The final submission in The 100 Greatest Supply Management Tips of All Time! contest revisits an old-school technique to uncovering your supplier’s hidden secrets — both good and bad:

• Make house calls: Have your sourcing team visit key suppliers’ headquarters, factories, plants, or showrooms on a regularly scheduled basis. Suppliers will give you insight into the latest trends and reveal insights into their costs and/or operations that they may not do otherwise.

The tip, while simplistic, stands as a reminder that, even in this age of Web-based purchasing techniques and global sourcing, managing key supplier relationships requires just that — a relationship. And, while visiting all your suppliers may be impractical (that’s where technology can help), regular meetings with your most strategic suppliers can turn up hidden gems of innovation or unexpected ways to remove non-value-added tasks or costs from the supply chain.

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If you listen to purchasing blogs like this one, it would seem that supply management improvements are impossible without the use of advanced software. And why not? There is ample evidence from industry benchmarks (such as those from Aberdeen Group, Hackett Group, and CAPS) that use of strategic sourcing and supplier management software is a core to the success of the top-performing purchasing organizations. Yet, today’s submission to The 100 Greatest Supply Management Tips of All Time! contest offers some practical proof that you can drive supply management improvements by mastering the basics:

• Start with the simple tools first: Get all of your sourcing professionals trained on Excel, Access, and PowerPoint. These are everyday tools which your team should be experts in using.

(Ironically, the tip was submitted by a purchasing executive at a financial institution that is well known for its use of business software, particularly to support purchasing operations.) Underlying this advice is the demographic gap that plagues the purchasing discipline today. Too many veteran supply managers are technology adverse, growing up in a time where manual negotiations and green-screen data entry systems passed as advanced purchasing techniques.

Future generations of purchasing professionals will not only be well versed in the above productivity tools, but they’ll also be experts in online negotiation and collaboration. And they will likely introduce new e-community approaches to supply management issues. (Sort of a Facebook for supplier management.)

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In case you missed it, the automotive sector went back to the future last week, when the world’s largest automakers announced plans to share more parts and assemblies in an effort to hold down cost and improve quality.

On paper, the move could provide much-needed cost and product stability. However, the auto sector has a dubious track record when it comes to collaborative purchasing and supplier management initiatives. (Consider the now-defunct Covisint. Or ANX the auto industry’s decades old elecronic connectivity initiative that has experienced several false starts and multiple “owners.”)

Spurred by shrinking auto sales and a spate of supplier bankruptcies, purchasing chiefs from GM, Ford, Chrysler, Toyota, and Honda agreed to collaboratively develop and purchase common components and assemblies. Their logic? Building components for use by multiple automakers ensure high volume production runs for suppliers. This not only increases supplier profits and operational efficiency, but it also boosts overall product quality. The move could also infuse some innovation and styling into otherwise mundane products, such as seat frames.

The plan would certainly benefit ailing U.S. automakers. As previously reported here, the Big Three are far less profitable per vehicle than their Japanese counterparts. And the Detroit trio has made commitments to reduce the number of parts and suppliers used in their vehicles. Sharing parts and assemblies would accelerate these efforts. (Although the move will do little to reduce the Big Three’s biggest costs: salaries, pensions, and benefits.)

Purchasing chiefs pointed to several examples where their companies are already collaborating on parts, such as Toyota and GM sharing a common seat frame in certain Chevrolet vehicles; Ford and GM’s co-development of a six-speed automation transmission; and GM and Chrysler’s co-development a hybrid gasoline-electric powertrain. (Although the latter was in a desparate effort to counter the Japanese’s lead in hybrid engines.)

Yet, follow-up interviews suggest that any further collaboration around parts development and purchases will be opportunistic. Ford SVP of Global Purchasing told Bloomberg News: “What you will see going forward is that two, three, or four of us [will share parts], when it makes sense.” Automotive consultants at IRN summed it up best in a Detroit Free Press article, “[Sharing parts] sounds great in theory. It’s much more difficult to execute.”

Indeed, as reported here Toyota and Honda won the first round of the green vehicle war by developing and locking up supply for hybrid powertrains. (In fact, Ford execs publicly complained that this supply approach gave the Japanese an unfair competitive advantage.) Rest assured, no automaker will be willing to give up that kind of edge just to shave a fraction of a percent off an O-ring.

And the arugment that collaborative parts development and buying is good for suppliers is not entirely accurate. Parts sharing means consolidating spend with fewer suppliers. So, if automakers keep their vows to share more parts, expect more suppliers to file for bankruptcy, at least in the near term. And, if the parts sharing practice were to take off, don’t be surprised if the regulators weigh in on the issue. 

Upshot: The latest news is much ado about nothing. (Must have been a slow news week in Detroit.)

The automotive sector may be in desperate times. Yet the desperate measure of collaborative buying will only be used sparingly. The reason is simple: innovation and supply chain are two of the automotive sector’s three pillars of competition. (The third would be manufacturing performance.) While sharing parts may hold down costs, no automaker will engage in such collaborative deals if they threaten a competitive advantage in terms of defensible innovation or supply chain efficiency. 

Hidden between the The 100 Greatest Supply Tips of All Time! contest entries last week was a post on a new investigation into how globalization is affecting supply and contract management approaches and performance. Run by Supply and Demand Chain Executive, the study aims to better understand the key challenges global expansion and competition are posing for purchasing and supply management executives. More importantly, the benchmark will reveal the organizational traits and strategies top-performing companies are using to capitalize on the global opportunity (and to mitigate the risks associated with it).

