Archive for the ‘Risk Management’ Category
April 12, 2010
Reports on konsumerbehavior and beliefs are always a great source when trying to understanding, educate and open the minds of procurement professionals (or anyone involved in development and manufacturing). Most often they expose consumers as a sort of elephant – they rarely forget and once they start moving in a direction, getting them to change can be an overwhelming task.
Recently, Konsument Föreningen Stockholm – swedens largest non-profit consumer organization – opened a social media project called “Myths about Food” whereby they sought to expose and bust many of the myths that still float around consumer circles.
One of the questions in the survey was related to the use of apples in Lingoberry jam. Now anyone who’s ever been to the nordic region will have experienced the importance of Lingonberry in Scandinavian cuisine. The fact that it’s one of IKEA’s big sellers abroad is a testament to the fact if nothing else. In it’s purest form Lingonberry jam consists of lingonberrys and sugar so when your starting to mess with the recipe you’re getting into pretty deep waters.
Evenso, about 20 years ago many producers were exposed using apple sauce in lingonberry jam to make their product cheaper.
In this years survey (swedish only) – 72 percent of the respondents still believed this to be true. Even though producers stopped the malpractice years ago.
Now that’s something to keep in mind when you’re trying to balance cost with your products consumer product.
Posted in CSR, Change Management, Governance, Risk Management, Spend management | Leave a Comment »
March 31, 2010
With many car manufacturers struggling with recalls and pointing the blame at their ailing supply chains this recent piece by Peter Hunter of HumanResourcesIQ (Root Cause of Toyota’s Failure: Employee Engagement) opened up the matter from a completely different perspective. Hunter argues that engagement is the real differentiator between East and West Toyota production lines.
Is it possible that the faults that caused the recalls did not occur in vehicles produced in the East because they were spotted and rectified by an “engaged” workforce, while in the West the “disengaged” workforce knew of the problems but never reported them to Toyota because Western managers do not know how to engage their workforces.
I shared similar sentiments in a post relating to Bianchi bicycles a while back (One Supplier Audit Question You Probably Never Asked); “…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…”. Passion and engagement are related emotions. And both have been out of focus in sourcing recently.
Understanding why an end-customer buys the product should be essential for procurement.
If you’re solely focused on up-stream cost reduction, chances are that you are missing the real reasons why your product is unique and why customers are attracted. In many cases it’s more than just marketing gimmicks that have driven them to the stores. It’s the pride of owning something that they can identify themselves with.
I had the chance of meeting one of the marketing and sales executives of Scania last year, and during our discussion we touched upon the subject of events where she mentioned that Scania once had put a tattoo artist in their exhibition booth. And people were queuing to have the Scania logo permanently fixated on their skin.
With that amount of customer dedication to your brand, can procurement afford to chose suppliers who are not as – or more – engaged/passionate about their job. I would say no.
Posted in Business, Change Management, Marketing, Risk Management, Strategy, Supply Chain Management | 1 Comment »
March 30, 2010
The Rio Tinto bribes-for-secrets case has become a landmark for corruption and risk management; exposing business practices many of us consider highly unethical.
Commenting the story for CNN (Wake-up call for foreign firms in China); risk management consultant Peter Humphrey points out several lessons that can be learned from the case:
- First, corrupt practices must be strictly monitored and curbed in order to avoid trouble both with Chinese law and home-country anti-bribery law.
- Second, companies clearly need to gather business intelligence and competitor intelligence but they must do so through legal and ethical means and not through bribes.
- A closely-related lesson for multinationals is what we have learned about the interests that China considers “strategic”.
Now, we’re all aware that corruption is wide-spread in China (as it unfortunately is in many parts of the developing world) the question is how we should deal with the fact. SIDA – the Swedish International Development Cooperation Agency recently announced that they are funding a center for CSR-issues in Beijing (in Swedish) but although training and cooperation centers such as this are one way of instigating change one wonders if it is enough. My belief is that CSR-practices must become the focal point for low cost country sourcing because unless procurement as buyers do not stand up for ethical procedures one cannot expect developing country suppliers to live up to western European cultural ideals in a cut throat business environment.
Posted in Best Cost Country Sourcing, CSR, Global trade, Low Cost Country Sourcing, Risk Management, Supplier Management | Leave a Comment »
March 12, 2010
While commuting to work this week I took this year’s first real tumble. Navigating the icy conditions along Norrmälarstrand had more in common with riding the pavé of Paris – Roubaix than a regular commute but to me it came as no surprise. I knew the risks and I had taken precautions – slowing down just enough to maintain traction, helmet on, cyclo-cross style gloves, both eyes on the road. I was also very aware of the risks I factually was taking – commuting in icy conditions on a fixed gear set-up with no breaks.
