Decideware

Let me pose this question: how much of the valuable knowledge you have about your strategic vendors and agencies is all in your head?

Capability Management

One area in which we are seeing increasing interest in Indirect Supply, especially among larger enterprises, is what we term "Capability Management".

Meaning, we seek to capture and manage data which describes the capabilities of suppliers to provide important strategic services.

How is this different to a Supplier Database?

Many companies have invested in a Supplier Database to help manage their portfolio of high transactional suppliers, particularly those that provide commodity items where on-line catalogues and up to the minute pricing is vital.

However, this approach is of little use when it comes to managing a roster of Strategic Suppliers, for example in the domain of services companies such as marketing agencies, because a suplier database does not hold the information needed to make good decisions about strategic suppliers.

Although cost is always an important factor in supplier decisions, capability, competence and experience are far stronger drivers when we're looking at strategic suppliers.

Centralizing Information

As a result, the idea of centralizing strategic supplier capabilities information, much of which resides in the heads of a few key executives working with particular vendors, is a central plank of the next wave of supplier optimization.

In most cases is much more cost-effective to first leverage those vendors with whom you are already working before reaching out to new providers. A well developed Capabilities database allows you to do that.

And in the current economy where cost management is such a key driver, we must also optimize our vendor portfolio to work with the best providers, selecting those that deliver the best functional capability at the appropriate cost.

Author: Richard Benyon (Decideware)

Steve Fajen argues in CMO Strategy that the agency model is not in fact broken, but is bent by three 'seismic marketplace fractures'.

He explains those three fractures, are:

1. Short-Term Accountability

Various forces have conspired to demand greater short-term accountability from agencies.

Those forces include: the rise of the agency holding company model and their drive for growth and economies of scale; the growth of media buying companies and their focus on accountability; the introduction of purchasing departments into the marketing department; the role of compensation consultants; and the search of the ROI holy grail.

2. New Compensation Practices

Steve quotes ANA research indicating just over half of clients are 'offering incentive plans to their agencies based on  performance goals' and that value compensation is the hot topic of conversation currently.

Value compensation shifts the emphasis of payment away from head hours to pre-defined goals - some of which are typically sales goals - encouraging agencies to think beyond delivering more than advertising alone.

3. Proliferation of Everything

Professionals and consumers alike are overwhelmed with information and this makes it difficult to focus on what is really important.

The Impact of these Fractures

The impact of these fractures, Steve argues is significant, including:

Short-term: Discontent -  '49% of CMOs polled intend to put their accounts in review this year.

Long-term: Reorchestrating the Agency Model - If agencies must be more accountable for achieving greater business success beyond traditional advertising metrics, they need a bigger seat at the marketing table to influence factors which drive those metrics, including sales.

The Next Step: 'A Blue-Ribbon Panel'

Steve argues the ANA and the 4As must better collaborate, perhaps via a 'blue-ribbon panel' to map out the future direction of the successful agency structure.

Author: Derek Groom. (Decideware)

Corporate environmental responsibility has come of age.

Companies want to reduce their carbon footprint and they want to see that their suppliers are doing the same.

We recently came across a consulting firm specializing in online sustainability training and sustainability professional certifications, greensupplychain.org and, for example a conference next month in San Francisco, the Sustainable Supply Chain Summit.

Consultants, supply chain heads, government agencies, academics and other informed stakeholders are promoting the need for companies to evaluate the performance of their own, and their suppliers' environmental programs.

This is a timely and obviously important idea and one which should be operationalized in supplier assessment scorecards.

It will be increasingly valuable, from a commercial perspective, to incorporate a set of green focussed assessment metrics into performance scorecards, based on key questions such as:

• Has the supplier implemented a formal green program?

• What is the quality of that program?

• Do we have an open and transparent corporate social responsibilty dialogue with them?

• Does the supplier publish an annual sustainability report?

• How did they perform on key green measures?

• Do they understand our environmental policies and priorities?

• Does the supplier maintain a chemical exclusion list to ensure that their processes are free from environmentally harmful chemicals?

• What is the quality of the suppliers reverse logistics program?

• What is their end-of-life reclamation strategy?

• Do they work with their suppliers to manage better environmental performance?

As environmental issues increasingly impact on the economic climate, I'm sure we'll see a significantly bigger effort placed on managing green supply chains.

And that will, of course require tools and methods which provide greater transparency and communincation between supply chain members.

Author: Derek Groom (Decideware)

CIPSA Supplier Evaluation Training

I recently attended a one day training course in Sydney on Supplier Evaluation.

