Archive for September, 2008

« Older Entries
Newer Entries »

Sharing supplier information on environmental issues and human rights

September 18, 2008

Here are some interesting findings from a recent KPMG study which surveyed almost 600 global procurement and C-level executives.

One-third (33 percent) of respondents have begun or are starting the process to reduce the environmental impact of products they are producing, and almost another third (31 percent) are considering doing so. Similarly, 43 percent of companies surveyed have begun using or are starting to consider human rights issues in procurement decisions, with another 28 percent considering doing so.
Yet only 30 percent of those surveyed said the supplier’s environmental record was very important or important when selecting a supplier, and 32 percent said a supplier’s reputation for corporate social responsibility (CSR)/human rights is very important or important.

In contrast, the two most important criteria for selecting suppliers were quality and price, among 93 percent and 88 percent, respectively, of respondents.

See full article

I think the fact that the environmental and human rights records of suppliers have moved onto the radar screen of purchasing organizations will drive the demand for strong supplier management systems in order to capture and monitor these dimensions much more in the future.
Hopefully organizations will also be more open to share this kind of supplier information with other organizations. Quality and price information has and will always be regarded as a sacred good but maybe social responsibility will open up for some more collaboration in this arena.

Posted in Supplier Management, Supplier Performance | Leave a Comment »

Structuring Your Purchasing Change Management Efforts

September 18, 2008

When it comes down to it; we, as humans, have two primal impulses that drive our behaviour. The first is the need to conserve energy, or in essence, to flee danger. The second is the exact opposite of the first; we strive to expand energy in order to hunt for food or seek a mate. The first impulse is the strongest, and the second only comes after strong stimuli.

This has to be taken into account when you are setting up your change process.

Because people are afraid of change, it’s deeply rooted in us as humans, and we need strong motivation in order to overcome this very conservative impulse. Just telling people about the goals and the processes is not enough. As humans, we focus on feelings, not facts, so the change needs to be perceived as positive and result in positive emotional memories in order to be successful.
Change is a fragile fruit, and should be treated as such. It’s a process of what you reap is what you sow. As in any growth process, control is of the essence.

A structured approach to change management follows this four step process:

Stakeholder Management and Change Leadership

  • Stakeholder analysis
  • Change management plan
  • Set up of global and local change management organizations
  • Communication

Communication plan

  • Project marketing
  • Expectation management
  • Motivate and support
  • Integrate and build acceptance

Organization Design and Training

  • Job and organizational design
  • Skills and competences gap analysis
  • Training

Benefit Identification and Tracking

  • Business case
  • Project goals
  • KPI follow-up
  • Feedback

This needs to be supported by a project team building effort.

Still, even the most well planned change program can fail and numerous risks have to be taken into account. But following the above mentioned guidelines gives you both a basis for risk assessment as well as a structured and controlled process.

Posted in Change Management, Governance, Organization, Strategy | 1 Comment »

When Kids Get Stuck in the Struggle over CGF Supply Chain

September 16, 2008

As the rest of the world is struggling with a volatile raw materials market, Sweden is experiencing a never seen before battle for power in the super market aisles. And the battle grounds are kid favourite’s meatballs and tomato ketchup.

Little over two weeks ago, ICA (one of three major super market chains, the others being Coop and Axfood) declared open war on Procordia, the maker of Felix products, due to disagreements over the price of tomato ketchup. In a display of brute force, ICA took a wide variety of Felix tomato based products off their shelves as part of the negotiation process.

Yesterday, Coop followed suit, and stopped the classic Swedish Scan meatballs due to a similar negotiation breakdown. Pushed into a corner, Scan has sent out warnings to the market that it might have to cut down on personnel.

At the moment, there is no clear winner in the battles of the super market aisles, although doomsday prophets see a ketchup crisis on the horizon. It’s a great thing that the summer bar-b-que season is over; otherwise kids all over Sweden might be rioting due to ketchup shortage.

Posted in Marketing, Negotiation, News, Supplier Management, Supply Chain Management | 1 Comment »

Unleash the Power of Your Suppliers

September 15, 2008

Being a purchaser means having the right to define the needs, problems and solutions you want your suppliers to address. However comfortable this feeling is, there is always that grain of doubt whether you have really succeeded in posting all the right questions that will capture the full capabilities of your suppliers.

A couple of years back, Nordea, one of the leading financial services providers in Scandinavia invented an alternative cure to this headache. Within the IT area they gave the right to define the problems to the supplier community. On their website, presentations made by different managers across the group were made available to potential suppliers. To be considered as a supplier you were required to go through a screening process. The supplier was supposed to; based on publicly available information, define the 5 most important initiatives where Nordea would benefit from engaging the supplier in question, and include this in an “application” to Nordea IT purchasers. Twice a year, the IT purchasing function reviewed the “applications” provided by the suppliers, and the most promising initiatives were brought up for further discussions with the supplier.

