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Category Archives for "Level of Outsourcing Thinking"

Outsourcing Tasks Does Not Transfer Responsibility For Those Tasks

Outsourcing Tasks Does Not Transfer Responsibility For Those Tasks

President Obama quipped in an interview with CNN. On May 14, 2010 "you had executives of BP and Transocean and Halliburton falling over each other to point the finger of blame at somebody else...The American people could not have been impressed with that display, and I certainly wasn't." The legal wrangling continues and will take considerable time and expense to resolve. We need not go into the gory details of dollar numbers too big to even fully comprehend, but from our perspective in this Chapter three key points stand out:

  • When you outsource a task, service or suite of services, you could still retain significant responsibility for its full and proper execution.
  • Brand-names, size of the company or even their experience is no guarantee of performance of the outsourcing service contracts.
  • No matter how close the 'partnership' is at the start, the test of a successful outsourcing contract is how it ends.

While these 3 key take-aways are still relevant to our discussion here, what is more relevant is the fact that all the companies in question will have to continue to outsource (and insource). So the practice of outsourcing itself will continue unabated. What will change after this learning experience is that the practice will be carried out in a much more sophisticated manner. That is the whole point of this book.

Before more on to newer, more sophisticated models of outsourcing that are emerging and examining them in more details in the next few chapter, let us consider the evidence on the satisfaction from current outsourcing arrangements.

Data, anecdotes and case histories abound on the misapplication of information technologies for supply networks. Not too many years ago, a very large corporation operating worldwide, made news with the downgrading of their earnings expectations due to supply chain system’s implementation setbacks. The expectation was that the new system would reduce the new production cycle from 1 month to 1 week. Furthermore, it would better match the demand and supply of its products to place the correct products in the right locations and quantities, all at the right time - a very lofty goal. The company spent an enormous amount of money, exceeding US $400 million in order to achieve its aim. However, the software system 'never worked right'. It caused the factories to crack out too many unpopular products and not enough of the trendier ones in high demand. While making the earning downgrade, the CEO asked the rhetorical question, ‘is this what we get for $400 million?’

The market analysts were not surprised. One respected market analyst [AMR] commented, ‘fiascos like this occur all the time but are usually kept quiet unless they seriously hurt the bottom line.’ Another respected market analyst commented that while the CEO made it sound like it was a surprise for him, if he did not have checkpoints for the projects, he does not have control over his company. A third analyst commented that companies are confused by escalating market hype and too often underestimate the complexity and risks. Another [Forrester Research] commented 'when the software projects go bad companies are more likely going to scurry up and cover it up because they fear that they are the only ones having trouble. But far from it; our conversation and research reveals this company was not unique or the only one having this kind of trouble'.

Despite their lofty goals, many of the large information technology deployment projects derail. It takes time for the word to filter out because, in most cases, the executives involved in the process are far too embarrassed to talk about what happened. They do mutter among themselves; after several similar instances the mutterings become more vocal and a trend emerges where a number of people start talking about the shortcomings of the system itself or the implementation process or of the time taken for implementation. Because the cost of this failure is so high – greater than $400 Million in the above case – it is instructive to understand the real root causes of this failure. I am not looking to apportion the fault or apportion the blame in this chapter.

Why do so many outsourcing arrangements fail?

Why Do So Many Outsourcing Arrangements Fail? 

It is common knowledge that the failure rate of complex outsourcing arrangement remains stubbornly over 50% depending on which survey you read. With such a long history and accumulated lessons from outsourcing, this is simply unacceptable. 

However, it is not only outsourced projects that fail. Internal projects – especially large scale IT systems development or technological developments have an equally unimpressive track record. For an amusing example of the reasons, I encourage the reader to peruse this blog post:

 "WHY ARE SOFTWARE DEVELOPMENT ESTIMATES REGULARLY OFF ?"

