Are you sabotaging your procurement or supply chain career?

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As a consultant, I get to observe procurement and supply chain professionals in almost every situation. It is always rewarding to see bright stars move through their organizations to the C-Suite. On the other hand, it is tragic to see bright stars burn out and get stuck on their career path. You may wonder, what’s the difference between success and failure in people with similar ambitions and skill sets?

In my career, I had several strong, ethical mentors who disciplined me in critical soft skills that make the difference between success and failure. Technology changes, digital disruption, social media and email are all changing the way we do business, but successful businesses have the best people who communicate and collaborate effectively.

Here are a few soft skills that can take you far:

  1. Business etiquette is one of the essential skills that shows that you are thoughtful, polite, professional, engaged and and respectful person. How you treat people says a lot about you. Do you take the time to send a thank you note? If you’re visiting suppliers or meeting new business partners take the time to write a note. You will create a great impression of you and your company.
  2. Always learn names and learn them quickly. This immediately shows interest and respect in the new people you meet. There are a lot of techniques for learning names and they will help you gain this skill
  3. Don’t make value judgments on people’s importance in the workplace. People deserve respect and others in your firm will be observing your behavior and will ultimately judge you. It is critical that you build strong relationships and self assess how you might be viewed.
  4. Be careful about your personal life. What you put on social media and what you share can come back to reflect on you in the future when being considered for promotion or elimination.
  5. Communication is a core skill. It’s sometimes not what you say, but how you say it that counts! Always return phone calls and emails promptly. You should make it a practice to promptly return all calls within 24 hours. Personalize your voicemail greeting so the caller doesn’t just get a cold system generic voice with a number.
  6. When writing emails, be sure they are professional and courteous with a bit of humanity so they are not seen as cold and manipulative. Make sure that the communication you send is grammatically correct with no spelling errors. Judith Kallos has an excellent resource on her business communication website.
  7. Just because you have a mobile phone number doesn’t mean you should text without asking permission. Even with permission, be respectful of the time of day you’re texting.
  8. There are few things that irk me more than someone arriving late to meetings or scheduling a meeting with no agenda, resulting in unprepared attendees and wasting time. Always be prepared, have an agenda and have a professional presence.
  9. Create the right image with your work space. Keep the space professional and neat with appropriate personal touches. Those who see the space consider it a reflection of you. Always respect the space of others. Even in casual business cultures, it is very important to dress for success. You may stand out, but in an impressive way.

Every procurement and supply chain professional with a desire to advance and make a great impression should take inventory of these skills. These skills are common sense, but at times we all need to review the skills, make adjustments and control the way we are perceived.

The things your mother taught you can serve you well.

 

photo: Olu Eletu

 

Leading Procurement and Supply Chain Transformational Change – Do you have the right stuff?

astronaut photo: NASA

Never content with status quo, companies that excel want to be the very best. They constantly drive continuous improvement, yet many procurement and supply chain professionals lack the confidence and capability to assess, build a business case for change and manage change across the business. How can companies and individuals get “the right stuff” to get to best in class?

The process starts at the assessment of the current state of the organization. Typically, it reveals an inefficient organizational alignment, gaps in the processes, competency issues in the team and systems which may or may not support the procurement and supply chain mission. I have seen leaders shy away from and resist change, while defending the current ways of doing business. Over time, the resistors of change are displaced by more progressive individuals. Those who stand before the management highlighting the issues and delivering a plan for change always accelerate their careers in the business.

Early in my career I worked with a purchasing leader that attended a seminar at Penn State. He approached the CEO and Chairman of the company, detailed that his team was tactical and influenced the senior management team to let him to build a change program. The change was painful and difficult, but resulted in over 40 million dollars in savings, streamlined the organization structure and the company achieved a leadership position in their sector. He moved on to different positions in the company, eventually ending up as CEO of one of the major divisions.

What made this individual a success? He created the assessment of the current state of the business by looking at the core competencies required to be successful in the food business and measuring the gap to achieve the best organization, processes and people to reach world class in his industry. He looked at benchmarks with the understanding that they are merely data points. To make benchmarking successful, one must understand both the process implemented to achieve them and the business cultural adjustments required to make them work. Too many times, the focus is on the size of the gap, which can cause some to think “we can never get there.” The focus should be on taking the first step, then the momentum to keep the team moving. Whether it’s a meter or a marathon, some will run, some will walk and some will do both to reach the finish line, so a plan should be developed that considers the company culture and the speed that the team can practically achieve.

