Stratoserve LLC

Input-process-output and the supply-firm-marketing chain

The input-process-output (see ICT model) is a way of looking at the firm's value chain. Supply managers handle the input coming in and the marketing folks handle the output coming out.

Like:                  

   global suppliers ->supply chain->[firm-]->marketing->global customers

Supply and Marketing folks are people who sit at either end of the firm and look at the world outside in the firm's value chain. The marketing manager reaches out to customers and supply chain managers reaches out to suppliers and also need to reach "in"to internal firm users.Both off course don't formally talk to one another - organizations are not set up to encourage the talking.  Unless there are operations review meetings, that can become mindless and boring. ERP systems can help but ERP speaks to only data and not the gut feel of these important folks.

If you look at the firm as just a processor - focused on creating superior value for its customers-you start realizing how much firms miss out in tapping on to the combined knowledge and expertise of their input and output side teams.

Procurement Reform bill becomes law and Memorial Day

Today is Memorial Day  and it is significant that President Obama and Congress strove to get the Procurement Reform Act ( officially  the Weapon Systems Acquisition Reform Act of 2009 ) passed before Memorial Day.

The defense industry and supply chain is remarkably "production" oriented. The focus is passively on what the Government  wants rather than proactively understanding the changing needs of  combat in different theaters. To quote:

 “By and large the government gets what it wants, when it wants it, for the price it’s wiling to     pay,” said Alan Chvotkin, executive vice president and counsel at the Professional Services  Council, who spoke this week at a panel discussion about the federal acquisition workforce. However, he said the procurement system still has room for improvements.

At the same discussion, Steven Schooner, an associate law professor and co-director of the Government Procurement Law Program at George Washington University, pointed out the Obama administration views contractors as lining their pockets at the taxpayers’ expense. Schooner said the president, Congress and the news media can’t treat contractors as pariahs because the government can’t operate without contractors’ support."

The intense public scrutiny of defense contracting results in contractors being treated as pariahs,as Schooner says. Consequently, mindless and irrelevant projects take a life of their own while combat troops have changing needs on the ground.Choosing and changing projects quickly is a top requirement in today's globalized world.

Let us hope, that efficiency and communication in the supply chain, right to the brave soldier whether in Afghanistan or South Korea,improves with the Procurement Reform Bill.

G-20 summit a success - is the world really getting "flat" ?

It is not just travel,communication and the Internet -that's turning the world flat as Thomas Friedman famously pointed out. The most amazing  image from the G-20 summit is of  Queen Elizabeth and First Lady Michelle Obama putting their arms around one another. When there was a gasp of protest from royal watchers, Buckingham palace quickly quashed any concerns about breach of protocol. It tells us a lot about the British Monarch  who recognizes the changing "flat world".

The camaraderie of the G-20 leaders also sent a strong message to businesses around the world  that we live in one world and must work together to solve the problems of our time, notably the current economic crisis.

Does this mean that all Governments are on the same page? Will global B2B and supply chains  become seamless - immediately?

Or at a more mundane level will wireless phone providers  start charging the same domestic price for global roaming? Not immediately but we'll get there probably sooner than we imagine!

What types of B2B and Supply Chain jobs will the stimulus package create ?

I have been trying to figure out the kind of opportunities that might come up from the stimulus package - particularly in the B2B  and Supply Chain  areas. I think there will be plenty of opportunities in these areas if you start looking at what the stimulus is planning to do. For example, in the procurement space as towns and communities start re-building infrastructure purchasing skills should be in demand. Now the question is whether ongoing contracts will be expanded i.e. existing contractors will be given more work and they would hire or there might be more new contractors entering the infrastructure. A friend in the purchasing community thinks that new bids will have to be prepared, in record time, but there may not be new supply management jobs in the public sector, although some additional hands may be needed to develop and execute the contracting of all this work. If you are a professional looking for work  in these areas checking with the local Government- may be a good idea.

Then there is the construction supply chain ( I was recently reviewing this literature for an academic paper review ) and herein lies an opportunity for all those sub-contractors out there. They should really start gearing up their B2B marketing with both towns and well established contractors so that they are ready to execute projects. There are a whole lot of displaced professionals (IT , finance)  who have taken up temporary work like painting etc. and this is the time to put your name out there and start lining up your work force.

The stimulus funds would probably be spent at the town level and there is some talk of a deadline of spending the money say within one year and this calls for a  speedy effective local project selection ( which school to renovate  ? - probably a separate blog on this ), contractor and subcontractor selection and off course the direct workers on these projects.  Probably discussion will move to execution aspects of the stimulus as we move forward.....

And change in modern cultures- Barack Obama

Barack Obama is the President Elect of the USA. Not many "young" cultures or countries or even "older" ones can claim to usher in such change. Remarkable and only in the USA !

An interesting dynamic of this election is the support of the American youth for Barack Obama. The Obama campaign was able to galvanize the youth,turn them out and since the Generation Y or echo boomers have great relations with their parents and grandparents this historic change became possible as the young were able to persuade their older relatives.

Now, time to get back to work!

