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I spent last week traversing Western Europe to meet with supply management executives at some of the region’s largest financial, aerospace, and high-tech and automotive manufacturing companies. My discussions ranged from determining the best organizational structure to how to drive greater adoption for e-sourcing and e-procurement initiatives. My recommendations stemmed from drawing correlations to the challenges faced by other organizations and the best-practice approaches they used to overcome them. In nearly every case, I followed up by connecting executives from the inquiring company with the aforementioned best-practitioners.
This exercise led me to a simple conclusion: No matter how different, supply management organizations tend to face similar challenges. At a high level, these challenges include, but are not limited to:
- Securing ongoing support and adoption from executives and stakeholders.
- Prioritizing supply management initiatives and aligning these with the objectives of the business.
- Evaluating and deploying supply management technology in support of these initiatives.
- Hiring, training, and retaining skilled talent.
- Developing, employing, and leveraging the right performance measures.
- Monitoring and capitalizing on supply markets opportunities and risks.
In its brief existence, Supply Excellence has been dedicated to bringing you proven tactics and strategies for accelerating improvements in these areas. However, if you’ve been paying attention, you recognize that Supply Excellence is merely a lens into what works in the real world. In other words, you are the real experts.
You are in the trenches every day, testing new approaches and theories. You know what works and what doesn’t. I am merely the megaphone to help frame the discussion and share these best practices to a large audience of your peers. And I’m honored to play this role.
With this in mind, I’d like to make a simple request. Send me the single best tip, tactic, or practice you’ve ever heard. You can use the comment section below. Or, if you prefer, you can e-mail me directly at tim@supplyexcellence.com
Your advice doesn’t need to be lengthy or complicated. In fact, it’s better if it’s a simple technique that others can use today. To get your creative juices flowing, here are just some best practices I’ve amassed from other companies:
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Create a crisis – whenever possible link your supply management initiative to a top corporate goal or challenge. Complying with the Sarbanes Oxley Act (SOX), selling into the white-hot China marketplace, or mitigating corporate risk are good places to start.
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Fire your best talent – to ensure success remove your best performers from their day jobs and put them in charge of your latest supply management initiatives.
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Host a “free” lunch – have regularly scheduled lunch-and-learn workshops to educate and train team members and other functional stakeholders on your supply management initiatives – whether it be training on a new application feature or a case-study of a successful sourcing projects or defining your company’s diversity program.
Send me your top supply management or contract management tips. I will broadcast your recommendations here. And will examine many of them in more detail in future posts.
4 responses so far ↓
1 Kyle Rosenthal // Nov 13, 2006 at 11:04 pm
Centralize Infrastructure & Decentralize Customer Touch - Organizations all too often struggle with adoption of a new technology. The struggle is “personal”, and individual team members are not always provided with a clear message on the intent of the technology. Strengthening the team members position on being “personal, localized, and empowered” while seamlessly gathering information from an infrastructure position has been extremely successful.
2 David Macdonald // Nov 14, 2006 at 9:05 am
Currency Considerations
The first question you typically ask when currency is a consideration is ‘Do I force suppliers to bid in my preferred currency or do I allow them to bid in their own?’.
One party, in a relationship where multiple currencies are in play, will be required to take the risk of currency fluctuations. Of course this could work in favour of either party but the question you should ask is ‘Why would I take a high risk option if I can take a no-risk option?’ When a supplier bids in their own currency as opposed to the buyer’s they are simply passing the risk of currency fluctuations to the buyer. Ask yourself ‘Why would they do that?’.
If you do allow suppliers to bid in a different currency you have to agree an exchange rate with them. This requires a degree of forecasting or ‘hedging’ on behalf of the buyer and this can often end in tears – even for those experienced in currency markets.
Best practice suggests forcing the suppliers to bid in the buyer preferred currency if at all possible. If this cannot be managed ensure that you engage with your in-house experts before agreeing an exchange rate with the supplier. This is for two reasons; firstly they are the experts and will be better positioned to advise you. Secondly, if the decision proves costly at least you have someone else to share the blame!!
3 Doug Evans // Nov 21, 2006 at 2:30 pm
I think the best practice I have seen in the area of driving usage of an e-sourcing tool would be to set the proper goals/measurements in place for each commodity team. Whoever is ultimately responsible for a particular commodity on a corporate level (i.e. Worldwide Commodity Manager or Global Commodity Leader or whatever title is appropriate in the organization) should be responsible for determining their total e-sourcing opportunity on a yearly basis. However, there should be a consistent method for setting the metric across commodity groups.
One method for setting the metric would be to begin with the total yearly spend for each commodity and then to subtract certain exemptions. The balance of the spend when all exemptions have been removed woudl then be the e-sourcing metric for that commodity team for the year.
Here is a simple example for a generic commodity:
Total Yearly spend = $100M
Less: Amount not actively sourced in the coming year (i.e. tied up in existing multi-year contracts) = $30M
Less: Amount spent with companies with a sole source relationship (i.e. product being purchased is still under patent protection) = $10M
Less: Amount spent with companies that may be goverend by “corporate” relationships (i.e. your main supplier is also one of your largest customers) = $5M
Less: Cumulative amount of small value, stand-alone orders not part of larger contracts = $3M
TOTAL TARGET FOR E-SOURCING = $52M
The corporate target for e-sourcing is then the sum of the individual commodity targets. This is basically a bottom-up development of a metric rather than setting a blanket “% of spend” target for the corporation. This allows the metric to adjust yearly as corporate conditions change.
The more realistic the target, and the more those responsible for meeting the target are involved in setting the target, the easier it will be to drive the desired behavior in the organization.
4 Supply Excellence » Three Card Monte and the Currency Risk // Dec 6, 2006 at 11:03 am
[...] A few weeks ago, I asked Supply Excellence readers to share your favorite supply management tactics and strategies. I’m glad to say that you were more than up to the challenge. [...]
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