Category Archives: Market Intelligence

the doctor’s Top 10 Mega Regions for Supply Management COEs (Where Should Your Supply Management Organization be Located? Part IV)

Our first post in this series began the discussion of where a better-than-average Supply Management (SM) organization on the path to becoming a world-class Supply Management organization should locate its new Centre of Excellence (COE) for its new centre-led Supply Management organization. We discussed the traditional factors of customer proximity, supplier proximity, business incentives, infrastructure, and the local talent pool and ended up demonstrating that the only thing that really matters in the end is the local talent pool. (This is because it is the people, not the process or the technology, that ultimately identify and drive the results.) Our second post discussed what type of talent you were looking for and where they were likely to be found. We concluded that you were definitely restricted to major urban areas, but did not identify which particular urban areas are likely to contain the talent your organization needs. Then, in our last post, where we dived into the findings of Professor Richard Florida, as chronicled in Who’s Your City, we illustrated that your new Supply Management COE should be in one of the top 40 mega regions, and a mega region with a strong innovation focus and a lot of open minded talent. We then indicated that, if you intended to be North America based, that you should be focussing on one of the following five mega-regions: the Boston-New York-Washington (D.C.) corridor in the Northeast; Miami and southern Florida in the Southeast; the Houston, Dallas, and Austin triangle in Texas; the San Francisco Bay Area down to LA on the West Coast; and the Portland-Seattle-Vancouver corridor on the West Coast. But kind of left you hanging if you were looking for a global SM COE outside of North America.

So, today, the doctor brings you his top 10 Mega Regions for Supply Management COEs, culled from the list of the 40 Mega Regions based upon North America data, cultural analysis, and emerging or current trends.

Rank Mega-Region Economic Clout Major Cities Rationale
10 The Rio de Janeiro to Sao Paulo corridor 230 Billion Rio de Janeiro, São José dos Campos, Sao paulo, São Bernardo do Campo Culture, fashion, finance, and the centre of the emerging South American Economy, lead by Brazil (but followed by Colombia and Argentina).
9 The Dallas Triangle 400 Billion + Dallas, Austin, Houston Finance, Oil, easy access to the Gulf of Mexico, and a good old fashioned “don’t mess with” attitude.
8 Greater Paris 380 Billion Paris, Versailles Culture, fashion, architecture, and a strange attractor for top talent across Europe and the Americas.
7 The Greater Seoul Region 500 Billion Seoul, Incheon, Ansan, Hwaseong, Suwon The economic power-house of South Korea and an economic powerhouse of Asia with a new generation culture that, unlike their predecessors, is (openly) embracing western styles of business, fashion, and life and that is the most willing of all of the Asian nations to take risks (which are often necessary for true creativity and innovation).
6 The Frankfurt-Gärtringen Corridor 630 Billion Frankfurt, Darmstadt, Mannheim, Heidelberg, Stuttgart, Cärtringen The Frankfurt stock exchange, renewable energy, and German engineering!
5 The California Coast 1280 Billion San Francisco, Sacramento, Oakland, San Jose, Los Angeles, Long Beach, San Diego Fashion, Entertainment, Technology, a global innovation leader, and home to the largest ports on the West Coast.
4 London – Leeds – Chester 1200 Billion London, Northhampton, Leicester, Nottingham, Leeds, Manchester, Chester, Birmingham Not only do we have (one of) the major financial, fashion, and trade centre(s) of Europe in London, but we also have the home of the Commonwealth. The UK may have been overtaken by the US in the final years of the 19th century in GDP production, but it is still in the top 20 and will always be of prominent importance.
3 Greater Tokyo 2500 Billion Tokyo The world’s largest mega-region in terms of economic clout, Greater Tokyo cannot be ignored. And while the Japanese are typically wary of uncertainty and risk, unwilling to commit to deadlines, very orderly in business, extremely respectful of hierarchy, very shy, and extremely respective of face, Tokyo is an exception. The younger generation have adopted a lot of western values, have no problem relating to the west, and are even willing to behave like outsiders in their soto groups. It’s also close to other major centres (and mega regions) in Asia.
2 Amsterdam – Brussels – Antwerp 1500 Billion Amsterdam, Rotterdam, Brussels, Antwerp The world’s fourth largest mega-region in terms of economic clout, one of the most open and advanced regions in Europe in terms of broadband penetration and clean technology, and close proximity to the UK and Germany, two European powerhouses.
1 Boston – New York – Washington Corridor 2300 Billion Boston, Hartford, New York, Philadelphia, Baltimore, Washington As the world’s second largest mega-region in terms of economic clout, the centre of the North American finance and fashion industries, and the nation’s capital, there is serious clout and talent readily available here.

