SUPPLY CHAIN RESOURCE COOPERATIVE

In a recent article in Supply Chain Navigator, I spend some time discussing the interesting relationship between the introduction of wolves in Yellowstone Park, and the evolution of digital supply chains.

When the wolves were all killed off in 1926 due to over-hunting, the elk population erupted, and the larger herds took a heavy toll on the systems’ trees and plants. When 31 wolves were reintroduced into Yellowstone in 1974, ten years later the population had grown to 301. Not only was the elk population reduced by half in the years that followed, but the over browsing of wood species by elk, notably aspen, cottonwood and willow was halted. This “trophic cascade” of wolves impact on increasing the population of trees, also impacted the lives of beavers, which feed off willows. And the wolves also reduced the number of coyotes in the park, which feed on young pronghorn antelope. Studies have shown that fawn survival rates are four times higher in sites with wolves then without them.

The rationale behind this is simple: Predators keep the balance of nature, and mankind needs to think about letting the natural rules of evolution play out. In the world of supply chains, the “natural rule” of evolution also emphasizes open and free trade, emphasizing open forces of competition, that drive naturally occurring outcomes. When wolves or elk are out of balance, bad things start to happen to the natural ecosystem. By the same token, supply chains should also compete fairly.

In our new book “The LIVING Supply Chain“, Tom Linton and I  propose that humankind needs to seriously consider letting the natural rules of evolution play out in the world of supply chain commerce as well. Today’s supply chains require competition to thrive but also require a degree of harmony. This is an important concept to remember, as we face a new world order that is increasingly localized and closing borders.

The “natural rule” of evolution emphasizes open and free trade and open forces of competition, which can spur innovation and continuous improvement. In this new fast-moving, digital economy, unbalanced supply chains can cause a cascade of economic impacts and instability.  Competition is good – but so is transparency.  We need both to keep the ecosystem healthy, and the wolves roaming for prey.

A New York Times story suggests that may change, researchers say, as more hunting is allowed in the states that surround the park.  As the packs grew, many wolves roamed outside the national park, replenishing the wild lands. Wolves now number about 1,700 in the Western states of Montana, Idaho, Wyoming, Oregon and Washington. Threats to livestock have intensified in recent years, pitting ranchers against conservationists and prompting some states to permit limited wolf hunting again at certain times.  A paper published last year by Dr. Smith and others found that sightings of wolves in Denali and Yellowstone “were significantly reduced” by as much as 45 percent from trapping and hunting.  Let’s keep the wolves healthy, and not hunt them down, for the good of everything in the ecosystem!  And think about this the next time you negotiate with a supplier or distributor, or when you vote for a politician who wants to shut down free trade…

 

 

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I recently published a white paper with Balaji Soundararajan and Joe Yacura, focused on the topic of data governance. The paper was published with the support of Bravo Solutions, and also included respondents from the SCRC.

The study deals with an issue that most organizations face today: the overwhelming amount of data being collected and stored both internally and externally. With the sheer volume of data projected to increase tenfold by 2020, the procurement and supply chain function is no exception to challenge of assessing better ways to leverage this dramatic increase in both structured and un-structured data.

These same organizations are seeking to adopt advanced analytical practices and utilizing innovative business intelligence approaches. The nature of these mechanisms is reliant upon continuous availability and utilization of data from multiple sources. Companies have invested significant infrastructure to support the availability of data in various structured (databases, data feeds etc.) and unstructured (social media, emails, text etc.) forms that provide volume, variety, velocity and veracity. The term “Big Data” is pretty commonplace to describe this activity using data. A basic assumption of all “Big Data” initiatives is that there are reliable sources of high quality, relevant, complete and accurate sources of data that support decision making. Given the volume of data and the expectations of quality, value and speed; procurement organizations need a strong “Data Governance” program in place.

“Data Governance” is a system of decision rights and accountabilities for the information-related processes, executed according to agreed-upon models which describe who can take what actions with what information, and when, under what circumstances, using what methods.
(“Data Governance” Institute). If this seems fairly straightforward and obvious, then think again. The results of our survey found that 68% of companies in America agree that their decisions were definitely impacted by a lack of solid data. Further, there is little clarity on what is meant by the term ““Data Governance””, and no widespread agreement about who is responsible for it. So far, there is no clear role on how procurement will handle current and future “Data Governance” needs. Only 15% of procurement leaders know or understand the specific presence of data governance functions within their companies.

