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A Supply Chain/Strategic Sourcing learning community devoted to ideas you can use in your work or daily life.

Archive for the ‘Sourcing/Supply Chain in Personal Life’ Category

Got a great tip on how you applied some sourcing concept in your personal life? Did you just negotiate a great deal using BATNA? Share any tips that have worked for you here!!

TCO has Failed! Value Maximization is the “Next” Practice Webinar

Posted by thempowergroup on September 2, 2010

Join Dalip Raheja, CEO for The Mpower Group, for this webinar as he examines the underlying reasons that a Total Cost of Ownership approach to procurement will NEVER yield exceptional business results.

Register Now

Date: Friday, September 17, 2010
Time: 12:00 p.m. CDT

The last decade has been one of continued elevated awareness for Procurement & Supply Chain organizations. C-Suites have increasingly looked to these functions as a source of cost reduction and competitive advantage. This webinar will discuss the fundamental challenges that Sourcing & Supply Chain executives face today in their quest to meet rising expectations, elevate the role of their function, and drive exceptional business results.

Based on research done by The Mpower Group, we lay out an argument that says that the way Strategic Sourcing is done today ultimately destroys long-term value. It will never be the silver bullet that so many boards and CEOs expect.

What’s needed is a new approach to sourcing, a “Next” Practice.

Join us as we share how a Value-based approach to Strategic Sourcing & Supply Chain Management can close the gap between what you are doing today and what your organization needs to be doing to drive exceptional business results.

Based on a 2009 survey of executives, analysts and industry consultants, we’ve determined that the majority of Procurement & Supply Chain organizations still struggle with many of the same challenges they faced a decade ago – despite huge investments in people, processes and technologies. We’ve concluded that this stagnation is the result of A) fundamentally weak strategies and B) poor implementation/adoption of sound strategies.

Regards,

Nicolas Hummer
Director of Client Relations
The Mpower Group, Inc.
nicoh@thempowergroup.com

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Safety vs. Cost Savings – What am I missing?

Posted by annekohler on July 1, 2010

There was an article in the Chicago Tribune on Sunday,  American Airlines fuels a debate by Jon Hilkevitch and Julie Johnson, discussing American Airlines aggressive move to cut costs by reducing the amount of reserve fuel carried on commercial flights.  Traditionally, this is a decision made by the flight’s captain and the dispatcher.  American, however, is proposing to rely on a sophisticated database to make that decision which will result in significant cost savings for the airline BUT at increased risk.   Pilots are both furious and concerned.

There is an ongoing debate between the pilots and American as to how much reserve fuel is really necessary.  No one is concerned that the fuel conservation effort will cause an aircraft to run out of fuel mid-air but it could require tapping into the reserve which pilots feel should never be touched (except in emergencies).  While an aircraft will not run out of fuel, it may need to divert a flight which is both inconvenient and increases the safety concerns for the flight. “With diversions, the complexity of operations goes through the roof.”

With all the negative press both Toyota (haven’t heard much about them since BP stepped into the limelight) and BP received because of speculation that cost cutting was valued over safety, you would hope that American would be smarter.   What am I missing?

This case is yet another example of “faulty regulation” – see Why Risk Assessment Matters by Lowell Yarusso, PhD, in Risk & Insurance Magazine, whereby American Airlines  is willing to relax it’s own prudent internal controls to save a few dollars.  As BP learned – the hard way, it will take only one accident that can be attributed to American’s fuel conservation effort for any cost savings and even their entire Market Cap to be wiped out in an instant.

In addition, we have been discussing in previous blogs the need for companies to refocus on value to the customer.  As a frequent flier, I can live with no blankets, paying for food and even paying for my carry-on luggage.  But saving a few pennies on airfare because less emergency fuel is available for an “emergency” seems crazy to me.

Whoever is in charge of “cost costing” at American Airlines (and I hope in this case it is NOT the Strategic Sourcing organization) really needs to listen to their most critical stakeholders – the flight captain and the passengers who will always trade cost savings for safety.  As a passenger, while I value an on-time flight at a reasonable price, I place more value on getting there in one piece.

A refocus on value, as opposed to cost, can actually help companies redefine the market they are a part of, BUT more importantly redefine their place in that market.  Go Value!!!!!

