Today’s post, not so much supply chain specific, but just as ninjas should be, I’m going to be flexible and talk about employee morale and culture.  I just finished reading an article by Fortune magazine re-posted on CNNMoney.com titled “Wal-Mart and the perils of ignoring staff complaints” (article is linked here).  I know myself and countless others have been thinking about how Black Friday has not-so-subtly crept into Thursday with many retailers opening their doors at 8PM on Thanksgiving Day.  It’s like 2013 car models have hit showrooms in August 2012 or Christmas decorations the day the spider web, pumpkins, and other Halloween decorations are taken down. But this time, creeping Black Friday into a holiday… that’s interesting.

The article primarily talks about how unhappy staff members are kept out of the loop of big changes (i.e. opening doors at 8PM on Thanksgiving Day for Wal-Mart).  The staff are now forced to work on a holiday where we, the consumers, get to relax and have time off to spend with our families.  The staff used to have this same holiday and time to spend with family.  Not so much anymore.  Big companies such as Wal-Mart, kinda-sorta big RIM (maker of Blackberry devices), and the like have had track records of ignoring staff.  Without a means of discussing complaints internally and with the explosion of social media, it only makes sense for these same employees to voice their frustrations out in the open on Facebook, Twitter, etc.  And that just makes everything spread like wildfire.  And to make things worse, some of these companies just fail to even address the complaints, and instead, send a canned, generic response which then adds fuel to the fire as more staff jump in igniting more attention from the outside world.  See the vicious cycle?

As we think about great companies and the bad, we think about the brand image.  The article went further to highlight a Weber Shandwick study (see study here) on company reputation and found that 63% of Execs say their companies’ market values are tied to reputations.  That doesn’t shock me.  How much do we hold Apple, Google, IBM in high regard?  Look at their stock prices… 561.70, 665.87, and 190.29, respectively as of November 21, 2012 4PM EST).  If you’re like me, you believe they have pretty good reputations and that they’ve got pretty good track records (in general) with their employees.

And you know what?  It’s not just about the employees of Wal-Mart, too, who actually now miss out on some nice family time.  I mean granted, to get ready for Black Friday at 12AM or 6AM still calls for some work on Thursday, but 8PM on Thursday just forces staffers to move up that time table.  However, it’s not just the staffers, right?  Thinking about it from a supply chain perspective, all the different movements in the supply chain also requires shippers, transporters (i.e. truckers), customer service centers (call centers), and the like to also move their time table up. 

So as you consider Wal-Mart and other retailers’ employees, consider the holistic view of everyone involved who makes Black Friday happen.  I guess we should start calling it Black Thursday or Black Thanksgiving.  Not sure how I feel or if I’ll be out elbowing my way to the latest and greatest deals, but I’ll take the time now to give thanks to the hardworking men and women who make commerce happen, if you wanted to work or not.  

And of course, I give thanks to YOU for reading… stay tuned for my thoughts on culture.  I ended up writing more than I thought so I’ll make this part 1 of… a couple. Cheers and Happy Thanksgiving!

Thanks,
Supply Chain Ninja

Going hand-in-hand with my most recent post about how everyone copies one another (How to Survive: Read the Market or Just Simply Read What’s On Your R&D Presentation), I received this in my email as part of my newsletter subscription to Strategy+Business — the article is titled “The Value of Being Second” by Oded Shenkar (see article here).

In the article, I nod my head in agreement with every word.  Shenkar cites a chapter from Eli Broad’s The Art of Being Unreasonable: Lessons in Unconventional Thinking.  I like to think I’m a thinker (else, why would I have a blog?), and I’m also a perceiver of the world.  That is, I like to sit back — no wait, I lay in bed unable to sleep at night — and reflect on the world around me.  And so I sit there and I think about how so many of the former companies of great stature, great products have just disappeared out of existence while new companies just take the world by storm.  Again, going back to my previous article where I talk about the Xerox’s and Best Buy’s of the world, it’s no longer needed or even desired to be the first kid on the block with a new product, service, or whatever else.  