Perhaps the most important function enabled by Data Governance programs is to ensure acceptable data quality levels for procurement function. Standardizing data quality across the entire procurement function will certify the veracity of analysis using any approach. Of the traditional six dimensions to data quality, Accuracy ranks the highest priority among the procurement professionals we surveyed, followed by validity and completeness. Our study also showed that governance programs helped increase overall data quality by 33% on average.

How should companies get started on a data governance program? Download our paper to read more…

Data Governance Survey | The Results are In!

Hi Andrea,

On behalf of BravoSolution and North Carolina State University’s Supply Chain Resource Cooperative, thank you again for taking the “Data Governance in Procurement Survey” a few months ago. As we promised, because you took the time out of your busy day to share your thoughts, you have first access to the report before it is officially published. The goal of the study was to determine how Procurement can truly benefit from advanced analytics.

Investment in Data Governance is a Foundational Requirement for Procurement

As companies seek to derive value from investments in advanced analytics, a recurring but often ignored subject that comes up in discussions is the challenge around data governance. Data Governance is a system of decision rights and accountabilities for an enterprises’ information-related processes that specifies how data is collected, flows, and is organized. The results suggest that despite having access to more data than ever, almost two thirds of organizations note that “bad data” is the primary reason for less than optimum decisions in procurement.

This report highlights the importance of data quality and governance mechanisms that organizations can put in place to achieve value. The results of this first Annual Procurement Data Governance Survey emphasizes that for organizations seeking to harness the power of analytics, investment in data governance is a foundational requirement for procurement.

Thank you again for your participation in this survey!

Sincerely,

Andrea Brody
Chief Marketing Officer

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It is no secret that future generations of managers are being asked to learn all about the different processes in the end-to-end supply chain, and be able to come together with others in a fast action plan when a disruption strikes. This capability in turn requires older generations of managers, often labeled “subject matter experts” who are willing to serve as key informants to educate these younger folk, and who are willing to transcend typical functional barriers between sales, operations, and procurement, to offer insights into the right solutions to different types of business problems.

Today, such experts often exist in a vacuum in a different geography or location within large organizations. And people are often hesitant to bother these experts, or in many cases don’t know who they are, nor how to ask the right question that helps to access the specific gray matter between the ears of these experts for help with a specific problem! In an ideal world, an individual would “ask the system” how to solve a problem that is new to them, and be directed to the learning materials or individual to advise them on on how to deal with that situation. In reality, this situation poses some unique challenges. One of the interesting observations from experience is that older managers are occasionally more hesitant to share information, as they worry if they give it all away, they will be made “redundant”. Younger generations have been observed to “share faster”, but often don’t have that much knowledge to share to begin with.

Systems such as IBM’s Watson are being designed to help capture knowledge through resolution room activities, that can lead to a learning capability around situational intelligence. Over time, as the system learns, it can be used to better train young professionals based on the expert work of more experienced supply chain professionals. For instance, Watson might be able to make a recommendation based on an observation that “The expert looked at this report, this set of data feeds, and requested these inputs when they encountered a similar situation.” In this manner, such cognitive learning systems can emulate the footprint of a company’s best and most knowledgeable experts, and capture them in a system.

A critical skill that future generations of supply chain managers will need to embrace is the ability to interact with a cognitive learning system such as Watson. The popular press acknowledges that in order to drive to a truly transparent, real-time, and cognitive environment, individuals will need to fully comprehend the need for an end-to-end view of the supply chain. In the past, individuals have been trained to optimize in their own business function, leading to “silo’ed” views of the function. Optimized decisions in manufacturing would lead to inventory shortages or surpluses in other parts of the chain. Sales forecasts that were designed to avoid “stocking out” created inconsistent signals for others in the chain (the well-known “bull-whip” effect). But moving to a broader view also requires that individuals be able to absorb much more information from a diversity of sources. End to end views produce a plethora of data that is overwhelming!

Clearly, cognitive learning systems are not just about creating a data science experiment. Rather, they involve enabling a dynamic workforce to embrace change and complexity, and be able to quickly learn from both machines and other humans in the supply chain. The machine-human interaction will become even more critical, as humans learn how to scale and work with technologies like Watson.

Because cognitive learning systems have the ability to learn and learn faster than humans, technologies such as the Watson “knowledge studio” can create domain-specific models that feed into a Natural Language environment. These studios will benefit by having “super-users” interact with them, forming “playbooks” that provide guidelines on decision-making in the face of uncertainty. These playbooks reflect common processes that might arise under different conditions in specific industries. Examples include order to cash, facility turnarounds, sales and operations planning, missing a delivery promise date, distribution to customer transportation planning, customer demand planning, logistics optimization, and other “foundational playbooks”. But IBM is also conscious of the fact that every client will have their own unique supply chain business model, constructs, and culture. So while such playbooks will provide a starting point for use, a module known as “Watson conversation” will customize this to learn each individual’s context when he or she is interacting with the system. If an individual is working from a different role, whether in shipping, logistics, or procurement, they will be coming at the system from a very different frame of reference.

