Social Networking and the Purchasing Professional of the Future

As an international speaker and recognized authority on supply chain management, it never ceases to surprise me that very few supply chain professionals know about Social Networking.  Although there is a periphery understanding through mainstream brands such as Facebook, only 10% of my audiences are familiar with the term Social Network.  An even smaller percent (if that is possible), understand the impact that Social Networks can and do have on their profession both individually and collectively.

The fact that social networks initiate develop and will ultimately define relationships in the 21^st century means that this emerging “medium” will play an important role in effective supply chain practice.

As the newest addition to my series of seminars, Social Networking and the Purchasing Professional of the Future will introduce the core elements of Social Networking and its impact on both our profession and the business community within which we interact on a daily basis.

Who Should Attend?

Senior level procurement executives, professionals, and government administrators/program managers should attend this session.  Organizations with small purchasing departments of 2 people to large global operations will benefit from the conference.  The conference is also beneficial for Information Technology and Finance Executives.

Learning Objectives and Outcomes

·         Understand the Core Elements of Social Networking

·         Identify and Review the various Social Network platforms

·         Understand and leverage the strengths of different Social Networks from a sourcing, knowledge gathering and career development perspective

·         Learn how and why the business community view Social Networks as either a viable tool or resource distraction (or a little bit of both)

·         Identify the risks versus returns of Social Networking

·         Learn how to integrate the power of Social Networks in day-to-day business activities

·         Understand Web 2.0 and why the evolution to Web 4.0 is critical to sustainable business success, and how Web 4.0 represents the transition from a collective interface to a viable intelligent engagement mechanism

·         Plan the next step in your Social Networking journey

 

Recent Comments from Seminar Attendees

“Jon’s extensive experience and drive to enhance the Supply Chain was refreshing.  As an attendee of his seminar on “Dangerous Supply Chain Myths” as well as being an instructor at Centennial College I was able to learn from Jon may real life examples that he surpassed and share them with my students bringing a more realistic approach balancing theory to practice in the Supply Chain world.  Jon made it clear that the Supply Chain industry is much more complex and generalizations are a thing of the past.  He described multiple ways for Supply Chain Professionals to express the necessary changes needed in order to present to Senior Management the requirements for cost savings to the bottom line.  Overall his seminar was very informative, interactive and armed the attendees to back their existing roles at work to pursue Supply Chain excellence.”

Sal Nazarali C.P.P.

“Jon presented a seminar on Changing Face of procurement for myself and three colleagues.  I was quite surprised that he didn’t promote the latest flavour of procurement . . . instead he asked us to use common-sense and not allow technology to define our business process . . . how refreshing!  Now, to apply this!”

Top Qualities: Great Results, Personable, Good Value

Dianne Mowat, Inergi

“Very informative seminar, the most recent trends within the field – great for staying ahead of the curve.”

Jason Gallace

“Jon is highly recommendable, thorough analysis bringing truth/real picture upfront.  Provides example and remedies of great value.”

Top Qualities: Great Results, Expert, Good Value

Alkesh Desai

“Jon provided well researched seminar.  His seminar was both informative and thought provoking.  He was able to draw out a good discussion on all points he was trying to make.  I would not hesitate to attend any seminar presented by Jon.”

Top Qualities: Personable, Expert, Creative

Joe Corbitt, C.P.P.

“I was very impressed with Jon’s presentation style, in depth knowledge, his ability to make and keep us interested in the subject as well as his interaction with all members of the group.  I recommend Jon very highly.”

Top Qualities: Great Results, Expert, Creative

“John was the speaker at the Changing Face of Procurement seminar through PMAC at the beginning of June 08.  The seminar was very well done and very informative.  He truly put a lot of things into perspective.  Excellent Seminar!!”

Gabe Fabiano

“Jon’s facilitation techniques are awesome!  Jon’s knowledge of Supply Chain is second to none!  I enjoyed his seminar on the “Changing Face of Procurement.”  Thanks Jon for making it interesting, informative and fun.”

Top Qualities: Great Results, Personable, Creative

Nancy Wilson

 

To obtain further information, rates and availability contact us via e-mail at jwhansen@sympatico.ca, or by telephone at 819-986-8953.

We would also like to extend an invitation to you  to learn more about our other seminars and conferences that are changing the way organizations view their procurement practice: http://procureinsights.wordpress.com/seminars-and-conferences-with-jon-hansen/

Dangerous Supply Chain Myths (Part 4) Revisited

Like the old real estate adage of location, location, location – communication, communication, communication is the key element to a successful supply practice.  Unfortunately, ineffective methods of communication between important stakeholders continues to plague most organizational supply chain initiatives.

This point was driven home by the results of a 2007 Aberdeen study involving Chief Financial Officers in which the general consensus was that “too often, finance executives in Corporate America simply don’t believe that purchasing departments are really bringing in the savings they claim.”

WOW!  This and the study’s other “surprising” results stops my audiences in their collective tracks.  The silence is usually deafening.  (Note: Part 3 of the Changing Face of Procurement conference series delves deeper into these as well as the results from other studies to provide purchasing professionals right up to the CPO level, with the necessary insight into how they can better align their objectives with those of their finance department’s.  Use the following link for more information on this and other seminars; http://procureinsights.wordpress.com/seminars-and-conferences-with-jon-hansen/)

The main reason that was cited for this critical disconnect is that “finance and purchasing don’t speak the same language.”  And as Bill McAneny suggests in his book Frankenstein’s Manager: Leadership’s Missing Links, the desire (or lack thereof) on the part of senior management to effectively communicate most likely extends to almost all stakeholders both internally as well as externally.

