SUPPLY CHAIN RESOURCE COOPERATIVE

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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Continuing my reporting of the Procurement Leaders meeting in Miami, I sat in on a very interesting session that included three professionals from very different walks of life:

  • Captain Harry Thetford – Defense Logistics Agency
  • Robin Shahani – CPO, TD Ameritreade
  • Cynthia Dautrich, CPO from Kimberly Clark

Each of these individuals had an excellent perspective on what cross-functional teaming really means. Too often, people throw out the term loosely, without really thinking about what cross-functional teaming truly implies. In particular, management will often say “Oh yeah – we use cross-functional teams.” But what happens in these team meetings is what really matters – and a lot of it depends on the behavior of the individuals, the culture of the organization, and the leadership mandate for the team to develop a goal and the resources to carry out that goal.

Captain Thetford noted that in the military, it is always a challenge to get these teams to work as they are envisions.

“For cross-functional teams, it is hard to impose collaboration. It requires a lot of communication. There are two views of collaboration – and leadership may think we are collaborative, but workers may think differently. Open offices are important – but open minds are more important. It is about hiring the right people with the right fit and experience – and I’d rather have a jack of all trades, then an expert, working on a team.

A really important component, to begin with, is whether people actually show up for the meeting! You demonstrate collaboration by being there, and being part of the team. If you aren’t there and you don’t show up – then you aren’t part of the team. We were working on a new project, and it was important the supplier be there, to ensure the money was going to the right people, and to be involved in every meeting and every action. Procurement is their own organization and often doesn’t see the need for going to team meetings, and if you don’t show up, people don’t take you seriously. And being there upfront from a logistics and procurement perspective becomes key. Having people who have the authority to make it happen is key.   And the right attitude is also important. If an expert says you know how to solve the problem – then maybe they are thinking it is too easy. There should be a learning curve, as every problem is unique and requires a different approach. Even if you have done the problem before – challenge yourself on how can we do it better this time! Then this becomes a great forum for innovation.”

Robin Shahani from TD Ameritrade offered a different view.

“I’m a big fan of the trusted advisor framework– which involves having the credibility to show stakeholders you have the right expertise, and the right intimacy and the right relationship when you show up at a cross-functional team meeting. Procurement has to have a demonstrated record of success and expertise to bring value of the table, and this is divided by the amount of self-interest. The less self-interest, the better. You can’t come in and say – ‘here is the policy, but actually I’m only here to help’.   There has to be a reason for the team to pull you in. At TD we try to pull people in when we need them on a targeted basis. We identify what the team is doing, and ensure that we assemble the best people together for the problem. It is important to be able to be agile and pull people together on projects on an as-needed basis, to look at an opportunity and bring the right people together quickly on an as-needed basis. If you think about it, the reason a a startup can move more quickly is that they are 60 people, not 600. Start-ups are more agile. And what you see is that when start-ups are acquired by a large company, they end up disappearing in the ocean of the big copany. Big companies take so much longer to do things. They bring together ross-functional teams because it is political, to make sure everyone has a voice, not because there is a need to bring in the right expertise together.

Successful cross-functional teams also need to understand the headwinds and tailwinds they face. For example, if we meet with another function, who may not know anything about our business, and we don’t feel that they will run with the idea, then we don’t have confidence in their contributions. It is important to see ambassadors from Procurement in the same way, Do they understand the business – and do they really get it? ”

Cynthia Dautrich also added another dimension of thought to the subject of cross-functional teams.

:Empathy and understanding regarding what the other party is going through is important on a team. Actions speak louder then words. This means jumping into action as part of the team, and ensuring that everyone agrees and is aligned on what we are here to accomplish. It is also important to develop an end to end measure of what we are trying to achieve. We can focus on the customer – and is the measure being on time and in-full? To achieve these things means we need to help procurement to build confidence and understand how to be a good ambassador. We have to be clear on what skills we expect our people to bring to the table, and if you are hiring the right people we will have greater confidence. But this also means we need to coach, mentor, and train people along the way, so they feel equipped.”

These insights left a lot for people in the audience with new ideas to take back to their jobs next week…

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I had the opportunity to sit in on a number of sessions at Procurement Leaders American Congress 2017 in Miami this week.  Despite the snowstorms that prevented many from making it down, there was a full house at the opening keynote.

PL’s research shows that for procurement, cost savings is still the main issue that executives focus on.  Cost savings were on average 4.5% in 2015, down from 7% in 2016. About 83% of procurement organizations are changing operating models, with 33% are undergoing transformation.   year over year savings – and 25% are reporting revenue metrics – but 97% stick to cost savings.