This evolution of the human-machine interaction has the potential to be very powerful, as Watson can eventually become an advisor to individuals in the supply chain. This is about having the platform “wrap around” the individual, and learning how they interact with the system, creating cohort mapping systems, identifying data sources, and making that individual more effective. This can lead to improved productivity, with individuals no longer having to comb through mountains of data to make a decision, as well as helping new individuals to adopt to a new role. The ability of systems to emulate at both the organization and individual level will require a new type of manager, one who is proficient in working with machines, and able to adopt their queries and thinking to exploit the data present in the ecosystem.

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The relationship between sales and procurement has always been a contentious one, and the idea of a friendship evolving between the two functions is laughable in the minds of many managers I’ve met with. The issue at the core of this tension is the concept of value recognition. Sales account managers accuse procurement of being purely price focused, and not recognizing the components of value. Procurement executives on the other hand complain that sales account managers are always trying to “work around them”, and to make the commercial sale to engineering, operations, clinicians, or other business stakeholders. “Sales people are always trying to raise prices and “design themselves in” to our organization, without being competitively tendered.” But sales people complain that procurement “does not recognize the value we bring to the business, in terms of quality, service, and reducing the total cost of ownership!”

So who is right? We recognize from the outset that these conditions will vary by firm, by industry, and indeed by individual characteristics. This situation does not always accrue – as there are cases where harmonious partnerships exist between sales and procurement. But this is the exception, not the rule. In an effort to better understand this issue, the NC State Supply Chain Resource Cooperative held a one-day executive summit, to discuss these issues in an open forum. We invited eight procurement executives from oil and gas, electronics, business services, industrial manufacturing, chemicals, and healthcare industries, and brought them in to meet with five sales executives from a large third party logistics provider. In this forum, we covered several major questions, and held open debates on these issues. In addition, both groups shared their internal tools and mindsets around customer/supplier segmentation, key issues that define strategic relationships, the effective use of performance measurement, and the types of disagreements that occur around contract negotiations. The outcomes provide a compelling picture of the great misunderstandings and myths that often exist in both sales executives and procurement executives as they approach one another. The lessons learned from this meeting have been encapsulated in a white paper, which will be read by all participants prior to the workshop.

Because sales executives have developed such a fear of procurement, their de facto position has always been to “avoid working with procurement”, as depicted in some of the sales training materials. And yet, this position runs counter to the current trends in which centralized procurement executives are playing a much stronger role in leading commercial discussions with third party outsource providers and suppliers. There is a fundamental need for sales to learn more about understanding how procurement is likely to react to their sales strategy and proposals, and to test the waters with the introduction of sales approaches that are new or which have not yet been pilot tested with new or existing customers. Sales people need to learn that procurement “can be your friend”, and drive engagement and growth in the business, if the dialogue is couched in the framework of reduced total cost of ownership, improved customer service, reduced working capital, productivity improvements, cycle time reduction, or innovative revenue drivers. On the other hand, procurement also needs to better understand the value proposition that sales people bring to the table, particularly in large, complex outsourcing deals where business process integration can directly impact customers.

In a recent workshop I held with a group of sales executives, it became clear through the dialogue and discussion that there continued to be misperceptions about what procurement can offer. Procurement was seen as being purely price-focused, and not understanding the concepts of value. As procurement has moved to a more centralized role, with oversight over all commercial contract relationships, the issue that emerged with these executives was that procurement was now a “necessary evil”. Indeed, when asked to describe procurement in a single word, executives used terms like “difficult”, “barrier”, “PIMA”, and others! Over three days, we were able to demonstrate that it was important for sales to work with procurement to better coach them on how to translate the proposals sales had for them, into tangible dimensions of cost savings. These savings needed to focus not so much on “price”, but on total cost of ownership, derived through improved productivity, reduced consumption, eliminating waste, optimizing freight loads and transportation networks, and other costs that are often “buried” in the balance sheet. By helping procurement to “look good to their boss”, by bringing these potential cost savings opportunities to stakeholders within the business, the possibility of expanding the length of the contract and avoiding a new bid on the contract was much more likely, as the opportunities to improve expanded. It also became clear that sales can “grow their account” with procurement, if they have a demonstrated track record of continuous cost improvements that address other areas of the business, their extended operations, or even the end to end supply chain. As an example, sales could inform procurement that “if you allow us to oversee more of your transportation, we can offer to you the volume discounts that we are able to negotiate with providers because of the size of OUR buy in the transportation space.” These types of scenarios intrigued and excited many of the sales people in the room, and the real possibility of becoming a friend to procurement began to emerge…

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I had an opportunity to watch some hilarious sourcing videos recently that I discovered on a sourcing blog by Citro Strategy.

