5 Steps to Effective Electronics Purchasing Strategy Using Your Supplier Scorecard

Sherry Gordon, President of Value Chain Group LLC, will be presenting a webinar on June 24th at 12:00 pm ET: “5 Steps to Effective Electronics Purchasing Strategy Using your Supplier Scorecard” for members of VentureOutsource, a community of electronics manufacturing operations, finance, purchasing and supply chain professionals.

This webinar will address how to create effective supplier scorecards and a successful scorecard process in order to to execute an effective electronics procurement strategy.  Some of the key takeaways from this webinar include:

  • 6 elements of a successful supplier performance improvement process
  • 3 criteria for evaluating scorecard metrics before using them on a supplier scorecard
  • Critical elements of supplier performance reviews to ensure effectiveness
  • How to evaluate your scorecard process using a maturity index
  • How to ensure continuing executive support for supplier scorecards

For more information and to register for the webinar, visit the registration page.

Sherry Gordon, President of Value Chain Group, will be presenting, ”Meeting Customer Expectations: Tools for Supplier Process Improvement“, on November 4, 2013 at the Retail Value Chain Federation (RVCF) Annual Fall Conference in Scottsdale, AZ.    RVCF is an industry organization comprised of major retailers and their suppliers. Its mission is to facilitate profitable business between Retailers and Merchandise Suppliers by synchronizing and improving operations.

Ms. Gordon will be covering topics such as:

  • What do customers really want in a “supplier of choice”?
  • What do suppliers look for in a “customer of choice”?
  • The biggest challenges that SMBs are facing: perception vs reality
  • What business improvement is and why it’s not just for the big guys
  • Key steps to successful continuous improvement
  • A couple of basic tools to get started

– See more at: http://valuechaingroup.com/tools-for-supplier-process-improvement/#sthash.YLNAWWxj.dpuf

Sherry Gordon, President of Value Chain Group, will be presenting, ”Meeting Customer Expectations: Tools for Supplier Process Improvement“, on November 4, 2013 at the Retail Value Chain Federation (RVCF) Annual Fall Conference in Scottsdale, AZ.    RVCF is an industry organization comprised of major retailers and their suppliers. Its mission is to facilitate profitable business between Retailers and Merchandise Suppliers by synchronizing and improving operations.

Ms. Gordon will be covering topics such as:

  • What do customers really want in a “supplier of choice”?
  • What do suppliers look for in a “customer of choice”?
  • The biggest challenges that SMBs are facing: perception vs reality
  • What business improvement is and why it’s not just for the big guys
  • Key steps to successful continuous improvement
  • A couple of basic tools to get started

– See more at: http://valuechaingroup.com/tools-for-supplier-process-improvement/#sthash.YLNAWWxj.dpuf

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GM ignition switch: Fixing the problem, not the blame

GM’s defective ignition switch problem came to light publicly after 11 years of installing a faulty ignition switch and after 13 deaths were linked to it. The new CEO, Mary Barra, vowed that she would get to the bottom of it. Here’s a photo of the part, a detent plunger, which will cost $3 – $5 to replace:

Photo from Lance Cooper Law Firm (from WSJ article on 3/23/2014)

The part on the bottom is defective, as the coil is more relaxed. The tighter coil (above) holds the part more securely in place.

The question is, of course, why would GM continue to buy and install a known, defective part? Those who are familiar with the pressures of being a buyer might conclude that PPV (Purchased Price Variance) is to blame. Procurement is under pressure to deliver year-over-year cost savings that go straight to the bottom line of the corporate income statement. A penny saved on COGS (cost of goods sold) translates into a penny earned on the bottom line. However, PPV does not consider the total cost of the part. Basically, PPV compares the standard price of an item to the actual price paid. When PPV prevails above total cost of ownership (TCO), then a situation such as the GM ignition switch problem can result. In this worst case scenario, accidents and loss of life can occur, negating any costs savings on this small switch. So was the continued buying of this defective part attributable to PPV? Pressures to deliver cost savings are very high on Procurement organizations everywhere. But how did it happen that some GM employees went this far to save money, despite their knowledge that the part was defective?

