Category Archives: Best Practices

3 Easy Steps to Take Up To 7% Off Of Your Organization’s Bottom Line Costs!

  1. Mandate Organization-Wide Cooperation with Supply Management on all Spend.
  2. Implement an e-Procurement/P2P solution and Mandate that 100% of Your Spend Goes Through the Platform.
  3. Give Supply Management the Talent it Needs to Apply the Appropriate (Advanced) Sourcing Techniques to all Categories.

It’s that simple. Why?

  1. 70% of revenue is spent on non-labour costs
    as per Proxima’s recent “Corporate Virtualization Report”
  2. 100% of spend through a single system gets all 70% of the revenue being spent on non-labour costs under management
  3. (Advanced) Sourcing saves an average of 10% to 12% across-the-board on all spend being addressed (as per back-to-back studies from Aberdeen) and 10% of 70% is 7%!

That says an average 1 Billion organization could add up to 70 Million to its bottom line at the end of a year with a proper focus on Supply Management. Supply Management truly is the organization enabler!

Supply Chain Insights 7 Steps to Failure

A recent Slideshare presentation by Supply Chain Insights (SCI) on 7 Reasons You May Fail in the Race for Supply Chain 2020 had some great insights into what many organizations are doing wrong but, more importantly, cemented the need for the 3Ts, as discussed in SI’s recent post on Supply Chain 2020 – What Will It Take to Get There, if you want you Supply Chain organization to make it to 2020.

According to SCI, these are the 7 reasons your supply chain may fail:

  • You treat your supply chain like a function
    rather than an end-to-end process.
  • You hired a boatload of consultants and spent buckets of money on “best practices”
    that were actually “emerging practices”.
  • Your technologies are more about you than your customers
    even though customer data is more readily available.
  • You are moving like a snail in a fast-paced world
    when you need to be executing in real-time.
  • You are simply not prepared to compete for supply chain talent
    which is the missing link in the supply chain.
  • Your technologies are quickly becoming legacy
    while new technologies are emerging every day.
  • Your supply chain is too reactive
    when it needs to sense and learn.

SCI is right on the money. If your supply chain:

  • lacks talent
  • runs on antiquated technology
  • hasn’t transitioned to new processes in decades
  • only reacts to disruptions, instead of trying to predict & mitigate them
  • doesn’t work with customers and never asks for their data
  • doesn’t focus on solutions instead of the “hot” methodology of the day and
  • doesn’t focus on strategic organizational planning because it’s spending all it’s time executing tactical processes

it’s not going to be around very long.

A supply chain needs to be:

  • driven by talent
  • enabled by technology
  • transitioning to improved processes all the time
  • focussed on risk management and mitigation
  • collaborating with customers and suppliers up and down the chain
  • solution-driven, not “emerging practice” focussed and
  • strategic, not tactical.

And that’s just the start. For more insights into what attributes your supply chain needs to adapt in order to survive the race for Supply Chain 2020, check out SCI’s 7 Reasons You May Fail in the Race for Supply Chain 2020 before your supply chain starts stumbling too (if it hasn’t already).

These Transformations Worked For Samsung. With a Few Tweaks, They Will Work for You Too!

Samsung is not only none of the most successful global electronic brands, but one of the most successful brands period. (And with the surging popularity of Android, and it’s new Galaxy tablet, it’s market share is increasing rapidly in that market – one of the hardest to compete it.) On top of this, it is a supply chain leader, ranked #8 on the Gartner 2013 Supply Chain Top 25. How did they do it? A recent piece over on Supply Chain 24/7 on 7 Best Practices that Transform Samsung Electronics’ Supply Chain by SupplyChainOpz that referenced research by the Harvard Business Review, Supply Chain Management: The International Journal, and the Journal of the Operational Research Society did a great job of identifying the key decisions, and transformations, that helped propel Samsung from a much smaller player in trading, food processing, textiles, insurance, securities and retail to a world leader in electronics and digital technology.