Against this backdrop of floundering dialogues a CPO Agenda Roundtable’s findings, which revealed that most senior executives believe that their purchasing departments are best run by someone who does not have a purchasing background, does little to build a collaborative bridge of understanding between the diverse interests that define an orgaization.

It is within the above context that Part 4 should be reviewed.  It should also be understood that it is not the identification of internal and external collaboration as one of the seven critical supply strategies that I questioned.  It is instead the limited potential for success given the hierarchical communication framework and corresponding attitudes that continue to permeate most executive suites, thereby reducing the concept of open discussion to one of political correctness rather than tangible reality.

 

Dangerous Supply Chain Myths (Part 4) – Reprinted from June 6, 2007

 

Segment 4 – Internal & External Collaboration: A Desire versus Skill!

• Internal & External Collaboration
  In order to extract the significant gains that collaboration can bring, companies will need to enable best-practice multi-lateral collaboration between supply partners, achieve integrated product development, and employ “customer of choice” positioning.

Once again, and at the conceptual level listing internal and external collaboration as a critical supply strategy makes sense.  However the inherent flaw with the report’s framework for collaboration is that it fails to recognize the real-world challenges faced by the vast majority of procurement professionals. This of course prompts the question, why is there a consistent disconnect between what the report has identified as being critical supply strategies versus what real-world procurement professionals consider to be important? 

I believe that the problem does not lie in the intelligence of the people who prepared the report but instead in the methodology they employed to reach their conclusions.

The Report’s Methodology  The report indicated that more than 100 supply management executives participated in “face-to-face” meetings and teleconferences.  As a result the authors felt that this wide reach gave great credence to the validity and reliability of the conclusions. 

However for this to be true one has to assume that the beliefs or perceptions of the 100 (regardless of their position in the organization’s hierarchy) are an accurate reflection of the industry as a whole.  Keeping in mind that 75 to 85% of all initiatives fail to achieve the expected results, it is not unreasonable to consider the fact that the net for capturing relevant feedback was too narrowly cast. 

This is especially significant when you consider the possible backgrounds of the many senior-level procurement executives who are likely to participate in such a study.

Is It Really an Arm’s Length Exchange of Information? In a speech he gave several years ago, Colin Powell made the statement that while it is important to seek the input of “experts” it is also important to consider the fact that they may have reached their peak in terms of current day relevancy. 

Conversely, the value of being on the front lines of procurement is that the feedback you receive is a true reflection of a present-day reality (or mindset) and not linked to a long held belief that is the result of past corporate affiliations.

Over the past year or so I have come to realize that there are a fair number of procurement initiative champions who have been hired by end-user organizations that have previously been employed by either a vendor or consulting firm. Therefore it is not unreasonable to believe that they bring to their position a predisposition in terms of their thinking.

For example, there was the senior government executive who was hired from IBM.  And another that was recruited from a major financial institution with close ties to EDS.  Even former managers from software companies such as Ariba have found their way into the executive suite. This begs the question, are the results of reports such as the one authored by ISM, CAPS and Kearney a true reflection of the issues that impact procurement practice?  Or are they the contemplations of the same tightly knit fraternity that continues to fall back on the mantra of past experiences and allegiances?

Besides Colin Powell’s invaluable insight based on his own experiences, the 75 to 85% rate of initiative failure is a result that cannot be ignored.  In short, do end-user organizations abdicate their responsibilities for developing sound procurement strategies by looking outward for “expert” guidance rather than calling on the internal resources and experiences that ultimately determine the success or failure of an initiative?  This is a question I raised in an article I wrote (as well as my column in Summit Magazine – refer to the link in the upper right hand column of this site) titled Technology’s Diminishing Role in an Emerging Process-Driven World.  

In the final paragraph of the article I made the following observation:

“Finally and this is key, have more confidence in your own team’s ability to understand and assess what needs to be done.  Anytime a vendor or consultant makes a statement that what they have to offer will make you a better organization run, do not walk to the nearest exit.  I have always considered an outsider’s proclamation that they know your business better than you do to be a foreboding sign of things to come.  The fact is that the partners with whom you choose to work should possess the ability to understand your business and provide valuable insight without a preordained end result in mind.”

I believe that this lack of confidence is responsible for the majority of procurement initiative failures.  That is the perception that you have to look outside of the organization to gain needed insight into your company’s procurement practice.  What is the old saying a prophet is never well-received in his (or her) own town?! 

Now I am not suggesting that you should not leverage valuable resources and insight from external parties.  The objectivity that can be gained is just one of the benefits of such a relationship. 

However, problems arise when you haven’t effectively laid a strong organizational foundation of understanding whereby effective avenues of communication have already been established between all key stakeholders both within and external to your company.

Unless you have a clear-cut understanding of your own organization’s unique requirements, the external input that you seek will define versus verify and refine your core procurement strategy.  This of course leaves you susceptible to interests or predispositions that may not entirely align with your best interests.  Once again think of the challenges associated with change management.

