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2014

I interviewed William Leo who discussed E-commerce Trends in China.

 

 

 

 

 

 

It’s nice to speak with you again, William. It’s been a few years since we’ve done our last talk. Today I’m looking forward to talking to you about e-commerce trends and also your views about China in particular. Can you start by providing a brief background of yourself?

 

Okay, sure. My name is William Leo; I’m the managing director for a French consulting company called Ataway. We have, altogether, 13 offices globally. Shanghai is one of the main offices for China. We focus on mainly IT consulting; we do a lot of Oracle, so we’re an Oracle platinum partner. We focus on PeopleSoft, Human Capital Management, PeopleSoft Finance, PeopleSoft Campus Solutions, we do PeopleSoft CRM Solutions, and also Oracle Supply Chain solutions. Right now we are moving into a new solution, which is SAP Hybris solutions. Hybris is an e-commerce solution platform. For companies willing, they’re trying to go into O2O—that means offline to online—as you can see, the market changes in China, as well as the rest of the world.

 

We are going into a digital world. The world is changing. Consumer buying behavior has changed. In the past, people bought things from the store, whether it is fashion, food, electronic items, et cetera, even home appliances. Today the trend is people buy things over the Web, through the apps on the phone, or through the computer. This has prompted a lot of retailers and distributors in China, as well as the rest of the world to move into e-commerce.

 

For example, if you look at the home-appliance market, Suning and Guomei, they used to be the top, big, giant home-appliance player in the market in China. But Jindong, they just came out only the past few years, and they managed to dominate the market now. It’s like the David versus Goliath story.

 

It’s the same story that happened in the U.S. with Amazon.com. Barnes and Noble was the bookstore, they used to be the big, giant bookstore in the U.S., and Amazon came up from nowhere back in the mid-’90s, I think, early 2000s; they were able to dominate and beat Barnes and Noble. Luckily, Barnes and Noble managed to overcome that and quickly moved into e-commerce. Otherwise, they would suffer.

 

The trend is, today, companies, a lot of retailers are moving into e-commerce, and they don’t know how to do it. We are able to provide the SAP Hybris solutions for them. In fact, there are not many consulting firms who can do Hybris in China, so it’s really a very hot market.

 

Can you talk more about what you mean by “Hybris”?

 

The solution is called Hybris.

 

Oh okay. Can you explain what it is a little bit, what it’s about?

 

Hybris is a company—I think it’s a Swiss company—that just got acquired by SAP; it’s a software company. What they do is provide an e-commerce platform to do B2B, B2C, and multichannel management. Basically, they help companies to move into e-commerce and allow their gross to be traded, either B2B or B2C, over the Web.

 

Where do you see things going in the next few years?

 

I think right now, a lot of companies are quickly getting into the e-commerce. For example, there is a big mega store; they sell all kinds of goods, based in Beijing. They’re moving to that. Even the Red Star, the big hyper mart, they’re moving to that.

 

I think the first wave to go into e-commerce for China will be retailers and then distributors; distributors meaning those companies that the product, like Digital China, those kinds of companies that sell electronic items. That’s the second wave. The first wave is retailers; second is distributors. The last wave of companies moving into e-commerce will be the brand owners, companies that have their own brand, like LG or Procter & Gamble, Unilever.

 

I think all these companies will eventually move into e-commerce. The trend is, of course, they will still go through China to sell the product, either go to retailers or distributors to sell the product, but I think the trend is that, eventually, they will want to go to B2C; that means they want to sell product directly to the consumer. This gives them more control of what their consumer wants; they know what their consumer wants. In the past, when they go to retailers, the consumers, they only get the final results; they don’t exactly know what their consumer wants. I think eventually they will go to B2C so they have all the data, all the information of what the consumer wants, the consumer behavior.

 

By doing that, they also cut the cost of the middle man. Previously, they go to retailers, consumer, and the margin from them is a lot because of costs. You know in retail shops, rent is very expensive, so a difficult retailer will mark up at least 50 percent over the price of the goods, the cost of goods; they will mark up at least 50 percent. Some of them I know, even 200 percent because of the high costs involved for retailers.

 

By doing direct B2C over the Web, I’m sure that brand owners will be able to enjoy better profit margin. This will be true for products that are not very high profit margin. Example like consumer products. Consumer products, the profit margin is not really that high. Cost management is very important for that. By doing B2C directly, I think they will be able to have a better profit margin. This will, of course, improve the P&L and also the market.

 

Thanks for sharing. Do you have any final recommendations?

 

My final recommendation is for the retailers, those retailers and distributors in the first way to move into e-commerce quickly. If they don’t, they will perish in the market. Even for myself, I used to buy rice—I like to eat the Thai rice—I usually go to the supermarket and buy Thai rice, 5 kg, one big pack. It’s very heavy and it’s also not easy to find. In China, this is an imported product, so you can only go to the premium supermarkets for imported rice. It’s expensive. I remember it’s like 100 RMB for 5 kg.

 

Today I just go to the eHaoDian, which is actually acquired by Wal-Mart; an e-commerce platform. I can buy at a cheaper price, which is 70 or 80 RMB for a 5-kg pack, and I have a lot of brands to choose from. The problem with supermarket is, because of limited space, they cannot put in too many brands in there. The e-commerce, I go to eHaoDian, I can choose a lot of brands. Shipping is very fast; within one or two days, I get the goods delivered to my house. I don’t even have to carry it from the supermarket; it’s very heavy. Also, if you buy over 100 RMB per order, they even give you some freebies here and there.

 

What I’m trying to say is that today, the consumer market is changing. The consumer behavior is changing. In the past you go to stores to buy things; today we still go to the store to look at things, to get the feel of it, and then we’ll go to the Web and find better price. Of course, we still buy at stores only on the special-need basis. If we like this special item which is unavailable on the Web, we still buy them.

 

I think the order trend is changing. I encourage all the retailers, distributors, those who have not thought about e-commerce, they’d better do so now. I know a lot of companies who show their product on Taobao, but it’s not good enough. They should have their own e-commerce store so they can really understand what their customers want.

 

Thanks for sharing today on this topic of the e-commerce trends in China.

 

You need supply chain to help you to do the procurement, the distribution, the warehouse and transportation, and final delivery to the customer. Supply chain is needed.

 

I agree with that. That’s a very key component.

 

Yes, that’s why I like to do this e-commerce thing. Eventually, supply chain is important. In fact, supply chain is the most important. A lot of Chinese customers—any Chinese companies—they are like the schools; they focus on the CRM thing; they focus on the external appearance, not the inner beauty of a person, you know? * Because e-commerce gives you direct revenue, improves the revenue; increase your revenue, your customer revenue, and so on. But at the back is your inner beauty; the inner beauty, inner strength is supply chain. Without a good supply chain system and operation in place, the e-commerce will fail.

 

Yes, and I like your analogy you used.

 

Oh, thank you. It’s good. if you put it in Connexus, I think it’s appropriate.

 

ATG vs WebSphere vs Demandware vs Hybris vs Magento vs Intershop vs GSI Platforms’ Biggest Clients


http://www.forbes.com/sites/forrester/2013/06/05/sap-to-acquire-hybris-what-does-it-mean/

 

 

About William Leo

 


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William Leo

 

Managing Director - Greater China at Ataway

 

LinkedIn Profile

I interviewed  Hank Mullen who discussed Density Pricing.

 

 

 

 

 

 

It’s good to speak with you again, Hank. We’ve done interviews in the past, and they’re always very interesting, so I’m looking forward today to hear a new topic called on density pricing. Before we start, can you provide a brief background of yourself?

 

I’m 44 years in the industry; started in 1969 as a driver for UPS. Worked there for seven years and ended up a district manager in Sales. And then, of course, Consolidated Freightways, The Roadways, The Ground Transport and the international freight.


