What's Nelson up to now?
By Ken Stork -- Purchasing, 4/22/1999
Regular readers of this column know I believe that benchmarking or--as I call it--continuous comparison is a powerful tool to accelerate improvement. While tools like reengineering and other recent panaceas have come and gone in a short time, benchmarking is still widely used and boasts a large number of satisfied users.Common sense tools like benchmarking should always remain in the purchasing manager's toolbox. I emphasize this for readers in supply management and procurement functions as my experience tells me these professions are below average in their use of benchmarking to break free of historical approaches.
A key step in the implementation of new processes is to understand the critical facts in successful "best practice" organizations. For example, I have stressed periodically the importance of being influential and capable of selling good plans and strategies to upper management.
In prior columns I have referenced Honda of America's best practices and the superb results its supply management organization achieved under the aegis of Dave Nelson. In September of 1995, Honda, with Nelson at the helm, received Purchasing Magazine's Medal of Professional Excellence. Deere & Company recently persuaded Nelson to leave Honda to become its global vice president of supply, a critically important assignment.
So, as the U.S. manufacturing sector has slowed, what do you think Dave Nelson has been telling his management? What would you do if you joined a company and learned that you had just over 1,000 people in supply management and approximately 16,000 suppliers? Some would do a Pareto Analysis and discover that approximately 165 suppliers represent 70% of total flow through. Many would plan significant reductions to both staff and supplier populations. But is this the best approach for shareholders?
Dave Nelson chose the opposite approach. He sold his top management on the notion of providing more resources--another $20 million annually. He promised a ten-fold annual improvement in savings, representing an additional $200 million. This is the kind of world-class thinking that effective benchmarkers gather, analyze, and implement at their companies. What are you going to do this year to generate a three-, five-, or even ten-fold improvement?
Stork is president of Ken Stork & Associates Inc. in Naperville, Ill., (630) 851-5445 or e-mail: ken@kstrork.com. Formerly Motorola's corporate director of materials and purchasing, and a member of Purchasing's editorial advisory board, Stork focuses on consulting and custom educational programs in strategic sourcing and supply base management.
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