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2016

I interviewed Steve Johnson who discussed Consumers Are Evolving Faster Than Supply Chain.

 

 

 

 

 

 

Today we're speaking with Steve Johnson who is the Grocerant Guru with Food Service Solutions. And Steve has 35 years’ experience in the food service sector. Today's interview is about why consumers are evolving faster than the supply chain.

 

So, Steve, my first question for this interview is what is a — and I might be pronouncing this wrong — a Grocerant?

 

A grocerant is any retail outlet that sells ready-to-eat or heat-and-eat fresh prepared food. And let's see. What does that mean?I'll give you a couple of examples. First example would be McDonalds. It's ready-to-eat food. You go through a drive-thru at McDonald's, you get the food to-go. 67% of all sales at McDonald's go through the drive-thru, are all packaged to-go. In the U.S. particularly, 50% of all Americans over the age of 18 are single. So meals to-go. The consumer thinks about meals.

 

What else is a grocerant? Restaurant food from Ruby Tuesday's, Bennigan's, T.G.I.Friday’s where they have pick-up and to-go. Olive Garden, buy one today, get one tomorrow. Most restaurants and sit-down restaurants have programs to get food, buy it today, take it home for tomorrow, ready-to-heat, and heat-and-eat, or prepared today for take-out, delivery, and to-go.

 

79% of all restaurant meals in America, 79% of all restaurant meals in America come from fast food restaurant. And over 67% nationwide of all fast food restaurants sell their food to go. It's a huge competitor.

 

One interesting fact for legacy grocery stores and people supplying grocery stores that they need to know, in 1960 there are eight restaurants for every grocery today. Today there are 25 restaurants for every grocery store. So this has become a battle of share of stomach.

 

Now let's get into the grocery stores and C-stores. Most recently, convenient stores have become fresh food and ready-to-eat prepared food retailers. From 7-Eleven, who builds 50% of their stores without offering gasoline. They sell food and prepared food as the key driver. Wawa, Sheetz, [inaudible 00:02:31], all do extremely well. And then the grocery store delis. Wegmans people know, Whole Foods. Central Market, HEB, Safeway, they all sell fresh prepared from the service deli, some better than others.

 

So those, that's the grocerant component right there. So, what's a grocerant? Any location that sells ready-to-eat, fresh prepared food or heat-and-eat fresh prepared food, where they heat it and use it right away.And it can be a day later.

 

Can you talk about why this is important, and in particular, how it's changing the supply chain?

 

Well, this is really an interesting fact that's happening particularly across the U.S., but it's happening in middle Asia and different parts around the world. Central kitchens in, let's say, if you had 10 restaurants in LA or a regional grocery store chain in Los Angeles or Portland, Oregon or Houston, Texas, they can provide and cook in one central location, a lot of food and package it up, single fresh pack, and run it out there three, four times a day.

 

In Japan specifically, the convenience store sector gets three deliveries a day at their convenience stores. They get fresh breakfasts brought in that are packaged, made in a central kitchen and dropped off. They get bento boxes at lunch and dinner that are fresh and targeted for each day part. So they're not sitting there all day long, even 24 hours. They're made fresh as the day goes.

 

In Dallas, Texas there is a place that's been around since '97, '98, Eatzi’s. They make fresh food all day long, and it sells all day long. At 9:00 at night, they put it on sale. Anything that didn't sell, they sell at half-price. It's all fresh all the time. Consumers respond to that.

 

One of the most important things about how it's evolving the supply chain, instead of getting all your chicken produced out of Tennessee in the United States coming from Tysons and shipped frozen all over, people are getting fresh chicken and cooking it fresh in a regional location and taking it out, or they're cooking it in house. There's a company called New Seasons Grocery Store and Green Zebra Grocery, both in Portland, Oregon that prepare food fresh in their stores. Makes a tremendous difference when they cook it fresh in the store.

 

And so how's the supply chain? It's decentralized. It's becoming more regional and more fresh, fresh prepared food. One of the things that 7-Eleven has done in the U.S., now they don't do it three times a day delivery, but they do get their sandwiches and salads pre-made. But they use a manufacturer, a production in many cities, at airports, Sky Chefs, where Sky Chefs, actually, at the airport caterers that cater to the airplane, they manufacturer the food fresh every day and run it out to the... 7-Eleven picks it up and runs it out to their store on a daily basis. So this regional outsourcing of fresh-prepared food, that's what's driving it. Customers are weaning themselves off their roller grill, that roll, roll, roll away roller grill, where you buy all the hotdogs and you get your hamburger buns would come in from the bakery. That's not happening so much. They want better for you, fresh prepared products.

 

So the decentralization of the supply chain is a real opportunity for those distributors who can adapt, and it's a great opportunity for young companies or startups that want to supply local restaurants and local outlets that sell fresh-prepared, ready-to-eat, to-go food.

 

What are the legacy retailers doing to address this?

 

Well, they are stumbling. Many of them have tried. Let me give them some real credit. Even though there are now 25 restaurants for every grocery store, the average person has to go by 25 restaurants to get to their grocery store. So there's a lot of competition out there.

 

Grocery stores used to sell people food to stock up in pantry. The grocerant sector...And the consumer doesn’t think anymore that they have to have soup for six months. They have to have food for three weeks at a time. They want to get meals for today or tomorrow. And they think meals, not pantry. And so the mindset of the consume has shifted, maybe because there is so many restaurants that offer very competitively priced, complete meals.

 

And the grocery store sector, you have to go home, you have to get it, you have to cook it. You have to start from scratch and spend hours. People say they like to cook. They simply don't do it.

 

But many of the grocery stores, they have a deli department that sells legacy packaged products, and then they have a service deli. But they've gone to, rather than regional manufacturing or local in a city, they might go to a six-state commissary, and they put stuff out that is problem not have good. They have chicken that's cooked somewhere in some other state that comes in cold and seasoned. And it sits there in the glass. And they've tried to make fresh, prepared food at CPG item. It's not working. The customers see through it.

 

Wegmans does a fabulous job using fresh food and doing it. Whole Foods is selling a lot of fresh food. 35% of their sales in their stores come from the fresh food at Whole Foods. Companies like Metropolitan Market sell about 44% of their food is all fresh-prepared food. So, it's happening at a few legacy grocery retailers, but they're selling fresh food, not legacy food, legacy CPG pantry products. And so they have to get a whole new mindset.

 

The traditional grocery stores are losing customers on a regular basis. If it were not for SNAP and WIC and some of these other programs, and if customers were empowered with more choice, they would lose even more customers. So they're not really combating it well enough, and they really need some more research, and they need to look at the consumer and not the pantry. They just still get fliers in the mail and sell you buy six, get six, or something like that. Or buy three, get six at a time, or buy 10 pounds of this, and you get five pounds of that. Those things don't work too well. They do, but for a very small sector of society in today's world. Particularly not for millennials who want fresh-prepared food, and they're migrating to fresh outlets to buy that food.

 

And do you have any final recommendations for supply chain professionals and executives?

 

Yes.Decentralization. Think fresh. Work locally. There is a company in Los Angeles called Every Table, which is selling meals and meal components. There are ways for specialty supplies to make and sell into them new product but that meets their format. The same with companies like Metropolitan Market, Wegmans, and Whole Foods.

