Category Archives: Blogologue

Rampant M&A Does Not Indicate the Demise of Best-of-Breed

On the contrary, it symbolizes the emergence.

But let’s back up. A few months ago, Supply Chain Digest, with a piece on the Consumer Goods Supply Chain Landscape asked if Best of Breed [is] a Dying Breed. Noting an increasingly accelerated accelerated spate of mergers and acquisitions among leading supply chain best-of-breed solution providers, they called into question the long-term efficacy of some of these solutions, as well as the viability of these software companies themselves on the premise that there would soon be no best-of-breed vendors left for a consumer goods manufacturer to choose from.

If there were only N vendors, and the rate of M&A kept increasing, then, yes, we would reach an end-state where there were no best-of-breed vendors left. But this reasoning ignores one very important reality — most startups chase the biggest opportunity, which is typically where they perceive the most action to be. If the most action is in the M&A of best-of-breed, then new companies will see the most value in being best-of-breed and, as a result, we will soon see the emergence of a whole new slate of best-of-breed vendors. And while it’s true some won’t be sufficiently capitalized while others won’t hit upon the right technology, leading to their untimely demise, the reality is that a fair number will make it and that some of these, by the law of large numbers, will be even stronger than the remaining best-of-breed players today.

So, while the choices may be limited for the next year or two, the reality is that the number of options available to your average CPG manufacturer will soon explode. As for the other concerns, they’re not too worrisome either. Let’s take ’em one-by-one:

  • vendor future uncertainty
    Manugistics and i2 were considered market leaders and potential acquirers, not acquirees but were still acquired. The reality is that even a billion dollar enterprise can be swallowed up by a larger company, or, as a few spectacular acquisitions have evidenced, go from market leader to an almost forgotten business unit (like Netscape and Lucent) so this is not a concern restricted to best-of-breed.
  • ongoing support
    As most best-of-breed players have moved to (multi-tenant) SaaS or update subscriptions, which keep a customer on the current version, support is not the issue it once was. Plus, most will agree to code escrow, so, even if the vendor went away, the product could still be supported. Plus, once a best-of-breed vendor reaches a certain size, a number of consultancies acquire a competency and while resources might be expensive, support resources are not unattainable.
  • risks
    No solution is without risk. And a small best-of-breed vendor can be more financially stable than a large aggregator leveraged to the max and highly dependent on aggressive sales targets to meet payroll.

So don’t lament the recent M&A binge of best-of-breed players. It only means that new ones will arise and that more innovation is, eventually, on the way.

Maybe Some Bribes Should Be Legalized

Especially since it’s already legal to bribe corporations, and public sector entities. But let’s back up for a minute.

A recent article in The Economist that asks who to punish notes that India’s chief economic adviser wants to (partially) legalize some kinds of bribe-giving. And while your first thought might be bribes are bad, m’kay, it’s actually not a bad idea.

First of all, as Kaushik Basu (who is the chief economic advisor to India’s finance ministry) points out, it’s hard to combat bribery and corruption when the law treats both bribe-giving and bribe-taking as crimes. If someone needs a basic service to be performed on their behalf, and they believe they can only get it by giving a bribe, they will pay the bribe. And they won’t report it because then they can be prosecuted.

Secondly, the bribes he is proposing to legalize are “harassment bribes”, made by a person to get things done to which he is legally entitled. Like filing a police report or getting his tax return processed. Furthermore, Mr. Basu is also proposing that it would still be illegal for the individual demanding the bribe to perform the service to take the bribe. The bribe-giver would be able to file a complaint, and if proven, would be entitled to a refund while the corrupt official would be punished. Moreover, bribes made to bend rules in one’s favour would continue to be illegal for both parties.

This isn’t a bad proposal. First of all, it will make a corrupt official think twice before asking for a bribe knowing that it is much more likely he’ll be reported since it will no longer be a crime for the bribe-giver to give a bribe to facilitate a service to which he is entitled.

Secondly, most “civilized” countries have already legalized such bribes when made to a corporation or a public body. We just call them service payments. Don’t want your package to take four days to go from point A to point B when you know it only takes one, pay an expediting fee. Want more leg room, and actual food, on your flight? Pay an upgrade fee and sit in first class. Don’t want to wait 6 weeks for your passport renewal? Pay the expedite fee and get it in 3 weeks. In each case, you’re getting the exact same service. The only difference is time. Pay less, and you are put in the bottom of the queue. Pay more, and you are moved to the top of the queue. And instead of paying a person directly, you’re paying an organization, which then pays it’s shareholders and executives more money. And even though you don’t pay an individual directly, the individual who sells you the upgrade still benefits. They get to keep their jobs, which they would lose the minute revenue and/or profit drops below a certain threshhold.

Finally, in some countries, low level public servants, just like waitstaff in “civilized countries”, are not paid a living wage and need bribes to support their families. Making facilitation payments legal makes sense in those countries where foreigners have no choice but to pay bribes if they want to do business. One way or another, service has to be paid for. And if someone is truly corrupt, you want to make it possible for those impacted to complain without repercussion (unless they are seeking to break the law themselves). Mr. Basu’s proposal may not be perfect, but it certainly is clever.

Is a New Age of Partnerships Near at Hand?

There is an interesting article over on the IndustryWeek site about “how the world is coming to Partnership”. Apparently the message that came from the Horasis Global Russia Business Meeting in Limassol, Cyprus in mid-April was that whatever happens in business, in nations, in economies during the coming months and years, we have to be working hand in hand. In other words, the message was that we’re partners.

