Category Archives: Uncategorized

Does your organization optimize the effectiveness of its talent development program?

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It’s a sad fact that many organizations devote on a large portion of their annual budget to developing their teams, but rarely get the desired results. Often organizations don’t take the time to develop key metrics to measure the change in skillsets, behavior or impact of the training.

While procurement and supply chain training provides best practices and new tools, many organizations fail to embed the learning through a linkage to the business process. Unfortunately, over time, the learning is lost as people return to their daily routines and old processes.

5 things companies can do to improve the effectiveness of their development program:

  1. Create linkage between training tools and business processes
  2. Build metrics and checkpoints to assure that tools are embedded and used
  3. Align all development programs to the industry and company using case studies and real life examples
  4. Build programs on a fundamental and advanced level that add value to participants
  5. Measure and report ROI resulting from the training

Today employees are in an environment where they are multitasking, highly distracted and working in matrix organizations with multiple masters. They resent spending time in a training environment that provides limited value.

To be successful, training must be meaningful, provide tools and value linked to a process that will deliver results and a high ROI.

How effective is your company’s training?

Driving Supplier Diversity- Numbers game or serious business?

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Why your program is ineffective

In my career I have been astounded by the corporate mandates to increase supplier diversity that occur without a strategy or plan. Corporate directives are typically to find minority suppliers and get the numbers up. The process buyers frequently use to do this is simple: cast the net, bring in diverse suppliers and get them on-boarded so they can be counted to allow their companies to compete for government work. The big conflict arises when the other directive given to procurement is to drive maximum cost and value improvement. When this happens, the diversity program usually does not include supplier development and many of the diverse suppliers are unable to compete on price with larger, well capitalized businesses (that will eventually replace them). Every year the process is repeated: cast out the net, bring in new suppliers and replace the suppliers that are unable to compete on price.

What can be done to stop this cycle? The only way the supplier diversity process can work is to attract diverse suppliers, develop them and build strong relationships that will endure over time. To do that, a company must be committed to work with the diverse suppliers, understand their business and assist them in building a growth plan for your business. This may include long-term contracting for finance purposes and forgoing the benefits of long payment terms for these suppliers.

Supplier relationship management is essential for all strategic suppliers, but it is critical if you want to succeed with a stable diversity program. Many of these firms are disadvantaged to begin with, based on access to growth capital, talent and networks. When we add reduction of margin through price reductions and terms extensions, they have little to no chance to remain as suppliers. One diverse client that I worked with was forced to use customer directed priced materials at fixed labor rates and a fixed overhead rate with a net margin of 2%. This supplier lost the business to low cost country suppliers who reduced the cost an additional 1%. This diverse supplier never had a chance–given capital he could have automated several operations, providing the OEM a 5% reduction and increased his margin 2%.

If your firm does not have:

  1. Budget for diversity development
  2. Strategy and process for attracting and on-boarding diverse suppliers
  3. Formal supplier relationship management process
  4. Fast payment terms
  5. Timelines for growing diversity programs and its suppliers

You may be paying lip service to supplier diversity.

Review your strategy, budget for developing suppliers and recognize:

“Suppliers are only as good as we let them be.”
David Johnson, Campbell Soup

Supplier Conference—Success or Failure? It’s all in the planning

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5 tips to maximize value from supplier conferences

Do you hold supplier conferences? Did they deliver value or not? I’ve participated in many supplier conferences in my procurement and consulting career. When done well, the buying company and the supplier commit to collaboration to innovate, improve value, drive out cost and improve productivity. When done poorly, suppliers walk away viewing your firm a nuisance and commit to finding a replacement customer who is more collaborative and offers better opportunities.

The days of bringing in suppliers as a group to demand lower prices, offering nothing in return, should be long gone. Hard core tactical approaches leave a poor impression and fail to deliver any value. I wish I could say we’re all smarter than that today, but there are many procurement practitioners from Millennials through Baby Boomers who pass along advice like “always get at least three quotes, let the supplier know you’re getting quotes and will go with the lowest to get competitive pricing” and “tell the supplier that you want a very high quantity, once you get the price, ask them how much for a lower quantity and say you’re getting it cheaper from their competitor.” Sadly, many managers still see suppliers as a source of incremental profit. Among the mistakes companies make at supplier conferences are:

  • Ask for cost improvement ideas, but lack the capability to test, follow up and provide feedback to suppliers
  • Make demands on sole-source, strategic suppliers when they have no leverage
  • Fail to include suppliers in the messaging as a valuable stakeholder
  • Make commitments with no follow-through

The most effective supplier conference I’ve ever participated in was with a retail company who ran the event like a shareholder meeting. The CEO provided the state of the business and the forward strategy. The CFO made a case for while the company is profitable, the profit is significantly less than in prior years. (The company was recovering from a bankruptcy and supplier engagement and support was a critical factor.) Marketing displayed the new products and fashion trends. Procurement presented the need for innovation and cost savings with a plan to work with each supplier that included a follow-up process. The suppliers were energized, focused and, over the next year, delivered on agreed goals to increase value delivery. Unfortunately, this is the exception to the way most supplier conferences are conducted.

