Supplier strategy

Why small businesses need strategic partnerships

Me against the world

The business world can be an intimidating place for small business. But there is no reason to think it is you against the world.  Strategic partnership can be extremely powerful and effective for small businesses to level the playing field.  Strategic partners can be used in areas such as marketing and sales, distribution or even throughout the supplier network. These alliances can be the difference between surviving or thriving.

One of the great benefits of strategic partnerships is they create the ability to leverage your resources.  Every small business has limited resources internally from capital, manpower, knowledge and or even buying power.  Strategic partners allow you to leverage areas that you may need additional strength to get a competitive edge.

Not every business relationship is suitable for a strategic partnership, so determining the proper fit is very important.  There is a process to determine who is suitable and can pay big dividends.  Kate Vitasek is a world renowned supply chain author and she calls these 3 ideas the foundation of the relationship.  Follow these ideas and you will be on your way.

  1. Trust – this can be difficult to develop and may take some time but it is critical to any relationship. It will take effort, but everything worthwhile requires work.  Trust must be developed over time through a series of actions, words and follow through.  Trust is a two way street and each party plays a vital role in matching the choices of trust along the way.  Trust is a simple concept that helps to provide a foundation for the rest of the relationship. But lack of trust destroys.  Choose wisely.
  2. Transparency – once trust is established the best way to keep it is through the use of transparency in everything. Nothing erodes trust like a lack of transparency.  Transparency helps to keep trust and can be achieved through simple agreements.  Whether it is through reporting, discussions or shared resources being transparent in your business relationship fuels the trust.  Don’t you think the current FIFA World Cup Soccer scandal could have been avoided with a little transparency?
  3. Compatibility – while trust and transparency are vital to the foundation, compatibility is like the glue that keeps it all together. Two partners that are not in proper alignment just don’t seem to fit.  It is very important to find a balance for the partnership that is beneficial for both parties and is a good fit. Proper compatibility comes from the proper alignment of values, culture or size.  For example, would it make sense for a small local organic restaurant to partner with Monsanto?  Not a chance!

Strategic partnerships have proven to change the course of history from Ford and Firestone, to Steve Jobs and Steve Wozniak or even Ben and Jerry. Partnerships can have a dramatic effect on your business from sales development to cost reduction in your supplier base. If you are ready to dominate vs. participate let strategic partnerships help you get there.

If you know anyone that would like help understanding how to develop strategic partnerships for their business, please email info@atssoutherncal.com for more information.

Question: what are some of your favorite business partnerships?

Advertisements

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?

4 keys why procurement’s like an ace up your sleeve

Ace up sleeve

It sure would be nice having an ace up your sleeve as part of your “go to market” strategy. Look no farther than you own procurement team.  Procurement has been working to establish itself as a worthy member of the executive team in every industry for years.  Procurement has long lived in the shadows behind sales, operations, finance and IT. Sales teams tend to get a lot of recognition for bringing in the business and it is well deserved.  Operations, finance and IT all seem to have their moments to shine too.  But procurement in general seems to get lost in the shuffle behind those other disciplines.

However, that in no way diminishes their ability to add value to the organization.  Maybe they just need a new marketing campaign.  Years ago procurement was viewed only as a necessary support function to fulfill internal requirements.  It’s continuing to evolve as more companies are seeing greater value being added than just filling a material requirement at the lowest cost.

Procurement’s strategic effect touches just about all areas of the organization.  Here are 4 key areas that procurement can effectively provide a competitive advantage for your organization:

  1. Product design

Developing products is a creative process that can consume lots of time and resources in order to maintain relevance in the marketplace.  Sales and operations typically drive the process, but don’t forget that procurement has direct communications to the supplier network.  That is an incredible resource that is easily tapped into for support to the latest technology and market solutions that extend well beyond your internal capabilities. Go ahead and invite your suppliers to be part of the process, you might be surprised what they bring to the table.

  1. Inventory strategies that increase cash flow

Investing into inventory is one of the biggest expenses for just about any company.  Unless you can turn around and sell the material without further touches, expenses quickly add up like space requirements, tracking inventory, audits, compliance, theft, packaging and support management.  Then there’s the risk of the inventory moving slowly or not at all.  Why not work with the suppliers to find solutions that minimize that risk and inventory investment?  Increasing cash flow, reducing lead time and logistics costs, what’s not to love about those benefits!

  1. Corporate social responsibility

Unfortunately as global commerce continues to expand into developing countries, corruption still exists but the good news is that information has never been more accessible.  There is so much injustice across the world, but organizations have never had as much information as they do today to make informed decisions on where they award their business.  There are major concerns when working internationally such as human rights, environmental issues or intellectual properties. How about turning those concerns around and sourcing responsible suppliers as an example of the right way to do business?  Now that’s an advantage that benefits everyone.

  1. Exclusivity

We all want to standout in the marketplace and having exclusivity in your supply chain is a very real possibility that allows you to be distinctive.  Procurement can drive this exclusivity advantage through strong relationships in the supply chain.  Keeping competitors out of your supply chain is a huge advantage that is best established right from the procurement team.

If you are tired of just being another supplier in the market place and distinction is what you want, look to your procurement solutions as a real advantage.   Advantages like this can be achieved through internal teams or through procurement outsourcing providers.  They have the experts on demand with proven concepts, experience and partnerships available to make ideas like this part of your competitive advantage.

If you know of any companies that are looking for a distinct competitive advantage through their procurement solutions, please email info@atssoutherncal.com for more information.

Question:  What creative procurement solutions have you used to develop a distinct competitive advantage in your marketplace?