Supply chain and marketing changes for a slow economy

Consumers in the US are making major changes in their behavior in the US market as the economy slows. In this article, I found the Nielsen number of store grocery brands growth vs branded products having significant implications for marketing and supply managers. Over the last year ending April store brands have grown in sales by 9.1% while branded products have grown by 3.9%. These numbers signal rather immediate actions that marketing managers and supply managers across every link of the supply chain will have to consider. Store brands have very low marketing expenses and simply launch generic products when significant local sales are observed in any branded product. Consider the OTC pharmaceutical shelves in a supermarket where the store brand for an off patent pharma product will have the same ingredients and mention "compare with X name brand" and place the store brand next to the "X" brand with off course a lower price. In good times consumers will buy branded products but these days consumers will tend to simply buy the store brand whenever possible. Brand marketers are cutting prices and offering deals to come nearer in price to the generic store brand in almost every category. These discounts coupled with cut marketing budgets is making marketing much more challenging

As demand slows down supply managers are being asked to help by trying to reduce input costs in every way possible, the market will simply not absorb costs. Innovative low cost options is something that every product category is looking for. So whether you are a marketing manager or a supply manager, you may have been already asked to cut costs and yet stay effective. If you have not been asked, don't wait for a formal mandate, get to it and just ask your customer and supplier how you can cut cost and come up with innovative solutions like combining deliveries, investigate economic inventory financing options and any way you can do more with less. And try to do these now!

Are P-Cards abused ?

Some years ago I wrote a paper on P-Card users doing maverick purchases.  Generally, I thought the issue was resolved till the recent GAO report, much discussed in the popular media.

P-Card  use  in Government, according to the report, has  grown from 3 billion dollars in 1996 to over 17 billion dollars in 2006. This growth has resulted in over $1.8 billion in savings in various transaction costs,compared to centralized purchasing and all the associated paperwork of small value "C" class purchases.

Interestingly, my quick reading of the GAO report suggested that the troubles are with mainly the purchases over $2500 that are 3% of transactions but 44% of the dollar value. Proper authorizations
( "control") are lacking and called for. The sampling of abusive use made for salacious headlines in the popular media.

I suppose much research on P-Cards need to be still conducted, but I think one finding from my own paper , is pretty applicable to the GAO report.  That is:

• Train P-Card users to be careful, particularly above the micro purchase threshold of $2500. Get approvals  soon after your purchase if you can't get approvals before buying, particularly if you are a Government employee or your organization rules have a P-Card per transaction limit. Also facilitate this by asking the card companies to report all buys above  your  threshold so that the very next month all approvals are sorted out. Should not be too difficult as only 3% of the transactions are over the limit of $2500.

Doing so would deter P-Card misuse (if you need to face your boss either immediately before or after  a dubious purchase, you'd think twice)  but, on the downside,would also make the GAO report less  colorful!

Mature Global design Strategies improve profits

I was rather happy to read the Aberdeen report's summary which highlights that global product design and development leads to reduction in product development time and time to market while allowing the protection of intellectual property through Digital Rights Management.

This blog and my research has been investigating these issues for some time and I am glad that the data is now available. The question is how do you make it work in practice, particularly if you are not a gigantic organization that can afford to open offices worldwide and actually place your person to work with the supplier in another country. That is an interesting question .....

LOL -Limitation of Liability-with Jim Bergman

The talk by Jim Bergman on Tuesday at CAPM turned out to be great. Jim gave folks a heads up on IACCM  and the real need for the buy-sell and legal side of companies to speak to each other instead of remaining in their silos.Organizations tend to, for example, not really understand their customer warranty requirements and then seek similar warranty requirements from suppliers. Instead, marketing and sales gives out warranties to customers without Procurement and Supply managers trying to transfer the risk upstream. For example, a supplier might offer a 2 year warranty as standard and procurement managers accept this as a bonus  without working for a lower price since their onward customer warranty might be just one year and they are needlessly paying for warranty that is neither needed nor ever used.

The fun part of Jim's presentation was the acronym LOL which you might think is "Laughing out Loud." Not so. LOL is "Limitation of Liability" and it is the most negotiated clause in buyer seller negotiations according to IACCM suveys, year after year. I felt that the audience was both energized and intrigued by this finding particularly because no one could disagree, nor like to admit it! All in all a very nice event as was the venue the il Monteicello restaurant.

Crib Recall - New Product Development meets Supplier Involvement

Walk into any furniture store in the US and almost all products are made in China. You order anything and the boxes arrive with instructions and you do as best as you can. I , for example, have a desk with a hutch that I could not install very well and just did not want to spend money on a professional installer and a rattling hutch is not a problem. But what happens if it is a crib or a rocking chair for the elderly? Serious injury or even death can result.

The recall of one million, yes one million cribs puts the focus on New Product Development and Early Supplier Involvement and the core of this blog i.e. Business to Business Relationships. According to the Chicago Tribune , 3 deaths , 7 entrapments and 55 incidents are reported where tiny infants are involved.

Apparently, the cause of the problem, is that customers might install the drop side of the crib upside down. This is because the design fault allows such an installation. Once wrongly installed, the hardware can weaken and can allow the drop side to detach. The gap so created in the crib could entrap the infant.

Was adequate product "in-use" testing done before launch of this product? Obviously not - because design flaws would come up straight away if even simple consumer product  tests were conducted before large scale market launch. For example, if you tried a testing with a large demographic of good and bad handyman Dads with infants almost certainly the wrong way installation of the drop side of the crib would have come up. Then obviously the designers could have eliminated the wrong side installation possibility. Such research would have cost a paltry amount and would save infant lives not to speak of the the organizations involved including Simplicity and its Chinese suppliers.

And if you ask the supplier, they'll tell you that they work off the drawing and the drawing is part of the contract. And off course the supplier has absolutely no idea,interest or concern about the product's actual in-home use  in classic B-to-B style. Also partly because the marketing company keeps the suppliers completely guessing about what's happening in the consumer market. Nothing wrong with that because the crib company has probably many suppliers and would not like to discuss too many market issues lest the suppliers become competitors at the consumer end.

But then could the crib maker have ordered a 100 samples for a consumer "in-home" product test - with no reference to the actual market?  The Chinese suppliers would have supplied them free!  But it was probably from the drawing board to the overseas manufacturer and then direct to consumer. Pretty neat and virtual as a new product process , with very messy and real consequences.