Once the change model is identified and a plan developed, it is only the beginning and once started, it is ever evolving. There are lots of drivers of change, like:

  • Technology
  • Economy
  • Competition
  • Innovation
  • Profitability
  • Industry consolidation

It’s important that procurement and supply chain team members understand that each of them has an important role in how these drivers impact the business and in making the changes needed for the business to succeed. For example, similar to, but broader than technology, product and service innovation occurs faster and faster, often making the ‘shelf life’ of current products shorter and shorter. Innovation in new product ideas, product packaging, integrated supply chain operations and distribution channels, customer service, and marketing are all examples of areas that can be market-changing for a business. Clearly suppliers can provide many of these innovations, if managed properly. The procurement and supply chain team is in the middle of the action.

What skills are needed for transformational change? One of the core skills of a leader is the ability to influence. The ability to evaluate your organization, develop a solution and build a business case to get the business to invest are critical skills of leadership.

Since change impacts every aspect of the organization, the change process really needs a good business case including all cost, risks and the measurable return that the company will see at the end of the process. The implications should be clear that the organization will be changed (reflecting the global, regional and local requirements of the business) to simplify the supply chain and increase velocity, flexibility, value and customer needs. As a result of the change, people will need development (some may no longer fit in the business) and processes will surely change.

Its always best to establish a management steering committee to remove roadblocks and select a project leader and a cross business/cross functional team to build stakeholder awareness and engage them. Build Change Champions and willing helpers to support the transformation and have a plan for the opponent and cynic who may work to disrupt the change.

There are many reasons change initiatives fail. Usually, failure is the result of:

  • Lack of management buy-in and commitment
  • Lack of leadership
  • Lack of focus and commitment
  • Resistant too hard to over come
  • Lack of knowledge
  • No process
  • No strategy

Procurement and supply chain transformation is exciting and can create competitive advantage for your company. It takes leadership, focus, influence, management commitment. It is a big task, but those with the confidence and capability will accelerate their careers.

Do you have the right stuff?

Why Sitting at Your Desk is Harmful to Your Business

desk

This month is National Slavery and Human Trafficking Prevention Month. The President’s Interagency Task Force to Monitor and Combat Trafficking (PITF) is a cabinet-level entity created by the Trafficking Victims Protection Act of 2000, its mission is to coordinate the the efforts to combat human trafficking. In the PITF Fact Sheet released earlier this month, Procurement and Supply Chain is named as one of the 4 priorities. The PITF meets annually and is proposing some new measures sure to put pressure on organizations like the fishing industry and retailers who unknowingly purchased product where trafficking was involved.

I mention this in my blog because I have long held the belief that it is impossible to responsibly source internationally from one’s desk in the US. Unfortunately, that’s the practice that a large number of companies engage in. They locate sources of supplies through trading companies, brokers or stumble across them on the internet. In many cases employers enjoy the cost benefits from global sourcing, but fail to see the value in the required due diligence of investigating the entire supply chain and creating relationships with suppliers. They are concerned about the budget and expense of travel and fail to see the damage that the company can be exposed to if the product has a reputation risk or bribery issue.

It may seem like a prudent move, but it can land a company in a PR, regulatory and customer nightmare. My experiences with international sourcing are that I have found that the trading companies and brokers are often not concerned with product consistency, CSR, dedicated manufacturing sites and sanitation. The customer orders are coming in and the customer is content to stay in the US and fork out money, so, why worry about anything but price and delivery.

Some things I’ve seen are food companies processing materials in rusty metal cans, unsanitary plants, machinery incapable of holding tolerances, safety violations capable of great harm, death and life-long disabilities and the list goes on. I have also seen the most modern robotics and invested capital to assure consistent, safe and least-cost manufacturing in many foreign companies. The trick is to survey and understand the supply chain, visit the supplier and make sure your company is not exposed to reputation damage from the global supply chain. Understanding the culture and building strong relationships with foreign entities is even more important when sourcing globally.

