Archive for February, 2009

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The necessity of purchasing evangilism

February 16, 2009

I often refrain from commenting on the activities of procurement/sourcing vendors; but I have to give a big shout out to the recent activities at Coupa. Last week, Coupa appointed Rob Bernshteyn as CEO, succeeding Coupa founder Dave Stephens in the role.

This might seem like nothing more than a company reorganizing themselves to suit the needs of their market; but the thing I love about this story is where Dave Stephens is going. To quote the press release:

Stephens will remain with the company as Coupa’s Chief Evangelist with responsibility for customer advocacy and business development initiatives.

Now, if there is one thing that procurement/sourcing/purchasing need, it’s not another CPO or another CEO or any other three letter acronym. In my mind, purchasing needs more evangelists. People willing to go out there and speak their minds, getting the profession out into the open, preaching the gospel if you will. Otherwise, what are the alternatives – as David Rae quite bluntly points out on the Procurement Leaders blog:

“…until we recommend pursuing a career in procurement to our kids, the profession will always be one, two, maybe three steps behind the likes of law, accountancy and finance. Not to mention marketing and sales”.

To be honest, I have no idea where Dave Stephens actually is going, but the semantics of his new title (and hopefully the activities of his new role) gives me great hope for the future of purchasing.

Posted in Business, Organization, Procurement, Sourcing, Vendor | 1 Comment »

Spend management in the entertainment industry

February 16, 2009

Stepping into the office this morning; I couldn’t help to notice that Universal Records (our next door neighbours) we finally getting ready to move in after having spent the last few months in renovation mode (in true record company style it has looked like they’ve almost gutted the place and rebuilt it from scratch).

But it seems like a little cost awareness has seeped into the minds of the record company office managers (as opposed to the freewheeling spend management that once seemed to rule the entertainment industry) since many of the boxes that were being loaded into the office were labelled IKEA.

Maybe the word management finally has take on a broader meaning in the record industry to encompass even activities outside of pampering rock stars.

Posted in Business, Spend management | Leave a Comment »

CSR and the recession – a match made in heaven

February 12, 2009

Last years hot potato – sustainable purchasing – is still making waves when it comes to supply management. But will it stay top of mind as hard times comes a knocking.

As reported by Supply & Demand Chain Executive; according to a CIES survey of 600 decision makers across the the food and CPG industries the recession has leap frogged Corporate Responsibility as the top priority. In a recent Bloomberg Europe interview, CIES CEO Alan McClay is cited saying:

“Consumers are trading down but they now expect the same quality to be delivered at that lower price,” McClay said. “Those retailers who are nimble, who adapt quickly to this shift, will survive, while those that don’t risk going under.”

While he’s right in his analysis, recession focus can; in balance with by a strong sustainability focus yeild even better results.
No-one is denying that the retail industry has been hit hard by the recession but as AT Kearneys “Green Winners” (great write up by 2sustain.com here) white paper points out; companies with strong sustainability programs in place outperform industry average even when it comes to retail (by 17 percent in September – November 2009) and food and beverage (by 8 percent in in September – November 2009).

It all goes to show that one has to keep an eye out for both near and long term risks and as well as targets to perform well.

Posted in Global trade, Sustainability, green procurement | 2 Comments »

Supply Chain Risk Visualized

February 11, 2009

The recent months have seen supply chain risks in the headlines on multiple occasions. If you’re still unconvinced of the necessity of managing the risks of your supply chain; lend an eye to this Business Week slide show. It neatly displays some of the latest supply chain related scares and briefly outlines the outcome – both for the companies who sold tainted and/or faulty products and the consumers who bought them including:

  • 45 million toys recalled due to poisonous lead paint
  • The shut down of Chi-Chi’s chain of restaurants and $800,000 of damages paid to 9,500 guests due to tainted scallion
  • 52,000 children sickened, 13,000 of which are still hospitalized due to tainted powdered milk

Posted in Risk Management, Supplier Performance, Supply Chain | Leave a Comment »

The CPO dilemma – How to get more done with less

February 10, 2009

In a recent white paper, Accenture cites a survey of the world’s CPOs noting that 75 percent of those surveyed reported that the downturn has “significantly affected” their purchasing operations. More that 50 percent claim their procurement budgets had been cut, many reported that they were experiencing cut of more than 15 percent. At the same time, savings targets have increased, and nearly 20 percent report that they now need to deliver savings of 15 percent or more.

