Innovation – do you WANT to win? Well, do you???

January 26, 2011 Leave a comment

Here’s an interesting, short blog I came across this morning that highlights the importance of a company applying its employees’ “Desire to Win”, re-igniting our competitive drive, you know… that entrepreneurial spirit that can so easily be lost (or shelved) in a large corporate environment…
Reading Time: About 3 minutes:  Innovation – do you WANT to win? Well, do you?

The irrational side of change management…

January 20, 2011 Leave a comment

My January 6 blog talked about the corporate Supply Chain strategy, its’ initiation and the success of its’ implementation depending on engaging internal stakeholders. The embedded chart also referenced Project Management and Change Management, so when I came across the attached McKinsey article, this morning, I thought it was only too appropriate to post this for my fellow readers.

It describes, in a very casual and hands-on style, the truth and the myths behind Change Management, supported by recent corporate examples. It’s a quick and interesting read, and I am certain that you will be able to identify with (and perhaps appreciate) quite a few of the anecdotes and examples. I know I sure did…

Click Here: The irrational side of Change Management

You are what you eat…

January 18, 2011 Leave a comment

… and you know what you read! That’s right! It’s time to feed the mind and put some thought into this year’s reading list. My goal for this year is to read at least one book per month.  – Now, this may not be all that much to some of you, but trust me, it’s more then I may have committed to reading in some previous years. After all, there’s only so much time available besides job, family, blogging, etc…
I want to make sure that I keep up my personal development, expand my perspectives, but also feed my mind some fiction or poetry to escape from reality, every so often…

Here is my Reading List for the first half of 2011 (not necessarily in this order)

– The 4-hour Workweek by Tim Ferris: Simply inspired by Tim Ferris’ perspectives

– Inception by Christopher Nolan: Loved the movie and now want to read the book

– How to Make Friends and Influence People by Dale Carnegie: Took Dale Carnegie courses over 10 yrs ago and never read his books – now it’s catch-up time

– The New Supply Chain Agenda by Reuben Slone: Professionally relevant and chalk-full of case studies and practical applications

– Influence without Authority by Allen Cohen: I heard this one’s a good one…

– The Leader Who had no Title by Robin Sharma: Also came recommended to me…

– Freakonomics by Steven Levitt and Steven Dubner: This one should be entertaining and educational

– Macher im Machtrausch by Günter Ogger –  A book in my German mother tongue– read it about 10 years ago but got distracted and stopped ¾ through it. Now I want to read it again and finish it…

So what’s your reading list for 2011? Remember, January 27 is Canada’s Literacy Day…..

Categories: Books, Reading Tags: , ,

Supply Chain Value in CEO Language…

January 6, 2011 Leave a comment
 If one of your New Year’s Resolutions was to convince the CEO of your company that the core value of your firm’s Supply Chain department does not solely come from the Supply Chain’s functional activities (ie. Procurement and Logistics activities) the attached chart may come in handy for you. In this chart (which is by no means intended to be a complete listing) I have illustrated how Supply Chain can impact most company functions.

 

 In terms of better selling your department’s activities to your company’s senior management it should also help the Supply Chain Enthusiast in you to express your Supply Chain deliverables in the language best understood by your CEO (ie. various metrics of tangible economic value directly or indirectly impacting shareholder value).

 

Secondly, seeing how a Supply Chain Strategy can deliver support to the objectives of the various functional areas, it should also be a reminder that the development and successful implementation of a company-wide accepted Supply Chain strategy requires direct input and consistent collaboration with the various functional areas. Only if your Supply Chain strategy is communicated and accepted throughout the organisation will you have a fair chance at a successful implementation…

 

Finally, while this chart illustrates pretty common Supply Chain activities and metrics to support your current firm’s operation (which a colleague of mine recently referred to as “my day job”), remind yourself in 2011 to step outside the box more often und start questioning the status-quo in order to develop a set of more high-level and innovative objectives. This reminds me of a questioning technique that I once experienced, first hand, with a US border security officer: He initially asked me why I was going to the US. Every answer I then gave him he followed up with another “Why?” in order to get to the next lower level of reasonsing for my prior answer. By the 5th ‘Why?” I was basically out of answers and all I could think of replying was “…because that’s what I do”. – Bingo!! This is the point you want to get to when you question why your company is doing things in a certain way. “Because that’s what we do…” is the type of behaviour that needs challenging and that can lead to innovative and entrepreneurial new ways of doing things….

                                             Click Here for the Chart…

To all of you a Happy and Prosperous New Year!!!

