How Your Organization been Viewed by Others?

You are what you eat.

That what your doctor may said to you one day or how other may said to you based on your behavior, or action.

Do you know how your organization been viewed by your suppliers, customers and other third party who may know about your company? Is the organization you worked in or owned by you are viewed positively by others?

Are these opinions or perceptions formed by them give your company a good standing?

Many may not realize it but the way other perceived how an organization operates and it internal organization culture behavior can create a barrier to good relation with its customers, suppliers and potential future interaction with others.

A simple example of an organization friendliness and trustworthy to do business with is by comparing and look up and down the list of countries have been ranked annually for corruption and red tapes for examples. The lower the countries profile down the list, businessmen will be more wary in doing businesses there unless there are other incentives which can counterbalance the negative profiles.

Organizations are just like another country and there are the various departments evolved in it. The actions and steps taken by these department and sanctioned by the top brass of the organization will reflect public perception. Public here mean the parties having transaction with the organization and these perception will disperse to a wider environment without anybody realizing about it.

To stay ahead of competition and to ensure customers still standby an organization depended very much on how well this same organization stand in the eyes of the suppliers. A good quality suppliers which offer excellent services will translate into better cost product to the customers. It is as simple as it seem but it is true.

Did we remember two year back when Toyota have to recalled cars due to defective parts supplies by its suppliers? This create an emotional customer lash-back and create problems for the for the company.

So back to the question, "DO WE KNOW WHAT OUR SUPPLIERS AND CUSTOMERS THINK OF US AS AN ORGANIZATION?"

How can we create the image we wanted to project for our organization?

Here is a number of suggestions which we can offer ourselves and implemented:-

a) Improve the overall structures of the organization with clear scope and authority and real clear line of segregation of senior executives responsibility.  A clear cut structures and responsibility  with properly defined job description will ensure that when third party engagement with the organization, there are clear cut what is involved and how these interaction can be done correctly and accurately.

b) Know your organization activities like the back of your hand. All senior and junior executives must able to know organization objectives and Key Performance Indices and where the strength and weaknesses of the organization. This allow your suppliers and customers to have confidence on your operation and keep in touch with you for more development of businesses and other activities. Nobody like to deal with organization which does not know its needs and ability as this create wrong signal to outsiders. Even if your suppliers love your businesses, they will be wary what to expect the unexpected later.

c) Set out a strong Corporate Social Responsibility strategy and get this communicated well to the public. There are still many perception that a CSR policy is always a public relation promotion.While this can be true, the real purpose of a good and strong policy actually set the tone for internal pressure to perform and "walk the talk". Example of a CSR policy is to ensure your employees and their family welfare are taken care of in event of any mishap and this increase motivational feels. Or a policy which ensure that all material used are able to be recycled again which meant the environment are taken care of. Green environment policy. This type of image projected will give your chosen suppliers and customers having a good feel when dealing with your organization.

d) Have clear policy procedures on everything which can affect a company image. Example an organization will need to have a clear supply chain policy statement and guideline to supplier to adhere to to prevent negative action from occurring and this give your suppliers the knowledge how to behave with the organization employees. Other policy and procedures needed are for example, Customer complaint policy statement and policy, Security Policy and procedure and Human resources policy and procedures. This will act as an deterrent of any objectionable action either by the employees or by the outside party.

e) Be consistent in all action taken. This is very important to all concern. Fair play in short.

f) Strong willed leadership from the top. As the top person in an organization, the ability of this person to able to project confidence, articulate behavior, unbiased decision making and live by all the policy and procedure of the organization like a holy person with a bible will help the organization to sustain further.Untainted in every aspect and gain respect from internal parties and external parties alike.


Now with all the suggestion above, what next?

Organization need to measure it own performances. Let throw away all the ISO standard for a while. Let focus on behavior and how your organization have been viewed and judged not only by your suppliers and customers, but also the employees itself.

The best method will be with survey form which assure confidentiality of the respondents and interviews been carry out.