Communication/Collaboration- A Desire versus Skill  In another article that I wrote titled How Not to Abandon your e-Procurement Initiative, I referred to Bill McAneny’s book Frankenstein’s Manager – Leadership’s Missing Links.  In the book McAneny stated that second to the ubiquitous lack of people skills complaint, the most common charge leveled at an organization’s leadership is ineffective communication.  He further went on to say that communication is actually a desire and not a skill.  And herein rests the key to a successful (or unsuccessful) procurement strategy.  

Communication!  Collaboration!  Does your organization have the desire and the will to effectively identify and engage all key stakeholders?  If not, you will lose the necessary mechanism that will enable you to filter the diverse concepts associated with what is supposedly “popular” or “mainstream” thinking.  And once again, with a 75 to 85% rate of failure that is a fraternity from which you do not want to be a member.  
 

Building a Successful Blueprint  The cornerstone for a successful initiative begins and ends with the establishment of a Results Objective Table.  While space limitations preclude me from including an example of an actual table (I will be happy to provide you with a copy of my original How Not To article as well as the follow-up piece – Vendor/consultant fees: Value for money? upon request, both of which include the aforementioned example), the benefit of this approach is in its universal applicability.

Regardless of where you are with your current initiative, this exercise will enable you to make decisions that will be understood and more readily embraced by all stakeholders.  As a result you will not have to automatically hit the eject button and jettison what is usually a sizeable investment to date along with company morale.

In fact, quite the opposite will be true. By taking the time to understand the forces at work both within and external to your organization (at the grass roots level) through the construction of a Results Objective Table you will eliminate the risks associated with a costly and ineffective program.  This includes capitalizing on the sharp decline in vendor licensing and maintenance fees, including consulting costs.  Next Installment: Talent Attraction & Retention

 

To learn more about the Dangerous Supply Chain Series as well as our other Seminars, simply use the following URL Link: http://procureinsights.wordpress.com/seminars-and-conferences-with-jon-hansen/

Procurement Insights Free Access Library

 

As popularity for the Procurement Insights Blog continues to grow I spent a great deal of time and thought on how to make my expanding library of white papers, reports and studies available to my readership.

 

Specifically, how do I provide you with optimal access to assess the veracity and applicability of my work on a cost basis that makes sense?

 

Along these lines, and based on the responses I received to a recent survey, I will be building a Free Access Library (http://procureinsights.wordpress.com/procurement-insights-free-access-library/) in which there will be a nominal download fee for each paper and service of between $5 and $25.  Sort of a “knowledge-based” shopping mall that provides everyone with the ability to pick and choose papers dealing with the subject matter that is of interest.

 

Once you have had an opportunity to review the quality of the content, and determine that the Procurement Insights Free Access Library is a resource that you will want to repeatedly use in the future, an annual subscription program will also be made available at $50 per year (someone suggested $49.95, but $50 is a nice round number) providing unlimited access to all papers and services including SpeedQuest.  If you already know that this is the kind of resource you have been looking for, and want to subscribe send me an e-mail at; jwhansen@sympatico.ca with “SUBSCRIBE” in the subject line.

 

As I go through the actual mechanics of providing (nee building) an automated pay/download function (ease of use is always an important factor, and I want to streamline the process for you as much as possible), I have set up a temporary page (http://procureinsights.wordpress.com/procurement-insights-free-access-library/) that lists all of the papers and services that are currently available including the corresponding fee.

 

During this interim period, you simply have to send me an e-mail indicating the item you wish to purchase.  I will then contact you directly to coordinate payment (all major credit cards are accepted) and forward the requested paper to you electronically. 

 

Once again, this is only until the automated pay/download site has been activated.  In the meantime, this interim process will actually give us a chance to talk.

 

Chat Groups

 

I will also be setting up chat groups centered on the theme of specific papers.  Access is Free with your purchase, and for those of you who have attended my seminars, you know that this will provide another opportunity to enthusiastically share our mutual passion for all things procurement.

 

Watch for this added feature in the very near future.

 

 

Procurement Insights Corporate Account Program

 

The Corporate Account Program provides a master download code that enables company employees to access white papers etc. through their corporation’s main Procurement Insights account.

 

Contact me for further details at jwhansen@sympatico.ca (be sure to include “CORP” in the subject line), or by telephone at 819-986-8953.

Dangerous Supply Chain Myths (Part 3) Revisited

As I have repeatedly stated with previous anniversary posts, time is ultimately the greatest sifter of fact from fiction, reality from opinion, clarity from confusion.

However for the majority of purchasing professionals, the soundness of identifying Multiple Supply Chain Networks as one of the seven critical supply strategies is generally dismissed in a sea of diverse definitions and exclusionary planning sessions at the executive level. 

While the latter’s reflection of ineffective communication has contributed to the former’s definitive breadth, the reality of an emerging global economy combined with the growing fossil fuel crisis referenced in a recent CNN special report, means that it is nonetheless an issue that must be examined and better understood. 

The big question of course is how do we gain a handle on a subject that has usually been confined to an oligarchy mentality at the senior management level?

One way that I thought might prove helpful, was to conduct a mini-global survey in which the respondents could provide answers beyond the perfunctory yes, no and how important would you rate this issue on a scale of 1 to 5 format that often obfuscates versus enlightens an issue.

