Purchasing Transformation

At the moment Stockholm is draped in a gorgeous cover of pristine snow – it’s a glittering prize to quote The Simple Minds. Unfortunately, a snowy winter also has it’s downsides. The traffic situation is in a state of chaos, public commuting is crippled and many supply chains are struggling to keep up.

In a press release Green Cargo – Sweden’s leading rail logistics carrier – point the blame at the Swedish Rail Administration for poor handling of the situation.

“The rail logistics volume has been halved and companies are severely affected” says Mats Hollander of Green Cargo.

Stora Enso’s information officers echo’s the sentiments from the supply side in a Dagens Industri article:

“We have goods that are going nowhere”

Now it would be easy to just slap on a few ppt:s regarding risk mitigation and leave it at that, but the problem when it comes to logistics and the impact of infrastructure is that even though there is risk awareness there just might not be a simple answer to the question of who’s to blame.

Just to expose some of the complications of an issue such as this:

• The Swedish Rail Administration has the overall responsibility for the rail transport system in Sweden.
• Green Cargo – and other logistics providers – are dependent on a functioning rail transport system to be able to carry on business.
• Stora Enso – and other suppliers – are dependent on logistics providers to deliver the goods.
• The Swedish Rail Administration has sub-contractors (suppliers) that are responsible for rail maintenance.

These suppliers have been sourced just as any supplier should be – yet I doubt that much focus was placed upon the issue of snow and ice in the RFP/I (statistics buffs can gawk at the fact that statistically there was no winter in Sweden at all last year – counting days of sub-zero weather). And the suppliers are now in the business of investing 15+ MSEK into machinery that is vital today (and stands un-used the remaining part of the year).

So the trouble of getting supplies and goods through today, with ice and snow delaying services, is not an easy one to solve since it’s not only affecting the supply chains using the logistics services that have faulted. The supply chain for rail maintenance has been undercut by sourcing hard and low (clearing snow is not profitable). And with a market that demands low prices; there is no upside to keeping snow clearance equipment as back-up.

Everyone is seeking a scapegoat – the problem is that we all know you can blame the weather.

With the Olympics in full swing – the Nordic countries are flooded with self-promoted experts who spend their days digressing who will take the most prestigious medals on snow (for those of you outside of our cross country crazed region it’s time to place your bets on Kalla, Björgen, Northug, Cologna, Hellner, Kowalczyk, Majdic or Saarinen). And with the speculation of glory comes (of course) the analysis of technique, material, weather and failure.

Host city Vancouver is at sea level and critique has been frequent regarding the decision to hold the Olympics in an area which cannot boast impressive numbers when it comes to (winter Olympic) necessities such as snow and icy temperatures (as this is being typed, 4000 tickets have just withdrawn from the snowboarding arena at Cypress Mountains due to rain and the unavailability of snow – which is being trucked in from Manning Park 250 km west of the city – now that’s a supply issue not dealt with often). I would have loved to be a fly on the wall when the risks were discussed as Vancouver was chosen to host the games.

The warm temperatures have also increased the focus on the tracks for the cross country skiers as well as the technique necessary for mastering the adverse – and in many cases unusual - conditions. Years of preparation hasn’t prepared the experts for preparing skis for tracks laced with fertilizer - much like the “new normal” that legio in global purchasing of today,

And this is where purchasing professionals should listen up and take notice – because there are numerous similarities between making the most of a supply chain and skiing fast in the conditions faced around Vancouver at the moment.

Germany’s biathlon poster girl Kati Wilhelm neatly summed up the challenge she and many others are facing in a recent interview with SVT: “I’m a ‘heavy’ skier, and I need to change my technique to float on the snow in order to stay competitive”. Now what she means is that she’s a power skier who applies a lot of pressure downwards as she propels herself forward. In perfect conditions with an icy track this is a great way to create traction and maintain velocity but in the slush that surrounds Whistler its like “running a marathon in clogs” (to quote Swedish biathlon coach Staffan Eklund).

Unfortunately this type of practice is what many purchasers still see as their main activities. They apply heavy pressure on your supply base to ensure low cost.

What one needs to do in Whistler at the moment is to balance pressure with release – there are many skiers who are known for this – the ability to float on top of the snow – making the most grueling races look effortless. What they seem to do is apply pressure downwards to get traction and increase velocity and once they’ve achieved this they release much of the pressure and let the skis do their job to sustain the momentum.

Put into the world of spend management this is the equivalent of applying pressure by securing a competitive environment in sourcing activities and still enabling suppliers to feel freedom (as well as security) as the contract runs to ensure that innovation is captured, flexibility is maintained and quality is sustained (and even improved).

Apart from all the other spend management related issues going on in Stockholm at the moment – this week is also one of Stockholm’s fashion weeks. At first sight, high fashion might be as far away from classic corporate purchasing as is possible – low runs, design focused, pricey, you name it – yet last year big fashion talk of the town was all about supply chain management without lost focus on the design and fashion end of the spectrum.

This fall saw the dawning of a new swedish designer jeans brand (adding further competition to a marked blurred by hipster faves such as Nudie, Acne, Cheap Monday, Filippa K and Whyred) – Noko Jeans.

When other designers start with pen and paper and demin – Noko had another thing in mind. A North Korean supply chain.

It took the guys behind Noko 2,5 years to get 1100 jeans produced. So much for a lean supply chain.

The Noko-website does a great job when discussing the issues and ethical questions that arise when dealing with suppliers in countries that are »off the map« for most purchasing organizations. Highly recommended and in my mind there is a great management type book buried in this story.

The trials and tribulations of Saab continues – after months of rumors and cliffhangers, GM finally decided to sell Saab to Spyker last week. And although the deal is far from finalized, things seem to be falling into place – a great relief to the Saab/GM supply base.

So with Saab production finally at go-ahead all things should be rosy, right?

Well, not quite. For nearly a month GM has been steadfast in their decision to liquidate Saab. Vital to the liquidation process has been the cancellation of ordered parts, a decision that now – for the new owners – has brought on a new headache: supply shortage.

Saab used their in-stock parts to build 100 cars last friday – but today the plant in Trollhättan is at a stand-still. There are no parts to build cars from.

Getting the supply chain back on track will take up to two weeks according to spokes persons at Saab.