SUPPLY CHAIN RESOURCE COOPERATIVE

Easy steps for supply chain students to ensure they remain unemployed…

May 21, 2013
by: handfield
categories: MBA Supply Chain Programs, Supply Chain Management, Supply Chain Talent, Supply Chain Talent Management

I recently visited with a large services company, and learned a few things talking to their supply chain recruiters that provided some great insights for students to think about.

First, the managers I spoke with talked about things every student who is serious about finding a job should do before an interview:

-       Be prepared – know what our business is! If it is a financial institution, don’t ask about how the bank teller business is.  If it is a manufacturer, don’t tell them you hate the idea of an assembly line job.  A good idea is to pick up a paper, and see if the company is in the news today.  Come in prepared to talk about a current issue that is relevant to the company.  Read about their business on their website, and learn how they are structured and their lines of business.

-       Be able to articulate strengths or weaknesses on your resume.  Emphasize accomplishments you proud of , but also areas where are there notable gaps.  If you’ve worked on an analytics project, or have done a team project, talk about the experience and what you learned from it.  Or call it out as an area of opportunity where you would like to get more experience.

-       Be open to constructive criticism.  Recruiters love to see people who welcome 360 evaluations.  If they seek the knowledge to understand how they can improve – it is a good thing.

-       Think about how the courses and projects you’ve done will translate well into the employer’s environment.  Put yourself in their shoes – why would they want to consider you in the first place?

-       Walk in, look the recruiter straight in the eye, and shake his/her hand.  A simple thing, that means a lot.

–       Connect the dots between what you did in the past – and what you intend to be able to do at this company.

-       Write a thank you note – handwritten.  The note should thank the recruiter for the opportunity to speak to them.  This simple act lets them know that you know how to create a relationship, nurture it, and develop it.  That is a critical skill that is necessary for survival in today’s global supply chain environment.  People will remember it, and it is such a simple act that will pay dividends.  And if you get the offer, you will find this person will extend themselves on your behalf.

On the other hand, if you really DON”T WANT A JOB and wish to REMAIN UNEMPLOYED, follow these simple steps for your interview.  These are all true stories (believe it or not) that recruiters shared with me.

-       Show up for the interview 10 minutes late. The first thing out of your mouth should be “I’m not even a supply chain major.  But I signed up for this interview anyhow!”

-       Avoid looking the recruiter in the eye, slouch in your chair, and put on your best “cool, indifferent” attitude…

-       Start texting during the interview.

-       Even better, lean back in your chair, put your hands behind your head, and stare at the ceiling.  A sure way to get nixed right off the bat.

-       Name drop.  “My neighbor is a big shot in this company, and he told me I should interview and I’d get the job.”  Your name just went to the bottom of the list.  (It is okay to say that you had heard about a friend who worked there and really liked the environment, however.)

-       If you go to a company-sponsored event, take advantage of the open bar and get plowed.  While you’re at it, take the opportunity to hit on a member of the opposite sex in full view of the recruiter.  Guaranteed to put you on the black list.

-       Forget to write a thank you note.  Don’t even acknowledge it happened.  Help them forget you as quickly as possible.

-        If you do somehow manage to get a job offer – tell them they will have to hold on because you’re waiting on another offer for a job that you really want.  Don’t even pretend like you are remotely interested in the job.  Guaranteed that they won’t get back to you.

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Do markets reward sustainable supply chains? The forces of social capital may change the rules…

May 13, 2013
by: handfield
categories: Procurement Sustainability, Supply Chain Management, Sustainability

In a recent dialogue with Barbara Grey, the author of new research on social capital today, we discovered an interesting anomaly.   It seems that companies who seek to identify problems and issues in their supply chain, and who intend to do the right thing, are not always rewarded by the markets for doing so.  In the series of sustainable supply chain assessments we’ve completed this year, our student teams assessed the extent to which codes of conduct were measured, audited, and rewarded/penalized by companies seeking to drive improved sustainable performance down the supply chain.  One would naturally assume that companies that are “doing the right thing” would be rewarded in the market…. but is it so?