The three scenarios depict the actions of “hardball negotiating” procurement approaches, that are  translated into  negotiation scenarios that  individuals in the consumer sector would never dream about using!  (Actually, I’m sure that anyone who has worked in these environments has probably seen some of these issues before!)  The video takes the viewer through some of the typical arguments used by procurement, applied in a consumer setting.

What is funny about each of these is the subtext that procurement uses in each instance to justify their demands for a lower price, that make no sense and are in fact insulting to the provider/supplier.

Restaurant Scene – procurement often uses the argument that they don’t have “the budget” for the requirement that they just contracted for.  In this case, the purchaser notes that what they paid for is similar to what they purchased at a “taco stand”, an allusion to the practice of benchmarking.  The server notes that he ordered a filet, and the response is “but they are both cow!”  Again, the distinction of trying to tie commodity prices to an upscale product or service is not appropriate, and is a way to try to chisel down the supplier.

Video Store – the purchaser tries to again get a “deal” on a full-price video, but claims he doesn’t have the money to pay for it.  He works every angle, including trying to create a “partnership”, but in reality not seeking to offer any type of benefit in return, other than a vague promise to give the supplier more potential business in the future.

Hair Salon – the purchaser is seeking to get something for free – highlights, but will only pay for a trim.  She claims that this is a “test”, an incentive to try to innovate and bear all the costs, with the somewhat vague referral to future business that may or may not occur.  This happens when procurement tells suppliers to “run a pilot project” for free, and then I’ll let you know if you get any more business.

What makes these videos disturbing, however, is the fact that these tactics are often readily adopted by buyers seeking to drive down cost, without understanding the total cost associated with the product or service that the supplier must bear.  Improved RFQ’s and better defined statements of work can help a lot to alleviate this situation.  There is a great piece on developing good RFQ’s that readers should look at on Cirtuo Strategy Hub.

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The Supply Chain Resource Cooperative held its bi-annual Industry Partner Meeting in the Talley Student Center at North Carolina State University this past week.   The theme, Navigating the Future in an Uncertain Political and Regulatory Environment”, included a keynote I gave, followed by presentations from Jason Schenker (Prestige Economics), Tim Barnes (AsiaPacific Consulting), and an industry panel of experts, representing a variety of different public and private sector companies.  Participants also attended the Innovation Showcase in Nelson Hall,, featuring two winning supply chain teams in the undergraduate and graduate divisions!

I began the discussion with an overview of the many uncertainties that confront supply chain executives, as well as some preliminary forecasts based on my recent discussions with executives in a variety of industries.  In general, some of the key takeaways that I presented were the following:

  • Given Trump’s strong personality, there is no doubt that the political environment will continue to waiver.
  • The general consensus today is that there will be an  increase in spending (especially in infrastructure) and a decrease in taxes, but also a decrease in regulation. However, when you cut taxes and spend more and don’t have money – it will cost more to finance debt.
  • The risks to the economy haven’t changed at all and the Fed will likely continue to drive higher interest rates despite extra spending – so this may present a situation of stimulating fiscal policy against tightening monetary policy.
  • The dollar will remain strong, and this will hurt exports.  The likelihood of a reduced corporate tax is good, but a reduced personal tax will hit a lot of challenges.  The barriers to global trade may or may not occur, as there is a lot of political influence on behalf of many industrial interests.
  • The Economists predicts GDP growth will range between three scenarios:  4% (15% probability), 2-3% (60% probability), and recession (25%), the latter scenario involving a global trade war and a crippled presidency.

Jason Schenker provided an interesting backdrop to these discussions also, noticing that optimism is very high for corporate and personal tax reductions, regulation reductions, and more government spending.  But as he noted, “Expectations – Reality = Disappointment!”  In February, the GDP forecast for 2017 was 3.4% – and in April, it is 0.5%.  So there continues to be a lot of shifts in the perceptions of what will happen in the economy.