The course was organized by CIPSA (the Chartered Institute Of Purchasing & Supply Australia & New Zealand) and targeted at supply managers. I was keen to pick up a lesson or two to sharpen my skills in the area of supplier evaluation.

Key Learnings

Some of the key points stressed in the course included:-

• Whether evaluating potential or existing suppliers, it is essential to have in place a robust process

• A basic first step is to identify evaluation criteria - which should form the benchmark against which performance is assessed. Suppliers should always be evaluated against the identified benchmark rather than against each other. It is more important to identify how well suppliers are meeting the identified objectives, rather than how well they are performing against each other

• While cost is likely to be an important evaluation criteria, it should not be the only criteria. As was noted, “If the only tool you have is a hammer then every problem becomes a nail”!

• Evaluation criteria should be prioritized to reflect relative importance

• Ideally, the evaluation criteria used to assess an ongoing supplier should be linked as closely as possible to the evaluation criteria used to select the supplier in the first place

• It is essential to involve key stakeholders within a company when developing evaluation scorecards. It can be useful too to involve suppliers

• Implicit to the whole process of evaluation is that all team members should be involved in the evaluation scoring.

Upgrade your toolkit

If all this looks deceptively simple in theory, it can be more difficult to execute well in practice witihout the right tools.

You may well need purpose-built software to help your team put into practice what the training courses preach!

Author: Derek Groom (Decideware)

In an excellent newsletter that I subscribe to, "Propulsion" by Tim Williams describes a great research technique to "look backwards" from failure in order to identify the issues that currently face a business.

"Account planners have an innovative research technique they call "The Obituary."

In individual interviews or small groups, planners ask consumers, "Let's say this brand just died. Write an obituary for the brand. What did it die of? Who will miss it? Who will come to the funeral?

Respondents are asked to put the brand's obituary in writing. Out of these responses come some fascinating insights about how consumers really feel about brands."

Tim goes on to describe how he applies the technique in his work consulting to agency executives - with a similar objective to help identify issues which can be addressed to help manage better client relationships.

We're familiar with the types of issues I'm sure Tim generates in his work.

Here are some examples of Relationship Obituaries we hear (and you may well have heard these as well)....

From a client:

"The relationship started out with the best of intentions but over time it grew stale. Vendor senior management never attended meetings and we felt isolated and under appreciated. At the end of the contract the business went to out to tender, much to the surprise of the vendor."

...and...

From an agency:

"The client never treated the us as a partner, they failed to share critical brand strategy and as a result the creative was never quite what it should have been."

I think this Obituary technique could be a great way to identify assessment criteria to apply in a formal supplier evaluation process and in particular, it could be focussed to reveal behavioral-based issues.

Behavioral based criteria, for example "information was not shared", and "management did not attend meetings" are much more easily actioned by supplier managers than non-specific issues, for example "there is no trust" or "they don't care about us".

I'm sure skilled researchers could guide respondents to go beyond top-line, non-specific concerns to verbalize specific, behavioral issues which can then be applied in formal evaluation programs.

The benefit of this whole approach is that by projecting into the future to look back to a terminal event (e.g. the death of a client-agency relationship) respondents have an opportunity to raise concerns in a low risk forum (the research setting) in advance of serious problems actually occurring.

So managers then have time to consider the issues, to perhaps gather further information to supplement the qual' work, and then to act to manage risk.

Author: Richard Benyon (Decideware)

With Thanks: "What if the advertising agency died tomorrow? By Tim Williams"

Purchasing.com offers a profile of successful efforts by Hewlett-Packard to improve their Supplier Management Process.

The article features comments by Operations Director at the Houston based Personal Systems Group, Tom Adams on how he focussed on a key objective of the program "to build partnerships with suppliers"

Critical to the program are two scorecards

Adams explains how the High Performance Supplier Scorecard enables HP to measure supplier performance and encourage positive behaviors, such as continuous improvement.

And, the Supplier Reverse Scorecard aims to ensure suppliers want to do business with HP by gathering honest feedback which is used in continually developing HP's supplier management business practices.

