Category Archives: Staff Skills

Supply chain and Procurement – The Decade in Review and Key Strategies for the Decade Ahead

Current State of Procurement
Working with some of the world’s best companies has given me a good view of procurement and supply chain over the years. As we exit 2019, we’ve made much progress, elevating the importance and status of our profession. Many firms have clearly articulated strategies that deliver year on year price reductions, restructured operations to separate transactional activity from strategic activity, and have designed multiple supply networks to meet the needs of specific market segments.

Overall, as procurement professionals, we have failed to progress developing rigorous category strategies, planning, and fail to optimize the opportunities available from detailed plans and well-executed cross-business/cross-functional business category strategies. Many of the firms I have visited in the last three years are just now embarking on developing a category planning approach. Many companies are still working with a centric, functional approach rather than recognizing that procurement is a business-wide process. Many businesses tend to have an annual, sometimes even quarter by quarter, business horizon rather than a forward-looking multi-year strategy. Many firms have not sufficiently invested to leverage technology to manage the current state and are in no position to look to the future state where data analytics and digital disruption will be a way of life. With robotic process automation, the internet of things, and automation with Artificial Intelligence are considered futuristic, and the reality is that they are here now. Data scientists are in high demand among progressive procurement, and supply chain-oriented companies.

The most surprising thing to me is that most companies do not have detailed maps of the suppliers in the supply chain. For me, this is some of the most critical intel a procurement or supply chain executive must have. It is impossible to have social responsibility, anti-slavery/forced labor, environmental or risk management programs without knowing all the suppliers in the supply chain. Knowing just the suppliers in tier one is not enough.

While we have made significant progress in the past decade, the challenges of a rapidly changing environment will force our firms to have renewed strategies that are forward-looking. The days where we chased low-cost labor around the globe are in our rear view. Far too often found out too late that our source of low labor costs put us at risk from natural disasters, political regulation and was temporary at best as standards of living are on the rise. In all cases, automation offsets low-cost labor. Robots work 24 hours a day, 24/7, never get tired or sick, and quality and productivity are consistent. Another lesson is that many organizations are building facilities close to the markets they serve in smaller footprints, making the supply chains more secure, agile, and flexible.

Strategies for the next decade

  • Enhance category management and develop robust strategies that are forward-thinking
  • Redesign the procurement process with the understanding that is a business-wide process with many owners, not a functional activity
  • Invest in bringing the technology up to manage the current state. Many companies are reluctant to invest in technology. Failure to do so will put the company at a competitive disadvantage and perhaps extinct
  • Build a TCO approach focused on total value. You could be getting low prices but higher production or management costs
  • Develop full supply chain maps of the supply chain along with real social responsibility and risk management programs
  • Provide the procurement teams with a comprehensive business orientation; in the past decade some organizations have compartmentalized jobs. When this is the case, individuals and groups fail to understand the business, company, and business strategies.
  • Manage succession planning and develop bench strength and a continuous recruiting
  • Develop a supplier relationship management program that rewards innovation, speed to market, business alignment and value contribution
  • Develop the individuals and teams in your business. Many groups need a program that goes back to basics and develops the population to build, drive and execute well-planned category strategies
  • Develop and train procurement leaders to look forward and create new processes, systems, and comprehensive business programs to cope with digitization, disruption, rapid product change, and supply chain agility

The changes I have seen in procurement have been challenging, exciting, and thought-provoking. The reality is that we are at the crossroads of change. While you may not agree with the current state of procurement and strategies for the future, I urge you to assess your organization and make a strategic commitment for the decade ahead.

Are you ready for the 2020s?

The Talent Management Game

I was asked to speak about talent management to a group of about 1,800 procurement leaders in the insurance industry. In the same week, in meetings with two CEOs in different industries, both discussed talent management as a key strategic imperative for their respective businesses.

I started to think about the attributes of a great talent management program. I pondered which industry sets the standard for attracting, retaining, developing and deploying talent. Perhaps because I just experienced the Pro Bowl and Super Bowl in Phoenix and attended a workshop for sports related philanthropy, the sports industry stood out for managing talent.