So, what exactly  do we do in the preparation stage? We should ask and answer several key questions:

  • What are the services to be outsourced? Why? How does this plan fit with our corporate strategy?
  • What are the Key Service parameters? How will we know that the outsourced service is meeting our strategic objectives?
  • What budget for Service?
  • How many Service Companies?
  • How long contracts? 
  • How to select Service Companies?
  • How to manage relationship/s?

So what happens when you fail to prepare? The obvious answer is that the outsourcing arrangement turns out to be sub-optimal, and sometimes even disastrous. 

If you are looking to make perfect Outsourcing Strategies without failure Risk factor, Buy Book Outsourcing3.0

30 Years Of Accumulated Wisdom Is Now Available

30 Years Of Accumulated Wisdom Is Now Available

However, it will be a fallacy not to learn from all the accumulated wisdom of the past. After all, those who do not learn from history are condemned to repeat the same mistakes again and again. This will enable us to understand the steps we can take from the very beginning to increase your probability of success. This will also allow you to confidently move forward with Business Network Information Technology system selection, integration and use in order to achieve the results that you set out to achieve.

The supply networks information technology projects have become bigger and bigger over the last 15 years. It is quite customary now to start with an expectation of spending around $ 50 million but end up spending in excess of $200 million on systems renewal projects.

Rough estimates indicate that, even today, about one third of these projects are cancelled without delivering any benefits, after spending more than $100 million. Another third of the projects are not cancelled, but fail to deliver significant parts of what they set out to achieve. Only one third of the projects achieve most of their strategic goals, but many still incur several budget upgrades and time overruns.

Why is this pattern of failure repeated over and over again?

To answer the key question above, let’s first examine a typical project cost structure. It is estimated that the software costs are no more than 15-20% of the overall cost of systems renewal. Programming and configuration costs run from 20% to 25%; external consulting costs generally associated with process changes run from 15-20%, data conversion costs run around 10-15%, training costs  run from 10-15%, systems startup costs run around 10%, applications support costs are between 5-10% and hardware costs are between 2-5% of the overall cost structure. Out of these costs only the software costs generally remains fixed through the systems renewal cycle. Pretty much all the rest of the cost buckets are estimated ambitiously at the start and tend to run over quite considerably as the project progresses.

Outsourcing is a fact of life in business today

Outsourcing Is A Fact Of Life In Business Today

We will however, briefly focus on three relevant parties - BP, Transocean and Halliburton for the sake of discussion relevant to this Chapter - on modularized outsourcing. BP had outsourced the task of drilling to Transocean. At the same time Transocean had bought the Blowout preventer from Cameron International Corporation. Whether it can be argued that BP or Transocean had outsourced the task of Blow-out Prevention (BOP) to Cameron is not certain; neither is the liability on malfunction of the blowout preventer because of allegations of lack of proper maintenance. Cameron agreed to settle all claims related with the Deepwater Horizon tragedy with BP for $250M - without any admission of guilt. The situation with Halliburton is still unclear. As per a CNN news-report:

BP and Halliburton sued each other in April 2011 claiming each is to blame for the deadly explosion on the Deepwater Horizon rig and resulting disastrous oil leak. Halliburton was in charge of cementing the Macondo well and claims that its contract with BP indemnifies (releases) Halliburton of any legal action resulting from its work as a contractor...

In a response filed Sunday, BP asserted that "maritime law prohibits indemnification for gross negligence."

As part of that four-page filing, BP reiterated that it was seeking to recover from Halliburton "the amount of costs and expenses incurred by BP to clean up and remediate the oil spill." BP has estimated in the past that the total cost will be around $42 billion, and by the end of November 2011 the oil company it has paid out or agreed to pay out $21.7 billion to affected individuals, companies and governments around the Gulf.

In an e-mail to CNN, Halliburton spokesperson Beverly Stafford said "Halliburton stands firm that we are indemnified by BP against losses resulting from the Macondo incident."

Myths about outsourcing and how to know the truth

Myths about outsourcing and how to know the truth

Not a single day goes by without a mainstream newspaper decrying the job losses or closure of some facility due to outsourcing. These are legitimate concerns. However, if outsourcing is carried out for the right reasons (and we discussed the reasons in detail in the previous chapter) it provides ample growth and profitability opportunity to the businesses and the economies. Certainly there are displacements and adjustments in the economies that need to be handled with compassion, creativity and flexibility. At the same time, we must remember that if the luddites had carried the day, we might have never seen the industrial revolution.