5 Tips for Maximizing Value from Supplier Conferences

  1. Define the cost, innovation and value requirements during the event planning
  2. Include a company Sr. Management and a business overview
  3. Create 2 events
    1. One for tactical/leverage suppliers
    2. One for more strategic suppliers
  4. Assure that your firm can handle suggestions and have a quick feedback mechanism
  5. Follow up with every supplier to assure compliance

If done well, the meetings are well-planned and create an inclusive, collaborative environment that will drive your firm to be a customer of choice.

If done poorly, your firm will likely be considered a nuisance and targeted for replacement when a better opportunity comes along.

Which customer are you—core or nuisance?

Food safety in the news again – Purchasing failure or regulatory failure?

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Two food headlines disappointed me the past two weeks; the first to grab my attention was “The Food and Drug Administration and the Centers of Disease Control and Prevention (CDC) and state and local officials are investigating an outbreak of Hepatitis A illnesses linked to raw scallops from the Philippines.” The second was “an outbreak of Hepatitis A caused by the imported frozen strawberries from Egypt has sickened 55 people in six states, the US Centers for Disease Control and Prevention said on Wednesday.”

In an interview with FoodQualityNews.com in 2013 and in an article in Food Safety magazine in 2014, I explained that not every container coming in to the US is inspected by the regulatory authorities. This means all food processors need to self-regulate their products. It is essential that the procurement team map and audit the supply chain on a frequent basis. As someone who has purchased seafood, it was necessary to visit the region, inspect the boats and factories. It was not uncommon to see modern stainless steel processing facilities with good manufacturing processes and sanitation protocol. It was also not uncommon to see old, rusty processing facilities with no protocol. It’s the same with the way the fish are handled on the boats. The unfortunate news is that not every buyer visits suppliers and limited audits occur.

In my consulting life, I have worked with many companies to build strategies for buying fruits, including frozen strawberries. The strawberry origins were Mexico and California. My advice was to visit the crop as it was growing and to be on hand when their products are being processed. In many cases the procurement team and their technical support intervened to assure the quality is achieved.

Too often low cost country sourced food materials provide attractive pricing, but they come with a big risk. It is never a good idea to source through third parties without building a map of the supply chain, auditing the supply chain and visiting the suppliers first hand. Many companies, unfortunately, will not fund such programs.

Since many food products are imported without regulatory checks, it’s up to the companies and procurement teams to self-regulate. The risks are many: reputation risk, creating illness and potential criminal charges if the company is known to have endangered lives.

Is it worth the risk?

Are annual performance reviews keeping companies from moving forward?

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I have long questioned the sanity, value and process for the annual employee performance reviews for most companies, especially for procurement and supply chain job roles. Too many supervisors, trying to be kind, overrate employees only to find that they have a major problem when the employee’s performance is no longer acceptable. Looking back on my own corporate career, I had several bosses who were uncomfortable delivering the performance reviews. Perhaps the worst was the one who sent my performance review in an email with a note “if you have a question or want to talk, let me know”. Of course many employees are intimidated by the process and very few have comments or want to let the supervisor know what the think about the review or the process.

There is little doubt that job roles changed; many team members are on-call 24/7, global, cross-functional and cross-business. Employees are reporting to more than one manager and are responsible and accountable for collaborating, solving business problems, applying business acumen, detailed analysis and, ultimately, enhancing shareholder value. With job descriptions rarely keeping up with the job role evolution and matrix reporting relationships, annual performance reviews do not reflect the dynamic environment nor the value of the individual to the organization.

I have always found it difficult to evaluate a whole year’s work on a one-page summary. Companies like GE, Microsoft, Deloitte and Accenture are scrapping the annual performance review. To do this, it’s necessary to evaluate the team as well as the individuals within the team for the contribution they have made to shareholder value. Many of our evaluation systems are based on models and point scales established by the HR department. This model does little to evaluate performance and is designed to distribute pay raises and bonuses equitably. The issue with this process is that not everybody deserves a raise and some performers deliver higher shareholder value than others and should be compensated accordingly.

  • Annual reviews are not in real time; they focus on looking in the rearview mirror rather than where you need to go.
  • Most supervisors reflect only the performance of the last quarter, leaving them nearsighted.
  • Course corrections need to be made daily, weekly and monthly to truly influence employee performance.
  • Typically, annual reviews are subjective and not fact-based, leaving employees disgruntled.
  • HR point scales may not reflect employees’ true performance and are often adjusted downward for employees receiving a stellar rating.