Jason also shared a number of interesting and compelling graphs that suggested other things going on in the global economy.  For instance, he showed a major drop in auto sales in Q1, a strong dollar impacting Q1 trade data, a European Central Bank heavily focused on inflation, and the fact that we are near full employment.  As such, tougher immigration laws are likely to drive increased wage rates and even tougher employment conditions for companies.  He also looked at commodity prices and especially aluminum, noting that they pointed to the fact that the Chinese recession is effectively over, and that we are likely to see growth in industrial metals, higher global demand, upside risks on oil prices, and gold prices going up.  Finally, Jason commented on insights from his latest book “Jobs for Robots“, that suggest that higher level human jobs will never be fully replaced by robots, but that mundane and low cost jobs very well could be.  Education is the best medicine against having your job “robofied!”

Tim Barnes, who has written in this blog in the past, was our next speaker.  He shared insights from his book on “A Naked View of the Trans Pacific Partnership“, but rather than focusing on the TPP, discussed a number of important trends stemming from the US’s withdrawal from the TPP.  He began by discussing how Free Trade Agreements, along with labor costs and transportation rates, are among the three most critical elements to factor in when analyzing global supply chain decisions.

He also noted that many companies have a strong focus on globalization, as countries like Yemen, Mynamar, Cote D’Ivoire, and Mongolia have 7-8% growth rates. India and China are both growing at rates of 6-7% as well. Textiles in India is going up – but geopolitical risks are still very high in all of these regions. There are some talks going on between North Korea and China, and as China buys a lot of coal from North Korea, so this may take a while in terms of pressure, but the two at least are in talks following Trump’s visit with the Chinese leader.

After the US dropped out of the TPP, the other 11 countries met in March 2017 to look for a 12-1 scenario. Australia and Japan are pushing to continue, however Malaysia and others are moving on, as they are not going to join now that the US is gone.

What US industrial leaders must now worry about is the Regional Comprehensive Economic Partnership (RCEP) which includes China, Japan, Korea, Vietnam, Brunei, Australia, New Zealand, Thailand, Cambodia, Indonesia and others. It excludes Canada, USA, Mexico, Chile, and Peru. It is expected to be concluded this year – and it represents about 30% of global GDP and almost half o the world’s population.   The RCEP doesn’t cover labor laws, data, information services – just products. This is what China wants – and so it is the focal point. The US is on the sidelines, and may be invited at some point in the future, but since it has not been part of this from the beginning, the rules have been already established.

Tim also discussed the “One Belt One Road” project in China.  Surprisingly, almost no one in the audience (including me) had heard of this. This project is a 100 year trade strategy that China has undertaken. It is $4T-8T undertaking, that will include Free Trade Agreements, involving a modern version of the Chinese “Silk Road”, going from China through Western Asia, the Middle East, and linking their their maritime network, SE Asia, Africa, the Middle East, and Europe. China will form Free Trade Agreements with every country along this entire network. It is a modern version of the old Silk Road, which sought to maximize trade with Europe and the countries between them. The One Belt One Road project covers 65% of global population and 34% of global GDP – and this will connect the future of low cost locations with value added locations, and will exclude South Korea, Japan, the Americas, but the RCEP will link this countries in.  This is a development that we all need to be more aware of.

Next, our industry panel spoke on a variety of perspectives that were fascinating to hear.  The panel included both public sector experts (Dianne Lancaster, Chief Procurement Officer, State of Oregon; Jon Johnson, CPO IT, General Services Administration) as well as private sector experts (Joseph Martinez, CPO, MUFG; Ian McCullogh, Managing Director Supply Chain Strategy & Operations, Duke Energy; Mike Cockrill, VP Supply Chain Management, Bayer Crop Science NA; and Ash Patel, Vice President, Kymanox).  These individuals provided a number of compelling and articulate insights into how they view many of the perceived risks around the current economic and political environment.  The general consensus was that the press is often focused on selling ad placements, and is always going to create a lot of noise around the president and his administration.  It becomes important to separate the noise from the real impact, and in most cases, these issues are not going to have a material effect on current strategies and policies in the supply chain.  As for the public sector, there are risks associated with the downsizing of government, as our speakers reminded us that most new innovations have to go through approval and permitting through the government, and that “cuts” in government are likely to slow down these processes.  Interestingly, a member of the audience pointed out that the ratio of government employees to the number of people in the US is at its lowest point in the history of the country!  There was also a number of interesting points of view related to the importance of talent and investment in innovation, as corporate balance sheets are in a bloated state, and companies are still often loathe to invest.