While a number of these answers were presented in a series of posts earlier this year (here is a link to one such response: http://procureinsights.wordpress.com/2008/02/18/are-multiple-supply-chain-networks-important-a-pi-q-and-a-track-no-3/), the sizeable number of responses clearly demonstrated a highly fragmented view of Multiple Supply Chains.  Hence one of the reasons I had originally questioned its inclusion as one of the critical seven.       

I hope that you find Part 3 of the Dangerous Supply Chain Myths series equally interesting.

 

Dangerous Supply Chain Myths (Part 3) – Reprinted from June 2, 2007

 

Segment 3 – Multiple Supply Chain Networks: An Issue of Timing versus Concept Validity?

• Multiple Supply Networks
  The tail of the supply chain needs to be tailored to each developing market and this will require domestic partners to help execute fulfillment and delivery.  In addition, good risk mitigation requires flexibility and diversity in your supply chain and supporting networks.

The volume of information available on the subject of multiple supply networks is only rivaled by the diversity of opinion regarding its relevancy and specific application.  While I personally question from a practical perspective, the timeliness of its introduction as one of the seven critical supply strategies it is without a doubt a subject that is worthy of consideration. 

The matter of multiple supply networks is not a new concept.  In fact in 1999 in a paper titled Outlining a Future of Supply Chain Management – Coordinated Supply Networks (and yes upon request I would be pleased to provide you with a copy of this as well as the other studies referenced in this segment), which was released through the Massachusetts Institute of Technology in 2001, the view of multiple supply networks was not necessarily favorable.   In an excerpt from the paper under the heading, Participants Belonging to Multiple Supply Networks, the author states “the idea of belonging to multiple supply networks complicates and duplicates the targeted efforts by each participant.  A shared supplier competing as part of two separate supply networks creates potential conflict of interest among participants.”

Conversely in a 2001 article titled Beyond Utopia: The Realist’s Guide to Internet-Enabled Supply Chain Management, the authors champion the “Federated Planning” approach.  And I quote; “for all these reasons, we believe that the Utopian view of centrally extended enterprise management is flawed, and that attempts to optimize the supply chain from the bottom up will ultimately fail.  To extend the political analogy, we endorse a federalist view, which recognizes each supply chain partner as an independent entity working to maximize its own objectives and trade-offs as a “citizen” of multiple supply networks.”

There are of course several other resources that I could reference, and will make them available to you if desired.  However, based upon my extensive interaction with procurement professionals through my Changing Face of Procurement Conference series, the real question that needs to be asked is quite simply, does the subject of multiple supply networks matter now?

Is it relevant to the majority of procurement professionals (especially those on the front lines) given the continuing high rate of e-procurement initiative failures?  Logic (and consensus) would have to say no, it is not – at least not at this present time.

You have to crawl before you can walk – walk before you can run

The debate, if you can call it that, surrounding multiple supply networks is clearly an example of technologically motivated vision rushing ahead of practical real-world applicability.  Specifically, technology (i.e. the Internet, and Internet-based applications) in and of itself will not drive the transition from a sequential supply chain mentality to a synchronous, real-time interaction between diverse supply chain stakeholders.  In short, it will not produce the long sought after savings that have eluded organizations that have made the costly and time consuming investment in an e-procurement initiative.

This is due to the fact that most organizations do not effectively engage and communicate with their own internal stakeholders, let alone external trading partners.  (I will discuss this in greater detail in the next segment – Internal and External Collaboration).

The vast majority of procurement professionals with whom I have spoken indicated that their e-procurement initiatives originated as part of an existing ERP (finance) or IT-centric strategy that did not involve them in any meaningful way until after a course had been set.  As a result, procurement personnel (a key group an initiative is supposedly designed to assist) were reduced to an unenviable role of just “making it work.”

Besides shedding some light on why 75 to 85% of initiatives fail, you can see why the introduction of multiple supply networks at this stage for the majority of organizations is equivalent to placing the proverbial cart before the horse.

Don’t get me wrong I am a proponent of synchronous engagement between diverse stakeholders (although I believe in the Metaprise or private hub structure which to a certain degree addresses potential conflict of interest issues). However I do not believe in a technology-centric strategy being utilized to define an organization’s processes.  This is because the ultimate result is the need to introduce a change management program which for the most part has proven to substantially increase implementation costs while simultaneously limiting potential savings opportunities. 

By introducing multiple supply networks as a critical supply strategy now, the authors of the report have either ignored the underlying foundation of e-procurement initiative failure, or are of the opinion that this will fill in the cracks and therefore deliver savings that as of today have not materialized for the majority of organizations.  Next Installment: Internal and External Collaboration

 

 

To learn more about the Dangerous Supply Chain Series as well as our other Seminars, simply use the following URL Link: http://procureinsights.wordpress.com/seminars-and-conferences-with-jon-hansen/

Dangerous Supply Chain Myths (Part 2) Revisited

In the year since this segment was first published, I have written a number of follow-up articles that have focused on testing the metal if you will of my position that the majority of supplier development and management programs are inherently flawed.  What is the old adage about the unexamined life?  Everything, including what I write should be subject to scrutiny and where appropriate – constructive challenge.

That said rather than diminishing in its veracity, the belief that most programs such as vendor rationalization have very little to do with operational efficiencies, and more to do with technological limitations has gained considerable mainstream acceptance.  (Note: Be sure to read Part 7 when it is posted sometime next week, as I will delve deeper into the reasoning behind this conclusion.)