As an aspiring entrepreneur, too, being a Co-Founder of Body Boss Fitness, I get to network with other entrepreneurs and hear lectures and presentations from successful entrepreneurs like Charlie Goetz (a Professor at Emory University’s Goizueta Business School), David Cummings (Founder and CEO of Pardot who just got acquired by ExactTarget for $95.5M after only a few years in existence!), etc.  They all say the same message that Shenkar speaks of in his article and what Broad wrote in his book — the market is changing and no longer is innovation and first-movers necessary to be successful.  Instead, it’s the guys who follow the first-movers who capitalize on the first-movers’ failures and mistakes, and they get to leverage the companies coming in second don’t have to educate the market.  Of course, second-movers come in with a new twist as the many entrepreneurs I’ve spoken to would say, including myself.  I especially like the analogy Shenkar cites from Broad: it’s like hiking.  The guy in the front has to clear the brush and is getting cut up and does all the hardwork.  However, he paves the way for the guy following who just simply walks the same path with less investment.

Of course, there are many benefits, too, of being the innovator and first to the market including brand name and access to the technology and more.  And then there’s me, whom I very much hope to be a builder of the future, and wouldn’t mind being the guy at the front of the line hiking.  I want my name out there because if done right, too, the first-mover can keep its place as number 1 in the market place.  The key here is the need to also continually innovate.  (I’m finally getting around to tying this post to my previous post.)  If you can continually innovate, you’ll keep ahead of the curve and you’ll reap the rewards and leave second, third-, n-movers behind you.  Don’t be stagnant.  Or be stagnant and be content to play second fiddle in the future (or no play at all).

And so in closing, I want you all to appreciate coming in second because when done right, coming in second just positions you for first place next year.  But if you’re willing to invest and keep innovation high and strong, keeping the pole position is certainly achievable.  When I hike, yes, I like to lead.  I may be the cut up by the brush and I have to be the one to clear it, but I like that. I like the challenge.  I’m okay with paving the way for others to follow because in the end, it’s for the good of the group.  Do know, though, that while I’m in front, I’m running.  So I’m keeping my place at the front.  You’ll just have to work that much harder to keep up.


[1] Shenkar, Oded. The Value of Being Second.  In Strategy-Business. [Website]. Retrieved November 1, 2012, from  http://www.strategy-business.com/article/ac00041?gko=ba14e&cid=BL20121025&utm_campaign=BL20121025

I just read an interesting article about how Nokia actually had research and made internal presentations about devices similar to the iPhone and iPad 7 YEARS BEFORE Apple ever actually introduced the iPhone.  Former Nokia Designer Frank Nuovo rummages through his old notes and presentations, and recalls how his team had all the research and development on where the mobile industry was going — “the Nokia team showed a phone with a color touch screen set above a single button” [1].  Yet, with all this foresight and research, it was Apple who actually invented the iPhone, not Nokia.  Nokia believed in its core basic phones even to the day Apple turned the mobile industry right-side up in 2006. 

This reminds me, too, of Xerox’s PARC (Palo Alto Research Center) back in the 70s when they actually developed the first PC.  Xerox spent boatloads of money in researching and developing new tech including the programming environment we’re all familiar with today with mice and the like.  And yet, it was actually Steve Jobs who saw the real value and future of the personal computer, and it was Steve Jobs who took it and ran with it and helped create the world we live in today.  Like Nokia mentioned before, Xerox had the opportunity to expand and grow and really change the technological landscape.  However, both companies failed to realize the real opportunities and read the tea leaves on how to shape their companies.

I’m not going to say companies should change their core competencies.  Instead, I want to highlight the true nature of why so many companies fail.  It’s ignorance.  Well, it’s more than that, but from the top, those who are actually steering the ship, ignorance and internal squabbles are what prevent companies from recognizing their ships are actually heading into an iceberg.  