Following this session, we all proceeded to Nelson Hall, to participate in the Innovation Showcase.  I had the opportunity to meet with a number of student teams, and was impressed by many of these, especially as many focused on predictive analytics and cost modeling approaches that were highly unique.  An example of one of our teams working with Aramark, one of our partners on a predictive modeling study, is shown below.

Two of our teams won prizes!  An undergraduate team working with Bayer Crop Science took first place, and an MBA team working with John Deere took second in the graduate competition.  Details on these projects can be found at this link.

Congratulations to all of our students who completed great projects this semester!!

 

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On April 19th and 20th the Supply Chain Resource Cooperative held its bi-annual Board Advisory meeting and Partner Meeting in the Talley Student Center at North Carolina State University.  The program was really exceptional this year, and the riveting discussions left everyone with a lot of nuggets and insights to take with them to work next week.  That, coupled with the Innovation Showcase in Nelson Hall,, featuring two winning teams in the undergraduate and graduate divisions, made me proud to be a faculty member working with the great students and industry partners that are part of this collaborative partnership.

The meeting kicked off with our Board Advisory meeting.  This was an opportunity to hear directly from our supporting partners, and get their feedback.  This meeting led off with a presentation from Bayer Crop Science, who had the bragging rights around winning Supply Chain World’s 2017 “Supply Chain Breakthrough of the Year”.   This is the equivalent of winning the Supply Chain “Oscars”, and we had the privilege of hearing Mike Cockrill share these insights.  Bayer won this award for its work in helping to bring agricultural supply chain into the 21st century. In the face of the depressed agricultural economy of the past three years and the substantial revenue loss throughout the channel, Bayer Crop Science developed a new collaborative, integrated and comprehensive approach to supply chain management. Named Supply Chain Integrated Planning (SCIP), Bayer’s program has greatly reduced the unnecessary storage of high quantities of pesticides throughout the year, in an effort to be more environmentally responsible.  Mike shared how this has helped Bayer with the challenges around forecasting in light of the different temperature cycles across North America.  He emphasized that the need to “think differently”, take a big risk on an idea that had no precedent, and running a small pilot to learn from was key for success.

Next, Mike Schobert from John Deere and Tom Nash from the American Red Cross presented their work on identifying what are the key business issues or talent needs are for supply chain students. These gentlemen spent a lot of time thinking about the skills and capabilities they need their newly hired students to EXCEL at.

They came to the conclusion that no single supply chain class can solve this – but there were some common skill sets that came out. They identified first the key issue they needed to focus on,  the definition, and examples of the skills needed.  Along the way they also referenced the books “How Google Works” and “Team of Teams”.

Innovation. Firms need to innovate constantly or fall behind. Customers are looking for multiple solutions – mobile apps, with phones, cameras, banking, etc. The customer is looking for a higher value, but a lower cost. As an example, Deere’s farming customers often drive in a pickup truck, but then they want to go from their truck into a tractor cab with the same comfort, the heat, the AC, that is cost effective with the same comfort. And the ARC want services that are also ahead of the curve.

What is Innovation? These definitions come from “How Google Works”:

  • Something that addresses a big challenge of opportunity
  • Something that is radically different from the existing
  • Something that is feasible and achievable in the near future.

What are the capabilities needed in students to drive innovation?  Mike and Tom believe it is important to have strong analytical skills, and to be able translate raw market data into usable information. You need to be able to pull information form the marketplace, but complement this with strong interpersonal skills that allow you to interact with a broad spectrum of individuals. There is a real shift with some of the millenials that these gentlemen have worked with – a reluctance to get into the details.  Many young students coming out of school are happy to make decisions, without knowing the details behind them, as well as the ability to communicate information upstream and downstream.

Customer-end user focus. This capability is about having an independent non-partisan view and truly taking a customer perspective to look beyond the organization and its biases .   Deere once had a lawnmower product that had exceptional turn radius capabilities, and it could cut grass in a straight line.  But when it was put on hills – the technology failed and all the lines were crooked – making it look like the driver was drunk!  Understanding how products and services are experienced by the customer is critical to success.

Capabilities required here include strong interpersonal skills, and strong toolmaking/process capabilities. We have to be able to design, develop, and implement tools for collecting, documenting, publishing and analyzing marketplace information. We have to be able to get optimal value to the customer. And once again – strong analytical skills require new hires to take market data and put it into usable information.  Bayer echoed this sentiment in discussing their innovation, and Mike noted that he had to spend two months on the road traveling to speak to customers, to truly understand what makes them tick, as their world is very different and they have very different parameters that define what success looks like.