Finding Talent

Both college and professional coaches scout talent, follow high potentials throughout their high school and college careers, consistently review player strengths and weaknesses, create a shortlist of needs, cultural fit and potential, then they recruit. While they may recruit star players, they always have their eye on recruits who have few bad habits, but are extremely coachable.

Starting with talent with the right attitude, smarts and cultural fit, coaches teach players the business by starting them in a rotational program, introducing them to mentors, shaping thinking, behavior and practices. They pare down the team; are they good enough to make the cut? Some companies like GE, Textron and others have embraced this process and move future leaders through the rotations, make them survive boot camps and grow into their destined positions.

I lived in Ann Arbor when Tom Brady played for the University of Michigan. He started college as 7th on the quarterback depth chart, and moved to back-up QB for two years. Then he battled Drew Henson for the starting position when Brian Griese graduated. In the 2000 NFL draft, he was selected with pick #199 in the 6th round. Now considered by many the top NFL pick of all time, he’s the poster child for finding “talent” with a high degree of coachability and high drive to improve.

Retaining Talent

Players are not developed to leave the team in free agency. Coaches must have defined career paths, challenging projects, continued coaching, training and development processes to drive the competence and capability of players to another level. Teams must also have an incentive scheme that makes it more difficult to leave once an investment is made in an individual. Just like sports, company development programs must be focused on individual and team needs to retain the talented employees they’ve invested in.

Playing the Game

Professional athletes are not only expected to have high skill levels and good game thinking, they are also expected to provide leadership to new recruits. The same is true in business, when the leadership and technical skills are in place, the business is learned and the team member is playing to his or her capability, it is important to align responsibility, authority and accountability with the individual and their position to help them become winners.

Winning the Championship

To get the best players, coaches and general managers know that they must grow, manage, develop and invest in talent to get to the championship. Talent management, whether leading procurement, supply chain or company organization, is not a short term proposition. It requires a plan, patience and investment to put the best team on the field. Great talent, customized to your business strategy, is not usually found as a star; find the coachable player and develop talent–great draft picks are waiting!

What’s your winning talent management strategy?

Strategic Agility is a Leadership Imperative for Procurement and Supply Chain

I read an interesting blog post by Steven Krupp (CEO Magazine) on strategic agility that can be applied to Procurement and Supply Chain leaders. In my 20+ years of consulting, I’ve learned that procurement leaders will fail and lose all credibility and effectiveness if they are not flexible and display strategic agility. It’s a career-ending move to say we don’t do it that way, we can’t do it, we tried it before and it doesn’t work. All of these demonstrate non-openness to change, lack of flexibility and limited strategic agility. Today’s business environment with its uncertain economies, drive for short-term earnings, increasing regulation and unstable markets can threaten the procurement leader who likes the status quo. It takes consistency, a great deal of courage, discipline and tenacity for leaders to be flexible during change and agile in strategy. Good leaders lead their charges to calculate and take the right risks to achieve their goals.

Each Procurement and Supply Chain leader must develop these skills:

  • Anticipate changes in the supply chain
    Do a minimum review with the team once a quarter to identify where key markets are headed. Be able to anticipate changes in the global economic climate. Review where exchange rates are strong and where they are weak. Be sure that you have a supply chain that is aligned with your business strategy. Work to develop strong supplier relationships that add value that will be seen all the way to the customer.
  • Challenge the conventional wisdom
    Strategic leaders are not afraid to challenge the conventional wisdom. Rather than having extensive category and industry experience, recruiters and organizations are now looking for a proven track record of conventional challenge. To challenge conventional wisdom, it’s necessary to speak up and voice your opinion on key topics even if not popular to show how ways, processes and opportunities can be met by changing traditional business thinking. Leaders display innovative ideas, strategic plans and solutions to age-old problems.
  • Learning from Experience
    There is no better teacher than experience. Giving people the responsibility, authority and accountability for decision-making will make them stronger and provide the opportunity for changing the status quo. Of course, there may be mistakes, but good leaders use those mistakes to build a learning organization that takes calculated risks for the benefit of the entire company. A true leader is open to this type of delegation and a culture of learning vs. retribution.

