Category Archives: Best Practices

Want Lean Success? Get Lean With Your Lean!

Inbound Logistics recently published a short article on How to Deploy a Successful Improvement Program that chronicled the advice of APL Logistics’, who saved 30M through continuous improvement initiatives, foremast Lean/Six Sigma/JDI professional that had some really good advice.

To summarize, the article outlined a five-step method for deploying a successful improvement program.

  1. Choose One Quality Discipline and Focus On It
  2. Choose And Deploy Your Preferred Training Model
  3. Select the Right Members For Your Project Teams
  4. Choose the Right First Projects
  5. Continuously Improve Your Odds of Program Success

Two of these tips in particularly are especially poignant. In particular, tip #1 and tip #4. The secret to success is focus, focus, focus. Don’t try to adopt too many initiatives at once and don’t try to take on too many projects at once. Just like too many cooks spoil the broth, too many initiatives spoil the effort.

Lean projects, like any other type of improvement project, take effort to accomplish, and there is only so much effort that can be applied to any project. Thus, undertaking multiple types of improvement initiatives splits the effort that can be applied to each, and reduces the chances of success.

Similarly, undertaking multiple projects simultaneously reduces the effort that can be applied to each project, and extends the amount of time required to complete it. If a project takes too long, the chances of it being cancelled before it is completed increase, and, thus, the chances of failure.

When a new effort is undertaken, success often depends on a quick win, and a quick win depends on selecting a project that can be completed in the effort available — and focussing all of the effort available to make it a success. This means that the last thing you should do is start a second effort half-way through the first in an attempt to duplicate a success you do not yet have. Get one success, then start another project. Get another success, start a third project. Once you have a pattern of success under your belt, you’ll get more support (in the way of effort available) and then you can start multiple projects. Until then, get lean with your lean initiative.

4 Strategic Sourcing Mistakes Businesses Should Avoid Courtesy of the Strategic Sourceror

The best way to get out of trouble is to avoid trouble in the first place. In a recent blog entry on the Strategic Sourceror on “4 strategic sourcing mistakes”, it outlined four common mistakes that a company can avoid to minimize poor spend management and operational efficiency.

Overlooking the Importance of Supplier Visibility

Having a clear understanding of supplier practices is essential in evaluating the risks and possible sources of disruption that are inherent in sourcing partnerships. Blindly entering a relationship with a supplier may result in a procurement strategy that is misaligned with business goals, and this could result in slashed profits in the future. For example, the strategy could be high quality to support the brand, but the end result could be poor quality and the resultant impact to the brand from the high defect rate could result in lost sales and slashed profits.

Failing to Emphasize Results

Because Procurement resides in the back office, it is often tempting to think of it as a service function and not a driver of productivity and profit. It’s critical to focus on real, measurable, and substantial results and communicate the message to the rest of the business. Like any business process, procurement management needs to impact the bottom line. When it does, and the message is communicated, Procurement, unlike Rodney Dangerfield, will get more respect.

Overlooking Contracts

Without written contracts with specific language, businesses won’t have adequate protection if a supplier relationship goes sour. That’s why contracts should be reviewed by a corporate lawyer before being signed. But just getting the contract right isn’t enough. It’s also important to make sure the terms are followed, rebates and discounts are collected, and contracts are renegotiated and not allowed to go evergreen.

Permitting In-House Inefficiencies

An inefficient internal procurement process can limit firms’ ability to obtain the goods and raw materials they need in a timely fashion. Be sure to install the appropriate e-commerce tools that will help a company identify potential suppliers, execute RFxs, conduct auctions, optimize awards, and strategically manage the maximum number of categories.

The Best Leadership Lesson

Brought to you by one of the greatest Comedians ever. John Cleese, in his recent Life’s Work interview by Adi Ignatius (and available on HBR.org), defines a true leader.

In the book Life and How to Survive It, which I developed with Robin Skynner, we decided that the ideal leader was the one who was trying to make himself dispensable. In other words, he was helping the people around him acquire as many of his skills as possible so he could let everyone else do the work and just keep an eye on things, minimizing his job and the chaos that would come with a transfer of authority.

‘Nuff said.

Acquiring e-Sourcing and e-Procurement Technology: What Questions Should You Be Asking?

Join Sourcing Innovation and the doctor for the next NLPA Members-only webinar on Acquiring e-Sourcing and e-Procurement Technology; What Questions Should You Be Asking. Taking place next Wednesday, February 26, at 8:30 am Pacific, 11:30 am Eastern, and 16:30 pm GMT (London) time.

This webinar, which follows Novembers webinar on Making Sense of e- in Sourcing and Procurement, will outline the critical questions that must be asked when searching for an e-Sourcing or an e-Procurement solution.

