Category Archives: Best Practices

Seven Tips for Succeeding in Any Market, Part II

Yesterday, we noted that the article published in Chief Executive last year on Seven Tips for Succeeding in Asia actually provided seven tips for succeeding in any market and, briefly, explained why. Today, as promised, we are going to review the supply management corollary to each of these seven tips because they will help you increase the value of your Supply Management organization.

So, without further ado, here are the seven tips for creating a successful Supply Management Organization.

  1. To expand your organizational influence, pick a department with an unmet need your organization can readily fulfill.
    For example, let’s say you are not yet supporting any marketing and legal spend and know that you have to go after one of these sacred cows to increase your spend under management. Let’s also say that you just hired a new analyst who was a marketer in a past life and who has experience sourcing creative services from his past job but not a single professional in your organization knows anything about e-Discovery, which is Legal’s issue of the day. In this case, you should go after Marketing as you have someone who can help them source better talent more efficiently, and save them money by decoupling non-value added services.
  2. Find a mentor on the Board (of Directors) who understands the value you can bring to the organization and can help you forge stronger ties with the C-Suite.
    This will get you more support across the organization and will inevitably help improve your financial situation as other budget holders see the value in supporting your efforts. Eventually, they will be willing to pay their share of system upgrades, GPO fees, or contract labour who you identify as being able to reduce their costs and/or increase the value they offer.
  3. Scale your organization by learning the language of finance.
    Let’s face it, if you can’t explain to the CFO in a language she understands that the budget and cost savings calculations should not be decoupled, you will be forever doomed with constantly being tasked to do more with less until the organization implodes under the weight of an increasingly impossible task. You need to be able to demonstrate the ROI of investments in training, technology, and talent to get the budget you need to deliver the savings the organization wants, and the ROI you know your Supply Management organization is capable of with sufficient budget.
  4. Be sure to consult regularly with the IP specialist on your legal team.
    Considering that you will be sourcing contract manufacturing and services from value-added services providers who could very easily copy your products and steal your expertise, you need to make sure you are adequately protected to discourage this from happening, especially in foreign markets.
  5. Keep an eye on your ROI, especially when services and SaaS contracts are about to come up for renewal.

    While there isn’t an advanced sourcing technique or technology that won’t save you money in the right situation when properly applied, not all techniques and technologies are created equal, and neither are all situations. If a service provider isn’t delivering the value you expect, they may need to be replaced. And if a technology platform isn’t delivering a decent ROI, it definitely has to be replaced. Your cash is limited. You can’t be wasting your budget on non-ROI products and services when there are dozens of products and services that can save you double digits and provide an ROI of 3X to 10X, or more.
  6. Go after the low-hanging fruit first.
    The fruit at the top of the tree may be juicier, but it is a lot more difficult to pick, and the risk of falling off of the ladder and seriously injuring yourself is much greater. Start with the easier wins, gain experience, and work your way up to the harder wins.
  7. Reward success with bonus pay tied to performance.
    Give your top talent the opportunity to increase their compensation without ceiling, and watch your savings soar and value surge. Just be sure to tie the compensation to appropriate metrics, because you get what you incentivize! (But, whatever you do, don’t put a ceiling on potential compensation. If you know you’re not going to make any more money, why would you work harder? There’s a reason the most successful companies in the enterprise space don’t limit the earning potential of their sales-people. They know that every dollar earned in commission puts ten dollars in their bank account, and the shareholders know that, at the end of the day, every $10 in the bank ramps up valuation by $20 to $100 and makes them many times richer in the end than the sales-person. If you think about it, a truly successful organization is one where the top sales-person and the top buyer both take home more than the average CXO!)

And this is how you begin to create a successful Supply Management organization. There’s a lot more to success, but these corollaries are a good starting point.

Seven Tips for Succeeding in Any Market, Part I

Last year, Chief Executive published an article on Seven Tips for Succeeding in Asia that, when you get right down to it, really presented seven tips for succeeding in any market. And while they were sales focussed, they did contain some good lessons for Supply Management, which is why SI is covering them. So sit back, relax, and after we get through the basics, we’ll dive in to the real lessons.

