Archive for June, 2008

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Mindset and leadership

June 19, 2008

Yesterday’s rather thrilling final round of the Euro 2008 highlighted two aspects of sports which are very valid when it comes to the business world as well.

  1. Mindset
  2. Leadership

As the Swede’s entered the pitch for the most important game of the year, they definitely went out with the mindset that this game was going to be a walk in the park. Heck, general manager Lars Lagerbäck had told his players; as well as the press; that they would easily beat Russia if the game went according to plan. Unfortunately, he forgot to tell the Russian squad that they were supposed to play according to Mr. Lagerbäck’s plan.

So; overly confident; the Swedes went out and got clobbered by a bunch of quicker, younger, more innovative and proactive Russians. While the Swedes waited for the game to get going, the Russians were going full tilt from the whistle.

And as the game progressed; the home grown Swedish managers did nothing. They occasionally waved their arms in the air, shouted some half-hearted instructions at the nearest players and hoped for thing to return to normal. The Russians on the other hand had placed their trust in a globetrotting Dutchman with an amazing ability to install his team with an enormous sense of self-confidence. To them, this game was not a game that could be lost; it was a possibility to win. It was a positive experience.

The Russian manager Guus Hiddink embodies the global talent pool; he knows no borders; he sees challenges as possibilities and seems ready to tackle them wherever they may be; be it South Korea (which he against all odds took to the semi-finals of the World Cup in 2002), Australia (which he took to the second round in the 2006 World Cup, the Aussies first appearance at this level in 32 years) or Russia (who now make their first appearance beyond the first round in any tournament).

Mindset and leadership. Simple as that.

Posted in Business, Organization | Leave a Comment »

The perceived usage of e-sourcing in Europe

June 17, 2008

The past few weeks has seen some rather conflicting information regarding the state of the usage of e-sourcing tools and strategic sourcing practices in Europe.

In one corner we’ve got (ex-Aberdeen analyst) Tim Minahan; who recently stated that: »Compared to North American firms, European procurement organizations have been reluctant to embrace online sourcing approaches.« on SupplyExcellence.com.

In the other corner we got Tim’s successor at Aberdeen; Andrew Bartolini; who’s recent benchmark report »Strategic Sourcing in the EMEA« (available for download from Aberdeen.com) found that the top European performers used e-sourcing for an astounding 56.4 percent of their sourceable yearly spend, yielding an average realized savings of 10.4 percent.

Having spent the past five years kicking around the outskirts of the European purchasing market I know for a fact that e-sourcing has been alive and kicking in Europe for quite some time; which (to his defense) Tim quite rightly points out in his post.

Posted in Sourcing, Supply Chain Management | 1 Comment »

Rather optimize than extend

June 16, 2008

ePurchasing applications have reached a fair level of maturity which has changed the focus of providers from adding more features to their products to actually improving and optimizing existing tools and processes. Of course as an application provider you need to show innovation in your product lines but the feature war seems to have calmed down a lot comparing to a few years back.

This is good for the customer side because usability actually moved form “Nice to have, let’s do it later!” to the top of the requirements agenda. If you compare the different ePurchasing applications on the market you will realize that they will all pretty much match up with your main requirements. Of course there are different bells and whistles but all tools will help you to get your stuff done the one way or the other. The differentiation factor is usability, performance, effectivness and beauty … or before we get to romantic here lets call it “layout of the user interface”.

  • Is the system friendly to use?
  • Is the user interface self explaining?
  • Can a new user get thru the process without any training?
  • Howquick can I get things done?
  • Usability drives adoption – rolling out an ugly system is much harder than introducing a nice, lean and fast user interface. Even if the ugly inteface can do more you will need to push your users much harder to work with it.
  • Or why do you buy your books on amazon? Because amazon has so many features? No, because it makes buying simple.

So when you post your next change request to your application provider I would like you to reflect on this? Will the change blow up complexity or will it make work easier? Not just for you – for everyone!

Posted in Software as a Service, Technology | Leave a Comment »

Take a lead in getting green!

June 13, 2008

Most manufacturing companies do very little manufacturing themselves. The own value add is in many cases limited to some 10-30% of total manufacturing cost. Therefore, as we tend to repeat as purchasers, purchasing has a major impact on competitiveness and profitability.

Interestingly, the same is true for environmental impact such as carbon dioxide emissions: 70-90% of the emissions are generated by suppliers. So we as purchasers have the most important role to play in making our companies greener.

Why then should we care about the environment? Doing good is a good start. But in many companies that does not give you approval on your business case or plan.  Therefore, here are some arguments why we should engage in it:  

  1. It makes you competitive: Customers and employees alike appreciate companies that care about more than profits.
  2. It will reduce your costs: Cost of energy will due to taxes, regulations or market price changes most likely increase. Therefore it makes sense to move before the rest does.