 

Selling fresh-prepared food in a new format that's fresh, local, and sustainable in the mind's eye of the customer is a huge opportunity for people. But many of these large distribution companies need to think local and decentralize in order to drive incremental sales.

 

Thanks, Steve, for sharing today.

 

You're very welcome.

 

 

About Steve Johnson

 

 

 

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Steve Johnson

 

Grocerant Guru® Foodservice Solutions®  in Tacoma Washington

 

LinkedIn Profile

I interviewed Claire McEachern who discussed Data Quality As Part of Any Organization's Supply Chain?

 

 

 

 

 

 

Can you first provide a brief background of yourself?

 

Sure. Thanks, Dustin. Hello, everyone.Claire McEachern here. I currently work for a sales technology company. DiscoverOrg specializes in sales intelligence. My role here, I cover everything from websites building to SEO to SEM and blogging, PR, social media, content creation. We're also, really, as an organization, and as the marketing department, really focused on lead generation and sales intelligence and big data and data accuracy as part of our core product offering. And also, just as we are a high growth organization, so it's something that we're really very focused on.

 

Previously, before working at DiscoverOrg, I worked for several years in marketing ecommerce, visual marketing. I did a lot of SEO and SEM before that and within those fields, and where I was working before was primarily in the sustainability realm. So, the products that the companies I worked for produced were in the up cycled space. So, returning what someone else consider to be trash — whether it's just a scrap of leather or it's an unused packaging material, and making that into something that has an even greater value. And prior to that, I worked for a proprietary software company that was focused on employment screening and help solutions. And somewhere during that time, I got my graduate degree in sustainable design and previously, I had an undergraduate degree in sociology.

 

I have found myself in marketing and working for tech and big data.

 

Can you explain data quality and why is it part of any organization's supply chain?

 

I think data quality, no matter what your position is and what your industry is, is absolutely important in ensuring that your business is able to grow, you're able to build strong relationships with your customers and your internal teammates. And that any time that you have good data quality, you're really providing better intelligence to your internal organization so that you guys can grow as well as any of your customers.

 

In DiscoverOrg, we look at data quality and sales intelligence. So, our particular product is a sales intelligence tool that focuses on the contact data, the direct dials, emails, to a 95% accuracy. And one of the things that is really core to our product, we also turn that information, and we map the org charts of organizations with the intent that sales marketing and staffing professionals are able to look at this data and create better relationships. They know who the decision makers are. They know who to contact. They know what their pain points are to be able to sell them, or really to find a best fit for their product or service and then be able to really help their customers, their future customers, find a solution that helps their day-to-day do better, whether that's cloud computing or security or social media tools, or whatever it is.

 

One of the big things for DiscoverOrg is that we are really proud of our data quality. And so, one of the things within our industry, in sales intelligence, a lot of our competitors will use crowd scraping. They'll use algorithms to go on LinkedIn or to look at company pages of teams to figure out an email, usually a first-name.last-name@whatever the domain is. But what this does in this non-human verified way of just crowd and computer and cloud scraping of information is that it doesn't actually provide a lot of accuracy. So, without having someone look at the data and really say, "Okay, this makes sense. This isn't just a computer found a pattern and said, 'This is what it is,'" we actually have an in-house team of researchers, about 150 to 200 people that will verify data every 90 days. And so they keep on top of it, so it's not we looked at it five years ago. It was accurate then. But, really, every 90 days.

 

What this does for our clients is it gives them the peace of mind that when they go in to do their jobs day to day, they're not ending up with a lot of wrong data that's sending them down the wrong path, that they're wasting time. And so, I think, in any business...that's DiscoverOrg's business. But if we look at manufacturing and supply chain, if a manufacturer gets an incorrect material data safety sheet, for example, and that's not correct, it's not filled in, think about how much time that's going to waste for that person's day of having to track it down and connect the dots, cross the T's, make sure that everything is right. If they're not able to trust the data that they're provided by their peers and their teammates, then it can really make the whole house cards tumble, so the speak.

 

I think for every business, whatever you're doing, data quality and accuracy of data is really, really important.

 

Can you talk about some success stories you may have with setting up analytic systems for gaining insights? And if you have anything related to supply chain, that would also be interesting.

 

Some of the analytics...I'm sure everyone these days has heard of big data and predictive analytics. One of the things that our company does, which I think is a really exciting product, it's called OppAlerts. And what it does is it's basically a tool that the end result is to provide people who are looking for opportunities with potential customers of seeing, for example, is IBM, for some reason, looking to switch security partners? So, we've... And we have proprietary algorithms on this. But we are able to look at the content consumption of particular companies. lLt's say IBM all of a sudden, people from that domain start going out and they start looking at a lot of articles and blogs and going to a lot of websites that has to do with cloud security. We take that information, and then, along with our human verification process, it looks like there's a pattern happening here. Let's verify it. Let's see if this is, in fact, true, that they're starting to look at cloud security solutions.

 

Then if that is true, then we have a product that will then notify our customer who are in cloud security that, hey, IBM happens to be consuming a lot of this content. It looks like there is an opportunity to sell and pitch them on a product that meets these kind of needs. So, that's just an example of how we're using analytics and predictive technology to combine the accuracy in supply chain to, again, make it a much more efficient process for people in sales, marketing, and staffing to have better intelligence, build stronger relationships, and drive faster growth in their own businesses.

 

Thanks, Claire, for sharing today. Do you have any final recommendations?

 

I think one of the recommendations, whether you're looking for a data provider or you're looking for a manufacturer, or you're looking for a distributor, is to definitely go out and test whatever their product is. Don't into rely on word of mouth. Make sure that you're able to look at what their data actually is. Make sure that it's accurate. Make sure it is all that they are telling you it is up front, before you go ahead and sign a deal and bring on a new technology or a new process, because I'm sure everyone out there has had some point in their life where they've brought on a new technology or a new vendor or a new whatever it is and maybe they didn't test enough in the beginning, and then they get burned by it three months down. So, think through how much time that is going to waste in your own efficiency and your own processes. So, definitely test, definitely challenge the data. And if anyone is worth their salt, whether, again, it's data, manufacturer, distributor, whatever it is, they'll be able to meet the challenges that you're throwing out there. So, good luck in finding good data.

 

And thanks for sharing today.

 

 

About Claire McEachern

 

 

 

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Claire McEachern

 

Director, Communications & Creative at DiscoverOrg

 

LinkedIn Profile

I interviewed Wolfgang Lehmacher who discussed Autonomous Vehicles and the Impact on Urban Supply.

 

 

 

 

 

 

Wolfgang. Can you first provide a brief background of yourself?

 

I am passionate about the flow of goods and the supply chain, which I consider to be the backbone of business and modern life. My interest lies in particular in the area at the nexus of economy, society and the environment. In particular, I am looking for combinations which at least serve more than one of the three dimensions. We need people and technology to make this happen and achieve progress at this vital nexus. We need to find solutions which cover the needs of seven billion people without depleting our resources. We need to protect the life of future generations. Are we going into the right direction? Yes! However,I believe not fast enough. We need to accelerate and intensify our efforts – individually and collectively!