To be successful in this profession, a leader must anticipate changes in the global economy, category markets and integrated supply chain. Leaders of the future are those who challenge conventional wisdom, create new ideas, consistently improve performance and encourage their teams to take calculated risks and rewards, modifying plans as necessary.

How are your strategic agility skills?

Learn to keep your skills current

People, keep on learning is the crux of this research study “Keep Learning Once You Hit the C-Suite” in the Harvard Business Review blog.

While it’s aimed at those in the C-Suite or those who aspire to it, the results are valuable to everyone who cares about his or her career.  Who among us wouldn’t benefit from being more flexible, adaptable and curious?  A better team player?  Or from updating our communications skills and learning to interact through social media?  The study talks about the value of mentors, and not just those who’ve achieved long, successful careers.  How about a “reverse mentor,” someone younger who can help change old habits and outdated ways of thinking?

The study cites the importance of looking for opportunities to get out of comfort zones.  And, to ask for feedback from your team, peers and bosses on how to be better at work.  Always keep developing your skills, a self assessment like ADR’s DNA is a good start.  I have the view that learning never stops and I can always learn more.

Whether you’re headed to the top, or happy in the niche you’re in, it’s all good advice.

Back to basics with three R’s

Strip away all the sophisticated software, instant communications tools and reams of data we can now incorporate into our decision-making and a simple truth remains: people are still the key to good procurement, and relationships among people still count.
Chris Jones at DC Velocity reminded me of that recently in a column he wrote about the three Rs of supply chain competitiveness. He says he heard them from a former professor nearly 20 years ago, and they haven’t changed much since. They are:
> Responsiveness
> Reliability
> Relationship
These are good principles to guide decisions about how we use all the procurement tools we have at our command. Will a big data analysis really help us respond quicker to changing conditions or anticipate possible risks? Does the vendor management software package make us a more reliable customer? How do faster communication channels help us build our relationships?
We often assume that whatever is new or “trending” is better, and data can often obscure as well as uncover a truth. So it’s good to have a few basic principles to guide us through all our metrics, and these are three that have stood the test of time.
They aren’t just good for supply management, they apply in general to business — and life.

To Become a CPO, Think Like a CEO

For a number of years we’ve been watching the trend of supply managers to think more strategically, for instance, looking for ways that relationships with suppliers can bring innovations that could increase sales instead of simply reducing costs. The Hackett Group recently released a research alert that confirms that trend. Read it here.
The report is based on an annual survey of procurement leaders, and this year’s survey found supply managers looking past cutting or containing costs to more strategic priorities as expanding the scope of procurement’s influence on spend and tapping suppliers for innovations.
The Hackett Group Global Managing Director and Procurement Advisory Practice Leader Chris Sawchuk said, “We believe many procurement organizations have reached the upper limit of cost reductions possible in categories they are actively sourcing today. So they’re looking for ways to reinvent their value proposition. A key part of this is expanding their influence, and taking a life-cycle approach to category management. This requires working more effectively with spend owners, executives, requisitioners, suppliers, and other stakeholders. It also calls for skills that are outside procurement’s traditional areas of expertise.”
The big idea from this research is that long term success for supply managers comes when they think like a CEO. However, as we all know, if you are stuck in the swamp it’s darn hard to see what it looks like from the mountaintop. To get from here to there it may take investments to raise your skills and those of the team around you. It may take a continuous process improvement approach to the work your department does, and it may take investments in technology to reduce the transaction costs of non-strategic purchases. In short, you may have to start thinking like a CEO of your team before you can align with the CEO of your organization.

 

 

 

 

Employees Succeed if Their Voice is Heard

Simple logic: if an employee is given the opportunity and is encouraged to share his or her opinion the company will benefit… not only because employees feel valued and comfortable, but because it prioritizes brainstorming and collaboration.