I personally remember, we conducted employees survey in one particular organization I was involved in many years back and there was no name or employee badge number on the form. Just a form filled with question and all we need to do was tick the box. Same applies to our associates and these respond was collected and send to a independent office outside the organization for tabulation.

Improvement steps if needed are then proposed from these forms.

Nobody like to invest in a place where nothing is clear cut and your associates and employees felt unfairly treated and this include the organization we worked in. So the start has to start somewhere and it is recommended that it start at the place you are working now.

Negotiation - Use of Threats versus Strategic Partnership (updated)

http://theaccidentalnegotiator.com

I read with interest blog about the strategy of using threats from the the above link. Threats and counter threats are always on the negotiation table no matter how the negotiation goes. Overall, I fully agreed to the information on this article contained in the link blog attach.

However.....

I tend to view a supplier - customer relationship just like a married couple or a man or woman with his or her mistress. Unlike a husband and wife with children in tow relationship where the relation are already filled with objectives to be met and how both partners want the child to grow up and how to ensure their relationship growth further with trust and fulfilled promises.

So when we negotiate, the common interest will be:-

a) Volume of business involved
b) Quality and material specifications
c)  Price of the material
d) How much the business meant to both parties
e) How the profit margin for both sides, how much the profit the supplier will gain and how much profit the customer will have by using the material

Just like the mistress who may feel unhappy if the "contributions" are not to expectations and she or him need to instead of receiving "profits", they need to reduce the gain or even just break even in order to keep the business.

Thus, threat is good to gauge how good the threat meant to each parties and also is it real and most importantly one of the party or both will walk away if the threat on the table is "too much". No commitment on long term, so it time to wind up the partnership.

Just like the mistress.

My thought is for threat to be made, make it clear what is at stake and if the threat a camouflaging strategy. Threat can be used in a strategic manner in which both parties lay the card on the table what at stake and how to resolve these threat to the business.

This will encourage a strategic thinking on how to resolve the issue and come up with a winnable solution for both parties, just like a good husband and wife team. But then, husband and wife do divorce too right but that will be the last resort.......mistress just walk away if she or him not comfortable with the threat.

My point is when having a supplier - buyer relationship, it is good to identify a supplier who you able to "married" to and trust and will work hand in hand with your organization. Threat will then be view by both parties as opportunity to explore for improvement in the process of business.

A supplier who will rather behaved like a "mistress" if you can managed to identify them, threat to these supplier will be taken into full blown account and the key objective will be how much benefit will be derived to accept any offer for renewal and if the benefit is not "attractive" these supplier will walk away or reduce the businesses.

STRATEGIC SUPPLIER PARTNERSHIP

Strategic supplier partnership

Supplier partnership is an integral part many procurement policy. However how do we measure these partnership and is it bringing to the buying organization benefit?

Partnership beside bringing in better competitiveness to the transaction in term of pricing, quality and delivery, also involve innovation and new ways of handling information, resolve situational problem and bringing added value to both parties.

As a buyer and decision maker in organization, i would want to see supplier and buying organization work out the parameter involve which will sustain the business relationship in the long term and these are:-

a) Supplier Performances which is a very basic condition to any organization. How can a supplier able to sustain it performances every year in term of delivery, pricing, excellent communication, quality control and able to understand the customers business.

b) Transparent costing which most suppliers, especially in Asia and certain extent elsewhere. As a buyer, you will need to be confidence with the cost you are given by suppliers. Counter check on pricing with new sourcing of vendors will help but this by itself is self defeating in any business partnership as the trust is been placed on a very thin line. I myself will want to check and see a genuine reporting of material usages on the part and the actual cost use. Labor cost and other overhead cost will be expected to contain variance but all i need to see will be a percentage figure which will be a industry average.

c) Offer Innovative New Design which keep up to the market trend. Suppliers who does this make them more valuable to any customer and as a buyer I always appreciate such suppliers and of course they is a take here of better value to the supplier in term of cost
and profit but if any supplier able to do this innovative things, they and the customer will be able to stay above compare to the competition

d) Supplier who can offer insight to their customer supply chain system and help to offer some improvement will be extremely valuable. These type of insight can be from mutual discussion on how to improve efficiency and their ability to take some measure to improve their customer performances and lastly i will value supplier which ......

e) Able to improve costing of their product. Most supplier when they begin to supply new material to customer will incurred investment of people and equipments assets and this sunk cost will need to be recover from the sales of the material to the customers. I would expect them to try to recover the investment in terms of number of months or few years depending on the cost of investment versus the expected sales. If the suppliers are able to reduce the cost and remove this element later after the cost has been returned, but maintain a very small portion of it for maintenance and improvement, these are the type of supplier we will tend to value most.

