Author’s Interview With Dr. Tom DePaoli of Common Sense Supply Management

Author’s Interview With Dr. Tom DePaoli of Common Sense Supply Management

 

https://www.amazon.com/author/tomdepaoli

 

 

Why did you write the book Common Sense Supply Management?

I wrote it as a follow-up to my original book Common Sense Purchasing.  Many purchasing departments were in the process of or transforming to the supply management or the supply chain concept. I wanted to build on and refine my ideas originally expressed in Common Sense Purchasing. In addition the supply chain is the most dynamic and changing area in corporate culture. When change occurs ideas and strategy are critical.

 

You used a different approach why?

In this book, I decided to share my supply management knowledge with readers. I believe people learn more from stories and real life events than from a text­book. The stories were meant to get the reader to think about improving their supply management strategy. Some of the stories are good management lessons. In some of these tales, I was very fortuitous (lucky); others were the result of having talented people work for me and teamwork, and still others were the result of just hard work and massive amounts of homework. I wanted to enliven the discussion about the supply chain.

 

 What is your opinion or definition of the supply management?

Supply management covers more breadth and depth than any other discipline in an organization. It’s the art of building multiple relationships. Although it covers negotiations, transactions, indus­try knowledge, market knowledge, and technology, it’s primarily about building strong relationships and gaining the trust of suppli­ers, customers, and colleagues. I said it in my first book and I’ll say it again: relationship building must be the foundation of any supply management strategy. Many cultures in the world spend what seems to us Americans as an inordinate amount of time building relationships before they get to problem solving or execution. Americans are often impatient with this approach, but it’s necessary, especially when dealing with other cultures, it is a lesson we must learn when using supply management techniques.

 

What do you think a supply management professional must master?

A supply management professional must be able to build rela­tionships. Supply management departments often spend excessive amounts of money on technical training. This is fruitless unless a strong foundation of relationships is well underway. Relationships can’t be faked, legislated, or forced. Supply management profes­sionals must live relationships and commit to them. Integrity in relationships will always carry the day, impress suppliers, scare the competition, and let the supply management professional sleep well at night. Educational credentials certainly look good,

and certifications are impressive, but nothing makes a purchasing professional more effective than developing strong relationships and being true to his word. Spending more time on relationships pays off for all participants. Once a trust is broken, it’s nearly impossible to repair it, so don’t neglect your relationships or underestimate how critical they are. You won’t be able to climb out of the deep pits that you dishonestly dug. Schmoozing with a supplier is easier than digging. On the other hand, honest dealings, over time, build the solid foundation of respect and admiration upon which a supply manager’s success depends.

 

What do you think is most important for a supply management professional?

The very best way to build relationships is to always do what you say you’re going to do, and to always hold yourself account­able for your actions.

 

Is there an ideal way to organize around supply management?

Nothing provokes as much discussion and disagreement as what is the so-called “best” supply management organization. Relax. There is no single optimal organization. What is essen­tial is that the head of supply management must be at the vice president level. At minimum, purchasing and logistics must be within the confines of the organization chart. The skill sets for folks within the organization include: great people skills, an incli­nation for strategic thinking, process-improvement skills, and relationship-building skills. Individuals who lack this skill set should not be given high positions in the organization.

 

What do you think is most critical for supply management?

You must have a disciplined collaborative approach to sourcing. Cross functional teams are paramount to get wide buy in to supplier selection. Business units are internal customers and should participate in the selection; however, never lose sight of the needs of what I call the final or paying customer for your end product. Many of the aspects that internal customers feel are

 

Once you select a supplier then what?

Always go with fewer meaningful supplier alliances. Trying to manage many so-called alliance relationships is nearly impossible. Pick your alliances carefully. One criterion that I used to select alliance was if the supplier could give us a competitive edge. Another criterion could be a material or service that was a major cost fac­tor for us. It does not make sense of waste time with an alliance with suppliers that provide readily available consumables or other nonessential items. The hard part about alliances is the demand for constant communication and relationship building. Relation­ships take time and energy. Make sure you agreed to metrics and define clearly your success factors. Always try to select a supplier who has experience with alliances.

 

Anything else critical?

Prior to attempting a transformation you need to know where you are spending your money. If you don’t, the process is doomed to failure. Here are some questions (checklist) to ask. They work for almost any size company.