Joe Agresta – VP Enterprise Procurement Excellence J&J, spoke at the keynote.  Joe has been at Johnson and johnson forg 17 years.  He elaborated further on the theme, “Conquering the Next Frontier” – which focused on thinking about the strategic positioning of the function, through collaboration and supplier-enabled innovation, as well as using technology as a disruptor.

Joe shared some insights from his time at J&J.  “J&J”s credo is about our communities and our people and our stakeholders. It is about the patient. It guides everything we do.  Innovation is our life blood – not just with products, but with processes, in the way we are organized and the way we use technology.

What is a culture of innovation? J&J’s Credo encourages everyone to innovate.  Here are a few points.

  • Patients are waiting for a solution, the next medicine.
  • When we look to innovation, we innovate with an eye on safety, quality and sustainability.
  • We need to look at the impact of innovation and how to prioritize those that will have an impact on our business and our customers.
  • The world is our Window – as procurement leaders we are one of the only functions that has an outside view of what is going on.
  • We have to resource to win – don’t do it half-baked. But also “Fail Fast” – and the two go together.
  • If you think it is Innovation – it is! If you believe it is an innovation – then it is and put it out there.
  • Perseverance and Passion is key – we may get discouraged early and it doesn’t get on the portfolio. Don’t forget about a project and persevere on a multi-year portfolio.
  • Aligning our research is critical and understanding where suppliers’ research is, where ours is, and aligning on that is key.
  • You want the A team and A suppliers on your investments.
  • We have to “LIVE a learning partnership” – sharing one of your best practices while you are here. It builds momentum and belief.
  • We need to share our stories – and do a better job of sharing stories on innovation.

J&J has developed a Supplier Innovation Center, that is focused on unmet business needs, and created an innovation culture through advanced sourcing and innovation teams with NPD people looking at product launch and innovation.   They have also split out innovation sourcing teams, in consumer innovationto drive collaborations to facilitate broad-based innovation opportunities. They have people who work closely between innovation and R&D to drive discussions with suppliers, and identify risks to bring potential innovations to market. Others work on health care solutions on global design offices, and who work on a Leadership team to build enterprise capabilities to deliver healthcare solutions in new ways, to motivate people, and to get the right technology at the right time. Design thinking is customer-centric, which is inclusive of the patient, considers the feasibility and viability of the business, and desirability for people. This drives meaningful solutions for positive health outcomes, working collaboratively with supply chain and suppliers on customer-centered innovations into development. Integration with other innovation centers between procurement and these groups is key. Procurement is not always comfortable and we are often too focused on saving money and expediting, and may not be comfortable with integration into the global design center, looking at unmet needs, and working with suppliers to target these. It is about having the right people in the right roles, to seek to understand and to seek to coach. No idea is a bad idea – this sounds simple, but it is not easy to do.

Cynthia Dautrich, former CPO from Kimberly Clark,  talked about talent.  The fundamentals for people they are looking for are key, but we are looking for people who are humble, hungry and smart.  But if procurement is only wanting to be recognized for cost savings, this doesn’t recognize what stakeholders always value.  So being humble, and influencing and managing relationships without authority is key to a successful career in procurement.  About 1/3 of the procurement was meeting the profile.  About 1/3 had to come in from outside.  And 1/3 we had to recruit from inside the function, in IT, sales, and marketing.  This required improving the procurement branding, and understanding what we needed to do in procurement to change the supply chain.  And moving people around in the function is also key.

Part of that involves taking your partner’s business measures, and making those procurement’s outcome measures.  Using revenue generation, profit margin speed to market, and market share, and making those part of procurement’s outcomes.  TCO and cost savings are the traditional measures that procurement uses – so assessing these other measures will become increasingly important.

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Many executives I speak with express reluctance at wanting to invest people, time, and money into projects that have a dubious return on investment.  Supply chain analytics projects, particularly those involving “big data”, “Internet of Things”, and real-time data are all being talked up in the popular press, but most companies are loath to dive in.  Why?  The response is often “we are waiting to see what happens in the market”, or “we are on the sidelines until we see a real benefit in terms of return on investment.”

So what exactly is the right “return on investment” number you have to hit to give the go-ahead?

The “wait and see” excuse, in my humble opinion, is the wrong one when it comes to the digital supply chain, and it will cause you to miss out on many opportunities for growth.  This opinion is supported by a recent article in the Harvard Business Review, “Strategy in the Age of Superabundant Capital“, that provides a compelling argument for how investment in new technology are imperative for success.   The authors argue that as financial assets have grown faster then the global GDP, the weighted average cost of capital has shrunk to about 5-6%.  And yet, hurdle rates for internal business investments have not changed significantly in the past two decades.  As a result, too many investment opportunities are being rejected, while cash is building up on balance sheets, and companies have no other option but to buy back stock.  But share buyback only makes sense if the company’s common stock is undervalued in the market….which is hardly the case, with equity prices at an all time high!