These five element need to be there most of the time and we will sure value such suppliers. However as a customer ourselves, we need to play an important role as well and these roles are as followings:-

a) Be transparent with your policy and keep our suppliers aware of happening in your organization as a assured supplier will be able to add more confidence on their part to support any buying organization.

b) Behave like a supplier. All business organization will have their own customers as well as their own supplier. Think what your customer will do for any action or reaction your organization take.

c) Offer analysis of your business situation and seek understanding for any expected slow down or increase in business to assure your supplier understand the situation. The first instance any supplier will react when they see a slow down in business is to suspect they have lost it or their customer in trouble. Preempted this thought from their thought.

d) Give ample lead time to ensure your suppliers able to act efficiently. One reason for cost to go up is due to the need to perform extraordinary tasks like overtime and secure expensive material to meet unexpected short lead time orders.

e) Pay on time.

Asking Customer to Accept Deferred Delivery

We have a very large account in our portfolio and this particular customer is BIG. When I meant big, I really meant BIG.

In size of the organization itself in term of employees, in term of business values it generated every year, in term of market capitalization. We often compare that for every 8 hours of sales it generated, most companies will take months to have!

Yup, you may guess this customer that we have have turnover in the billions of dollars per year. Not one not two but slightly exceeding hundred billion per year.

When you have such a customer in your list, you will love it and at times feel threatened by them as well. Imagine the sales person who handle this account lost it? This could meant a potential lost of high amount of revenue and worst case, a closure of a plant as well, depending how much they purchase.

In our case, they purchased up to >50 million dollar of goods per year from us.

In supply chain, you always want to be extremely careful with this type of account and ensure your capacity for production, inventory and quality and bottom line delivery performance is always on the top of it.

Negotiation power, they will be on the top of you as competitors will be fighting tooth and nails with you to gain such an account and you need to be efficient.

What will you handle a situation where you are caught with your pant down in term of supply chain performance? Example would be a raw material delay to your production and after confirming delivery date to the orders, you found yourself in a quandary that a particular shipping week will be delayed?

Imagine that this customer do not like been delayed even 1% of their order.

How do you deal with it?

Frankly irrespective of customer profile, it is always negative to delay an order after confirmation of delivery date. Most companies will not think twice about delaying an order but there also many companies who dislike even to think about delaying customers deliveries.

Think about industry like automotive or avionics or even electronics parts where thousands of employees waiting for parts to be delivered for production and you failed them. Think about the penalties involved and even the reputation of your organization in the market place......

I have to deal with this situation recently and the most important think when writing emails to inform delays is the pressure you felt even before you lift your little fingers to tap the keys. However, it is always to my mind to inform a delay well in advance and provide alternative solutions and counter measures to the client rather then having to inform them when it is too late.

So i did inform them.

Blah blah blah the reason and how important is the business to your organization and the best ship date you can handle and the date always to my mind be reasonable. Not more then three days delays and the plan for improvement.

Press the send button... and then pray hard that they will accept without complaint.

Guess what?

They did accept it and i do not feel elated or happy but the thoughts that we need to be better and get on top of the issue in future.

Key reason customer accept delay is be honest with them about the REAL issue, no BULLSHIT and give them time to plan. Do not give them last minutes information on delays, this is truly unprofessional at all and create much problem on both ends.

Create the trust between you as a supplier and they as a customer, just like a good lover who trust each other.

That how we should manage matter and your organization will gain the respect it deserve and your clients are comfortable with you. No broken heart later.

