Category Archives: Supply Chain

Easy Question. Easier Answer.

A recent post over on Strategic Sourcing that asked “Executives:Do You Have the Right Resources” asked an easy question with an even easier answer. NO.

How does the doctor know this?

1) Not only did The Hackett Group 2014 Procurement Key Issues survey report that 76% of companies stated that they needed to expand Procurement’s scope/influence, but previous studies have shown that as little as 8% of organizations are world class.

2) Large organizations that embark on a Procurement transformation journey generally take 5 years or more to become world class, and by the time they reach this point, a number of technologies or processes that were upgraded in the first stage remained untouched for three years, meaning that these organizations have to go back and start a transformation journey all over again just to stand still.

3) Since the definition of the right resources changes with operational changes, product and services changes, market changes, and new developments in talent management, technology, and operations research, even if you had the right resources yesterday, you may not have the right resources today.

When you put all this together, the chances of a large organization having all the right resources are so astronomically small that they are effectively zero. A few organizations, which fall into the Hackett Group’s world class organization bucket, are close, but the vast majority, which make up the average or laggard category, are nowhere close.

So what are these resources? For a start, as pointed out in Mickey’s post, they are the right talent, technology, and transformation (capability) resources — the 3Ts that form the base of a successful, aligned*, organization.

Talent

Even though everything changes as time goes on, one thing has been the same since global trade began. Ever since goods first floated down the Nile or first travelled the Silk Road, people ran the supply chain. And even though they may employ a wealth of tools and be hindered and aided by a plethora of government regulations, they still do. You need the right talent to succeed.

Technology

Always in a state of change, and sometimes flux, you have to not only identify the best products for your organization, but implement and utilize them properly.

Transformation Capability

Remember, it’s not people, technology, process; it’s talent, technology, and transformation because you need the ability to constantly evolve your process as needed to meet the current needs of the supply chain. If you don’t have transformative capabilities, buying the best processes and practices from a big 6 consulting firm won’t do you any good.

You need to not only acquire the right talent, technology, and transformative capability but you also need to maintain the talent, technology, and transformative capability as time goes on to truly succeed. And if you ever say you have the right resources, in today’s economy, you’ve lost the supply chain battle before it has even begun.

* More to come on this!

Could You Be Doing It Right? Part II: Risk Monitoring

In last Friday’s post, we asked if you were doing it wrong. In particular, we mentioned category management, supply chain risk monitoring, and big data, and asked if you were doing them wrong. We noted that even though a number of companies have jumped on these runaway bandwagons, most have yet to grasp the reigns and take control of the wagon and get it on the right track.

Why is that?

Fundamentally, it’s the same reason that there are no world class Procurement Organizations in Asia Pacific — the classic Triple-T problem.

  • Talent
    the organizations don’t have the right talent to properly manage the initiative
  • Technology
    the organizations don’t have the right platforms to capture the right data and support the right processes
  • Transition Management
    the organizations don’t have the right processes in place to handle the necessary organizational shift to properly manage the initiative

Once the talent, technology, and transition management is in place, the organization has what it needs to fully embrace the initiative and take it to the next level. And do it right.

Where should your Supply Management Organization start? By identifying the core capabilities that are required in each “T” category and finding the right talent, technology, and transition management for the initiative, the organization will be well on its way.

In the rest of this post, we’re going to talk about the requirements for an organization to get on the right supply chain risk monitoring track.

Talent for Supply Chain Risk Monitoring

Good risk managers need the following hard and soft skills:

  • Analysis
    On what services, products, components, and raw materials is the organization (most) dependent and which of these are sole-sourced and/or in scarce supply.
  • Mapping and Modelling
    What does the multi-tier supply chain look like and how can it be represented in software?
  • Mitigation Planning
    If a certain raw material, component, product, or service becomes temporarily, or even permanently, unavailable, what other options can be put into action?
  • Insight
    The greatest risk is always where you least expect it. You will need someone with great insight to not only determine what types of risk you may face, but how your organization can most effectively monitor for them.
  • Sportsmanship
    You will need a great team player to bring it all together.
  • Crisis Management
    When the proverbial sh!t hits the fan, and the organization goes into panic, you need a strong, level-headed crisis manager to get them back on track quickly, and without loss.

