Wednesday, September 29, 2010

Stuck in the Last Century?

Let's take a trip down memory lane. Lets go back to supply chain operations in the pre internet age. Yes I am old enough to remember back in the olden days, when we spent our time poring over greenbar paper reports, sent memo's, had secretaries. Faxes were new technology. The MRP arrived on our desk vs. on our screens. Everyone came to work at 8 and left at 5 and the hierarchy ruled. We had rooms full of data entry clerks who fed the beast of the mainframe. Telephones had wires and we were actually out of communication when we went home. Heck, on weekends, whole days would go by without any thought or intrusion from work.

Most of your suppliers were in town. Worst case your stuff was coming from across the country. Only the most exotic unobtainium was brought n from overseas. If you had a problem you could drive over to the supplier and fix it. Jobs were clearly defined and many times there were many people to do the same job, as many "labor saving" technologies were still a gleam in someone's eye.

Now fast forward to 2010. Today's supply chain would be unrecognizable to the average buyer or purchasing manager in the last century. For one thing most of the work they did has now been automated. Supply chains sprawl all over the globe. Complex logistics methods and multiple sales channels, sometimes shared with competitors, make just getting product from factory to customer a challenge.

With suppliers all over the world and instant communications via the internet and smart phones, work really never stops. The workweek starts Sunday night as the email from Asia starts to come in, and woe to the person who waits till Monday morning to get the lay of the land. Europe conference calls start at 5:00 AM west coast time.

The organization has been downsized and Kaizen'ed and 6 simga'ed to the point where there are very few people left. Repetitive tasks automated; non value added tasks eliminated; small scope jobs combined. Only complex thinking jobs are left here in the US. They are broad in scope and responsibilities change constantly. The line between "manager" and "worker" is blurred, as the level of decision making at the individual contributor level has risen drastically to accommodate the speed of business

Interestingly enough though, the organization and work rules are similar. We are still expected to be in our seats for certain hours each day, Our employee evaluations, though "improved" many times though different fads, still look much the same. Managers pick a ranking, like "meets requirements" and then write an evaluation to support that. Everybody follows that charade knowing it has nothing to do with what they do for a living. Titles and positions on the org chart live on like vestigial organs on an evolved species. Roles and responsibilities are assigned in homage to this obsolete model.

So what can we do? How do we pull the organization into the 21st century?

First we have to look at what we do, what are our key business processes.

Much of what was historically the buyer's job takes up a very small part of the work day. Nearly all of the buys are from a preferred supplier list. Quantities and schedule are set by the planning group through the ERP system. Actual negotiation are largely and annual affair when contracts come due. The part of Purchasing the stays with us is reacting to change and improving processes. Supply chain as little to do with purchasing and lots to do with scheduling – and rescheduling.

Most of the planning/scheduling work of those days is also gone, automated or offshored. The Key activity of the planning group today is to match supply with demand as best as possible, and provide "Purchasing" with the best and most accurate scheduling data possible.

The warehouse, is now the Logistics group, tasked with keeping the sea of product all over the world moving as closely as possible to the demand of these other groups.

Logistics contracts are maintained by purchasing, PO's are placed by purchasing even though they really have nothing to do with their actual content. Planning tries to maintain data element that they have no visibility of. All of these, of course, are operating using many of the same KPI's they used in the last century, and are evaluated using a process developed in the 60's.

Make the change

We need to reorganize, around our key business processes. Move role, responsibilities and resources so that they are aligned around managing a process. Align metrics with those processed and then base performance evaluations on just the same thing the executives use, results. Forget standard work hours and let your people decide when they need to work and when they need to be on the office.

If you really want to do more with less and be more effective take a look at these ideas. This is not a manual of how, but hopefully the start of a discussion. I would love to help you with the how and the what based on your organization.


 


 


 


 

Wednesday, September 8, 2010

Know When to Walk: and Be Ready


 

Negotiation is about winning. I definitively ascribe to the idea of "win win" in negotiations, but any combination that ends up with your side in the "lose" column needs to be avoided at all cost. In the worst case situation, that means walking away. It is important to remember that the point of negotiations is not to make the deal but the get a deal that works.

The single most important issue in a negotiation on the buy side is the ability to have options. This is what gives you the ability to negotiate from a position of strength; any negotiation where you know you have to make the deal is not a negotiation at all. It is bickering, at worst it is begging. Even if you are dealing with "Supplier of Choice", it is important to be able to talk to them in a competitive environment. So how do you get there?

Do Your Homework

First you must understand your options in the market place. As you come into yearly negotiations for example. Engage a competitor (or 2) in serious discussions. This will give you real data to use in your negotiations to know what really is a competitive position. Your current supplier will no doubt hear about it as well and likely sharpen their pencils. If things don't go well, you have a real back up to bring in.

Look closely at your stock positions on the product. Insure that you can stand a short interruption of supply or a transition in service. This will also help you if you are forced to accept a price hike. Your incumbent will also likely notice this as well.

Notify your Sr. Management of what you are doing. They will then see your actions as a strategic process in the best interests of the company and not ask you why you "blew the deal" in the event that you do have to back out.

Meet with your team and talk through the issues of what may happen if you do back away from the table and insure that contingencies are in place to deal with other issues.

Set the stage

Relationships are important, you are about to go into a position where you want to appear prepared to walk away from what might be a long term relationship. This can be difficult to do and it can also put unneeded strain on personal relationships that you count on all year. For this you need new hats. What? In a negotiation you need "White Hats" and "Black Hats" (apologies for the cowboy analogy)

A designated Black Hat needs to have approval authority over the deal and be at least somewhat removed from the day to day management of the relationship. This is typically a very highly placed executive in the company who can become involved where needed. He not only serves as a guy who can say no without damaging the personal relationships, but she can also serve as a coach and reviewer of the negotiation. From here the White Hats can conduct the heavy lifting of the discussions. They have the mastery of the details and understand the subtleties of the issues involved and can recommend compromise positions to the Black Hat.

At the same time everyone in the room knows that whatever deal they make has to get past the Black Hat, which keeps both sides aware of the deliverables. To a degree it also puts everyone on the same side, trying to win over the Black Hat, which can result in some very creative solutions to sticky problems.

Taking these actions will position you well to walk away. More importantly, they put you in a very strong position at the table. A good supplier will see that you are well prepared and serious about achieving your goals. Don't be shy about discussing the "homework" you have done. Present this to suppliers as meeting the requirements of an internal process.

Be ready to walk so you really don't have to…