For those of you who missed my post earlier this month, United Breaks Guitars, The Trilogy, is complete and available for your viewing pleasure on Youtube ... and embedded below for quick access. Right now, Dave is over 9.2 Million hits! Let's get him to 10 Million before the year is up and show United, and all the other airlines, that we don't like it when they break our guitars, lose our luggage, or run over it with the baggage cart so it gets jammed in the automated baggage distribution system and ripped, slashed, grease covered, and torn apart. (And we like it even less when we are told "it was that way when we got it". Yes, the latter happened to the doctor and yes that's essentially what he was told.)

United Breaks Guitars

United Breaks Guitars, Song 2

United Breaks Guitars, Song 3: United We Stand

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Before you answer, think about it.

Carefully.

Because you're probably not.

That's right, there's a good chance that you're not relevant.

And the worst part? Most likely, it's not your fault.

The business landscape is changing, the old normal is coming back, and it's no longer about better, faster, cheaper (or lean and six sigma) or closed systems. As noted in this HBR post about The New Paradigm of Advantage, we're returning to a time where innovation and creativity rule, and where only the relevant companies are going to succeed.

Given that most companies are still struggling, with more going bankrupt every day, it's pretty obvious that most companies are still not offering relevant products and services. So even though they did well in the last upturn -- and let's face it, it's hard to fail when money is flowing like the reservoir will never empty -- it's pretty obvious that it wasn't because they were relevant, but that their success was just a side effect of the overall buoyancy in the market.

Since only a few companies are succeeding right now, relatively speaking, it's obvious that most companies are not relevant. And these companies are dragging you down with them.

So what can you do?

Get creative. Get innovative. And show your company what they should be doing. As per my recent post on the talent innovation imperative, these companies are not succeeding because they're wasting their resources -- namely, they're wasting your talents. And there's no need for it. So get busy and show them what you got. And if they don't listen, join the majority of your colleagues who are already looking for new opportunities with relevant companies. Because YOU deserve to be relevant!

In Parts I and II I reminded you that Pierre Mitchell of The Hackett Group invited you to participate in a study designed to help you identify where you were on your procurement journey by way of 18 value streams that range from "naive apprentice", where you're measuring performance at an elementary (tactical) level, to "expert sourcerer", where you're extracting procurement value at a very advanced (transformational) level. Then I covered some of the seven tactical value streams and some of the six strategic value streams. In today's post I will cover the final five transformational value streams, which range from:

Internal Procurement process cost savings are found from process re-engineering
  through
Benefits due to currency hedging, inflation hedging, options/derivatives, etc.
  to
Revenue uplift from supplier collaboration (e.g., innovation, diversity advantage, joint marketing, etc.)

Very few companies are transformational in their procurement. A company that is transformational goes beyond just taking cost out of the supply base, but finds ways to take costs out of all aspects of company operations while making the entire company leaner, meaner, and smarter about it's organizational finances and processes. A truly transformational Procurement department positively impacts every area of the organization.

Internal Procurement process cost savings are found from process re-engineering

Instead of being reactive and trying to reduce costs after 70% to 90% of costs are baked in during the design phase, Procurement works with Engineering and R&D to help them select materials and specifications that will be the most cost-effective in the long run when multiple options exist. Instead of shaving a few percentage points off of list price, Procurement can be shaving a few dozen percentage points off of total cost by going out to market with designs that are much more cost effective to produce.

Benefits due to currency hedging, inflation hedging, options/derivatives, etc.

Instead of just looking at the total cost in today's market, Procurement looks at the expected total cost over the lifetime of the contract and works with finance to select options that will insure the expected cost reductions are realized in spades over the contract duration.

Revenue uplift from supplier collaboration (e.g., innovation, diversity advantage, joint marketing, etc.)

Once a Procrement organization has truly embraced transformational procurement, it works with its suppliers to not ony take cost out of the end-to-end supply chain, but also to inject more value that will allow for greater revenue on each sale. Cost are reduced, revenue is increased, and the company's profitability becomes world class.

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After reading a recent article on Boeing's Innovative Approach to Leadership, I have to ask. Boeing found that engaging the workforce in innovation requires positional leaders and managers to abandon the command-and-control style of management that is so prevalent in business today. Instead, leaders must employ a more participative approach and solicit collective ideas from the workforce rather than imposing initiatives on them.

