subscribe: Posts | Comments | Email

Supply Chain Matters Highlights from ISM 2016 Conference- Part Three

0 comments

Last week, this supply chain industry analyst attended the Institute for Supply Management (ISM) 2016 annual conference held in Indianapolis. This is the conference where global purchasing and supply management professionals from large and smaller organizations alike gather for added learning, education and insights related to supply management and in particular, its role in contributing to required business outcomes.

Readers can view ISM 2016 conference highlights in our prior Part One and Part Two postings.

During our second day at the conference, this author had the opportunity to participate in a press conference and hear from five of this year’s 30 Under30 Rising Supply Chain Stars, a program introduced by ISM and ThomasNet last year.  In previous postings, we have shined a light on this program along with its designees.

During the special press event, ISM CEO Tom Derry indicated that the organization could not be more pleased with the success and visibility has garnered among the purchasing and supply management community. Representatives from program co-sponsor ThomasNet expressed similar equal praise for the ongoing visibility of this program. With an average age of 27 and delivering more than $10 million in cost savings from just a single individual, this year’s recipients span industry settings ranging from manufacturing to education, medical devices, IT and government.

During the interactive press conference, the panel of five recipients who attended the conference indicated that their generation is less concerned with an 8 to 5 work week structure favoring more a flex time schedule that allows for required family and personal time.  I asked the panel whether mentorship from an older or experienced generation was considered important. The response was that this is absolutely essential, but clarified as to sponsorship rather than mentorship. Having a sponsor to be able to bounce ideas or ask open questions was noted as very essential to their current accomplishments in their roles. They further described themselves as a generation without borders, not encumbered by organizational barriers.

On the topic of technology, the panel indicated that often, their biggest challenge is access to data, particularly involving resident ERP systems that are “older than me.” They articulated that timely information is needed to make informed decisions, that current information cycles are far faster requiring more timely data and information which is often frustrating to find.  The panel further indicated that their generation prefers knowledge on-demand, utilizing micro-learning and E-learning on the fly to gain knowledge of unfamiliar processes or product areas.  They therefore seek and expect an environment that provides such forms of knowledge management tools.

We continue to be impressed and blown-away with the scope of responsibilities being managed by these Millennials.  Job responsibilities of all 30 of this year’s designees include roles as Contract Administrators, Managers, Program Managers, Buyer and Senior Buyer, Sourcing Managers, Team Leads, Improvement Leader, Category Analyst, Logistics Support Supervisor or Director, Global Change Management Lead, or Director of U.S. Operations among others.

Readers can gain an overview of all of this year’s 30 Under 30 Rising Supply Chain Stars by clicking on this dedicated program web site.

 

This Editor had the opportunity to once again conduct an interview with ISM CEO Tom Derry. Our conversation touched on a number of today’s burning topics for supply management professionals. Derry noted that the procurement role has indeed become more strategic to businesses and ISM continues to work on continuous learning and training programs that include more strategic business and broader supply chain management competencies.

He reiterated the announcement at this year’s conference, of the ISM launch of an online learning initiative termed eISM, a program designed to support the increasingly busy lifestyles of today’s procurement professionals. The offering features a number of distinct learning options, varying from self-led learning modules to guided learning sessions with instructors, fostering more convenient learning in a way best suited to personal learning style.

From a broader skills perspective, our interview included the need for added competencies in driving environmental and social supply chain sustainability efforts and we both touched upon efforts shared by PepsiCo, Fed Ex and others at this year’s sessions.

We discussed this year’s J. Shipman Award winner, Tim Fiore, one of the most prestigious ISM recognition awards for procurement. This year’s recipient provides an example of a role model beyond cost savings, which Derry believes is becoming more desired across various industry settings. He reiterated that Mr. Fiore holds two masters degrees along with life-long learning in procurement transformation which he believes is becoming more of the model among today’s leading chief procurement officers.

Unfortunately, because of the schedule constraints involved with last week’s array of simultaneous conferences, I was forced to miss the final day of presentations at ISM 2016.

We encourage readers who attended this year’s ISM 2016 to share their own perceptions as well.

Bob Ferrari


Supply Chain Matters Highlights from ISM 2016 Conference- Part Two

0 comments

Last week, this supply chain industry analyst attended the Institute for Supply Management (ISM) 2016 annual conference held in Indianapolis. This is the conference where global purchasing and supply management professionals from large and smaller organizations alike gather for added learning, education and insights related to supply management and in particular, its role in contributing to required business outcomes.

In our previous Supply Chain Matters Part One posting,  I primarily focused on thoughts related to the sustainable business presentation that was presented by PepsiCo. In this Part Two commentary, I provide some additional highlights and takeaways of the conference.

One intriguing presentation that caught my eye was a panel discussion within the People conference track focused on the topic: What Private Equity Expects from Sourcing Leaders. With so many private equity takeovers and activist actions that have occurred across multiple industries, subsequently impacting various industry supply chains, this author was especially curious to hear the perspectives of representatives of private equity. This year’s conference organizing committee deserves praise for the bold move in including such a panel under a personal skills learning tract.