Speed to Market – the market changes so quickly – and firms need to develop and implement products and services in an expeditious manner. Apple is really good at this because as soon as they get their new product out, they are on their next iteration. This requires visibility to marketplace configuration. Also, companies need to recognize that  “I don’t need a perfect mousetrap – I need to catch the mouse!”  Having a product that meets the end customer goal is key.  This is about establishing visibility to marketplace configuration, continuous improvement, organizational integration and urgency, and risk/benefit decision-making.  Capabilities required?  You guessed it:  strong interpersonal skills, strong analytical skills, and strong leadership skills to make quick data driven decisions, and to motivate cross-functional teams to transform decisions into tangible products and services.

Value-Chain Integration Dealerships, stores, end user, customer, all have to be integrated. Firms need to manage resources efficiently.  It is about information, materials, labor, facilities, logistics, all vertically aligned and integrated through multiple tiers.  To be successful, companies need a strong ethics and value system – to understand and demonstrate ethical behavior, fairness, and win-win.  (This is something that I also emphasize in my upcoming book, the LIVING Supply Chain – a property that we call “federation” in the supply chain.) . VCI also requires strong interpersonal skills, and an ability to interact with a broad spectrum of individuals, and communicate upstream and downstream, plus strong leadership skills.

Mike and Tom noted that it is hard to teach students how to be a good communicator. Students need to be able to learn communication skills that focus on the ability to work across different cultures, and how to communicate with individuals, and our clients and sponsors on our projects can help with this. From an analytical standpoint, the difference between academia and industry is if a project is a failure or success is different. Walt DeGrange, one of our faculty mentors, noted that

“I’ve had projects that produce a negative result. If the data isn’t there to support a technique or model,  that is still a successful project. Why?  Because you’ve written off that approach and it may be a failure, but you’ve learned something.   For one of our student teams this semester,  we did an analytics project working with a large dataset and tried to look at it and get some predictability, and could not get one.   But it isn’t a failed project, it is a negative result! This could point them in different directions – and nothing is a slam dunk – to be on the cutting edge requires some risk tolerance and negative results. You can see what the data can give you.

As Thomas Edison once said, “I know a thousand ways NOT to make a lightbulb.” Even as companies in the financial world live and die in a quarter, they must learn to also celebrate failures, learn from them, and continue to innovate.

 

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Based on the deluge of news coming from the press on Trump, Russia, China, trade talks, tax reform, healthcare reform, and a multitude of topics, it’s enough to make your head spin.  This is particularly the case if you are working in the supply chain.

In our upcoming meeting next week, we are bringing together a group of supply chain executives from a variety of industries, to help us understand the major impacts that these potential outcomes could mean for their industries, and for the supply chain profession.  Here are some of the questions and issues we expect to cover on our industry roundtable next week.

 

  1. We have heard a lot today about the impact of various policies under way, including the withdrawal from the TPP, new immigration laws, Dodd Frank, new regulatory issues, the repeal of Obamacare, and many other factors. Please pick one or two of these issues, and describe their major impact on your firm.
  2. Based on these impacts, what approach is your leadership team taking, other than a “wait and see” attitude? Are there any risk mitigation measures that can be taken?
  3. What are the key triggers and events that supply chain executives should monitor and be aware of that will impact supply and demand in the economy?
  4. How will the global economic community react to the changes that are likely to occur?  What will be the overall impact on global and regional economic growth?
  5. How will the ban on immigration, as well as the construction of “the wall”, impact the domestic labor force? Which sectors are likely to see labor shortages, escalating wage rates, and capacity constraints in the market?  I have spoken with numerous supply chain students who are very worried indeed about their chances of landing a job in this environment.
  6. How will regulatory changes in the energy and agriculture market change the flow of goods and services in the domestic economy?
  7. What will be the likely impact of the legal rulings on acquisitions in multiple markets, (AT&T and NBCUniversal being the most recent)?

This is sure to be an exciting and insightful event.  We will also have presentations by a world-renowned economist Jason Schenker and TPP Global Trade Expert Timothy Barnes.  Don’t miss it!

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I had the opportunity to sit in on the CPO Leadership Summit in Atlanta, GA this week, hosted by IBM Watson Supply Chain.  (I drove by the famous collapsed bridge on the way to the airport this morning as well!) . I presented the keynote to the group of procurement executives gathered, speaking on the subject of “The New Reality of Supply Chain Ecosystems”, which addresses many of the emerging issues that face supply chain executives in the digital world.

My session was preceeded by a discussion by Brian Bancroft, Vice President of Direct Procurement at Coca-Cola in Atlanta.  Brian pulled together some interesting facts to consider, which he presented as the key issues to think about in terms of the global economy and issues facing us.  Here is the list.

