Core business solutions

Remembering our military supply chain

Arlington cemetary

Memorial Day in the US is a time for us Americans to remember those who gave and risked their lives for our freedoms.  In observance of Memorial Day, there will be no article, but instead a salute to the men and women gave the ultimate sacrifice.

Since this is a supply chain blog, I thought it was best to remember those in the military supply chain.  Logisticians do their best work behind the scenes and away from the battlefield but they play a vital role to the success on the battlefield.  Today my salute to them is remembering their work by posting my 5 favorite military logistics quotes:

“Gentlemen, the officer who doesn’t know his communications and supply as well as his tactics is totally useless.”
– Gen. George S. Patton, USA

“You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics.” – General Dwight D. Eisenhower

“Forget logistics, you lose.”
– Lt. Gen. Fredrick Franks, USA, 7th Corps Commander, Desert Storm

“Logistics … as vital to military success as daily food is to daily work.”
– Capt. Alfred Thayer Mahan, Armaments and Arbitration, 1912

“Amateurs talk about tactics, but professionals study logistics.”
– Gen. Robert H. Barrow, USMC (Commandant of the Marine Corps) noted in 1980

Tank in C17

On behalf of a grateful nation, thank you for your service.

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What can business learn from Moneyball?

Money ball

Brad Pitt once brought to life the importance and value of metrics when he portrayed Billy Beane in the movie Moneyball.  “Sabermetrics” as it is widely known today has really changed the way scouting in baseball was performed.  It elevated the process from tribal knowledge that had been in place for over 100 years to analytics that could measure performance creating a contender out of a small market team.  Just like Sabermetrics, almost all companies today use some sort of data analytics to measure performance.   But just how effective are those measurements and where did they come from?

When used properly, metrics work to support strategic initiatives and provide feedback to all stakeholders regarding the performance of the group quickly and effectively.  However, when they don’t they just become another number.  They quickly become irrelevant and people will just tune out.

Here are 5 ways to make sure your metrics are relevant and adding value to your organization:

  1. The metric fits into higher strategic goals

All metrics must align with your strategic focus.  Every metric created must support the higher goals of the organization.  No metric should be created without it fitting into the bigger picture.  Any metric not in proper alignment quickly losses value and can becomes irrelevant.

  1. Ownership

Metrics must have the proper ownership within the organization so that the individual/group responsible can have as much control over the process as possible.  It is unrealistic to hold anyone accountable for areas outside of their control.  Positive changes cannot be expected by individuals without the ability to change the dynamics of the input.

  1. Simple data

Making the metric as user friendly as possible is the best method.  The most useful data is when everyone can easily understand it and interpret the data instantly.  A great example of a simple metric is in the airline industry and on-time departures.   This is simple, to the point and everyone can easily relate to it.

  1. Publish regularly

However you designate the publication time, make it relevant. Whether it is weekly, monthly or quarterly, the measurement should be on time and relevant.  Data ceases to become relevant if it is outdated.  There is not much relevance to reading old news.

  1. Don’t be afraid to adjust

Keep in mind that not every metric is set in stone. I recently was asked the best way to measure fill rate for a distribution company.  The simple answer is that how you measure is irrelevant if your customer base disagrees with you.  Never forget to check with your customers. They will certainly have an opinion of your performance and how you should measure it.  Ultimately, keeping your customers happy is the goal. Don’t be afraid to get their input.  If your customers disagree with your metrics then you end up looking like you are out of touch.

While there is no denying that effective metrics help guide companies to higher performance, the development of the metric itself can be more about trial and error than pure science.   Constant improvement is the goal in any organization and metrics are no different.  Keeping your metrics, strategy and customer satisfactions in alignment takes constant adjustment.  Relevant metrics are often a work of art in the end.

If you or anyone you know would like more information regarding the use of metrics in their organization please email info@atssoutherncal.com.

Question:  What are some of the most useful metrics you have used?

Is your procurement team ready for center stage?

center-stage

Centralizing procurement is a timeless argument that has plenty of support on both sides.  Cost savings can be identified quickly, but why should the end user be the one that suffers because some other area is saving money? How does their input figure into the argument?

The great part of centralized procurement is that you control all the pieces. Centralization puts you in the driver seat for better negotiations, increased visibility of demand flows and at the same time increasing your overall level of talent.  The key is to balance the benefits of centralization while not losing the local touch.  Thanks to technology, keeping a localized touch is now easier than ever before.

Cash flow is king and centralizing procurement directly impacts your bottom line like few other business strategies. Here are 5 key benefits that will impact your organization by implementing centralized procurement:

  1. Negotiation leverage

The biggest benefit in centralizing procurement is the benefit of being able to negotiate with your centralized demand.  Would Walmart ever consider negotiations with their suppliers based on an individual store?  Never and neither should you.  Negotiating with your suppliers with centralized demand in mind increases your leverage significantly.  Consider it buying in bulk.  Negotiations change quickly when you can look at a bigger picture.