In this context, the lens through which you read today’s post as opposed to a year ago, takes on greater signifigance as organizations in both the private and public sectors are now scrambling to overcome the damage (in some cases irreparable) of an ill-conceived supply strategy.

And while the aforementioned follow-up pieces (The Continuing Dangers of Vendor Rationaliztion – November 27, 2007, and The Bands of Public Sector Supplier Engagement – December 13, 2007; http://procureinsights.wordpress.com/?s=Vendor+Rationalization) expand on the ideas first introduced in the original segment, there are also success stories relative to effective supplier engagement and development worth noting.

One such story is the Commonwealth of Virginia’s eVA program, where an increase in the number of actively engaged suppliers coupled with an equally impressive increase in the distribution of business over the supply base has resulted in more than 80% of the targeted $3.5 billion being processed through the system.  Compare this to the results of similar programs with other governments during the same time period and you can see why Virginia was ranked number 1 in the 2008 Pew Center Report (http://procureinsights.wordpress.com/2008/03/04/virginia-is-ranked-number-1-in-2008-pew-center-report/).      

So without further delay, I am pleased to present Part 2 of the Dangerous Supply Chain Myths series.

 

Dangerous Supply Chain Myths (Part 2) – Reprinted from May 29, 2007

 

Segment 2 – Supplier Development and Management: The Fruit of a Poisonous Tree?

• Supplier Development and Management
  Effective supplier development and management should deliver a competitive advantage in cost, quality, delivery/responsiveness, technology, and innovation achieved.

In Segment 1 I reviewed the inherent risks associated with the broad application of a consolidation strategy.  This was an appropriate starting point due to the fact that any adjunct undertakings that extend or branch out from this original “tree” will by and large fail.

Let me start off by saying that the ISM, CAPS and Kearney report was correct in terms of highlighting Supplier Development and Management as one of the seven key tenets of succeeding in a dynamic world.  However this determination is undermined by the consolidation strategy that is pursued by the vast majority of organizations.

Specifically, do suppliers perceive your current e-procurement strategy as a threat or a benefit to their organization?  What is worth noting is that this question even extends beyond the concerns of the SME community to include supplier organizations of all sizes. In 2005 I addressed an audience of 200 senior executives from the supply-side of the automotive industry.  The general consensus regarding e-procurement (re technology) overall can be summed by just two of the innumerable concerns that were voiced afterwards.  They are as follows:

“It (e-procurement – technology) will have a negative effect on my business.” 

“The product (we sell) is commoditized under an e-procurement program . . . we will do everything to resist participating.”

These are strong sentiments that were still being echoed by suppliers in a March 2007 seminar I gave in Toronto.  This should prompt you to ask the question; is my organization’s current strategy seen by our supply base as a benefit or a threat?  Of an even greater significance is the question, will a broad consolidation strategy enhance or erode my supply base? Now there are certainly organizations which have both the volume and means to “flex” their buyer-side muscles, and are therefore prone to be less than empathetic with supplier concerns.  However if history has taught us anything, it is quite simply this – supplier buy-in is a critical element of a successful e-procurement strategy.

From the automotive industry’s failed Covisint initiative (for those of you unfamiliar with this massive initiative which was championed by a consortium of manufacturing heavyweights such as Ford, Daimler Chrysler and Nissan, I would be happy to provide you with more information upon request), to Ford’s abandonment of their own Oracle-based Everest program, supplier resistance was cited as a determining factor.

Staying within the automotive industry (although these statistics are somewhat consistent across all sectors), a 2004 study provides an imperative numerical means of measuring the impact of supplier resistance.  Of the 45% of U.S.-based customers who have contracted vendors, 33% of all purchases were from non-contract suppliers.  In Canada, this number ballooned to 79%.  Is this a compliance (or non-compliance) issue, or is it the result of a questionably conceived, broadly applied consolidation strategy?

This is a question that needs to be asked . . . and answered before any strategy is ultimately embraced and introduced in the real-world.  Unfortunately, most decision-makers abdicate this responsibility by looking outside of their organizational expertise to seek the input of consultants and vendors whose vested objectives may not necessarily align with those of their customers’.  (An article I wrote titled Technology’s Diminishing Role in an Emerging Process-Driven World provides actual case references, and as always I would be pleased to provide you with a copy upon request.)

In conclusion the ISM, CAPS and Kearney Report, while on the surface makes a solid point, it is actually beneath the surface at the foundational level of your core strategy where the effectiveness of Supplier Development and Management will ultimately be determined.  Next Installment: Multiple Supply Networks 

 

To learn more about the Dangerous Supply Chain Series as well as our other Seminars, simply use the following URL Link: http://procureinsights.wordpress.com/seminars-and-conferences-with-jon-hansen/

Dangerous Supply Chain Myths (Part 1) Revisited

As with any well researched article that is offered up for public review (and scrutiny), one can never really anticipate the ultimate reaction and therefore impact a particular piece will have on its readers.

In fact to be truly effective and meaningful, the predalictions of a mass audience while understood, have to become secondary to the core principles being presented.  In essence writing is not a popularity contest, but an exercise in providing both a different and unique lens through which a particular subject or circumstance can be seen regardless of the vagaries governing popular opinion.

This was certainly the case when I chose to review and in many instances constructively (at least I hope it was viewed as being constructive) critize the findings of the paper Succeeding in a Dynamic World: Supply Management in the Decade Ahead.