  1. Anti-globalization. There is an influx of refugees due to strife, lack of opportunity and lack of water. More than 65M people were forcibly displaced in 2016 and 16M have not found homes. This administration and others across the world have not been proactive in addressing this massive shift in the global population.  What is remarkable is that 53% come from Somalia, Syria, and Afghanistan. We have taken on a protectionist position here in the US, but oddly enough other countries like China has recently signaled an openness.
  2. Labor arbitrage- labor costs and mfg. costs are going up and labor in the supply chain is going to continue to be an issue.
  3. Because of the mass migration and the anti-globalization issues, companies are finding it harder and harder to fill positions, and talent management is a big, big problem.  One executive in another session from the service industry noted that part-time contingent labor is one of the biggest challenges, and he has had to revert to dropping the drug test for many positions, as they would simply go unfilled and impact customers!
  4. Tax cuts for big business is certainly imminent, but there is conflicting information. From a personal tax point, Trump is proposing moving from 7 tax brackets  to 3 – and maybe will move the top bracket from 40% to 33%.  The 35% corporate tax could be 15-20% and could be a boon to American companies. But the repatriation of profits – 2.7 T$ of profits outside the US – is a big issue.  It may involve a discussion of a tax holiday or a flat 10% repatriation tax – which could stimulate job growth and return these profits to the US. Wait and see.
  5. Slowdowns in the economic growth of Brazil, India, and China  is having an impact on commodities, especially on agricultural commodities, due to demand decreases and increase of supply, which means that inventory is growing. Crude oil is a benchmark which was at a low of $29 in Jan 2016 – now around $50. Experts don’t expect oil to go over $60, and and to stabilize in the $51-73 range.
  6. Global climate change – whether you believe it or not – you can’t argue with the fact that something is happening! California has more water than they can deal with – while there are other places where water is becoming a problem.
  7. Natural disasters may be forcing some of the migration. Natural disasters are pushing people out – and health and economic issues as well as humanitarian needs for water, food, and basic medical care is exploding globally.
  8. Currency fluctuations, supply risk, Anti-American sentiment are all major issues that make it difficult to sell abroad.  As we take a look at imports/exports, and environment uncertainty it is likely that supply chain designs will move more towards more local sourcing, driven not only by total cost of ownership, but even more so by global risk mitigation.
  9. The number one global issue is not about oil – it is about water.  There isn’t enough of it.  When someone from Coca-Cola says this, you better worry.
  10. Decision support systems – and big data continues to drive lots of activity – and in next 3 years, there will be more than 8 times more data through people’s phones.

These predictions should create some interesting scenarios to consider in your strategic planning!

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This week I’m adding a guest post from Mike Challman, VP, North American Operations for CLX Logistics.

 

Supply chain management is defined as the active streamlining of a business’ supply-side activities to maximize customer value and gain a competitive advantage in the marketplace[1].

Yet, as supply chain industry professionals can attest, there’s a plethora of strategies you can employ to maximize value and efficiency.

Most companies turn to a third-party logistics (3PL) provider for help because they have not just market-intelligence and expertise at their disposal, but also proprietary technological advantages such as transportation management systems (TMS).

Optimizing Freight Management with TMS

Logistics providers often create these intelligent software platforms to enhance supply chain visibility and optimize freight management. These programs are increasingly popular amongst the supply chain management (SCM) and logistics community. In fact, the TMS market was valued at $6.85 billion in 2013 and is expected to reach $19.2 billion by 2022, according to Transparency Market Research.

TMS software helps manage your carrier network and address inefficiencies in your freight management processes that are otherwise difficult to diagnose. For example, should your product utilize intermodal transportation methods?? Which route will be the most cost-effective and eco-friendly?

Measuring Your Performance

Although ROI is the most obvious metric for determining the success of your SCM, don’t overlook other performance indicators of your freight management process.

Safety is a crucial consideration, especially if you’re transporting heavy or hazardous material on behalf of a client. Regularly review regulations in the United States (and other countries, if transporting globally) to ensure compliance.

Another matter of importance is route guide compliance. Are the directives being properly communicated and carried out? If not, this could be an opportunity to bridge an internal gap.

Optimizing Operations

Learn about the remaining freight management KPIs and how to fine tune your reports to properly measure them in the infographic below.

 

 

Mike Challman, VP, North American Operations for CLX Logistics. CLX is a global provider of transportation management, technology, and supply chain consulting services.

[1] http://www.investopedia.com/terms/s/scm.asp

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