Exhibit “A” is the apparel manufacturer, Lululemon.  In recent weeks, Lululemon’s stock went down 10% when it was announced  that they product issues.  The apparel maker pulled some of its yoga pants from store shelves for being too see-through, and their product officer fell on her sword taking the blame.  But they had the guts to do the recall…. and even though they took a hit, the company is fundamentally based on a strong culture of transparency and ethical behavior.  In the longer term their stock is going up.

Exhibit “B” is Apple…as I’ve noted in prior blogs, Apple has begun a campaign of audits, but has not made significant changes to its stable of manufacturing partners as a result. Its inspections have turned up serious violations at hundreds of plants, but only 15 suppliers have been terminated since 2007.  And their stock?  Taking a major hit, and dropped from a high of 700 to below 400…..that’s a lot of market cap to lose.  But was it because they were transparent – and if they do try to drive more change, will they be rewarded?

Barbara recently wrote an insight  on a new phenomenon called Social Capital, which is based on social media as a forum to drive change.  Social media has the power to influence, expose, and disseminate views (both positive and negative) on a company’s products and/or services, including how a company treats their suppliers and stakeholders, and how a company’s business activities impact society and the environment. This will enable parties in the supply chain to self-organize and join forces on a common cause to gain support from others and lobby for social and regulatory reform and change.  In the process, they will begin to create new communities to enable learning, collaboration, and co-creation.

In my opinion, organizations now have to make a tough decision.  To be transparent, or to hide their supply chain flaws.  I truly believe that those organizations that step up to the plate and make the tough calls, drive new measures into their supply base, and lift up the bar for the entire community will win in the longer term…. not the short term mind you – but the long term.  The forces of Social Capital are at work.

 

 

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Supply chain talent management remains a priority at Lenovo

May 10, 2013
by: handfield
categories: China Supply Chain, Supply Chain Talent Management

I recently interviewed John Zapko at Lenovo, who talked to me about some of the issues Lenovo is facing globally around supply chain talent management.  John began our interview by commenting on the importance of this topic.

Zapko:  Without question, attracting talent, bringing it on board, being able to hire this talent and especially retaining talent around the world in some of our most important positions, not only at management levels, senior management levels, but also commodity management and the people that really focus on the procurement activity, driving the supplier-based management… negotiations, contracts. As we drive in this complex world, having that level of talent is really critical for us, and it is clearly the biggest challenge we have.

How do you create talent and why is it so important in a complex world? We’ve been hearing a lot about global complexity and the challenges in dealing with governments, with regulations. Why is talent so important in procurement as you work these issues?

Zapko …Global complexity is becoming more and more significant for us. As we drive our growth, in emerging markets especially, and as we drive our activity into those emerging markets, people that really understand the procurement role, with experience in delivering professional procurement activity… in a more complex environment in the merging market, where government regulations’ specific uniqueness is around contract.

New emerging suppliers and our ability to manage those emerging suppliers become key critical skills and key critical experiences that, if we don’t have, we’re seriously lacking. So we benefit from those greatly, and when we find those people, whether we build that town internally through activity and growth and development, or we hire it in — once we have it and once we’re driving the advantages with it — we really have to retain it. And so that becomes the major initiative for us as we work in this complex world.

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Hey Mr. President, Why Can’t We Be More Like Germany?

May 8, 2013
by: handfield
categories: German supply chain, Global Distribution, Logistics, Supply Chain Talent

For those of you who follow international sports, you know that the king of sports is soccer, and the Superbowl of soccer tournaments is the European’s Champion League.  And what teams are playing in this year’s title game?  Germany vs. Germany.  Two German clubs, one from Dortmund in the Ruhr Valley and the other from Munich in deepest Bavaria, will face off for the European title, which means the nationality of the champion is already assured.