A collaborative effort by industry heavyweights ISM, CAPS and AT Kearney, the paper focused on what they referred to as the “seven critical supply strategies” for success.

Unfortunately, when one takes into account the continuing high rate of e-procurement/supply chain initiative failures, the strategies presented represent the fruit of this poisonous tree.

And as awareness of the failure of the majority of programs to deliver the expected results enter mainstream consciousness, vendors and those associated with the recommendation and implementation of solutions find themselves in the unfamiliar waters of having to answer hard questions from an increasingly cynical market.   

Starting with Part 1, today’s anniversary post will once again revisit the initial entry of a 7 Part series that has gained critical acclaim and has resulted in a highly popular seminar series of the same name.

 

Recent ISM, CAPS and Kearney Report Perpetuates Dangerous Supply Chain Myths – Reprinted from May 28, 2007

 

While generally interesting, the recent 10 Page Report (excerpt) by ISM, CAPS and Kearney perpetuate a number of the myths that actually fuel the high rate of e-procurement initiative failures.

Focusing on what is referred to as the “seven critical supply strategies” for Succeeding in a Dynamic World, I will address each “strategy” over the next seven day period referencing the results of our 15 years (and counting) of research findings and front line experiences.

Please keep in mind that this undertaking is not designed to malign or even call into question the capabilities of the parties involved.  The main impetus behind the effort is to provide you with information that will hopefully motivate you to think outside of the framework with which you are most familiar.  The fact is that based on my interaction with procurement professionals across North America through my Changing Face of Procurement conference series, the majority already question the validity of what is supposedly “accepted” or “mainstream” thinking.  As we progress in this series you will find out why.

Segment 1  The Myth of Consolidation

• Category Strategy Development
  Consolidate your supply base for each category into a small number of preferred suppliers that can be efficiently managed while mitigating risk. The strategy for each category should focus on the overall value chain over a three-to-five year time frame.

This strategy is the epitome of the two edged sword.  While applicable in certain situations it is the broad application of the consolidation strategy across the entire spend which is a major factor in the high rate of e-procurement initiative failures.  In my paper Acres of Diamonds I highlighted the results of 14 years research which identified that all commodities fall into one of two categories, Historic Flat Line and Dynamic Flux.  Based on the study’s findings the strategy with one will not work with the other.  (Let me know if you would like a copy of the Acres paper by return e-mail.)

Unfortunately, virtually all existing applications are structured around the procurement of Historic Flat Line commodities.  As a result of the exorbitantly high licensing and maintenance fees clients pay for implementing these applications, when savings (both Cost of Goods and Cycle Time Reduction) dry up organizations employ what I refer to as a “pull through” strategy in an attempt to satiate the voracious savings appetite of a costly underachieving initiative.  Specifically, they attempt to justify the application investment by utilizing a consolidation strategy for purchases which are not suited to this approach.  The result is an over-reliance on a change management and compliance strategy that consumes valuable cycles in an effort to legislate or enforce a program which should not have been introduced in the first place. 

Kearney’s failed efforts to implement such a strategy with the Federal Government of Canada are just one of countless examples where this approach alienated stakeholders both within and external to the client, with the most vociferous resistance coming from the supplier community.  In fact for those of you in the public sector (although I am certain that private sector professionals will also be interested), you may want to refer to a US report which came to the following conclusion (and I quote):

“The number and size of bundled contracts within the executive branch have reached record levels.  Although contract bundling can serve a useful purpose, the effect of this increase in contract bundling over the past ten years cannot be underestimated.  Not only are substantially fewer small businesses receiving federal contracts, but the federal government is suffering from a reduced supplier base.  American small businesses bring innovation, creativity, competition and lower costs to the federal table.  When these businesses are excluded from federal opportunities through contract bundling, our agencies, small businesses and the taxpayers lose.”

Note that while the report recognizes the fact that contract bundling or consolidation can (and I believe this) does serve a useful purpose, the problems arise when there is an attempt to force feed the strategy against the better judgment of key stakeholders (especially those for whom the initiative is supposedly designed to assist).  (Let me know if you would also like a copy of the US Report.) And while I recognize the conceptual value of organizations such as CAPS, or an Aberdeen and Gartner the fact that they have ties to vendors through a variety of non-arms length relationships (either as a collaborative study partner or client) is the main reason that the validity of their study findings are subject to an increasing level of cynicism from key stakeholders such as frontline buyers.   When 75 to 85% (some would suggest that this number is even higher) of all e-procurement initiatives fail to achieve the expected results, one cannot help but wonder why the CAPS’ and Kearney’s of the world continue to cling to a broadly applied consolidation strategy.  (Next Installment: Supplier Development and Management 

To learn more about the Dangerous Supply Chain Series as well as our other Seminars, simply use the following URL Link: http://procureinsights.wordpress.com/seminars-and-conferences-with-jon-hansen/

The Greening of Procurement Revisited (Part 2)

As a follow-up to my post from earlier this week, I am pleased to present Part 2 of the 2 part Greening of Procurement Series: It’s Not Easy Being Green!

For those of you who would like to delve even deeper into the factors that are shaping both public and private sector sustainability strategies, including case studies on companies such as Kodak and Ford, you can purchase ($20) my white paper titled The Greening of Procurement: How Social Consciousness is Re-Shaping Procurement Practices (http://www.procureinsights.wordpress.com/procurement-insights-free-access-library/). 