Here are 5 key tips that I recommend:

  1. Never source from your desk; visit the supplier
  2. Include the cost of visiting suppliers in your cost reduction analysis
  3. Always visit the suppliers and consider contracting resources in the region to be your eyes and ears
  4. Look for all health and safety issues, create extensive interviews with principals
  5. Develop strong CSR and Sustainability policies that the suppliers must sign and agree to

The PITF is creating resources to help, including the release of the online Responsible Sourcing Tool this month. Use these resources and read up on USAID’s new Supply Unchained initiative. Look into the tools offered by ISM like the Supplier Risk Tool and CIPS’ Sustainability Index. And most importantly,

Get up from your desk and visit suppliers.

The Secret to Capturing a Market—How will you get there?

capture a market

With the PowerBall frenzy of a $1.5+ billion prize, many of us are thinking of what we would do with the winnings. While winning this big prize will certainly give one leverage with the swarms of financial advisors and others seeking investment, even those of us who enjoy planning our investments and playing the market will need to rely on suppliers to manage and meet our goals if we win the big prize. If you want to break into a market or develop that next “can’t live without it” product or make life better for a community, you need to rely on suppliers. The kind of customer you are determines your outcome. For businesses, regardless of size, the value you need to capture a market doesn’t just come from inside the organization.

Many of us have been exposed to a management philosophy that suppliers are a source of incremental profit. Nothing can be further from the truth; a continuous focus on reducing price gives a false sense of security as companies meet short term cost reduction goals. Many buyers are happy that their suppliers are reducing margins, but lose sight of the fact that suppliers need sustainable margins to reinvest in the business, innovate, automate and drive to be the low cost producers. The astute business person knows that the larger opportunity for their company is in the value from the suppliers.

Value can come in many forms and the opportunities that arise truly provide sourcing professionals, and the organizations they represent, competitive advantage. A few examples are:

  • Achieving Speed to Market
  • Supplier investment
  • Product improvement
  • Process improvement
  • Complexity reduction
  • Systems integration
  • Shared risk
  • Shared resources
  • Market intelligence
  • Lowest cost manufacturing
  • Financing Capital
  • Innovation
  • Market exclusivity
  • Joint design

The skillset required to capture the value opportunity goes far beyond the tactical skills required when applying competitive leverage and price pressure. It requires strategic thinking, planning and execution skills. It also requires team members who are trustworthy, reliable and analytical with strong influencing skills.

Whether your organization is first in a market or captures a market with innovation and exclusive rights to technology, these benefits far outweigh the few dollars captured in the short term with price reduction. Steve Jobs understood the value proposition when Apple launched the first smart phone; do you think suppliers viewed Apple as a good customer?

Price or value? How you reach new heights is your choice!

Why Supply Chain and Procurement Leadership Matters

bubble

No longer can procurement and supply chain pros live in a functional bubble and survive. Although some mid-tier and small companies still act functionally, they’re becoming extinct. Today’s business requirements to drive value delivery, speed to market, spend under control and increased supply chain velocity requires cross-functional and cross-business mastery along with technical, influencing and political skills.

In the interesting McKinsey Quarterly article Decoding Leadership by Claudio Fesser, Fernanada Mayol and Ramesh Srinivassen, the behavior that organizations should encourage and develop in their teams is discussed. When we think about developing our teams for leadership, what are the priorities? Do they include influencing, decision making, problem solving and adapting?

The McKinsey authors identify four behaviors that account for 80% of leadership effectiveness:

  1. Be supportive
  2. Operate with strong results orientation
  3. Seek different perspectives
  4. Solve Problems effectively

As I think about the procurement and supply chain, there are a few additional behaviors that should be developed for a high performing team:

  1. Learn and understand all aspects of the business
  2. Develop a speak for management accounting
  3. Champion change
  4. Develop a clear vision and share your mission
  5. Foster mutual respect
  6. Champion organization values

Many of organizational development programs are based on technical skills only. As I approach a new year and develop new training initiatives, I plan to work with company leaders to expand development programs to incorporate core behaviors for leadership. Many organizations realize that leadership drives performance, but leadership is too often considered a soft skill. Everyone involved in procurement and supply chain needs to consider a leadership program for high potentials. First quartile leading companies do!

Don’t rely on experience to create leaders.