 

Improving your Supply Chain Design

December 5, 2010 Leave a comment

We’re once again reaching the end of another calendar year and it’s a good time to look back and evaluate how successfully every one of us has lived up to his or her professional commitments.

 But it’s also the perfect time to look ahead and determine what will be our objectives for the upcoming year. What tasks, projects, and strategies is it that we need to pursue in order to ensure our organizations remain running at their best?

 Most of us already have a list of objectives that may take us through the better part of next year to complete – so let’s put this list aside for a minute and think outside of our busy pre-defined day-to-day responsibilities:

 What Political, Economical, Social or Technical factors (that’s right: PEST) are we predicting to hit our company in 2011 that may cause us to change our priorities and spend time on fire-fighting activities to keep things on track?

 Will more industry consolidation push the pendulum further towards a seller’s market and thus expose your company to additional supply risk?

 Will global economic uncertainty and volatility keep key equipment production at minimum levels and thus further deplete safety stocks and increase lead times? (not to mention economic and political uncertainty associated with global logistics itself)

 Will a continuing shortage of adequate financing options force you to shelf those expansion plans and require you to come up with more creative ways to increase production capacity, equipment availability and utilization?

 They key towards preparing for the expected and the unexpected lies in maintaining a higher level strategic perspective. Here are 5 Steps that should help you towards a more resistant Supply Chain Strategy:

 #1) Make sure your Supply Chain is not just designed for operational efficiency but also for strategic advantage

Supply Chain touches all core functions of a company’s operations. Today’s success stories show that innovation in Supply Chain design is vital to competitive advantage. Think about how the various competencies in your organization could benefit from a more embedded Supply Chain strategy.

 #2) Implement Collaborative Relationships

If you know of a strategic initiative that could lead to improvement the go ahead: Lead initiatives that aren’t necessarily Supply Chain-driven. The experience and exposure will lead to new relationships inside and outside your department and will facilitate much-needed Supply Chain penetration.

 #3) Forge Supply Chain Partnerships

Working together beats going it alone – and if it’s with a supplier it doesn’t mean all your ‘chickens’ are now guarded by the ‘wolf’. And if in the past your company was more set on dealing with suppliers in a short and highly cost competitive manner, now might be a good time to try the other approach – Supply Chain Partnerships are highly valuable and the extended enterprise is powerful and is for real.

 #4) Manage your Supply Chain Information

Make sure, consistent measuring and reporting (not by converting meaningful data into high-level meaningless averages) show that you are either progressing towards succeeding wildly or towards failing miserably. And make sure measurements are not simply focused on value created by Supply Chain (ie. as justification for your existence), but also focus on progress made in other departments, incorporated and supported by a Supply Chain strategy – All leading towards a better overall company performance.

 #5) Make money from the Supply Chain

Managing costing pro-actively and in-line with a procurement strategy will continue to bring home the bacon. No matter if you are in a manufacturing environment or in a wholesaler distribution business, don’t wait to think about costing (or even worse: thinking about a procurement strategy) until you receive your supplier’s semi-annual price updates…

And that’s all the wisdom I will pass on for the year 2010.

At the beginning of this year, one of my personal goals was to start a blog about Supply Chain Management – something I feel passionate about. The idea behind these short articles is to share thoughts and information that have been helpful to me and hopefully proof interesting and valuable to you. Writing this blog has been an interesting experience and I am appreciative of the relationships that have developed as a result.

 I look forward to sharing more in 2011 and I look forward to hearing from you.

To all of you, Happy Holidays and All the Best for 2011!

What’s the value of your Savings?

September 16, 2010 Leave a comment

There is no better way to start an argument among a group of Procurement Professionals than to mention the topic of savings measurement.

But why should the measurement of purchasing performance be such a contentious issue? Probably because the subject is both important and difficult. Important because in most companies “Savings” remains the ultimate measure of the impact of a procurement organization. Gladly, some companies are starting to include other shareholder value-drivers such as security of supply, exclusive access to a resource, and other non-conventional measures of delivering competitive advantage to the organization. While measuring savings in itself is more of a rear view mirror approach to measuring value, it is historical and it forgets the competition… Difficult because, if there was a simple solution to the measurement problem, we would already be using it and there would be no need for further debate.

 Everyone would like a single, absolute unarguable number that represents the contribution of purchasing to the business. Certainly, most CFOs would be delighted with such a number.

 In practice, there are a number of well-established measurement systems, each with their own advantages and disadvantages:

 “Net of market”—here we try to estimate the effects of the market, and remove them from our equations. This requires good understanding of the market when you set your targets, and has the disadvantage of “cost avoidance” effects where the budget of a category in real terms goes up while procurement at the same time claims savings.