 

One are we need to focus on is urban planning, in respect to mobility and beyond. Every month the equivalent of the population of Denmark is moving into the cities, this is about six million people. Already today, there are worldwide 300 cities with more than one million inhabitants. The world’s biggest city is Tokyo with around 38 million inhabitants and China plans the Perl River City with 42 million people – resulting from the merger of 11 urban areas – and with a growth projection of 80 million urban dwellers. We easily can imagine the enormous needs in respect to energy, food etc. and of course mobility.

 

Not only the mobility of people: urban dwellers require also commerce. People do not only wish to be mobile and buy goods in shops but also receive online purchases quickly and at home. This increases traffic, and possibly accidents, noise and pollution. Investments in new technology and new models of operation are needed to provide the required capacity but also reduce unwanted side effects, such as CO2 emissions.

 

What are these solutions for today’s overcrowded cities?

 

Two developments are most possibly important: autonomous vehicles and the sharing economy. Just imagine everyone would share vehicles. The World Economic Forum in collaboration with the Boston Consulting Group is working on the understanding of requirements and consequences of operating self-driving vehicles – in particular in cities. Many benefits have been identified. For example: approximately 20 percent better fuel-efficiency, 70 percent less accidents, 60 percent freed parking space, and about1.2 billion hours of pure driving time saved over a period of ten years.The highest willingness to share a self-driving vehicle was encountered in China and India, the lowest in the Netherlands and the United Kingdom.Of course, self-driving comes not without new risks and challenges, such as the impact on jobs. Nevertheless, the combination of autonomous vehicles and sharing economy is a powerful formula Dustin.

 

What are the biggest barriers in respect to implementing the self-driving vehicle concept in today’s cities?

 

The World Economic Forum has spoken to policy makers in 25 cities, including New York, Amsterdam, Dubai and Singapore, and has conducted a consumer survey amongst 5,500 city dwellers.

We know that many cities are pushing towards sustainable mobility modes, such as public transport, walking and cycling. In this light, many policy makers seem to have thought about self-driving vehicles. However, they have expressed that there is high uncertainty, in particular around public acceptance and technological readiness: 56 percent consider consumer acceptance as the top impediment, 44 percent see the biggest barrier in the maturity of the technology. However despite this, 88 percent of the policy makers expect autonomous vehicles to gradually become reality starting within the next ten years.

 

58 percent of the5,500 urban dwellers surveyed in the 10 countries and 27 cities are ready to try a self-driving car. 53 percent are willing to buy one and many are prepared to pay more than 5,000 USD extra for a self-driving vehicle. The most important advantage is seen in the time saved for parking and driving. The biggest concern is safety. And there is good news for the environment too: For 66 percent of the respondents a self-driving vehicle is electric or hybrid.

 

What does this mean for the transport of goods?

 

The person with the truck and the van will be largely freed from driving. Instead, other tasks can then be completed: for example preparing documentation, checking devices or communicating with customers and receivers. Provided legally permitted, also preparing for unloading or sorting can be considered while vehicles are self-driving. Maybe less personnel is required in the driverless future. Consequently, productivity gains, lower costs and better quality and service can be expected. Good news for shippers and transportation companies.

 

We might also see more democratization of the supply chain. Owners of self-driving cars might wish to use the own vehicle to pick-up goods instead of having parcels delivered at home or other places, such as work or service points, by delivery companies. This will probably not replace the delivery services of today’s express parcel operators but might be an interesting supplementary option for consumers. And the retail business as well might benefit from the new level of convenience.

 

The autonomous concept does not come without threats. 60 percent of the policy makers expect that there will be a ban for private cars in a significant part of the city over the next 15 years.Will this ban stay limited to private vehicles? Probably not: over time cities might also be tempted to limit goods delivery activities.In some cities only authorized companies might be allowed to operate a fleet – for example only a self-driving electric and hybrid fleet. Therefore, not only transportation companies, also shippers need to prepare for the driver less future.

 

What are the gaps to be closed, items to be resolved?

 

Although less accidents are expected, we need to better understand the risks and find solutions before going into mass application of autonomous mobility. One concern is cyber risk. We need to ensure that self-driving cars cannot be hacked.There are also ethical questions to be answered. How to decide who the vehicle is supposed to save in case of an accident. Furthermore, cities need to consider the impact on jobs: where to start to permit self-driving operations, in passengers or cargo mobility? In what way: instantly or gradually? And what will be the impact on public transport and transportation companies?

 

 

 

About Wolfgang Lehmacher

 

 

 

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Wolfgang Lehmacher

 

Senior Executive

 

LinkedIn Profile

I interviewed Julio Franca who discussed What Trends will affect the Next Generation of Supply Chains?

 

 

 

 

 

 

Interview 1

 

Please provide a brief background of yourself

Sure. I am a Naval Engineer with a Master in Finance and a MBA at Rotterdam School of Management (top 5 in Europe). I have over 20 years of experience in Supply Chain, having spent ½ of my time as a Supply Chain executive in a FMCG manufacturer, running operations, and the other ½ of my careers as a Supply Chain consultant.

 

Currently I am one of the founding partners of Spin Consulting (www.spinconsulting.net), a specialized SC boutique who differentiates by deliver fast, tangible and sustainable results to our clients.

 

Thanks for having me here.

 

Regarding the top 10 issues affecting the next generation of supply chains, what would you say are the 3 issues are at the very top of the list?

 

1. Service chains will become more important than product chain

2. Companies will need to fully report supply chain externalities.

3. Supply chains must be designed to serve the “base of the pyramid

 

Please explain what each issue is and why it is important. And what can be done to effectively address these 3 issues? 

 

1. Service chains will become more important than product chain:

 

In many if not most business sectors today, great product is considered to be the table stakes just to play the game. Increasingly, discerning consumers are demanding morefrom pre- and post-sales service for the goods they buy. Accordingly, companies that effectively couple the pre- and post-sales service supply chain activities (including product knowledge, in-store service, warranties, responsive consumer services, and the like) will emerge as the winners over their solely product-centric competitors. That message was underscored by Apple CEO Tim Cook in his recent apology to consumers in China for the company’s perceived failure to listen to feedback about post- sales service. This was a great example of a company with one of the most innovative products in the marketplace forgetting that the consumer is still largely in charge and that service plus product (in this case, repair and warranty practices) trumps product only.

 

2. Companies will need to fully report supply chain externalities:

 

Corporate externalities are defined as the impacts of an organization’s manufacturing and business processes on other segments of society—and the need to disclose those externalities. While some work has been done around supply chain sustainability and the need to reduce carbon footprint, companies will need to do a much better job of disclosing the end-to-end impacts of their supply chains. This means measuring and reporting on the effect of major supply chain transactions on jobs created, carbon footprint reduction, sustainable procurement processes, types of labor used, and modes of transportation among others. The customer or consumer will begin to demand the transparency into these impacts much as these have now on the labelling of food and beverage products.