After an internal investigation at GM, Mary Barra announced that 15 employees had been fired because of this situation. The question is: does conducting such a purge actually help solve the problem? GM is under pressure to take action, and the quickest approach is to make sure that “heads will roll”. Rid the company of the perpetrators.

This type of problem is likely to recur unless the system and the culture is changed. There’s a saying about fixing the problem, not the blame. Usually problems as severe and as long-standing as the GM ignition switch situation are not due to a few errant employees. Firing some people in Legal and Engineering is unlikely to prevent future problems. GM needs to do some serious root-cause analysis about its culture and embark on a transformation process. The culture of a huge organization such as GM is challenging to address and transformation can’t happen overnight. GM’s culture has been around a lot longer than the ignition switch problem. Ms. Barra and GM have huge challenges in front of them.

 

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Supplier of choice

A couple of months ago, I spoke at the Retail Value Chain Federation (RVCF) conference, which brings together large retailers and their suppliers as well as providers of enabling technology.  The title of my presentation was: Meeting Customer Expectations: Tools for Supplier Process Improvement. This conference addressed advancing the customer-supplier relationship in very direct and concrete ways. In a November post, I wrote about the qualities that suppliers seek in their customers. This post shows the results of the qualities that customers look for in their suppliers.

The people who attended my session on supplier process improvement were primarily retail suppliers. I asked attendees to indicate the top 3 qualities that suppliers look for in the “customer of choice” and that customers look for in the “supplier of choice”. The participants used their smartphones to vote and get instant results for polls developed by presenters.

In the Supplier of Choice poll in my session, here are the qualities that made the top 3:

1. Provides a quality product or service – 25.7%

2. Is responsive to customer requests and expectations – 21.6%

3. Is reliable – 18.9%

Other qualities of the supplier of choice that participants voted on and the scores included:

  • Is willing to improve (12.2%)
  • Is willing to go the extra mile (10.8%)
  • Offers the best value for the money (6.8%)
  • Is likeable and easy to deal with (4.1%)

In this survey, the top 3 choices were, in my experience, typical and expected: quality, responsiveness and reliability. The most surprising result was how low best value was ranked. If I had put “lowest price” rather than “best value” in this survey, it may have received more votes, given that this was a group of retailers who are always feeling price pressure. This survey is simply an opinion poll with a limited group of retailers. So drawing conclusions must be done in the context of its limited scope.

 

 

Posted in Supplier Relationship Management (SRM), Supply Management | Leave a comment

Customer of choice

Earlier this month, I spoke at a conference focused primarily on bringing together large retailers and their suppliers as well as providers of enabling technology. The organization that runs the conference is RVCF, the Retail Value Chain Federation, who, as part of its mission,  advocates trading partner alignment, retailer-supplier operating synchronization, and best practices. This excellent conference directly addresses advancing the customer-supplier relationship in very direct and concrete ways.

The people who attended my session on supplier process improvement were primarily retail suppliers. One area that I spoke about was: what qualities do suppliers look for in customers and also what are customers looking for in their suppliers. I asked attendees to indicate the top 3 qualities that suppliers look for in the “customer of choice” and that customers look for in the “supplier of choice”. The organizers had provided some great polling technology so that participants could use their smartphones to vote and get instant results for polls developed by presenters.

In the Customer of Choice poll in my session, here are the qualities that made the top 3:

1. Treats suppliers as valued business partners – 27.9%

2. Is fair, ethical, and respectful – 23.5%

3. Has an efficient decision making process – 13.2%

In case you’re wondering what other qualities of the customer of choice that participants voted on, they included:

  • Is willing to pay for best value over lowest price
  • Pays its suppliers on time
  • Is open to supplier ideas
  • Gives access to customer executives

What I found interesting is that the top two scorers, which garnered the most answers above all the others, were about the customer-supplier relationship and how customers treat suppliers.

With this group of retailers, basic human values of fair treatment, respect and good ethics go a long way to creating good customer-supplier relationships.

Next, I will post the results of the Supplier of Choice poll.