I say this at the outset of this Chapter in order to ask you to be objective and rational when you examine the myths surrounding outsourcing. There are probably dozens, if not hundreds of myths that keep circulating on this topic. Most are self-serving rumours started by people directly affected by the decisions and events. Some are part of the sales arsenal of the service providers, while others are defensive myths designed to freeze any potential moves towards outsourcing in their tracks.

So, why should you read this chapter with interest?

Recognizing the key myths, and understanding the reasons why they are false will help you discern specious arguments, whether during sales process, or in subsequent management of the outsourcing arrangement. It will also spur you on to dig out facts, and use facts to foil attempts of disinformation. Using facts to make decisions, and to present information will help you gain credibility, profits and promotion. Moreover, if you think deeply enough about why people perpetuate myths about outsourcing, you will discover what questions to ask of your outsourcing service providers in order to retain the leverage and advantage.

I have been writing about the myths and communication issues prevalent in outsourcing almost since I co-founded Global Supply Chain Group in 2000. Many of my articles and white papers on the topic have been published in a plethora of business magazines from which I have distilled the key essence in this chapter.

Outsourcing has a long history

Outsourcing has a long history

Outsourcing, or as it was then labeled „contracting out‟, has been in use on an industrial or commercial scale since the advent of the industrial revolution in England during the 1700‟s (Brown & Wilson 2005; Kakabadse & Kakabadse 2003), with firms facing the "make or buy‟ conundrum that resulted from the greater production efficiencies that characterized eighteenth century England (Domberger & Hall 1995). In support of this contention, Greaver (1999, p.10) wrote that "outsourcing is similar to subcontracting, joint venturing, and strategic partnering concepts, which date back hundreds of years‟, citing the following examples: farmers hiring migrant workers; construction companies subcontracting electrical and plumbing activities; and governments subcontracting defence materiél production to private companies.

The first systematic use of outsourcing can be traced back to the 1940's, during World War II, when organizations provided systems facilities management services to the U.S. government (Greaver 1999). However, it was the growing dissatisfaction with the underperforming post World War II ideal of economy-of-scale driven conglomeration (Hunter & Cooksey 2004) and the introduction of timesharing mainframe computer services in the 1950's and 1960's (Factor 2002) that set the scene for the wider adoption of outsourcing methodologies.

Is there a way to distinguish between good outsourcing and bad outsourcing? What are the tell-tale signs? In a later chapter we will deal with the objective measure, but at this point I want to note a few tell-tale signs that generally apply.


The debate on outsourcing is centered around Core Competence

Ask any executive, when to outsource, and when not to outsource – you will get a quick answer. If it is a core competence, do not outsource. If it is not a core competence then consider outsourcing.

 But are there situations when you must NOT outsource? We were faced with a situation like this in one of our projects. One of the directors was dogmatically against outsourcing of any kind. In his executive career, prior to becoming a non-executive director, he had faced several outsourcing situations where the outsourcing service providers did not deliver the promise. In addition, he had seen an erosion of capability within his own company to an extent where it lead to dependence on the outsourced service provider, even for minor tasks related to the service. At times, he felt that the service providers charged inordinately high prices for these minor services, especially if they were not covered by the initial contract. All these memories had created a bias which is not uncommon.

Valuation Of Business Networks Ranges Into Trillions Of Dollars

Valuation Of Business Networks Ranges Into Trillions Of Dollars

Each industry has a highly unique and valuable supply network that its participants have created in response to the circumstances, regulations, customer needs, and economic situation in the industry. Either by trial and error or by intelligent design somewhere along the way, each of these networks has evolved over the past several decades to reach into its current state as a result of all the changes in economics, technology, regulatory requirements and customer tastes. Sometimes a new player, such as Red Bull, enters the industry and causes a major disruption to the established supply relationships and networks. In most cases, the established supply relationships and networks in every industry will go through a gradual evolution as the environment evolves. Most CEOs are now familiar with the power of supply networks transformation. Currently in many industries these supply networks are rapidly undergoing massive transformations as CEOs adjust their business strategies to global realities.

