Author Archives: thedoctor

Nine Rules for Stifling Supplier Innovation

Over on the Old St Labs blog, Mark Perara recently penned a great post on “Nine Rules for Stifling Supplier Innovation” in homage to a post by Rosabeth Moss Kanter on the HBR blogs on “Nine Rules to Stifling Innovation”. I thought Mark’s post was so awesome that I asked to share it with you, and he graciously agreed. So, without further ado, here are Mark’s Nine Rules.

1. Be suspicious of ideas that come from your suppliers – your strategy, innovation and R&D teams know your business better than anyone externally.

2. Keep suppliers really busy. Change your requirements and staff regularly so suppliers have no time to focus on innovation. Their account managers will be too busy to try and second guess what your business needs as well as not knowing who to speak to.

3. In the name of excellence, encourage cut-throat competition. If a new idea comes in from a supplier, immediately put it out to the rest of your suppliers to see if they can provide it cheaper. Even better run a RFX and auction.

4. Don’t share any information with your suppliers. Sharing product roadmaps, demand and organization charts will only encourage them to come up with ideas on how to help. Knowledge is power!

5. Sit on ideas for as long as possible. If a supplier does find the time to share some innovation, ensure not to get back to them in a timely manner. Let the idea bounce around the different areas of the business with no ownership until it fizzle’s out and the supplier stops asking for an update.

6. Ensure quarterly reviews don’t happen. Make sure the procurement team are so busy that they don’t have the time to hold their quarterly meetings with top suppliers. Having a face to face meeting with suppliers on a regular basis may provide a sign that you care about the relationship.

7. Pay late and extend payment terms. By paying late your supplier will spend hours chasing your accounts payable team trying to get payment. Even better push out payment terms as far as possible. Your FD will thank you and the supplier can bear a little bit of pain for the grace of having you as a customer.

8. Act as though punishing failure motivates success. If a suppliers idea does somehow slip through the net, ensure the employee who championed it is aware that failure will be a direct reflection on their capability. A few public hangings will soon stop future cases arising.

9. Above all, never forget your the customer and you already know everything there is to know about your business.

Following these rules will ensure suppliers will never see you as a customer of choice and will take their innovation to your competitors. That said if you work for a dynamic business that wants to develop a competitive advantage, I would suggest creating a culture to embrace and nurture supplier innovation.

For each of these supplier innovation stiflers, innovation promoters can move to the opposite behaviours. So if you want to be a customer of choice, which suppliers invest in and bring innovation to, take a look at these behaviours and allow supplier innovation to flourish:

1. Encourage ideas from suppliers as they often know your business better than some of your own team.

2. Promote your commitment to the supplier innovation programme and ask your suppliers to invest time into providing new ideas. Respect their time by giving them as much notice of changes to requirements and key members of staff, so they can spend the time on innovation.

3. Nurture ideas with suppliers and establish a culture of trust, so suppliers know you respect their IP.

4. Share as much information as you can with your top suppliers. The earlier suppliers can see your product roadmap, the sooner they can provide ideas to improve it.

5. Make sure you have a defined supplier innovation workflow and let your suppliers know how their ideas are progressing on a regular basis. Assign an internal owner to each idea ensuring there is accountability.

6. Make sure your category managers hold their quarterly reviews with strategic suppliers, to share performance reviews and discuss innovations

7. Pay your suppliers as agreed and if at all possible don’t push out payment terms. It diminishes your position as a customer of choice and adds costs to the suppliers, as they have to find alternative financing to support your improved working capital position.

8. Motivate your employees to collaborate with suppliers on new innovations. Let them know there will be some projects that will not be as successful as others, but its okay to fail. Publicize and reward innovative suppliers at annual supplier awards ceremony.

9. Embrace your suppliers as an extension of your business. Learn from their ideas and build open and trusting relationships where innovation will thrive.

Thanks again to Rosabeth for the inspiration for this post and good luck with driving supplier innovation in your business.

