Art Koch's Profit Chain™ - Cheap is Cheap - Buyer Beware!

A couple weeks ago I posted about Cheap is Cheap - Buyer Beware!

I discussed how buying cheap lets entropy into your organizations. We are seeing this play out in real time with the Boeing 737-MAX, DO NOT let this happen to your organization! It looks as though Boeing went with a low price contractor. Here are five things that can help you to avoid this type of error.

Do you have a buyers in a purchasing department or commodity specialist in a procurement departments?

Ask these five questions.

  1. What percent of the team are professionals with education and certification supply chain or procurement management.

  2. Who does procurement report into? If it’s finance, I can guarantee they are focused on the incorrect metrics.

  3. What percent of the time do you reward contact to the lowest price bid?

  4. Do you have a supplier score card and are the rankings credible?

  5. What percent of suppliers are jointly working with procurement, supplier quality engineering and design engineering to reduce total cost?

Lastly:

  • Staff a department with unskilled workers, you create a cost center.

  • Staff a department with skilled professionals, you create a profit center.

Below is my original post from July 8, 2019.

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A quick way of adding Entropy into your organization is via purchasing.

If you’re always buying from the lowest price vendor, you’re running a purchasing department.

If you’re working to understand the TOTAL cost of ownership and rewarding suppliers that support; excellent customer service, flexibility delivery, outstanding quality and jointly deliver ongoing cost reductions, you have a world class procurement function that builds supplier partnerships.

The best way of becoming an Entropy Busters™ zealot. Never open the door and let it in…

Ask yourself and the team these three questions.

  1. What percent do we reward contact to the lowest price bid?

  2. Do we have a supplier score card and are the rankings credible?

  3. What percent of suppliers are jointly working with procurement, supplier quality engineering and design engineering?

If you don’t readily have the answers to these questions, you’re letting entropy into the process

Cheap is Cheap - Buyer Beware!

Supply Chain Management is alive and well!!!

Supply Chain Management is alive and well!!!

I recently read the June 2018 HBR article “The Death of Supply Chain Management

Shocking….to say the least.

I liken this article to the mid 1980’s and the push for “Lights Out” manufacturing.  Are they shouting from the same roof top?  Have not educators and professionals alike learned that lights out manufacturing has an extremely limited application.  And here they are sounding the same horn.  I can hear it now, “The Light’s Out Supply Chain” or “The Autonomous Supply Chain”.

If the authors’ objective was to get our attention, they did. However, they missed significant historical lessons. Nothing can replace human tactile/touch of making the pieces fit together.  Just ask Elon how his autonomous factory is working.  How many truly believe there will be 100% autonomous networks of vehicles roaming our roadways. Not many…we like driving and conditions change too often.

They’ve missed a critical point: SCM has been a 2nd class citizen within organizations for years and never let loose to show its true potential.  And NOW with big data, AI, and better analytics we have moved to the front of the bus. 

It’s time for SCM leaders to invest in themselves, organizations to invest in SCM as professionals. SCM is a profession just like CPAs and engineers.  As we move to the front of the bus, we as leaders in SCM must demand more professionalism within our profession.

The authors are correct, in there are significant benefits to AI and linking; sales, demand planning, inventory optimization and replenishment planning.  However, there must always be a strategy, vision and professionalism to “right the ship”.

SCM welcome to 1st Class!!!  Let’s act like we belong and let’s not blow the opportunity to show the world what integrated SCM can achieve.  It’s a great time to be part of this transformation.

 

Art Koch

Advisory Services and Founder 

+1-336-260-9441

art@arthurkochmgt.com

Thinking Big!

Just finished Alan Weiss’s one day session on Thinking Big! WOW…! Alan is the author of more that 60 books and the person behind the Million Dollar Consulting® franchise. This is my third class/session he has lead, all have been transformational for me as an expert resource and advisor for Operations and Supply Chain.

Key learnings;

  1. Don’t let our norms consume our creativity.

  2. Focus on what you desire in life to have break out Thinking Big opportunities.

  3. Build your brand; Entropy Busters!™, Inventory Is Evil!, The 1%=50% Rule, and Found Genius.

  4. Over communicate

  5. Stand out in the crowd / become an object of interest.

Alan Weiss and  Art Koch

Alan Weiss and Art Koch

Our class.  19 people from 4 counties.

Our class. 19 people from 4 counties.