We will cover business networks and supply networks in great detail in Section II and III. For this reason, we will devote the rest of this chapter to looking at some other types of networks familiar to you. 

The most familiar network to you is your own. A network of
business associates and contacts. Inevitably, they come to your rescue when you need help and vice versa. They are also good sources of information, job leads, business leads and even guidance or inspiration. LinkedIn and Plaxo have put the Rolodex of old online and added far more functionality and possibilities with their web versions In that sense, online networks enhance the possibilities and functionalities far beyond what is possible with the offline networks. An enriching, quasi-structured and purpose oriented interaction is possible using online networking tools - it would be difficult to replicate this in an offline context.

Other Examples Of Networks Abound

Other examples of offline networks are alumni networks from your schools, colleges, previous work places and similar locations. Many of these are now online, though very few are doing much beyond basic database creation and sharing. Just this year, one of my graduate schools has started systematically co-creating executive education programs with the help of its alumni network - even though the possibility has existed in technological capability for almost a decade.

Some of the more well known formal networks are organisations such as the Freemasons, the Rotarians and clubs including the chambers of commerce. Each of these was created for a different mission and most still adhere to their original formal charters. Many of these formal networks are moving online, at least for the purpose of database creation and sharing. Contrary to some beliefs, most of them are rather benign associations that create a forum for gathering and sharing interests. Many networks of professionals with similar interests exist online either at LinkedIn or through professional bodies where the only condition of entry is your interest in the topic of discussion.

One such offline network where I served on the Global Advisory Board broadened its membership by tens of thousands during the five years I was on the board. 
The professional courses, seminars, forums and lecture seminars, forums and lectures series run by the organisation contributed significantly to the body of knowledge on the subject. At the same time, numerous
individuals found suitable jobs and professional progression
advancement though the network.

Another online informal network I have created on a social networking website has grown to more than 6,500 members globally and business opportunities worth more than $650 million are offered every year. It is difficult to estimate the actual trade that results from the network as trade is mostly carried out offline. This network is growing rapidly. Now I am grappling with the question of how to keep its in formal nature and yet enhance its usefulness and relevance
to the participants of the network. 


In the rest of this book, we will focus primarily on the
business networks, their efficacy - efficiency and effectiveness and their utility to the participants. More specifically, we will demonstrate how the business leaders of the future are busily building networks that will underpin their business aspirations. There are five key leverage points of the business networks and we will discuss these in details in the next section.

Venice – the powerful business network of the Middle Ages

Venetian Merchants Of The Later Middle Ages


No wonder, then, that the Venetian merchants - the middlemen closest to the end customers and with the most visibility of the entire network - moved to take greater control of the network.

It should not surprise us that consolidation of political power made the business network more effective and efficient at the same time. There are ample historic records, as well as anecdotal writings - from Shakespeare’s “The Merchant of Venice" to Horatio Brown's historical reviews - that make great reading about the business network centered around the Venetian merchants of the later Middle Ages.

The network had become a lot more formal in its form 

In the late Middle Ages, the bankers, merchants, and ship owners of Venice controlled the trade into Europe. At the peak of its power, the Venetian Republic had a fleet of ships exceeding 3000 vessels and controlled all trade from the eastern shore of the Mediterranean Sea to Europe. To assure security of the supply network, the Venetian Republic controlled territories on the Adriatic coast, so pirates could not attack their ships coming from the east. Using their financial power, the Venetian Merchants’ Guild began to dis-intermediate the middlemen in the entire supply chain.

The simultaneous rise of strong Arab empires with central command, first in Baghdad and later in Cairo controlling a vast territory, aided this process of dis-inter-mediation as the caravans could traverse a much greater distance and were assured relatively more security in their travels. A key feature of the Venetian business network was the role of political power, as well as finance, in shaping desirable business outcomes and securing these outcomes for the key participants in these networks.