In today’s world, I’m constantly reminded of large retailers who are struggling to keep up with their more agile competitors who operate e-commerce solutions and direct fulfillment.  Take the Best Buy vs. Amazon battle.  It’s apparent that Best Buy’s 42.0M+ square feet of retail space is a huge anchor on Best Buy’s financials, an anchor e-commerce companies like Amazon are not held down by [2].  With the advent of apps and smartphone penetration of 47% [3] (and of course, it was lower several years ago, but it’s explosive growth was readily apparent), you have to think to management in big box retailers would have seen this coming.

Not all is bad, however.  In the case of Best Buy, anyways, the company has shifted much of its growth strategy away from the big box stores and are focusing on smaller standalone stores (SAS).  These stores features much smaller footprints (you’ve probably seen one in a mall near you) are mobile device-oriented.  Best Buy has been focusing much of its efforts on the growing mobile industry, and it’s clear where the company wants to go with 2012 projections of closing 50 big box stores in 2012 and opening 100 additional SAS formats across the U.S. [4] 

Will Best Buy’s new shift in strategy work?  Will it even be enough to right the ship towards calmer waters?  Only time will tell.  This much is certain, though: don’t get stick your heels too deep in the ground when it comes to your operations.  Oftentimes, the writing is on the walls or in the case of Nokia, the writing was right there in product designs and in presentations — the business needs to pivot.  Pivot to grow.  Pivot to capture new revenues.  Pivot to survive.



[1] Grundberg, Sven and Troianovski, Anton. Nokia’s Bad Call on Smartphones. In The Wall Street Journal. [Website]. Retrieved October 14, 2012, from  http://online.wsj.com/article/SB10001424052702304388004577531002591315494.html


[2] Reisinger, Don. Best Buy has become a soap oprea. In CNNMoney. [Website]. Retrieved October 12, 2012, from http://tech.fortune.cnn.com/2012/07/31/best-buy/


[3] Lunden, Ingrid. ComScore: US Smartphone Penetration 47% In Q2; Android Remins Most Popular, But Apple’s Growing Faster. In Tech Crunch. [Website].  Retrieved October12, 2012, from http://techcrunch.com/2012/08/01/comscore-us-smartphone-penetration-47-in-q2-android-remains-most-popular-but-apples-growing-faster/


[4] Epstein, Zach. Best Buy posts mixed Q4 earnings, plans to close 50 U.S. stores. In BGR. Retrieved October 13, 2012 from http://www.bgr.com/2012/03/29/best-buy-posts-mixed-q4-earnings-plans-to-close-50-u-s-stores/

Ninjas in Supply Chain (like yours truly), front-line customer service, Accounting, anywhere and everywhere are motivated by a number of factors.  It’s not necessarily fruit, either.  (From the popular mobile and Microsoft Kinect game Fruit Ninja.)  For some, motivation comes from factors such as a good work environment (next to a beach?), money, or other external factors called extrinsic motivators. For most, motivation comes from sources of intrinsic motivators such as vertical job ascension (read: promotions), recognition of work, and other internal, personal factors.

I recently stumbled upon a TED talk of Dan Pink back in July 2009: The puzzle of motivation.  What a great talk.  You can watch the video here. [1]

Dan discusses the people aspect of motivation and their true motivators — the battle of intrinsic and extrinsic motivators.  In business school, half the students would argue money is a massive motivator.  However, money is also one of those factors which only causes workers to not only want more but people then tend to EXPECT compensation (salary bumps, bonuses, etc.) as normal procedure.  Dan adds that compensation actually motivates those with finite, discrete processes, but compensation does NOT motivate those with more challenging, innovative tasks.  In fact, “these contingent motivators — if you do this, then you get that — work in some circumstances but for a lot of tasks, they actually either don’t work or often, do harm.” [1] 


Dan cites several social experiments including the Candle Problem from 1945 by an American Psychologist named Karl Duncker [2].  Groups were tasked to attach a candle to a wall so that the wax does not drop onto the table.  An illustration of the materials is shown in the figure below [3].  