Where Should Your Supply Management Organization Be Located? Part III: The Mega Region

Our first post in this series began the discussion of where a better-than-average Supply Management organization on the path to becoming a world-class Supply Management organization should locate its new Centre of Excellence (COE) for its new centre-led Supply Management organization. We discussed the traditional factors of customer proximity, supplier proximity, business incentives, infrastructure, and the local talent pool and ended up demonstrating that the only thing that really matters is the local talent pool. This is because it is the people, not the process or the technology, that ultimately identify and drive the results. Our last post discussed what type of talent you were looking for and where they were likely to be found. We concluded that you were definitely restricted to major urban areas, but did not identify which particular urban areas are likely to contain the talent your organization needs. That is the subject of today’s post.

In short, based on the research of Richard Florida, as chronicled in Who’s Your City, you should probably locate your centre-led Supply Management organization in a city within one of the forty mega-regions, which are the new economic units of the “spiky world” that we live in. By overlaying maps of continual, unbroken, light intensity around the clock, innovation (as measured by patents), and economic activity, Richard was able to identify forty global mega-regions that each produce more than $100 Billion in economic output and collectively account for 23% of the global population, 66% of economic activity, and 86% of patents. Led by Greater Tokyo and surrounding area and the Boston-New York-Washington (DC) corridor, which produce in excess of $2.5 Trillion and $2.2 Trillion respectively, these mega regions are the powerhouses behind the global economy in which your Supply Management organization functions. They are so productive that the top two mega-regions produce more GDP than all but the top three economies (now that China has moved up the list) and the top six mega-regions place among the top ten national economies in the world.

The talent you need is going to be in one (or more) of these mega-regions, clustered around one of the global innovation centres in the region (which include Tokyo, Seoul, New York, San Francisco, Boston, Seattle, Austin, Toronto, Vancouver, Berlin, Paris, Stockholm, Helsinki, Osaka, Seoul, Taipei, and Sydney). But which one? Not only do the most talented and ambitious people need to live in the means metros in order to realize their full economic potential because the proximity of talented, highly educated people has a powerful effect on innovation and economic growth, but they need to live close to people they collaborate well with. Close to other innovators where their collective efforts make a whole that is greater than the sum of the parts. (When the right people come together, it has been statistically demonstrated that a doubling of population in an urban area results in more than two times the creative and economic output.)

But, as Porter has found, the economic world is not only taking shape around clusters, the clusters are becoming more specialized in individual locations. For example, if I say New York, you probably think finance and fashion, and you are right. And if I san San Francisco, you probably think technology, and you are right.

But since Supply Management is just emerging, we don’t really have Supply Management clusters (even though places like Singapore, where global companies tend to cluster and bring their Supply Management talent with them, contain higher than average Supply Management professional populations), and since not all clusters in early stages actually crystallize into long term clusters, what we do have may not be long-term. So how do we pick the right mega-region? Lucky for us, we know that a good Supply Manager has a certain personality profile and not only do we find clusters of talent, but we find clusters of talent with similar personality profiles.