Posted in Supplier Relationship Management (SRM) | 1 Comment

6 Tips for Creating Supplier Evaluation Questionnaires

Here are six tips for creating supplier evaluation questionnaires. When it comes to creating supplier evaluation questionnaires, everyone thinks they’re an expert. And with supply management software tools and internet surveys as Survey Monkey and Zoomerang readily available, it’s easy to feel the power. When creating questionnaires or surveys to get supplier performance feedback, they should be clear and easy enough to complete so that they will be readily answered. The following 6 tips apply whether you are doing internal stakeholder satisfaction surveys or are on a supplier site visit.

  1. Keep it short. If the same respondents are going to answer a survey on a regular basis (such as surveying internal stakeholders regarding supplier performance), keep the survey short. If responding is too time-consuming, fewer people will respond. You want to collect more data points in order to get more reliable results. According to a Survey Monkey study, survey completion rates drop the most sharply with every additional question asked up to the first 15 questions. After that, the drop-off rate declines less sharply.
  2. Keep it clear. If you must use buzzwords, jargon or acronyms that people outside of your function or that your suppliers may not understand, be sure to define them. For example, if you use the term SME, respondents may not know whether you mean a small-to-medium enterprise or a subject matter expert.
  3. Don’t lead the witness. Phrase questions in a way that evokes an accurate response and not just a specific response. For example, if you put a supplier on the spot about whether they are Lean, they are likely to try to tell you what you want to hear.
  4. Avoid twofers. That is, don’t ask two questions within the same question. For example, don’t ask whether a supplier is on-time and responsive in one sentence. Break that into two questions
  5. Phrase questions positively rather than negatively, especially when using scaled responses. The scales have to be consistent. So if you use a 1-5 scale, make sure that one end of the scale is consistently positive and the other is consistently negative. Not only will you confuse respondents when you ask whether they “never miss a delivery”. (Is never missing a delivery a high or low score?) But when you tabulate the scores, you may have inaccurate results from respondents who were confused about which end of the scale to score their answer.
  6. Create questions that relate to actionable metrics. Every question asked in a survey should have a corresponding action that can be taken as a result.

For more detailed information, see Chapter 8 in my book, Supplier Evaluation and Performance Excellence. There are sections about creating surveys and considerations for designing supplier surveys.

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Draining the swamp

Draining the swamp is a common expression in continuous improvement. Problems remain hidden underwater in a swamp. Once it’s drained, the real landscape comes to light. In this analogy,  a few problems may be sticking up above the water. But once the brackish water is gone, you’ll probably find a slimy mess.

I’ve been cycling by a real swamp on Water Row in Sudbury, Massachusetts for the last couple of years. The area started out as just as wetlands. Then it began to fill with water. After a while, the water had a layer of light iridescent green on it. And the smell of decay permeated the air. Here’s a picture of it:

Whenever it rained, this smelly water would flood the road.

 

 

 

Then one day I was riding by and saw this:

swamp drained

The swamp had been drained. Then I saw men with heavy equipment. Apparently, they had to wait several years to get permission from the Feds to drain the swamp by removing a beaver dam, as the swamp was located in a National Wildlife Refuge.  There had been a huge grate over the drainage spot that was supposed to keep the beavers out, but these clever animals just built on top of it.

Here was a real swamp before and after being drained. Just like work situations, swamps can get larger and worsen over time. You may not realize what is actually under the water, especially after it becomes covered in green slime. Then, mosquitoes, some of which are carrying EEE (Eastern Equine Encephalitis), make there home in the swamp, which is now home to beavers. In the work swamp, industrious employees, like the beavers, build their fiefdoms and turf battles ensue. As the swamp becomes dank and infested and work processes convoluted, it may seem that it was always this way. Processes happen, but no one knows where they came from. No one can remembers the swamp the way it was, without the smell and green water. People get used to the inefficiency. When the swamp is drained, problems are exposed and then can be addressed.

 

 

 

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Tools for Supplier Process Improvement

Sherry Gordon, President of Value Chain Group, will be presenting, ”Meeting Customer Expectations: Tools for Supplier Process Improvement“, on November 4, 2013 at the Retail Value Chain Federation (RVCF) Annual Fall Conference in Scottsdale, AZ.    RVCF is an industry organization comprised of major retailers and their suppliers. Its mission is to facilitate profitable business between Retailers and Merchandise Suppliers by synchronizing and improving operations.