So what is the alternative?  Growth.  For companies to grow, they need to invest in new technologies, new products, and new businesses.  One of the biggest opportunities for growth today is the massive set of changes we are seeing in the ecosystem, in terms of real-time data, supply chain analytics, mobile computing, cloud computing, and the massive trove of data that exists in most companies.  DATA, as I’ve indicated in the past, is the gold at the end of the rainbow, yet few companies I meet with are truly exploiting this data in a fashion that will produce insights and new business opportunities. Investments in creating the real-time LIVING supply chain are all around us, yet so many companies are dragging their feet. A good place to start would be to invest in creating a data governance council, and assemble a center of talented individuals tasked with verifying data standards, but also start to experiment with new approaches for working with this data.

Mankins and his colleagues support this view.  Amassing cash on the balance sheet is a poor use of capital on behalf of shareholders, and leaders should have a strong bias towards reinvesting earnings in new digital products and technologies that is rapidly shaping our new world.  These projects should be focused on growth opportunities, and may involve tolerating failure.  As Bill Harris, the former CEO of Intuit and PayPal once said, “Rewarding success is easy, but we think the rewarding intelligence failure is more important.”  That means putting together special teams of individuals who have the time and motivation to work on new digital products, explore the art of the possible, and creatively test new technologies.  Not all these projects will succeed.  In fact most will fail.  But the learning that occurs will reward those organizations who truly view themselves as research leaders, and who are intent on growth.

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Recent articles in the New York Times and in the International Business Times highlight the emerging role of blockchain as a key enabler of improved integration between parties in the extended global supply chain.  For instance, IBM and WalMart are partnering to begin tracking The blockchain — the buzzy, bewildering technology behind cryptocurrencies like Bitcoin — is starting to be applied to real-world problems like tracking pork chops, shipping containers and footwear with a speed and security not currently possible. The IBM-Walmart partnership is one of the biggest practical tests to date.

IBM seems to be leading this charge.  Recently, the Supply Chain Club in the Poole College of Management featured a presentation by IBM Vice President Steve Rogers from IBM,  discussing how BlockChain represented a new opportunity to drive trust between parties in the end to end supply chain.Believe block chain will change our lives.  Steve discussed blockchain as the  “trust” protocol, the Internet Axis, the Internet Value, the Democratization of the Digital World.  He began with a history of block chain, dating back to  1989 and a paper was released by Timothy Berners-Lee, called  “Information Management: A Proposal“. Which laid out the basis for the WWW. They released it and the Internet was born. Now 3B people use it every day. New business models came about and new information. It also changed how people interacted – and how business occurred and how governments are run.

But there is a flip side, some would say the darker side, to the Internet.  You get cyber bullying, phishing, identify theft, and online fraud. You could argue the Internet has a trust issue.  And then someone called Sakoti Nakamoto published a paper on what he called Bitcoin, which was a peer to peer cash system. He laid out the details about creating what he called a cryptocurrency. It was in October 2008. This was the time of the economic crisis collapse, and confidence was at an all-time low.

A blockchain simply refers to a bookkeeping method that “chains” together entries so that they are very difficult to modify later. It provides a way for large groups of unrelated companies to jointly keep a secure and reliable record of their transactions.  More then anything – it is a technology, upon which transactions can be layered over it.

This approach has real implications for the world of supply chain and supply chain financial transactions.  As Spend Matters Pierre Mitchell notes, there can be value realized in 1) the elimination of redundant data maintenance activities across the supply chain, 2) the reduction in PO or AP mismatch issues on the transaction side and 3) ease of access to a wider and more universal sales/sourcing network that is not closed to participants based on membership and network fees.  Also, he imagines a world where a supplier could publish information about itself in a peer-to-peer blockchain-type distributed and discoverable registry!

There are also other potential benefits for shippers.  Maersk had found that a single container could require stamps and approvals from as many as 30 people, including customs, tax officials and health authorities.  Pilots with IBM have shown that all these documents can be captured in a blockchain, and could potentially reduce shipping delays due to lack of paperwork..

But there are lots of issues here to work out.  For instance, what happens if you are the Middleman between customers and suppliers?  You are then not the supplier of record. How do you keep the trust of both without having to share that trust end to end?  That is how middlemen make money – they sell at a higher cost than they buy at. How would they be able to build trust with this transaction flow?