The seven tips for succeeding in any market are:

  1. Pick a segment within a fast-growing market sector that still has an unmet need your company can fulfill with a differentiated product or service.
    Let’s face it, you have a much greater chance of breaking into a market that is still growing when you can meet a demand not currently being serviced than you do of breaking into a stagnant market that already has a number of established products that dominate 90% of sales and that people unconsciously trust.
  2. Find a mentor who understands your business, the local culture and can also help you cement connections, stretch financial resources and expand into new territory.
    Even in an established market, your chances of success are better if you have an advisor that is tapped into what the public really wants, and can hook you up with appropriate marketing and advertising agencies to target them and contract manufacturers / providers to fulfill your manufacturing or contract service provider needs at the best value.
  3. Scale your business by tapping professional management who can bring in sophisticated financial and management tactics.
    Most businesses lack sophisticated financial modeling skills. As a result, any business that acquires them has a much better chance of scaling.
  4. Be sure to retain a good corporate lawyer, who can help you to navigate intellectual property-protection issues.
    It’s imperative to protect your intellectual property no matter where in the world you are.
  5. Keep an eye on your cash-burn rate, ditching products/services that don’t work out quickly and focusing on the money makers.
    Cash flow is the life-blood of any business. It doesn’t matter what your valuation is or future (projected) receivables are if you can’t make payroll.
  6. Conquer markets within grasp before trying out new opportunities.
    While it’s nice to have stretch goals, over-extending your reach and spreading yourself too thin is a just a recipe for disaster!
  7. Keep human capital by rewarding fast learners with pay tied to results.
    Reward your value-generating star performers and they will stick with you and help you make more money.

And each of these tips has a supply management corollary, that we’ll address in tomorrow’s post.

Do Successful Supply Management Organizations Adapt to their Customers?

Or do successful Supply Management Organizations adapt their customers to them?

It’s a good question. For a few years now, thought leaders, including the doctor here on SI, have been saying that good Supply Management organizations become the go-to organization in the company. They do this by making sure that each time they are engaged, they identify what the customer organization thinks is valuable and ensuring that they deliver that in addition to, or, if need be, instead of cost savings. Supply Management also works hard to identify problems, including problems the customer organization may not even know it has, and solutions to those problems. Supply Management also goes out of its way to make sure that the customer organization gets its fair share of credit so that the customer will want to use the services of the Supply Management organization again. As the success stories spread, and its reputation grows, more organizations turn to Supply Management, which begins to be known as the go-to organization. Once Supply Management has most of the organizations of the company as internal customers, it hits the target of 80%+ spend under management, and begins to deliver not only significant savings, but to identify value opportunities.

For example, if Marketing is approaching Supply Management for the first time, Supply Management won’t focus on its cost savings strengths, because, honestly, Marketing doesn’t give a damn about savings. Marketing’s job is to create as much demand and value as it can within the budget it is given. As long as Marketing stays within budget, it’s happy. As a result, Supply Management will need to identify what Marketing really needs. Is it a better campaign management process (and Supply Management is the king of processes)? Is it better supplier identification and qualification? Is it a way to qualify the value it is getting (through a balanced scorecard, for example)? Supply Management will deliver what Marketing really needs, and also identify ways that cost can be reduced on the production side (be it print, media, etc.) and freed up for more value-creation activities such as campaign design or creative development (for web and print media). In addition, if Marketing said it needed help with supplier identification and qualification, Supply Management might also notice that Marketing’s supplier management and campaign management processes were weak, and devise appropriate processes, using its RFX and/or project management tools, to improve Marketing’s processes and then demonstrate to the Marketing department how it could do better (and, if need be, let Marketing take full credit). Marketing will see a department that wants to produce value (and not just reduce budgets), make Supply Management a core part of its spend-related processes, and spread the good word.

But is identifying, and doing, what the customer wants the right thing? If, as Michael Schrage implies in his book that asks what do you want your customers to become, you are what you consume, then you should be doing more than just servicing your customer desires. Specifically, instead of adapting to the (internal) customer, you should be adapting the (internal) customer to you.

Of course, this is easier said than done when you don’t have any internal customers, or any customers beyond the customers with spend that has been mandated to you by the CEO, CFO, or COO. If you don’t have internal customers, you have to adapt to their needs, or at least appear to adapt to their needs, in order to get them. That being said, it may be that the only way you’re going to ultimately succeed as a Supply Management organization, especially when you are continually given the ludicrous mandate of cost-reduction (without any consideration of whether or not it makes sense), is if you adapt your customers to appropriate processes and technologies. If the processes and technologies your internal customers are using don’t reduce cost, increase efficiency, or add value, then theose customer processes and technologies need to be adapted to processes and technologies that do — otherwise, you will be hindered as a Supply Management organization.