By inviting the suppliers to the table, sharing detailed yet publicly available information, Nordea created an opportunity to drastically improve technology driven innovation. This does for sure not remove strategic planning for the purchasing agenda, but it is in an efficient means of unleashing the creative power of your supplier base.

Posted in Supplier Management | Leave a Comment »

Simple logic on how to spend the money on a purchasing transformation

September 12, 2008

I believe in three equal important areas when investing money in a purchasing transformation:
1. Hire the best people – Hire the people with the best education, ambition, mind-set and drive. These people will be able to take on the important leadership role and create an impact in the organization. The McKinsey Quarterly also covered this in the 2007 article “The talent factor in purchasing”.
2. Do it thoroughly – Set the vision, strategy and transformation plan for organization, processes, and systems. Execute according to plans. Do not underestimate the need for Change Management. Set KPIs for the transformation itself as well as for the expected results. Follow-up and report on progress and deviations. Do not give up, there will be ups and downs, people will come and go, but in the long run the improvements will come.
3. Use the right partners – As important in all purchasing, choose the right vendor. This includes choosing the right consultants, system vendors, and training partners. The right partners can boost the initiative and secure full effect of the areas above. 

Now to the simple logic on how to spend the money assigned for the transformation. If the areas above are equally important, a rule of thumb would be to spend the money equally on the three different areas. Of course, it is not the money being spent that make the success but without enough focus on one of the areas above, I doubt that the transformation will be a success.

Posted in Uncategorized | Leave a Comment »

Sourcing Organization Visualized

September 11, 2008

In a recent conversation, my colleague Björn Stenecker he showed me an ingenious model that describes the transition a purchasing organization need to make in order to succeed with a modern sourcing process as well as assessing the needs of new roles and responsibilities.

The model is based on the fact that many purchasing organizations – almost by default, and most probably (mis)guided by tradition – focus most of their energy and effort on the negotiation phase of the sourcing process. From a historical standpoint, this is where purchasers excelled.

The problem is that although this may very well work from time to time, a modern purchasing process utilizing modern tools are more dependant upon analysis, base-lining and sourcing strategy than on negotiation skills. The success rate of the sourcing effort is also increased by the effort spent implementing and continuously improving the agreements in place.

What Björn then did, was overlap this model with graphics showing how the efforts of the purchasing organization were deployed over the sourcing process. The result was stunningly brilliant in all its simplicity. The effort curves of a purchasing organization that included commodity managers, analysts, category directors and contract experts neatly matched the optimal focus curve.

IBX - Sourcing Organization Visualized

IBX - Sourcing Organization Visualized

Given the support of business developers, administrators, e-sourcing managers and a core team approach to process roll-out this type of organization can provide sustainable savings, ensuring that purchasing strategy is inline with corporate business goals and taking advantage of news purchasing opportunities.

While this type of organizational grid is nothing new; Björns model clearly displays the need for expanding the skill set to refocus the sourcing effort to maximize the impact of both a global supply chain as well as the impact of the tools that have been revolutionizing purchasing in the past decade.

Posted in Organization, Sourcing, Strategy | Leave a Comment »

Reverse Auctions in the public sector

September 8, 2008

Today I stumbled upon an article about South Korea introducing reverse auctions as a tool for public procurement.

SEOUL, Aug. 28 Asia Pulse – South Korea will introduce a reverse auction system in the public sector as part of efforts to streamline the nation’s overall procurement process and drive down purchasing costs, the Finance Ministry said Thursday.
The reverse auction is a tool mostly used in industrial procurement contracts, in which sellers compete to obtain business.
Many advanced nations such as the United States and Britain use the auction system, but experts say it may cause some unwanted side effects, such as dumping and quality problems as a result of overheating competition.
The Public Procurement Service will introduce the new auction system starting next year after revising related laws this year.
To minimize these side effects, the reverse auction will be applied only to contracts worth 190 million won (US$176,000) or less, the ministry said.
The procurement service expects the introduction of the new system to save around 20 billion won a year in purchasing costs.

Found on http://asia.news.yahoo.com/080828/4/3o94a.html

The approach of setting a contract limit to reverse auction negotiations is very similar to the public sector regulations for online auctions in Germany. It seems that in many countries the public sector is afraid of adapting this way of negotiating. The so called side effects will only appear if the auction preparation work is not done in a proper and professional manner. If all products and services are clearly defined and non price factors such as quality are taken into account when designing the auction these side effects will never take effect. I believe it’s about investing in education and preparation.