The magazine will shut down the study at close of business tomorrow. So this is your last chance to participate.
There’s a number of reasons you should play. First, by participating, you’ll get a good idea of how your supply and contract management strategies and performance measure up against your peers. And you’ll take away actionable strategies you can use to improve your performance in these areas.

In addition, all participants will receive a complimentary copy of the resulting benchmark report: Global Supply and Contract Management: Strategies for Success in the New World Economy.

Finally, as an added incentive, one lucky survey respondent will receive a free pass to Procuri Empower 2007, a conference that will provide even more insight into global best practices, thanks to first-hand presentations from nearly 50 supply and contract management executives and luminaries. (Access the full Empower 2007 agenda here.)

In order to be eligible for the free pass contest, you must fill out the optional contact information fields at the end of the survey. All individual responses will be kept strictly confidential. To take the survey
click here.

The clock is ticking… the survey ends tomorrow.

The final days of the The 100 Greatest Supply Management Tips of All Time! contest turns us to a tip that reaffirms the dangers of myopically focusing on reducing spend (i.e., what some call “spend management). The head of global sourcing at one of the world’s largest software companies offers up this lesson learned:

• Don’t Penalize Yourself: Performance credits and charges (thinly veiled penalties) can be misleading. I inadvertently learned that whenever a performance charge was owed due to a missed service level, the tier-one supplier was profiting from the sub-tier suppliers. They charged the tier-two 150% of what was owed to my company. So in fact, we had built an incentive to fail into our risk/reward factors with the tier one mitigating the full risk. This, of course, isn’t a sustainable strategy in the long term. It also misaligns actions with intended performance.

The tip should stand as a warning that a narrow focus on reducing spend can have dangerous side effects. (Sort of like cutting inventories seems like a great idea until you stock out.) Every supply strategy must balance supply cost, performance, and risk. As evidenced in the above tip, focusing too much on any one of these areas often yields unintended (and negative) impacts on your supply and business performance.

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As we enter the homestretch of The 100 Greatest Supply Management Tips of All Time! contest, we turn to a tip that, while on the surface may seem like a cop out, in reality is a good rule of thumb for supply management, business, and life, for that matter:

• Pad Your Forecasts: When forecasting your projects, give an actual plus a few days. Under-forecasting is unrealistic. It does not show accurate project skills, and in supply management, it sets you up for failure and employee dissatisfaction.

I can hear the cynics saying, “Isn’t that sandbagging?” But how many times have you found yourself stressed out or, worse yet, asking for an extension on a project because of the activity took longer than you anticipated?

One of my first bosses was an ex-Marine that was adept at firing off advice that was often crass, yet brilliant in its simplicity. (His best advice was to “Always buy lunch.”) One day he took me aside and said, “I find it best to under-promise and over-deliver.”

That’s what the above tip is all about: be sure you can meet and exceed the expectations you set.

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Today’s entry to win the The 100 Greatest Supply Management Tips of All Time! contest is one of my personal favorites. It offers good advice for how to approach supplier negotiation and management:

• Predictability is more important than time: Fixed, reliable lead times are more important than the length of the lead time. The importance of lead time in inventory is seen in the expression, “uncertainty is the mother of inventory.” The length of lead time is of secondary importance to the variability and uncertainness in the lead time. Examine lead times throughout the supply chain, involving all of the different players and interests.

Of course, considering the volatility and unpredictability of lead times, a better phrase might be, “Uncertainty is the mother-in-law of inventory.” (Truth be told, my own mother-in-law is a saint. But I couldn’t miss the opportunity for a good – albeit predictable – joke.)

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The 100 Greatest Supply Management Tips of All Time continues, this time with a focus on inventory management.

• Cut it out: Work with partners to eliminate unnecessary or redundant inventory from the supply chain. The format of inventory and where it is held is of common interest to all supply chain players and must be jointly investigated and examined. It is often held at multiple places in the supply chain and is controlled by many different players who are usually working independently of each other. This results in too much inventory being held throughout the supply chain.

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The author of the top rated tip will win a free pass to Aberdeen Group’s CPO Summit in Boston this November.

We interrupt this regularly scheduled program (or, supply tip contest for those devoted readers) to plug a survey launched this week by Supply & Demand Chain Executive. The magazine is tackling an issue that I have addressed the last few months: Globalization. The five-minute survey will:

• Identify the key challenges globalization is posing for purchasing and contract management.
• Uncover hidden risks of negotiating and managing suppliers and partners in emerging regions.
• Compare your purchasing and contract management competence to top performers and industry peers.
• Examine the role of technology in global supply and contract management strategies.
• Define best practices of top-performing supply and contract management organizations.

All participants will receive a complimentary copy of the resulting benchmark report: Global Supply and Contract Management: Strategies for Success in the New World Economy. And, as an added incentive, Procuri will give one lucky survey respondent a free pass to Procuri Empower 2007.

In order to be eligible for the free pass contest, you must fill out the optional contact information fields at the end of the survey. All individual responses will be kept strictly confidential. To take the survey
click here.

The clock is ticking… the survey ends August 30th.

The tip submitted yesterday for the Top 100 Greatest Supply Management Tips of All Time! contest reminded us that executive support only goes so far. To truly drive your supply management initiative, you must win the hearts and minds of the team members and stakeholders in the trenches.

Today’s recommended tip builds on this theme, encouraging Supply Excellence readers to start supply or contract management improvement initiatives by focusing on internal processes and policies before focusing on supply chain improvements:

• Win the home game first: Many companies start into supply chain management by working “only” with the closest suppliers and customers. Instead they should first ensure that all of their internal operations and activities are “integrated, coordinated and controlled.”

 
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