Establishing a strong communication plan for your supply management initiatives is critical for its success. Seeking help from trained marketing professionals and communication experts is essential. A continuous communication plan using various media will help overcome the resistance to change.  You need to spend at least 30–40 percent of your time get­ting the word out to folks, by many communication channels, on your strategy, messages, and plans. You cannot over communi­cate, especially about something as radical as transforming the supply chain.

 

What about continuous improvement?

No other department in an organization has more dynamic issues to deal with than supply management does. Supply man­agement is continuously challenged by changing global events and demands from both internal and external customers. My advice to supply management professionals is to lead the change and not be a victim of change. They need to lead not follow these efforts!

Lean, Six Sigma, and Lean Six Sigma are just disciplined approaches to problem solving. They are a combination of solu­tion tools used in a systematic manner. Decisions are supposed to be data based. Lean Six Sigma is very disciplined and plodding. All these approaches can be highly successful, but patience and discipline is required. A kaizen is a more structured approach, but flexible and quick enough to produce quick results. Kaizen is a term meaning “continuous improvement.” In Lean Six Sigma terms, it refers to a project performed at the work-group level that will remove waste from a process. These types of projects can be performed quickly (usually in less than two months). I prefer to perform them in two weeks or even less.

 

What is your philosophy on negotiations?

Information-based negotiations are an approach to nego­tiations that emphasizes deep knowledge of the supplier and its industry. It varies greatly from some traditional approaches to negotiations. It’s not the adversarial Win-Lose negotiation style with the emphasis on game playing, exposing untruths, and taking full advantage of the supplier’s weaknesses. This old approach is a competitive winner-takes-all system that rarely builds longstand­ing, deep relationships with suppliers. Information-based negotia­tions are not based upon the Win-Win model, either. Information or knowledge is definitely power, but in information-based nego­tiations, the supply chain professional gains a deep knowledge of the supplier’s industry, their margins, and their culture. In essence, this is a deep immersion or empathy with the supplier and their competitive landscape.

 

What about your thoughts on planning and metrics?

The Institute for Supply Management notes that 95 percent of supply chain departments do not have a procurement strategy or long-term supply management plan. Of the 5 percent that do in fact have a strategy, only half have successfully aligned the strategy with overall business strategy. Don’t be afraid to put non-traditional metrics in your plan. Remember, people behave according to the way that they are rewarded. After you have a strategy, you must educate other employees on its tenets and the reason behind it.

 

Any more thoughts on supplier management?

Radically reducing the number of suppliers is one of the first efforts that must be tackled. You can’t have “relationships” with thousands of suppliers. It’s difficult enough to have strong rela­tionships with just a few key suppliers. Ruthlessness is necessary. This is not the time for compassion or backing off your supplier-reduction goals. Set the new supplier standards high. You will be surprised. Many will not want to participate under your new, higher expectations. Does the supplier add value, or is the sup­plier a product of misplaced loyalty? We once cut a base of five thousand suppliers to 252 in three months. It can be done, but ruthlessness was required. Any supplier can lowball on the price of any item. I have seen it done hundreds of times. Retail stores are great at having a lead-in low-price item in one aisle with the marked up high margin items very near. Always benchmark your prices whenever possible with other companies. Keep a handle on the price pulse. When a supplier offers a lowball price on a particular part or service, see if they can extend the percent price decrease to all the other items you buy from them. Usually, dead silence results, or the quick backped­aling begins. Calling their bluff almost always works. Call it.

The best companies have the best suppliers!

 

Any more supplier lessons learned?

Never incorporate a new supplier without a test run of buy­ing an item from them, period. No exceptions. Have a purchas­ing professional pretend that he is an end-user. Have him play dumb and actually order an item from the new supplier. Review the entire transaction process to include acknowledgement and invoice payment. Carefully process-map it out, and use Lean and Six Sigma principles. Check on status often. This one road test tip will save you mountains of headaches and resistance to change. Folks do not really want new suppliers. Bad new suppliers infuriate internal customers. Remember most folks do not like change. They will latch on to any minor or frivolous mistake to justify their resistance and to castigate the new supplier.

Progressive supply management is highly team-oriented—especially cross-functional teams. The examination of the supply chain and total cost of ownership drives the decision-making process. There is a systematic process for supplier selection. Relationship building and management is the key skill for the purchasing pro­fessional. When senior management not only supports but also understands the process, purchasing becomes a true business partner and leader.