Nevertheless, I still crashed. No major harm done, but still.
One of the classic cycling anecdotes is that you’re not a real cyclist unless you’ve broken your clavicle. When Lance Armstrong broke during the Castilla y León last year twitter was alive with commentators joking about how the seventeen year pro and seven time Tour de France champion was finally a cyclist.
Why am I telling you this; well crashes, accidents and risk-taking are significant attributes in our culture – and that includes purchasing. On many occasions I’ve had the pleasure of listening to procurement pro’s swapping war stories; bailing out suppliers in far off countries, manipulation, bribery, you name it. And although the stories are both compelling and at times quite exciting one wonders why we pay so much attention to (and show so much appreciation for) what could be seen as risk management failures.
I’ve got six words for it: scars impress in the male world.
It makes one wonder what would be premiered had there been more Barbara Kux’ out there.
Posted in Risk Management | Leave a Comment »
March 5, 2010
Dogged by the downturn, the pulp and paper industry has slowly recovered over the past months to the extent that it has been flagging for price increases to boost profitability. Now for the affected categories purchasers this was old news, but no-one was counting on the perfect storm that hit the industry in the last week.
- The earthquate in Chile
News reports indicate that 7 percent of global pulp capacity is shut down.
- Severe weather conditions in Scandinavia
Rail transport has been at a standstill and is still not at 100 percent capacity interrupting many supply chains. Hallsberg, the main rail hub in Sweden has been at a standstill for 12 days and Green Cargo estimates losses of 30-40 million SEK according to Dagens Nyheter.
- Transport workers strike in Finland
While road transport is back to normal, dock workers went on strike this thursday effectively shutting down all finnish ports. Both Stora Enso and UPM-Kymmene has flagged for mill closure due to the strike.
With pulp costs rising higher than expected, purchasers are in a tough spot. I wonder if any risk management initiative could have seen all of this coming in a once. It also makes one wonder which category will be the next in line.
Posted in Business, Risk Management | Leave a Comment »
September 8, 2009
As I rode my bike to the Stockholm central station this morning it struck me that the more protected you are the faster you go, and the more risks you take. Since I was travelling to the UK I had left my helmet at home (cost carriers are low cost for a reason, and extra luggage is not one of them) which is rare, so as a consequence I was taking it a quite bit easier than I normally would have. And since I was riding fixed gear, I also kept my attention as far upfront as possible, since there are no mechanical brakes on the bike to assist with the process of slowing you down.
Since I was lacking in both protective (no helmet) and divertive (less breaking power) aspects I was very aware of the risks I was taking and thus I was doing my utmost to avoid any. This of course got me thinking.
Are we less willing to accept even the notion of risk if we lack any risk management solution at all?
I’m quite sure that this is true for us as human beings. But does this mean that sourcing professionals who know that they lack the processes and tools to manage risk source more carefully than those who are secure that they can handle any problem should they arise?.
A lot of risk management vendors push strongly for the need of supplier information – preferably in real time to avoid outdated information – but I’m quite convinced that the best risk management solution starts at home with large dose of risk awareness. Carefulness might not be one of the top credentials when scouting for purchasing talent but the ability to avoid risk altogether should definitely be rewarded in one way or another.
Posted in Change Management, Organization, Risk Management | 2 Comments »
May 29, 2009
Yesterday Jason Busch at Spend Matters (D&B: Powering Multiple Spend and Supply Risk Offerings) provided some insight into D&B:s strategies going forward with their supply management solutions:
In a recent conversation with D&B’s Jim Lawton, who serves as Senior Vice President and General Manager of the Supply Management Solutions (SMS) business unit, I confirmed D&B is moving to a “D&B inside” model to enable supply management and spend visibility providers to leverage D&B data to help customers move toward more strategic risk management.
Now this is great news, managing supply risk is so much more than just having data readily available at your fingertips and what D&B now are moving towards is a model which enables those with experience, know-how and process knowledge with better data which in turns leads to better value for the customers.