Since they will work for any Supply Chain with a few tweaks, SI is strongly suggesting that you (re-)read SupplyChainOpz 7 Best Practices that Transform Samsung Electronics’ Supply Chain before continuing on to SI’s 7 Transformations that will transform your CPG Supply Chain.

7 Transformations that will Transform Your CPG Supply Chain

  1. Listen to the Voice of the Customer
    Look at the top 10 of the Gartner Supply Chain Top 25. Apple, McDonald’s, Amazon.com, Unilever, Intel, P&G, Cisco, Coca-Cola, and Colgate-Palmolive. Every single one of these companies sells products the customer wants in every market they are in. To better understand the market, Samsung sends senior employees to MBA programs at local universities to help them understand the market and then establishes connections with appropriate leaders and partners in those markets to keep the insights coming in after the executives return to their HQ. While it’s not critical to attend a program in the target market, it is critical to be tapped in. Pay attention to market intelligence, go to trade shows and see what is attracting attention, follow the emerging trends, and consider what an average individual in your target market does in the course of a day and a week.
  2. Setup a Cross Functional Team Composed with the Right Talent
    As a Supply Management practitioner, this is a best practice that should be well ingrained by now as you should be setting one up for every strategic sourcing project. However, there should also be a cross-functional team that guides the over-arching supply chain strategy.
  3. Adopt a Measurable Supply Chain Improvement Methodology
    Samsung adopted Six Sigma and transitioned to DMAEV (Define, Measure, Analyze, Enable, and Verify). There’s also TPS and the Lean Methodology that fell out. The particular improvement methodology is not as critical as the commitment to implementing and executing on it day in and day out.
  4. Transition to Standardized Technology, Processes and Parts
    Samsung standardized parts and processes and produces the majority of its components in Korea to enable them to better monitor and manage product quality. But don’t stop at parts, and production processes, move to planning and management processes and the underlying technology processes. For every function, there should be one system and one version of the truth. Each department can use its own best-of-breed systems if, and only if, there is a central data store that functions as the master data repository that each system works off of and that is always taken as the one version of the truth.
  5. Utilize Advanced Sourcing, CRM, and Production Systems
    An Advanced Planning and Production System is a good start, but lets face it, true efficiencies materialize by getting the sourcing right. Be sure to source all strategic or high-value components using a strategic sourcing process that makes use of spend analysis and decision optimization and other advanced technologies. In addition, be sure to capture all of the sales data and user feedback that you can with good CRM systems. And be sure to make sure that you react to sales forecasts appropriately with your advanced planning and production systems.
  6. Implement Risk Monitoring and Measurement
    The best laid plans are easily and quickly ruined by a single supply chain disruption. Implement an advanced supply chain visibility and monitoring system that monitors your suppliers and their suppliers to detect minor supply hiccups before they become major supply chain disruptions and to make sure you are aware of any significant event (such as an earthquake, border closing, civil uprising, etc.) that could affect your supply chain as soon as it happens.
  7. Focus on Your Talent
    Samsung threw out the seniority-based performance evaluation system and implemented a performance-based system in its place that allows the best and the brightest to have their career fast-tracked. Make sure you have a system that allows talent to advance through your organization if you want to attract, and retain, the talent you need for your supply chain.

Supply Chain 2020 – What Will It Take to Get There?

I’ve been noticing an uptick in Supply Chain 2020 discussion and blogging lately, despite the fact that 2020 is only 7 years away. Why do I say only? While 2020 may be 28 years away in ‘Net Time, given the pace at which the average Supply Management Organization moves, that’s breakneck speed! (It shouldn’t be, but it is. That’s why, despite the fact that it’s 2013 and e-Invoicing is old enough to drink, approximately 90% of invoices are still paper-based.) Furthermore, most prognosticators want to make predictions that are far enough away that either their prediction will almost guaranteed to be a reality by that time or everyone will have forgotten completely about their prediction by then. (Given the rate of increase in ADD/ADHD in recent years, that might be long enough for all of us to have forgotten everything from today, but I’d like to think that some of us may still have a long-term focus, and a longer-term memory, in 2020.)