 

3. Supply chains must be designed to serve the “base of the pyramid:

 

The “base” of the pyramid is usually referred to market potential of the 5 billion-pluspeople in the world whose incomes are less than $2,000 a year.  We contend that companies in the consumable and durable sectors, in particular, will need to create products and associated supply chains to support the products that will cater to this market segment. To tap into this enormous potential, our supply chains must go through a total utilitarian design philosophy in order to deliver sustainable bottom-line performance. Current supply chain thinking, which is largely based on a cost plus model, will need to shift to a “not to exceed” cost model.

 

About Julio Franca

 

 

 

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Julio Franca

 

Director at Spin Consulting

 

LinkedIn Profile

I interviewed Vladislav Mandryka who discussed Total Cost of Ownership?

 

 

 

 

 

 

Hi Dustin, thanks for the opportunity of sharing my thoughts about total cost of ownership.

 

Hopefully this information will be useful and valuable for procurement professionals around the world.

 

My name is Vladislav Mandryka. I am procure to pay manager in AnadoluEfes Group with 10-years’ experience in procurement and various skills in strategic sourcing, SRM, project management, supplier performance evaluation. So recently, I have been thinking about TCO concept and particular systematic implementation of this approach. Moreover, I extracted some outcomes that could help to formulate how realize it gradually.

 

What does TCO mean?

 

TCO is a process for knowing all the important supply chain-related costs of doing business with a supplier for services and goods. TCO can improve decision making by helping managers select options that have the best overall cost impact on the organization rather than just providing a lower purchase price. In its broadest sense, TCO looks at the big picture by considering many costs beyond price.When purchasing an item or service, hidden costs may include administrative costs, usage and disposal costs, and elements of the purchase price itself. For example, hidden costs in offshoring include longer lead times, supplier distance, and unforeseen costs. Longer lead times can result due to a supplier being thousands of miles away, which increases the average lead-time and possibly the variation in that lead-time. This can drive up inventory holding costs and safety stock requirements. Distant suppliers, especially when located in different cultures, require more administrative effort to maintain relationships, and the transactions are more complex due to international documentation regulations, as well as currency exchange. Accounting for that type of overhead is part of TCO.

 

In addition, many other related unforeseen costs exist that do not occur with domestic purchases, including import duties, taxes, employing customs house brokers and freight forwarders, insurance coverage, and so on.

 

Structure of TCO

 

Based on my experience I would like to mention that TCO analysis should include 5 steps:

 

  • - prepare for analysis,
  • - map the process,
  • - identify relevant costs,
  • - gather data,
  • - perform analysis.

 

Prepare for Analysis

 

The first phase of TCO is to prepare for analysis by determining if your potential purchase, process, or outsourcing decision being analyzed has a sufficiently high potential to justify the performance of TCO analysis. Here, you want to make some determination that the savings or improvement opportunity is significant, and if so, then you will need to consider assembling a team to do the analysis.

 

This determination will be only a rough approximation, and a quick review is usually all that will be required to see if there are significant, hidden costs that you will be able to affect. Costs can be considered hidden when they may be combined within a general category such as overhead or perhaps mixed with some other cost factors. One example could be disposal costs where a single trash receptacle removal may apply to several departments or operations, with little understanding of the origins of the waste generated.

 

Once you have a project in mind, you will need to assemble a team representing multiple functions potentially impacted, which could include purchasing, finance or accounting, and operations. The value of the team is to gain wide buy-in across the organization, allow for multiple perspectives, and provide access to cost information that might reside in different accounts and departments.

 

Map the Process

 

To map the process you create a diagram that shows the flow of activities involved with the acquisition, use, and ultimate disposal of the good or service that you are buying or the process change that you are considering. Like a road map, the process map is a picture that the team can use to develop an understanding where there may be areas of redundancy or inefficiency—in other words, where the areas are that can potentially be improved.

 

The process map allows the team to depict a complex flow in a more simple and easy-to-explain manner where relationships between activities become obvious. Anyone familiar with the process will be more able to determine if a step has been omitted.

 

Identify Relevant Costs

 

Not all costs are going to be relevant to your TCO project, so it is important to find those that will potentially make a difference to your decision-making process. It is not realistic to include every possible cost. Not only would this be overwhelming, but it is possible that you would quickly find that the cost of the analysis would outweigh its potential benefit. However, you would not want to omit significant costs because it would adversely affect the project’s outcome, which would then hurt the credibility of the analysis. The ability to determine relevant costs is a matter of informed judgment—all the more reason why a cross-functional team is beneficial.

 

There are several key questions that may prove helpful in identifying the relevant costs of your project:

 

• Are you trying to understand the true cost of an item over its entire useful life?

• Are you trying to compare various alternatives, such as two different manufacturing processes?

• Are you looking for alternatives for improvement? One of the most common decisions of this type is the make-or-buy decision, which is also called the outsourcing decision.

 

A powerful approach for identifying relevant costs is to divide them into categories such as usage, price, and administrative, which may also leverage your team’s expertise from such areas as operations, purchasing, and finance and accounting. As you approach the end of this phase, your key output will be a list of the data that the team will need to gather.

 

Gather Data

 

The gather data phase builds on the previous phases of the TCO process and addresses several key questions, including how the data-gathering effort needs to be divided between team members, where data can be collected from, how accurate the data is, and what the team needs to do should no data be available.

 

Another value of having a cross-functional team is that each member will likely have a good idea of where to go to get the data that their own functional area has. There will be challenges because data collection often involves a manual effort that could include sifting through old records, talking with numerous people, and observing actual processes.

 

Not all necessary data may be readily available, and in some cases that which is available may not be considered sufficiently accurate. These are legitimate concerns, and there may be circumstances where the team will need to make informed assumptions and estimates. Data collection needs to be an orderly process where sources are documented in the event that the team needs to return for further details at some future point.

 

Perform Analysis

 

Performing the analysis consists of taking collected data and subjecting it to various processes to convert it into meaningful information for subsequent decision making and management action.

 

Perform analysis is the last phase of a TCO analysis and involves three major steps: determine the unit of analysis, perform a sensitivity analysis, and present the analysis.

 

This phase often begins by determining the unit of analysis that represents the most meaningful way to present the TCO data to the organization. As the team proceeds with the analysis, it may need to gather more data or reevaluate the relevance of certain data.

 

Most TCO analysis is done on a project-by-project basis. A standard template for TCO analysis does not exist, because each analysis is different. However, if the organization completed a similar analysis in the past, it would be useful to review it for lessons learned and to verify whether the team has missed any major cost drivers.

 

How define the unit of analysis

 

It is critical to communicate your TCO results in a way that makes sense to the organization. You must answer questions such as:

 

• How does a company analyze and understand the cost of various purchases?

• Does a company consider annual expenditures as a key performance indicator?

• Is it by piece price or some other performance measure?

 

Four ways exist for examining the costs for a particular project: capital, office or manufacturing equipment, manufacturing components or consumables, and services.

 

Capital

 

To determine the unit of analysis for capital, use the total cost per relevant unit of output. To calculate this, determine the TCO for a specific period, such as the life of a product or a year, and divide it by the volume you plan to use in that same period.

 

For example, to determine the TCO for a car, use the cost per mile or kilometer based on how you drive. Assume the present value of total ownership is $29,000 over a five-year period, including trade-in value. You plan to drive the car 85,000 miles, or 137,000 kilometers, during that time. Therefore, the relevant total cost of ownership is:

$29,000/85,000 miles = $.0341 per mile.