This is very much in-line with our experiences. Purchasing functions are under pressure to do more with less.

A few days ago, I touched upon this subject in a post called “Talent and competence retainment in a downsizing economy” and I’d like to expand a bit on this subject.

In times of turmoil and significant downsizing, CPOs and purchasing directors need to be very clear in they ways they lead the changes whilst manage expectations and motivation. Successful leadership can be attributed to the following three areas:

  • Visibility – Lacking information, rumours will flourish like air filling vacuum. CPOs need to keep staff informed of changes (internally and externally).
  • Engagement – Involvement in the change process is two fold. Not only does the staff see the engagement of the management first hand, they also partake in the decisions and are able to vent concerns, offer improvements and channel their energies away from distractions.
  • Value-driven – True understanding of what the real value for the company is, is vital for keeping motivation. Unfortunately, in bad times, long term goals are often obscured by the panic to save the moment, yet much research suggests that staff with an inner drive and a deeper understanding of the business model often outperforms staff whom focus on delivering the set targets.

Successful leadership is often attributed to being able to see and channel the talent of each and every individual. Everyone has the power to excel if their talent and potential can be brought into the lime light in a given situation. Being visible and transparent with relevant information, engaging staff in the process and projecting the long term goals and strategy of the business provides a foundation for bringing out this potential. Something that is vital to tap into in order to succeed with doing more with less.

Posted in Change Management, Governance, Organization | Leave a Comment »

Another case of CSR gone wrong – the down sourcing dilemma

February 9, 2009

A few days ago, yet another CSR-related media storm hit the Swedish press. According to TV4:s Kalla Fakta, several leading outdoor apparel (among them Fjällräven) as well as leading home furniture and bedding companies (IKEA among others – press release – in Swedish) have used down plucked from live geese for their products despite stating clear policies against this practice.

This may not strike the eco-aware as any big news as the question of sourcing ethical down has been raised and discussed on a wide range of forums in the past few years. But the impact on the affected brands is still harmful.

IKEA now offer refunds to those that feel discomfort because of the issue and are now taking a close look at their supply chain. Leading Swedish retailer Åhlens have pulled all down and feather products from their shelves until further notice (press release in Swedish).

And maybe even more interesting, Fjällräven – who was recently awarded Signum Priset 2009 for outstanding trademark management and protection – face even stronger competition from their strongest Swedish competitor Haglöfs use this CSR controversy at their advantage on their website stating that they do not use down plucked from live birds.

Whilst little is actually known from a scientific standpoint about the live plucking practice this little CSR issue still has the power to shake up a market.

For those interested in the practice of sourcing down in an ethical manner, small UK outdoor specialist Alpkit did some digging in May last year with very insightful results well worth reading to get a hand on view of the hardships of finding out what ethical sourcing actually requires.

Recycling down
Ethical down sourcing pt. 1
Ethical down sourcing pt. 2

Posted in Low Cost Country Sourcing, Marketing, Risk Management, green procurement | 2 Comments »

Understanding demand is a real protectionist killer

February 6, 2009

As economic nationalism starts to gain hold of international trade many are calling to our leaders in an attempt to try to keep trade free (and fair). Unfortunately, many of the voices championing global trade are as single-tracked and close minded as their protectionist counterparts.

The strange thing is that both parties are just as far from the mark; because a one sided free-trade economy is often just as bad as a one sided protectionist economy. One side is blinded by the shiny cost per part savings, the other is blinded by local/regional opinion.

So what’s the solution?

Well, instead of joining the shouting game, purchasers can start to pave the way by focusing on the full cost of their contracts; awarding contracts to suppliers that offer best total value as opposed to lowest cost per part. It’s in line with the evolution of purchasing as a profession; and it’s in line with what corporate management is expecting from purchasing today. It’s about understanding the demand; and then going out to a global market (and let’s remember that local suppliers are just as vital a part of the global market as any other business) and getting a contract that satisfies that demand.