Sam Glucksberg, a Psychology Professor at Princeton University, pivoted on the Candle Problem by gathering participants and challenged them to solve the problem based on: 1) solve to help establish norms vs. 2) incentivize monetary incentives (top 25% of fastest times earn $5; fastest time earns $20).  The incentivized group solved the problem faster than the group who were tasked to help establish norms.  NOT!  The incentivized group actually solved the problem 3.5 minutes SLOWER than the group without the incentives!  (I tricked you, didn’t I?)

Another iteration was performed on the Candle Problem… I won’t describe it now, but I’ll let you watch Dan’s video for more information.  What Glucksberg found was that incentives only motivate people when the path to solve are explicit and known — a concept Dan Pink touches on called Functional Fixedness.  Incentives actually do NOT foster innovation and creativity!  Who would have thought?!  This tells us that today’s motivation and incentives programs are actually hampering people from using their creativity to solve problems!

This TED talk was one of the best I’ve heard (and there are many on TED).  There has been so much attention recently regarding intrinsic vs. extrinsic motivators.  This TED Talk further supports intrinsic motivation as THE way to foster creativity and innovation and to ultimately higher performing and happier employees.  The incentives today of if-then only dulls creativity, and will continually hamper people from thinking creatively to solve today’s problems.  So as leaders in our respective domains, remember to motivate fellow Ninjas with intrinsic motivators and as Dan Pink says, “we can strengthen our businesses, we can solve a lot of those candle problems, and maybe, maybe, maybe, we can change the world.” [1]


[1] Ted (August 2009). Dan Pink: The puzzle of motivation. In Ted. [Website]. Retrieved September 19, 2012, from http://www.ted.com/talks/dan_pink_on_motivation.html?utm_medium=on.ted.com-android-share&utm_source=direct-on.ted.com&awesm=on.ted.com_o7xb&utm_content=ted-androidapp&utm_campaign=


[2] Wikipedia contributors. “Candle problem.” Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 7 Sep. 2012. Web. 19 Sep. 2012.

[3] Dewey, Russ (2007). From Puzzles. Intro Psych. [Website]. Retrieved September 19, 2012, from http://www.intropsych.com/ch07_cognition/puzzles.html


During my wait for the bus this morning, I did my daily ritual of scanning a select set of websites.  And this morning on CNNMoney, I read an excellent (and lengthy) article about Nick Saban, Head Coach of University of Alabama’s football program.  Titled “Leadership Lessons from Nick Saban” (see the article here — actually, this article will be in the September 24th issue of Fortune), I couldn’t help but be intrigued.

Throughout the article, I smiled and laughed.  No, it’s not a funny, humorous article.  Instead, it reinforces so much that I’ve been thinking, and what I’ve been hearing throughout my consulting experience and in business school.  

Coach Saban developed what is referred to in the locker rooms in Tuscaloosa (and his prior stops at Michigan State, LSU, etc.) as The Process.  Instead of focusing on W’s, Saban preaches to his players to trust The Process.  Trust the coaching and fellow team members’ skills.  “Saban keeps his players and coaches focused on execution — yes, another word for process — rather than results” [1].  Coach Saban firmly believes in what he coaches, and luckily, it’s worked out quite well for him.  The article continues…

[…] Sound like your typical chief executive? “I think it’s identical,” Saban says, digging into his salad. “First of all, you’ve got to have a vision of ‘What kind of program do I want to have?’ Then you’ve got to have a plan to implement it. Then you’ve got to set the example that you want, develop the principles and values that are important, and get people to buy into it.” [1]

Coach Saban structures his program around his own core values, and the whole of the community of the University of Alabama, not just its football players, benefit from his leadership.  Since Coach Saban took over the reins at Alabama, the program has held the number 2 position in football players’ graduation rate in the SEC (after Vanderbilt) for the last 3 years.  Saban even helps coordinate his players to do philanthropy having provided aid to tornado victims last year.  All this while producing a National Championship this past January, 8 first-round draft picks the last two years, and so much more.