A lot of these discussions are focussing on what the Supply Chain is going to look like in 2020, what technologies are going to drive it, and how the Supply Chain is going to run. These discussions are interesting, because we all want to know what tomorrow is going to look like today, but it’s not 2020 — it’s 2013. And whatever vision you have of 2020 is not going to become a reality without a plan to get there. That plan will, of course, depend on your vision and your end goal, but regardless of the plan you choose, there are three elements that will be required to get there.

What are these three elements? The Three Ts of Strategic Supply Management, of course!

  1. Talent
  2. Technology
  3. Transition

No innovation, or renovation, will succeed without these 3T’s, and an alignment thereof.

Despite the need for transportation, Supply Chains don’t run on trucks and trains — they run on Talent. Talented people identify potential suppliers. Talented people run strategic sourcing events. Talented people negotiate and execute contracts. Talented people collaborate with supplier personnel to ensure quality, on-time delivery, and quick issue resolution. Talented people deliver to Sales and Marketing what the consumers want.

And what do these talented people use to accomplish their tasks? Technology. Real-time communication with suppliers around the globe requires modern technology. Value-generating strategic sourcing events require good strategic sourcing technology. Contract generation, management, and supplier performance management requires good collaboration technology. And the list of technological needs goes on.

However, the technology that is required, for most organizations, is not the technology that the organization currently has. In order to acquire and implement this technology, the organization will have to transition appropriately. This will involve mapping current processes, mapping desired processes, identifying technologies that can appropriately support the desired processes, and putting together a transition plan, that takes into account the needs (but not necessarily the wants) of all of the stakeholders and that is supported by the appropriate executive(s) in the C-Suite, that will get the organization there.

So if you want to get to 2020 in style, first get to 2014 in-style and focus on the 3Ts. This is one best-practice that is year-independent.

PPM is important, but it should be done by a COE that functions as a PTO. Not a PMO.

Confused yet? Let me explain.

Late this spring, over on Spend Matters, Pierre Mitchell, noting that PMOs have failed in IT asked “Should We Really Use Them in Procurement”. This post, which followed Jason Busch’s post that asked” Does Procurement Need a PMO?” (Spend Matters Plus Content) offered may reasons why a PMO should be pursued in Procurement. However, in SI’s view, not one justifies the focus on a PMO.

A PMO, short for Project Mmanagement Office, is a group or department within a business, agency or enterprise that defines and maintains standards for project management within the organization. (Source: Wikipedia) This department, which strives to standardize and introduce economies of repetition in the execution of projects, sounds good in theory, but has often failed in practice, especially in IT. Why? Simply put, you can’t manage what you don’t understand — and IT projects, which are exceedingly complex in nature, can only be understood by the senior engineers, software architects, and developers capable of implementing them. They’re not going to be understood by a two-bit run-of-the-mill project manager whose background is a basic business degree and training on the PMBOK (Project Management Body of Knowledge). The few IT projects that succeed are those that are managed by former engineers, software architects, and/or developers that have been trained in basic project management (and not the other way around). It’s the same reason mathematicians (given enough Ritalin*) can make great (forensic) accountants, but accountants make bad mathematicians. (Who, when they see 2x + 2 will ask “two times what”.)

Similarly, there are some Procurement projects, especially in high-tech, medical, and automotive, that are too complex for an average project manager. These should not be managed by a project manager, but by a domain expert. However, they should be tracked and the appropriate resources made available by a Center of Excellence (COE) that functions as a Project Tracking Office (PTO). This COE would insure that the domain expert has the appropriate tools, methodologies, and processes at her disposal and the training to use them, as well as the necessary training in project management. In addition, it would focus on Procurement Performance Management (PPM) and, as Pierre Mitchell noted, act as a TMO — Transformation Management Office.

In other words, SI agrees with Pierre Mitchell in that there is a need for better Project Management, and in particular, Project Performance Management, in Procurement — but disagrees in the approach. We need to focus on the COE — not the PMO. It’s important that the focus is on excellence, not the mundane.

* Let’s face it, Accounting is pretty boring to a mathematician who might need a little help focussing on it for eight hours a day.