You will also find my seminar, Sustainability Facts and Fiction: Linking Green Idealism and Practical Business Application, to be quite beneficial in mapping out a strategy for your own organization.  Contact your regional or national purchasing association for details, or contact me directly at jwhansen@sympatico.ca. 

 

The Greening of Procurement (Part 2) – Reprinted from July 26, 2007

 

Are environmental considerations truly the central element of recently emerging green programs, or are they an advantageous, politically correct by-product of an existing strategy that is linked to more “traditional” motives?

While the EcoMarkets 2007 Survey adroitly provided us with an unbiased look into the mindset of the purchaser, the attitude (and actions) of vendors requires equal consideration to accurately answer the “motive” question.

Green Snake Oil?

In his July 24^th article titled Green IT: Marketing ploy or new tech? (to obtain a copy of the article send me an e-mail at jwhansen@sympatico.ca with “Green IT” in the subject line), Bruce Hoard introduces us to the term “Greenwashing.”

Referencing comments from a Greg Schulz interview (Schulz is the founder and senior analyst at the Stillwater, Minnesota-based StorageIO Group), Hoard reports Schulz’s assertion that the “green” behind recent green IT efforts has less to do with the environment and more to do with a vendor’s bank roll.

One example Schulz gave was Hewlett-Packard’s announcement of its Adaptive Infrastructure offering in June.  While the manufacturer claims that this new, green storage technology can cut data center power and cooling costs by 50%, Schulz believes that this is “simply a shift to another technology,” that HP is touting as being part of a green initiative.

While Schulz does believe that “virtualization can help reduce the number of servers,” he questions whether the reduction actually translates into any meaningful, bottom line savings?  This is a good question, and one for which I do not have an immediate answer.  Perhaps this is the real issue with going green . . . the absence of tangible and verifiable data.  Although, even if these numbers were available, would it really matter at this stage?

But it’s good for you Mikey!

Like a movie that the critics applaud as being an artistic triumph, but the buying public won’t go and see, green procurement has numerous hurdles to overcome before actual conservation numbers become truly relevant.

Referring to the Province of Ontario’s highly successful energy efficient lighting program (see Part 1 of this posting), one has to ask the question, “would the high level of adoption by the business community have been the same without the substantial subsidy from the government? ”It is an important question given that the savings associated with energy efficient lighting would not have been realized if the same majority of businesses that had opted into the program had refused to make the change from their traditional lighting fixtures.

Even with products that have long been associated with green programs such as paper and cleaning supplies, traction has and continues to be an issue.  For example, the EcoMarkets 2007 Survey found that while “88% of American and 90% of Canadian organizations have a paper re-use and/or recycling program,” the existence of paper purchasing programs are still uncommon.

This is undoubtedly the reason why recent articles such as Bruce Hoard’s are introduced under the heading “for now, going environmental often means going alone.”   Or the findings of a recent BrainNet study which concluded that despite the growing awareness of “procurement’s environmental impact . . . few companies are incorporating green purchasing” into their overall procurement strategy.

So as I had concluded in Part 1 of this posting, just being green won’t be enough to win customers.  A clear demonstration of direct (and immediate) savings such as Ontario’s generous lighting subsidy or that Province’s suspension of sales tax must be established before the indirect or green savings can come to fruition.

 

To purchase a copy of the white paper The Greening of Procurement: How Social Consciousness is Re-Shaping Procurement Practices on-line, simply use the following URL Link and select the paper with the heading The Greening of Procurement: http://www.procureinsights.wordpress.com/procurement-insights-free-access-library/

The Greening of Procurement Revisited

“In our rapidly evolving capitalist economies, where it is in the natural order of things for corporations to devour competing corporations, for industries to carve up and digest other industries, one emerging form of capitalism with a fork – sustainable capitalism – would certainly constitute real progress.”

From Cannibals With Forks – The Triple Bottom Line of 21^st Century Business, By John Elkington (Capstone Publishing, Oxford, 1997)

Do Cannibals With Forks Constitute Progress?

So started the introduction to one of my most popular white papers titled, The Greening of Procurement: How Social Consciousness is Re-Shaping Procurement Practices.

When I first wrote about green or sustainable procurement (the latter extends beyond the realms of eco-friendly considerations to include socio-economic factors) last summer, I had no idea of how voracious an appetite the business community had for information on this subject.

However much the interest in my papers and research material was unexpected, the contentious and at time contradictory opinions expressed by different stakeholders on both sides of the issue ensures that it is a matter that will remain on our collective radar screens for many, many years to come.  Even if the progress of these ideals do not gain the same level of traction (at least in the foreseeable future).

With that said, and as part of our 1^st year anniversary series,  I am pleased to once again share with you the 2-Part Greening of Procurement posts.

Starting with Part 1 today, Part 2 of the series (It’s not easy being Green!) will appear later in the week.

 

The Greening of Procurement (Part 1) – Reprinted from July 20, 2007

 

In my extensive travels to exotic locales (alright Calgary may not be exotic but it is certainly a great place to visit), purchasing professionals who have attended one of my conferences have rarely if ever broached the subject of environmentally friendly (re green) procurement practice.

Burdened by the more pressing challenges associated with unnecessarily complex initiatives that are behind schedule and over budget, one can certainly understand the reasons for the paucity of inquiries.