A STORY OF AN ORGANIZATION DYSFUNCTIONAL SCM SYSTEM

I have a story to tell and this is based on an organization which I will not reveal the name or location but it should be a good lesson on how to manage a Supply Chain System. We will not be interested the system they use. Irrespective of Lean management or some other conventional system they are using, this is not the real issue at all.....

This company was a small start up with core business in manufacturing and employees count was small with one management employee plus a number of production and warehousing personnel. Business was good and with a small set up and a single manager to make all the decision, thing was easy and decision making was extremely easy. We shall not discuss about if those decisions was effective or efficient for the company as this is not the real part.

However, over the years, business beginning to grow and the owner of this investment realize that to manage a organization which has a few hundred thousand dollar turnover a month and to manage the same set up worth business dealing worth 4 million to 6 million dollar a month is something else. They will need more resources and more employees in management, warehousing, shipping and production plus quality. They also need to be more efficient in handling the business.

The cost incurred to the organization in air freighting material from overseas due to no material in stock cost them a few hundred thousand dollar per year and the overtime cost to manage the order is worth at least in the 7 figures dollar per year. Payment to suppliers was based on invoices not properly verified internally before payment and worst of all planning is non existent for production, shipping and planning,

Soon, the organization decided to introduce a Supply Chain Management system in the organization and for this, they need somebody who will manage this task, hence a Supply Chain Manager came on board.

The first thing this manager did was:-

a) Set up a purchasing policy on purchase, verification of material receipt, warehousing management and supplier selection and review area where cost was not in the organization favor and desire that this will be turn around

b) Required a micro production planning system in order to ensure material are always available in stock for all orders

c) Production meetings on daily basis

d) Review and required demand planning system so that customers orders are able to be forecast and build to stock instead of made to order and this will be an efficient manner of operating to reduce overtime and material stock out when there is a sudden increase of order and this can be anticipated.


Except for (a) and (c), none of the above get done and as happened every year, customers orders started to increase on certain period of the year and material will be late in arrival, employees have to be placed on compulsory overtime and everyone in the organization was stress out.

The SCM Manager was blamed for these and was made to answer all the delayed on shipment and to compensate for this, she has no choice but to increase inventory and add up holding cost.

So a viscous cycle begin...

Even when the product are profitable, however due to overtime need to be perform, higher inventory level been kept (and sometimes the wrong item kept as well) the performance of this company begin to suffer. To add further to injury, recruiting was non performing to replaced employees which resigned and this reduce capacity further and again add up to cost....

What the problem with this organization?

The answer was simple,  beside the SCM system in name, all the others stake holders are non committal or understand  the system and the mentality of running a business was early 20 century style but with 21st century ideas. The is a GAP which need to be closed up.

To most of the employees and management team, when there is an issue with meeting an order, the guns are aim to one direction, i.e. SCM department. In fact they are wrong and correct at the same time but ......

When implementing SCM system, it is not the SCM department alone to carry the burden, and the responsibilities and accountability has to start directly from the very top of the organization and strategic decision to take place and implemented and this later to be developed into the operational (tactical) strategy which all departmental managers has to follow through.

Examples of strategic decision needed will be:-

a) Identify the capacity planning of the total organization and from this, identify the lead time for order with the customers in order not to increase operational cost

b) Identify which order need to to be Made to Stock (M.T.S) and which order has to be Made to Order ( M.T.O)

c) Inventory level of the M.T.S item to be set up. We need to understand here that when setting M.T..S system the driving force for raw material will be the stock of the finished products. With M.T..O system, lead time to customer to be identify and this run in tandem with lead time from supplier and reducing this lead time will be long term objective in many system implementation.

d) In which manner order to supplier to be managed and how delivery to be enforced from suppliers

e) Managing information flow and system efficiency and which Key performance Index need to be review on regular basis. Many companies are asking managers to report KPI for sake of reporting without understanding the true value of the reports and if these report can be independently verified

f) To what extend level of inventory for raw material / semi finished product and finished product to be invested will be also a key policy. Weight of each investment need to be calculated on the return of investment and stock turnover ratio which need to be achieved.