Re-thinking Supply Chains

A look at rethinking supply chains By Stuart Emmett

Introduction  – Why are so many companies constantly rethinking supply chains? Why many other companies are out of step?

Many people do now understand what is involved when following a supply chain approach. However, ensuring the supply chain is optimised for the benefits of all participants; will mean a re-thinking of traditional ways. This article will explore some of the changes in thinking that are needed. This re-thinking may not be an easy process for some individuals in some companies and this may therefore limit the optimum development of supply chains. It would seem a possibility that Supply Chain development in the UK may well falter because of the prevalent way of management thinking. One thing is very sure; what worked for many years may not work for many more.

A Supply Chain approach

The supply chain approach is now well documented and at any level of development will require changes to “the way we do thing around here”. It is not the purpose of the article to discuss these changes, which have been well documented elsewhere; however the following briefly illustrates some of the needed changes

Changes Some of the needed “ends” are:
“Silo” functions to “holistic” processes Decision integration, organisations of extended enterprises, collaborative management approaches, web connected, real time focus
Product “sells” to Customer “buys” Demand pull, order driven, low to zero stock holding, involved suppliers, short production runs, real time visibility, short product life cycles, fewer suppliers, market segmentation
Transactions  to relationships Dependency , commitment, cooperation, collaboration, aligned company cultures, extensive trust, proactive managemen

The way we look

A Supply Chain approach will require a business to change and this, in turn, will mean changing the thinking from a current and known position, towards a possibly unknown but planned for future. As the way we think affects what we do, then the way we think, is an important process to be considered. Research suggests our brain is in two parts – the left hemisphere and the right hemisphere. At least, this is the simple view – front and back, upper and lower quadrants are other “divisions”. Indeed, research into brain activity, continues to contribute to our understanding at a rapid pace. Meanwhile, the left and right view suggests we have a Logical Left side Brain and a Creative Right side Brain. The Left side brain will firstly conduct an Analysis, will then Act, and finally will Feel, (for example, is the action “correct” and “right”). The Right side brain however, works the other way, Feeling, then Action, then Analysis. Most people are relatively flexible in this brain wiring and of course the influences of environmental forces and the way we are nurtured, treated, handled etc also has a powerful impact to our thinking and to our personal behaviour. In exploring the simple left side-right side brain differences, then the following is revealed:

Logical left brain side people Creative right side brain people
Prefer written, mathematical, science based approaches Prefer musical, art/visual based approaches
Objective, linear thinking, short term views Subjective, wholes/parallel processing, longer term views
Analytical, step by step “head” thinkers Creative, free flowing “heart” thinkers
Rational “facts” based reasoning that converges Emotional “feelings” synthesis that diverges
Summary: Analyses-acts-feels Summary: Feels-acts-analyses

Most individuals can usefully recognise which side is the most personally representative one.

The way companies manage

As companies are collections of individuals; it is therefore possible to see left side and right companies. Following on from the above individual brain sided view, then company’s can be viewed as follows:

Left brain sided companies Right brain sided companies
Task based “today.” People based and a long term view.
Problems reoccur as only the symptoms are treated ;(“Elastoplast” solutions). Problems are tackled by looking at the thinking that causes the problems.
Making/selling products-services has the priority. Make people before products-services.
The way forward is with Science/technology. The way forward is by Motivating/empowering people.
“The numbers speak for themselves.” “It is how we connect together that is important.”
Incremental results/parts. Holistic, whole results/parts.
More Western cultural based. More Eastern and Latin cultural based.

Left sided companies will often work with fixed assumptions for development and growth as they are incapable of “going outside of the box”. When they are pushed to change from “tradition”, they will react negatively as they fundamentally believe the way forward is “more of the same” and they see the only solution to for example, company growth, as needing a bigger share of the existing market.