Technology for Supply Chain Risk Monitoring

Appropriate technology platforms for risk monitoring will have at least the following features:

  • Supply Chain Mapping
    the platform should map your supply chain multiple tiers down to the source raw materials for any raw materials you are dependent on
  • Event Monitoring
    the platform should identify any natural or man-made disasters that can disrupt your supply chain
  • Mitigation Planning
    the platform should allow the risk manager to put together plans of action should any required part or raw material become unavailable
  • Response Management
    the platform should allow the incident management team to manage the response to a disaster when it occurs
  • Mobile Interface
    as people need to be able to access the platform from anywhere, wherever they are, as the disaster could take out your primary offices

Transition to Supply Chain Risk Monitoring

In order to transition to a proper supply chain risk monitoring framework, the organization needs to hire someone with good change management skills and give that person the tools and C-suite support he or she needs to get it done. That person also needs to be a natural born leader and someone who can work with teams to get it done.

This isn’t a complete (laundry) list of what is required for proper supply chain risk monitoring, but it’s a good starting point. Get the right talent, technology, and transition management in place, and your organization will be well on its way to risk management success.

SIM? Is It Old News or a Shiny New Pair of Shoes? Part II

As per our last post, SIM (Supplier Information Management) is a mature and stable technology with a large number of suppliers not only providing the tools and best practices to manage supplier life-cycles, but to manage risk, compliance, receivables, and even spend repositories for spend management. It’s almost a commodity in the Supply Management Space, and an acquisition thereof is not likely to get baby that new pair of shoes anytime soon. Or is it?

As great as they are, most SIM products — stand alone best-of-breed or integrated suite offerings, have at least one weakness — and often two. In particular, the data model and the workflow. Just like early spend analysis solutions were often tied to one, rigid, UNSPSC data model, most current SIM solutions are also tied to one, rather rigid, data model. In addition, most of those solutions with some SLM (Supplier Lifecycle Management) also have rigid workflows.

This worked well when business processes were predictable and stable and corresponded to products with long life-spans. But the times they-have-a-changed. These days, product life-spans are measured in quarters, and not years, if we are lucky. Associated processes change to not only accommodate the new product demands but to adapt to new technologies and new business requirements. If the workflow can’t adapt, the capability, and overall usefulness, of the tool is limited.

A SIM product that could not only allow a user to define, and redefine, data models as necessary but define, and redefine, workflows as necessary would offer more value than current SIM platforms. And if that product could also maintain full audit trails, which not only track data changes but model and workflow changes, and insure that old records and workflows can still be seamlessly accessed when the data model or workflow changes, then that would be even better.

And if that SIM product went even further and allowed for dynamic organizational, supply base, and user-defined hierarchies, that would be icing on the cake. Supply Chains are not boring because they are not static. They are constantly changing. The supply chain can not only change from product to product, but batch to batch as a primary raw material or part supplier runs out of material, becomes unreachable due to a political or natural disaster, or simply gets greedy and forces the higher tier supplier to find a new source. A good SIM solution will allow the supply chain map to evolve in real-time as the supply chain evolves. Moreover, with acquisitions, mergers, and spin-offs being the normal modus operandi for many businesses, a SIM solution that can easily adapt the organizational data model is also required. Finally, for maximum productivity, a user needs to be able to maintain their own view of the supply chain, back and front, relevant to them. They need to maintain their view of the relevant multi-tier supply base and the relevant hierarchies in their organization that they have to report to and serve.

In other words, a SIM tool that allowed for a truly dynamic data model, workflow, and supply chain organization map could bring a new wave of value to a modern Supply Management organization and the individual with the foresight to acquire such a tool might just get baby a new set of shoes. But is there such a solution?

Stay tuned!

SIM? Is It Old News or a Shiny New Pair of Shoes? Part I

Supplier Information Management, also known as SIM (but which has almost nothing to do with your Subscriber Identity Module card in your cell phone), is not new. The early leader in this space, Aravo, which boasted the likes of GE and CISCO as clients, was formed in 2000 and followed not only by a slew of companies trying to be best of breed in SIM (including AECSoft, now owned by SciQuest, Hiperos, and Lavante, to name a few) but by a slew of suite vendors that began to implement enhanced SIM into their platforms (including Ariba, Iasta, and Zycus).