All through the article, the article’s author Brian O’Keefe details the diligence and sheer commitment to the program and his players.  Commitment including some hard-nosed recruiting that prompted the NCAA to create the “Saban Rule” (limits the travel of coaches to potential recruits — Saban apparently now Skypes with many recruits).  Terry Saban (the Coach’s wife) shares the stress and passion Coach Saban has for perfection. It’s not just about winning or doing something well… it’s about the opportunity to improve.  “You should always ‘evaluate success’. Even when you win, you should study what you could have done better and plan how to improve next time.”[1]

Success comes from the top-down.  Success is bred from Leaders like Coach Saban who instill positive cultures and ethics.  Success is the result of hardwork and dedication.  Coach Saban has his goals (to win Championships, to enable his players to reach their goals and achieve greatness), but he doesn’t focus on the results.  He follows the Process.  Three National Championships, NFL players aplenty, loving family… yeah, I think the Process works pretty well.

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[1] O’Keefe, Brian.  Leadership Lessons from Nick Saban.  In CNNMoney. [Website]. Retrieved September 7, 2012, from http://money.cnn.com/2012/09/07/news/companies/alabama-coach-saban.fortune/

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Today, I am excited to introduce to you Max Moriarity as a guest writer for today’s post.  Max provides an interesting  perspective on Reverse Logistics (RL).  All too often, I hear of RL as a pure service-related play.  However, Max shares good insight on how manufacturing companies can leverage the RL supply chain as a competitive advantage.  

This is a snapshot of manufacturing as a grand industry(-ish), but as I pointed out in the RL blog post earlier this month, some companies do redeploy returned assets into other programs.  And in some instances,  companies are able to harvest parts (a.k.a. parts reclamation) from returned product to be used to refurbish other products (i.e. refurbished phones from the earlier article).  This is a huge cost mitigation strategy and an area flourishing in the high-tech industries especially.  Before I get too excited, here’s Max:

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McKinsey released a great story about two weeks ago exploring the idea of circular economies and supply circles.  After reviewing McKinsey’s extensive research and analyses, it led me to start thinking about how manufacturing companies can leverage advanced reverse logistics practices to their advantage.
As McKinsey noted, volatility in the commodity market and increases in global consumption have dramatically increased raw material prices reaching all time highs.  In fact, McKinsey states, “with supplies of many raw materials becoming harder to secure, commodity price volatility may not be a temporary phenomenon”[1].  This volatile environment has necessitated the need for manufacturing companies to think well outside of the proverbial box to lower the cost of inputs to create one output.  It is this need that has led to the concept of supply circles, where manufacturers not only create products but utilize reverse logistics to obtain materials from recycled or returned products.
Manufacturers who understand the value in a strong reverse logistics operation will benefit from creating a new source for procurement of valuable materials and components from recovered or recycled products.  Additionally, manufacturers will be able to further refine their product designs to fully take advantage of these recycled materials as well as improve how their products are produced.
Instead of just seeing reverse logistics as a way to deal with mistakes, companies who realize the importance strategic reverse logistics operations can gain a significant competitive advantage over their competitors.  The list of companies who failed to innovate and adapt includes many well-known companies like Circuit City, Blockbuster and Kodak.  In order to remain viable in today’s competitive economy, I will remind everyone that it was H.G. Wells who said, “adapt or perish, now as ever, is nature’s inexorable imperative.” 

Max is a consultant in the Supply Chain Operations Practice of Chainalytics.  Max has advised clients in designing and implementing supply chain transformations in the areas of reverse logistics strategy,  distribution network strategy, and large-scale transportation network optimization.  For more information, visit Max’s LinkedIn profile here.


[1] McKinsey & Company (n.d.).  From Supply Chains to Supply Circles.  In McKinsey & Company. [Website]. Retrieved August 16, 2012, from http://www.mckinsey.com/features/circular_economy

Irv Grossman, VP of Supply Chain Operations in Chainalytics, wrote a very interesting article regarding the similarities between fishing and Reverse Logistics.  If you haven’t had a chance to read it, go ahead and take the time to read it first (here) and then come back.