However based on the recent spate of newly released studies and reports coupled with the announcement of upcoming conferences (one of which is the November 2007 Green Purchasing Summit referenced at the conclusion of this post as well as under the PI Blog Roll), I was interested in trying to understand the root causes of the discrepancy between expressed interest (or lack thereof) and the increasing market activity.

The EcoMarkets 2007 Survey

At the beginning of May I received an advanced copy of the 2^nd annual EcoMarkets Survey.  A collaborative effort between the North American Commission for Environmental Cooperation, the Center for a New American Dream and TerraChoice Environmental Marketing (who spearheaded the program) this ongoing research initiative monitors patterns of green procurement practice within the B2B and B2G communities.  (If you would like a copy of the complete survey send an e-mail with “Green” in the subject line to jwhansen@sympatico.ca.)

The survey’s results were based upon 692 respondents from a total invitation pool of 10,500 procurement professionals.  The conclusions are therefore drawn from a 6.6% sample response rate.  The respondents’ organizations account for more than $5 billion in combined annual spend.

Clear Answers

Unlike a lengthy dissertation where the desired answers can be somewhat obscured by superfluous (and sometime meandering) statistics, the EcoMarkets 2007 Survey wasted little time in providing meaningful insights.  This was no small feat given the fact that the subject matter is simultaneously contradictory in that while green procurement is widely recognized as being important (91% of respondents indicated that they consider green factors at least occasionally) its importance in terms of practical adoption is relatively low.

From a purely statistical perspective, the survey reached the following conclusions (and I quote):

• “It is clear that while environmental factors are being increasingly incorporated into purchasing considerations, the translation of policy to practice is mixed and incomplete.”
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• “The three most important factors that influence purchases are product performance, durability and price.  Environment is a lower priority.”
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• “A strong majority of respondents (60%) report that they will not pay a price premium for environmentally preferred products.”

The question this raises is quite simply what set of circumstances will elevate green procurement from a nice to do “boutique” status to a more meaningful (and essential) element of a sound purchasing strategy?  At the risk of answering my own question, I do not think that green procurement in and of itself will achieve this status, nor do I believe that it is a reasonable goal.  At least not in today’s dramatically evolving procurement practice climate.

Factors such as the ever expanding talent vacuum combined with the continuing high rate of e-procurement initiative failures will likely dampen organizational enthusiasm for going green.

Governmental influence – the fuel for change?

Another interesting statistic provided by the survey indicated that the majority of government departments or agencies in Canada and the United States have instituted a green purchasing policy.  Based on these findings, the report concluded that this is a clear indication that “governments are making the effort to lead by example,” and are less driven by “financial constraints or profit-making.”  While it has generally been accepted that government procurement practices are measured by a different set of criteria from the ones employed by their counterparts in the private sector*, in the context of green procurement it is still a notable observation.

* (Note: as chair of the 2006 Summit Roundtable on Federal Government Procurement Practices, I prepared a comprehensive report highlighting the key elements of a successful purchasing program.  This of course was based on feedback from a diverse group of participants.  One of the points for which a general consensus was reached dealt with the very issue of purchasing guidelines in the public sector.   And I quote, “it is also generally agreed that government is not a corporation and therefore has different priorities and imperatives to meet when procuring goods and services.  This acknowledgement takes into account socio-economic implications including the importance of developing key Canadian business sectors or industries.  Examples of key sectors or industries include the SME/minority-owned business community, or Canadian-based manufacturing sectors such as shipbuilding where job creation and community financial stability are taken into consideration.”  So it is certainly not a stretch to extend the above statement to include green procurement.)

However, looking beyond the realm of its own procurement practice, governments have historically demonstrated a proclivity for fueling environmentally-inspired change.  The Province of Ontario’s energy efficient lighting program of the early 90’s gives testimony to this fact.

Looking for ways to reduce energy consumption, the Province of Ontario offered “significant” subsidies to businesses that made the change from standard compact florescent lighting to energy efficient lighting.  With the subsidies covering the majority of the transition/upgrade costs, the rate of conversion skyrocketed as immediate savings were realized with the first electric bill.  An unexpected adjunct benefit was also realized through the program as the subsidies also stimulated revenue opportunities for the companies that sold and installed the new fixtures.

Almost 15 years later, the EcoMarkets 2007 survey reflected the continuing enthusiasm for programs like the one offered by the Province of Ontario.  The response from survey participants indicated that “energy conservation programs are 3x more common than green electricity purchasing programs.”  While I am not familiar with the level or immediacy of the savings associated with the green electricity programs, the success of the energy conservation programs should motivate green marketers to look for parallels between the two initiatives.

This is especially important given Ontario’s recent decision to suspend the Provincial Sales Tax (which is 8%) when an energy efficient appliance such as a fridge or stove is purchased.  While this program has obviously garnered a universally positive response, to what degree it actually influences consumer buying habits remains to be seen.   That said green marketers should pay close attention especially given the fact that the savings impact is immediate.

The survey’s assessment that “being green won’t be enough to win customers” rings true.  Both direct and indirect savings must be clearly demonstrated and easily understood by the purchaser.

To purchase a copy of the white paper The Greening of Procurement: How Social Consciousness is Re-Shaping Procurement Practices on-line, simply use the following URL Link and select the paper with the heading The Greening of Procurement: http://www.procureinsights.wordpress.com/procurement-insights-free-access-library/