Category Archives: Market Intelligence

Any Blogger Can Benefit Your Brand — But It Takes a Great Blogger to Benefit an Organization!

Late last year, Apparel ran a good article on How Bloggers’ Influence Can Benefit Fashion Brands that is worth a read by all Supply Management Professionals because blogs can be used to influence more than just consumer trends in brand preference. They can be used to influence trends in technology, transition, and even talent management — the three T’s of the modern Supply Management organization. How? We’ll get back to this — first we’ll discuss the article.

The article notes that leading creators and distributor of fashion are working with bloggers big and small in both traditional media (TV, Radio, etc.) and new media to get their brands out there. Why? Because, despite the rumblings that “blogs are dead” now that we have the Twitter-Generation who believe that conversations can happen in 140 characters (and to whom I respond ha ha ha Ha ha, ha ha ha Ha ha, ha ha ha Ha ha, heh-heh-heh-heh-heh-heh-heh-heh-heh), they are doing better than ever. The links have shrunk (thanks to temporary link shortening services), the virtual access locations have changed (as many people read them in a central online access point like Google Reader or their own RSS feed manager), and the promotion strategies have shifted (from SEO and sites like Digg to Facebook, LinkedIn, and Twitter promotion), but blogs are stronger than ever. Established authorities are read day-in and day-out and draw a more regular audience than some newspaper columnists as more and more people go on-line for their daily dose of content. Plus, since bloggers have more freedom to choose whom they do and do not work with, and what they do and do not promote, than advertisers, readers can trust that the blogger is promoting his or her opinions and not that of the company (unless the two happen to sync up).

And the proof that blogging is mainstream is in the pudding — if there are agencies that can make a profit simply through the promotion and management of independent bloggers, willing to work with companies and brands they identify with, that shows the acceptance of the medium. No one stays in business supporting a medium that isn’t supported. And since more of these firms are popping up, it’s obvious that blogging is mainstream — even if it isn’t on Facebook.

But the real point is that many people trust independent blogs for advice more than they trust mainstream media, which needs to be heavily supported by advertisers to stay in business, and, in essence, often needs to promote some of those views and products whether or not the media outlet personally supports or identifies with the views and products it is promoting. This is what gives blogs power of influence, and that power of influence is not limited to brand. It extends to technology, transition, talent management, and other forms of thought leadership. An idea astutely put forward on a blog can often take hold faster than an idea put forward by a vendor who obviously wants to promote a product or service. And that’s why organizations need to work with great bloggers to advance the level of practice in their industry. Unless the blogger can put forward the idea in a clear, well-thought out, and defended manner, the message will be lost and the organization will be better off focussing on brand (and sales) than thought leadership.

But fortunately for Supply Management organizations, product, and service providers, there are a number of great bloggers in this space. And if these organizations are as great as the bloggers, they will learn to make better use of them both as outlets for best practices and inlets for thought leadership in their organization.

That’s my virtual 2 cents. Any differing opinions?

“Procurement’s Strategic Role in Driving Total Corporate Performance”


Today’s guest post is from Robert A. Rudzki, President of Greybeard Advisors LLC, who has (co-) authored a number of acclaimed business books, including Beat the Odds: Avoid Corporate Death and Build a Resilient Enterprise, On-Demand Supply Management, and the just published text on Next Level Supply Management Excellence that is a follow up to the now-classic Straight to the Bottom Line.

 

Every CPO or chief supply chain officer needs to be conversant with the performance improvement framework shown in the following figure.

World Class Supply Management

This is one of my favorite charts, and is the essence of relating supply management to improved corporate performance. Let’s walk through this framework briefly — a more involved discussion appears in Chapter 4 of my new co-authored book “Next Level Supply Management Excellence”.

Two important measures of corporate performance are return on invested capital (ROIC) and cash flow. ROIC is calculated by taking the annual earnings of a business and dividing it by the total capital invested in that business (long term debt and stockholder’s equity). ROIC is important because it is an indicator of the current health of a business. For a business to deliver value to its shareholders, ROIC needs to exceed the corporate cost of capital. A company that operates where its ROIC is lower than its cost of capital is essentially liquidating itself.

Improving profits helps to improve both ROIC and cash flow. Reducing the capital intensity of your business also helps to improve ROIC and cash flow. Improving profits while also reducing the capital needed to run the business has a powerful compounding effect on ROIC and cash flow.

So how do we go about improving profits? There are two fundamental ways: revenue enhancements and cost reductions. Supply management can — and should — play an important role in each of those areas, as indicated with examples shown in the Figure above.

Supply management should, for example, take a leadership role in creating a more responsive supply chain, thereby helping the company to win more business (and increase revenues) from customers. Supply management should also take the lead applying good processes to better manage all areas of spend, not just those typically assigned to procurement.

