Monthly Archives: August 2011

The Triple Bottom Line will Soon Be The Norm

Is your Supply Management organization ready?

The Triple Bottom Line — which balances economic, environmental, and social performance in order to make a corporation more sustainable — is gaining more support by the day. As per this recent article over on Chief Executive on the ‘Shareholder Push for the “Triple Bottom Line”‘, the percentage of social and environmental shareholder resolutions that garnered at least 30% shareholder support, rose from a mere 3% in 2005 to 26.6% in 2010. At the current rate that support is increasing, it’s just a few years before the majority of social and environmental shareholder resolutions exceed the 30% threshold and not many more years before the majority of well-formed social and environmental resolutions pass.

So, is your Supply Management organization ready?

Unless it is a true CSR leader, probably not. So where should it start? Near the end of 2008, CAPS published a “Critical Issues Report” that addressed the Triple Bottom Line (TBL) framework offered some suggestions for an organization that wanted to get started on the TBL path. Specifically, the report recommended that an organization:

  • Smart small (but do something).
  • Insure proposed strategies are aligned with overall corporate strategies and goals.
  • Incorporate green into your purchasing and sourcing processes.
  • Be proactive.
  • Make sure you’re not just greenwashing.
  • Form a cross-functional team to scale your efforts company wide.

The “Cloud” is Not a Magic Mirror Nor is it Omniscient

Quotes like this one:

Organizations need the visibility of their supply chains because they never know when they might be required to make a change to respond to world and market events. They have been actually talking about this kind of visibility for the past two decades, but now with new Cloud capabilities they are advancing into that environment

from a recent article in World Trade that purported to describe “a smarter supply chain” really bug me. Not only can one argue that the speaker is implying that the Cloud is necessary for good supply chain visibility, which it’s not, but that the writer, who notes that there has been greater company acceptance of the Cloud because the Cloud … can provide answers to new and existing problems, also appears to be arguing that the Cloud is necessary for greater visibility as well as smarter supply chains. Nothing could be further from the truth.

The Cloud is Not a Fluffy Magic Box (and there are more reasons and yet more reasons that this is the case) and simply throwing an application into the Cloud does not make it better. The nebulous Cloud does not enable applications that cannot be delivered over the traditional internet from a traditional data center. For most providers, the Cloud just happens to be whatever they have — multi-tenant SaaS in a redundant data center if you’re lucky, single-tenant ASP if you’re not. There’s nothing special or magic about it. And there’s no visibility inherent in it. The visibility is in the applications it is hosting (whatever it is).

Similarly, there is no “smart” in Cloud. Any “smart” is again in the application that is being hosted. And there is no magic data connector in the Cloud either. It’s not Cloud-based solutions that provide more affordable ways for suppliers to link to a common database — it’s more efficient providers that use economies of scale to offer good ETL solutions at fair prices to a large customer base.

Finally, the “Cloud” is NOT a Supply Chain Solution. e-Sourcing. e-Procurement. Inventory Management. Demand Management. Spend Analysis. Optimization. Those are Supply Chain Solutions. The Cloud? It’s just a delivery mechanism. Nothing more.

It’s a Knowledge Economy – Do You Know Where to Turn?

Today’s economy is a knowledge (driven) economy, “one in which the generation and the exploitation of knowledge has come to play the predominant part in the creation of wealth. It is not simply about pushing back the frontiers of knowledge; it is also about the more effective use and exploitation of all types of knowledge in all manner of economic activity“. Very little has changed since the Department of Trade and Industry of Great Britain penned these words in 1998.

In fact, the importance of knowledge in wealth creation is accelerating by the day now that global trade, information technology, new media, and, in particular, the social web is increasing in innovation, size, and market penetration on an exponential basis. Leading organizations now “follow the sun” and operate core business processes 24/7/365 on a global basis. Product and service pricing are increasingly being driven by value first and cost second. Organizations have to either accept the new economic reality created by the knowledge economy or fall further behind their peers in sales and market size.

But over the the past three decades, the knowledge required to compete in today’s global economy has increased exponentially. And, for your organization to survive, it needs people who are up to the challenge. People who need to be well educated, and, for the most part, better educated than they are because the world keeps changing, while the education your people received, 5, 10, and 25 years ago doesn’t.

So how do you go about educating your Supply Management workforce? Especially when there are at least seven different options available to you? You start by asking the right questions. And you find out what those questions are by downloading the latest white paper by the doctor of Sourcing Innovation, sponsored by BravoSolution, on The Knowledge Economy.

Six Red Flags In Any Relationship, Not Just Outsourcing

A recent article over on the Outsourcing Center, an Alsbridge Company, highlighted “six red flags to help avoid a bad outsourcing relationship from ever starting” that is a good read for anyone negotiating any kind of deal with a product or service provider, including a deal for (supply management) software and associated services.

The following six soft characteristic red flags are indicative of a provider that is likely to bring with it a dysfunctional and damaging relationship.

  1. Selling, Not Solving
    Is the provider listening and offering what you need, or selling what they have, whether or not it solves your problem.
  2. Telling, Not Listening
    Does the provider assault you with the triple digit PowerPoint presentation rapid-fire, without letting you get a word in edgewise, or let you drive the conversation, breaking out slides only as needed.
  3. Homogeneous, Not Diversified
    Is the provider diverse enough to understand your cultural nuances, or only aware of his or her own company’s culture.
  4. Complicating, Not Simplified
    Is the sales process, and proposed solution, overly complex, or is it simple and straight-forward, addressing the problems you have now, not the problems you may have in five years. While it’s important that the provider can grow with you, it’s not important that they dive into details of problems you don’t have today, or sell you solutions before you need them.
  5. Far, Not Near
    Relationships and decision making should be as close to you as possible, not half a world away.
  6. Arrogant, Not Supplicant
    The provider should be confident, but not arrogant. The provider should be willing to listen and understand your problem before proclaiming that they have solved it before. That’s confidence. And that is what you want.

While the lack of these red flags will not guarantee a good relationship, as a nearby supplicant solution-driven diversified provider that listens and simplifies can still be incompetent, at least there’s a good chance that the relationship can work. And any odds of success are much better than virtually guaranteed failure.

What China’s Five Year Plan Ultimately Means for Your Business

If you are sourcing from China because it is part of your LCCS (Low-Cost Country Sourcing) Strategy, you will need to find a new low cost country to source from. Just like India is no longer a low cost country for call centers and outsourced support, it won’t be long before China is no longer a low cost country for manufacturing. As clearly pointed out in this recent McKinsey Quarterly article on “What China’s five-year plan means for business”, the plan targets:

  • a 13% increase in minimum wages each year,
  • an annual increase in household income of 7% each year,
  • new policies for pricing energy, raw materials, and water … that will increase costs further … and
  • tighter environmental regulations … that will increase costs even further.

In other words, your labor costs will be 84% higher within five years. And your raw material and environmental disposals cost will likely see a comparative price increase. Low Cost Country? Not anymore!