 

Photo credit: Sebastian Pichler

What the Holidays Can Teach You About Supplier Relationships

bluescreen

This time of year we focus on relationships. Often it’s thinking of how to get through the holidays without a disagreement with a certain family member or how to manage time with your family and your spouse’s without damaging relationships. In either case, if feathers are ruffled, you’re more likely to try to repair the relationship than to replace it.

It seems we’ve become a replacement society. It’s more likely the appliance repair person will replace a board rather than repair it. Last week, when a Windows 10 update failed and a laptop would not boot, the Microsoft support recommendation was to reset the PC back to its factory settings, wiping out all files, then reinstall (replace) Windows 10 and all programs and files. Since my wife is technical and actually seemed to know more than the Microsoft support person, she stepped in, formatted a USB drive, booted to bios, dusted off her old DOS capability to issue a string of commands, repaired the defective system files and the computer started normally with all files intact. It took time and effort, but the result of being able to repair the operating system rather than replace all files was well worth it. She will lecture on back-ups, but that’s another story…

The replace mindset carries over to buyer/supplier relationships, too. In many of the industries I work in, I am sad to see that there is less and less reliance on relationships, even though they are at the very core of business success and failure. Many buyers develop a “what have you done for me lately” attitude, believing that the grass is greener in the next pasture. Nothing can be further from the truth. The reality is that the existing supplier has tribal knowledge about your business, the cost to switch suppliers is relatively high, but this is rarely calculated in cost savings projections in the “switch suppliers” business case. The learning curve is long and the investment to onboard a new supplier is often not a consideration in sourcing decisions.

If results aren’t what is expected, should you repair or replace a supplier relationship? The answer depends on the response to these questions:

  1. What is the total cost of the change?
  2. How will you develop and manage a new supplier to increase value delivery?

In many cases there is no supplier relationship plan and the relationship drifts along until the company is ready to replace the relationship again. Repairing relationships and extracting maximum value takes hard work; if you put in the work and build the process, existing suppliers can increase value delivery. It’s an easy solution to replace, but a better value to repair relationships.

I wish everyone a happy holiday and safe new year. I am thankful for the relationships have in business and appreciate those clients and business relationships that made Aripart Consulting successful in its first year.

Take a little time to repair the next time you’re tempted to replace.

What is the Right Supplier Relationship?

AngerConflict

I’m asked often to identify the correct relationship that companies should have with suppliers. Many clients are surprised at the answer, which is the minimum relationship that will enable you to meet your business objectives. If you’ve read my blogs or heard me speak, you may now be asking “is this the same Bill Michels who says companies need suppliers for innovation and that the best customers get the best ideas?”

There’s a wide range of relationships. I classify suppliers as competitive market, proven suppliers, performance driven suppliers and strategic alliance partners. As a supplier moves up the relationship curve, the intensity of resources required to manage the relationship significantly increases. Logically, it’s impossible to drive all of your supplier relationships into the strategic alliance classification. Strategic alliances normally involve shared capital, objectives, resources, business information and equity. The partners are interdependent and have significant synergy which enables them to achieve competitive market advantage by the strategic linkage. The strategic alliance is a rare relationship for many companies and one that is not easy to achieve. Although many companies believe they operate with strategic alliances and refer to their suppliers as partners, they actually have competitive market and proven relationships.

The second part of the supplier relationship question posed to me is “how can I operate with both a business and personal relationship?” The business commercial relationship must always be the dominant relationship. The personal relationship is helpful in achieving preferential treatment as the customer of choice.

SRM

The key to developing the right supplier relationship is to move beyond a price focus to a value focus. Value can be defined as:

  • Speed to market
  • Innovation
  • Investment
  • Product improvement
  • Process improvement
  • Complexity reduction
  • Systems integration
  • Shared risk
  • Shared rewards
  • Aligned business objectives
  • Shared resources
  • Market intelligence
  • Finance
  • Performance
  • Waste reduction
  • Redesigned products and specifications
  • Lowest cost producer

While it is unfortunate that some companies and industries remain focused on tactical strategies which are short term price-based. To survive in the future, supplier relationships must be mapped, managed and optimized for value delivery.

What is the minimum relationship that will enable you to meet your business objectives?
Sometimes it’s a true strategic alliance, but sometimes it should be arm’s length.