At least in North America, Richard helps us out here again. He presents clusters for each of the five personality types, including the open personality type, which is the personality type that is required for Supply Management success given the need to interact with a wide range of people in a wide range of cultures using a wide range of processes and technologies. In North America, while such personality types are spread out across the country, they are clustered in only some of the mega-regions, and only found in significant concentrations in the following five mega-regions: the Boston-New York-Washington (D.C.) corridor in the Northeast; Miami and southern Florida in the Southeast; the Houston, Dallas, and Austin triangle in Texas; the San Francisco Bay Area down to LA on the West Coast; and the Portland-Seattle-Vancouver corridor on the West Coast.

In other words, we’ve already weeded out the Chicago-Pittsburgh Corridor, most of the Houston-New Orleans corridor (outside of Houston which we’ve opted to place in the Texas Triangle), the Charlotte-Atlanta corridor, the Phoenix-Tucson corridor, the Toronto – Buffalo – Chester triangle, and Mexico. And if you want your COE to be based in another part of the world (like Europe or Asia), all you need to do is get similar personality profile surveys or, where they are lacking, cultural profiles and you will be able to limit your options even further. For example, if you are thinking of Asia, while Singapore may be a great choice and Beijing a good choice (given the recent increase in innovation and cultural offerings in the area), given the lack of individualism, the lack of tolerance for risk, and the polychronic view of time in the Thai culture (as detailed in this SI post on overcoming cultural distances in international trade with Thailand), Bangkok is not going to be a good choice for your Supply Management organization. (On the other hand, it’s probably an excellent place to put a factory as they will want the factory to work like a Swiss time piece.)

The reality is that, when you do your homework, you’ll find that you really don’t have many options in the spiky world, and if you want to consider infrastructure, corporate strategy, or the willingness of your current superstars to relocate to one of the places on your short list, you’ll have even fewer, But considering that, by 2025, our world will be considerably more concentrated around mega-regions than it is today, this might not be a bad thing.

Where Should Your Supply Management Organization Be Located? Part II: The Talent Factor

Yesterday’s post began the discussion of where a better-than-average Supply Management organization on the path to becoming a world-class Supply Management organization should locate its new Centre of Excellence (COE) for its new centre-led Supply Management organization. We discussed the traditional factors of customer proximity, supplier proximity, business incentives, infrastructure, and the local talent pool and ended up demonstrating that the only thing that really matters is the local talent pool. This is because it is the people, not the process or the technology, that ultimately identify and drive the results, and without good people, the best process and technology in the world won’t take your organization where you want it to go.

So this brings us to the next logical question — where are the people you need to power your Supply Management Centre of Excellence? To try to answer this question, we’ll turn to the work of Richard Florida, as chronicled in Who’s Your City, who attempted to put together a book that would help people decide where they should live. And since you have to go where your talent is, wherever your talent is [going is] where you should be.

The first thing one has to realize is, despite claims that the world is flat and that talent is evenly distributed, today’s key economic factors — talent, innovation, and creativity — are not distributed evenly across the global economy. They concentrate in specific locations. It’s obvious how major new innovations in communications and transportation allow economic activity to spread out all over the world. What’s less obvious is the incredible power of what Richard calls the clustering force. In today’s creative economy, the real source of economic growth comes form the clustering and concentration of talented and productive people. New ideas are generated and our productivity increases when talented individuals locate close to one another in cities and regions.

Despite the recent flat-world hypothesis put forward by Thomas Friedman, we still see the explosive growth of cities and urban areas worldwide. More and more people are clustering in urban areas — and there’s no evidence to suggest that they’ll be stopping anytime soon. In 200 years, the number of people living in cities has increased from 3% to over 50%, and the urban population is still rising. So, as you already knew, you definitely want to be in a major urban area, but the question is, which one?

A key requirement is talent, but what kind of talent? Supply Management requires a special kind of talented individual who harbours a wide range of hard and soft skills, that complement her high IQ and EQ, who works well with people across cultures, and who has the creative insight to find opportunities others miss. This eliminates your average city from the equation. Furthermore, your average city will not have the creativeness, innovation, or economic activity required to continue to attract top talent.