The first maybe 20-something years, I was actively involved in the industry with the carriers. Then in 1987 I started a company called ABM Transportation Services, and we did transportation consulting. My background is not only manual labor, but the management, midlevel management, less-than-truckload national, less-than-truckload regional ground transport, and, of course, international freight forwarding. I can say that I grew up in the industry, which is rarer nowadays. It’s rare to talk to somebody who was actively involved in the industry in 1980, when the Motor Carrier Act came and deregulated the industry.


I had my 10, 12 years of regulated industry, and then the remainder wasn’t regulated. Then, of course, in 2007 the Surface Transportation Board eliminated all the antitrust ruling the carriers had. That’s why density pricing theory just opened up the field for everybody to put their pricing not on National Motor Freight Classification classes. But essentially how much space it could take up, which, if you’ve done international, those people say, “We’ve been doing it two, three hundred years.” It’s kind of funny, especially since the Interstate Commerce Commission, in 1897, said pricing should be based on space that you use. And, of course, it didn’t; carriers just got in there and took over freight classification.


National Motor Freight Traffic Association, which owns the National Motor Freight Classification is actually managed by carriers; very few people know that. And then your Southern Motor Rate Conference, that’s actually maintained by the carriers also. That 2007 antitrust decision is huge, but it’s taken everybody about seven years to figure out how to do it. Of course, UPS freight started it March of last year, and in the past month or two have just come out full bone and said, “Hey, give us the length, the width, and height. Give us the weight and we’ll give you a price. No more classification,” which is actually incredibly huge. That’s kind of a lot there, isn’t it?

 

What is density pricing?

 

Density pricing—and this is interesting because you bring up something very few people know—there’s a difference between volume pricing and density pricing. Density pricing is length times width times height, then your weight; you get your pounds per cubic foot. If you look at the National Motor Freight Classification density chart, there are 18 freight classifications, and it goes from less than one pound per cubic foot, which is class 500—very, very, very expensive—down to class 50, which, essentially, is 35 to 40 pounds per cubic foot.

 

You can see the big difference. And if you look at a 12-by-12-by-12 package, it actually works out that density is 9 pounds per cubic foot, which would be class 100. The package carriers, specifically UPS and FedEx, have had that 12-by-12-by-12; that’s the standard-size package. If you take it just one step further, both FedEx and UPS say now on the packages, if it’s 3 cubic feet or less, you just pay gas and weight. Not anymore. January 1 of 2015, you’re going to pay whatever the density pounds per cubic foot comes out to; that’s huge. I figure UPS said this: “If the package people are going to do it, why don’t we?” It’s like that program American Pickers; they have to bundle it. If you go to DC Velocity, and if you go to my Web page, you can click on an article—I was interviewed—it explains a lot of this. It just kind of tells you it’s about time we joined the rest of the world and did something that makes sense.

 

The scarcest commodity a carrier has is space, and that’s exactly what UPS and FedEx said: “We’re sick of these great, big, huge cartons. We’re getting four, five pounds’ worth of revenue. We’re not going to do that anymore.” Of course, I think that’s tremendous. That’s the reason that I do those things.

 

Is there any more you can say about the why? Why do we have density pricing?

 

Essentially, like I said, the package people realized that the space on their vehicles was critical. If you had a 10-pound package, that was great in a 12-by-12-by-12-inch carton, but if you had a 12-by-12-by-12-inch carton and you had 2 pounds, oohh. One gets by with 2 pounds’ worth of revenue, and the other gets by with 10. If you realize, a lot of the packages nowadays are going residential; that’s kind of tough to take that type of a hit.

 

If people are familiar with it, there’s a thing called an oversize package, over 84 inches and less than 130, but you’re going to be billed 30 pounds. If it’s 85 inches in size and you have 12 pounds in there? No, you’re going to pay for 30; that’s been around 15, 20 years. They just took it down to the smaller-weight packages now, the stuff you’ve got—a lot of it, of course, is residential Internet. The other thing is, if you watch and listen to a lot of the industry, four or five years ago, Wal-Mart came out and told all the vendors, “Make all the packages five percent less in size.” With 60,000 vendors, you can imagine how much space it took up, but it also meant a lot less cardboard. A big green issue.

 

And then if you go back one or two years and you start reading about a company called Staples, they got a system in there that each carton that comes down is custom-built to fit the size of commodity inside. Just huge. It’s something that’s been around. People have finally begin to see this is a really good idea; the greening, less cardboard, less space, less cost; make it smaller and you pay less. That’s pretty simple pricing, isn’t it?

 

How is it done?

 

Whatever you have for carton size, just make sure there’s not a lot of empty space in there. That’s it; just make the shipment smaller. Instead of a 12-by-12-by-12 carton, maybe you have a 12-by-12-by-10, and that two inches is huge; it’s just absolutely huge. Think about 16 million packages a day going through a UPS system, and you take 10 percent of the space that they’re taking up out of the system. Boy, that’s a lot; that’s tremendous.

 

Same with the LTL carriers; there’s just so much you can put in a 53-foot trailer. If you could make it 10 percent less, maybe I get four more shipments on that trailer. If you’re doing 30,000 shipments a day and you can take that down by 10 percent, wow; that’s 3000 shipments that fit in to a smaller space. Once again, huge savings.

 

Thanks, Hank, for sharing today on the topic of density pricing.

 

Yeah.

 

 

 

About Hank Mullen

 

 

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Hank Mullen

 

Principal, at Third Law Sourcing.

 

LinkedIn Profile


Website


I interviewed JJ Coughlin who discussed Public/Private Partnerships, Information Sharing, and Layered Security.

 

 

 

 

 

 

It’s great to speak with you today, JJ, and I’m looking forward to hearing your views on the topic of public-private partnerships, information sharing, and layered security. Before we start, can you provide a brief background of yourself?

 

Yes, Dustin, thanks for having me today. I appreciate you being interested in this topic. I was a Dallas police officer for 21 years, and I left that job in retirement and decided to try my hand in the transportation and logistics industry, so I worked for a full-service transportation and logistics provider as a regional transportation security manager in Texas, the four states around it, and also in Mexico for their full enterprise. About seven years ago, after using some products from Supply Chain Integrity, which is now LoJack Supply Chain, I started working with them more on the security and data push end of the business.

 

Thanks. Can you explain what a public-private partnership is regarding information sharing and security?

 

Sure. What I found, I think when I came into the industry is that before, when I was on the police department, I had worked my way up to where I had quite a few detectives who worked for me, a secretary, and everything else. When I left, I found that I had five states in Mexico to cover for a large enterprise. I started looking around, I’m just like Lone Ranger without a Tonto. I started looking and talking to some of my colleagues when I was new in the transportation industry, and I started learning about some of the ways regionally that people were communicating and networking with security managers of other companies and with law enforcement.

 

Over time, through the Southwest Transportation Security Council, which I formed along with five other ex-law enforcement officers who were in the industry, we started a communication system which started pretty much regionally and then has grown over the years to cover just about all of the U.S. and even into Canada and allows us to communicate with the industry folks and allows us to network with law enforcement to provide them training. We were kind of forced to do it, especially after 9/11. The FBI tended not to be real responsive to major theft as they were obviously working on other things, so we kind of had to build the system ourselves to deal with cargo theft, and most cargo thefts happen in one place and are immediately in another jurisdiction.

 

That’s kind of how it started, and then, over time, it’s grown just through getting regional participation in several different cargo councils that exist now. There are actually about eight of those that exist now, and we all communicate, share information, network with the police, and do two or three major conferences and trainings a year for law enforcement and the industry.

 

Why do we need this?