Global sourcing is risky business…

Faceless man

Global sourcing is risky business. These risks come in many forms such as quality failures, environmental exploitation, supply chain delays, stolen intellectual properties, financial fraud or just plain theft. Add in language barriers and cultural issues and the process can be very complex and risky. But where there is risk, there is also reward.

The big question then is the risk worth the reward?  It certainly can be as long as you take some actions to minimize the risk.  One of the best steps you can take it is finding a global sourcing partner to help you navigate the process from beginning to end. They can be your partner behind the scenes.  Here are some great benefits why a global sourcing partner can help you reduce your risks in sourcing products overseas.

  1. Sourcing partners can help break down cultural barriers when attempting to do business overseas. They are fluent in the local language, business practices and can help represent your needs to the potential suppliers in a very professional manner.
  2. Supplier qualification is a very key step and using a global sourcing expert plays a vital role in this process. This is where the expert can pay for themselves. They help validate the supplier through certifications, production capabilities, site location, customer referrals, site visits and much more. Qualifying a supplier up front will save a ton of headaches after the fact.
  3. The type of payment method is another key area that a sourcing partner can help counsel based on the type of transaction. Wire transfer, Paypal, Letters of Credit, open accounts or cash-in-advance are all options and each option has its own set of pros and cons depending on which side of the transaction you are on.  Both sides need to be come to an agreement that facilitates doing business together and a global sourcing expert is a great resource for this.
  4. Maintaining production quality throughout is one of the riskiest parts of the entire process. Setting up the right quality parameters up front is the key to success. Defining the specifications, getting approved samples and establishing ongoing quality checks in the process help to ensure a successful outcome.  I have seen first-hand the costly mistakes of poor quality and the negative effect it can have from lost sales, a bad customer experience and tying up huge amounts of inventory dollars waiting for a resolution. This is truly a case where a dollar of prevention is worth many times the cost of the cure.

Sourcing products from overseas can seem risky but with the right partners it can add a tremendous amount of value to any company.  Global sourcing has been a way of life in business since early explorers developed trade routes around the globe hundreds, if not thousands of years ago. There is no reason to believe this practice will stop anytime soon. It is your choice whether to take advantage of the opportunity or not.

If you or anyone would like learn more about how global sourcing experts can reduce the risk in overseas sourcing, please email info@atssoutherncal.com for more information.  We would be glad to assist you in finding the right partner for your business.

Question: what were some of the cultural challenges you had to overcome when doing business overseas? 

The “people bottleneck” in the supply chain

What is a “people bottleneck”?

Where is all the supply chain talent going?  As we end the first quarter of the 2015, baby boomers across the US are focusing on retirement and taking with them decades of experience creating a “people bottleneck” in the world of supply chain.  Study after study tells us that there is a large gap in supply chain talent coming with no easy answer on how to fix it quick enough to backfill all those people retiring.  So how did we get here?

Obviously, baby boomers have an effect on every industry and supply chain is no different.  The industry can be very challenging with the international demands, technology applications, shifting demand flows and limited resources to make it all come together. Business today demands supply chains to be agile enough to handle all of these issues whether it is a multi-billion dollar corporation or just a mom and pop. Education at universities and through continuing education programs will have to increase their graduates to fill the growing demand.

However, one of the biggest challenges within the supply chain industry has been a lack of incoming talent.  I network with hundreds of people and I consistently find that most people don’t even know what supply chain is.  We need a social media star to create awareness across the board. Think about it for a second, for those people under 25, they don’t know a world that is not social media driven.  Stars have been born from social media yet how many people can name a supply chain star?  Unfortunately the supply chain world does not carry a lot of social media credibility with the under 25 crowd.  Stars transcend their industry and create awareness. People like Bill Gates helped make Silicon Valley cool for the Mark Zuckerberg’s of the world.

Effects:

Despite our ability to foresee the problem, we can’t avoid it. So what’s the effect?  Just like life, those with the greatest resources will have advantages over those without.  Due to the limited talent, the Fortune 500 companies will be able to pull the best talent from the smaller companies causing serious issues in the small to medium size companies.  As baseball season is about to start, this is just  like the NY Yankees taking the best talent from the small market teams after they have developed the talent for years.  This lack of talent at the small to medium size company will create a large lack of efficiency in the supply chain causing increases in costs and delays.  Lacking the in house talent, companies will likely have to restrict their offerings based on the limited resources.

Options:

Awareness must be at the fore front.  Who is the Mark Cuban of Supply Chain that transcends the industry and draws people to it?  Someone needs to step up and create the sizzle that sells the idea it is cool to be in supply chain.  We have technology, globalization and the ability to change in the world due to the business we transact. The education system can help train those interested people through universities and continuing education organizations.  Continuing education is a great place to learn the relevant concepts and potentially find a mentor in the process.  Corporations also have a responsibility in helping educate and need to do a better job.  They benefit the most, so those that put some skin in the game will surely reap the rewards.

Education is the long term solution but it will take years to see the effect.  How will companies deal with the reality of today when faced with a supply chain problem?  How do you fix a problem without the proper tools?  Supply chain outsourcing can be a solution to help until the talent is available. Supply chain issue experts have the ability to quickly diagnose and offer proven solutions without the risk of adding additional head count. Outsourcing can be a much needed bridge to get companies through temporary issues.

If you would like to learn more about how outsourcing can help your supply chain issues please send an email to info@atssoutherncal.com for more information.

Question:  Will the lack of supply chain talent cause you to lose business?

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.