Supply Chain Integration
The right thing, at the right place, at the right time. It is hard to argue against the benefits - both tangible (economics) and intangible (satisfaction) - that come with doing everything right. In fact, information technology is driving expectations to new heights where quality is a given, accuracy is built in the process, and timeliness trends to immediacy of delivery... with a smile!
More than 15 years after the phrase was coined for the first time, supply chain integration still remains largely a buzz word in corporate meeting rooms. The concept behind it, namely the perfectly efficient interaction between individuals to achieve the same business objectives via integrated business processes and information sharing, is clear. What has also become clear is that seamlessness is far from effortless... as the history of Amazon.com testifies. And that it takes the vision and boundless determination of a Jeff Bezos to turn ambition into reality, top down.
Another source of inspiration is Michael Dell's pioneering and successfully implementing a customer-driven integrated value chain that fully aligns processes and information management within the enterprise and with its business partners. Doubtlessly, most companies nowadays strive to emulate business models powered by supply chain integration. However, all too many falter along the way due to either lack of leadership (for direction and priority setting), inertia (status quo and "silo" mindset), complacency (pointing fingers), or all the above. In this context, supply chain integration is - at best - making demands on suppliers and business partners to adapt to and work with your own constraints and limitations.
Supply chain integration starts at home. Here's a little to-do list: 1) Implement a common product nomenclature across the enterprise, 2) Link ERP systems in a coherent IT architecture with a shared database, 3) Work cross-functionally to eliminate the duplication of activities, 4) Clearly define performance metrics that are both applied internally and used consistently with external business partners. How many of these can you tick off as clearly achieved and under control in your organization?
Organization Effectiveness
Another critical business management theme turned buzz word in management consulting lingo and corporate circles alike, organization effectiveness is too often a catch-all phrase for a variety of dysfunctions (aka: areas of improvement) that may be either structural, organizational, or relational.
Addressing these dysfunctions to bring about significant and lasting improvements in organization effectiveness requires a disciplined approach that starts with diagnosing and understanding the nature of the real problem. Interestingly, in most cases, actually solving the problem is the relatively easier part. Probably because, more often that not, the cause and effect associated with the real problem are of the same nature, namely either leadership (direction setting), management (decision making and action planning), or execution (adoption and implementation discipline), or the actual interface mechanisms between any of these three levels.
How do you sort through all this? First, let's think of the enterprise as a living organism and apply parallel thinking with the most complex and evolved living organism: the human being (not just body...) Second, let's keep clearly in mind the difference between efficiency and effectiveness... and their interdependence. Efficiency relates to "doing the right thing" and, as such, to leadership (direction setting) and its management relay (decision making and action planning). Effectiveness relates to "doing things right", therefore execution. Execution, in turn, mostly depends on how well directives and actions are understood and embraced (degree of adoption) and how rigorously they are implemented (discipline). Obviously, information management and processes are key to a high adoption rate, whereas active communication paired with appropriate control mechanisms and incentive systems foster execution excellence.
With this in mind, the diagnosis process focuses on identifying gaps and/or disconnects in the harmonious functioning of the organism in order to perform at its best, from leadership/direction setting (brain) to management structure (skeleton and nervous system) and execution (organs and limbs). It may lead to a prognostic that has as much to do about efficiency as effectiveness... and a treatment that boosts total productivity.
Strategic Sourcing
In its classic and widely accepted definition, Strategic Sourcing is "a disciplined, systematic process for reducing the total cost of externally purchased materials, goods and services while maintaining or improving levels of quality, service, and technology".
In practice, the word strategic - worn out from over-use and abuse - is too often down-played and relegated to a vague intent while the word sourcing is largely associated with day-to-day purchasing activities. So, let's take a moment to refresh the meaning and purpose of Strategic Sourcing... and why STRATEGIC should be underlined three times. First of all, per its definition of "disciplined, systematic process", Strategic Sourcing calls for total commitment from practitioners to engage in its process, which can only happen if it's clearly mandated and fully supported top-down from the CEO and her/his Executive Team. Second, the Strategic Sourcing process is fact-based and relies on the power of information and strictly controlled communication with suppliers. "Information is power" and "communication is a strategic tool" are the two key principles that condition successful results. Third, and probably most important to pose squarely right off-the-bat, Strategic Sourcing - besides being very demanding because it requires intense and collective preparation efforts - is disruptive by nature: it challenges the status quo, calls for tough (and yes: strategic) decisions that shake up established relationships with suppliers and forces everyone involved out their comfort zones. Here's the good news: Strategic Sourcing generates significant savings (done right, double-digit percentage of annual spend) on total cost of external purchasing... and statistically, it does so while generally retaining the same set of major incumbent suppliers. Creating the case for shifting to new suppliers is a means to achieving total cost savings, not the end. There are costs and risks associated with switching to new suppliers that are estimated and accounted for in the process and the calculation of savings projections. Consolidating the supply base by forging better and more cost-effective relationships with fewer suppliers is the usual outcome, not necessarily changing suppliers. However, this is only achievable if incumbent suppliers are convinced of the credible threat of losing business on the one hand and, on the other hand, the real opportunity to gain even more business as a result of the process.
In order to generate a credible threat - and in addition to leveraging data and crafting careful communication - practitioners must commit to fact and number-based decision-making to award business to suppliers as the outcome of the process, regardless of personal preferences, friendly relationships, diverging incentives, or bias against change. This pledge to "no sacred cows" is the single most effective way to establish and convey the credible threat to suppliers. Back to the top, this reinforces the criticality of a consistent message from the office of the CEO to confirm the empowerment and total support of the Strategic Sourcing team to "speak as one voice" - and make decisions - on behalf of the company. No out-maneuvering up the ladder allowed!
Conversely, in balancing "the carrot and the stick" during negotiations with suppliers in order to maximize bargaining power, the Strategic Sourcing team needs to develop attractive value propositions that quantify and detail substantial business upside for targeted suppliers. This is best achieved by presenting a "win-win" business development plan that not only awards an increase in the supplier's "book of business" with the company short term but also commits to specific initiatives to work jointly on product/cost/service continuous improvements and build the partnering relationship further over the longer term.