 

Well, the reason you need it is because when your truck gets stolen in Chicago and the freight all ends up in Miami, if you don’t know who to call, if you don’t know who works those cases, if you’re dialing 911, you’ll probably never get anything done. We need a network; we need a way to get past the in-the-box way of doing things. By doing this, it allows you to know whom to call when you have a problem and who works your issues and who will give you the best chance to recover. Obviously, when we start talking about the layered security part, we really want to do prevention way before we do response, but if something does go bump in the night, you need to have a way to respond and recover.

 

Can you talk about how this works a little bit, in more detail?

 

Sure. Really, it works through communication systems. The Southwest Transportation Security Council actually will put BOLOs and alters out, also along with a company, a group called CargoNet that collects that and puts out BOLOs and alerts. The Supply Chain Information Sharing Analysis collects a lot of that data, along with CargoNet. Through that, we’re able to actually study the crimes and make some determinations from that analysis about what they target, how they target it, what their methods of operations are, where the highest-risk areas in the U.S. and Canada are, and it just gives us a lot of knowledge so you don’t have to operate in a vacuum.

 

It’s really all about the sharing of intelligence and networking with police and networking with other industry folks who are involved in the security side of things. By doing all those things and having those contacts, you’re able to have a response-and-recovery system that actually works with people who actually work cargo. If you called most police departments cold, you probably couldn’t even find the guy who works the crime. Many times, it’s identifying the persons assigned to those kinds of crimes and then educating them, networking with them, and bringing them into the fold and communication system so that everybody’s on the same page and we know how to call, when to call, using the database.

 

A lot of times, when police do find a warehouse full of stolen goods, we can identify complainants for them and do a lot of good work for them and for the industry. Also, many times, by working together, it just makes it where not so many things fall through the cracks. You actually have an opportunity, even six months after a crime occurs, to recover because you have a way to communicate all that information through the group and through law enforcement to identify crimes, especially when a crime occurs in one state and the property ends up in another.

 

Just to recap, who would the end users be and maybe some of the other stakeholders for this system?

 

Most of the regional councils are staffed with the security management of folks from transportation and logistics companies, from insurance investigative groups that work cargo, and, a lot of times, even vendors who provide security products for that venue. Those people are the stakeholders * (8:15—audio cuts out) many times the ones who work cargo. There are eight cargo-theft task forces in the U.S. They’re not everywhere—they’re in a lot of the hot spots, but even a lot of the hot spots don’t have task forces.

 

The task force people are in, and then we identify, usually, commercial auto-theft folks or something like that in other places who are actually tasked with working a crime and then bringing them into the communication fold. It allows the public law enforcement types to seek information from the industry, which, a lot of times, is that connect-the-dot that you need in the communication side of things to know what’s missing, who’s missing it, where the actual crime occurred and all those things. It’s really just a large communication system that can be used by both the public and the private entities.

 

One more question I have is: How does layered security fit into this type of system in the overall big picture?

 

Really, Dustin, the way it fits in is by taking the intel that we establish through these databases and these BOLOs and alerts and all that information and by identifying how the criminals that—especially the organized criminals—that prey on the industry, identify how they operate, what they target, where they operate; then we’re able to provide that information to the operators in the industry. Based on that information, they’re able to, based on the commodities they’re carrying and some other things, they’re able to realize if they’re going to operate in a certain area, carrying a certain commodity, what kind of security they need. That security could be covert cargo tracking in the trailer; it could be locking devices; it could be team drives; it can be a lot of things.

 

The way it really works by all of the industry exchange and the public-private partnership and exchange of information, it allows a person who’s aware of the risks to operate in a safe manner using a layered protection system so that they’re not victimized. Actually, most people who understand the risk and put in the right protections usually aren’t victimized.

 

 

About JJ Coughlin


 

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JJ Coughlin

 

Vice President - LoJack Supply Chain Integrity/Chairman - Southwest Transportation Security Council


LinkedIn Profile

I interviewed Andrea Stroud who discussed Improving the Procure-to-Pay Processes.

 

 

 

 

 

 

What benefits can organizations see by taking steps to improve their procure-to pay-processes?

 

In any organization, procurement and accounts payable activities are inextricably linked. Becoming efficient in both processes and improving the communication between the processes should result in lower costs, fewer personnel, and improved cycle times. Organizations with high-performing procure-to-pay processes examine how these activities interact in order to boost productivity and efficiency. In doing so, they ultimately reduce process cost and improve their cash flow.

 

What are some business drivers of integrated procure-to-pay processes that lead to specific improvements and business results?

 

We are often asked this very question. In conducting a recent analysis using data from APQC’s Procurement Open Standards Benchmarking Survey, we identified five key characteristics within organizations with high performing procure-to-pay processes.

 

  • The first driver is associated with Goals, Objectives, and Measures. Top performing organizations understand the relationship between procurement and payables and have integrated goals and objectives for procure-to-pay processes. These goals are explicitly linked to performance indicators for evaluating and improving the integrated processes.

 

    • A common mistake organizations make is to neglect the strategic importance of goal setting and measuring progress and instead focus primarily on tactical tasks. Organizations are going to have to switch from a tactical mindset and retool to a more strategic mind set in order for procure-to-pay processes to be successful.

 

    • A well-defined and adhered-to procure-to-pay process allows for more strategy to be quickly identified and put into action with the appropriate allocation of procurement resources. By knowing when to apply certain strategic procurement practices in lieu of tactical ones on a situation-specific basis, procurement professionals are well positioned to deliver peak performance and outstanding financial results.

 

  • The second driver of an integrated procure-to-pay process is centralization and/or standardization. Top-performing organizations centralize and/or standardize the procurement process and implement cross-functional teams to enable focus on more strategic, value-added processes.

 

    • APQC’s recent research showed that an organization can perform procure-to-pay processes well regardless of how it is structured; however, centralization can help an organization excel by enabling an easier, faster, and less expensive process. In addition to simplifying work for procurement and payables support staff, centralization helps align individuals based on item type or commodity purchases. Centralization and standardization also facilitate the ability to take advantage of early payment discounts, which enables an organization to transform accounts payable into a revenue center by leveraging systems, people, and efficiency gained to take advantage of those discounts and become a more value-added function.

 

    • If an organization cannot centralize procurement and payables, then the second best option is to standardize policies and practices to the greatest extent possible.

 

  • The third driver is supplier management. Top-performing organizations appraise and work with suppliers to assess performance and identify improvement opportunities across organizational boundaries. This can help an organization save money in the long run. Supplier management is a critical aspect of procurement.

 

  • The fourth driver is automation. Organizations can no longer afford not to automate their transactional processes. Those who fail to automate simply cannot match the speed, efficiency, and effectiveness of those that do.

 

    • Regardless of how strong and efficient an organization’s procurement staff is, it cannot optimize its productivity without automated purchase order processing. Automation drives productivity up and, therefore, costs down.  As mentioned previously, automation also frees up employee time to be spent on value-added activities.

 

  • The fifth and final driver of an integrated procure to pay process involves securing stakeholder commitment. Having a great procure-to-pay process is only part of the solution. Even if there is a theoretically perfect system in place, it will never reach its full potential if employees and/or suppliers do not buy in. Top-performing organizations evaluate and promote increased participation and decreased rogue behavior from all stakeholders in the official procure-to-pay process.

 

You talked about centralization, do organizations experience any challenges when trying to centralize or standardize their processes?

 

Shifting to a centralized model is not without challenges and definitely requires a proven change management methodology. Depending on an organization’s culture, individuals who previously had control over which suppliers they worked with may push back as control is diminished at the field or site levels. As with any change there is resistance, but in the case of centralization within procurement processes and activities, there are significant benefits in the long term. Key to a successful transition is a clear vision, a defined change strategy, and engaged leadership.

 

What recommendations do you have for organizations who want to improve their cross-functional procure-to-pay processes?