The panel itself consisted of executives representing firms Apollo Global Management, Centerbridge Partners and The Blackstone Group. For the most part, the panelists indicated that current PE strategies typically involve a 5-6 year investment window with the objective to move earnings and shareholder return to a much higher value. They stressed that where-as 5-10 years ago, PE was more “financial engineering” driven. Today’s focus is on operational intervention and improvement.

Most all of the panelists reinforced that supply and operations management has now become the prime target for leveraging such value rather quickly. Firms focus on leveraging buying power across the entire direct and indirect materials value-chain seeking both quick near-term as well as longer-term opportunities to leverage material cost reductions.

A full spectrum of business process, technology and supplier management tools are expected to be deployed, including supply facing electronic auction capabilities. The PE focus is in driving value over time in working capital reduction. One panelist bluntly indicated that procurement professionals are expected to have demonstrated direct experience in auction tools and in generating meaningful cost savings. Others on this panel pointed to seeking and recruiting procurement professionals with broad, across the board skill sets, including strong linkages and acumen with finance in the u understanding of line-of-business expected bottom-line financial outcomes. For PE, the focus remains of continuous working capital reduction.

Consistent readers of this blog are probably very aware that this Editor is not very keen on such strategies, which includes the short and long-term havoc imposed on supply chain capabilities and relationships. But, with the realities of the current business environment being what they are, and with so many firms now under the PE looking glass, procurement professionals need to be aware of such expectations of continuous working capital cost reductions that are to be expected.

Be forewarned and be prepared, since those possessing or prepared with these skills can reap some short-term financial and other rewards.

In our Part Three posting concerning ISM 2016, I will highlight two other sessions that I found noteworthy and insightful.

Bob Ferrari

 

 


Supply Chain Matters Highlights from ISM 2016- Part One

0 comments

This supply chain industry analyst just returned from attending the Institute for Supply Management (ISM) 2016 annual conference held earlier this week. This is the conference where purchasing and supply management professionals gather for added learning, education and insights related to supply chain management and in particular, supply management’s role in contributing to required business outcomes.ISM 2015 Conference Logo

I walked away from this particular conference with many positive impressions, some of which will be shared in subsequent Supply Chain Matters commentaries.

Overall attendance was impressive as well as the profiles of those attending.  I was especially pleased on observing the many Millennials in-attendance, more so than I have observed in the many supply chain conferences this author has attended over the years. That is indeed great and a testament to perhaps the growing attraction to careers in supply chain management. Praise to ISM’s conference planning teams for putting together an overall agenda that featured many topics related to do’s and don’ts of procurement management as well as a number of panels that addressed skills, talent and career management topics. In that light, I also had the opportunity to hear from five of this year’s 30 Under 30 Rising Supply Chain Stars which was equally impressive.  More on that will also be forthcoming in a subsequent posting as-well.

One very impressive presentation I would like to highlight was presented by Ian Hope Johnstone, Head, Sustainable Agriculture for Global Operations at PepsiCo. His presentation addressed how this global based food and beverage producer is advancing sustainability in agricultural practices across a spectrum of farmers.  Further addressed was PepsiCo’s ongoing Sustainable Farming Initiative(SFI).

In a previous commentary addressing the global and industry supply chain ramifications of the recent COP21 Paris Climate Agreement, this author came to a realization, that the recent ground breaking COP21 Agreement on stemming global climate change provides both a profound call to action as well as a significant opportunity- an opportunity for bolder collaboration and joint goal-setting to not only address greenhouse gas reduction imperatives and to saving our planet, but the imperative of sustainable business itself.  It literally should change our perspectives and goal-setting for sustainability strategies surrounding industry supply chains, moving such initiatives beyond functional to line-of-business level efforts. Through Supply Chain Matters, my hope is to provide specific examples of such efforts, and clearly I can now cite PepsiCo’s ongoing efforts as a benchmark example of the context of business sustainability.

PepsiCo’s sustainability umbrella is indeed broad and includes sustainability needs related human, environmental, talent and global citizenship initiatives. No doubt the firm’s dynamic Board Chairperson and CEO, Indra Nooyi has been a guiding and important C-Level sponsor for such efforts and resources. Within the firm’s 2014 Sustainability Report, Ms. Nooyi articulates very powerful statements that communicate the broader requirements for sustainable business. One of those statements is here noted:

Weaving sustainability into the very fabric of our organization is a way to help future-proof our business for the changing world around us.”

PepsiCo’s sustainability umbrella therefore extends beyond procurement and umbrellas the entire value-chain and the many dimensions of doing business.

In his presentation, Johnstone highlighted the compelling need that food production must double by 2050 amid constrained land environments, an aging farm population and the ongoing climate changes impacting our globe today.  Once more, he validated that consumers are highly influencing sustainability needs, being much more demanding of health conscious and protein-based foods, along with demanding visibility to where particular food products are sourced.