So far so good, but how do we reduce capital intensity? Again, there are two ways: working capital improvements and capital expenditure improvements. Once again, supply management can play an important role in each of those areas. In many companies, for example, there is no clear responsibility for analyzing and coordinating supplier payment terms. This area is ideally suited for supply management to take a lead role (as detailed in Chapter 15 of “Next Level Supply Management Excellence”).

With regard to capital expenditures, experience demonstrates that the sooner Procurement is involved in new projects (even at the concept stage), the better the overall project economics and ramp-up time will be.

A thorough opportunity assessment for supply management requires a careful evaluation of the improvement opportunities in each of the four categories shown on the exhibit. Then, to tie it together for the executive audience, you relate those improvement opportunities to the company’s income statement and balance sheet. Going that extra step allows you to demonstrate the impact of supply management on net income, earnings per share, ROIC and cash flow — all key areas of interest for senior executives. It’s a powerful way to communicate the enormous potential of a transformed supply management organization in the language of senior executives and in a manner relevant to your company.

And, based on our experience, it can pave the way for significant executive support for your agenda.

(Note: Portions of this post are based on the author’s new book “Next Level Supply Management Excellence” — a sequel to the bestselling book “Straight to the Bottom Line”.)


Thanks, Bob.

Managing Indirect Spend: An In-Depth Review, Part II.2

Our last post continued our review of Managing Indirect Spend, a new book by Joe Payne and William (Bill) Dorn of Source One that is the culmination of everything they have learned while doing nothing but Strategic Sourcing, primarily on Indirect Spend, since 1992 — before it was cool. Specifically, it discussed the chapter on Market Intelligence, which is critical to the success of any sourcing initiative and one of the most important tools in any sourcing professional’s toolkit. In this post, we review the other non-software tools at a sourcing professional’s disposal that were discussed in Bill and Joe’s tome on Managing Indirect Spend.

The major tools at a sourcing professional’s disposal when conducting market research can generally be classified into the following categories:

  • Traditional Industry Publications
    One of the first stops should be one or more traditional industry publications that publish in-depth case studies that include best practices, savings achieved, and new processes or technologies being employed by suppliers and your competition.
  • Indexes
    Indexes such as the CPI (Consumer Price Index), the ISM Manufacturing Report, the ISM Non-Manufacutring Report, and speciality indexes such as the Pulp and Paper Weekly and American Metal Markets can be extremely valuable. Furthermore, for just about any commodity that can be listed, somewhere in the world is an index tracking it. For example, Mintec has over 15,000 indices in its database.
  • Blogs
    Practitioner, Commodity Specific, and General Supply Management blogs can all be helpful. Of course, we agree with Bill and Joe when they indicate that you should start your search in the latter category with SM and SI.
  • Import Records
    This is a great source of competitive intelligence. You can find out who your competitors are using, what types of products they are importing, and in what volumes. Sites like Panjiva, Import Genius, the Datamyne, and PIERS are great places to start for easy access.
  • Search Engines
    It is surprising just how much information is available through Google, especially if one takes the time to learn advanced search capabilities, like restricting to a domain or a set of document types. There are often a considerable number of presentations in PDF and PPT format on the web which already contain the data you need free for the taking. One just has to find them.
  • Social Networks
    It’s amazing the information that some people will let slip on a social network or how frank they will be in a one to one discussion in a group or forum. Don’t forget to use these tools as well – but be careful what you post – it may be archived for eternity.
  • Research Reports
    While most research reports are sponsored and skewed towards the sponsors, the generic market data as well as the capabilities they describe are always useful, and it’s especially useful to see which vendors didn’t make the tragic quadrant or grave analysis. Sometimes they are just as good for your organization’s needs.
  • Group Purchasing Organizations
    GPOs often have oodles of benchmark data. Your organization might need to join, and use them for some non-critical spend, but a judicious use of their master contracts where other members have more volumes can often result in better rates for the organization with very little effort.
  • Electronic Sourcing Tools
    Some SaaS/Cloud providers will often bake-in aggregate market intelligence into the tools they offer. If the organization is already paying for these tools, use them to their full advantage!

Another tool at the organization’s disposal for a successful sourcing project is a spcialized consultancy or Procurement Services Provider (PSP). A PSP with the tools, consulting experience, and skills in the right categories can jump-start an organization’s indirect sourcing efforts and get significant returns months, if not years, earlier. The key is to find the right one that is incentivized to do the job. As such, the organization should probably look for contingency providers that only get paid when hard dollar savings are realized. Providers that get paid based on man-hour effort often have no incentive to get the organizatio the best deal possible as they are paid regardless and providers that get paid based on estimated savings have no incentive to make sure the savings are actually realized. And while contingency providers that get paid on hard dollar savings may ask for a (significantly) higher percentage, it’s better to pay 30% of realized savings and realize 80% of the estimated savings than to pay 15% and only realize 40% of the estimated savings. In the first case, the organization still nets 56% of the savings in its pockets while, in the second case, it only nets 34% of the savings.

