Beware shortcut management
By Ken Stork -- Purchasing, 8/12/1999 2:00:00 AM
Business publications today are full of interesting information on how to significantly improve a company's financial results. Supply chain management (SCM) is currently the leading tonic for building strong competitors. It's a concept that, I agree, has been too long overlooked by most companies.
In context of SCM discussions, a repetitive message to purchasing managers is that they need to learn to play different roles. As Dave Nelson of Deere & Company so eloquently describes it, they need to "level up." This is excellent advice. But, as one plant manager recently put it, today's reality is to "constantly do more with less."
The "more with less" theme is universal, and leads frequently to what I call "shortcut management." For instance, I received last week an e-mail message from a director of operations requesting that I provide examples of "world-class scorecards that had been successful." I surmise that he feels a benchmarking project on supplier scorecards sounds lengthy. He would rather send e-mail and surf the Internet to find the best solutions. I would contend that supplier scorecards are a critical foundation of strategic supply base management worthy of some in-depth research.
Supplier advisory boards are another critical foundation of supply base management. I recall a major corporation conducting a comprehensive benchmarking study that covered what I call "relationship management." While benchmarking our company, they became very interested in our use of a supplier advisory board. Their interest was so strong that they wangled an invitation to observe our next quarterly supplier advisory board meeting. They benchmarked the process and discovered who facilitated the launch of the program. They went so far as to engage the same resource as their facilitator to help successfully launch their own similar program. They took no shortcuts and continue to enjoy considerable success in a very competitive industry. Systematic benchmarking processes generally achieve superior results.
The lure and the power of the Internet are strong. Surely there are databases containing all we really need to know about best practices. Common excuses for choosing the shortcut route: "Our people are too busy to go on benchmarking visits," or "We can't consider pulling our supply management people away from their jobs to be exposed to education and training in benchmarking." But some areas are so critical that it's well worth a company's time and money to conduct proper benchmarking studies.
Consultants who are engaged in supporting implementations of enterprise resource planning (ERP) software systems are very busy these days. Too often, however, I see ERP being presented as a super shortcut to reach large benefits from improved supply chain management. Frequently, people are advised to fit their businesses around the software and eliminate legacy systems developed individually for specific needs. This presumes that the software contains all the appropriate best practices in managing supplier-customer relationships.
A few years back, Purchasing Magazine ran an excellent article on purchasing and benchmarking experiences. The results indicated that there is far too little commitment to effective process benchmarking in strategic approaches to managing supply and specific suppliers. [PUR: May 23, '96; p. 42]. Meantime, a recent survey of manufacturing executives reveals some very unsurprising results:
- Over 90% of North American respondents rate SCM very important, or even critical.
- Only 2% rate their supply chains as world class.
- Nearly 50% of respondents have no formal SCM strategies.
Clearly a large segment of the business population does not comprehend the success factors for SCM. They're far too busy looking for shortcuts. The companies that renew themselves around effective relationship management--with suppliers, and with customers--will be very tough to beat. Learning to create and maintain a supply base that confers on your company a long-term competitive advantage is a benchmarking project that requires considerable effort. And you won't find the road map using shortcut management.www.purchasing.com
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