In our last webinar, we clearly defined the sourcing and procurement cycle, indicated where each technology (e-Sourcing, e-Negotiation, e-Procurement, e-Invoicing, e-Auction, e-RFX, e-Contract, e-Payment, Procure-to-Pay, Source-to-Pay, etc.) fell, outlined what each technology did, and indicated the conditions that needed to exist for each solution to potentially be appropriate for your organization. This provided your organization with a set of questions it could ask to determine what technologies it needed to focus on as it looked to acquire new sourcing and procurement technologies to support it in its Supply Management Journey.

However, just knowing that your organization needs a solution is not enough, especially if its biggest need is a basic e-Negotiation suite that is theoretically available from over two dozen vendors. Which solution, or solutions, are right for your organization? Depending on the needs of the organization, it might be the case that only two out of twenty solutions will appropriately address the organizational needs, but unless the right questions are asked, it might look like six meet the needs and the organization will have a 66% chance of selecting the wrong solution.

That’s why the doctor of Sourcing Innovation is hosting this follow-up webinar on Acquiring e-Sourcing and e-Procurement Technology; What Questions Should You Be Asking. You’ll learn the critical questions that must be asked when searching for an e-Sourcing or an e-Procurement solution, some important questions that should also be considered for each major module, and how to structure a (multi-round) RFX for Success.

To register for this free event, login to the NLPA and navigate to the “Webinars” tab where you’ll find a registration link. Be sure to enter a valid email address as attendance details will be sent to you by email. Registration is free (as is basic NLPA membership) but attendance is limited, so sign up soon to ensure access to this event. (If you have forgotten your NLPA password, please visit the NLPA password reset page.)

See you next Wednesday, February 26, at 8:30 am Pacific, 11:30 am Eastern, and 16:30 pm GMT (London) time.

Supply Management Should Drive M&A Evaluations

But don’t look to e-Auctions to save the day. As per SI’s recent post, the entanglements of e-Auctions could get in the way.

Last fall, e-Sourcing Forum published a two-part series on M&A and e-Auctions, stating that what’s old may be new again, which claimed that e-Auctions could be a perfect tool for procurement in post M&A scenarios as they provide a competitive advantage for industries frequently involved in M&A activities. They can, if the situation is right, or they can be as useful as a trap door in a life-boat. There is no one-size fits all sourcing tool, and if you get it in your head to force-fit a sourcing tool to your situation, e-Auctions should be on the bottom of your list because they can bust as bad as they boom.

The rationale presented for their selection as the potential perfect e-Sourcing tool in the post-merger environment is based on the fact that e-Auctions can:

  • put negotiations directly into the hands of the suppliers,
  • create fair competition between suppliers by creating a level playing field,
  • provide suppliers with more direct/immediate feedback on their position in the market, and
  • drive “truer” market pricing and justifications for establishing baselines post-merger.

This is all true provided that:

  • the majority of suppliers, including those that are currently preferred, are willing to negotiate through the auction,
  • the buyer designs the auction in a way that is fair to all suppliers,
  • the auction platform can support real-time feedback to all suppliers taking part in the auction, and
  • the suppliers don’t collude and don’t make unrealistic bids in an effort to win the auction, hoping to make up the unsustainable loss either in volume or add-on fees or future business.

In order for auctions to work, especially in a post-M&A scenario, a number of conditions need to hold true.

  • supply has to at least equal, and preferably exceed, demand as per our post on the entanglements of e-Auctions,
  • there has to be enough qualified suppliers to make the auction competitive — if only two suppliers can supply the custom product or service you need, the auction ain’t gonna do squat except offend suppliers who should be your strategic partners,
  • there has to be enough volume to make the event worthwhile — saving 1% on 100,000 is not going to be worth the time and effort, and, most importantly,
  • there has to be enough categories that meet these requirements that are available to source in the first year, as it will typically be the case that both companies have contracts in place for a large number of their high-spend or high-volume categories, and, furthermore,
  • these categories have to be significantly larger than they were before the merger — if the merger does not yield enough common categories that are available to source at volumes that are high enough to be more attractive to the supply base than each company would source on its own, then the merger / acquisition is not going to yield any sourcing quick wins by way of e-Auction.

If neither company has a lot of spend under contract, neither company has a large number of complex products or services that can only be sourced from one or two suppliers, and both companies source a large number of overlapping products and services, then, if the market is ripe, the supply base is willing, and the buying team can design and deliver a fair and professional e-Auction, then e-Auctions can drive M&A success. But if the opposite is true, all e-Auctions will do is get the M&A team into trouble.

As with every sourcing exercise, it must start with a situational, and spend, analysis to see what’s what.