 

Procure-to-pay processes are designed to provide organizations with control and visibility over the entire life-cycle of a sourcing transaction – from purchasing operations to payment operations and accounting activities. The end-to-end process visibility allows for effective management of working capital and reliable views on cash-flow and financial commitments.

 

It is important for an organization to begin by mapping its procure-top pay processes. Once processes are mapped, organizations should establish governance over the procurement and accounts payable functions. Organizations govern and improve cross functional procure-to-pay processes by initiating more conversation between the two functions.  And some organizations identify a single process owner or process group that oversees the cross-functional processes, which has proved to be very effective in improving processes.

 

To see more of the research being conducted on procure-to-pay processes visit www.apqc.org.

 

 

 

About Andrea Stroud

 

Andrea Stroud, a research program manager with APQC, a Houston-based nonprofit that focuses on benchmarking and best practices. Her focus is on uncovering and sharing supply chain management, product development, and innovation benchmarks and best practices.



 

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Andrea Stroud


Research Program Manager APQC

 

LinkedIn Profile

Twitter Profile

Website

I interviewed Rod Collins who discussed Plan and Control to Iterate and Co-create.

 

 

 

 

 

 

     It’s great to speak with you again, Rod. I’m looking forward to hearing your views on the topic of plan and control to iterate and co-create—you were mentioning thriving companies. What do you see with thriving companies, and how do the upper levels of management do things differently? Can you start by providing a brief background of yourself?

 

Sure, good to be with you again, Dustin. I’m Rod Collins and I’m the director of innovation for Optimity Advisors and also the author of the recently published book Wiki Management: A Revolutionary New Model for a Rapidly Changing and Collaborative World. Our topic today is really at the heart of the transformation that’s happening in management, where the fundamental dynamics are shifting from a foundation of plan and control, which is the way it’s been for well over a century, to a new set of dynamics, which can best be termed as iterate and cocreate.

 

Can you start by providing a definition on what is plan and control compared with iterate and cocreate?

 

There’s a lot changing in the world today; let’s start with what’s not changing. What’s not changing are the two timeless accountabilities of senior business leaders: strategy and execution. If they do those things well, they keep their jobs and companies stay around. If they don’t do either one of those well, they could be in peril. What’s shifting is the foundation to each of those two timeless accountabilities. For the past hundred years, planning has been the fundamental basis of strategy. We even have the term strategic planning; that’s how much it’s been institutionalized.

 

The typical modus operandi was the senior leadership team would go off maybe on an off-site once a year, they’d do some deep thinking, and they’d work on three- to five-year plans and lay these out in great specificity; some of them were PowerPoints that went into the hundreds. Then, with that plan in hand, the foundation for execution in the old model was control. You got the plan with all the details, we know exactly where we’re going, how we’re going to get there, all those little things we’re going to do, and the control structures are in place to make sure there are no variances, no deviances, that we stick with the plan. That has worked pretty well for over a century.

 

That’s all shifting now, thanks to the digital age and the accelerating pace of change that it has driven and the requirement for companies to become innovative. Now, when you look at companies like, let’s say, for example, Google or an Amazon or a Wikipedia, look at LINUX; they’re a very successful, crowd-sourced operating system. The foundation for strategy in these enterprises is not planning at all; it’s iteration. And the foundation for execution is not about control; it’s about co-creation. This looks very, very different from the way we’ve done it before.

 

Let’s talk a little bit about how iterating and co-creating are different. The leaders of what I call vanguard companies understand in a fast-changing world, you don’t need maps;- and plans are now, I guess, the maps. You need a compass because when the landscape keeps shifting, a map is totally useless, but a compass gives you a general sense of direction.

 

It’s well-known, for example, that Google is working on driverless cars; this is a long-term project of theirs, but they certainly intend to revolutionize driving as we know it. They have a general sense of direction of what they want to be doing, but as they’ve been working on these driverless cars, they’re iterating as they go along. They’re finding what works, what doesn’t work, and they make adjustments. There’s no master plan that knows exactly what it’s going to look like when they get there. They’re kind of learning as they go along, and they think learning is an important part of the strategic process.

 

Rather than expect people to comply with an elaborate set of controls, companies like Google have their workers intimately involved in the creation or, as I say co-creation of what they’re building. There is this continual cadence of we iterate a little bit, find out what works, what doesn’t work, learn that together, then co-create the next phase. This is also the same rubric that operates in agile software development, which is very different from the traditional model known as waterfall. Waterfall is essentially a planning and control model, whereas in agile software development, they are constantly iterating and co-creating and not worried much about having long-term, elaborate plans. Planning is done with each different iteration as they work on.

 

Some people listening to this might say this sounds very chaotic, it sounds very haphazard, and would be a nervous wreck if they ever did anything like that, because how do things get done well and on time? Well, it turns out those who use iterate and co-create tend to deliver faster, tend to deliver higher quality than those who don’t because control in a fast-changing world is essentially an illusion. What the business leaders who practice iterate and co-create are very firm on is they tend to set some firm timelines in which they will work. If they’re working to deliver something by a particular date, they keep their eye on that as they’re going through the iterative and co-creative process.

 

To demonstrate how fast this can happen, somebody at Zappos came up with the idea a little while back: Wouldn’t it be wonderful if somebody’s sitting on a subway train and sees a pair of shoes on somebody else on the subway that they like? Obviously, they’re not going to tap a stranger on the shoulder, but what they can do is take a picture of the shoes. What if, after they take that picture, Zappos can send that style of shoe to them in their shoe size? That was an innovative idea. They got to work on that, and they went from concept to functionality in 12 weeks. Iterate and co-create, despite the fact it may not seem, on first blush, to move quickly, actually does because it is building continual learning into the process, and the faster you learn, the faster you can deliver.

 

The problem with planning and control is that it leaves no room for learning, it doesn’t like variances, and when things don’t work, you have to rework all of the plans again, and that takes time and drives a lot of delays.

 

Can you talk about, people have habits and mind-set which is still planning and control, how do you change that mind-set and those habits?

 

That is the $64 million question. That’s the crux of the management problem today. Most companies are being led by leaders who are very skilled in the planning-control dynamics of management and highly uncomfortable with the notion that we will have a general sense of direction, iterate and co-create together. They’re uncomfortable because their role essentially shifts.

 

It’s funny we’re having this conversation today because the thought occurred to me just this morning that the title of chief executive officer is probably becoming obsolete. The whole picture of chief executive officer is here’s somebody at the top of the pyramid and has purview of everything, and their job is to make sure that we execute according to plan. This is the mind-set that executives have. I think the new CEO going forward is the chief enabling officer, and that leader’s job, that version of CEO is, they’re making sure that the workers have all the tools that they need to learn and to deliver.

 

If I can quote Google, I just recently finished Eric Schmidt’s new book How Google Works. He said that their management formula is very simple: You hire good people and get the hell out of the way. The chief enabling officer gets the hell out of the way. Now, they are not laissez-faire because they are holding up we need to get from here to there by this date, and that is the focus. Instead of laying out everything for everybody, you let them figure it out. This requires business leaders to be highly trusting that their workers will figure a way to get it done. That has not been the case in the past, but these are the habits of what I would call the chief enabling officers, the new CEOs of tomorrow.

 

I think those who can make the transition, which I think may be psychologically challenging, I think will be greatly rewarded. Those who can’t make the transition are going to be handicapped because in this fast-changing business world in which we are today, only the fast and the adaptable survive, and iterate and co-create is much better at adapting than planning and control.

 

Do you have any final recommendations?

 

Yeah, I think that senior business leaders today need to read a lot of the literature that’s coming out. There’s a lot of good literature coming out in the space of innovation. I think business leaders need to understand what innovation is. I think they will discover it’s very different from what they think. Innovation is not a function, it’s not a department, it’s not something you can purchase like software. Innovation is fundamentally a different operating system that the heart of this operating system of these dynamics of iterate and cocreate. I would encourage business leaders to read some of the fine books that are coming out now in the innovation space.