What I’ve seen, as has much of the industry, is a growing focus on the Reverse Logistics side of the supply chain.  Reverse Logistics (RL) is the inverse of Forward Logistics (FL) where RL encompasses products from the consumer back upstream.  In contrast to FL, RL can embody much more complexity as it’s dependent on potential failures (think: general buyer’s remorse, warranty, insurance, etc.) in addition to the lead time associated after new product launches.  (FYI, there’s more reason it’s very complex — I’m being kind and simplifying to a couple main points.)

As Mr. Grossman points out, cycle times from receipt to disposition of assets once the assets have re-entered the supply chain are extremely critical.  In fishing, the longer you hold onto fish, the less valuable and stronger the scent.  Similarly, especially in high tech industries, product sitting in inventories start to lose value — and fast.  (In all my experience, I haven’t noticed these products starting to smell, yet.)  


Consider this: in the fast-paced world of cell phones, devices can lose at least 1% per week.  Let’s do some back-of-the-napkin math and extrapolate what this may mean… You accept 20,000 devices per week through your returns process.  The blended cost of a phone is roughly $350 (Nielsen estimates 2/3 of sales are smartphones with average smartphone COGS of $550, feature phones representing 1/3 of sales at $250 COGS) (see source 2).  Extrapolating, you can be losing $70K per week!  Aghast!  What can you do?!

Fear not!  There are ways to maximize value and create a leaner RL supply chain!

One of the most crucial areas companies are targeting is “simply” stopping returns from even occurring.  In the consumer electronics world, the key area of opportunity is tackling No Trouble Found (NTF), No Fault Found (NFF) or Cannot-Duplicate (CND) devices (NTF, NFF, and CND are by and large synonymous).  Accenture estimates 68% of returns are NTF (see source 3).  Indeed in my own experience, I’ve seen NTF rates reach as high as 60-65% including 30-35% purely software-related.  Addressing NTF devices not only reduces costs from the point-of-return and further up the supply chain, but it also increases customer satisfaction as he/ she is able to keep the device.  Happy customers make loyal customers, right?  Just watch the Genius Bar at any Apple store…

Once the product has entered the supply chain, however, companies are tackling the dispositioning problem. That is, how can we, the company, now maximize value recovery?  I know several companies (carrier, OEMs, retailers) are choosing one or a combination of the below solutions:

  • Speed up cycle times from receipt to disposition.  Depending on how many touchpoints of companies’ RL supply chain, companies can significantly inventory and maximize recovery by consolidating touch-points.
  • Maximize value recovery through optimal liquidation channels.  That sounds good, right?  What does that mean?  Optimal channel management is being able to select the RIGHT secondary channels to disposition through bulk sales, auctions, or otherwise.  Maximization of value includes the balance of capturing the most value per device while also clearing inventory of more obsolete products.  This may include the use of auctions and bulk sales.
  • Maximize value recovery through redeployment through channel/ program management.  Different from the preceding bullet as I wanted to highlight the liquidation aspect of cell phones above.  This solution is more related to redeploying returned assets into the company’s other programs (i.e. insurance, warranty, loaner phone, etc. programs).  If you’ve ever returned your computer for a warranty claim with an OEM, for example, you most likely received a refurbished unit back.  The key for the OEMs and companies performing the returns is, again, maximization of value.  Companies must understand the back-end value and determine necessary refurbishment costs to bring a returned asset to a quality level acceptable for redeployment.
This is not an exhaustive set of solutions.  However, these are a few prominent methods companies are employing to address their RL processes.  The Reverse Logistics supply chain can be one of the toughest areas of operations to tackle and a key cost-driver.  However, it can also by a key operational competitive advantage.  Luckily, there’s an evolution of technologies and solutions in today’s high-tech world, especially, to maximize value for not just the companies, but to end-consumers as well.  Triaging devices before returns and dispositioning those devices that do enter the RL supply chain with a sense of urgency and a bit of intelligence will ensure maximum value recovery and keep those returns from smelling fishy.