Now the good news are that the methodologies to use when reducing, for example, carbon emissions are very similar to the standard purchasing toolbox. If you do a full TCO analysis of a purchased product, you have to break down the costs generated through the production of a product. When you have these costs elements, you then assess what can be saved in each element and how hard or costly it is so archive those savings. You get the classical Impact-Ease of implementation matrix and start with the juiciest low hanging fruits. The same approach can be used on carbon emissions. It is not harder than that. Try it. It is fun, it it good for your company and it is great for the planet.

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Posted in Supply Chain Management | Leave a Comment »

Sourcing of company cars

June 13, 2008

In Sweden, the most bought company cars are Volvo and Saab, followed by some German brands. It seems like the professional buyers of company cars are not thinking of low cost country sourcing in the same way as buyers for other categories. I understand the challenge of sourcing the cars. Both the employee satisfaction and total cost of ownership have to be taken into account. So, how can these two criteria be fulfilled in the best way?
 
Imagine this; a four door car, designed in Italy and available in red. Rear engine and rear-wheel driven, just like a Porsche. Sounds pretty good, right? Employee satisfaction! In addition to this, the make of the car is the same as for Jaguar and Land Rover. Now I know what you are thinking; it is probably expensive and will not fit into the total cost of ownership budget. But, it is not expensive!

Tata Motors has produced the Tata Nano. It is a small car in the same size as the new Fiat 500 or the Smart Fortwo. But it has four doors instead and place for four people so with these advantages it is not completely comparable to the Fiat and Smart. The drawback might be the small motor with only 33 hp. On the other hand, nowadays you really cannot drive fast anymore and the top speed of 110 km/h might do it. The small motor also results in a low fuel consumption of only half a liter per 10 km. It reaches 90% of its top speed in 21 second which is very good comparing to any car. If you have more need for speed there probably will be a tuning kit available in the future.      

The car is produced and sold in India and the price there will be 1700 EUR. That is like the price of two better lawnmowers. The Fiat and Smart cost approximately six times that price.

The car is available after this summer. Why not buy it for all employees? Paint it in the company colours and put the logo all over the car. What a marketing campaign at the same time. When buying a large volume I also suppose there will be some room for negotiations.

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Posted in Best Cost Country Sourcing, Business, Global trade, Sourcing, Supply Chain Management | 2 Comments »

Increased oil prices – Will that generate non-fossil fuel usage sooner?

June 11, 2008

The current oil price per barrel is $138. Before 2008 the highest price ever was just below $100. The cost of pumping up oil from the North Sea is said to be approx $25. The same cost for the Saudi Arabians is said to be approx 25 cents (!)…we are not talking about a cost plus situation here really….and we are not talking a normal demand / supply situation either to say the least.

The cost to ship a container from Shanghai (including the inland Chinese transportation costs) to the Eastern US seaboard has risen over 250% since 2000 when oil was $20 per barrel. (www.spendmatters.com)

Extremely high oil prices drive a number of industries to reevaluate their current consumption. This will generate new ideas and alternative methods.

Fossil fuels emissions include Green House Gases. Green House Gases generates global warming.

I say the higher the oil prices the better it is for the environment in the long run.

I hope the price per barrel will reach $200 already this year (as many analytics actually already is assuming)….and $300 per barrel by Q2 next year…

One of the bad things with these price levels on oil is of course that new oil fields, not yet profitable, all of a sudden seems to be interesting for investors….increasing the total world supply with gazillions of tons of more potential oil that can be pumped out on the market…

Posted in Global trade, Sourcing, Supply Chain Management | 1 Comment »

Euro2008 – The EUROPASS Supply Chain Impact

June 10, 2008

With the Euro2008 in full swing, football fans from all over Europe are flooding into Austria and Switzerland to see their faves duke it out on the pitch. But in the background an amazing supply chain has been processing stadiums, balls, trophies, mascots, fan-zones, and accommodations etc for years.

The revenues for this years event is expected to be up 50 percent from Euro2004 in Portugal, landing at an astonishing 1,3 billion Euro, most of which are coming from broadcasting rights,

The budget – or shall we call it purchasing volume – for the organizers were set at 147 million Euro; covering stadiums, fan-zones, mascots, promotions, logos, and – the always as controversial – a new ball: the Adidas EUROPASS.

Since every championship needs a sense of urgency and innovation – and with rules pretty rigid – organizers and suppliers often start to look at the details to develop the game. The Adidas EUROPASS was unveiled late 2007 and reactions from the players was skeptic, at best.

“Those balls are going all over the place, changing direction all the time, especially if fired from a distance,” Croatia goalkeeper Stipe Pletikosa said to India Times earlier this week.

“They are not designing balls for goalkeepers,” Netherlands goalkeeper Edwin van der Sar said in the same article, referring to the technological wizards at Adidas who designed the white ball with the black patches.

Although Adidas are keen to point out all the high tech features of the ball, as seen in this promo film there are still loads of manual labor involved; supply chain management at Adidas has to be top notch for the players to succeed.

