Category Archives: Corporate

Ensuring Executive Support in Your Quest for Purchasing Fire

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Last year, over on the e-Sourcing Wiki, I brought you The Quest for Purchasing Fire, a twelve step guide to selling sourcing and procurement initiatives internally in your organization. Last month, the SSON published the “top ten tips for ensuring buy-in from the top”, which complements the wiki-paper nicely. Because you have to:

  • Have a Compelling Business Case
    Anything less than a complete, finely detailed, business case with backed-up ROI calculations and you’re just asking for rejection from an executive with too many time requests and a need to kill some as quickly as possible.
  • Create a Sense of Urgency
    If you can’t demonstrate why the organization can’t wait to take advantage of your cost saving initiative, it will likely get put on the back burner
  • Understand Your Organization’s Internal Processes
    Go through the channels and make sure not to offend anyone who could cause trouble if not included.
  • Be Open and Honest About Endeavors
    Be honest about past mistakes and any shortcomings you may have and how you plan to correct them with this initiative.
  • Keep Company Staff in the Project
    Not only do many organizations still distrust consultants, but getting company staff involved early is key to obtaining buy in.
  • Maintain a Tight Focus
    You’re not trying to save the world … so don’t tackle everything at once.
  • Be Bold Where it Counts
    Even though you’re not trying to save the world, be sure to have a plan that aims high with respect to the problems you are tackling.
  • Give Examples from Beyond the Organization
    Demonstrating how similar projects have helped your competitors will go a long way towards alleviating fears of the unknown.
  • Demonstrate Your Risk Awareness
    Every project involves risk … be sure to address all of the likely, and unlikely risks to let management know that you’re aware of the risks and actively taking steps to mitigate them.
  • Highlight the Compliance Benefits
    As the article says, pull up your SOX.

Winning Support from the CFO for Your Supply Chain Project

You can win over the CPO, the CIO, the COO and even the CEO, but if you don’t win over the CFO, chances are your project, even if it has an expected 10x ROI, won’t go anywhere if the CFO won’t cut the check. You need the support of the CFO, and fortunately for you, it’s not as hard to get as you think it might be if you do your job and demonstrate how the project helps the CFO do his.

Remembering that it is the CFO’s job to not only control cash-flow and monitor the financial health of the company, but to serve the shareholders, you should have no problem winning over the CFO over if you can clearly demonstrate that your project will improve the financial health of the company AND serve the needs of the shareholders in a reasonable time-frame.

But how do you do this? As I described in The Quest for Purchasing Fire on the e-Sourcing Wiki, you clearly define the value proposition, build the business case, create a great presentation, and, most importantly, address the concerns of the CFO.

What are the concerns of the CFO that you can address? As outlined in a recent article in i2’s Supply Chain Leader on “linking the CFO to Supply Chain Execution”, your well thought-out supply chain project should reduce the company’s cash-to-cash cycle times, reduce the company’s risk profile, support profitable growth, and deliver predictable revenue … big concerns of every CFO in today’s economy.

  • Reducing cash-to-cash cycle times
    If you increase your perfect order rate, you’ll optimize cash collection and shorten cash-to-cash cycle times. A number of projects will increase perfect-order rates. They include:

    • e-Procurement
    • Transportation Management Systems (TMS) and Warehouse Management Systems (LMS)
    • Just-In-Time (JIT) and Vendor Managed Inventory (VMI) initiatives
  • Reducing the company’s risk profile
    If your project addresses supply risk, currency risk, or total landed cost risk, it will reduce your company’s risk profile, and total cost.

    • Better inventory management will reduce supply risk and decrease costs as less shipments will need to be expedited
    • Negotiating contracts in relatively stable currencies, like the Euro, or your home country currency can reduce currency risk.
    • Implementing a global trade management system to help you insure compliance reduces the risks of customs delays, fines, and seizures.
  • Achieving profitable growth
    If you can calculate the top-line and bottom-line returns of your project, you can win the CFO over more quickly.

    • E-procurement systems will instantly eliminate high manual invoice processing costs, which are between $30 and $90 in an average organization
    • e-Sourcing platforms with decision optimization will cut at least 10% off your total spend, and keep it off
    • indexed contracts will insure that your price increases never rise more than raw material costs and, more importantly, insure that you see price decreases when commodity indexes drop
  • Deliver predictable revenue
    A project that you can repeat month after month, such as the application of e-Sourcing to category after category, or spend-analysis on different areas of the business which looks at the data in different ways, can deliver long-term predictable revenue streams. If you identify projects that keep on giving, your CFO will be very happy.

Looking for Savings? Don’t Overlook Your Insurance Premiums!

A recent article in Industry week noted that when it comes to “insurance renewal, a 1-2-3 strategy can pay off”. Many decision makers may be tempted to compare corporate insurance renewal with personal insurance … where you get the bill and send a cheque, because you don’t really have much choice as changing (life, disability, health, illness, etc.) plans will undoubtably result in a cost increase and benefit reduction, as costs go up (while benefits go down) with age. But this is a bad comparison because corporate insurance plans don’t work like personal life / disability / health plans, rates change with demand and business conditions, and business conditions change all the time.

Business change may not only introduce the need for more insurance (such as when a company begins exporting its products overseas), but may also reduce the need for current coverage (when asset values decline). As the article points out, failing to recognize the impact of new business approaches, whether new strategies that increase risks or downsized operations that alter exposure levels, can cause a manufacturer to make the wrong decision on insurance coverage. And for a large company, this can cost it tens (or hundreds) of thousands of dollars annually (and millions if we’re talking employee group benefit plans). (There’s a reason there are consulting companies which specialize in insurance plan selection and negotiation.)

So what should you do? The article recommends the following 1-2-3 agenda:

  1. Coverage Type
    Examine company operations, compare them to what they were in the past, and accurately assess what needs to be covered. Where are the risks, and what will the recovery cost if they materialize?
  2. Coverage Limits
    How much is at risk and how much insurance is needed to cover it? If you have doubled the size of your shipments, then you might need double the transit insurance. But if you’ve moved to JIT inventory, you might be able to cut your warehouse insurance in half.
  3. Risk Management Services
    Examine a potential insurance provider’s capacity to deliver training, information about industry best practices and expert advice when an emergency makes quick action imperative before you enter into negotiations.

The only thing I’d add is a step 4: hire an expert. The few thousand a day it will cost for an external expert to evaluate your needs and negotiate a better deal could not only save you many times her fee, but prevent financial disaster should an emergency arise.

Cut Cost with the Supply Chain

A recent article in CPO Agenda on how “supply chains hold the key to cost cutting” covers a recent “Opportunities in Adversity” survey by Ernst & Young across 337 senior supply chain executives. According to the survey, the majority of supply chain executives (83%) reported that their supply chains provided opportunities to lower costs, with a whopping 57% indicating that major cost savings opportunities rest in the supply chain.

This should not be a surprise considering recent findings by Aberdeen, Accenture, Hackett, and many others. The only surprise is that companies still see the need to do these studies. How many studies should it take to convince you that untold savings opportunities lie in your supply chain? That every procurement event is a savings opportunity? That every dollar saved by procurement matches five, ten, and sometimes twenty dollars of revenue brought in by sales? That best-in-class operations see a 6:1 ROI for every dollar spent on their procurement operations? I’d think three would be enough (and by now there are well over thirty). So, what are you waiting for? Hire a consultant (they’re cheap!) and get cracking!