But soccer isn’t the only thing that Germany is admired for.  Recent statements from a New York Times article show that Germany is the envy of Europe for economic reasons as well.  Germany’s stock market is riding high, its unemployment rate has remained stubbornly low and the Continent’s best and brightest are moving here in droves. The article goes on to note that Germany, Europe’s largest economy, is viewed not only with resentment but with a mixture of apprehension, envy and admiration, informed by a belief that the Germans have cracked the code of how to compete in the globalized world, coupled with an uncertainty about whether their efficient, export-driven economic model can be replicated.

The secret sauce for Germany is related to a number of important policies, in my opinion.  First, the trade unions have established a strong relationship with business, wherein trades actually require certification and training to become a journeyman.  Government-influenced negotiations between unions and business ensure that high quality standards are put in place commensurate with high paying jobs for those who are willing to go through the years of training required to become a union member.

Second, the nature of Germany’s supply chain is focused on near-shoring.  German companies simply prefer to do business with local German suppliers.  When one executive was asked why, his response was simple.  ”Who else will buy from them if we don’t?”  This is a point that US companies should think about, instead of off-shoring from suppliers that do not directly support the economy.  If Germany is able to provide high quality, high technology products using local, more expensive suppliers, why can’t the US do so?

Finally, the government in Germany is strongly pro-business, unlike our current administration which seems to view big business as not only the enemy, but the source of all that is wrong with the economy.  There needs to be more collaboration between business and government on a multitude of issues that are impacting our competitive edge, including transportation and infrastructure, education, labor issues, trade laws, environmental regulations.  These are all issues that require smart people from both sides working together to solve, as there will be no easy answers here.

And finally, we need to have role models for young people that drive them towards careers in supply chain, not as NBA or NFL players.  One small step we will be talking about more on this blog will be the introduction of a new BVL chapter for logistics in the North Carolina region.  For those of you who don’t know, BVL International is a global supply chain and logistics organization, based in (you guessed it)… Germany.  So while we can’t replicate their soccer prowess, perhaps we can start to move more towards their business model.

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So Your Supply Chain is Banning Bangladesh….and Going to Cambodia?: “The Ugliest Race to the Bottom”

May 8, 2013
by: handfield
categories: Corporate Social Responsibility, Labor and Human Rights in the Supply Chain, Procurement Sustainability, Supply Chain Management, Sustainability

In our ongoing discussion of labor and human rights violations in the supply chain, we’ve discussed in prior posts the problems that occurred in Bangladesh resulting in over 700 dead.  Companies like Nike and Disney have publicly stated that they are not going to Bangladesh for apparel sourcing in the future.  But that leaves these companies with what other options?

As noted in a Wall Street Journal article today, low cost countries all have the same problems that factories in Bangladesh do.  Sanjiv Pandita, executive director of the Asia Monitor, called it “the ugliest race to the bottom, because the financial crisis in America and Europe means that people are scared of buying expensive things”.  But as any buying agent who has visited these countries knows, things aren’t much better when you visit factories in other parts of Asia, including Myanmar, Pakistan, China, Indonesia, or India.  The same unsafe working conditions prevail, and you are just as likely to encounter the problems with capacity and subcontracting that we’ve noted in other blogs.

According to the WSJ article, conditions in these other countries are just as horrific, although come in different varieties.  For instance, Puma’s factory in Phnom Penh, Cambodia, worked with the Fair Labor Association to discover a “strong possibility” that fainting workers in the factories was caused by chemical exposure and cited excessive overtime and insufficient drinking water as contributing factors.  In Thailand, workers at a factory producing Nike apparel were forced by military personnel allegedly hired by the manufacturer to sign a petition allowing them to be paid less than the minimum wage of $4 a day.  That’s considered high pay when you look at Myanmar, where people are paid as little as 40 cents to $1.10, but that’s only if they have perfect attendence, meaning coming in seven days a week.

This is nothing short of slave labor, and apparel companies are going to have to come together as a group and drive community-based changes.  They may have to increase wages by as much as 10 to 15%, and pass on the costs to the ever complaining Western consumer.  I think most of us can afford to pay $1 more for that “Mickey Mouse” or “Just Do It” t-shirt……

 

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600 Dead in Bangladesh: Is there a soul to the enterprise?