There are also lots of concerns about who will own the technology.  Critics are concerned that IBM will corner the market, although they have maintained an open source approach.  The Times article notes that

“Many technologists who got excited about Bitcoin have said that the newer, corporate-designed blockchains — like the one being built by IBM — are missing one of the main elements of Bitcoin’s success, namely the extremely decentralized structure. Anyone in the world can join Bitcoin and, in effect, study its ledgers. But only a limited set of participants can gain access to ones like IBM’s.  That could make them more vulnerable to attack from, say, a hacker who targets a few of the participants. Even though the IBM technology for tracking shipments is more decentralized than previous methods, “it still concentrates power in a handful of entities,” said Emin Gun Sirer, a professor at Cornell who studies distributed systems.”

There are certainly many issues to work out in this space.  But there is no doubt that companies are beginning to invest in Blockchain technologies, and may even begin to start working on their own corporate platforms.  Keep an eye on this one…

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This week we announced the theme of our upcoming Supply Chain Resource Cooperative meeting.  The theme of the meeting, “Mapping the Road Ahead in Uncertain Times”, brings together a number of industry experts to share insights and develop some thoughts on how organizations can plan ahead to deal with the many surprising events that pop up every week in the news.

The current political and economic environment we find ourselves in is indeed full of surprises, both positive and negative. The election of Donald Trump surprised the pundits, the general public, and I believe, Donald Trump himself! The global community has also expressed the uncertainty imposed by these events, which is stoked further by the on-going ad hoc communications from the new President.  Not a day goes by without Trump’s Tweets sending individual investors and executives scrutinizing the press, trying to understand the impacts of what the sudden changes mean for their industry, their company, and their jobs.  Our loyal readers of Supply Chain View from the Field have also expressed surprise at what this means for the supply chain.

On the plus side, the markets have reacted favorably. The new administration has promised to spend more money on infrastructure, highways, airports, and other elements that could ease the ailing logistics networks that have been sagging under the pressure for years. He has also promised to revisit Dodd Frank, improve the clogged approval processes of the FDA, and lower the corporate tax rate which could generate a boost to the economy.

But everyone is holding their breath for the budget to come out. It costs money to build infrastructure, yet Trump has stated he wants to cut taxes, which could produce a deficit. He has taken to attacking specific companies on their globalization strategies. In fact, he seems to be on the side of eliminating all trade agreements including the TPP and NAFTA. These changes produce uncertainty, and could impact not only the balance of trade, but also the regulatory environment and tariffs that could impact many companies. There are many questions that arise in this environment for supply chain executives.  This is an example of the types of questions on the minds of many executives I am speaking with.

  • What does Trump’s withdrawal of the TPP mean for domestic and international trade in the U.S.?
  • What is the likely outcome of the repeal of the Affordable Care Act for the healthcare and life sciences industry?
  • 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?
  • 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.
  • How will regulatory changes in the energy and agriculture market change the flow of goods and services in the domestic economy?
  • What will be the likely impact of Trump’s impact on acquisitions in multiple markets, (AT&T and NBCUniversal being the most recent)?
  • 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?

My Keynote Address, “Impact of the New Administration on the Supply Chain” will kick off the meeting, followed by a number of presentations by economic and industry experts who have deep knowledge of these issues. The meeting is a private forum for open discussion of problems faced by executives with a common interest in driving intelligent solutions to a largely undefined and challenging public sector environment.

The meeting agenda will include:

  • An SCRC Board of Advisors meeting (by invitation only)
  • An update on SCRC programs and services since the last meeting.
  • The Keynote address “Impact of the Trump Presidency on the Supply Chain” by Dr. Rob Handfield, Bank of America University Distinguished Professor of Supply Chain Management and Executive Director of the SCRC.
  • Timothy Barnes, Asia Pacific Consulting, on “What Does the US Departure from the TPP Signify?”
  • Jason Schenker, Prestige Economics, on “Planning for Fat Tails: Economic, Financial Market, and Policy Expectations in a Time of Uncertainty”. (All participants will receive a free copy of Mr. Schenker’s online book)
  • Industry Perspectives on the Trump Presidency.” An industry panel will follow with insights and opinions offered by a group of cross-industry professionals from the electronics, manufacturing, energy, and government sectors.
  • Supply chain professionals and practitioners networking opportunities.
  • The meeting will culminate with the Poole College of Management Gallery Walk, known as the “Leadership and Innovation Showcase” presenting ~70 graduate and undergraduate practicum projects completed by all academic concentrations within the Poole College of Management this semester.

A networking reception with presentation of student awards will follow the gallery walk on Thursday, April 20th and will be attended by supply chain professionals, as well as a number of NC State administrators, faculty and students. This is an enjoyable event that showcases our students and facilitates an informal networking opportunity for them to interact with corporate executives and to learn about supply chain issues in person, face to face with executives who are also seeking insights from these young people.  You won’t want to miss this one!

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