From the procurement lens, PepsiCo’s Sustainable Farming Initiative is both consumer and supply chain facing linking the two toward common objectives. The Procurement criteria now include a diamond visual that includes Service, Quantity, Price and recently added Sustainability as buying criteria. Sustainability includes security of supply over a much longer-term window, ten or more years in many cases. Noteworthy was PepsiCo’s procurement team efforts in listening to and collaborating with various farmers on efforts required to reduce water consumption, smarter agricultural practices and respecting the data ownership needs of farmers.

This global food and beverage producer clearly recognizes that no one corporation can succeed in farming sustainability without actively working with other consumer products producers such as Land of Lakes, Kelloggs, McDonald’s Unilever and others in an industry consortium for addressing common standards in sustainable farming practices and in consistent water and land conservation and renewal practices.

For further information, our readers can review PepsiCo’s dedicated sustainability web page.

In our Part Two commentary I will address some other personal highlights from this year’s ISM annual gathering.

Bob Ferrari

 


Evidence of Business as Usual in North America Automotive Supplier Relationships

0 comments

In the week that the purchasing and supply management community is meeting at the Institute for Supply Management (ISM) annual conference being held here in Indianapolis, is a disappointing report of business as usual supplier relationship management challenges across the U.S. automotive industry.

The Wall Street Journal reports Lukewarm Supplier Ties Hamper Auto Makers (Paid subscription required), reflecting a recent survey involving many suppliers to the U.S. automotive industry. The report concludes that: “top U.S. and Japanese auto makers are losing out on hundreds of millions of dollars in potential cost savings because of lackluster relationships with their parts suppliers.” This 16th annual survey, conducted by Planning Perspectives Inc. polled 647 salespeople from 492 top suppliers.

According to the survey results, four out of the six auto makers operating manufacturing plants in North America experienced erosion in their supplier rapport over the past year, a year in which auto sales have been booming in North America.

Among the top five ranked automakers in supplier relationships were brands such as Toyota, Honda and Ford Motor.

Noted as having the largest erosion in supplier relationships was Nissan Motors, which intensified pressures on suppliers to reduce costs. Cited as most improved in supplier relationships was General Motors which reportedly resulted in suppliers contributing more than $3,000 to the profit GM realized on every vehicle manufactured and sold in North America last year. However, GM was ranked just 25 points above Nissan. The report notes that GM hired a new procurement chief in 2014 with previous executive experience at parts supplier Delphi Automotive, who asked suppliers for input as to what GM was doing that, was not contributing to a win-win relationship.

Coming in with the lowest supplier ranking was Fiat Chrysler which reportedly has improved many of its internal processes but those processes still lag behind those of its competitors. The automaker has recently reorganized its quality and purchasing management teams including recruiting a new chief purchasing officer.

From our lens, the takeaway seems to be that for U.S. automotive OEM’s, when it comes to fostering more positive supplier relationships, the trend remains one of business as usual, namely singular cost reduction pressures flowing down the tiers of North America automotive supply chains. The more times change, the more behaviors remain the same, despite learning to the contrary including unprecedented industry product recall incidents


To No Surprise- Another Ocean Container Shipping Lines Alliance Announced

0 comments

At the beginning of this month, Supply Chain Matters advised our readers to pay particular attention to the ongoing sober signs of global transportation structural changes. For the ocean container shipping segment, it was inevitable that a new multi-carrier alliance would emerge, and indeed it has.

Late last week came the announcement that Germany based Hapag-Lloyd AG intends to join five other Asian carriers to create a vessel-sharing alliance to be termed “The Alliance.” According to the announcement, this new alliance will control 18 percent of the world’s container shipping fleet with more than 620 vessels and a combined capacity of 3.5 million TEUs. Since there are reportedly merger talks between Hapag-Lloyd and United Arab Shipping are in the works, there may be additional capacity added to The Alliance.

Members have agreed to a five-year term scheduled to start operations in April 2017 subject to necessary maritime agency regulatory approvals.

Since three Asian based carriers currently belong to the existing G6 alliance, and three others belong to the CKHYE alliance, all will cease these alliances next year. Further, Hyundai Merchant Marine Co., now part of the G6 Alliance, in a separate statement indicated that once its business is normalized, it will initiate necessary processes to join The Alliance before September.

Just about a month ago, China’s Cosco Group, Hong Kong’s Orient Overseas Container Line (OOCL); Taipei based Evergreen Marine and France’s CMA CGM agreed to form the Ocean Alliance, representing nearly 350 vessels across various global routes, and by CMA CGM estimates, could account for 26 percent market share in Asia-Europe routings.

These new alliances are being put forward to rival the market dominance of Maersk Line and Mediterranean Shipping Co., (MSC) which formed the 2M Alliance in 2014 that reportedly now controls roughly 34 percent of the Asia to Europe trade route.

It would be understandable if readers are confused at this point as to which carriers will eventually be associated with which asset pooling alliances. What is of more concern is the amount of global shipping capacity that could be eventually pooled and aligned to global shipping routes. Is it no wonder that reports are circulating that some global maritime regulatory agencies are becoming a bit concerned as to any imbalances in pricing power.


« Previous Entries