Show folks how you are doing versus your metrics. Use pictures and graphics. People can relate to them much better. Spreadsheets are not very publicity friendly. Don’t be shy with graphs, and always display them professionally. Keep the radar gun on the process and suppliers. Let other folks see the results, good and bad.

One of the fundamental tenets of Lean is visibility. Use it in supply management.

Purchasing, supply management, and transaction discipline are critical. Most folks do not like it, but most of the routine pur­chases and process must be disciplined. Discipline—especially around using preferred suppliers—must be strictly enforced. Make folks e-savvy and adept at using catalogues. Teach them how to search catalogues, or they will soon quit searching.

 

Any concerns about global sourcing?

If you decide to deal directly with the source or supplier in another country, you need to realize that reaching a strong cul­tural understanding will make or break the process. The task of understanding the culture of the sourcing country is the most dif­ficult of the entire process. Culture includes social organization, political beliefs, the legal system, religious beliefs, language, and the educational system, to name just a few. Any one of these areas requires extensive study and understanding in order to be suc­cessful. It is no small task.

 

Finally any advice to someone new in supply management?

Yes get out from your desk! Check the supply chain links, visit suppliers, learn about industries and do not be afraid to get hands on experience.

 

Contact Dr. Tom = thomasdepaoli@yahoo.com drtombooks.com for newsletter sign up https://drtombooks.com/contact/ My Books link: https://www.amazon.com/Tom-DePaoli/e/B003XSV1IQ

Why Common Sense Purchasing via Relationship Building is the Key to Supply Chain Success

 

 

 

Article from Supply Chain Planet ()