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The Bagel Problem – Supply Chain Management 101

Posted by thempowergroup on June 17, 2010

Just a Bagel?

Isn’t it nice when you arrive at work and find that one of your fellow employees took it upon themselves to treat the rest of the office with bagels or some other form of breakfast treat?  It makes you feel as if that Monday, when you’re running late and leaving the house without breakfast, really isn’t that bad.  Why do the bagels only come on certain days…special days?  Can’t every day be “bagel day?”  How hard could it be to make that happen?  We just need one person to pick up the bagels each day, right?

That’s what I thought.

My second day as an intern at The Mpower Group was when I was asked to find a “bagel solution.”  I honestly didn’t even know what this meant.  The bagels were getting here every Monday, Wednesday, and Friday, so what is the problem?  I realized the bagels were not arriving consistently at the same time.  Sometimes they would be here by 7am with the first person, but often not until 9am.  Sometimes two people would bring in bagels, and every-so-often no one would bring bagels.  The process needed a little more structure.  This way, the bagels would arrive at the right time every other day.  I developed a flow chart of the process and procedure in purchasing the bagels and getting them to the office.  Little did I know this was only the tip of the iceberg.  I was about to experience supply chain management 101.  Who knew it could be so complicated!

I started devising alternative solutions because the bagels were still not arriving at the desired time.  Employees were getting frustrated when the question “Who is picking up the bagels?” continued to circle around the office.  I tried setting up catering accounts with Einstein Bros. and Panera Bread to have the bagels delivered every Monday, Wednesday, and Friday.  This ensured freshness and no one from the office was responsible for picking them up.  The only downfall:  $50.00 minimum per catering order…that’s approximately 4 bagels per day for an office of 10.  I knew this solution was too good to be true!

I began thinking more strategically and approached this “bagel solution” as if it was a real supply chain problem…The Mpower Group way.

First, I communicated the desire for a new process and developed interview questions for each TMG employee.  These questions included:

  • Who eats bagels in the office?
  • How many per person?
  • What kinds of bagels are preferred?
  • What are the preferred cream cheese flavors?

After collecting this data, I asked for feedback on current process (i.e. what is currently working and what is currently not working.)  I then assessed the possible supply bases (including Dunkin’ Donuts, Einstein Bros., and Panera Bread) to make sure I was accommodating all employees’ needs as much as possible.  I then separated individual wants and needs to confirm that our priorities were straight throughout the development of this new process.

After making the executive decision to develop a standing order with Einstein Bros., our baker’s dozen, with all of our favorite bagels and cream cheese spreads, is waiting for pick-up at 7am every Monday-Wednesday-Friday; Sliced and ready to be consumed!

After figuring out the proper procurement and logistics for this process, the next items to be considered in this supply chain include storage, inventory, and maintenance.  I devised an easy-to-read flow chart (ordered by time) to organize the different responsibilities each TMG employee holds in this new process.  The responsibilities include:

  • Setting up the bagel station by a certain time
  • Clearing the station by a certain time
  • Marking the cream cheese with a date so that we know how fresh it is
  • Placing the bagels in sealed containers
  • Taking inventory of plates and knives
  • Discarding the bagels & cream cheese

So long as responsibilities are being handled properly, we will have the cleanest bagel station, along with the freshest bagels and cream cheese.

After considering storage, inventory, and maintenance, I found it important to have a process/solution measurement.  With this, I can receive feedback from all employees in regards to the new bagel process solution.  Every week, I have the opportunity to call Einstein Bros. and adjust my standing order to accommodate to the employees’ needs.  At the end of the summer, when I return to school, I will transition the monitoring and supply chain management tasks to another TMG employee.

Since my focus is to make this process simple for each bagel consumer, I took morning trends into consideration and thought about something other than bagels for a moment.  Why should the employees of this office have to walk into a different room in order to get their morning coffee?  They should be able to pour their coffee at the same time their bagel is toasting.  With this, I developed a coffee station right next to the newly developed bagel station.  This simplifies the morning processes and lessens the traffic within the office.

This project took a great investment in time, feedback, trial & error, and multiple attempts towards success.  Realizing that there was truly a glitch in the morning process’ supply chain was the first major step in developing an efficient and effective solution.  The main criteria for success included executing the new process under proper supply chain management after it had been developed.

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