 

Office or Manufacturing Equipment

 

To determine the unit of analysis for office or manufacturing equipment, use the total cost per relevant manufacturing volume. To calculate this, determine the discounted TCO for a specific period and divide it by the volume manufacturing plans to produce for that same period.

 

For example, with a digital copier-printer, use the actual (not potential) number of images you plan to print or copy as the volume. Assume the present value of the copier-printer, including maintenance, supplies, and all other relevant items, is $500,000. You plan to use the copier for three years and create 200,000 images during that time. Therefore, the relevant TCO is:

 

$500,000/200,000 images = $2.50 per image.

 

Manufacturing Components or Consumables

 

To determine the unit of analysis for manufacturing components or consumables, use the total cost per usable units purchased. To calculate this, determine the TCO for a specific period and divide it by the number of units purchased during that same period.

 

For example, add the TCO of all purchases for particular parts―including prices, delivery, return costs, travel expenses, holding costs, and so on―and divide by the volume purchased during that time. Assume that a firm purchased 50,000 integrated circuits (ICs) at a price of $800,000. It paid a total of $2,800, which included shipping insurance, warehouse storage until used, and testing by an outside firm. Ten of the ICs are discovered to be damaged and unusable at about the same time the firm pays for them. Therefore, the relevant cost of ownership is:

 

$802,800/49,990 ICs = $16.06 per IC.

 

Services

 

To determine the unit of analysis for services, use the total cost to have the services satisfactorily performed. This may mean that cost per hour is not relevant unless a task takes everyone the same number of hours to perform. To calculate this, determine the total relevant cost and divide it by output, not input.

 

If you have an hourly cost, multiply it by the number of hours over the specific time you are analyzing.

 

For example, the relevant cost for cleaning an office building is the total cost to clean per time cleaned, or per week, month, or year. Do not use the hourly rate paid if the company bills by the hour because one supplier may charge $28 per hour while another charges $32 per hour, but the latter takes significantly fewer hours to perform the same task.

 

Assume a company received a quote for cleaning its processing plant 250 times a year. The quote is $30 per hour including all supplies, and it will require 20 person hours each day. Therefore, the relevant TCO for one year is:

 

$30 per hour × 20 hours per day × 250 days = $150,000.

 

 

About Vladislav Mandryka

 

 

 

 

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Vladislav Mandryka

 

Senior Procurement Specialist at Anadolu Efes, MBA

 

LinkedIn Profile

I interviewed Mark Katchen who discussed International Ethics in Supply Chain.

 

 

 

 

 

 

Mark Katchen, who is the managing principal of the Phylmar Group, and this is an International Environmental Health and Safety and Sustainability Consulting Firm. Mark is a certified Industrial Hygienist with 35 years in the business, and he has experience dealing with international environmental supply chain issues. Today the topic is International Ethics in Supply Chain. So, Mark, is there any more you want to provide about a background of yourself?

 

No, I think that's about it. We certainly have a broad base in some of these... broadly, from international. We do work in Asia and Europe, South America... So, we've got quite a broad base of experience.

 

What is a typical scenario that you deal with regarding international environmental supply chain issues?

 

Well, from the ethical standpoint, let's take an example of a company that's operating and producing, say, widgets in the US, United Kingdom, and Germany. And as part of that production process, they have to use, say, a fairly toxic chemical called methylene chloride. In each of those countries, there's different limits of exposure that are allowed for given employee populations. The question is, which limit or limits should the company adhere to in those varying facilities. That's a typical scenario.

 

Are there any frameworks that you can use to resolve these issues?

 

Yes.As a matter of fact, we try to use what's known as an eight-step framework to deal with some of these ethical conundrums. And they're really rooted in a couple of basic principles. One is what is called now, non-malfeasance, which is avoiding any kind of harmful acts. Second is beneficence, which really is maximizing potential benefits. Third is respect for individuals and communities. And the fourth of one of justice — treating equal equally, so to speak.

 

So, with respect to the framework, the first step is really gathering facts. In other words, what are those? In this case, what are those particular exposure limits in each of the locations? For example, here in the United States, the exposure limit is what we call 25 parts per million of exposure. In the UK, it's 100, and in Germany, it's 50. So, we know that. And the next step is we then review the standards for ethical practice that a professional who is acting in that way — in my case, being a certified industrial hygienist — I'm looking at what is called the American Board of Industrial Hygiene has an ethical practice. And so, I'm going to use that as a basis in terms of code of ethics that I'm going to apply.

 

And the third step is really to articulate those ethical concerns. For example, if the company really complies with the local law, it may be treating employees differently with respect to disease risks in these different localities. So, that presents the dilemma that we're having to deal with.

 

The fourth step is really determining the ethic, principles, involved. In other words, we'll get into issues of compliance as a baseline, but what about... How does that gel with the code of ethics that a professional will have, like myself, in trying to apply these standards as well as the code, and how do we mesh them together?

 

In the fifth step, we determine whether the principles are in tension with each other and to see if, for example, the dilemma provides some nuances to consider. For example, complying with the law is an ethical act. So, therefore, if we're requesting the UK factory to reduce its exposure limits by a factor of four, maybe we increase cost for them. If the local law is satisfied,should the cost be considered part of the cost-benefit equation? Maybe yes and maybe no, because while we take that into consideration, how does that play into the fact that we're still exposing a population at greater risk if we only look at those cost perspectives. So, we're always looking at not only cost-benefit analysis, but from an ethical standpoint, how do we work all that into this framework?

 

The sixth step is determining options, including analysis of the pros and cons. So, we just talked about that from a cost standpoint. What are the good parts and the bad parts?So that, while it may cost a little more to bring those exposure levels down to a common exposure level, it may be beneficial, in the long run, because if we have information that suggests that people would be at considerably good risk to be exposed at, say, the UK level of 100 parts per million, we may be saving us in the long run in terms of that employee's productivity. Because if they get sick, especially if it's something like cancer, we would lose that individual and therefore, that would have a much broader impact than maybe the cost of actually controlling the exposure.

 

The seventh step is soliciting feedback and that's including from local shareholders, stakeholders. Excuse me. So, we want to get input from, say, the UK and Germany folks to indicate how that's going to work. Is that lowest limit of 25 parts per million, for example, attainable? And what would that take and over what period of time can we do it? It may take a few years and work at certain budgeting requirements to make sure it works.

 

And finally, the eighth step is to finally decide on an approach. What approach are we finally going to take? How are we going to implement this? What makes the most sense in terms of our operations on this global scale?

 

So, those are the, Dustin, the eight steps that we would use in this process.

 

How do you apply these frameworks in practice?

 

So, at the end of the day, what we're really trying to do is look at what makes the most sense in terms of achieving, really, as low as reasonably achievable perspective in all of the scenarios. We want to make sure. Because we always find out new information as things evolve. Normally these limits never go up or increase. They always tend to go down. And as a result, again, we may reach a certain level today, but if we get more information tomorrow, it really makes sense to try to get as low as we possibly can. And so, even though we may hit a certain, or try to establish, a certain benchmark today, if we can get lower using the same technology or modification, even slightly more, then it makes sense to do it. So, we're always trying to get the lowest reasonable achievable limit that we can.