HP offer 10 Tips to 'Getting Useful Supplier Feedback':

1. Agree to formal and informal feedback from suppliers

2. Formal feedback can occur meeting with suppliers - such as monthly with strategic suppliers, quarterly with partnership suppliers and annually or semi-annually with transactional suppliers

3. Informal feedback can take place on a much more regular basis (even daily), via phone calls, emails and personal interaction

4. Consider designating an executive sponsor/champion to each strategic supplier, who talks with suppliers frequently and provides opportunities to share informal feedback

5. Create a formal process to assess supplier feedback. The first step should be to determine if the idea is worth pursuing. If so, come up with appropriate actions, and arrange for a team to work on those actions

6. Change may involve not much more than tweaking an existing process, not completely restructuring it

7. Respond to the supplier to let them know you are working on their idea

8. Implement the actions. Then provide the supplier with a way to provide feedback on the change

9. Be sure to get back to suppliers if you decide not to take any action on their recommendations

10. Finally, keep the whole process in perspective, remembering that it is designed to continue building stronger supplier relationships

Source: Purchasing.com & Hewlett-Packard

From Adversarial to Co-operative - How to Improve Supplier Relationship Management Practices

A recent article in SupplyManagement.com, 8 May 2008 highlights the supplier management journey of UK infrastructure provider Network Rail and makes the point that change is achievable with good leadership.

Following criticism of its previous supplier management policy, characterised as adversarial in nature and failing to properly address a balance between risk and reward, the head of contracts and procurement, Ian Ballentine committed to change in the organisation and said he wanted the group to improve the company's approach towards suppliers.

"There are elements of adversarial behaviour," he said. "You do see aggressive behaviour arise when things are not going well.

"Where we see it we will use training to get people to understand there are other ways of delivering a project rather than banging on the table and saying, 'I need my project today'."

Graham Coombs, communications director at supplier membership organisation the Railway Industry Association, said it was a positive step for the sector. "There is no doubt in the days of Railtrack [Network Rail's predecessor] that it was highly adversarial. It has been changing ever since. We are not quite in a fully co-operative environment, but we are moving in the right direction," he said.

Source: SupplyManagement .com

What Pharmaceutical Marketing Clients Want and Need

The Pharmaceutical sector is recognized as one of the largest, most complex, competitive and influential marketing environments.

A special feature in this month's PharmaVOICE, "Client Services" focuses on the client-agency relationship and reveals agency executives' perceptions of industry trends, best-practices and client needs.

While the challenges of successful pharmaceutical marketing remains, ahh ... challenging, some common themes emerge from discussions with major providers of communications services when asked the question 'what it is that clients want and need? from their relationships with their agencies.

In no particular order, those answers include the following:

Brand

Clients want agencies to demonstrate their commitment to managing the brand. No surprise here, but they now expect seamless brand management across a complex, disparate media landscape.

Training

Clients typically recruit their marketing team from the salesforce; these people need training in the skills that will make them successful marketers - agencies are well placed to provide that service.

A Partnership Approach

Clients are looking for their agency to integrate with the marketing team and other communication service providers to work seamlessly as one coordinated unit.

"The most important component of providing excellent client service is to break down the barriers that can form between client and agency."

Channel Agnostic & Integration

Channel growth and fragmentation has confused the media landscape. Clients need help understanding what strategies are most (cost) effective to help drive sales growth, short term and long term. And they want advice on how to integrate their marketing spend across various channels.

"Client service teams that are communication channel agnostic can better serve their clients by not only recommending the most effective communication tools for their brands, but by providing guidance on how all of their communication will work together."

Media Expertise & ROI

The rise of digital media channels has added to the complexity of the media environment and (re)fuelled the call from marketers (and their CFOs) for greater levels of accountability. Marketers want a better understanding of the ROI from A&P spend.

Author: Derek Groom

Source: PharmaVOICE.com

This is part 3 in the series of key points that I picked up on at the eyeforprocurement 2nd Supplier Management Conference at the Flamingo in Las Vegas.

CPO vs Buyer

A third area of discussion was from the supplier perspective, about whether noble ideas for strategic supplier relationships that the CPO desires could be at odds with the behavior of Buyers operating "at the coal face".

To expand, Buyers working at operational levels are typically using leverage techniques to force down costs, sometimes in competition with other desired outcomes, such as improved quality.

It is possible for Suppliers to receive mixed messages from Buying organizations lacking a supplier management technique which clarifies each suppliers' performance objectives with a meaningful and well constructed scorecard, which allows all the key people working on the business to contribute to the performance evaluation process.

We were invited to think carefully about the alignment of scorecards developed to support the business objectives of the relatively few, high value suppliers and how that needs to be managed very differently to the relationships with the much larger group of transactionally focussed suppliers.

Conference Summary

All in all it was a terrific conference for professionals interested in techniques and tools to manage high value strategic suppliers. All the speakers were on message and there was plenty of time for discussion and networking. I will be sure to attend next years conference!!!

Author: Richard Benyon (Decideware)