Thanks again Mark for sharing “Nine Rules for Stifling Supplier Innovation”.

Making the Warehouse More Sustainable

A recent article over on Logistics Management, which was titled 7 Trends in Sustainable Design but which only gave six (as number six was absent from the list), gave some good tips on making the warehouse more sustainable that can be retroactively applied to existing warehouses.

  • Better Lighting
    Lighting can consume 30% of energy use in a DC. If you reduce this by 33%, that’s 10% off of your energy consumption. And when you consider that many DCs have too many lights that take too much power on for way too long, you see huge opportunities. Be sure to install daylight and motion sensors to make sure that lights only come on when it’s not sufficiently bright and only stay on when there is someone there. Switch to energy-efficient fluorescent fixtures, which can be turned on and off on demand (and are suitable for intermittent operation). And if any renovations are being done, install solar tubes, lighting tubes, and clear glass to take maximum advantage of natural daylight.
  • High-Volume Low-Speed Fans
    Designed to move massive columns of air at low speeds, HVLS fans can help regulate a facility’s temperature year-round from floor to ceiling and permit facilities to increase or decrease thermostat temperature settings between 3 degrees and 5 degrees without realizing any negative temperature changes. Furthermore, if they are networked, monitored, and controlled from a central location, cooling and heating costs can be decreased by up to 50%!
  • Returnable Plastic Containers (RPCs)
    At the very least, use RPCs in internal captive pools designed for a particular (set) of operations, or, if possible, in external shared pools with standardized designs that enable supply chain wide efficiencies. These can minimize operating costs (as non-reusable containers cost money) and minimize waste reduction (by 90% plus), which further reduces costs.

In addition, the following tips not mentioned are also applicable:

  • Use Electric Lifts
    Fuel-based lift trucks use non-renewable resources and produce pollution, which increases the air circulation requirements of the warehouse (and demands even more energy be used). Electric lift trucks produce no pollution and the batteries can be recharged from renewable energy resources.
  • Harvest Your Own Power
    Use ground source heat pumps, solar panels (on the roof/sides of the building) and/or windmills to maximize the use of your own free, sustainable energy sources and minimize your dependence on the grid.
  • Harvest Rainwater
    And use it for cleaning vehicles, flushing toilets, and other toilets where the water does not have to be pure or sufficiently chlorinated.

Delivery Success Demands Delivery Planning

DC Velocity recently ran a good article on how “Home Delivery Success Starts at the Order” that had some good pointers on delivery success in general. The article, designed to help retailers, gave the following advice:

  • Steer the Customer to the Delivery Times You Want Them to Take
    If you’re not really setup for next-day service, but you have optimized 2-day service, steer them to 2-day.
  • Upsell Premium, Expedited, or Tighter Time Windows and Value-Added Services
    Delivery doesn’t have to be free, and if it’s low-cost (or free), it doesn’t have to be speedy. After all, the if the customer wants a speedy, free, delivery — he can pick it up in the store (unless it’s Best Buy, where he’ll get to stand around and be ignored by no fewer than three associates before anyone even attempts to serve him). Time may not always be money to the end consumer, but it is always valuable. If you’re working, an evening install is worth a small premium vs. having to sit home all day waiting. And if you’d rather watch the game than drive 2 hours to get something for tomorrow, that’s worth it too.
  • Omni-Channel Retailing Needs Omni-Channel Delivery
    All deliveries should go through one scheduling solution — whether the order was made in-store, on-line, or over the phone.

If you reverse this, you can see how you can optimize your inbound supply chain delivery success when ordering from a supplier.