 

Thank you, Mark, for sharing today.

 

Okay. Thank you very much, Dustin. I appreciate the opportunity.

 

 

 

About Mark Katchen

 

 

 

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Mark Katchen

 

Managing Principal at The Phylmar Group, Inc.

 

LinkedIn Profile

I interviewed Dr. Emre Göllü who discussed Common Approach to Supply Chain and Procurement with an Innovative Perspective.

 

 

 

 

My name is Emre Göllü. I am Turkish, working since 16 years in the pharmaceutical industry, in the field of operations management in which areas of supply chain management, production, and quality management have been included in. I was born and grew up in Istanbul here, graduated chemical engineering in Istanbul Technical University. Then also continued the Masters of Science in the same field. I studied MBA to enrich the capabilities from the commercial sense, and I also completed my PhD in business administration with the specific focus of management in the specialization on supply chain management. So, I feel directly the linkage between the professional carriers, requirements, and academia, its importance.

 

 

And today, I would like to speak about how it can be a common approach, as an innovative approach to bring procurement and supply chain together from strategic point of view, bear these both to our fields, are mostly separate to each other, if you look at any of the organizations in various sectors.

 

 

Can you talk about this common approach to supply chain and procurement?

 

 

Yeah. You know, let's start with innovation. Because it is one of the most preferred and most trendy topics in the business environment in the last couple of years, we can say. Everyone is speaking of innovation. But how would we approach innovation? It has the source of innovatus in Latin, which means to find new methods, create new methodologies for sociological, cultural, and managerial issues and, obtain new and different outcome about it. Create new ways, find new methods, especially these are called...innovation. But how to combine this synergy of procurement and supply chain through innovation. That is out key point, you know, because in the traditional business models and organizations structures, the function of procurement can be seen as very limited.

 

 

It is directly related to the inbound logistics part of supply chain, like a support function. What is expected in that sense from procurement? Can we say, okay, just take care of the inputs to the process, which means that, okay, please make it relevant to provide that all the required inputs are provided on time and in full and just talk about it. And don't think about the further steps within this chain as to how the process with be executed. What are the requirements? What will be the outcome? And how the supply chain directly would continue in order to create the value chain in that sense?

 

 

Right now, the business environment has been rapidly changing through globally, widespread competition, which we call as globalization, where various sectors, we see that many companies from different countries do not directly hinder to compete in the new markets in different countries, and which directly brings all the competitors to think of new approaches directly to get more benefits from this competition and directly to create added value for themselves and directly to bring them upfront in this ongoing competition. Because competition will be always continuing. There will be the risk, accordingly occurring in that sense.

 

 

So, in order to survive in such kind of a changing, competitive environment and where the dynamics are rapid and highly evolving, there are some organizational and structural changes and conversions, necessary, which brings strategic partnerships and strategic internal alliances into the fields. Because, if we speak of, for instance, global competition, which means that as a company, you need to think out of borders. You need to adapt yourself to the requirements of different markets. You need to adapt your processes to meet the demands that will come in different shapes.

 

 

What does this mean, to create this competitive advantage?

 

 

First, internally, as your whole company, organizational-wise, you need to create the capability of responding quickly to market demands. And secondly, you need to be very flexible against a rapidly changing environment in the markets. It is important to create cost advantage for yourself and to directly convert this into a real asset in the competition. And also, it is important to keep the cash flow very efficient, which is also crucial to serve in the rapidly changing and developing markets.

 

 

Therefore, it is important to have this synergy between procurement and the supply chain. We have our mostly distinction in various organizations, if you look at different sectors. Where this role of procurement has been really limited compared to the sub flow of supply chain processes. In that sense, the approach to the procurement process can be brought from a very strategic perspective instead of a limited operations perspective, we can say, because as I tried to point out, it has been the approach of keeping the role of procurement very limited within the organization. Even it is necessary to involve procurement into the strategic perspective to be able to compete in the rapid changing and evolving environments, where the dynamics are defined each other by themselves.

 

 

And if you won’t be able to create advantage to efficient procurement to efficient sourcing of the inputs, you won't be able to create very efficient outputs. That is the critical process.

 

 

You know, procurement is mainly focused on the relations — the vendors and suppliers, we can say. And it is important to manage your suppliers in a very competitive and efficient way, because they will always create your inputs for your processes, for the goods you will be producing or for the services you will be rendering. So, in order to be able to create competitiveness, efficiency, and profitability for your own business, so you need to get this insights from your suppliers in that process.

 

 

And in that context, it is also the crucial point for procurement that it can be included into the supply chain process as a strategic partner where the negotiation part with the supplies to have the efficiency in the relations management and a colleague to create the continuity and the sustainability with them, to create cost saving through this cooperation. Also to determine alternatives suppliers, especially in the critical procurements, which can be directly classified as the bottlenecks, especially for production processes, we can say, for the components or for the specific goods, which cannot be tolerated in case of any interruption. That is important, as well as it is also a very crucial matter to have the capability to measure the performance of the supplier. Otherwise, it won't be possible to evaluate the relation with the supplier, rather, it's directly creating added value for the organization or not.

 

 

There, where the competency of the procurement department is high, it can create added value through the synergy or the supply chain. I can bring that certain example for this from my organization where we have succeeded to have this corporation between procurement and supply chain departments, where, through only simple negotiation rounds with the key suppliers, we can say, and through some revisions and amendments in the supply conditions, we have been able to achieve a 3% yearly cost savings.

 

 

And a second benefit has been the improvements in the payment term conditions, which directly has shown a positive impact on the cash flow of the company, where we have increased the payment term plus 30 days. And as well as we have been able to establish certain scorecards, directly to trace the performances of suppliers continuously and use this performance measurement as a real feedback during the negotiation rounds carried out with them. This has been, also, an important process, because in the past, only directly based on the carrying out of negotiation based on census, feelings, and feedbacks exchanges through only relations and verbal communications cannot create a certain and precise value. But if it speaks of facts and figures, based on the performances, this directly brings up certain evidences and shows that how the supplier should approach the business, to improve itself or to keep its position. This is always important.

 

 

And the procurement department has the key strategic partner, it is solid background and expertise on this can directly bring very added value. And this synergy has also brought other benefits as well, like positioning of the procurement department within the organization. If you look at the traditional and classical organizations, we see that the role of the procurement is limited, as I tried to point out during my speech, we can say. It was only to create the input for the process, to take care of from the supply chain point of view, we can say, "Okay, handle the inbound logistics and the procurement also." We can say to purchase and leave it.

 

 

But for the moment, in order to achieve this synergy twist, strategic advantage, we can say, "Okay, just do not hesitate to extend it by using the procurement function." Purchase or make it purchased for the organization. Think beyond the processes on the strategic way.

 

Observe the benefits and observe the performance of, and accordingly, measure it and then try to keep the continuity of this benefit within the organization. And if there will be an interruption or dissatisfaction to the process, it will be possible to, again, to get back to the starting point. Start with the suppliers, and it will be easy to define the root cause, where the bottleneck is coming from, where these inefficiencies are caused by.