May 6, 2013
by: handfield
categories: Procurement Sustainability, Retail Logistics, Strategic Sourcing, Supplier Relationship Management, Supply Chain Management, Sustainability

News of the increasing death toll in Bangladesh continues to pour in, with the latest at 600 found dead in the rubble of the Rama factory complex.  Demonstrators are protesting apparel offices (such as Gap’s offices in San Francisco) to demand better working conditions in Bangladesh factories.  But how easy is it for companies to turn off the flow of cheap labor?

This is a difficult set of decisions for apparel companies.  Some, like Disney and Nike, have announced that they simply won’t buy any apparel produced in Bangladesh.  But is that really the right solution?  Parliament members in Bangladesh, as well as the garment manufacturers in that country, are pleading with companies not to leave Bangladesh, noting that “the whole country should not be made to suffer.”  Fourteen million families depend on the jobs produced by the apparel industry, including women such as Shaheena, a single mother described in the New York Times article this morning.  Shaheena works to feed her young son, and left her husband who abused her for a job that would allow her to be independent and self-sufficient.  This job meant everything to her, and she was one of the hardest workers.  She, like many others, went in to work when cracks appeared in the building on the morning of the collapse.  Paid $100 a month, she needed the $25 that day in advance wages to pay her rent, which was about $38 a month.

The garment manufacturers ordered other workers to go in.  A big order was due for Benneton and Loblaws, who like other retail apparel manufacturers, worship the deity of perfect order fulfillment.  Get the production done on time, or penalties will result.  Translation:  get people in to work at all costs, even if it means sending them into an unsafe building that is about to collapse.

Viewed from the stoic perspective of supply chain excellence, the idea of getting orders completed on time in full is of course familiar to all students of the profession.  But what are the implications of such an order, when weighed against the lives of 600 people trying to make a living in one of the poorest countries in the world?  Is there a limit to the extremes companies will go to get low value clothing to store shelves?

Of course, executives will always publicly state yes, especially in hindsight.  But there will be other disasters that occur in emerging countries with poor infrastructure, unsafe or inhumane working conditions, and dangerous conditions.  Some companies are taking steps.  Officials from two nongovernment organizations, PVH (Phillips Van Heusen) and Tchibo Group from Germany, have signed on to a group that would ensure a broad plan to ensure fire and building safety in Bangladesh factories.  But this is not enough.  One company executive I spoke with stated it very succinctly:  ”I can no longer be in this business if it means we are forced to work with suppliers who have the potential to destroy our business values and our brand.”  It is that simple.  The soul of the enterprise is directly represented by the values, integrity, and relationship an organization develops with its key suppliers.  So yes, your brand is at stake.  And it is high time that senior executives take on stronger measures to prevent the needless loss of human lives in places like Bangladesh.

So how do other companies rate when it comes to human rights and sustainable supply chains?  A group of 30 MBA students this semester decided to “stress-test” the supply chain code of conduct behaviors of major companies in the retail, aerospace, chemical, and other industries.  The sustainability reports for 2013 are found online.  The scoring mechanism found for these firms represent an impartial, objective view of the integrity of their supply chains, and how well they are driving standards into their supply base.  Read for yourself, and perhaps you can also make a difference.

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A Great Meeting – Insights on the Future of Procurement from BP, Caterpillar, Duke Energy, and others

April 30, 2013
by: handfield
categories: Strategic Cost Management, Strategic Sourcing, Supplier Relationship Management, Supply Chain Management, Supply Chain Talent

We had a series of great presentations this week at the SCRC meeting.

Bill Knittle from BP first presented his experience on building a supplier performance measurement system, and how this has evolved into a true supplier relationship management system.  He talked about the importance of segmenting the supply base, and building out a small cadre of suppliers that were truly vetted, before attempting to build a strategic solid relationship.  This involved application of not only a standard portfolio management appraoch, but surveys of supplier views on how they viewed BP as a customer, as well as a power analysis to identify the relative balance of power in the relationship.  His key question at the outset of every strategic supplier meeting:  ”How do you view the opportunity of working with us as a partner, given your history with BP?”