  • Try to Choose a Delivery Schedule a Supplier/Distributor Wants You to Take
    If you have a set of almost equal choices to you, pick the one that’s the easiest / most cost-effective for the distributor / supplier. Not only will it keep your costs down, but it will maximize the chances of getting the order on time as you will be using schedules (and routes) the distributor / supplier has optimized for.
  • Avoid Unnecessary Expedited Shipping or Value Added Services
    Suppliers will use the same tactics on you that you use on consumers to maximize their revenue. It doesn’t mean you have to buy into them. In many cases, shaving a few days off of shipping time to the warehouse doesn’t make much of a difference, especially if you forecast properly, and paying the supplier to do trade document management that your 3PL can do cheaper with an effective system integration isn’t worth the savings of dealing with one less partner.
  • Single-Channel Ordering Should be Fulfilled, Whenever Possible, by Single-Channel Delivery
    If you are ordering five products from the supplier, and they can all fit (and go) on the same truck, they should all be on the same truck. Delivery density reduces costs.

Pretty simple, eh? Almost as easy as getting the mouse in the bottle …

Headline From the Land of D’oh: Notorious Somali pirate quits: Now is shipping safe?

A recent CNN article which noted that the retirement of the pirate leader Mohamed Abdi Hassan, also known as “Afweyne,” has generated much media coverage, but the real significance of his announcement is the indication it gives of how Somalia’s pirates currently view their business model and that it appears that hijacking vessels in the Indian Ocean and the Gulf of Aden is no longer seen as a relatively risk-free affair concluded that while piracy off the country’s coast will not be ended conclusively … it might be contained to a manageable level.

Depending on what you conclude a manageable level to be, that might happen, but shipping is NOT safe. If a pirate can make 10 times the average annual salary in one hijacking, and one hijacking can command a 5M ransom, even with the introduction of international naval ports, armed guards aboard vessels, and best practices, piracy is not going to stop. First of all, it’s still way too lucrative when the right ship is passing through. While it is true that an average shipment of consumer goods is many times safer, the risk for high-value petroleum, weapons, pharmaceutical, and hi-tech shipments is still there. If there’s a 100M worth of easily-moved cargo on the ship, and pirates know about it, the risk is there — especially with more organized crime getting involved in supply chain thievery. Secondly, when a void is created — there’s always a rush to fill it. Recent warfare against gangs across North and South America has shown us that if multiple gangs are vying for a territory, and the biggest one is wiped out, violence escalates as the smaller gangs jockey for position.

The reality is that, for some of you, shipping is now more dangerous than ever. And any article that tries to insist otherwise is giving you a false sense of security that is even more dangerous. Especially when your cargo is more valuable than drugs and guns.

Maximizing ROI from Technology

Logistics Management recently published a piece on Maximizing ROI from Technology that included some good tips that deserve to be repeated.

The first point to note is that, as stated by Beth Peterson (President of BPE Global), the biggest mistake [companies] make is that they implement a solution without even beginning to measure what they were doing before they implemented it. You can’t maximize ROI if you don’t even know what you’re measuring against!

The second point to note is that expectations have to be realistic. You’ll never achieve your goals if they are unrealistic. Also, as the article suggests, when setting goals, try to be as precise as possible. Is it cost savings? Better customer service? Faster delivery? What are the specific metrics that you are trying to improve and by how much?

In addition, as noted, make sure that the objectives do not benefit one functional area to the detriment of others or to the company as a whole. Otherwise, you’re not going to get much support for your endeavor.

Then select the right vendor. One can start with the vendor evaluation and selection criteria evaluated in the article, but as pointed out in SI’s recent series’ on Technology Trials (Part I, Part II, Part III, Part IV.1, Part IV.2, and Part V, Part VI) and Best Practice Vendor Selection for True Multi-Nationals (Part I, Part II, Part III, Part IV, Part V), selecting the right technology vendor just isn’t that easy. Remember, in the end, it doesn’t matter how strategic the IT Vendor is, it only matters how strategic the solution they offer is.

And get the implementation right. As per the article, Key factors that need to be in place include the flowing: effective user training; management support of and commitment to the initiative; sufficient allocation of resources; and, perhaps most importantly, buy-in from the users. All of these pieces (which have been discussed in the SI Archives) are essential. Forget one, and it crumbles since you’re building a cube, not a pyramid.