 

 

And it also increases the teamwork and coordination between the, inside the organization, between the different departments and functions, we can say, which is also desired, especially if we speak of flexibility and agility in this rapid, competitive environment of today. Everyone is speaking of creating a team spirit to achieve rapid, competitive and profitable results. But in order to realize this, it should be a background, directly consistent, where different people from different departments with different responsibilities, experiences, and expertise should be aware of how to create added value as to how to bring in with their personal capabilities, and convert this into real common benefits.

 

 

And this synergy, also, I can tell you it definitely increases the efficiency of decision making within the organization, because our different department starts and learns how to think from different perspectives in that sense, especially in the technical department. We see that the strategic perspective might be really limited, where people focus on only the processes.But if it would be the possibility to make everyone think of end to end processes, its flow, and the positioning of the departments in that flow, how it may be important to keep the continuity for everyone and knowing each other as a combination, supporting to each other in the flow like a real chain, it would be possible to come to a real value chain.

 

 

And what can be done to achieve competitive advantage through this synergy? It is easily, we can say, first, to intent, plan, and initiate the process to create a strategic procurement model, and as well as be directly encouraging to create common projects within the organization, where various departments are coming together and cooperate each other. And, as a result, it will be possible for the organization to receive the required responsiveness, flexibility, and agility as well as the profitability as a real outcome and the efficiency in the utilization of the time, manpower, and resources.

 

 

Thank you, Emre, for sharing today.

 

 

Thanks a lot. My pleasure.

 

 

 

 

About Dr. Emre Göllü

 

 

 

 

 

 

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Dr. Emre Göllü, PhD

 

Senior Supply Chain Manager, Turkey & MENA Region at UCB Pharma A.Ş

 

LinkedIn Profile

I interviewed Dick Metzler who discussed The Uberization of Freight.

 

 

 

 

 

 

Can you first provide a brief background of yourself?

 

Sure. My entire career was in transportation and logistics. My mother and dad met at my grandfather's warehousing and trucking company on the south side of Pittsburgh, Pennsylvania. So, logistics ran in my DNA, I guess you could say. But I spent a lot of years at FedEx, TNT, and DHL in the express ground parcel business. I also, prior to coming to uShip, was doing acquisitions at XPO Logistics. Prior to that, I was involved in the trucking and warehousing industry at Greatwide Logistics.

 

What is the sharing economy?

 

This is one of those things that a lot of people have a lot of different opinions on. I'll just give you mine. It's on-demand companies really aggregating demand in an online manner, but that fulfill that demand is some kind of offline type of scenario. And where a lot of this has gotten started, where the biggest awareness and the best examples that everybody knows is Amazon and Uber, if you will. A lot of people who are seeing the success there, they're wanting to be the Uber of almost everything.

 

What does this mean for the trucking and logistics industry?

 

The trucking and logistics industry has yet to be dramatically affected by a large degree, because a lot of what is being discussed is on demand. And on-demand is a subset of the sharing economy, which means that there is an order request, and there's immediate fulfillment, oftentimes in one to two hours. But that part of the sharing economy, we think, is a difficult part to sustain and grow and scale over the long term within trucking and logistics.

 

Where we do think it makes sense is to support the obvious consumer demand for free shipping with more cost effective, slower, and more innovative types of solutions that are more cost effective. Consumer have said in research, time and time again, they'd rather have free shipping than rather have speed. And a relatively small number of consumers have really taken up on one to two hours services. Virtually none of them are willing to pay a lot more for it. Just a very narrow niche in that regard.

 

Could that change, and could Amazon change expectations? And could Uber start delivering packages in the back of cars? Sure. But there isn't any strong signs at this point that that change will occur any time soon.

 

Where will this all shake out?

 

I think there will be a lot of dead VC money that has gone into one and two here startups, trying to out Amazon Amazon, or out Uber Uber. I think there's only two ways that people are going to be successful in the sharing economy and on-demand. And that's if they either have phenomenal route density in residential neighborhoods — think FedEx, UPS, United States Postal Service, some of the regional couriers, things of that nature. And like I said, maybe Uber if they scale up Uber Rush and Uber of everything. But besides that, it's very difficult for a startups to get scale, where essentially the United States Postal Service is delivering to every address in America every day in sequence versus one to two hour delivers zinging back and forth across town for five dollars. I've been doing this a long time, and I'm telling you that won't work. So, that's one way.

 

The second way is to have higher revenue for per stop in trucking and logistics for the sharing economy, business to consumer type things. Think of a gun safe you ordered online or a refrigerator that needs to get to your house. Well, the most common way of doing that today is less than truckload, but they really don't want to do that. We're in that business from a marketplace point of view and in terms of household goods, and things of that nature, virtually anything you can imagine ordering online, up to and including a car.

 

So, that's the other way to do it.And there's some folks in this space, including us, that are targeting that sector as the other way to go.

 

Thanks, Dick. Do you have any final comments on this topic?

 

Yeah. I think, obviously, this is the highest growth area of retail and, obviously transportation and logistics, retail is a key consumer and a key customer for our industry. And I think that finding ways to more efficiently mesh consumer need with consumer demand on cost efficiency and overall profitability of the providers doing this, is where it's all going to shake out, and that's where the winners and losers are going to defined. I'd say most of the VC-funded startups and on-demand delivery are not going to make it.

 

And thanks for sharing today.

 

Thank you, Dustin.

 

 

About Dick Metzler

 

 

 

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Dick Metzler

 

Chief Marketing Officer at uShip.com

 

LinkedIn Profile

I interviewed Julio Franca who discussed How does a Successful Supply Chain Academy look like?.

 

 

 

 

 

 

Can you please give us a bit of background on your experience in Developing and Implementation Supply Chain Academies?

 

Sure. I firstly got involved in 2005/6 with the subject, when at one of my previous employers, I was invited to implement the Supply Chain Academy at this top FMCG manufacturer, who is considered to be one of the best supply chains in the world (according to the Gartner ranking).

 

At the time, it had been identified a considerable gap in the Supply Chain skills and competencies globally, and we needed to develop a holistic solution to considerable raise the bar, and raise the ceiling, of over 20.000 SC professionals globally. Without that, the business would strong to deliver the expected top and bottom line results.

 

Over a couple of years, we developed and implemented a very comprehensive Supply Chain Academy solution, which included, for every Supply Chain area (Source, Plan, Make and Deliver), a detailed set of:

 

1) Skills Dictionaries

2) Job Skills Profiles

3) New Blended Learning Solutions (face to face courses, e-Learnings, virtual gatherings, etc)

4) Learning Frameworks

5) Certification Solutions

6) An integrated Career Path & Principles solution

7) An integrated global Supply Chain Portal

8) A Learning Management System Solution among others

 

After this initial experience, I then moved into a top consultancy firm, with a remarkable Supply Chain Academy e-learning solution, where I worked as a Sr Manager for nearly 2 years, being in charge of global supply chain projects, among others, implementing Supply Chain Academies in various clients across the globe.

 

In 2009, I then founded Spin Consulting, a boutique SC Consultancy, and we further deployed these refined solutions in more than clients over the last 7 years, in different industries such as food, personal care, pharmaceutical and chemicals, among others.