Why Common Sense Purchasing via Relationship Building is the Key to Supply Chain Success By Dr. Tom DePaoli   Having a strong purchasing foundation grounded in a common sense is the key to supply chain excellence. Purchasing is the art of building relationships. It is not about negotiations, transactions, industry knowledge, market knowledge, know-how or technology. These are tools or a means to an end.  Purchasing is all about the building of strong relationships and gaining the trust of suppliers, customers, and colleagues.  Nothing else comes close in effectiveness to the building of relationships for successful purchasing. A purchasing professional must be able to build solid relationships. Supplier relationships are the most critical.   Why Honest Relationships are Foremost and a Powerful Ally Don’t spend inordinate amounts of money on so called purchasing technical training or software unless a strong foundation of relationships is well underway. You can’t fake relationships. You can’t legislate them. Purchasing professionals need to live and commit to relationships. Integrity in relationships will always carry the day, impress suppliers, scare the competition, and let you sleep well at night.  Educational credentials look good, and certifications are certainly impressive but nothing makes a purchasing professional more effective than developing strong relationships and being true to their word. Spending more time on relationships almost always pays off for all participants.  Once trust or relationships are broken they are nearly impossible to repair, so don’t neglect them or underestimate their criticality. You won’t be able to dig yourself out of any of the deep holes that you dig by dishonest relationships. Smoozing is a lot easier than shoveling. Honesty almost always builds respect.   In Relationships Use Some Common Sense Methods The best way to build relationships is to do what you say you are going to do always, follow through on your words with actions, and to hold yourself accountable for your actions. Working together problem solving with the suppliers you are trying to build a relationship with is a powerful way to enhance relationships. Nothing beats sympathy and genuine caring about their struggles and personal fears. People remember when you take the time to personally help them through difficult times or issues. During a crisis if you can help a person solve an urgent problem or issue by going the extra mile you will get their gratitude and trust. Treating others like you want to be treated is the surest way to build relationships. The golden rule works. Use it.   Knowledge Builds Respect and Respectful Relationships The very best piece of negotiations advice I have ever received was to know the capabilities of your supplier, their industry, their competitors, their cost drivers, their margins and their capabilities better than they do! Much easier said than done but it is a powerful tool. It requires a lot of homework, digging and flat out hard work. Once a supplier realizes you understand them, it eliminates all the negotiations posturing and game playing. You will be surprised how fast they will now focus on real issues and problem solving once they know you can’t be bamboozled. You obviously can’t do this with every supplier only the most important and most strategic ones. It is a powerful negotiation tactic based on knowledge not histrionics. Level the playing field with your knowledge! Gain the respect of your key suppliers. Roll up your sleeves, dig deep and become an industry expert. Suppliers will be impressed and more open to relationship building. Sizing up Your Suppliers and Preparing the Relationship Suppliers that have had experience with non-traditional purchasing concepts, alliances and partnerships definitely have an advantage when it comes to developing a deep relationship with them. Make sure you take the time to explain your procurement or supply chain strategy to them and to take the time to understand their strategy. They need to know what’s in it for them. Make it clear and measurable. Feeling good about each other doesn’t get to the bottom line. Appearances do count.  You can size up a supplier’s partner quotient a lot by actual site visits and talking to their employees at all levels. Smiling faces are better than growls and disgruntled remarks. Make sure you dig up the standard industry references about industries and do your homework on which suppliers or companies are at the top in the industry. In most industries there are three or four top companies and although there are differences on many routine items or commodities you can’t go very wrong by picking one of the top ones as your supplier. Don’t over procrastinate on these types of items. Top management needs to understand one important precept.  Suppliers can make or break any business or business plan.  According to Dr. Deming defective materials or equipment not human error or the defective process causes over 80% of quality variances.  Suppliers obviously play the key role in achieving high quality.  Suppliers need to be treated as stakeholders not adversaries.  World-class suppliers can become a company’s very best competitive weapons.  They play the quintessence role in reducing time to market. You must focus on these supplier relationships for supply chain excellence.   Pick Your Relationships Carefully With a Few Suppliers Don’t generate a plethora of partnerships or alliances with suppliers. True partnerships are deep relationships and they must be tightly controlled and evaluated. It makes no sense to partner with hundreds of suppliers just for the sake of using the partnership term. True partnerships require a lot of energy, relationship effort and time. One of the prime criteria to select a supplier as a partner is the fact that they have had previous partner experience. This is a tremendous advantage and should not be discounted at all in your criteria.  Think of partnering as important as a long-term marriage and treat it as such. Divorces are bloody so choose carefully the supplier partner.   Testing Suppliers Capabilities Always Do A Road Test Never incorporate a new supplier without an actual test run of buying an item from them period and no exceptions.  Have a purchasing professional pretend they are an end user, play dumb and actually order an item form the new supplier. Review the entire transaction process to include acknowledgement and invoice payment. Check on status often. This one road test tip will save you mountains of headaches and resistance to change.  Folks do not really want new suppliers. They will latch on to any mistake to justify their resistance and castigate the new supplier. During trial periods new suppliers are most vulnerable to detractors and attackers. Make sure you meet frequently with them. You need to act almost with SWAT team efficiency when a problem occurs and solve it immediately. Agree to problem solving procedures in advance and deadlines. Solve glitches and explain what happened openly. This is not the time for shoving things under the rug or stonewalling problems. Fix them on the spot whenever possible.   Just How Many Strategic Suppliers and How to Select Them Strategic sourcing is a disciplined process organization implement in order to more efficiently purchase goods and services from suppliers. The goal is to reduce total acquisition cost while improving value. A Strategic sourcing strategy should be initiated immediately. A comprehensive sourcing methodology should be followed religiously to include strategic alliance and strategic relationship building with key suppliers. Key supplier alliances must be established. Supplier rationalization (reduction) must be accomplished first and dramatically. Many consulting firms offer a Strategic Sourcing Management solution that walks online users through each step of a consulting-type procurement sourcing methodology. Sourcing savings are in the 20-40% range for many companies. Cultural fit and chemistry are also important. If the relationship is strictly going to be commercial and not a true partnership it is okay to go with your gut on some supplier selections. Make sure they have the capabilities to grow with you. Gut check time is scary for some folks but it is okay to go with your gut on some suppliers especially non-strategic suppliers.   Relationships are the key to purchasing and supply chain success and the straightforward use of common-sense methods will carry the day. Relationships require deft handling by a purchasing professional. No other skill even comes close to insuring supply chain success.     Dr. Tom DePaoli is the author of Common Sense Purchasing –Hard Knock Lessons Learned from a Purchasing Pro available at Amazon.

 

Make sure you are on the right procurement planet. The Common Sense one. #purchasing #procurement #supplychain

https://www.linkedin.com/pulse/why-common-sense-purchasing-via-relationship-building-depaoli-3e

 

 

 

 

Contact Dr. Tom = thomasdepaoli@yahoo.com drtombooks.com for newsletter sign up https://drtombooks.com/contact/ My Books link: https://www.amazon.com/Tom-DePaoli/e/B003XSV1IQ