Posted in E-Auction, Sourcing | Leave a Comment »

How Far Can One Take IPR Theft – The Story of How NEC Was Robbed of its Brand Name

September 8, 2008

A story in yesterdays Svenska Dagbladet regarding the widespread counterfeitting and IPR theft (in Swedish) in global trade today led me to this bizarre story starring Japanese electronics giant NEC.

In 2006, Internatial Herald Tribune (among others) reported that a fake NEC had been uncovered in China. What had started as an investigation into counterfeited keyboards and recordable  CD and DVD discs had bloated into something far bigger; and far more bizarre than anyone ever thought possible.

The counterfeiters had set up a parallel NEC with links to over 50 electronics factories in China, Hong Kong and Taiwan. Using the NEC brand name; even carrying NEC business cards; the counterfeit NEC copied NEC products and even went as far as developing a range of consumer products such as MP3-players, DVD players and home entertainment systems. The real NEC even got complaints that they weren’t providing warranties for the fake NEC products.

“These entities are part of a sophisticated ring… …which has attempted to completely assume the NEC brand,” said Fujio Okada, the NEC senior vice president and legal division general manager in a written statement to IHT in 2006.

Now, Chinese authorities have made great improvements in their efforts to maximize IPR protection since 2004, earlier this year the National Working Group for IPR Protection presented an Action Plan on IPR Protection 2008, deploying 280 detail measures in 10 areas. The complete plan can be studied on the Intellectual Property Protection in China web site.

Posted in Business, Global trade, Low Cost Country Sourcing | Leave a Comment »

Reverse Dutch Auctions for Low Rate Loans in New Delhi

September 5, 2008

Today I found an interesting  article about a series of reverse dutch auctions for low rate loans held by an infrastructure finance company called SREI in New Delhi India. 

SREI brings together construction equipment manufacturers on one side, and contractors engaged in construction activities on the other. The manufacturers present the financing for their equipment and the bidding is conducted on the interest rate in a dutch reverse auction. The interest rate will start high, and will be automatically lowered until the first  contractor accepts to buy at that interest rate.

The concept seems to pay off as they are already planning to spread the concept to 9 more cities in India and to other countries abroad.

Here is the full article:

http://profit.ndtv.com/2008/08/23204446/Reverse-auction-for-low-rate-l.html

Posted in Sourcing | Leave a Comment »

One Supplier Audit Question You Probably Never Asked

September 5, 2008

Michael Bengtssons post yesterday regarding cost and quality in the teddy bear industry made me want to share a fantastic story regarding cycling manufacturer Bianchi and their factory in Triviglio in northern Italy. In the latest issue of the fabulous cycling magazine Rouleur, british cycling connoisseurs Guy Andrews and William Fotheringham visited the factory to write an article about the 120 year old cycle manufacturer; who’s riders read like a who’s who of cycling greats: Fausto Coppi, Felice Gimondi, Marco Pantani, Jan Ullrich, all have ridden celeste Bianchi’s to victory.

Starry eyed, the authors traverse the factory speaking to old mechanics, frame welders and R & D staff; sampling frames ridden by champions over the years and looking at what the the future may bring (steel frames, carbon monocoque T-cube bikes and even a titanium frame with etched graphics).

They summarize their factory tour with the words:

You’ll be glad to know that today the staff, including [Felice] Gimondi [Who is one of the cycling greats and an Italian icon, one of only four cyclists to win all three grand tours – Giro d’Italia, Tour de France and Vuelta Espana – as well as the world championships, he is the current president of the Bianchi-Gewiss MTB Team], ride their bikes at Treviglio. Bianchi’s management team are keen too, riding daily and taking great pleasure in ripping the legs off unsuspecting journalists. It is a friendly factory, with a devoted team who seem to like what they do.

And if that wasn’t enough, they end their factory exposé in the staff canteen:

Lunchtime in the canteen with relaxed conversations, wholesome Italian food and proper espresso machines: it all makes for a civilized atmosphere.

Proper espresso machines.

Now that might not be a mandatory question for you regular supplier audit, but for the avid cyclists – who are basically romantics with their hearts on their sleeves – I don’t think you could do any better.

Back to Steiff, co-chief executive Martin Frechen said in a Financial Times article that some suppliers only “think in terms of price and volume” and concludes that “for children, surely only the best is good enough – the best design, the best production, the best safety standards”.

To me, this spells out one thing; passion for your business. In a world where cost and volume seem to be the rule of the day; passionate businesses can surely find a niche market and exploit it to the fullest, but it also means that the business must share the same passion as the consumers. Steiff has understood this, and so has Bianchi.

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

« Older Entries
Newer Entries »
Follow

Get every new post delivered to your Inbox.