Bill noted that “For those we are ready to take to relationship management – we have to ask both the supplier and our internal team – what is the real value of doing it?  What are the value opportunities?  The net result of this exercise is we got down to less than 1% of the supply base to be part of a strategic relationship.  I sit on advisory boards with Honda and Cisco – and they would agree with us on that – you can only really build truly collaborative stratgic relationships with the top 1%  of total supply base.”

Next on the docket was Ron Reising, CPO of Duke Energy.  Ron provided another compelling view on the Future of Procurement, and shared the organization model Duke Energy is using to build their merger activity and integrate a diverse supply base.   A supply chain implication of a merger is to understand not only what are the common suppliers, but also the common best practices that have to be identified.  The supply chain group has guaranteed Wall Street analysts savings  - and this is both a challenge and an opportunity.  The opportunity is that the savings goal is a real goal that every part of the business (Fossil-Hydro, Transmission and Distribution,  Nuclear, Major Projects, and Enterprise) had to buy into.  Ron noted that “Merger was almost a lab to compare and contrast different models – and was there a really good sourcing model that would work in each business?”  A core part of the strategy was to recruit people from each of the businesses to drive category strategies – and that the activity is still on-going.”

Pat Murzyn of Caterpillar shared a compelling presentation about procurement transforamtion, and the incredible impact it is having on the organization.  He used the metaphor of a caterpillar transforming itself into a butterfly – it is a messy and gooey operation, but the net result is incredible.  Along the way, people have to shed things they used to have, and have to learn new ways of living and breathing and sustaining.  This powerful metaphor served as a vision for discussing the massive changes in supply management at CAT, including the focus on analytics, P2P, end to end integration, and category strategy, The rubric he followed covered the following approach:

Know the company

Know the organization

Know the gaps

Know the approach

Know your processes

Know the data and technology

Know the people

Deliver results and expect changes

Chris Hitch from the Shelton Leadership Center spoke on the importance of Value-based Leadership.  He emphasized on the importance of understanding first your own values, and then putting in a plan to act on those values in the things you do and you seek to do.  The issue of leadership is one we will continue to emphasize in our discussions…

Jason Schenker from Prestige Economics provided his bi-annual update on his predictions for the global economy.  The basic message – more of the same.  Don’t expect a huge amount of growth, until perhaps 2014 when things may improve marginally.  He also shared a dismal view on the state of unemployment – and the fact that the figures don’t reflect the massive number of people who have dropped from the workforce, as well as the crisis of young people who remain unemployed.  Predictions including increased pricing on commodities and oil – and in 3-4 years an increase in interest rates that is inevitably coming.

Finally, a good friend, David Minshall, provided his lessons learned from working 40+ years in procurement, based on experiences at J&J, Suncor Energy, Enbridge, and other various companies.  He emphasized that procurement doesn’t have a seat at the table beause they have failed to articulate the opportunity well enough.  He also shared his views on talent – and that companies need to recruit more humble, smart, and hungry students who can challenge the status quo, and be assigned not just to tactical problems, but real strategic issues.  His views concluded with the idea of the importance of properly stating the business case through a position paper for all category strategies that results in a clear statement of what you intend to do, and then doing it.

I want to thank all of our speakers, the students for their great projects, and all of the others involved in putting together this great meeting!

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Random thoughts on “close-to-home-shoring” based on my travels last week…

April 27, 2013
by: handfield
categories: BRIC Supply Chain, Contract Management, Global Supply Chain, Supplier Relationship Management, Supply Chain Management, Supply chain Relationships

Last week I had the opportunity to travel first to New York and then Monterrey, Mexico, and speak with a number of people to explore perspectives on the current economic situation we find ourselves in.

Early in the week I sat in on a lecture given by Clay Christenson (from Harvard Business School) to a number of senior supply chain executives at a gathering at the new 7 World Trade Center in New York.  Sitting on a clear day with a 360 view of Ground Zero and the New York skyline, Clay shared with us some of his thoughts on the role of innovation and what he called the “Church of New Finance” in the current economic downturn we are struggling to get our way out of.  He pointed out that this is the longest comeback from any economic recession for some time, and that we continue to struggle with employment.