 

Thanks again for sharing.

 

Thanks, Dustin, always a pleasure to spend some time with you.

 

Yep, I look forward to talking with you again soon.

 

"See Rod's New Book on Wiki Management for Growth in a Rapidly Changing World. http://www.optimityadvisors.com/WikiManagement/




About Rod Collins

 


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Rod Collins

 

Author, Speaker, and Innovation &

Organizational Design Expert

Optimity Advisors

 

LinkedIn Profile

I interviewed Thomas Tanel who discussed Get Some CHAAF - How to Achieve Supply Chain Resilience.

 

 

 

 

 

 

Dustin, thanks for having me today to discuss the idea of supply chain resilience.  The New Normal caused by the financial crisis in 2008 illustrates the importance of supply chain resilience as a 21st century phenomenon in today's interdependent global economy.

 

The World Economic Forum’s Building Resilience in Supply Chains report stated, “Resilience is the ability of a global supply chain to reorganize and deliver its core function continually, despite the impact of external and or internal shocks to the system.”

 

In my 40 years of experience, the supply chain resiliency concept is still in its early stages; but to achieve it,there are five basic components for success that I will term CHAAF (Celerity, Hardiness, Adaptability, Agility, and Flexibility).  This webinar will outline each of those componentsand confirm the benefits of achieving supply chain resilience.

 

C—Celerity

 

Supply chain celerity—rapidity of motion or action—is a necessity as today’s supply chains move at a higher velocity than in the past which require extensive supply chain communications among trading partners to be more agile and responsive to your business’s needs.  The timely and accurate exchange of information is more important than ever. There is little or no tolerance for errors or bottlenecks—and anything that is not immediately corrected can result in costly delays, penalties or potential cessation of activities for transportation providers and your organization’s trading partners.

 

Your supply chain is no longer bound by geography.  The need to find economies of scale and lower costs will drive a further need for supply chain synchronization.  Clearly, data needs to be captured and classified in a consistent manner at a detailed actionable level.According to a whitepaper Missing Link to SC Success published by GT Nexus, “80% of the data a company needs resides beyond its four walls, in the systems of global partners.”

 

Celerity really matters!  Quicker response times help organizations react to customer needs faster and hence gain or hold market share, and as well to withdraw, when necessary.  As Cleopatra suggested “Celerity is never more admired than by the negligent.”

 

Therefore, transforming raw data into useful, real-time business intelligence (BI) goes hand in hand with smarter, celeritous (ce-ler-i-tous) decision making.  While it is human nature to avoid exposing potential problems to trading partners, fact-based information-collection tools can make supply chain risks visible and facilitate effective risk mitigation efforts.

 

Constant supply chain celerity and communication are the keys to managing a global supply chain that is changing by the minute.  Celerity means that you are able to synthesize external and internal data and rapidly take action to minimize the impact of a supply chain disruption and can quickly adjust and respond to the market and economic conditions at hand.

 

H—Hardiness

 

Hardiness is the key to resiliency; and not only surviving but thriving under pressure.  Hardiness enhances performance, leadership, conduct, mood, as well as physical and mental health, according to the American Psychological Association.

 

When you are faced with tough supply chain situations, do you stress out and falter?  Why do some people step up when the same situation is presented to them? Researchers pin the difference between defeat and perseverance to what they call hardiness.It turns a negative event into acompetitive advantage.

 

As a case in point, Automotive Newsreported that supply chain management at Honda was being stress tested during March 2011, given that at least 113 of its suppliers were located in the affected areasfrom the earthquake and tsunami, and the ongoing nuclear crisis in Japan.

 

The common characteristics for being hardy and staying positive are dubbed the 3 C’s: commitment, control, and challenge attitudes.  Commitment allows a person under duress to strive to keep involved as opposed to isolating himself/herself.  Control leads someone to try and influence outcomes rather than fall into passivity and powerlessness.  Challenge influences a person to grab stress as an opportunity to overcome it.

 

A great example of hardiness in the supply chain is the “Center of Excellence” concept---organizational hubs for focusing skills and resources. Gathering experts in one location provides a way for staff members in a specific logistics function to hone their skills and knowledge through the collegial exchange of ideas; therefore, seeing problems or stressors as challenges and opportunities.  It involves having a sense of purpose and meaning in a volatile and uncertain supply chain world.

 

That's a genuine advantage in a world where supply chains are constantly at risk of unexpected disruptions.Usually organizations with this hardiness trait do not just survive, they thrive!

 

A—Adaptability

 

ain oriented organizations, in part, hinges on having an adaptable logistics operating structure that makes it possible to capitalize on opportunities as they arise and respond to supply chain risks without disruption.  Resilience, at its most basic level, refers to an ability to adapt quickly to, or recover from, challenges and changes.

 

By way of example, the European debt crisis, the Japanese earthquake and tsunami, and the Arab Spring uprisings all had an adverse ripple effect, throughout the global supply chain,in 2011.

According to Charles Darwin, “It is not the strongest of the species that survives, nor the most intelligent that survives.  It is the one that is the most adaptable to change.” For clarification, he didn’t define the fittest as those that survive.  His “fittest” were those endowed with the best equipment to survive, and that makes all the difference.

 

As Darwin observed (and he himself was at pains to point out), natural selection is all about differential survival within species, not between them---just like different supply chain streams.  He said, “In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.”

 

Supply chain integration is still important but its principal limitation is adaptability: During periods of rampant change (like now), organizations with rigid supply chains cannot change gear fast enough, let alone survive.

 

A—Agility

 

The haziness of reality, the potential for misreads and the mixed meanings of supply chain conditions in the New Normal requires agile execution.  Ambiguity can onlybe matched by agility!

Organizations benefit from agile execution, the ability to very quickly adapt operations to respond to market changes whether they result from new market opportunities, a natural disaster or other business variables, thereby enhancing the organization's performance.

 

A single risk event can easily disrupt at least one of your supply chain streams.  In most cases, the impact of the disruption can be observed along the supply chain. Any hiccup will cause delays and even commotion.  Recent incidents such as Hurricane Sandy in the USA show how such disruptions can severely affect even the most stable supply chain.

 

As defined by AMR Research, Supply Chain Event Management (SCEM) is a software application that supports control processes for managing events within and between companies.  As part of SCEM, the Supply Chain Control Towers concept has come into being.  A control tower operates as a single, unified command center for visibility, decision-making, and action which is based on real-time data for both inbound and outbound logistics flows.

 

It allows you to monitor your supply chain processes, providing visibility withinthe process and alerting appropriate parties to potential critical situations.  As you would expect, dashboards or cockpits monitor supply chain developments and events in real-time along the supply chain.

 

F—Flexibility

 

Real flexibility demands strong, collaborative relationships with key suppliers and supply chain partners in order to jointly address capability gaps and help mitigate supply chain risks.

Today’s uncertain, turbulent environments expose supply chains to risks/disruptions that can significantly damage organizations and economies. Research conducted by the Business Continuity Institute (BCI) found that 85% of respondents had suffered at least one significant supply chain disruption in the last 12 months.

 

For example, flash memory is a global commodity, much like oil.  Its pricing fluctuates with supply and demand. As PPB Newslink reported in March 2011, more than 40% of the world’s USB flash drive supply is produced in Japan.  In fact, one major supplier, Toshiba, supplied 30% of the world’s memory chips alone. Due to the history-making earthquake and tsunami in Japan, memory prices jumped by 50 to 60% overnight–literally. Fear caused the price increase because of the unknown impact on supply.

