Category Archives: Corporate

The 3rd Wave

No, this post isn’t about molecular diagnostics, feminist activists, or Toffler’s vision, but instead about Blinco System’s (now called 3rdwave) Global Commerce Management (GCM) solution or, more precisely, their approach to Global Commerce Management.

Billed as a solution that seamlessly fills the gaps left by SAP, Oracle and other enterprise IT solutions, and allows companies to manage all their global processes surrounding their products or services from “procure-to-pay” or “cash-to-cash”, what it really is, or wants to be, is an ERP-for-Distribution solution.

Noting that traditional ERP systems like SAP and Oracle are not appropriate for non-asset-based distributors, in addition to being prohibitively expensive for small and medium sized companies, and that many companies also have to buy additional sourcing and procurement and supplier relationship management (SRM) and customer relationship management (CRM) solutions, which are also expensive for small and medium sized companies, Blinco decided to try and rectify the problem with a single approach that tackled the unique problems associated with non-asset based distributors.

The solution is built around a Global Data Repository that tracks all data associated with a product or service from the time of the first requisition through product delivery to final payment and accounting. It can track sourcing related RFX information and bids, procurement related purchase orders and invoices, and accounting information and payments. Whereas an ERP system is traditionally inward-centric, focussing on the data you need to run your manufacturing operations, what a global company needs, especially one that is focussed on distribution, is an outward-centric solution that is able to track all of the information associated with import and export – purchase orders, insurance information, financing, trade documents, shipment information, goods receipt, invoices, etc. (For more information on global trade, and the import and export cycle, see the Global Trade Primer over on the eSourcing Wiki [WayBackMachine]).

I’ve only begun to investigate Blinco System’s GCM solution, but the approach is intriguing – especially for a smaller, mid-size, company that needs the latest in ERP, sourcing, procurement, and supply chain technology, needs it all integrated, but at a budget. Most smaller mid-size companies have a much greater need for solutions that cover the various supply chain areas – sourcing, procurement, SRM, CRM, etc. – than they do for best of breed solutions, as most of their spends are not large enough to warrant the extra investment. Even though best of breed solutions typically save more than average solutions, the few extra percentage points may not make enough of a difference relative to the cost of such solutions for most categories procured by your average mid-size company. Thus, a specially integrated solution might be the way to go.

I’m not going to go so far as to recommend their solution at this point, as I have to learn more about it, and you won’t be able to maximize it’s potential until they correct for a few deficiencies (which they’re working on, but it will probably be nine months to a year before the next version that addresses them is released), but it’s certainly worth looking into if you are in the market for an ERP and a sourcing or procurement solution, as it may be able to fill both of those needs. Furthermore, since the due diligence required in the selection of an ERP system is not something that can be performed over night, by the time you made a selection, completed your implementation plan, and got started, they might be pretty close to what I’d like to see for the type of solution they are expanding. (Which, by the way, is proven with more than one multi-billion dollar company.)

Head2Head for the Supply Chain Nail

During my last Toronto trip, I had the chance to sit down with Wayne Burgess, Head2Head’s Supply Chain practice lead and discuss Head2Head’s rather unique supply chain recruitment solution. Head2Head was founded in 2000 by two guys in a basement who thought an innovative approach was required in recruitment. Today, they have roughly 30 employees and are still growing.

Starting in Human Resources, they soon found out that their clients tended to have specialized needs in two disciplines, Procurement and Information Technology. To that end, they sought out practice leads and starting building specialized capabilities in supply chain and IT, but I’m going to focus on supply chain – since, in all honesty, specialist IT recruiting shops are still a dime a dozen, whereas specialty supply chain recruitment firms are still quite rare, especially north of the border.

The Head2Head approach is to augment the client’s human resources and / or recruiting team with one of their own experts on the client site on an as-needed basis. Furthermore, whereas most recruiting firms force you to completely outsource the recruiting process, and keep all the resumes and data gathered once a candidate has been placed, a Head2Head recruiter works as an extension of your team, on your own site, and you get to keep all the data gathered when the Head2Head recruiter leaves. Furthermore, whereas most firms work on a contingency fee, which usually falls in the 20% to 30% range, and higher for key positions, they work on a flat fee basis, based on the amount of time you want one of their recruiters to augment your team. This can represent a large cost savings if you need to hire multiple supply chain professionals to help you with your supply chain transformation, which can all be sought at the same time. Instead of paying 100K to 150K in contingency fees for five hires for two to three months of work, you can instead pay 30K to 50K, for a 3X to 5X cost savings. Furthermore, if you need multiple positions filled across your organization at various stages, you can bring in multiple recruiters and scale the team size up and down as needed.

