to survive. That’s why many prices for components are rising faster than the raw commodity costs. The lack of prompt payments has cut many suppliers to the bone. Extending payment terms doesn’t help with cash flow or “cost savings”. Extending payment terms only drives up the price in the long term while increasing the risk of a major supply disruption as a supplier could go out of business if all its customers take too long to pay.

So instead of extending Days Payable Outstanding, consider looking at other strategies that can lower your cost of operations – such as improving forecast accuracy, balanced just in time (JIT) production, and low cost financing options that are available to you, as a large company, and not your supplier. Better forecasts lead to less missed opportunities and a reduced need to clear inventory at significant markdowns, balanced just in time (JIT) production reduces inventory costs, which is much better than just shifting them to a third party, and financing your purchase at prime or less will cost everyone less in the long run that forcing a supplier to take out short term financing at 20% to 40% per annum.

Efficiency is Never Bad. It’s the Focus on Cost-Cutting that Kills You!

Glancing through my notes, I came across this piece in S&DC Executive from the early spring that asked if “too much efficiency [can] be a bad thing”. I bookmarked it because articles like this really grind my gears. We have enough problems without respected publications publishing idiotic articles, such as this, that try to answer difficult problems with findings from studies that identify correlation, not causation. (And as Pinky and the Brain explained in their brilliant lesson in statistics, correlation and causation are not the same thing. Simply put, correlation measures the relationship betwee effects, which have underlying causes.)

And while I fully believe the results from the in-depth study that asked what drives financial performance and analyzed the financial performance of publicly traded U.S. manufacturing firms from 1991 to 2006, as reported in Volume 29: Issue 3 of the Journal of Operations Management, I reject the editorial staff’s claim that the results present empirical evidence to support the view [that too much efficiency is a bad thing]. Efficiency is never a bad thing. It’s the principles guiding the application of the efficiency that is the problem.

As the article states, if there is no slack in the supply chain when a disruption occurs, then this will cause operational problems that will result in a negative financial impact. But the decision to go all-out with a Just-In-Time (JIT) philosophy is not an efficiency decision, it’s a cost-cutting decision. Less stock means less inventory and carrying costs. So some firms, in their effort to save every penny, go ultra-lean and then run into serious problem when a demand surge or supply disruption hits.

Efficiency corresponds to the production, inventory, and logistical processes used to manufacture, store, and ship the goods. It’s streamlining the process to eliminate time and resource waste, not cutting production quotas to dangerous levels. It’s minimizing packaging and storage space requirements by maximizing package integrity and space utilization, not eliminating safety stock. And it’s optimizing the distribution network for quick and affordable shipping, not altering lot sizes to fill an existing truck or lane to save a few pennies on shipping costs (when there are dollars to be saved from a network redesign).

Efficiency is never bad. Only ill-conceived supply chain design decisions and overly ambitious cost cutting is bad. And anyone who thinks otherwise doesn’t understand what efficiency means.

Why Finance Needs to Work With Supply Management

A recent survey by KPMG that was highlighted in a Supply & Demand Chain Executive article on how “finance executives [are] at odds with dated, ineffective technology” made it abundantly clear why finance needs to work with Supply Management. The global study found that the number one weakness in finance processes, as reported by almost one-third of respondents, was planning, budgeting, and forecasting.

It’s hard to plan without a budget, and its hard to budget without a forecast. To get a forecast, Finance could work with Marketing, but that’s not meaningful from a Finance perspective. What’s meaningful is how many units are actually bought and used / sold. And how much is actually paid. Who does the buying? Supply Management. And who is most likely to have a price locked in, or at least reasonably estimated? Supply Management. If Finance works with Supply Management, they can get meaningful acquisition/production forecasts (distilled from input from Marketing and Manufacturing), generate meaningful sales forecasts (using historical fill rates), calculate a realistic budget (once target sale prices are factored into account), and then construct an actionable plan. But if Finance doesn’t work with Supply Management, then everything is a crap-shoot estimate based on unrealistic interpolation curves.