Originally posted on on the e-Sourcing Forum [WayBackMachine] circa March, 2008.

A generally accepted (and obvious) “best practice” is to procure services via a robust competitive methodology. In general, this is achieved by issuing a comprehensive request for proposal (RFP) to each of the potential vendors for that service. The practice has now become so common that many organizations have developed a standardized template (or templates) and are able to rapidly churn out RFPs to meet the demands of its business unit customers. This semi-automated approach accelerates the overall procurement timeframe and enables the organization to rapidly achieve superior results for the procurement of commodity products and services. Unfortunately, as with any automated process, this approach has also led to a reduction in critical thinking that is applied to each RFP.

Hear, Hear! This is precisely the point I was trying to make in the doctor on Technology RFPs: Don’t Put The Cart Before The Horse!, although I was restricting my attention to technology RFPs at the time. “Filling in the blanks” on a template isn’t sufficient for large and/or complex projects. The RFP needs to be carefully composed if you are to achieve maximum value from it. That’s why it was nice to see the article “Beyond the Template” over on SourcingMag.com which outlined some best practices for:

• effectively creating a competitive environment
• clearly defining the services being procured
• enabling the objective evaluation of vendor responses
• achieving optimal terms, conditions, and pricing in the competitive environment

The article may be services centric, but it still has great advice.

Creating a Competitive Environment

• Accentuate the positive
  Why should the supplier want to engage in a relationship with you?
• Clearly specify what you hope to achieve
  What are your goals? What do you require from the supplier?
• Enable the vendors to differentiate themselves
  Be sure to allow some open-ended responses. Check-the-box, multiple-choice radio-buttons, and fill-in-the-blank does not leave much room for vendor differentiation.
• Ensure the vendors understand your environment
  How do you work? How will the relationship be managed? What do you expect from a supplier?
• Emphasize the importance of the transition period
  If you are transitioning away from a current supplier or a current process, be sure to explain how the transition process is going to work and what you expect from the supplier.

Defining the Services

• Know what you want
  An RFP should not be used to gather information to help the enterprise decide what it would like to procure — it should be used to gather information about what the organization is going to procure and how it is going to go about the process.
• Define the boundaries
  If you are procuring a product, who is managing the transportation? If you are procuring a service, what capabilities will the supplier be providing, what capabilities will you be retaining, and how do you define the break-points?
• Define the measurement criteria
  How will the supplier’s performance be measured?
• Put yourself in the vendor’s shoes
  Read the RFP from the viewpoint of a supplier. If there is anything that requires clarification, then clarify it. If you’re unsure if it is clear or complete enough, have an uninvolved third party (such as a colleague in another department) review it.

Objectively Evaluating Vendor Responses

• Establish discrete requirements
  What do you need at a minimum to consider a supplier? If you are unsure, do a multi-round process where you ask for general proposals on how a supplier will solve a problem, followed by a request for specific proposals once you have selected an approach.
• Weight the requirements according to their relative importance
  In order to score the proposals to select a winner, it is important to give more weighting to key factors.
• Define the proposal pricing format
  This will allow you to compare proposals apples-to-apples.

Achieving the Best Buy

• Make it clear that RFP responses are contractually binding
  Of course, this only applies to the final RFP/RFQ in a multi-round process.
• Use contract-ready requirements in the RFP
  This will prevent snags in the negotiation.
• Don’t put off until later what you can do now
  Do your best to make sure that the requirements in the RFP address all key considerations. After all, how likely are you to receive favorable terms regarding any items you forgot to address once you enter into a deal and lose the competitive environment?

This is great advice and, if you have the time, the full article is worth the read.

Originally posted on on the e-Sourcing Forum [WayBackMachine] circa September, 2007.

What is Corporate Social Irresponsibility? Simply put, it’s the practice of not being socially responsible as a corporation. What is social responsibility? Although heavily debated, it’s something that 71% of adults in the US believe corporations are not doing, or at least not doing well, according to a recent study by Harris Interactive. Why is it important? If it leads to even a one point change on Fortune Magazine’s “Americas Most Admired Companies”, it can translate into 107M of additional value for your corporation. Furthermore, the portfolios of the most admired companies show cumulative returns of 126% while those of the least admired show cumulative returns of only 80%. Furthermore, a good CSR program can make any company more competitive.

So what is it? Simply speaking, it’s the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of that of the local community and society at large. It’s responsible production, socially responsible labour relations, community involvement, environmental cognizance, and sustainability. It’s about a commitment to do things right.

What is right? That’s up for debate. The specifics will depend on local regulations, industry standards, your shareholders, and your corporate values, but at a high level, you can pretty much count on needing good labour, health and safety, environment, and community conduct codes.