Which city will? In our next post we will discuss the requirements for such a city.

Where Should Your Supply Management Organization Be Located? Part I: Factors

Chances are, if your organization is a better-than-average Supply Management organization on the path to becoming a world-class Supply Management organization, then it is in the process of moving from a centralized to centre-led organization — and in the process of trying to figure out where to locate the centre of excellence (CEO). It’s a tough decision. Chances are the organization has identified the following factors as important in location selection:

  • customer location
    the organization should be close to its customers
  • supplier location
    the organization should be close to its suppliers
  • business incentives
    the location should provide some business advantages over other locations
  • infrastructure
    there should be a good infrastructure (in terms of utilities, business support, and personal services for the employees) to support the organization
  • the local talent pool
    there should be a good mix of talent to draw from

And on the surface, these sound like good selection criteria. However, for an organization on the path to world class centre-led Supply Management excellence, only one of these factors really matters. Can you guess which one?

Let’s take them one by one, starting with customer location. The organization should be close to its customers, but this doesn’t mean Supply Management has to be. Sales and support should be close, because they interact with the customer on a daily basis, but Supply Management can be half a world away as long as they take the time to consult with a customer focus group periodically to find out what needs are emerging and with sales and support regularly to find out if the current customer needs are being met with the current products and services being sourced.

Similarly, while the organization should desire to be close to its suppliers, generally speaking, it’s more important for the manufacturing organizations to be close to the raw material and component suppliers, as this minimizes shipment time and lead-time requirements when a spike in sales requires a corresponding spike in production or a quality issue or supply interruption requires a quick shipment replacement (from a different supplier). Plus, your suppliers today may not be your suppliers tomorrow and some are unlikely to be your suppliers in three to five years with constantly shifting market conditions and organizational needs. Thus, any attempt to locate near suppliers (unless, of course, your organization is a significant shareholder of a supplier and it’s part of the organizational strategic plan to take a strategic interest in the supplier for the long term) is likely futile.

Business incentives sound like a great idea, until you realize that any incentive on tax reduction is probably not going to result in any savings as most taxes are based on the (country) headquarters location. Similarly, any reduction on payroll taxes is going to be minimal as Supply Management tends not to the anywhere close to the largest division in the organization. And any one-time start-up grants that may be offered are going to pale in comparison to the savings a good Supply Management organization is going to deliver. So, from a Supply Management perspective, business incentives are rather irrelevant.

This takes us to infrastructure. This is somewhat important, but nowhere near as important as it is for the placement of a manufacturing facility. It’s not like a Supply Management organization requires 3-phase 480-Volt power, hundreds of thousands of gallons of water each day, or a thousand telephone lines coming in. The only thing it requires is decent phone service and good bandwidth so its people can collaborate in real time with their colleagues around the world. And these days, you can get decent bandwidth in just about any city, so infrastructure is only a minor concern.

This leaves us with talent, and this is the one factor that really matters. You can take the doctor‘s advice and get the best technology available, and manage the implementation using the best transition process that change management gurus can provide, but without talent to properly use the technology or implement the transition, it will all be for nought. Processes and systems don’t find savings, people find savings, implement the changes to capture those savings, track those savings, and ensure that those savings are delivered. This says that you need a good talent pool available to you. While a few top-notch people may be willing to relocate to your chosen centre for the experience, and a few more new hires might be willing to move for a chance to rise rapidly through the ranks, most people won’t move just anywhere for a job — no matter how good that job is. Consider the findings of Professor Richard Florida, as chronicled in Who’s Your City, when he asked his students if they would move anywhere for a great job. While most initially said yes, diving deeper into the answer (by asking if they would move to a place like Des Moines, Iowa), we find that most people would not be willing to move just anywhere. Most people who say they will consider moving anywhere in fact mean they will consider moving to any big city with lots of opportunity or a growing city where they have lots of connections. This means if you don’t already have a talent pool locally, you’re not likely to attract one.