One of the things they’ve found is that many companies have a hard time identifying what makes a good sourcing professional, as they often have trouble understanding what supply chain is. As a result, they work hard on explaining to HR and internal recruiters what supply chain is, what makes a good supply chain professional, and how you go about landing one. To this end, they maintain and produce newsletters and other materials for their clients on a regular, monthly, basis.

They also provide traditional, tactically focussed, Vendor Managed Services where they will manage your entire contingent labor force, and typically save their clients 10-15% when they do so. They also support a “marketplace”-based vendor management approach to help their clients get the best value for their money. Finally, they also provide market intelligence and data mining solutions. However, it is their specialist supply chain recruiting division that, in my view, sets them apart.

Managerial Delusions

I know this isn’t a management blog, but since the success of a sourcing team is considerably influenced by the quality of the manager running it, I don’t feel too bad about pointing out a recent article from The McKinsey Quarterly on “The halo effect, and other managerial delusions”.

I loved this article, and not just because just about every manager I ever worked for (during my days as an employee) suffered from at least a few (dozen) delusions. The article describes three common delusions that every manager should be aware of if they care about their performance along with three tips they can employ to help them think clearly.

Delusion #1: The halo effect

The halo effect refers to the tendency to make specific inferences on the basis of a general impression. Company performance, good or bad, tends to create an overall impression – a halo – that shapes how its strategy, leaders, employees, culture and other elements are perceived. Most everyday concepts in business – including leadership, corporate culture, core competencies, and customer orientation – are ambiguous and difficult to define and what we believe to be contributions to performance may actually be attributions. In simple terms, as the author points out, outcomes can be mistaken for inputs. Thus, it’s important that managers look for independent evidence that their company, when successful, has a visionary leader and superb customer orientation or that their company, when struggling, has a poor strategy and weak execution. Sometimes even a poorly run company can do well in a bull market and a well run company can do poorly in a market slump.

Delusion #2: Absolute Performance

Following a given formula can’t ensure high performance, and for a simple reason: in a competitive market economy, performance is fundamentally relative, not absolute. Moreover, whereas a given set of factors may appear to have led predictably to success, the reverse is more likely – it would be more accurate to say that successful companies tended to be described in the same way. The direction of causality is wrong.

Delusion #3: Lasting Success

The halo effect can lead to a second misconception about company performance: that they can achieve enduring success in a predictable way. Statistically, lasting success is an anomaly and, in reality, markets, and marketplaces, change daily. There is no reason to blindly believe that a strategy that worked yesterday will work tomorrow. Most companies that have enjoyed long-term success have generally done so by stringing together many short-term successes, not necessarily related.

Clear thinking tip #1: Recognize the role of uncertainty

Rather than search in vain for success formulas, business executives would do better to adjust their thinking about the context of strategic decisions. Strategic thinkers must recognize the fundamental uncertainty of the business world. This uncertainty is everywhere – customers, competitors, capabilities, technology.

Clear thinking tip #2: See the world through probabilities

This will help you improve your odds of success through a thoughtful consideration of multiple external and internal factors.

Clear thinking tip #3: Separate inputs from outcomes

Clear-thinkers understand that in an uncertain world, actions and outcomes are imperfectly linked. Just because a choice didn’t turn out the way you expected does not mean it was a mistake. Thus, it’s important to examine your decision process as well as your decision – good decision processes have a much better chance at arriving at good decisions.

There are, of course, many more delusions – and a more detailed description of a good decision making process could have been included – but it’s a great article, and great advice.

Supplier Performance Management Webinar

Hopefully after reading yesterday’s post which pointed out that only 49% of organizations have bothered to implement a supplier performance measurement and risk management program, you’ll want to do something about it. If you do, you might want to take advantage of Procuri’s [acquired by Ariba, acquired by SAP] well-timed webinar on Jumpstarting a Supplier Performance Management Program. Moderated by Tim Minahan, editor of Supply Excellence [WayBackMachine], the featured speakers include Chris Herbtst, Supply Chain Program Manager of Constellation Brands, and Dawn Tiura, Partner at Denali Consulting.

According to the messaging, this webinar will cover:

  • How to organize for effective supplier performance management
  • The right supplier performance metrics for cross-company measurement
  • How to assess and select the right solutions to help your company achieve its supplier performance measurement and improvement goals
  • Sure-fire approaches to speed performance management program system deployment and adoption

All very important topics.