An explanation offered by Christensen was what he coined“The Church of New Finance,” in which business school professors act as the high priests that indoctrinate their MBAs into a belief system of complex, ratio-based financial metrics as the only correct system of measurement.

The Church of New Finance has created a paradox in which the financial economy prospers with good balance sheets and income statements, while the real economy in terms of jobs creation languishes. There’s currently $1 trillion of capital available, which remains unused. When faced with short-term measures of profitability, companies won’t invest for the long term in disruptive innovations, which would create jobs growth.  Instead, they prefer to invest in sustaining and efficiency innovation which drive short-term gains based on financial internal rate of return metrics, but in fact don’t drive a lot of growth for important innovations that fuel the greater economy.  This got me thinking…..with all of this capital sitting around unused, companies should be seeking long-term partners for disruptive innovation.  And to do this, don’t you need a partner you can trust, especially when it comes to developing joint technologies with shared intellectual property?

Later in the week, I traveled to Monterrey, Mexico to speak to a group of executives at Xignux, a large private manufacturing company of cable, food products, engineering services, and power generation equipment.  Although these four businesses don’t seem to have a lot to do with one another – that was sort of the point of why they fit together.  Each business has its own cycle of growth (with food being the most stable), which in fact provide a solid basis for profitable growth.  A private company like Xignux has the luxury of not having to report to publicly-traded shareholders, which allows them to invest in disruptive innovations that can provide a solid basis for growth, without having to fall victim to the high-priests of the church of new finance… Xignux is making solid inroads as a trusted supplier to utilities, manufacturing, and energy customers in North America, South America, and Asia, because of their ability to demonstrate real growth, innovation, and dependable cost management capabilities in the face of a complex environment.  Many Americans who have previously ignored Mexico (including our president who has visited Mexico once in his six-year presidency) are recognizing that they have a valued partner who is next door, that is on a solid footing with a new government that is on track to drive out crime, control inflation, and provide a stable environment for the supply chain.

Finally, on my trip home I sat next to a sales manager for a large US distributor of wiring harnesses and cable, who was returning from Monterrey back to Milwaukee.  Jim (the manager’s name) told me that he too was seeing more growth in Mexico, as they were expanding their sales offices to support customers in a growing economic region.  He also noted that on his recent visits to China, he has seen newly contracted apartment blocks sitting completely empty, with yet more construction going on….a sure sign in his opinion of a coming housing bubble about to explode. Like me, he also believes that US and Canadian companies will be taking a much closer look at Mexico as a source of “closer to home shoring”.  Not only do Mexican business people speak English (for the most part), but they have a strong business work ethic, respect legal intellectual property laws, and are willing to do what it takes to be competitive.  And their buildings don’t tend to collapse suddenly due to cheap construction…

Random thoughts perhaps…. but even I’m able to start connecting the dots…

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Moving beyond “minimally acceptable” sustainable supply chains…

April 23, 2013
by: handfield
categories: Procurement Sustainability, Supplier Relationship Management, Supply Chain Management, Sustainability

A lot of people are emphasizing the need to drive sustainable supply chains.  “If we have a more sustainable supply base”, we hear from advocates, “…it will cost less, and we will be better corporate citizens.”

I’m not sure I buy this line of thought, although I would certainly put myself squarely in the camp of someone who is for“sustainable supply chains”.  Being green is all well and good, but in the process, it is also important to get a sense of what is “minimally acceptable” , and what is a “home run”…

I recently spoke with a Chief Procurement Officer, who recalled his experiences in driving green manufacturing practices and labor conditions in the semiconductor industry.  “Years ago the electronics industry aligned on an Electronic Industry Code of Conduct.  We would do a heat map around auditing suppliers, essentially a “check the box exercise”, and then declare that “we are sustainable!”  So now we’ve gotten a bit better – we have people who do self-assessments in the supply base, and we still put out a heat map, we do a little more due diligence – and so we think we are okay.”