  1. Increased utilization of resources

Everyone has to deal with limited resources and centralization allows for the most effective use of those resources.  This not just limited to manpower, but other resources such as space, equipment and technology.  Why pay additional expenses for duplicate resources if you have the option to consolidate expenses.  Office space, software licenses, training and many other opportunities exist in the consolidation of procurement. Fluctuations in the marketplace create challenges when attempting to allocate resources and centralization helps to smooth out those peaks and valleys.  Centralized procurement is better equipped to handle seasonal demands, new projects or customer spikes than a localized procurement strategy.

  1. Strategic alignment

Implementing strategic goals across an organization is tough enough, but attempting to implement strategies in procurement when there are different leadership teams is even tougher.  Aligning the teams into one centralized structure allows for a consistent message to be delivered top to bottom. It also lends itself to standardized processes from beginning to end. Key metrics are easily identified, tracked and used for evaluation throughout the process.

  1. Driving down costs through technology

ERP solutions have changed the game when it comes to centralizing procurement.  Centralized procurement is now possible through the use of ERP applications that can be accessed from just about anywhere.  Cloud services make those solutions easier today that what it was just a few years ago.  Now purchasing can essentially stay on top of all localized demands through real time ERP systems.  Inventory levels and logistics costs can be directly reduced through information that is easily accessible in centralized ERP applications.

  1. Procurement outsourcing

Outsourcing is a well-established model that is widely utilized in many areas such as IT, Human Resources or Payroll and is now gaining traction through procurement outsourcing.   Centralized procurement allows for a much easier transition since many of the processes can be standardized and information is flowing through one focal point rather than many points. Procurement outsourcing is an extension of centralization because it allows even greater access to industry experts and potential technology solutions such as eprocurement applications.

Centralized procurement is a strategic solution that helps benefit operational efficiencies across many areas from negotiations to increasing cash flow.  Once upon a time, keeping the localized touch was out of reach with a centralized procurement strategy, but today’s technology such as ERP applications easily helps keep centralized services in touch with end users as if they were just next door.

If you or anyone you know would like to know more about how centralizing procurement can add value to your organization please email info@atssoutherncal.com

Question: Have you ever been hurt or helped by centralizing a procurement function?

Following the money is just the beginning…

money trail

“Follow the money” is a timeless quote made famous in the movie All the President’s Men.  But the point remains just as relevant in today’s business climate.  Accounting departments today can tell us where the money is being spent, just not necessarily why.  This is especially true when it comes to indirect spending which can range from 20-50% of all costs for companies.  But how does that much spending go without proper oversight?

Indirect spend is mostly made up of spend categories that fall outside of core competencies for most organizations. Whether you are a restaurant, law firm, manufacturer or dentist the fact of the matter is you likely are very in tune with every detail from your supplier base through delivery to the customer that involves your core competency.  You have organized the structure of the company to deal with all facets from sourcing, contract development, marketing, sales and customer service.  Indirect spending by contrast has little accountability to any one person or organization in most cases.  Costs such as insurance, fuel, utilities, office support equipment and supplies or maintenance.  These have a way of flying under the radar.

If your goal is just to match last year’s indirect spend budget then you are not asking the right questions.  Business services change, technology changes and your demands are constantly moving.  Take the time to investigate existing contracts. The effort will more than pay for itself.  Here are three ways to help you manage those costs:

  1. Start by following the money – Identify, track and create awareness as to how much and where those costs are being spent. Most people in the organization do not have an understanding of how many total dollars are being spent outside of the areas they directly touch. Awareness is the key to making change possible.
  2. Review contracts – Most companies get into contracts and do not update the level of service timely to account for the shifting demands of their business. Increasing or decreasing staff or new technologies often change your demands on the level of service required. Service `providers also are constantly updating their level of services, rates and not to mention competitors.
  3. Engage partners if you are short on resources– There are many options when attempting to negotiate with indirect services. No one has to go it alone.  Just like you have a core business, there are companies whose core business is to simply negotiate these services for you and they will often times more than pay for their services through their work.  They have the experience, capacity and strategic partnerships already in place to quickly deliver turn-key solutions that fit your needs.

Indirect spend is a very significant factor in cash flow that is seldom properly addressed.  Therefore I think the challenge to procurement should not be to just follow the money.  It is time for procurement to take this challenge to the next level.  Cuba Gooding said it best in Jerry Maguire, “Show me the money” procurement!   That is the question procurement should be answering when it comes to indirect spend strategy.

If you know of any companies that may need help in “showing me the money” please email info@atssoutherncal.com.  We would be glad to assist you in finding solutions that will “show you the money” in your indirect budgets.

Question: what other famous movie lines apply to your business challenges today?

5 reasons why using an expert to manage your indirect spend will pay for itself

Animal help

We all need a little help sometime

Are indirect expenses directly costing you cash flow you don’t need to spend? While you may have a difficult time defining your indirect spend, these expenses seem to have no such problem adding up.  Expenses such as marketing, office equipment, maintenance or industrial supplies are just a few typical indirect expenses.  Organizations rarely have the right resources available to manage these costs, but that does not mean they can’t effectively manage the expenses.