 

How effectively an organization implements flexibility is reflected in their focus: On being reactive or proactive.  Because we’re part of a global supply chain, we all felt the effects when the earthquake and tsunami hit Japan.  How we experienced these effects would be dependent on our flexibility. Are you reactive or proactive?

 

Organizations are rethinking their supply chains to craft a strategy that can deftly accommodate broad swings in demand and supply.  In fact, 64% of respondents to PwC’s recent 2013 Global Supply Chain Survey said they plan to implement greater flexibility to better respond to shifts in volume.  That makes flexibility a top supply chain priority.

 

Flexible supply chains that incorporate event readiness are capable of providing an efficient response, and often are capable of recovering to their original state or even better postponing the disruptive event.

 

Summary

 

You can make a case that supply chain resilienceis a must-have in today’s supply chain because volatility is always around the corner for most organizations.

Two characteristics that distinguish companies on the Gartner Supply Chain Top 25 are an emphasis on supply chain strategy and a mind-set that strives for continuous improvement.  In closing, aligning supply chain strategy with business strategy is the shift organizations need to transform a traditional, reactive supply chain into an agile, hardy, organization that adapts and flexes within a celeritous environment.

 

If you haven’t got some CHAAF, then what are you waiting for?  How are you going to make your supply chain more resilient to the increasing likelihood of potential disruptions?

 

 

 

About Thomas Tanel



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Thomas Tanel


CEO

CATTAN Services Group

LinkedIn Profile

I interviewed  George G. Arenas who discussed The Contribution of 3D Printing to Innovation and International Business.

 

 

 

 

 

 

It’s great to speak with you today, George. I’m looking forward today to talking about the topic of the contribution to 3D printing to innovation and international business. Before we start, can you provide a brief background of yourself?

 

Sure. Dustin, thanks for interviewing me; this is an exciting topic. Actually, it’s a topic that’s near and dear to my heart. My background actually has two chapters; I’m an international marketer and I’m also an entrepreneur and innovator. Call me a product developer.

 

The first half of my career was international marketing, primarily in the automotive aftermarket. I worked with some of the leading brands in the United States—Pennzoil Quaker State—and we had a portfolio of automotive aftermarket brands. I was also the international sales manager for Winner International; we manufactured the Club steering-wheel lock.

 

The first half of my career was international marketing, and then I became an entrepreneur. I developed a retractable car seat cover, and from beginning to end, I commercialized, designed, patented, developed the product, commercialized it. I consider myself to be an international marketer and product developer.

 

Thanks. My first question is: What is 3D printing?

 

That question is so broad and dynamic because 3D printing is such a large entity, I’ll call it. I’m going to give you a fraction of what it is. Most of your listeners probably are aware of 3D printing as being an additive manufacturing process as opposed to subtractive manufacturing, where a product can be built layer by layer by layer. That’s common knowledge.

 

When approaching this question, I’m going to look at it in an analogy. I consider it to be a disruptive technology that introduces manufacturing efficiency. I like to use analogies—and I’m going to use the analogy of snail mail versus e-mail. Basically, 3D printing does to manufacturing what e-mail did to snail mail. When I say that I mean it leapfrogs into a new level of efficiency. In the past we used to use mail, and it was a very physical process. You would manually write a letter and you would have it touch a number of hands to get to its final destination. It was a very physical process, and many hands touched the letter when it was going from point A to point B.

 

With e-mail, a lot of that was digitized, and that basically added this efficiency where you didn’t need to have so many hands touching the process, and that’s pretty much what’s happening with 3D printing. Manufacturing, in general, used to be a very physical, hands-on process where people would use their hands to make a product. That is changing now with 3D printing because it’s becoming more of a cerebral process where a person can make a product digitally. That adds a huge level of power in manufacturing. Basically, we’re really moving from a hands-on process to a mind process. That’s the biggest—well, it is just one of the bigger disruptive features of 3D printing. You could literally go and talk about many, many other disruptive features, but this is the one I wanted to highlight in our brief conversation.

 

What is the contribution of 3D printing to innovation and international business?

 

Well, innovation and international business forever have been business activities that were essential, but they were relatively slow, they had an element of risk to them, and they were generally expensive. They still are, actually. In business, whether you’re innovating or whether you’re thinking of taking a product internationally, it’s generally a slow process and it involves a huge amount of risk and 3D printing is basically reducing these barriers.

 

Again, going back to the topic of manufacturing efficiency, the efficiency of 3D printing is accelerating. For example, when companies try to innovate, they try to fill fast. Innovation in the past has been a slow process. If you can imagine, when I was manufacturing my seat cover, it was a slow process, and it involved a lot of people and logistics issues. For example, I would have to send products to Asia, for example, where you are, and the back-and-forth communication and the opportunity for error and mistakes is magnified in the subtractive-manufacturing process.

 

By 3D printing being a digital process, all of a sudden, you’re able to innovate and create prototypes much faster. Things that took months and years can be changed in days and hours. Really, there’s a level of efficiency and innovation where I imagine that the level of innovation is going to accelerate because you can make products and test them and make a prototype within a day or two and find the errors in your products faster and improve them.

 

In years past, to innovate something, to create a new product and bring it to the market, if it took you a year to bring a product to the market and you brought this brand-new market, inevitably, there’s going to be something that you could improve upon, or there could be a quality issue. Well, now, instead of waiting that whole year to find a quality issue or an improvement possibility, you can find that in days and weeks. That alone is a huge disruption.

 

When we’re talking about 3D printing, I think one of the biggest benefits to innovation is speed. Since time is money, that can translate very easily into money and profits for companies. That also translates into lower risk because bad products can be avoided, and good products can be brought to market faster.

 

On the international-business side, I think we’re going to be entering a very new view at international business. Again, going to the theme of international business being slow, expensive, and risky, if we just look at logistics issues, the world is always getting smaller, and the reason it’s getting smaller is these technological leaps that are provided by the Internet. If you think of years gone by, when I used to look at getting into a market, one of the biggest considerations was always: How much is it going to cost me to bring a product into country X, and what is the least expensive way of getting it there? When you’re bringing a new product into a country outside of the U.S. or to a new market, the logistics cost causes so many different hands to touch a product to get from point A to point B.

 

As an international marketer, you try to minimize and reduce the number of hands that touch a product and that gets into the market. Well, what 3D printing does is add a whole new level of efficiency. Actually, we’re removing the number of hands that are touching a product during production. That’s extremely powerful because instead of having to consider shipping costs, inland freight costs, and duty costs, the digital delivery of a digital file that gets printed in a foreign country pretty much eliminates a huge amount of cost.

 

It makes me wonder how commerce is going to deal with duties, for example, because now products are able to be delivered in the country digitally. That’s going to bring some interesting opportunities and also very new business models. You’re going to have new approaches to markets that we haven’t even seen yet. I guess, all in all, 3D printing is making the world smaller and it’s bringing manufacturing closer to the consumer. Again, all of this is serving to make international business faster, less expensive, and it’s reducing the risk.

 

In both cases, whether you’re talking about innovation or international business, I see 3D printing as accelerating everything, reducing the cost, and I see the world getting smaller and receiving better products faster, thanks to 3D printing.

 

My last question is: How can companies take the next steps with 3D printing?

 

At this point in the game, you’re probably going to be taking baby steps because 3D printing is, I guess, evolving. Right now, as a company, a logical first step would be to use either available technology. Depending on your budget, if you’re into product development, you might either bring in a 3D printer that fits your budget to make prototypes—that’s one way. If you can’t afford a 3D printer, depending on the complexity of the products you make, you can outsource, because, little by little, there are more companies coming up that are getting into rapid prototyping, so it’s becoming more accessible. That’s something that can be done right now to save money on innovation, to accelerate the speed of innovation, but, over time, what you’re probably going to see is larger printing service centers located in different parts of the country or parts of the world, and that’s going to be an exciting thing. There are companies out there that are developing printing centers worldwide. That adds some excitement and some reach, and that’s only going to grow.

