Category Archives: Supply Chain

Solving the 2011 Supply Chain Budgeting Dilemma

A recent post over on Supply Chain Matters by Bob Ferrari discussed the 2011 supply chain budgeting dilemma. According to Bob:

Input commodity prices are again on the rise. A recent Wall Street Journal article (paid subscription may be required) notes that in food products, metals, energy and other commodities, prices are again on the rise. As an example, because of the severe crop failure in Russia, wheat prices have risen 34%. In one year, corn is up 44%, milk 6.5% and cheese 29%. Copper is up 30% and other metals such as steel, aluminum and other metals are on the rise.

The implication is that in many industries, firms are determining whether increasing costs will be passed along in higher prices, or will be absorbed or buffered by reduction of costs in other areas … supply chain cross-functional teams will again have to ascertain what assumptions, plans and programs will need to either be accelerated or deferred in 2011.

In our view, these challenges come at a very unfortunate time. Now, more than ever, teams need to be prepared with the supply chain planning and execution capabilities required for the post-recessionary recovery. Most companies who survived the global recession have done so by severe cost cutting and reduction of headcount. While balance sheets remain cash rich and profitability remains at high levels, supply chains are probably the highest state of lean than they have ever been in the last decade.

It’s a bad situation, but it doesn’t have to be. There’s an easy fix. Stop hoarding cash, buy some new systems to increase your team’s productivity, add a few top guns, and go to work on controlling costs along the board. I know it’s never that easy in practice, but it should be.

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P.S.  (Shameless plug.) If you need help selecting those new systems, both Bob and I can help.

Want a More Productive Supply Chain Worker? Take a Page from Tina Turner!

The difference between a productive supply chain worker and an unproductive one is staggering in today’s knowledge economy. As per this recent article in the McKinsey Quarterly on “boosting the productivity of knowledge workers”, raising the productivity of these workers, who constitute a large and growing share of the workforce in developed economies, represents a major opportunity for companies, as well as for countries with low birthrates that hope to maintain GDP growth. However, those companies that fail to keep up with their competitors will soon be swept aside in the battle for supremacy in the knowledge economy.

But knowledge work involves more diverse and amorphous tasks than do production or clerical positions and is thus hard to automate or streamline. Plus, the real returns are often the result of creativity and ingenuity that spark a new innovation — how do you boost that with a system or process? Typically, you don’t. So how do you increase the productivity of your knowledge workers? Simple, you increase the amount of time they have to spend on creativity, ingenuity, and innovation. And you do that by identifying their time-drains and taking them away.

According to McKinsey Research, knowledge workers spend half their time on interactions. Half their time! If they’re not getting what they need from these interactions, that’s up to half of their time wasted. So what can you do? You identify the productivity barriers — which can be physical, technical, social, cultural, contextual, and/or temporal — and you remove them.

If distance is a problem, you get people together when needed. If the technology isn’t sufficient for the types of global collaboration required by your team, you upgrade it. If the organizational modus operandi isn’t appropriate to the locale, you change it. If your people are having trouble understanding their counterparts across the globe, you give them some cultural training. If marketing can’t understand engineering and vice versa, you upgrade their technical skills. And if there truly isn’t enough time, you admit that fact and adjust the project scope and timelines to be more reasonable.

In other words, Tina Turner was right. If you want to succeed, you have to break through the barrier.

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Life Lessons from Clown College: I

I received a lot of positive feedback from my first post, and I must admit, it went to my head a little. I never knew I had so much to offer! So I’ve decided that I am going to share some of the many life lessons I learned in Clown College with you over the next few months in hopes that they will help you become a better procurement professional.

  • Be Flexible

    You never know when you’re going to have to share a car with 11 of your best friends, or an office (after your company decides to downsize). You’ll have to get along, even though you’ll all be highly stressed all day long.

  • Practice, Practice, Practice

    Just like it takes a lot of skill to fold a balloon into a little dog in 30 seconds flat, it takes a lot of skill to to source 100,000 units of a specialized manufactured components in 14 days after Engineering tells you the forecasted demand they sent you in the spreadsheet was missing a zero!