Ms. Gordon will be covering topics such as:

  • What do customers really want in a “supplier of choice”?
  • What do suppliers look for in a “customer of choice”?
  • The biggest challenges that SMBs are facing: perception vs reality
  • What business improvement is and why it’s not just for the big guys
  • Key steps to successful continuous improvement
  • A couple of basic tools to get started

 

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What really is Lean Procurement?

Lean enterprise principles and practices have been widely adopted in many companies and continue to enjoy strong support. Many organizations have realized incredible gains such as faster cycle times, reduced costs, higher quality and increased customer satisfaction. The lean movement began in manufacturing and has spread to administrative functions and services industries such as healthcare and education. But in one area in particular, procurement and supply management, applying Lean can be very effective, but is not as well understood.

What really is Lean Procurement?

Often Lean Procurement is viewed primarily as an inventory reduction method where a customer reduces its own inventory exposure by just-in-time material shipments from suppliers or by arbitrary reduction of inventory in the supply chain. Others see Lean Procurement as implementation of procurement and supply  management automation software. Or, some companies think that the “lean and mean” approach — staff cuts — will make procurement Lean.

Interested in finding out more? I’ve just written a white paper for BravoSolution’s thought leadership series: Using Lean to Improve Procurement and Supply Management.

After you’ve had a chance to read this white paper, please let me know your thoughts and reactions.

-Sherry R. Gordon

Posted in Lean, procurement, Supply Management | Leave a comment

Supplier Scorecard Sustainability

A question that often comes up is: What about using Excel to create supplier scorecards? It has always amazed me how much people depend upon Excel spreadsheets, even though most have information technology (IT) systems. I remember in my days working in manufacturing that an entire computer hardware manufacturing operation seemed to run on spreadsheets apart from the resident MRP system. I was part of the movement, with my own set of spreadsheets. Spreadsheets meant fast calculations, easy modifications, and total control. That is, each person had total control over his or her own data, and no one had to wait for the IT department to create reports or develop new software capabilities. I called it running manufacturing by spreadsheet technology. The main downside, of course, was that none of these spreadsheet silos talked to each other. And assumptions and data sources were totally up to each individual. Getting your data locally and try to think globally with it had its limitations. Plus, there was the sustainability problem of continual updating and maintenance of all of these spreadsheets.

IT has come a long way since those days. But silo thinking and acting still remains. And people still love their spreadsheets and the control that they afford. No IT department required. Just do it.

When it comes to supplier scorecards, Excel spreadsheets are widely used. Spreadsheets can be created quickly, cheaply and easily. However, here are some of the downsides:

  1. Data needs to be captured or created on a regular basis and input into the scorecards
  2. Typically, a human being has to do the work. Unless automated feeds exist, scorecards are a manual undertaking
  3. Humans have been known to get busy with other tasks and not always diligent about updating the scorecards. Thus, scorecards get issued late and lose their timeliness and urgency for taking action.
  4. Scorecard spreadsheets can end up being stored locally on one computer, where only their creator has access.
  5. People change jobs and no one takes over manually updating the spreadsheets
  6. Suppliers may question the source and accuracy of data in manually-produced spreadsheets

Using spreadsheets to generate supplier scorecards is attractive because it’s relatively inexpensive and gives people an easy and affordable way to get started measuring supplier performance.  But, in my experience, this approach is usually not sustained. Any manual, time-consuming step is in danger of falling by the wayside. For long-term sustainability, approaches that do not depend on particular individuals and that are systematic and automatic (such as SPM and scorecard software packages) have a better chance of supporting supplier scorecard sustainability and outlasting the individuals who toil to update spreadsheets.

Posted in Scorecards, supplier performance | Leave a comment

Best Practices for Getting Real Supplier Performance Improvement

Sherry Gordon, President of Value Chain Group LLC will be presenting at the NLPA (Next Level Purchasing Association) Conference being held in Pittsburgh, PA on September 12 & 13, 2013. The theme is “Make Procurement Rock”. Sherry’s session is called: “It’s Getting Better All the Time: Best Practices for Getting Real Supplier Performance Improvement”. This presentation addresses the challenge of having supplier scorecards, but having suppliers that are not making any real headway improving their performance. The session will give practical ideas and tools for jump starting a supplier performance improvement process and getting real results.

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