 

What are the typical benefits for the business?

 

That is a very good question. Ensuring that your people possess the right level of skills, knowledge and competencies is crucial for the success of any individua and business.

 

Organizations usually recognize that to a certain extend, but however, they allocate a very considerable budget ($$$) on training / learning solutions, which are utilized, in a considerably or even fully disconnected way when compared to the REAL business and supply chain requirements.

 

First and foremost, a well-oiled Supply Chain Academy can support the Supply Chain Leaders to lead their teams at a much higher level of performance, consequently delivering superior tangible results to the business. That in all imaginable dimensions of Supply Chain: safety, quality, service, costs, differentiated solutions, etc. You name it !

 

In addition to that, a learning & career integrated solution, fully aligned to the business needs, enable the HR teams to closely measure and monitor the Return on Investment of the ‘ big’ training budgets they own. It is about doing much more for their people with much less investment ! Simple like that!

 

There are some others less ‘ tangible’, and still very important benefits, such us moral, power of attraction of talents, a high performance culture, etc, etc… But in all honestly, at the end of the day is about DELIVER MORE RESULTS and SPENDING LESS MONEY, at the same time.

 

Unfortunately, I still see some quite big organizations that don’t get the point yet, and continue to ‘ burn’  money by having a sort of ‘ tick in the boss’  approach for their Supply Chain Academy.

 

Can you go a bit more in details on that ?

 

Sure. Implementing a High Performing Supply Chain Academy goes well beyond of offering a portfolio of ‘ somecourses’  on an annual basis. It is a cultural transformation whereby SC and HR work closely together in terms of:

 

1) Understanding the REAL business and supply chain challenges

2) Developing a fit for purpose SC Academy solution which encompasses the points 1 to 8of my answer to your 1st question

3) Ensure that the gaps are identified on an INDIVIDUAL (not generic) basis and therefore the learning solutions are then ‘customised’ based on each’s department / individual / geographic needs

4) Implementing it through the entire S/Chain based on an unique approach, so professionals can develop their careers throughout the various SC areas (at the end, Supply Chain is a very integrative area!)

5) Strongly linking it through the annual reviews, development plans and career progression tools from the HR teams

6) Ensuring that the learning is always implemented back at work, with clear targets of improvement, and a clear measure of ROI (I like the Kirk Patrick model on that one)

 

What are the Key Success Factors for a High Performance Supply Chain Academy?

 

Well, I think it is a combination of all the above, which typically is a big change management programme, on top of the required technical solutions. Due to the degree of newness involved, usually organizations are supported by external consultancies like ourselves.

 

I have seen some trials of implementing an in-house solution, but in all honesty, it ends up most of the time, in the old and wrong mindset of having ‘a portfolio of few outdated and not relevant courses’ available and running a couple of times a year. A very bad investment the learning budget, overall…

 

In addition to that:

 

1) Sponsorship of the SC and HR leaders is crucial.

2) The understanding of the real TOP and BOTTOM line benefits (you would be surprised on how often I find professionals with over 10-15 years of experience that simply don’t get the point)…

3) Willingness to go through the required cultural transformation

4) SC Leaders able to progressively take ownership as Subject Matter Experts

5) A good tool / system able to collect / track / report data on a constant basis

 

Thanks for that. Can you please provide a brief overview about yourself.

 

I am a Naval Engineer with a Master in Finance and a MBA at Rotterdam School of Management (top 5 in Europe). I have over 20 years of experience in Supply Chain, having spent ½ of my time as a Supply Chain executive in a FMCG manufacturer, running operations, and the other ½ of my careers as a Supply Chain consultant.

 

Currently I am one of the founding partners of Spin Consulting (www.spinconsulting.net), a specialized SC boutique who differentiates by deliver fast, tangible and sustainable results to our clients.

 

Thanks for having me here.

 

 

About Julio Franca

 

 

 

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Julio Franca

 

Director at Spin Consulting

 

LinkedIn Profile

I interviewed David Rajakovich who discussed Digital Learning in Procurement and Supply Chain.

 

 

 

 

 

 

Can you first provide a brief background of yourself?

 

Yes. Thanks, Dustin, for having me. It's a pleasure to be on your blog. My name is David Rajakovich. I'm an American that helps to be living in the UK. I started off my career as a US Army air defense officer. I have experience working in manufacturing. I've worked for a number of years in a procurement consultancy and most recently and currently, I'm a managing partner at Procurement Academy, which now includes Supply Chain Academy.

 

What outcomes can be expected from digital learning and procurement in supply chain?

 

Really, digital learning is just a very efficient and cost effective way to improve to performance of procurement and supply chain teams. One hour of good, what we call, high impact e-learning is just as effective as an entire morning spent in the classroom, because you don't have to... The trainer doesn't have to think about examples and explain things. All of that is made very concise. And digital learning, obviously, has the advantage of not having to deal with all the travel and logistics and missed work time that's involved with classroom training.

 

Our training focuses, really, on showing people how to apply learning, rather than just providing high-sounding principles and things that people then are left confused about how do they go and actually apply it in their job. And that's one of the founding principles of how we build our content.

 

And training is directly linked to improved performance because, by the end of our programs, people have not only learned the right way to do things, but they've also actually applied it in their own context.

 

How do you demonstrate that students can apply what they've learned? Do you have any specific theory of learning that guides your work?

 

That's a great question. I'll take the first of first. So, how do they apply what they've learned, or how do we know that they've applied what they've learned, and that's easy, because they've actually done it in our learning programs. Learners are asked to apply their learning throughout our training programs in a number of different ways, becoming more specific to them as they go along in their training plan.

 

In terms of the second question, we make use of the 70-20-10 model, which has become the dominant model in corporate learning. And that means that 70% of learning is done on the job. 20% comes from conversations with managers and peers. And only 10% comes from formal learning. And our training programs engage learners in each part of that model.

 

Basically, each step in our learning program builds off the previous one, and they become more and more practical, what we call application based, until learners are actually asked to apply it in their own situations and produce outputs. We get line managers involved and even top managers, so we know that our training programs have an impact.

 

Do you have any good results or success you can share?

 

Absolutely. I mean, clients stick with us, so we must be doing something right. Also, we're continuously adding to what is the largest catalog in procurement and quickly becoming the largest in supply chain. So, there's always more to learn. Generally, clients are hungry to continue adding to their skills, and that is mostly even driven from the learners themselves.

 

In other cases, even though we're not a consultancy, clients establish the models that we present in our courses as their own ways of working. And finally, what I'd like to mention is there's Roche who's a long-time client, who won the Procurement Leaders' Learning and Development Award in 1015, probably the most prestigious award in corporate learning and development that there is in procurement.

 

So, we've seen quite a few good results in a number of different ways, Roche probably being the highlight. But all of our clients, I think, due to the fact that they continue coming back for more, and they continue giving us good feedback, so we know that we're on the right track.

 

Well, thanks, David, for sharing today.

 

Thank you, Dustin. It was a pleasure. And I'm sure we'll speak again soon.

 

 

About David Rajakovich

 

 

 

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David Rajakovich

 

Managing Partner at Procurement Academy and Supply Chain Academy

 

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