 

Right now, I would say just get access to a 3D printer and test it out; see if it can fit within your internal company innovation process. I think once you dip your foot into the 3D pond, it’ll open your eyes, because once you see its capability, you’ll start to look for other opportunities and you’ll start to embrace it. It’s a new technology and it’s exciting and it is going to grow. Right now I would just basically get access to 3D printing through a service provider or a machine that can fit within your budget to test out prototypes and go from there; see where this evolves. I think within the next five years, you’re going to see some exciting stuff.

 

Thanks, George, for sharing today.

 

Oh, Dustin, thank you. It’s always fun to talk about this topic. It’s one of these topics we could talk about for hours and hours on end because there’s so much more to it. I just really spoke about one aspect of it; there’s a lot more and I encourage your listeners to really take a good, close look at it.

 

Thank you.

 

 

 

 

About George G. Arenas

 

 

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George G. Arenas

 

Owner, Armarko Inc.

 

LinkedIn Profile

I interviewed David Meggitt who discussed VES: A New Tool for Cultivating Innovation in Supply Chains.




Tell us a bit about yourself


Hello Dustin. It’s great to speak to you again. The last time was almost 3 1/2 years ago in May, 2011 and a lot of exciting things have happened since then. I gather that today you are in China, which is the really great, so it's greetings from us all to everyone in that country. Earlier this year my son Ryder, with others, accompanied, the leader of the Scottish Parliament, on a trade mission to China representing the construction industry and its innovative developments, and they had a great reception there. It's really about innovation that I want to focus on today.

In almost 50 years of working life I have seen huge changes in the way work is conducted using new methods and techniques with the Internet dominating the way we can now collaborate across boundaries. But we also need the right people around us with vision, an open mind, courage and drive amidst adversity to make things happen.  So the ideas I'm going to put over today are being co-created and developed with my business partner Christie Sarri, who fits that description. She is an experienced chartered civil engineer like me, but with an MBA, to match my own management consultancy experience and exposure to innovation over the years in many sectors and many disciplines.

We practice as Meggitt Bird LLP in co-creating value projects for change growth and success and in essence we act as facilitators for change, whether clients want incremental or more disruptive adaptation.


We also appreciate that everyone is in a supply chain – we have our own customers who have their customers, and suppliers who have their suppliers. We are enmeshed together in a swirling soup of human activity, it seems.


With this in mind, it is our sense that currently we are doing things wrongly at every level.


What are we doing wrong?


I always ask the question: are we envisioning situations in a sufficiently dynamic and big picture (or holistic) way?

Let’s look at an example of where things went really wrong. The economists did not predict the financial and economic crisis in 2008 that has gripped us, and even if it had been by some, wilful blindness and a sense of powerlessness prevented appropriate avoiding action. Let us simply say that the economists did not do their job well, caused by examining static pictures of historical events. We can expand on this in the comments below if needed. Suffice to say now, if we use the same tools as before we will have the same imperfections. So, how can we improve our foresight?


Let’s look at how predictions of structural behaviour have improved dramatically in the construction industry. 100 years ago engineers designed structures by hand with limited theory and low buildings were the result. Now, with new tools we can design and construct structures of almost limitless scope, soaring to great heights and spanning across great lengths. Our capabilities have soared, matched by a new confidence in tackling such challenges. The new tools show movement and change in the behaviour of structures - they are dynamic analysis tools, not static ones.

So what if we assume that we adopted 21st-century leadership and management approaches that were dynamic and not static – that showed interactions that really occur in work place activity and not just formal process and structure.  What leaps in performance would then be within our grasp? What co-creativity, innovation and collaboration could be cultivated? That is why I would like the rest of the interview to feature VES, a value exchange system approach to directing and managing enterprise.

Why is a value exchange system different?

No tools exist that take into consideration the real interactions that take place between people in whatever roles they are playing. If it is claimed they do exist they are static tools based on management principles developed in the 19 century. We rapidly need an update if we are to tackle the global interacting challenges that we are now faced with. The findings of the Chartered Management Institute in the UK for example has highlighted real failures in current management practice and the need for reform in business school curricula.


Traditional thinking would have us regard supply chains as a  method for delivering specified items to clients. But we know supplt chains comprise relatively small to medium sized enterprises with new ideas that need the support of the goliaths of their industry (and Government)  and a collaborative environment in which they can thrive in order to contribute innovative solutions to the ultimate client.  So, what the value exchange system allows us to do is to focus on the really important essentials in a straightforward way. It focuses on what needs to be done without getting clogged up with detail – an ideal precursur to the Business Model Canvas for example. VES draws on the wisdom of economics which tells us that the exchange is the fundamental basis of an economy and it draws on the wisdom of the late Peter Drucker who constantly emphasised that it was the contribution that individuals made in an organisation that really mattered in achieving desired results.


Also consider a conventional position or job description: it will contain roles and responsibilities. If we now combine these components together – roles, and the contribution of deliverables via the exchanges which contain them, we can create a picture of how an organisation ticks and how it interacts dynamically with its collaborators and entire business ecosystem. In other words, its business model. And with this new perspective we can discover new interactions and relationships we would otherwise not see, and do things we would otherwise believe to be beyond us. And we can do that whether we are considering value relationships in a small team, a large project, an entire business, a Government department, a region or interregional collaborations and so on.


An indication of this scope is contained in our co-authored technical paper we wrote in 2012 for the Institution of Civil Engineers’ flagship journal “Civil Engineering” and I'll provide a link to that in the comments section below.


How is VES used?


We find that VES can be applied to any area in which human beings conduct exchanges – which is any business activity. So there is huge scope, particularly to help identify and formulate new projects and develop business models. Consequently, we are creating what we call Advisory Information Products to guide all those who are interested in using VES…it’s a commercial venture so there will be a mix of free and paid for products which will be available on the Internet. I can provide a link in the comments below.


We can also provide links to the many groups we have been involved with covering such topics as project management, value chain management, construction supply chain management, ethics, governance and risk management and so on, whose deliberations have helped us validate VES for its general applicability.

As far as Christie is concerned in the Region of Crete in Greece, within the Agas Group in which she is also a partner they are innovating in creating new technical products which require new supply chains within an evolving business ecosystem of collaborators and influencers. We are also taking the first steps to achieve inter-regional collaboration. So VES is being applied there right now.

What results can we expect from VES?

There is a long history of results over the last 10 years with what is described in the literature as a value network approach and I can provide a link to a list of these for people to peruse at their leisure. For the future, by using the value exchange system, which is a reformulation of this, you will be able to incorporate seemlessly ideas put forward by Don Tapscott on business webs, Clayton Christensen and Henry Chesbrough on innovation to name but three pioneers.


We think it is a very exciting time that we and collaborators will be enjoying in the near future as we introduce techniques that are fit for purpose for use in the Internet enabled 21st century, where mass collaboration and manufacturing is now more the norm and we certainly anticipate that many around the world will be interested enough to join us in that.


It’s as exciting, I think, as the first introduction of a pencil and paper!

 

 

 

About David Meggitt


 

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David Meggitt

 

Civil Engineer and management consultant, identifying and formulating projects for change, growth and success.


LinkedIn Profile

Website

www.meggittbird.net

I interviewed  Mary Pat Freeman who discussed Leveraged Purchasing Agreements.

 

 

 

 

 

 

Well today were speaking with Mary Pat Freeman, we've spoken in the past we've gone interviews in the past and today, she's going to discuss something does not-well-known regarding how companies can achieve significant operational cost savings. So Mary, can you start by providing a brief background of yourself and your company.

