Category Archives: Best Practices

Looking for Something to Read this Weekend? Download Chris LaVictoire Mahai’s ROAR for FREE today only!

Chris LaVictoire Mahai, managing partner at AVEUS, a global strategy and operational change (consulting) firm, has made the e-book / Kindle version of his new book ROAR available for FREE on Amazon (at this link) TODAY (and Monday through Wednesday of next week) for anyone who wants it.

The book, which uses the animal kingdom as a metaphor for building peak performance, and includes interviews with several executives to explore what drives peak performance, was written in an effort to help companies adopt a systematic approach to strengthening their performance chain. A good performance chain must be fast, flexible, predictable, and leverageable — and simultaneously balancing these requirements to achieve better customer outcomes can be tricky. As Chris implies, it’s like trying to combine the best qualities of the cheetah, elephant, coyote, and ant into one animal. (The Greeks found it difficult to combine the Lion, Goat, and Snake into a Chimera. So imagine the challenge we’re faced with!)

the doctor hasn’t made it through the whole book let, but the lessons learned summarized in the 4-Lens Profile are good ones:

  • speed at any cost becomes a negative
  • predictability delivered too late or for something that has lost market appeal is of little value
  • flexibility that extends every process, decision, or outcome is more harmful than helpful
  • leverage of every resource to the nth degree will deteriorate performance and increase risk

So, anything you can take away from Rashida Cheetah, Oralee Elephant, Ace Coyote, or Rickie Ant, or, better yet, the many executives that Mr. Mahai interviewed, is definitely worth your time.

Who’s in Worse Shape? The USPS or Royal Mail?

According to this recent article on Accounting Madness in the Economist, Royal Mail has racked up a £10 Billion deficit in unfunded pension liabilities alone. Wow! The USPS, which is about $15 Billion in debt, only racked up 5 Billion in underfunded pension liabilities. And we thought they were doing well, as they saved over 300 Million pounds in the first phase of their Procurement Transformation and expect to save over 600 Million pounds in the second phase. Too bad they don’t understand that contingent liabilities are still liabilities and that, if ignored, will just come back to bite you in the thigh, repeatedly, like your friendly neighbourhood boghog.

Who came up with the National Accounts rules anyway? The pension liabilities of unfunded pension plans are contingent liabilities and are therefore not recorded as liabilities in the National Accounts or public sector finances. How can you count the assets, and say you have a £16.5 Billion Surplus, but not count the liabilities, especially when the reality is that you are in a deficit of £10 Billion? It’s just insane.

How much credibility would your Supply Management organization have if you only counted savings and not cost increases? Specifically, if you counted the $10 Million you saved on temporary labour on the balance sheet when reporting your successes to management but ignored the extra $20 Million you spent on oil because you didn’t lock prices in for the long term? Not much. Nor would it be wise to do so. Ignoring losses takes the focus away from where the organization, and cost management, should be focussed. It’s time for good GAAP to be accepted around the world, and, in particular, a GAAP standard that doesn’t allow such big gaps to go unnoticed for so long!

Best Practices of Trade Compliance

A recent article over on the ISM site entitled “A Steel Thread”, which discussed how import/export compliance management is part of the fabric of today’s global business world and how ignoring it could result in your shipment being flagged for intensive investigation, seized, or destroyed, did a good job of pointing out how federal trade compliance regulations have increased dramatically over the past several years. But this is not why SI liked it. It also did a good job of pointing out the roadblocks to compliance for an average Supply Management organization, starting from the fact that the sourcing and compliance teams often have different definitions of supply chain security. But this isn’t why SI liked it either. The reason SI likes it is because it summarizes six best practices of trade compliance that will significantly help an average Supply Management organization get its global trade processes and policies under control.

The six best practices it focusses on are:

  • Education and Training
    Let’s face it. The average supply management professional is probably not aware of the myriad of compliance and security legislations that an average category could be subject to when sourcing internationally. Training, which overviews the major legislations, the common sourced categories that might be covered under those legislations, and best practices to maximize the chances of compliance is a great place to start.
  • Senior Management Commitment
    We all know nothing takes root without senior management sponsorship, so making sure senior management understands the importance of a good trade compliance initiative and supports it is a great place to start. If you’re having trouble getting support, SI recommends that you start by pointing out the 88 Million Dollar Fine JP Morgan got for failing to comply with trade compliance legislation.
  • Written Policies and Procedures
    Once you’ve identified your best practice processes that minimize the chance of non-compliance, you need to write them down, create checklists, and make sure they are followed. The reality is that if you are found in non-compliance, you will be fined, even if it was 100% unintentional and you did everything you could to be in compliance, but if you can show you did your best, the severity of the fine and punishments levied will likely be minimal. The government agencies responsible for monitoring compliance aren’t out to shut businesses down or make trade unduly difficult, they are just trying to do their job and enforce the law. However, most of the acts only define maximum fines, not minimum ones, and it’s not common practice for them to severely punish good corporate citizens who have a process, follow the process, and do their best to ensure compliance for a small slip-up.
  • Connectivity with Business Units
    Not only is it impossible to do compliance in a vacuum, as the article points out, but it is the business units who often have the detailed data on products and services that you need to make proper compliance assessments. Working with them can eliminate issues before a shipment is even made.
  • Internal Assessment
    As the article points out, an internal self-assessment of compliance practices should be performed to gauge how well regulations are being met and how compliance is connecting with logistics, supply management, sales, shipping and receiving — and it should be done as soon as possible if you haven’t done one, and reviewed annually to see if all bases are still being covered. And it should be very well documented. This will help you if you are ever investigated for possibly running afoul of trade legislation.
  • Third Party Assessment
    In addition, as the article points out, once or twice a year, a “second set of eyes” should evaluate how trade compliance is being handled throughout the company to make sure you didn’t miss anything. This can turn the tide in your favour if non-compliance occurred someone along the supply chain as you not only did your best to make sure you were in compliance, but had a third party that has expertise in supply chain audits do their best to verify that you are in compliance as well.