Senior managers in Boeing's C-17 program took a bold first step toward establishing this new leadership paradigm by gathering all 10,000 C-17 employees in a hangar and communicating their philosophy directly to the front-line employees and the epic event just changed everything inside the Boeing C-17 culture. As a result, the program went from the brink of cancellation in the early 1990s to he model acquisition program for the U.S. Air Force," earning the Malcolm Baldridge National Quality Award in 1998. The innovation captured by the program saved over 90M in less than a decade.

While I believe that innovative thinking begins and ends with the individual, if the business doesn't support the individual and harness the innovation she produces, then it doesn't go anywhere. And if the leaders don't see the value in the innovation, it won't get harnessed. Which suggests that innovation begins, or ends, with leadership. What do you think?

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In the first Harvard Business Review of 2010, Robert S. Kaplan and David P. Norton, the original developers of the balanced scorecard, are back with an article (co-authored with Bjarne Rugelsjoen) on Managing Alliances with the Balanced Scorecard. Quoting a recent study by McKinsey & Company that fond that half of all joint ventures fail to yield returns to each partner above the cost of capital, they argue that a methodology is needed that will dramatically improve the odds of success.

Not surprisingly, the authors are recommending the adoption of the balanced scorecard management system (BSC), a technique that can help companies switch their focus from operations and contractual obligations to strategy and commitment, which the authors argue is the key to success. Proper application of BSC techniques should clarify strategy, drive behavioural change, and provide a governance system for strategy execution. As an example, the authors presented a detailed case study based on Solvay, a top-40 pharmaceutical company, and Quintiles, a contract research company providing a wide range of clinical research and trial services for pharmaceuticals that Solvay selected in 2001 to manage all stages of its trial processes across all of its pharmaceuticals under development. After an initial five year partnership, which worked well (but not as well as each side felt it could), the companies wanted to move up to an alliance, but needed a way to accomplish it successfully. They chose a variation of the BSC process -- that they called JSC, formed an alliance management team -- led by an external impartial consultant, and got to work. And while it took some time to make things happen, the alliance based on the new JSC (BSC) approach reduced total cycle time for clinical trials by approximately 40% (which not only considerably reduces costs but accelerates profits as the products hit the market faster) and generated a new methodology for managing non-performing sites that halved the number of non-performing sites (which don't recruit enough patients) and saved 25,000 to 35,000 Euros per site. (Considering that a study can have up to 150 sites, this new methodology can save up to 5.25M Euros per study. And while that might only be 5% of the cost of bringing a new pharmaceutical to market, it's not pocket change!)

The methodology is based on the collaboration theme scorecard that captures metrics that allow you to track your progress on objectives under each theme. The general format for each scorecard is the definition of:

• the process objective,
• joint wins,
• metrics, and
• initiatives.

The scorecards are the tools of an alliance strategy map that defines the intended collaboration, business processes, and expected values. The article presents the strategy map used by Solvay Pharmaceuticals and Quintiles in the definition and execution of their alliance.

The article also mention's Infosys' success with its relationship scorecard and LagasseSweet's success with its own modification of the balanced scorecard, which has helped it to identify 150M in new revenue opportunities. Thus, if you are willing to take the extra time required to jointly build the alliance strategy map and theme scorecards, you might just see a much bigger ROI than you might expect with your own implementation of the BCS.

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Does Supply Chain Excellence Really Pay Off?

You don't even have to go beyond the first page of this recent article in the Supply Chain Management Review (subscription required) to find the answer. According to a recent study by Morgan L. Swink, Rajdeep Golecha and Tim Richardson at Michigan State University, which analyzed the financials of top supply chain management companies and their nearest competitors from 2004 to 2007, supply chain leaders clearly outperformed their closest competitors across the following 10 metrics:

• 50% higher net margins
• 20% lower operating and SG&A expenses
• 12% lower average inventories
• 30% less working capital expenses
• 2X the ROA
• 2X the ROE
• 44% higher economic value add
• 2X the return on stock price
• 2.4X the risk-weighted stock return
• 46% greater market value-to-assets ratio

Excellence pays. What else do you need to know?

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In Part I, I reminded you that Pierre Mitchell of The Hackett Group invited you to participate in a study that would help you identify where you were on your procurement journey by way of 18 value streams that range from "naive apprentice", where you're measuring performance at an elementary (tactical) level, to "expert sourcerer", where you're extracting procurement value at a very advanced (transformational) level. Considering that this survey will not only help you identify a path to increased value but that Pierre has promised to share some of the results with all survey participants for free, it's a survey that's definitely worth your time as Hackett has the premiere benchmarking data in the space.