 

Certainly, I’m Mary Pat Freeman, a corporate strategic consultant and previous Vice President of i-pallets, Inc. a division of Indiana Properties TriState Logistics, a US provider of international logistics, pallets, and warehouse services located in southern Indiana that currently operates a 350K sq. ft. storage and outsourced manufacturing facility.  I helped them launch a new product line and find ways to reduce and control costs with ramping up.  That’s why I’m here – to talk to you about a great way I found to save significant indirect costs.

 

Today, cost-reduction strategies are top of mind for most executives.  World economics mandate it.  Yet, many executives overlook one major strategy that could have the biggest cost-savings impact to their operation – Leveraged Purchasing Agreements.  I’m here to talk about it because I didn’t know about it.

 

What are Leveraged Purchasing Agreements?

 

Leveraged purchasing agreements, or LPA’s they are called, allow medium-to-large companies with significant spends in these areas to be able to enjoy the large discounts that large Fortune 500 companies get for their indirect spend– well beyond what they could achieve negotiating their own volumes – and I’ve found that Gentry Partnership, another US company, offers LPA’s that are unique-  andcould save money for many of you listeners.

 

So, who is Gentry Partnership?

 

John Syverson is who I’ve worked with at Gentry Partnership, a US company based out of Chicago, IL.  John is a Managing Partner for Gentry Partnershipand has personallynegotiated many of their LPA’s.  He has extensive expertise in corporate purchasing and negotiating and previously worked as an executive for Kelly Services, United State’s largest temp labor provider.  He’s very effective at leveraged that knowledge as well as his professional connections to construct effective agreements.

 

What types of cost-savings are available through Leveraged Purchasing Agreements?

 

Gentry Partnership has focused on several very specific indirect spend areas – those that can have the largest financial impact on a company:   Temporary or Contract Labor, International Freight Forwarding, Small Parcel Shipping, and Corporate Relocation Services.   Yet, because of their expertise, theyalso offer Workplace Solutions, Safety Equipment, and prescription benefit LPA’s as well.  Your international listeners would probably be most interested in the Temp/Contract Labor LPA or the International Freight Forwarding LPA’s they offer.

 

According to John, for the Temp Labor LPA, it took over 2 years to develop the LPA that your listeners could participate in.  Gentry Partnership brought together Sr. Leadership from several large, Fortune 500 international companies to develop the Temp Labor LPA.  The Agreement aggregated their entire spend – all 200 Million dollars of it.

 

They, then leveraged this $200Million in a draft LPA, and put it out for bid – not just to achieve higher discounts, but to achieve improved service performance, Business-to-Business communication, and, improved problem resolution response time.  They then thoroughlyassessed each potential vendor’s proposal, selected a few large, reputable vendors to work with, and created the Temp Labor LPA.

 

They did the same for international freight forwarding.

 

So what impact have these clients seen on their operational budget by participating in thesespecific LPAs?

 

Gentry has indicated that all of their existing clients are now realizing significant savings – between 10 and 39% of their overall, already-very discounted rates.  Plus, they are seeing improved service metric, stronger vendor relationships, and quicker problem resolution when issues do come up.

 

Are there other providers of the same types of LPAs? And what’s the major difference between them?

 

Yes, there are other providers.  In the United States, there are a few large GPO’s  or group purchasing organizations that offers this type of leveraged purchasing power…. But, I found Gentry Partnership’s LPA’s to be different.  Many of the other GPOs require huge member fees (some up to $2500) to reap the cost-savings benefit.  However, Gentry does not charge membership fees.  Plus, Gentry Partnership does not charge to perform the analysis necessary to know if companies could companies could benefit from participating.   They simply dialogue about needs, provide a few spreadsheets that you populate with current usage information, and then they show you how much you’d pay using the tiered-discounts available in the Gentry  LPA.   YOU decide if you want to participate…..

 

Plus, because the continuance of the LPA is based on the overall aggregate spend, savings and improved service level agreements are just going to get better over time.  That’s what I loved about it when I was first introduced to it and why I think your listeners should be aware of its availability.

 

So what types of clients can participate? 

 

For Temp Labor LPA’s, any client that is medium-to-large in size and could benefit from a higher tiered pricing and service structure in either temp labor utilization or international freight forwarding.  Even large defense contractors can participate.  And, each of them can reap the benefits without signing a long-term agreement or paying upfront fees.

 

In fact, some clients engage Gentry at the outset to help design the entire cost-saving program and manage the vendor selection and negotiation processes, while others bring Gentry in at the end of their selection process to drive additional savings they may not have known existed.  Bottom-line -- Many of YOUR listeners could participate.

 

John provided me with Case Studies for both Contract Labor and for International Freight Forwarding.  I’d be happy to provide links to access them.   

 

Sounds like a very good cost-savings strategy.  So how can listeners contact you if they would like more information?

 

They’re welcome to contact me directly via email at 1mpf@sbcglobal.net or to contact Gentry Partnership directly at 888-267-7084 or marypat.freeman@gentrypartnership.com.

 

 

 

About Mary Pat Freeman

 

 

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Mary Pat Freeman

 

Business Development/Marketing, i-pallets. Inc.

 

LinkedIn Profile

I interviewed Mark Katchen who discussed Training People in Developing Countries on Environmental Health and Safety.

 

 

 

 

 

 

It’s great to speak with you today, Mark. I look forward to hearing your views on the topic of training people in developing countries on environmental health and safety. Can you first provide a brief background of yourself?

 

Sure. I’m the managing principal of The Phylmar Group. The Phylmar Group’s a peer-advisory organization. We run three different groups in the area of occupational health and safety and restricted substances and a supply chain of apparel and footwear companies. We’re also involved in the bio pharma area. Specific background in training and occupational health and safety is as an industrial hygienist. I’ve been doing this for about 30 years.

 

Great. A little bit of a background. I understand one of the key issues in the developing world regarding environmental health and safety when organizations and companies do supply chain on is that there are some problems. Can you talk about the problems and whether or not these audits are effective?

 

Sure. There are some benefits to these audits. They do uncover some issues as far as that are fairly obvious, but what we see, certainly recently, in areas like Bangladesh and some areas of Asia, they do miss a lot of things. The problem is, they were just going in and taking a quick snapshot; they’re not able to spend long periods of time just trying to cover a lot of areas. There are some definite gaps in the approach that the audit brings as well.

 

How do you address this problem?

 

One of the ways that, more recently, people are looking at is something we call capacity building. In other words, we’re trying to train workers who are in the location or the locales, get them hired so that you have someone in the factory of the supplier who understands the environmental health and safety area and can bring that expertise to bear on an ongoing basis as opposed to just a little bit here and there. That’s one of the solutions, if you will, of this issue of supply chain environmental health and safety compliance.

 

And do you have any examples you can share regarding some success?

 

Yes, as a matter of fact. One in particular is the Occupational Hygiene Training Association. This is an international group actually begun by British Petroleum and GlaxoSmithKline because they had this issue of not having the expertise where they needed it. The association was begun and they developed a number of courses primarily focused on industrial hygiene and occupational hygiene, developed originally by the University of Wollongong in Australia. These courses are typically five-day courses; they cover a multitude of industrial-hygiene issues, from exposure assessment to noise and dust and chemical agents, to some ergonomics and some other areas now. They’ve trained hundreds of people now, going through the process, where, in some cases, some of these courses have been and will be accepted as college credits or even graduate-school credits. This individual can move from either a technician level all the way up to a master’s level person in the environment health and safety area. The Occupational Hygiene Training Association has done a really good job of developing this model, which I think can be used again as a model for other organizations and their training areas.

 

Thanks, Mark, for sharing today.

 

Happy to do it, Dustin.

 

 

 

About Mark Katchen


 

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Mark Katchen

 

Managing Principal at The Phylmar Group, Inc.

 

LinkedIn Profile