The ball is also made in custom batches, with unique graphics for each game including the names of the opposing teams, group, date, city and stadium. The final is to be played with a special edition entitled EUROPASS Gloria.

No matter who actually wins the Euro2008 using the new features of the Adidas EUROPASS (my bet is Germany, consistency always pays off, and they’ve kept their world champ runner-ups from 2006 intact), one thing is certain; the ball is still round. But only just.

Posted in Personal, Supply Chain Management | Leave a Comment »

1st CPOs Economist Forum – Sourcing is the focus in Milano this week

June 10, 2008

June 12-13 see the 1st CPOs Economist Forum; subtitled “Innovative Technologies and Strategies to reduce purchasing costs, improve processes and add value”; take place at the Westin Palace in Milano.

To me, this is of interest in a number of ways:

  • The Economist is acting as organizer and media partner; pushing purchasing and supply chain even more into the limelight.
  • Aberdeen analyst Andrew Bartolini  is making a European appearance. My hopes is that he will share some of the insights that Aberdeen has found in their upcoming Strategic Sourcing in EMEA report. I’ve been lucky enough to partake in a draft version of this report and it includes som rather stunning highlights that expose the different approaches to strategic souring in the EMEA (Europe, Middle East and Africa) region as opposed to the rest of the world. 
  • In the preliminary program, speakers come from two corners: Emptoris and Bravosolutions. Now, that’s a matchup that I’d love to hear more about.

Posted in Best Cost Country Sourcing, Conference, Procurement, Sourcing, Supply Chain Management | Leave a Comment »

Maslow and Purchasing

June 6, 2008

Over the last 20 years both consultants and scholars have been trying to pin point how purchasing can create a competitive advantage. Since you need to start with the basics (get the stuff to the factory) a commonly used approach for describing Purchasing’s creation of competitive advantage has been some kind of twist of the classical model on Hierarchy of needs developed by the American psychologist Maslow. Among others, professor Rozemeijer has made some contributions to create a framework for purchasing.

The latest contribution is however done by the Hackett group which recently launched its 5 stage model on purchasing value proposition:

  1. Supply Assurance (”Right goods and services at the right time at the right place”).
  2. Price (”Right goods and services AND at the right price”).
  3. TCO (”Shift from lowest price to lowest Total Cost of Ownership”).
  4. Demand Management (”Reduce demand activity, complexity immediacy and variability”).
  5. Value Management (”Increase business value derived from spend rather than just reducing total cost/spend”).

Stages 1-4 are all fairly well know. The new thing is stage 5. Here Purchasing should not only secure the lowest cost but also increase the value of the products that are sold by the company. The activities involved could include:

  • Explore the opportunities of global supplier markets to get external innovations into the products and services
  • Taking a leading role in driving the work within Corporate Social Responsibility and so improve the world, increase the corporate image and strengthen share holder value creation
  • Take a lead on core/non core analysis and drive outsourcing/insourcing
  • Take the same approach on itself and automate and off sore non-core processes and categories.

But remember Maslow, before you make a deep dive into self-actualization; make sure you fix the air to breath, the food to eat and the shelter to sleep under.

Posted in Best Cost Country Sourcing, Global trade, Sourcing, Supply Chain Management | 1 Comment »

Has Globalization come to an end?

June 5, 2008

The last couple of years I have been the strong believer of globalization and specialization as the major Business trends. Internet has for me manifested the final realization of globalization and continuously consumers demand more and more customer specific products and services making the importance of specialization noticed.

Thinking back to when I was a child there where two types of milk. Now I’m astonished by all different milk types and surprised that I feel a need to buy the barista milk and that is not the light one. Globalization is for my generation something we take for granted from the things that we buy to the people we meet; work and socialize with; even affecting activates we do on our spare time and how we spend our vacations.

However since Al Gore made the world aware of global warming and the climate change I strongly believe that it will have an impact on the future of globalization in certain areas. Although most of us understood that there were issues concerning the environment before Al Gores “The innocent truth”. The majority like me thought that their actions would not make a difference.

It now seems that it is a common knowledge shared by all consumers to care about the environment and that it affects the consumer behavior of even the least green friends that I have. Several of my friends have changed to cars running on ethanol and even I’m thinking about doing the same. Going to dinner where the hostess says that they recently bought a fantastic soda machine, thinking of the pollution while transporting sparkling water. What a revival global warming must have been for the soda machine manufacturer!

If it affects my consumer behavior I’m sure it will effect how companies source products too . I believe that it will be even more important for companies to have local suppliers for things they can source locally. McDonald’s states very clear that they source cheese and meat locally. What has started in the food industry with; locally sourced products being a unique selling point will spread to other industries.

Maybe it is not the end of Globalization; maybe it just shows how important it is for companies to make sure their sourcing strategies are green and Glocal.

Posted in Global trade, Supply Chain Management | Leave a Comment »

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