 “Gross” measurement—here you bundle market movements into the measure. You still need a good understanding of the market when you set your targets, otherwise you risk overstretching your people when prices are rising. It also has the disadvantage of “wind fall” effects: showing apparent good performance when the market moves favourably.

 Against budget—here you need a good understanding of the market when you set your budgets, and you end up with a measure that is directly equivalent to the “gross” method.

 Against model—A refinement of the net method, here you build a model to attempt to capture external effects on prices and measure your performance against that model. This method requires sufficient understanding of the market to build a good model, something which can be useful in itself.

 Before we worry about which of these to choose, it is instructive to take a step back and think about why we want to measure purchasing performance. There are two fundamental reasons: the internal steering and management of the function; and external appreciation of purchasing efforts. Let’s look at these in turn.

 Internal steering. People often forget that in management, steering is a feedback loop, and that the feedback process is at least as important as the measurements used to drive it. If you’ve ever studied electronics, you’ll remember the way feedback allows unpredictable electronic components to deliver highly predictable, useful results. In management, feedback is equally important. If you have meaningful strategic discussions, target setting, aligned incentives and effective post mortems, you can drive the whole purchasing function with “good enough” metrics. A measure that is 80 percent right will keep you moving in the right direction. Any of the measurements approaches outlined above would do that for you.

 External appreciation. This can be a thornier problem. Every CPO and purchasing professional wants the wider organization to recognize the value of their efforts, but all too often they run into the same issue: If the purchasing function issues its own numbers, however impressive they are, there will always be a slight suspicion that they were achieved through sleight of hand.

 Fortunately, there is a simple solution to this problem. If controlling doesn’t believe your figures, use theirs. In the long run, it is far more powerful for purchasing to deliver $50 million of independently reported savings than the $100 million it claims for itself.

 There is no doubt that debate about the measurement of purchasing performance will continue, but we could help ourselves by arguing a little less about which measurements we use and a lot more about how we use them.

Categories: Supply Chain

BP removed from the Dow Jones Sustainability Indexes – Now What?

Part of my group’s responsibilities is to ensure that our suppliers comply with our company’s Supplier Code of Ethics. This code ensures that not only we are conducting business in the most compliant, ethical, and safety-conscious manner, but that our suppliers also follow these rules (and ultimately enforce these rules with their sub-suppliers). On an annual basis, I reach out to our suppliers and have them complete an on-line check list. Since many of the questions of this on-line survey are derivatives of the principles of the UN Global Compact (referred to in the Dow Jones Sustainability Index (DJSI)), this June 1, 2010 press release has now triggered a thought process in me of just how deep we need to go to determine if suppliers are truly compliant with a company’s code of business or how much investigation or proof of compliance is actually required. The answers to this are not clear to me at this point. Is the importance of suppliers’ compliance (and its’ impact of a company’s dealings with them) a question of economic viability? Should every company listed on the DJSI discontinue dealing with suppliers that were de-listed from the DJSI due to cause? I believe that as much as Supplier Code of Ethics, DJSI’s, and other various compliance and Sustainability efforts are still in their early development stages, so is dealing with the consequences of subscribing to them, complying with them, and no longer being in compliance like in the unfortunate case of BP’s latest catastrophe (and how allegedly their crisis management execution was not in line with their stated principles and policies). There is probably no “black & white” answer to this, either, and I believe it’s important to remain aware of the motivation and background for companies being listed or de-listed on the DJSI.

 That being said, below is the above mentioned press release and attached is the latest Sustainability Yearbook 2010 which offers some interesting insight into the Sustainability efforts of some 300+ companies…

On June 1, 2010, the website of the Dow Jones Sustainability Indexes (DJSI) made the following press release:
The oil company BP plc. was removed from the DJSI, effective May 31, 2010. As a component of the DJSI World Index, BP was subject to index rules that allow for elimination from the DJSI following extraordinary events.

No substitution was made to the DJSI World components. The DJSI World now has 315 components. The extent of the oil-spill catastrophe in the Gulf of Mexico and its foreseeable long-term effects on the environment and the local population – in addition to the economic effects and the long-term damage to the reputation of the company – were included in the analysis leading up to BP’s removal. The decision, which was taken by the Index Design Committee, was communicated to the company.

Companies are selected annually for the Dow Jones Sustainability Indexes based on the SAM Assessment. The construction of the DJSI family is strictly rule-based which applies to the inclusion and exclusion of companies in these indexes. Index components are monitored daily for newly arising critical issues. The subsequent analysis assesses a company’s involvement in economic, environmental or social crisis situations and compares its crisis management against its stated principles and policies.