For organizations to meet their future needs and targets, consideration should be given to scrapping defined point scale, annual reviews and realizing that properly coached employees make a huge contribution to shareholder value. I’m an advocate of providing feedback to employees that acknowledges strengths, gives examples of any weakness and focuses on behaviors and things that can be changed. While everyone has packed schedules and is extremely busy, it is it is important to take the time to provide regular (weekly or monthly) feedback to employees. As performance issues arise, they need to be documented and dealt with immediately.

I’m glad to see more and more companies realize that the current methods of rating employees are out of step and antiquated as we evolve in the information age.

Are you taking a step into the future?

Centralized or decentralized organization structure?

 

treeThe question I am most often asked by CEOs

This is a question frequently asked by the C-suite, who is wrestling with autonomous business units seeking control over their P&L rather than optimizing leverage and synergy from the supply base. The answer that I give is always simple and easy to understand: Let the company’s’ expenditure be the guide to how you design the procurement organization. If the company has spend that crosses all business units and is strategic to the business, it needs technical expertise, global strategy and coordination. The other consideration is understanding regional markets and regional business requirements. This needs to be supported by regional teams, each with a perspective on the region they represent and serve. They can coordinate and drive regional strategies, while coordinating the implementation of global strategies. There will always be a need to have resources on the ground at the manufacturing location to buy and manage local requirements. A key role of the local procurement teams is input to supplier performance measurement.

While a three-tier organization is the most effective organization structure, it must tie in to the overall business objectives and deliver on the needs of the individual business units. The procurement team is the commercial arm of the business, responsible for cost and value improvement, supplier integration and alignment to the business and supplier risk management and performance delivery. This leaves conversion, productivity, sales and marketing to the business unit to optimize. This matrix organization works at its best when the organizational objectives for the business are clear, aligned and focused.

What sort of organization should a company have?
Let the spend be the guide.

 

photo credit: Adarsh Kummur

Three Hours of Power

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The Secret to Achieving Strategic Procurement and Supply Chain Goals

As I watched the Olympics last night, I saw the thrill of swimmers and gymnasts achieving their strategic goals and became even more excited about this blog. This week I’m honored to have guest blogger Chris Brogan. Those of you who know me understand that I’m all about implementable solutions and Chris’s tools and suggestions work. He’s had a huge positive impact on Linda, me and our business and he’ll help you win, too.

Three Hours of Power
By Chris Brogan

I’m writing to you within the three hours I’ve allotted each day to reaching my goals for myself and my business. It’s part of something I sell called the 20 Minute Plan JUMPSTART but it’s something that I work from daily. Remember the old ad? “I’m not just the president. I’m also a client.” True of me.

Three Hours of Power

The basic concept of the 20 Minute Plan is that you take 10 minutes in the morning and 10 minutes in the evening to set up your days for success. The mantra behind this is simple: your day is your week is your month is your year.

Your day is your week is your month is your year.

What you do today influences your weekly goals, and impacts your monthly progress and ultimately shows up in what you get for the year.

The three hours part is what I call the 9box. It’s for a simple reason. Take three hours and split them into 20 minute blocks. That’s 9 blocks of 20 minutes each. On my little sheet I work from, it looks like one side of a stretched out Rubik’s Cube.

In those three hours go ONLY that which moves me closer to my goals for me and my business. No client work. No honey do list stuff. Only priority work. Grade A top shelf stuff that will move the needle.

The To Do List is the Enemy

You’re so busy that you’re not doing anything. Let THAT sink in a moment. Are you one of those people who answers “How are you doing?” with a deep sigh and says, “Oh, busy!” And then you open your mouth to draw in air and your eyes are a bit wide, like, whew the exhilaration.

Guess what? 1.) No one cares that you’re busy. 2.) How successful is that busy making you?

People love their to-do lists. They feel excited when all the boxes are checked off. I call to-do lists noble masturbation. It feels good, but it’s not the real thing.

Sure, you have work to do. Whatever. We all do. But if you don’t dedicate some time to the actual priorities and efforts that will move your business forward, you’re just eating up hours on tasks.

The to do list is the enemy. Make it a third class citizen in your life.

Work Inside Three Hours

You’re awake roughly 16 hours each day, if you get 8 hours of sleep. I get 8 or more. You’re probably too busy to sleep as much as me.

Of those 16 hours, people speak for a lot of your hours: family, friends, work, clients, whatever. Find three. You can find 3 out of 16. And make those about your priorities. This isn’t piano lessons. This is “this will make me more successful because I’m investing time and focus in it” type stuff.

You can find it. And your success will start giving you proof that it’s working. And then you’ll defend it. I promise. It’s how I’ve written ten books and counting, while still traveling to consult, speak, and spend as much time as I can with my kids and my fiancé. Join me in taking some of this power for yourself.

Chris Brogan is a business advisor and New York Times Bestselling author. Learn more about him at http://chrisbrogan.com