Remembering that, as Michael Schrage points out, the real purpose of business is to profitably transform a customer and that the real purpose of Supply Management is to align with, and serve the, organizational goals, at some point Supply Management has to go beyond just serving the internal customers — it has to adapt them to be cogs in the Supply Management wheel that keeps the business turning. Just like Apple trained its customers to be design connoisseurs, Supply Management needs to train its customers to be value connoisseurs — who know how to balance cost and expected return appropriately for all types of spend.

While, in the end, Supply Management might just be one stray vegetable in a very large pot of organizational stew, it has a choice. Supply Management can be the bland celery that absorbs the flavours all of the other vegetables until it has absolutely no individual flavour of its own, or it can be the pepper that defines the flavour of the organizational stew. It’s your choice, Supply Managers.

Could You Run Your Supply Chain from Another Country for A Month?

A recent post over on the HBR Blog Network on why we’re relocating our HQ to Dubai for one month about Starwood’s one month move of their HQ to Dubai for one month brings up an interesting question:

 

Could you run your supply chain from another country for a month?

 

It’s an important question. Because if you can’t, you’re not prepared for a disaster. And given that the likelihood of a disaster shutting down your primary location is increasing as the number of natural disasters rise each year (thanks to global warming), you should be. While the risk of a disaster shutting down your Supply Management headquarters is likely small compared to the risk of a significant disruption impacting your supply chain (which is approaching 85% for many companies), the risk is there. And you have to be ready.

Furthermore, if you have the right supply management infrastructure, you should be just as capable of running your supply chain from another country as you are of running it from a temporary location fifty kilometres away. If you have a true visibility solution, you just need an internet connection and you know where everything is. If you have a good sourcing and procurement platform, you can source and order whatever you need from anywhere. And if you have a good e-payment solution, you don’t need to pick up a check from a PO Box. Good distributors have their own on-line visibility and transportation management systems, and all of your 3PL and Import/Export Brokers can be connected with an e-Document Management solution. Plus, if you truly are global, you should be able to set up quickly near a major supplier who wants to help you out in the local country to keep you as a major customer.

In other words, if you couldn’t pick up and temporarily relocate your Supply Management headquarters at a moment’s notice, you probably don’t have a modern Supply Management office running on a modern Supply Management platform. And you should. Especially since there might be no better way to really learn a major market that you are sourcing from.

So What Are You Doing For Your Drivers?

As per our post on Sunday, where truck drivers are concerned, working conditions are bad, getting worse, and you’re on the fast track to not being able to move 10% of your shipments on time as you’re going to be short 10% of the drivers you need within a decade unless you do something to change things.

So what can you do?

1. Make sure you do everything you can to give drivers good working conditions.

According to this post by Peter Moore over on Logistics Management, some distribution centres force drivers to stand in a 10-foot painted circle on the floor near the loading docks while the trailer is being loaded. No restroom, no cell phone signal, and no chair. Are you serious? People charged with crimes get treated better.

2. Make sure your carrier does what they can to give drivers good working conditions.

The carrier should pay them better than average, minimize waiting time by always using dropped trailers for TL, optimize routes to minimize partial loads and stops, and make sure all long haul truckers on routes without an adequate number of safe rest stops have sleeper cabs. In addition, routes should always be planned to ensure that legislative limits are not breached, which will give the driver adequate rest.

3. Make sure the drivers have good medical coverage and care.

Drivers should have a schedule that gives them at least one weekday off a month to schedule a regular doctor’s check-up and should have a plan that allows them to visit a doctor whenever they need to. (In US terms, this means that they should have PPO or POS coverage.)

4. Make sure you support any effort to prevent rest stop closures.

More rest stops are needed. We’re at 90% capacity every night and things are only going to get worse. Support any effort to not only prevent more closures, but to (re)open more rest stops to make trucking safer for all drivers.

And while all of this may not be enough to make a driving career attractive to younger drivers, it should at least stem the surging turnover and buy us the time we need to come up with a better solution.