I also told you that the first seven value streams were tactical and provided relatively little ROI compared to the ROI that is available through more advanced value streams. The next six value streams are strategic and will generally provide you with good payback over a longer term. They range from:

Costs avoided by receiving 'no charge' items and services
  through
Early payment discounts, P-card rebates, or other supply chain finance benefits
  to
Internal enterprise process costs are reduced via a new supplier solution

Costs avoided by receiving 'no charge' items and services

Now we're into strategic procurement where the "savings" are real and sustainable. By negotiating in more items and services for the same money, you've considerably reduced your costs and increased the value that you can provide your end customers for the same price. And while it's true that the 'no charge' items and services could disappear at contract termination, you've established with your supplier(s) that you expect a higher level of performance and service, which will make future negotiations, and cost-avoidances, easier.

Early payment discounts, P-card rebates, or other supply chain finance benefits

Now you're starting to look at the total cost of the buy from an organizational perspective, and not just a unit cost or landed cost perspective. If your supplier's annual cost of capital is 36%, and yours is less than 12%, you could be saving yourself up to 24% annually, or 2% for each month you shave off the total payment time. This can be substantive and is easily sustainable. Plus, once you get good at managing your working capital and finances, you'll start to see even more savings opportunities appear.

Internal enterprise process costs are reduced via a new supplier solution

Once you get to the point where you start recognizing that sometimes you don't know all the answers and that a smart supplier can point out additional opportunities for you to save money, you have not only mastered the art of strategic sourcing, but have reached the point where your sourcing is on the verge of becoming transformational ... which is the topic of Part III.

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I enjoyed the recent white paper from Motorola on Warehouse Management: A Quick Reference Guide To Improving Inventory Accuracy For Perfect Orders because it was short and got straight to the point. Defining the perfect order as an order that is

• delivered on time and in full,
• in compliance with a customer's three-way match (invoice, PO, and receipt), and
• free of quality issues,

it goes on to say that multiple factors contribute to imperfect orders and that the most important starting point is a value stream map that identifies where the most errors are occurring in your current operations.

It then presents some straight-forward resolutions to common operational challenges that you can use to quickly increase your perfect order accuracy. Examples include:

Operational Challenge	Resolution
Manual Order Processing & Improvement	automation technology, RFID, barcodes, and mobile printers
Picking Methods	hands-free wearable computers, scan verification, and voice recognition
Software Systems	central database/ERP, WMS module, continuous training and improvement
Labor	include employees in improvement processes, reward workers for achieving goals, communicate regularly, and hold everyone accountable for following the right processes

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DecideWare, an Australian Company (with offices in the US and the UK) that dubs itself as a Supplier Performance Expert with a Scorecard Deployment Service, offers a niche Vendor Management Solution that excels in managing certain types of vendors. Specifically, their niche solution, which started out as a niche play in HR Management, is used globally by a number of Fortune 500 Multi-Nationals -- which include P&G, Dell, Pfizer, Target, and Wal-Mart -- to manage their vendor relationships, and their Agency relationships in particular.

Their uniquely designed solution -- which allows for simultaneous 360° degree assessments and self-assessments between buyers, agencies, and vendors (which allow a buyer to rate an agency who can self-assess while it rates the buyer and a third party vendor, such as a print shop, which can rate the agency in turn) -- is built on the ultimate application of the KIS(S) (Keep It Simple, Stupid) philosophy. Knowing that their target market are not very technically sophisticated, they opted for the 80% solution, free of bells and whistles, with easy SaaS deployment and an easier-to-follow step-by-step methodology for building vendor capability repositories, scopes of work, vendor assessments, and reports that allow vendor performance to be quickly determined, performance gaps immediately identified, and a vendor's relative performance graphed against their competitors.

While the base capabilities may not exceed the capabilities of a standard RFX tool with extensive survey creation (which they have), process management (which the tool is built around), and reporting capabilities (which are fairly extensive), the extensive amount of industry knowledge they've built in for their niche markets is impressive. They understand that organizations have units, geography, account structures, account types, locations, functions, and accounts; that profiles need criteria, contacts, priorities, questions, and documents; that accounts have definitions, assessors, and reviews; and that business people in non-technical areas of the business like lots of ready-to-use pre-packaged reports and easy-to-use drop down interfaces for drilling into performance data and performing gap analysis. The tool literally walks an administrator through the definition of a vendor capability database, a scope of work, and an assessment step-by-step. (And the tool is even more streamlined for the assessors.)