And most of the basic features are now commodity. Try to find a vendor that sells SIM that doesn’t track all headquarter location, financial, core product, service, insurance, and third party risk information associated with a tier 1 supplier. Most of the good vendors also track third party credentials, compliance information against all relevant laws and directives, internal performance metrics and third party ratings, and even integration with third party supplier directories and databases.

And the uses are well known.

  • Where are the bulk of my suppliers located?
  • What is the financial health (risk score) of my top 100 suppliers?
  • Are any of my products out of compliance with regulations in one or more countries?
  • Do all of my suppliers have their relevant insurance certificates up to date?
  • Who are my riskiest suppliers?
  • Have all of my suppliers verified their primary contacts in the last six months?

And the more mature companies, to try and maintain an edge, maintain their customer base, and expand into new companies and additional verticals have started to integrate additional, and related, functionality. Aravo evolved into a full Supplier Lifecycle Management solution that balanced compliance, performance, and risk management. Hiperos is focussing on Third Party Management and on Compliance and Risk Management in particular. For example, their compliance management solutions include code of conduct, diversity management, insurance attestation, social accountability, and sustainability. Lavante is focussing on on-boarding and integrating SIM with audit recovery services.

When all is said and done, SIM seems like a mature space that is old news in Supply Management. And betting on it probably musters the image of an old gambler clutching dice in one hand and his last dollar in the other mumbling “baby needs a new pair of shoes“. But is it a bet you would lose?

Are You Doing It Wrong?

If you’ve been following the media, you know that we have reached a point were most major business publications are now putting focus on Supply Chain as your top risk and your top opportunity.

You also know that these same publications, and the solution providers that follow, and reference them, have been preaching the following solutions to not only tame the risk but increase the opportunity.

Comprehensive Category Management

Spot buying individual categories at market lows or evening running reverse auctions at opportune times is not category management. And for that matter, neither is an event that covers the entire category. At this point you probably think that the doctor is losing it a little, because how could it not be category management if you are addressing the whole category?

It’s Simple. Category Management isn’t just about grouping all seemingly related items and running an event, it’s grouping items that have related characteristics that allow the items to be sourced effectively under the same strategy. For example, while it might make theoretical sense to group printers, ink, and paper together — because you use them together, from a sourcing point of view, ink and paper often go better with office supplies and printers with hardware. You can probably get them thrown in for free with a server purchase. But that’s just the start. If you source a lot of metal parts, you should probably group them by primary metal, since the price of steel, aluminum, etc. will largely dictate their prices and it might even make sense to not only source all of the parts from the same supplier but even buy the metal on behalf of the supplier with your better negotiating power and/or credit rating.

Supply Chain Risk Monitoring

Natural and Man-Made disasters devastate supply chains when they result in raw material or product unavailability for weeks or months. When a company doesn’t understand their dependence on a single source or the risks that single source is subject too, they can figuratively get caught with their pants down to say the least.

As a result, most leading companies in the Risk Management arena are now tracking and monitoring their tier 1 supply base for not only missed deliveries, but late shipment dates and inquiring immediately when something is late shipping. However, by the time a shipment is late, it’s often too late to go to another source if the reason for the lateness is the lack of an important raw material. So the smarter companies also ask their suppliers to let them know when their suppliers miss a delivery. This is better, but sometimes this is still too late. You need to track the primary sources of the raw material and their ability to produce. Not only the companies, but their locations. All natural and man-made disasters in the region and then evaluated for impact and if the producer of the primary raw material or part is potentially at risk, they make sure, or ask their tier 1 supplier to make sure, that the raw material or product can still be delivered on time and if it can’t, these leading companies immediately seek a secondary source (or lock up available supply pre-emptively) — not two weeks after the tier 1 supplier required the raw material to meet the commit date.

Big Data

The only buzzword on par with big data is cloud. According to the converted, or should I say the diverted, better decision are made with better data — the more data the merrier. This sounds good in theory, but most algorithms predict demand, acquisition cost, projected sales prices, etc. based on trends. But these days the average market life of a CPG product, especially in electronics or fashion, is six months or less, and the reality is that there just isn’t enough data to predict meaningful trends on. Similarly, every disruption impacts the cost, and these disruptions are as unpredictable as future sales predicted using trend models with insufficient data.

You use all of the data available to validate your operations, procurement, and financial situation. Not to blindly predict future sales or prices. An over-reliance on big data is often more dangerous than not having data at all.