In the opinion of this executive – “this is the minimal acceptable approach”.  In fact, becoming sustainable needs to be a much broader intention, which begins first and foremost around the value to the stakeholder.  Many organizations today are striving to be green to cater to potential investors (but NOT internal stakeholders).  Private equity funds are starting up “green stock funds”, designed to cater to those who prefer a “green portfolio”.  Some companies have also launched brand redesigns to exploit the green consumer movement.

But in fact, few companies have really driven a green agenda around what the stakeholder is trying to deliver.  Being minimally acceptable is a cop-out.  But driving a solution around what is really NEEDED, and being able to define that need in terms that makes it absolutely critical to drive a different solution is at the core of what it means to be sustainable.  This is a very different question that drives a very different set of decision criteria, and which results in a very different set of outcomes.

This executive noted that he worked for a solar company that produced solar panels at one point in time.  As a supply chain executive, this company did business with Maersk – one of the world’s biggest shipping lines, that burned tons of crude oil products in their operational business as a matter of course.  “By comparison, they had a much better sustainability program than we did!  We were a renewable energy company, and our idea of sustainability was recycling paper!”

Look around – most companies are doing what is minimally acceptable.  Putting in scorecards, doing some measures, filling out WSJ assessment surveys, and putting in programs to get “cookie points”.  But how many are really driving sustainability back to stakeholder value?

The executive I spoke with concluded with another interesting thought:  “ It seems like the people with the burning platform are the most innovative when it comes to supply chain sustainability.  Rather than the burning platform being about the public image, it is about the business.  Are we trying to do the right thing for the business and for the community – and where are we trying to get to?”

 

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Managing supply chains in a fragile environment

April 19, 2013
by: handfield
categories: Forecasting, Strategic Sourcing, Supplier Relationship Management, Supply Chain Management

Gerard Chick and I had a good chat over skype this morning, and we both started jotting down a few facts….

Banks are buying up gold and moving currency out since 2009.  A friend suggests that the banks feel it is very unstable out there, and are hoping for some stability.  But the dollar, the pound, and the euro are all over the map, and the future of the euro is still very much up in the air.

A friend working at a large third party logistics company noted how demand is very soft.  A major provider of apparel is seeking to bypass 3PL in the hopes of taking out costs, but are in fact being bypassed themselves by the retailer.

Regulators are pressing financial services to drive audits of their key suppliers, and have lost their confidence in their ability to manage the intellectual property they have outsourced to third parties.

A large global manufacturing company has frozen their travel budgets due to concerns over revenue.

Are these really signs of growth?  Perhaps this is indeed the new normal.  Maybe the challenge is now about understanding the nature of fragility.  For supply chain executives, there is a need to recognize that this may indeed be the new normal.  The goal for executives in this environment may indeed be just to preserve revenue through assurance of supply, and managing complex cost reduction.  The latter is about managing intellectual assets in such a way to drive cost in a different way – you pay a bit more so the line doesn’t go down for six weeks.  You work with the supplier to take out leadtime in the supply chain and reduce working capital.  You pay more for a supplier to drive productivity improvements in the facility and minimize downtime.  That is really the next new challenge.

Old risk was like driving down a foggy road, going slowly, looking for the center line.  New risk is like walking a tightrope.  Eventually the fog goes away or you get home in the first case.  In the second case, the consequences are much higher – and so people are much more careful.

Gerard talks about managing the tail – the stuff you have to do that is the normal procurement stuff that has to get done.  But the gain line is everything beyond understanding TCO.  This includes demand management – looking to the future, and how might we do this.  Instead of counting money spent, consider how to better spend money in the future.  This gets to the real pure parts of being lean and agile, and working with a local number of suppliers to drive innovation, rather than offshoring.  Using a two by two matrix to classify everything isn’t the solution – the real benefits will be driven by those who can accurately think about the value chain, collaborate with those along the way, including the stakeholder, and establish the right relationships along the way.

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