Sources and Research:
1. Grossman, Irv. (2012,  June 5). What Fishing Teaches Us about Reverse Logistics.  [Blog]  Retrieved from http://www.chainalytics.com/blog/service-supply-chain/what-fishing-teaches-us-about-reverse-logistics/
2. Two Thirds of New Mobile Buyers Now Opting For Smartphones. (2012, July). Retrieved from http://blog.nielsen.com/nielsenwire/online_mobile/two-thirds-of-new-mobile-buyers-now-opting-for-smartphones/
3. King, Joe. Carving Out a Path to Aftermarket Service Profitability Starts with the Basics. [PDF] Retrieved from  http://www.cscmpsfrt.org/resources/Documents/Value%20Recovery.pdf
4. AberdeenGroup. Industry Best Practices in Reverse Logistics. [PDF] Retrieved from http://www.ismsv.org/library/RevLogistics.pdf


Jon Stegner’s famous article “Gloves on the Boardroom Table” is a classic example of not just leaders in denial (for my business school friends) but also the opportunity in procurement – specifically, strategic sourcing.  The article can be found here.  I’ll downplay the leaders in denial aspect in favor of the Supply Chain benefits in the article – Jon describes the opportunity in cost savings opportunities within his organization.  Convinced of significant savings opportunities, Jon tasked his summer intern to gather various gloves (yes, something so simple) across the factories in his organization, and what he found was staggering… FOUR HUNDRED TWENTY-FOUR different gloves were being used across the factories.  Many of the gloves were similar but their costs could vary greatly.  In one case, two gloves which were nearly identical were marked one for $3.22 and the other $10.55.  Jon Stegner proceeded to lay out all 424 gloves on the boardroom table for his peers to witness the opportunity at hand.  Jon didn’t share the cost savings his company was able to reap, instead citing a general “a great deal” but as you can imagine, strategic sourcing in this example can yield significant results.


And so this brings to light the very simple, yet impactful opportunity in strategic sourcing to your bottom line.  Synchronizing procurement efforts across an organization can have immediate effects to costs.  This should come as no surprise as you think about companies who do this extremely well including Wal-Mart (the epitome of operational excellence), UPS, The Home Depot, etc.  Strategic sourcing empowers your procurement organization reap the benefits of supplier competition.  And today, there are many ways to empower your company’s procurement strategy…
  • As a Consultant, I was part of a small team leading the transformation of the Procurement organization of a major IT outsourcing company with spend across global business units.  Over the next several years, the organization looked to reign overall Procurement spend with immediate savings through an e-Sourcing solution.  
    • The implementation of an e-Sourcing system enabled the company to leverage RFx templates and run auction events to drive down costs and enable supplier competition for its more than 1,000 vendors and more than a 100 internal procurement categories.
  • I spent a few years as a Procurement Analyst within a major third-party logistics company’s Procurement group within its Transportation organization.  Third-party logistics companies are the very shining examples of strategic sourcing.  I supported the management of largely truckload and less-than-truckload carriers on behalf of our customers analyzing transportation costs, rate changes, and provided lane-carrier recommendations.  At the end of the day, upper-tier carriers are very similar.  Yet, when you review RFP bids, some carriers bid with 30% premiums over their competitors.
    • Further benefits of strategic sourcing (and 3PLs) include “soft” benefits which at first are hard to quantify until service failures arise (in this example).  Aside from numbers, Procurement empowerment meant also assessing suppliers’ qualitative bid as well.  For example, being a low cost provider counts for naught should a carrier’s on-time performance be well below top-tier standards (99.8% oftentimes).
    • Other activities included the analysis of rate increase requests.  Our strategic goal here was mitigate costs as much as possible reducing rate increases, fuel surcharge increases, accessorials, etc.