But it’s not just as easy as raising wages, reducing greenhouse emissions, or opening a day care. For example: One company reduces its emissions of greenhouse gases. One increases its spending on recycling. Another provides free child-care facilities for its workers. Another raises the wages of its lowest-paid workers. All of these things cost money: suppose, for the sake of argument, that all four have reduced profit by the same amount. Which company has done most to protect the environment? Which has done most to advance social progress? Overall, how far has each company improved its triple bottom line? Bearing in mind the cost, can you even say that any of them have done so? (“The World According to CSR”, The Economist, January 2005)

It requires a strategy – and that requires a good process to develop one, a process that is described in the new wiki-paper over on the eSourcing wiki: “Corporate Social Responsibility: A Sustainable Solution” [WayBackMachine]. It’s complete with over a dozen in-depth references, so check it out!

Originally posted on on the e-Sourcing Forum [WayBackMachine] circa February, 2008.

First of all, the doctor would like to point out that he’s thrilled with the level of supply chain coverage that Industry Week has had of late. the doctor realizes that it’s a drop in the bucket compared to the focus they put on manufacturing overall, but it’s better than no drop in the bucket at all. Late last year they published an article that asked “What are the Critical Skills of Supply Chain Leaders” that the doctor had to read, especially since the doctor spends a significant amount of time trying to answer this question when formulating the seven savors and the seven scruples of a sourcing sensei on the e-Sourcing Wiki [WayBackMachine].

According to the article, supply chain leaders embody five critical skills:

• Hire the Best and Brightest
  This syncs well with the third savor – team builder – so the doctor has to agree with this one. Great leaders surround themselves with the best and brightest. Only charlatans insist on hiring those that they can wield their inferior superiority over. Furthermore, the best will also recruit actively during times of recession – since this is when their team can make the greatest impact.
• Metrics Driven
  This syncs well with the first scruple – analysis – so this is another winner. They are also focussed on regular benchmarking, so they can set meaningful, realizable, goals.
• Performance-Reward Orientation
  This syncs well with the third scruple – team recognition – so this one gets two thumbs up. They reward performance against goals, and especially those who take action that benefit the whole firm and not just themselves.
• Technology Savvy
  This is the sixth scruple – technology – so this is right on the money. Great leaders embrace technology advances that can support more sophisticated supply chain management. They know the difference between real analytics capability and static reports and also when, where, and why to apply decision optimization. They also understand that while technology can enable a good supply chain, it can’t fix a broken one and know when to apply process re-engineering.
• Resist the Urge to Surge
  Supply chain leaders understand that end-of-quarter sales surges are disruptive and costly and push to avoid these types of practices. They realize that surges depend on a cycle consisting of inventory buildup for a long period of time – which costs dollars, as well as unprofitable use of capacity – which costs more dollars, followed by a deep discount, which resulted in a lot of sales but the need to temporarily increase capacity – which resulted in overtime costs. And unless you’re producing holiday themed items, chances are this demand can be afforded by pricing your products more appropriately. Consider the example given of a diaper manufacturer who thought that a quarterly sales pattern of “low-low-high” was the natural demand pattern. the doctor surmises that the CEO never had children. Infants and toddlers don’t go through 6 diapers a day for two months and then suddenly double to 12 diapers a day for one month and then suddenly drop back to 6 diapers a day for two months on a quarterly cycle. Demand for diapers is relatively consistent. The only reason the pattern was low-low-high was because the retailers knew that the end of the quarter brought deep discounts, and they could save money by ordering an entire quarter’s supply at the end of the previous quarter, since their inventory costs, relative to the manufacturer’s, were minimal when you consider they could distribute the supply to each of their locations for which they paid overhead for regardless of inventory level.
  This skill is important, but it’s actually a critical component of the second scruple – strategy. Because if you happened to specialize in holiday decorations, then you have to surge to make money. The trick is not to resist the urge to surge, but know when it makes sense. If the item is seasonal, or it’s a new product launch, you have to sell big and do it fast, and this will require inventory build-up. (Or you could be a Sony and lose hundreds of millions of up-front sales because you didn’t have enough units to satisfy initial demand.) However, if it’s a staple, or non-seasonal commodity, surging is much more likely to be costly than profitable. You need to know the right strategy for every item you’re sourcing for.

In other words, this is a great set of skills, but it doesn’t necessarily cover all of the skills that you need. They missed the following scruples:

• Compliance
• Sustainability
• Innovation

And even though you can delegate compliance to a senior risk management practitioner, the doctor just don’t see how you can be a great sourcing leader unless you have an eye on sustainability and another on innovation at all times.