Here are 5 reasons why companies should look to experts to help them manage indirect costs:

1. Ability to tap into expert knowledge

No matter what business you are in, everyone has a core business they perform and unless you specialize in indirect cost management, your organization is likely to be leaving money on the table. Most organizations do not have the expertise in house to match those skillsets on the other side of the table when it comes to buying indirect goods and services.  This is why using experts makes sense.  We all use experts throughout our lives.  Would anyone really consider doing their own dentistry? How about legal advice, tax advice or just car maintenance? We all use experts in our life to get the best value and provide a level of protection.  Indirect spending is no different.

2. Lack of internal resources

Everyone is faced with doing more with less. Procurement is no different.  This is why every procurement department is focused on their core suppliers that keep the daily operations functioning at a high level.  But who is actively managing non-core suppliers? In most organizations, no one!  Indirect providers know this and use this to their advantage. This is exactly why companies are paying too much and not getting the highest value for their money.

3. Turn-key solutions

Just like you would never expect your doctor to ask you to run a blood test, experts do not ask you to handle the research, analysis and communications needed to provide a solution.  Sure some interaction is needed to gather and understand the issues, but the actual work is performed by industry experts that are very experienced and trained to provide cost effective solutions ready to implement into your organization.

4. Increasing cash flow

Indirect spend can range between 20-50% of all expenses.   Finding a way reduce indirect spend therefore has a very positive effect on increasing the bottom line.  Many indirect cost reduction projects find ways to reduce costs by double digits.  What impact would reducing your spend by double digits mean to your organization?

5. No risk

Still not sure if using an expert is right for you?  Try one for free.  The right experts will provide a no cost assessment up front to determine if the fit is right.  No investment is required.  The expert will identify the opportunities and provide a roadmap on how to achieve the results.  Compensation is paid out of from the savings achieved.

Every organization has indirect expenses. The question is how effective can you manage those expenses. Effectively managing those costs can make a huge difference in your cash flow.  Using the right team to help you manage these costs can pay for itself in a very short amount of time. If your goal is to reduce indirect spend in your organization but lack the proper resources, contact me for a no cost assessment and I can put you in touch with our team of industry experts.

Question: What is your experience in managing these indirect costs? Please share your experiences with me.

5 reasons why a supply chain a strategy is critical to successful companies

Blue_Chess_

How many organizations use a supply chain strategy to create competitive advantage?  In my experience, most small to medium size companies ignore the fact that a well-designed supply chain strategy can create many benefits including a competitive advantage.  The properly executed supply chain strategy has far reaching effects from the suppliers to the end customers and allows limited resources to focus on their core business function.   Direct cost reductions are just part of the benefits.  Indirect benefits can also include shorter lead times, lower cost of ownership and ultimately a competitive advantage.

Here are 5 reasons why it is important to create a supply chain strategy.

  1. Supply chain strategy sets the overall guiding foundational principles of the entire supply chain organization.  It helps define the directional strategies from people, partnerships, supplier base, capital investments, processes and goals.  Without such well-defined directional guidance your organization may find itself running down unknown, dark, dangerous paths and possibly out of control.
  2. A well-designed supply chain strategy helps to properly align the supply chain team in an efficient, creative and a collaborative environment from executives, buyers, logistics and the supplier network.  This alignment helps provide the framework to ensure all other supply chain initiatives fit together properly and are working for the same goals. If you don’t have this comprehensive alignment, then you cannot expect very much from your supply chain team when it needs to respond to unforeseen challenges and to quickly to come up with innovative solutions or new ideas.
  3. The strategic plan is based on the needs of the whole organization. The supply chain strategy must support the overall goals of the organizations and should extend all throughout the supply chain including the supplier network.   For example, if your company markets itself as a local provider of goods, sourcing from overseas is probably not a good fit.
  4. The proper supply chain strategy allows organizations to focus on their core business internally while at the same time allowing their suppliers to focus on their business.  This may seem simple, but too often companies lose sight of their core and begin to dictate to suppliers requirements that add no value and only increase costs.  Due to limited resources everyone must deal with, focusing on your strengths creates an amazing collaborative environment that can create win-win solutions.  This directly leads to cost reductions across the supply chain both internally and externally. Any organization that lacks a true strategy will likely find its’ limited resources chasing projects that do not fit into the greater strategy.
  5. Well executed supply chain strategies can be used to differentiate your company from the competition. Does your competition focus on low cost solutions?  Then maybe providing value added services such as vendor managed inventories may separate you from the competition.  Will a shorter delivery time differentiate you from the competition?  How about using environmentally friendly supply chain?  Or maybe a technology driven solution will help you stand out from the competition.   Most companies that do not have supply chain strategy fail to distinguish themselves in the industry.

If your company is ready to explore with an expert how creating a supply chain strategy can help provide competitive advantages in your industry, feel free to call or email me at your earliest convenience for a free, no-obligation supply chain assessment.