It’s a no wonder during the Great Recession, opportunities in Procurement were (and are still) the fad.   Not many strategies can be implemented so quickly with such significant impact straight to your bottom dollar.  Strategic sourcing, e-Sourcing solutions, and intelligent deployment of 3PLs can be a powerful advantage against your competitors.  So the question is: how many gloves are on your table?

What is the state of your business?  If I were to ask you how are your operations faring, would you hesitate?  What about the trends?  Has operations been reducing no-trouble found/ cannot-duplicate rates?  Is your call center not asking the right questions when triaging customer complaints thereby letting through costly non-warrantable devices?  Has your days of stock inventory levels been trending positively or negatively?  Are you hitting your targets?

Successful companies know how operations are running daily.  Not just the leaders of the company but from the ground-level up.  Paramount to understanding the state of your business is relevant, actionable reporting.  Call them KPIs – that’s Key Performance Indicators for those of you who don’t know. 

In today’s business, analysts, managers, and executives alike are inundated with loads of data.  However, it’s not always a sure thing that stakeholders know not only what to look for but how.  I’ve been lucky enough to have consulted at several clients where reporting has been on all sides of the extremes, though no one having the ideal/ best practices.  Let me share a few thoughts…
  • Work smarter, not harder.  I’ve seen clients who had excellent cadences for metric reviews (simply put) but the way they created the reports was overly complex.  Analysts pulled reports together during the week and once the weekly report was completed, the analysts started working on the following week’s!
  • Rationalize your dashboards and metrics.  Too often leaders think they’re doing a good job because their managers and analysts are creating a plethora of reports.  They could show you reports for every piece of the business.  But as leaders, there are only a handful of metrics you really should be focused on.  Don’t waste your time and everyone else’s in your meeting sifting through which metrics are key to driving your business.
  • Reports should be easily digestible.  Okay, so maybe if you’re staring at a report showing your customer churn is skyrocketing and so you may be reluctant to swallow that bitter pill.  However, metrics should be easily recognizable/ read.  In reviews with other Leadership, who really has the time to stare at a data table to understand what’s happening?  Like back in elementary school, communicate through pictures (i.e. graphs) to tell stories of the trends, the current state, and the future.  Make reports easily understood and read.
  • Keep a cadence.  Reviews of metrics and dashboards should be done intermittently.  How often depends on your business.  Someone once told me you need to review everyday (in a short meeting) citing a day of not knowing is death.  I hardly think missing a day would mean death in most industries… perhaps in healthcare (company-wise and literally for patients) which is where he worked.  Reviews should be done on a regular basis so that metrics have a baseline for trends and are a part of company life.
  • Make your metrics actionable.  What is the purpose of creating metrics illustrating your business is not faring well if you’re not going to do anything about it?  Metrics, like x-rays at the doctor, tell you the situation and gives you clues as to how to repair or improve your business.  
  • Assign accountability and responsibility.  Hold your people accountable to address concerns.  To the point directly above, metrics should be actionable so that the state of the business lies with your people.  If no one takes accountability and responsibility, then how can change happen?

It’s easy to say, “oh yes, we have metrics.  They’re…” and then you rattle off a dozen, but are those metrics really important to you?  Or maybe you’re really creating metrics and dashboards just to have them.  Paramount to reporting and the whole purpose of reporting is not to have a status meeting daily, weekly, or whenever and leave the room feeling good but nothing was really accomplished.  Instead, reports should be ACTIONABLE and ACCOUNTABLE.  Metrics should be directed and focused on specific operations so that before the meeting adjourns, every stakeholder knows what’s spiraling out of control, what metrics are off target, what are the corrective actions, and of course, who has ownership.  It’s too commonplace to just create reports just for the sake of having them without the necessity to truly understand the business and act upon them.

Treat status reviews and meetings of reports as a tool to check the health of your company.  If you monitor with the right frequency, check key components to your company’s health, and address the bad habits (negative trends or otherwise) through accountability, it will be far easier to keep your company fit for the foreseeable future… and perhaps prevent a few heart attacks both for the company and you.