About the only critical best practice that they missed is:

  • Implement a Trade Compliance Platform
    The reality is that you can’t do all of this manually, or even attempt to track all of the relevant data manually. You need a technology solution to help you — one that centralizes all of the data and makes it all available to all of the people in your organization that need it, as well as to trusted partners that need, and are authorized to use, it.

There are other best practices, but if you start with this list, you will get most of the way there in short order.

Great Advice on Career ROI Can Be Found on the E-Side

Yes, on the E-Side. ISM’s eSide Supply Management to be precise. Earlier this year, it published “Career ROI: Advice From the C-Suite” which offered 10 great suggestions to get, and keep, your career on a successful career path. These were offered by a career procurement professional with over two decades of experience and were right on the money. These five in particular were on the money.

  • Own Your Career Plan
    Actively take charge of your career growth and the opportunities that come your way. This includes educational opportunities, professional opportunities, and networking opportunities — whatever and wherever they may be. And be sure to check out the talent management resources popping up from the leading consultancies (Greybeard Advisors, The MPower Group, etc.) and professional organizations (ISM, Next Level Purchasing, etc.). Start with the presentations from the recent ISM conference which had a track on talent management.
  • Develop a Personal Brand
    Figure out who you are, how you are different from everyone else, and what it is that you bring to the table. Then work the brand online and offline. Start by establishing a great electronic image, that has clout (with or without Klout), and advertises who you are, and then live it when you network and interact with people. And be sure to constantly maintain and build your networks as this will help demonstrate the success of your personal brand.
  • Work Hard on Your Soft Skills
    If you look at a top 10 skills list for Supply Management today, you are just as likely to find team management, change management, negotiation management, supplier (relationship) management, CSR (Corporate Social Responsibility) management, leadership, communication, cultural sensitivity, and professional development as key requirements as you are e-Sourcing/e-Procurement technology experience, data analysis, risk management, financial management, innovation management, or working capital management.
  • Be a Strategic Thinker
    Supply Management is about the long term. It’s not about reducing costs today just to inflate them tomorrow (by cutting too deep into a supplier’s cost margins, selecting components of inferior quality, or hanging on to last generation technology too long and avoiding investment in next generation technology that can greatly reduce costs and increase sustainability in the long term). It’s about finding ways to increase the pace of innovation, assist the organization in NPD (new product development), and assist the organization in new market entry. It’s about finding new opportunities for value generation, and not chasing the same cost reductions year over year. At some point, 2% just doesn’t make a difference.
  • Don’t Be Afraid to Take Risks, or Fail
    If you aren’t willing to take risks, you’ll never push the envelope and see what you are, and are not, capable of. If you don’t figure this out, you won’t make much progress in developing your personal brand, and won’t really stand out form the crowd. So take a few risks, fail once or twice, learn from your mistakes, and exceed expectations the next go around.

For five more great tips, see the original article on Career ROI: Advice From the C-Suite.

Bravo to CPO Agenda for Pointing Out That Charging Suppliers to Bid is a Really Bad Idea!

As I’ve told everyone who has ever asked, charging suppliers to bid is a really bad idea. Not only does it generate ill-will, but as this recent article over on the CPO Agenda that gave “tips for understanding why charging suppliers to tender is a bad idea” noted, it could even be illegal. But let’s take the tips one-by-one because it seems that this practice, which started rearing its ugly head at the start of the recession, is still trying to push through.

  • It is Counter-Productive
    It reduces the expressions of interest from time-wasters and quality suppliers alike. This is what goes through the head of a serious bidder with a quality product: “I know my product is quality, and so do my happy customers, so why should I pay $1,000 just for the opportunity to submit a bid? I’m not even guaranteed my product will be evaluated. I’m going to bid on these four other RFxs instead.” So, what you’ll end up with is a set of suppliers who are desparate for your business. But why are they desperate? Maybe their sales team can’t sell worth a damn, or, maybe (and the doctor leans this way) their products just aren’t as good as their competitors, or if they are, they are not able to produce them as cost effectively. Do you really want inferior products or unnecessary premiums for quality?
  • Suppliers with No-Pay-To-Play Policies are Out
    Not only will you likely knock out most of the quality suppliers in your potential supply base who, while quite willing to bear the costs of providing you with product samples, etc, are not willing to pay just to bid, but you will definitely knock out any supplier with a no-pay-to-play policy that prohibits them from bidding on any contract that requires a bid fee. These could be the best suppliers in the world.
  • There’s no Rationale for it
    The logic is that it takes time to collect, verify, and analyze a bid, and while this is true, with modern e-RFx / e-Auction software, you can collect, verify the completeness of, and compare a bid to a benchmark in less than a second. You will likely only need to analyze the Top 5, accoring to your weighted metric, in detail at the end of the day. And, since you can now buy unlimited use of these systems for less than what a single project used to cost, it doesn’t cost any more to collect fifteen bids than five bids.
  • It is Unethical
    There is way too much opportunity for corruption or the perception of favouritism. (In simple terms, you are sending this message: We value suppliers who bribe us for our business.) Plus, there is always a chance that this restriction could be illegal, in breach of fair competitive practices, or public procurement law. Oops! Can you say “class action lawsuit”?
  • It Says Your Company Is An Ass
    Okay, so the original article said it sends a strong message to the supply base you need to connect with that you are actually uncooperative and uninterested in building a relationship that will benefit both parties, but this sums it up nicely. Unless your organization has a monopoly, and can get away with being a self-centered smug corporate ass, just don’t do it.