Given the amount of functionality available in e-sourcing software today; awarding the contract to a supplier based on more than just cost per part is the simplest part of the job. The real trick is to fully understand the real demand. Unfortunatly, this is where many purchasing organizations fail, by focusing too hard on external issues, they forget (or lack resources to manage) their internal responsibilities.

Posted in Business, Change Management, Global trade, Organization | Leave a Comment »

Supply Chain Finance

February 5, 2009

In the latest issue of World Trade Magazine, Richard Barovick  does a great job outlining and describing how companies can benefit from Supply Chain Finance (SCF) in the cover story of their February issue. The article is entitled “Where’s the Goods, Where’s the Money” and it’s a primer into a field of supply chain management that is still being explored by vendors and customers alike but the tools used are becoming more and more streamlined and now offer an almost standard set of functionality.

…four activities and their cluster of advantages have been shaping the field for some time. These include: making automatic payments, supporting supplier discounts and buyer early payments, injecting credit into key points along the chain (pre-shipment, post-shipment, inventories), and a catch-all effort, “integrating” the flows of goods, funds, and information.

For anyone interesed in increasing their risk awareness as well as streamlining the finance aspect of their supply chain, the article provides a great starting point.

Posted in Supply Chain Management | Leave a Comment »

Talent and competence retainment in a downsizing economy

February 4, 2009

According to the latest ADP report; employment in the United States has fallen by more than 2 million in the past five months; including a decrease of 522 000 in January alone. Although many of these cuts are found in traditional blue collar sectors, purchasing – just like many other business support functions – have also felt the crush of downsizing.

This triggers one very important question: how does one retain talent – and competence – in a downsizing economy. The challenges are many and include both the retention of corporate knowledge as well as the social structures that support innovation and development.

More often than not downsizing often includes voluntary attrition programs, and although this is often seen as a good way of managing downsizing, it often leads to major loss of competence, since these programs often propose early retirement meaning that companies lose those most experienced who carry much of a companies institutional memory.

Downsizing can also severely damage social networks as individuals – as opposed to processes – often serve as key connectors between business units and departments. In organizations such as purchasing, which is frequently center-led and rely on local market needs/possibilities to be factored into strategies, this can be of significant importance.

A third aspect of downsizing is the increased focus on getting the job done; meaning that much slack time, that was used to improve skills and sharing experiences is lost. Struggling with day-to-day business leaves little time for mentoring or knowledge sharing among co-workers.

So how does one cope with these challenges? One can start by focusing of these two issues:

  • Knowledge needs to become structured and codified in order to become accessible for all.
  • Management needs to understand the critical social networks in order to retain the key individuals that act as “information super-highways” in an organization. It is also important to have support tools and structures in place that facilitate social networks.

In the near future, we will focus on other issues related to talent and competence retainment as well as leadership and communication issues that proactively address the concerns of organizational transformation and development .

Posted in Organization | 1 Comment »

Commercial and Sustainable Issues Go Hand-In-Hand

February 3, 2009

Earlier this year, The Chartered Institute of Purchasing and Supply (CIPS) released their take on sustainable/responsible purchasing in a report entitled “Balancing Commercial and Sustainable Issues”.

The paper does a great job in outlining the pros and cons, as well as potential pitfalls and benefits, of sustainable purchasing and as with all CIPS material it is well researched (albeit slightly UK centric). Among the take-away’s is this list of benefits for the organization, most important I feel are the long term benefits (life cycle focus, proactive internal dialogue and (well researched) challenging the demand side).

List of potential benefits for an organisation:

  • the existence of a defined procurement strategy and the value outcomes – the improved social, environmental and economic impacts
  • compliance with national and international sustainability standards and regulations
  • to have a better understanding of risks in the supply chain
  • contributes to the sustainable organisational strategy
  • better commercial/economic decisions from understanding of issues that impact on the procurement decision (whole life cycle)
  • potential benefits in a long term relationship, innovation, better materials, alternatives, technical advice, emerging technologies
  • if the objective is `grab the cash’ it’s not sustainable, build a more sustainable platform and achieve savings year on year
  • better quality of purchasing staff with more satisfying goals and improved performance
  • education of suppliers
  • much more proactive internal dialogue and challenge with demand side
  • more effective evaluation of proposals and bids
  • more ‘sustainable’ source of supply.

Posted in Business, green procurement | Leave a Comment »

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