However, be sure to follow the best practices outlined by the authors if engaging a (contingency) PSP, or your organization might not get what it bargained for. Specifically, don’t engage an organization that

  • Baits and Switches
    Insist that if the organization provides a resume, that resource actually works on the project.
  • Overstretches
    Make sure the organization has the resources to complete the project – manpower and financial stability.
  • Asks for Double Payments
    If the consultancy gets a commission for (re)selling a certain product or service, they aren’t out to get you the best deal. Period.
  • Asks for Up-Front Payments on Soft-Dollar Savings Claim
    It’s not a savings until the goods are received, invoiced, and paid at the negotiated price without any extra financial gotchas tagged on.
  • Bakes in Hidden Additional Costs
    Read the Fine Print. If you are responsible for travel, software, hardware, and miscellaneous expense costs, your organization could pay more than it saves.
  • Makes Ridiculous Savings Claims
    If a PSP comes in and promises 30% off the board in a category where the base market index has gone up 20% over the last year, that’s probably not a valid claim (unless your organization has the worst sourcing team imaginable).
  • Lacks Analytical or Technical Skills
    Long-Gone are the days when hardball negotiations or reverse auctions were enough. Creativity and deep analysis are often key to uncovering new savings opportunities.
  • Doesn’t Include Audits in their Proposals
    How else will you insure you get the promised savings? Seriously – if the PSP forgets the audit, you forget them.

Finally, it’s important to note that if the organization uses an electronic sourcing tool, it’s doubly important to remember what not to do or the tool will blow up the event faster than you can read this post. Tools don’t replace the necessary human contact and it is vital that the team does not neglect to:

  • insure the right tool has been selected for the event
  • insure the right suppliers are being invited
  • personally invite suppliers
  • follow up on the RFx/Auctin invitation
  • insure the right specifications are included
  • insure the right training is provided to supplier representatives

There are a lot of tools at a Supply Management organization’s disposal for conducting market intelligence and managing indirect spend, but they have to be used wisely.

At this point SI is going to take a short break, but next month it will continue with Part III of it’s review of Managing Indirect Spend and discuss some examples from the field.

Managing Indirect Spend: An In-Depth Review, Part II.1

In Part I we began our review of Managing Indirect Spend, a new book by Joe Payne and William (Bill) Dorn of Source One that is the culmination of everything they have learned while doing nothing but Strategic Sourcing, primarily on Indirect Spend, since 1992 — before it was cool. And as SI noted in its last two posts, clocking in at 422 pages, this book is an incredible handbook for anyone who wants to get a handle on indirect spend, which has increased in organizations across the board since outsourcing and right-sizing rose to fame in the 1990s. Part I reviewed the process. Here, in Part II, we will review the tools.

The first “tool” that we are going to review is Market Intelligence. Market Intelligence can be defined as a branch of market research, involving collation and analysis of available and relevant information and data on specific market. The information that is gathered varies based on the type of product or service that your organization is purchasing and how critical that product or service is to your overall supply chain and sales of your end product. However, regardless of the product or service being researched, there are critical types of market intelligence that will always need to be collected, including intelligence on global market conditions, benchmarking data, and market pressures. For starters, a buyer needs to understand the forecasting that suppliers use to prepare for competing in a global market. For example, even though a product might be purchased for domestic usage from a domestic supplier, that supplier may be making plans based on forecasting for markets outside of your home country, because if demand for the products grows significantly in foreign markets, or if currency exchange rates shift so that it is more favourable for that supplier to sell internationally rather than domestically, it may cause a shortage off domestic supply, or higher prices.

Bill and Joe are right when they state that world class organizations spend a lot of time constantly (re)evaluating their supplier chains to identify risks and non-competitive pricing. This is how they get ahead. However, it takes a lot of time to collect intelligence, and even more time to separate bad intelligence from good. Once the global market conditions are understood, the next thing the buyers will have to sift through is benchmarking data. This can be difficult in a new, or closed, marketplace if suppliers are overprotective of their data. The best way to get this data is often by working with sales and marketing. It may sound crazy that sales and marketing should be the first stop, but when one considers that all they do is benchmark their competition every day to help with daily sales efforts, they are the perfect guides to get the market intelligence team on their way.

Market pressures are also important. Not only do they impact your organization, but they impact your suppliers’ organizations as well — and these market pressures are critical. If the supplier is cash strapped, in danger of a labor shortage, or located smack-dab in the middle of an uprising-in-the-making, that supplier could be a high risk. And since suppliers are typically an organization’s biggest supply management risk, this is important intel. (Other big risks are impending government regulations, cultural shifts, and natural disasters.)