All of these tools have all of the basic capabilities, and a few advanced ones, that you would expect in a scorecard-based on-demand performance management tool. The vendor capability database, which is a streamlined Supplier Information Management (SIM) tool, allows you to approve supplier (agency) representatives to manage their supplier profiles. The scopes of work (or, for us in North America, statements of work) module allows you to define the services, initiatives, and deliverables that are required, broken down by organizational unit, type, and geography, as well as the details of the quotes required (line items, fees, expenses, etc.), with fees that can be broken down by type and include overhead rate, profit margin, and total hours and benefits for FTE quotes. And the assessment creator, which is part of their Relationship Optimizer, includes all of your standard RFX Survey creation features including configurable variable weight scales, the ability to include quantitative measures, and the ability to define weightings to each section and each component question. The tool contains significant support for comments and detailed explanations for questions as the goal is to take the qualitative and fuzzy and generate numeric scores that are quantitative and precise which can be used to generate actionable intelligence for semi-annual, or quarterly, performance reviews.

In summary, while a number of providers might offer more powerful Supplier Information Management (SIM), RFX, Reporting, or Supplier Performance Management (SPM), the tool is exceptionally well defined for the niche Vendor Management Spaces DecideWare is going after. And their client list, most of whom have rolled out the solution globally, speaks for itself -- as will the case studies from Pfizer and Dell that they will be releasing in the near future.

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The Sourcing Innovation Resource Site, always immediately accessible from the link under the "Free Resources" section of the sidebar, continues to add new content on a weekly, and often daily, basis -- and it will continue to do so.

The following is a short selection of upcoming webinars and events that you might want to check out in the coming weeks:

Date & Time	Webcast
2010-Mar-16 13:00 GMT-05:00/CDT/EST	What Everyone Should Know About China    Sponsor: 42 Rules
2010-Mar-16 11:00 GMT-08:00/AKDT/PST	Fixing Broken Oursourcing Arrangements    Sponsor: Sourcing Interests Group
2010-Mar-16 11:30 GMT-05:00/CDT/EST	Our WMS: Should it Stay or Should it Go?    Sponsor: Cornerstone Solutions
2010-Mar-16 13:00 GMT-04:00/AST/EDT	Effective Management of Non-Strategic Spend    Sponsor: Global eProcure
2010-Mar-16 14:00 GMT-05:00/CDT/EST	DrinkIT Overview Webcast    Sponsor: Tectura
2010-Mar-17 14:30 GMT-05:00/CDT/EST	Contract Management the Last Mile    Sponsor: Zycus
2010-Mar-17 11:00 GMT-06:00/CST/MDT	Measuring Supply Chain Profits and Costs    Sponsor: CSCMP
2010-Mar-17 10:00 GMT-08:00/AKDT/PST	How NOT to pick a Marketing Partner/Trusted Advisor    Sponsor: Regalix
2010-Mar-18 11:00 GMT-05:00/CDT/EST	Through-Life Sustainment for Customer Excellence    Sponsor: BAE Systems
2010-Mar-18 10:00 GMT-05:00/CDT/EST	Improve and accelerate your S&OP process with OMP Plus    Sponsor: OM Partners

Dates	Conference	Sponsor
2010-Apr-14 to    2010-Apr-16	International Conference on Information Systems, Logistics and Supply Chain    Casablanca, Morocco (Africa)	SAP
2010-Apr-15 to    2010-Apr-16	IEEE Green Technology Conference    Dallas, Texas, USA (North-America)	IEEE
2010-Apr-18 to    2010-Apr-21	11th Annual Purchasing Card Conference    Orlando, Florida, USA (North-America)	NAPCP
2010-Apr-20 to    2010-Apr-21	NTMA/PMA Legislative Conference    Washington, D.C., USA (North-America)	NTMA
2010-Apr-21 to    2010-Apr-21	Retail & Distribution Operations China Summit    Shanghai, China (Asia)	GSCC
2010-Apr-25 to    2010-Apr-28	Payments 2010    Seattle, Washington, USA (North-America)	NACHA

They are all readily searchable from the comprehensive Site-Search page. So don't forget to review the resource site on a weekly basis. You just might find what you didn't even know you were looking for!

And continue to keep a sharp eye out for new additions!