It is definitely time for businesses, and the supply chains that drive them, to globalize if they want to be world class, but are true partnerships required? The first stage of globalization for an average business or supply chain is typically outsourcing. The second stage is typically expanding operations on site. Only in the third stage are true global business units created. But even then, partnerships are usually restricted to the most strategic of suppliers. True partnerships are few and far between, and most companies believe that if they want local market intelligence, production, and delivery, they either outsource the whole kit and kaboodle, or build a local operation and hire local talent. Many companies still don’t see partnerships with a local operation as a viable option.

However, I do agree that the smart people will form business partnerships that use technology to advance the interests of both organizations as best-in-class organizations use leading technology solutions to increase their efficiency and effectiveness from spend analysis through sourcing to procurement and trade management.

How Do I Find Top Supply Management Talent?

So, after reading yesterday’s post, you now know that if you can’t find* top supply management talent, it’s because you’re looking for a mythical resource that doesn’t exist. In fact, you have a better chance of finding a chimera. Wish all you want, but a senior buyer with a PhD and ten years of experience who speaks three languages, has expertise in multiple e-Sourcing and e-Procurement processes and applications, has bought twelve different categories, has sourced from multiple countries in Europe and Asia, has led global cross-functional teams, has participated in NPD, has financial chops and can help the CFO optimize working capital, is an SRM expert, has a high CQ, is an expert in global negotiations, is a master of spend analysis, can manage multiple projects simultaneously, and lead global services team is not someone out there waiting to be hired. You’d have a better chance finding a CEO for a Fortune 500 than finding a buyer with these skill sets.

So what do you do? You stop focussing on the super-resource and start focussing on the team. Yes you need all the skills, but you don’t need them all in the same person. Break the “super” buyer role into an analyst role, a global trade role, an engineering management role, a contracts role, and a set of buyer roles organized around compatible categories. Then, instead of looking for 7 – 10 “super” buyers, you’re looking for five different roles that will be much easier to fill. For example, the job description from the previous post would break down into the following descriptions:

Supply Management Analyst

  • expert in should cost models, TCO models, and global logistics models
  • experienced user of e-Sourcing and e-Procurement applications and expert in e-Negotiations and award optimization
  • expert in spend analysis
  • working capital management skills
  • financial reporting experience
  • expert at market intelligence

Global Trade Specialist

  • expert in negotiations with a global supply base
  • buying experience in Europe and Asia
  • speaks two or more languages
  • expertise in import/export requirements of the US, the EU, India, and China
  • in-depth knowledge of REACH, WEEE, RoHS, and similar regulations
  • high CQ

Innovation Engineer

  • great project management skills
  • risk management skills
  • innovative and capable of leading cross-functional innovation teams
  • NPD experience
  • experience with CSR and sustainability initiatives

Contract Specialist

  • excellent communication skills
  • excellent writing skills
  • experienced in contract drafting
  • familiar with regulatory requirements
  • experienced with compliance programs

Senior Buyer

  • great communication skills
  • bachelor’s degree with 5 years of experience, master’s preferred
  • buying experience in one or more of manufactured goods, services, IT & Telecommunications, legal, marketing, and temporary labour
  • supervisory experience of global business teams and outsourced services preferred
  • implemented multiple successful SRM initiatives
  • great leadership skills

And your chances of filling these positions are much better than finding a mythical chimera.


* Again, only referring to “find”. There are a number of reasons that you might not be able to “hire” such talent if you can find it, but they are not the subject of this post.

Why Can’t I Find Top Supply Management Talent?

The simple answer: you’re looking for a resource that is so rare it may not even exist! And I’m not the only one who thinks so. After talking with a number of thought leaders at the Hackett Best Practices conference, it’s become clear that this is the most common reason Supply Management organizations can’t find talent. (Note that this is only the case with respect to “find”. There are a number of reasons a Supply Management organization can’t hire talent.)

As Supply Management has become more and more challenging, the average reaction of a supply management organization has been to continually augment the job description of a supply manager to the point where the individual is expected to not only be a jack of all trades but master of all. This has resulted in a search for senior buyers with an eclectic collection of skills and experience so rare that you can probably count the number of global supply professionals around the globe that make the grade. For example, whereas the average job description for a senior buyer ten years ago might have looked like:

  • good communication skills
  • college degree
  • negotiation experience
  • buying experience in chemicals, pharmaceuticals, and energy
  • some supervisory experience

Today’s average job description for a senior buyer looks like:

  • great communication skills
  • excellent writing skills
  • master’s degree with 10 years experience, PhD preferred
  • expert in negotiations with a global supply base
  • buying experience in manufactured goods, services, IT & Telecommunications, legal, marketing, and temporary labour
  • supervisory experience of global business teams and outsourced services
  • buying experience in Europe and Asia
  • speaks English, Hindi, and Mandarin fluently
  • experienced in contract drafting
  • expertise in import/export requirements of the US, the EU,
    India, and China
  • in-depth knowledge of REACH, WEEE, RoHS, and similar regulations
  • expert in should cost models, TCO models, and global logistics models
  • experienced user of e-Sourcing and e-Procurement applications and expert in e-Negotiations and award optimization
  • expert in spend analysis
  • great project management skills
  • risk management skills
  • working capital management skills
  • financial reporting experience
  • innovative and capable of leading cross-functional innovation teams
  • NPD experience
  • implemented multiple successful SRM initiatives
  • experience with CSR and sustainability initiatives
  • expert at market intelligence
  • high CQ
  • great leadership skills

See the problem?