Of course, the big question on everyone’s mind is how do you succeed with such a hard task? Dedication is key, but so is insuring that each of the components of success are there, including:

  • Right Team
    You need a technical, analytical, and communicative cross-functional team working collaboratively.
  • Sufficient Time
    Make sure everyone on the team has enough time dedicated to market research. It can’t be just another task on an already full plate.
  • Right Metrics
    The right hard metrics, that measure tangible things, and the right soft metrics, that analyze intangibles that can effect the end product or service, need to be defined. Hard metrics may include hard-dollar savings projections, payment term improvements, lead-time improvements, and measurable quality improvements. Soft metrics may include exclusive distribution rights, material changes that will change customer perceptions, better relationships, or process improvements.
  • Right Suppliers
    Researching suppliers that cannot meet organizational needs is a waste of time.
  • Component Costs
    What is driving the costs? Raw materials? Labor? Currency fluctuations? Look for, and track, appropriate indices.
  • Adjacent Technologies
    If a product is too new or there is a relative lack of data, identify adjacent technologies that can provide insights into costs and supplier performance. For example, instead of trying to find iPad component pricing, you might try to find generic tablet component pricing.
  • Right Questions
    Don’t look for a specific part or product, look for all parts or products that could potentially meet organizational needs by describing what it should do instead of naming it.
  • Know When To Stop!
    As with any investment of time, you eventually reach a point of diminishing returns. While you should have enough data to intelligently raise counterarguments with the supplier about price increases and, at a minimum, have a firm understanding of the supplier’s cost models, knowing what drives the costs of a sub-component that is only 5% of the cost might be going to far. Saving 3% on 5% only saves the organization 0.15% in the long run, and will generally not be worth the investment of time to realize that savings.

It’s great advice. Stick around for Part II.2 where we will dive into tools for gathering data and expediting the sourcing process and complete our review of Part II of Managing Indirect Spend.

Five Steps to Long-Term Growth – Huh?

Even though I was browsing the HBR Bogs, I was still a little surprised to see a post titled “Five Steps to Long Term Growth” because, to be honest, thanks to Wall Street, I didn’t think anyone knew what Long-Term Growth meant anymore. And I’m being serious here. The focus on quarterly earnings calls has gotten so intense that it’s almost obscene — the nosedive a stock takes in the market after a bad earnings call is typically so severe that one would think the world is going to end.

Not only did this intense focus on short-term profit cause the end of the famed research labs in the 1990s (like Bell Labs, Xerox Parc, Texas Instruments — and yes, I know that Bell, PARC, and TI still exist, but what we have today is not what we had then), two major market busts in the naughts (as everyone tried to IPO at unsustainable valuations), and the loss of hundreds of thousands of jobs (because people cost money and it’s more profitable to operate at skeleton crew levels and make everyone, in fear for their jobs, work unpaid overtime than actually be responsible and use the obscene amounts of profit the corporation is making to actually hire the headcount the organization should have), but it pretty much spelled the end of any thought to growth plans beyond the next year in the corporate boardroom – at least as far as I can see.

Of course, it is this lack of focus on the long term that captures everything that is wrong with the marketplace today. Once long term growth and sustainability take centre stage, short term profit becomes unimportant, Wall Street is told to go <expletive> themselves, people become as important as product, and the market changes — for the better. If you would like the market to change for the better, and become successful beyond your wildest dreams when it does, you can start by taking Vijay Govindarajan’s advice and take the following “Five Steps to Long Term Growth”.

1. Decide What You Are Playing For

Are you playing for the fat <expletive>s on Wall Street? Or are you playing for yourself and your stakeholders. If the latter, then you have to take a stand and do something about it. No one is going to do it for you.

2. Get Everyone Speaking the Same Language

Once you decide you’re playing for the long term, the next thing you have to do is something different. Growth means fostering transformational or breakthrough innovation. This will require identifying value propositions that will expand your business into new markets with new advantages.

3. Imagine Your Future

If you want sustainable growth, you must have a sense of what the future will be, what it will require, and how you will win. Then you apply your breakthrough or transformational innovation to achieving that vision.

4. Align Your Actions With Your Intentions

As Def Leppard said in a fit of Pyromania, it’s Action, Not Words. You have to remember that your people are used to hearing a lot of big talk about great new initiatives that never come to pass and without some action behind them, they will assume that your words are just another corporate fad that will be forgotten as time passes. If you say you are going to eliminate all traces of phosphate from your products, assemble teams to do it. If you say you are going to create 50 jobs with a new initiative, start hiring!

5. Do It!

Growth is hard work requiring strategy, judgment, and leadership. It involves risk. It involves you. You will have to keep doing it. Day in. Day out. Day over. Day under. Day torn asunder. And back to day in.