  • Make Sure You Have a Safety Net the First Time You Walk the High Wire

    Just like you’re going to fall the first time you try to walk the tight-rope in your big, floppy clown shoes, something is bound to go wrong the first time you try to e-Negotiate a strategic high-dollar category with suppliers who are still in the paper-centric stone ages. Equipment will fail, a key supplier will refuse to participate at the last minute, or someone will make an unsustainably low bid (and scare everyone else away). Make sure you have your “disaster recovery” plans in place before you start. Have someone standing by to take bids over the phone. Have a relationship councillor at the go to calm the supplier’s fears and convince them the e-Negotiation is in their best interest. Make sure that incorrect and unsustainable bids can be quickly withdrawn or rejected by the event administrator. Otherwise, without these safety nets, the event might fall through the proverbial floor.

I hope you enjoyed these life lessons. Until next time, please join me as I lead the honkers in a rousing rendition of Honk Around the Clock!

Getting Your Supply Chain Ideas off the Ground

A recent article over on the HBR blogs on “five powers that get ideas off the ground” basically outlined the five things you need to do to get your supply chain ideas off the ground. To show you just how straightforward they are, I’m going to translate them for you in this post.

  1. Show UpWoody Allen once said that ninety percent of life is just showing up. It’s as true in business as it is in life. It might take a long time, but, generally speaking, the squeaky wheel gets the grease.
  2. Speak UpFor your ideas to take flight, they have to be heard. Put them forward. And don’t be afraid to stand up when others make claims you know are wrong. As Seen That pointed out in response to my post that Sunk Costs Are Not Underwater Treasure, you have to have the guts to stand up and say, “Yes, but what you bought us is completely useless, because (a) nobody uses it, (b) nobody knows how to use it, and (c) the one person in your department who apparently does know how to use it is up to her eyeballs with work. So you haven’t solved our problem”.
  3. Team UpFind an organization that will benefit and profit from your idea and create a joint initiative. There’s strength in numbers, and if you get enough support, it gets to the point where only the CEO could veto your effort, which she’s not likely to do if enough of her team stands behind you.
  4. Look UpDefine and focus on guiding principles that are ethical and sustainable. Not only is it the right thing to do, but it will score lots of points inside and outside the company in a world that’s becoming ever more focussed on corporate social responsibility.
  5. Don’t Give UpPersist, persist, persist. Everything is a failure until it succeeds. Never Give In!

ISM’s Prediction for the Supply Chain of the Next Decade

A recent article over on the ISM site on “Globalization: An Endeavour in Fluidity” laid down some predictions for supply chains in 2010 and beyond which were pretty interesting as some of them indicate that supply chains will finally in a direction they should have moved five years ago (as regular readers of Sourcing Innovation and Spend Matters are well aware).

The six predictions made were the following:

  • Networks will be demand basedinstead of being inventory-focussed with the intention of pushing as much product into the market. Every market becomes saturated at some point. A supply network has to be demand based to be profitable over the long term. And sometimes, selling less at an optimal price point is more profitable than selling more.
  • Debt load will hinder, advance initiativesWhile many companies will still file for bankruptcy, those companies that have been aggressively working to eliminate debt will be left with more growth possibilities, which will allow them to fund new supply chain initiatives.
  • A shift in the value of innovationThe focus will start to shift away from LCCS (Low Cost Country Sourcing) to LCCI (Low Cost Country Innovation) as companies shift their focus to harvesting the innovation potential in the LCCS markets.
  • Sourcing markets become buyersAs the emerging markets gain a greater share of global purchasing power, organizations will repurpose their networks to supply these markets with goods and services in addition to sourcing from them.
  • Corporate responsibility as a competitive advantageSustainability and corporate responsibility is front and centre in the thoughts of every consumer these days. Those companies seen to be responsible now enjoy greater mindshares than their competitors, and this is leading to greater market shares as well.
  • United States a viable sourcing optionDue to the weakened dollar, the US will continue to remain an attractive location for foreign investment. Furthermore, home cost country sourcing will begin to take hold as many firms realize that it’s just as cost effective to source and produce locally, as it is to source and produce half-way around the world once you take into account rising transportation costs (as oil prices rise again), uncertainties, the weakened US dollar, and the savings from government subsidies and tax-breaks being pumped into the economy to stimulate it.

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