So where should you locate your new centre-led Supply Management organization? Using talent as our indicator, we’ll discuss that in detail in Part II.

If You Do Not Get Sustainable Results, Blame Yourself!

Let’s Talk!

It’s deja vu all over again!

Robert Rudzki is not the only blogger and consultant to recently hear that a potential client had, just a few years ago, hired a large consulting firm to do a high-profile “strategic sourcing program” with nothing sustainable to show for it, as he indicated in his recent SCMR blog post on Deja vu all over again. I’ve heard the same sentiments echoed to me by a number of consultants at a number of small and mid-size niche and specialty services and software providers in the e-Sourcing & Supply Management space in recent months.

It would appear that a common trend last time money flowed into laggard Supply Management organizations before the recent downturn was to simply hire a Big-X consulting firm to fast track the organization to strategic sourcing success. While this is a great way to fast-track a project, and a contract, that is expected to result in significant savings, the only thing that is fast-tracked from a finance perspective is payment to the consulting firm that runs all the way to the bank! As leading Supply Management professionals know, a contract does not guarantee savings. The only way to achieve savings is to execute against the contract and make sure savings are realized. Just because you have a new contract that allows you to source widgets at $8 a pop, instead of $10 a pop, this doesn’t mean you are going to save $200,000 on your annual purchase of 100,000 widgets. For the savings to materialize, all of the following has to happen:

  • the buyer has to place the order with the contract supplier
  • within the contracted lead-time and the supplier
  • has to ship on time
  • using the approved carrier and shipping arrangement
  • and pay all required third party and government export fees
  • and file all appropriate paperwork at the same time your organization, or a 3PL acting on your behalf,
  • files all of the appropriate import and compliance paperwork
  • and pays any associated duties to make sure that
  • the product arrives at the warehouse when its supposed to
  • where it is received, inventoried, and appropriately stored which results in
  • an invoice being accepted and verified against the contracted rates and
  • paid at the appropriate time only when all goods are received and verified as acceptable.

Simply put, if

  • the order is placed with the wrong supplier
  • or placed late and the order has to be expedited
  • or shipped late and a different shipping method has to be used
  • or export documents are not filed on time
  • or fees are not paid and fines are issued
  • or import documents are not filed on time
  • or taxes are not paid and fines are issued
  • or the product is not properly inventoried or stored and can’t be found and unnecessary replacements
    need to be ordered
  • or the invoice is not verified and the old rate is still being charged
  • or the invoice is paid late and a penalty is applied

then those (significant) savings negotiated on your behalf go out the window. And you’re not going to get them back! First of all, once they’re gone, they’re gone. Secondly, because you weren’t actively involved in the project and didn’t insure that the knowledge that you required to achieve a sustainable transformation was transferred, you’re not going to be able to keep costs down when you renegotiate the contract in this economy where supply is tightening and costs are rising. So you’ll pay even more, even if the rate should stay almost flat.

In order to get results, you have to work with the consultants to understand the strategic sourcing process, the strategies applicable to your organization, the goals of each individual project, the savings opportunities in each project, the key contract terms, the changes that need to be made to capture the savings and adhere to each
contract term, the key metrics, the measurements that need to be made regularly, and the warning signs that something is happening / has happened that could jeopardize the savings the organization expects. Failure to do any of this is a sure-fire way of making sure that nothing changes and that your organization continues to leave money on the table.

In short, if your organization continues to be one of those organizations that leaves up to 40% of the contract value on the table because you did not do all of the above, don’t blame the service provider unless you did all of the above. As Charles, Bill, and Bob said in their recent books on The Procurement Game Plan, Managing Indirect Spend, and Next Level Supply Management Excellence, success is your responsibility and you have to actively manage your service providers and make sure that the knowledge required for a sustainable transformation is transferred to you.