This is particularly crucial in Supply Chain so that everyone can contribute towards the continuous improvement of production. AlterNet indicates the United States may be a bit behind the times in this thinking (specifically in the automotive industry).

After spending a lifetime developing purchasing and supply chain professionals, I am always amazed that some of the supply base innovation gets lost or is never heard.  Perhaps we need to improve our presentation skills, but management must improve its listening skills.

Do you think employee voice is directly related to company success?

It’s all about talent development

Early in my career I bought parts to build typewriters — which happened to be important pieces of equipment for purchasing departments everywhere because manually typing purchase orders was one of our important functions. The typewriter and that job became obsolete together.
I was reminded of that by an article in Forbes about how “We Need to Change How We Think About Talent.” It points out how the skills needed to succeed are always changing. Technology is an important part of that. We don’t need typewriters and clerks to manage a supply chain any more, we need sophisticated technology and skilled professionals. And as supply management is more tightly integrated with overall corporate strategies, the breadth of those skills is constantly increasing. It’s uncomfortable for some of us, but we really ought to embrace it.  The fact is that software is doing to cubicle work what automation did to the factory floor — replacing people who did repetitive tasks.
The only way to stay on the top of your profession is to become a continual learner. World-class supply organizations have recognized that, but you don’t have to be part of a global purchasing operation to find opportunities for learning.  I’ll put in my pitch for ISM educational resources, because they are very accessible to any professional and can lead to credible professional credentials. However, a number of degree-granting universities are also very active in online programs, if that’s your goal.

GAO Keen on Strategic Sourcing for Services

According to the U.S. General Accountability Office, the federal government  spent $307 billion to acquire services in its last fiscal year. Did they get good deals on all that work?  The GAO wasn’t so sure, so it turned to ISM, asking for examples of organizations that might have best practices that the federal government could put in place. Obviously, they came to the right place. ISM staff offered a list of supply management organizations that the GAO might interview, and in its report the GAO mentioned four tactics that it found important.
(1) Standardize requirements
(2) Understand cost drivers
(3) Leverage scale
(4) Prequalify suppliers
The GAO remarked that effective organizations did not treat all service purchases the same, and they had to be able to adapt tactics to changing conditions.
None of this should be a big surprise. It did come from “good sources” as it were.
The GAO might not be able to persuade the whole U.S. Government to follow those good practices, but that should not stop you from paying attention to them in your own work.
Here’s the link to the report summary and PDF.
Strategic Sourcing: Leading Commercial Practices Can Help Federal Agencies Increase Savings When Acquiring Services

Halftime in China

We have all heard that it’s halftime in America — and that we are going to come roaring out of the locker room for the rest of the game. That may be true, but here’s a heads up — business leaders in other parts of the world are giving themselves the same pep talk and expecting similar results.
I’m saying that because I’ve seen it first hand in training sessions for Chinese supply management professionals. We are working with employees of several billion-dollar global companies — some based in China and others that have Chinese operations. They are generally Chinese nationals, have good English skills, and are excellent students. They are attentive, ask questions, and apply what they have learned after our seminars.
I don’t want to sound like I’m stereotyping, but anyone who has ever visited the Beijing Pearl Market has seen how haggling over prices and quality is deeply embedded in Chinese culture. However, no one should look at the lively interactions between buyers and sellers there and think that Chinese procurement in general is focused just on transactions.
The organizations we are working with want to know best practices in supply management. They want to use the best tools and the latest strategies for bringing value from their supplier base. Because Chinese companies have operated in a protected domestic environment, their knowledge of global markets may have gaps, but the participants in our seminars are eager to fill them as quickly as possible.
This post is not supposed to be a warning. In a global economy Chinese companies may be your partners as well as your competitors. But it is an observation that they are not not expecting to do well only because they have access to cheap labor and a protective government. They are sharpening their skills in every area of business — and supply management is a high priority.