From these decisions, the operational level managers will then have to implement strategy into daily operational tasks.


Bottom line i wish to explain here is that Supply Chain Management is not a problem with supply chain alone but it is a system which need to be anchored to a very strategic decision, i.e. decision on how to run a business.

Closing sales and orders is one decision every one will love to have and hear but frankly managing Supply Chain will ensure if:-

a) the order will be profitable

b) what will be the actual cost of the order and if this cost can be managed in a better way

Supply Chain - How to determine your supply chain strategy

Many businesses are managed or run on the primary thought of getting the sales and deliver the orders and one wonder is this all?

Managing a grocery shop supply chain or managing a small cafe  supply chain one may thought it is easy because the key element of running these businesses are:-

a) stock the shop with goods which people will want to buy from a grocery shop, for example a packet of salt or a can of milk

OR

b) for a cafe, you just need to purchase your coffee beans and tea or beers and get a fairly good cook or the owner cook can cook themselves provided he or she purchase all the ingredients as per the menu listed in the menu displayed on the front of the cafe.

Easy right?

Well, not so i guess.

The owner of the grocery shop has to decided how much sales he can do in a day or in a week or month and how much he need to stock up, right? Well his or her job could be easier because sundry items will have longer shelf life and he will purchase enough quantity to stock up based on how much the business venture willing to fork up as working capital. For the cafe, it is very similar one may think, but he will have also have to come up with the strategy what food he will like to sell to his potential customers or which foods or drinks type he will offer and most of all, the owner may also have to think about how long he can keep his vegetable or meat in the freezer and how many plates of food he will sell in a day......


OK, wait, a while....will the owners of these businesses have to think who will be his best source of supplies? His best source of discounted price and as he already think of these two, he will also need to know when they can deliver the materials and also will the groceries or food or meat will be in fresh and mint condition?

That supply chain, i.e the art of managing the supplies in order to have the best deal for the business.

Let now review how will be a larger organization deal with this matter......

Most business owner or CEO or top management managers will like to think and think very alike the cafe or grocery shop owner. However, before thinking it will be as easy as the above, think again if these are as simple as ABC.

Well i would expect some of them to think along those line and even though this is very true because the art of doing business is to make profit and the way to make profit is to have sales and purchase raw material cheaper then your product and overhead cost. That is true.

How about thinking how to handle it more efficiently?


Let now consider what CEO or top management managers has to think about.

a) How to manage the customer order is important. Do the business have to wait for the order to comes in after all the promotion and sales activities?
b) What type of product the business is dealing with? High tech expensive products? Daily consumer product in the super market? Product with fast changing technological advances?
c) Who will be the businesses customers?
d) What volume expected of the product been sold?
e) What the value of the product?
f) What the profit margin?
g) Where are the suppliers or sub contractor located? Is this nearby or few days or weeks by sea freight or hours by flights?
h) Output unit of production compare to budgeted forecasted sales?
i) What the business capacity?

This is what i consider strategic thought and these strategic thought will be transformed downward to tactical or operational strategy.


From this strategic thought, top management will decide if:-

a) Outsourcing of certain material is necessary when compare external and internal cost
b) Build the product complete to stock or build the product complete to order to be received
c) How much to produce for stock?
d) What type of lead time to be provided to customers based on capacity?
e) Does the business need to build semi finished product and stored it ready for assembly?
f) How about proposing to large account to agreed on a number of strategy, for example offering to managed customer stock with VMI plan?
g) How to managed the logistics side of the businesses?


These decision will then be transferred down to line managers or operational staff to carry out the strategy with tactical approach.

Without this kind of brain storming on the higher level, businesses very often will find themselves in a quandary on what to do and handle when come to the real crunch of handling businesses expansion and change.

Businesses sometimes grow in a pace too fast that owners of businesses are suck into the promise of profitability and this make sense as all businesses are meant to make a nice income for its owners. But a fast growth in sales need to be strengthened with supply chain strategy rethinking how to manage it right.