It is also something that goes hand in hand with some of the functionality available in SAP SRM 7.0 (which analysts and bloggers alike will surely explore now that it is on the market). SAP now provide for a bird’s eye view on supplier management through custom scorecards which can aggregate data from numerous sources such as D&B. No doubt will D&B’s proposed openness add even more value to applications such as SAP – what still needs to be seen is how and when the SAP supply chain partners pick up this lead and how they will attempt to exploit the possibilities. Because when (and if) they do; that is when the real value will come alive to the customers.
Posted in Risk Management, Supplier Performance | 2 Comments »
May 6, 2009
Spring finally kicked in with a vengeance in Stockholm this weekend and as always it’s accompanied by a number of sure to tell spring spend management signs.
First, we’ve got the eProcure & Supply – Germany’s largest purchasing and supply management event with approximately 125 exhibitors and an expected attendance of around 3000 purchasing professionals.
Second, and from my perspective a little more interesting is the annual spring unveiling of Aberdeen’s CPO Agenda report; this year subtitled “Smart Strategies for Tough Times”. As always, Andrew Bartolini has done a solid job, yet there are few headline grabbers lodged in the 36 pages.
The one standout metric unveiled relates to 2009’s big spend management topic: supply risk.
“71 % of CPOs believe supply risk is increasing, yet 30% have a formal program in place to manage it.”
Now, that a figure that definitely will be front and center in many vendor presentations as the year rolls-on.
I for one think many more companies actually have a formal risk management program in place, it’s just that it probably did not involve the purchasing department, let alone give purchasing the responsibility to actually own and manage the process.
Posted in Business, Risk Management, Strategy, Supply Chain Management | 2 Comments »
March 30, 2009
This weekend The Economist published a piece entitled Moving on up where they (partially at least) championed a return to Henry Fords vertically integrated supply chain model. Concluding, they offer, that though there are risks involved (in either approach), “Recalling the days when Henry Ford ruled, vertical integration—in adapted form at least—may emerge from disgrace as an innovative solution in an era when innovation is sorely required.”
One company that recently has started to revisit a more vertically integrated supply chain is Sandvik – one of Sweden’s leading high technology groups, represented in 130 countries world wide with market leadership in stainless and high-alloy steels and special metals. In mid-February Sandvik acquired Wolfram Bergbau- und Hütten-GmbH Nfg. KG (WBH), an Austrian producer and supplier of tungsten products. In the press release that announced the acquisition Anders Thelin, President of Sandvik Tooling is quoted saying:
“It [WBH] provides us with resources to manage the entire production process, from ore to finished cemented carbide powder. In this way we will be able to further strengthen our raw material supply and develop our business and customer offering.”
Given the volatility of the current commodity markets, carefully choosing your supply chain integration strategies is becoming more and more important.
Posted in Risk Management, Strategy, Supplier Management, Supply Chain Management | Leave a Comment »
March 25, 2009
If it’s non-core; it can; and some claim should; be outsourced. But how does one really define non-core.
Recently several municipalities in Sweden have outsourced their ordering services for mobility service- and medical service transportations to call center service providers. In theory this seems just fine; municipalities should focus their activities on issues more core than just answering the phone and placing an order to a local transportation provider (such as the local cab company).
Unfortunately this non-core business is slightly more complex than it may at first appear to be:
- It’s highly dependent on local geographic knowledge, knowing where a certain street actually is located will certainly speed up the process and minimize errors
- It’s highly dependant on communication skills, both from a customer confidence angle, as well as the ability to correctly receive and process customer demands
- If something goes wrong, there needs to be a feedback possibility connecting the transportation provider with the customer to sort out any misunderstandings
Given these three preconditions, the sourcing decision to award the contract to the lowest bidder might make sense from an economic perspective, but who would have thought that call centers in Tartu, Estonia and Chisinau, Moldavia really had a fair chance to live up to any of the above mentioned preconditions. Especially given that the customers are most often elderly, disabled and in need of special services (hence the municipal involvement).
Our task is to plan cost-efficient trips of high safety and quality. We specialise in coordinating and planning trips, which allows us to handle the demands for quality and safety of our travellers.
About Samres from their corporate website
When the buyer Stockholm Läns Landsting (SLL) measured their customer satisfaction after a few months; the satisfaction level had dropped from 85 percent to 77 percent. The contract has not been renewed and SLL is currently looking for a new supplier.
What can a purchasing department learn from this: make sure to evaluate outsourcability from more than just the core/non-core aspect. Equally important is the strategic importance and the depth of stakeholder involvement as well as the impact on the customer.
Posted in Outsourcing, Risk Management | Leave a Comment »