Protiviti: Manage Risk, Reap Reward

Your supply chain will be disrupted. Bet on it. You’ll win. The only two things more absolute in this world are death and taxes. I’ve told you that there is Real Risk in your supply chain. I’ve reviewed the basics of Managing Business Risk. I’ve even went so far as to tell you that Your Supply Chain is NOT Secure. But I still feel that I have not even come close to drilling the point home as to how at risk you are every minute of every hour of every day or how likely it is that your supply chain is going to be disrupted in a big way – and how much this will cost you if you are not prepared.

But that’s a post for another day. Today, I’m going to start helping you identify where you can go to get help, and the first company I’m going to point out to you is Protiviti, specialists in Independent Risk Consulting with an in-house expert group on Supply Chain Risk. Rising from the ashes of the old Arthur Anderson back in 2002 (with a little help from Robert Half International), Protiviti has more than quadrupled in size without diverging from their core practices of internal auditing, technology risk management, and business risk management (where the supply chain group resides).

Recently, I was fortunate enough to be able to talk to one of the leaders of the Supply Chain Risk group at Protiviti and talk about how they help clients identify, mitigate, and manage supply chain risk and I was quite satisfied with what I heard. Rather than trying to sell you a big black binder with an industry standard system generated risk management plan (which is not as useful as you might think since every company is different and has different risks), they instead work with you using a well-defined methodology that they’ve refined over the years to build a complete picture of the risks you face (a risk assessment), the mitigations you have in place or available to you, and a plan for managing those risks going forward. Furthermore, they help you build appropriate cross-functional teams that they work with throughout the process to make sure that when they are done, you understand not only what your risks and mitigations are, but how they were derived and how you carry the process forward.

The first thing they do, and you must commit to this for the process to work, is a risk assessment that evaluates your overall operations, supporting supply chain, regulatory environment, and organizational goals to help them build a risk profile that helps you understand where your risks are, the probability of them happening, and the dampening effect of any mitigations you currently have in place. They then categorize the risk universe into meaningful groupings, such as operations, supply base, distribution chain, and regulatory environment, that can be addressed and evaluated from a similar functional perspective. Then, working with your cross-functional teams, they help you qualify the probabilities, potential impacts, and mitigations that you can use to address them, including controls and monitors that you already have in place today. They then help you refine any identified and approved mitigations into processes and procedures that you can use to detect and manage a risk. After all, risk management is not a one-time project, but a continual process. However, you have to start somewhere, and a project focussed on supply risk is a great place to start.

They also assist you in putting in place critical and sustainable/repeatable risk management capabilities including, but not limited to, strategies, policies, processes, organizational accountabilities, information for decision-making, continuous identification, monitoring and control, tools and methodologies, and base data integrity procedures.

However, what I really liked hearing was that Supplier Relationship Management (SRM), Contract Lifecycle Management (CLM), and Compliance Management (CM) best practices done right were really risk management processes. SRM is not about managing your supplier, it’s about managing the risk associated with a supplier not performing. CLM is not about keeping track of a contract over it’s lifetime, but about making sure the critical terms of the contract, designed to mitigate your risk, are adhered to. CM is not about making sure your purchasers don’t go rogue, it’s about managing maverick spend to non-approved suppliers that increases your risk. After all, the key to long-term sustained financial performance is not cost savings – you’re always going to have to spend money – it’s cost avoidance – making sure you don’t spend any more than you have to. I know a lot of executives, and CFO’s in particular, these days only care about cost savings, but they’re just a bunch of short-sighted nitwits who need a good smack up-side the head. After all, there’s a limit to how much you can save! Once you’re performing at the best-in-class level, sourcing every category at market value, and optimally allocating the award so as to minimize your Total Value Management (TVM) lifecycle cost (or Total Cost of Ownership on steroid cost) – there’s nothing left to save – the best you can do in such a situation, should you be enlightened enough to reach it, is to avoid unnecessary spending. You avoid unnecessary spending by making sure everything goes according to plan. You do that by managing risk.

Another tidbit worth repeating is that they are currently working with Michigan State University(and AMR) on a new certification program for C-level executives in value chain risk management to help them understand, and proactively manage, risk. After all, considering one supply chain disruption can wipe out all of your strategically sourced savings, it’s critical that not only you, but your financial decision makers, understand this and allow you to invest in the methodologies and tools you need to make sure that if something really bad happens (your primary contract manufacturer’s plant goes up in smoke, for example), you know about it in time to do something about it (such as immediately route all your orders to your secondary manufacturer) before your supply chain shuts down, and you lose millions of dollars in sales.

So when you embark on your next risk management planning effort, be sure to put Protiviti on your list of potential vendors. (The reality is that such an effort is something you should never embark upon entirely in house – you’ll never see all of your own weaknesses.)