Supply Chain thinking

The ways of thinking will also translate into all management approaches including how supply chains are managed and structured, for “as a person thinks then so they are” (Proverbs 23.7). The following three diagrams represent a thought process for the past and future of Supply Chain management.

1) Older Approach/Linear thinking

This model has given proven benefits, as will be shown later in this article, to the previous non supply chain ways of functional silo management, It will be seen that this approach represents linear thinking, which is classically left brain mode. This is also a major model currently used in the UK for supply chain development. By following the above left brain explanations, we can see that this means having short term task centred approaches with an incremental view of the supply chain, with relationships to the next level only. This may or may not involve a collaborative approach and will more than likely have fixed arrangements and contracts in place. The supplier may also feel that the supply chain coordination’s are all one way and that “coercive power” is being used. It will tend to use a rigid and reactive approach to customer service with scheduled and rational replenishment.

2) Newer approach, network thinking.

Here there is some attempt to go further into the supply chain using collaborative approaches and extending beyond the first supplier level. Fixed arrangements with boundaries/contracts may exist but the collaboration will be more open and sharing. Customer service can be more responsive and flexible with real time replenishments.

3) Emerging Approach/Systems Thinking

In this model, much more fluid arrangements occur with systems thinking recognising the complex interactions that affect each other player in the specific supply chain. Right brain thinking concentrates on the wholes of the supply chain and perhaps uses seamless collaboration and virtual arrangements. Collaboration will be totally open and shared, and is unbound and innovative. Each specific supply chain could be viewed as a small company in itself comprising of cross internal functions and jointly managed with suppliers / customers, maybe following a matrix/project management structure organised into specific supply chain cells with decentralised control and shared responsibility from all involved. This following the basic principles of “small within big” that has for example, worked successfully when adopting TQM and JIT methods for production cells internally within product manufacturing/assembly organisations. Interestingly, such approaches were pioneered in Japan, a more natural right brain culture but of course have been actively adopted and managed in the UK culture. Some changing in thinking went on! A summary of the three models on supply chain thinking follows:

Old Supply Chain approach Newer Supply Chain approach Emerging Supply Chain approach
Linear thinking Network thinking Systems “links and loops” thinking
Maybe collaborative at first level  only Collaborative and maybe beyond first levels Collaborative and seamless in scope
Fixed contractual arrangements at “arms length” Fixed arrangements/boundaries/contracts Virtual arrangements, unboundand innovative
Horizontal flow chart shape“Rigid” Venn shape“Connected” Petal/Shamrock shape“Fluid”

Changing how we think

There have been many well known examples of former company sector leaders who have slipped from the number one position and former state owned monopoly companies that no longer exist. Companies can therefore be slow to change their thinking. In Supply Chain management, the consequence of “sticking to the knitting” thinking can be as follows:

  • Adversary play offs with suppliers
  • Long production runs of not needed products
  • “Just in case” expensive stock holding
  • Customers get fed up and go elsewhere
  • Inspection, reworking, warranty claims
  • Vertical silo management structures
  • “Turf conscious” reactive “fire fighting” managers
  • “Rowing the boat” upstream and resisting change

Companies are however a collection of individuals and it is the thinking of the individuals in companies that needs to change. As has been noted above, individuals will tend to be more “happy” in one of the brain sides. This then means they can miss out on the other side. To be complete, we therefore need both sides. This is the classic whole brain thinking. Clearly many companies do try to reflect such whole brain thinking through their recruitment policies and in the way they structure the organisation of the business. But for efficient and effective supply chain management then perhaps, companies and the individuals in companies need to take conscious responsibility for the thinking. Business channels change and when taking the view that supply chains now compete, this can mean thinking in a different way. Those individuals/companies who do not do this may well find that they will not be “invited to the party” in the future. An example here is where some supply chain approaches acknowledge that the supplier numbers will be reduced; yet, some suppliers maintain a “head in the sand” ostrich incremental approach, perhaps believing the reductions could not possibly affect them.

Thinking differently

Our brain is actually very similar to everyone else’s – but the difference comes from, how we use it. Individuals and companies should be challenged to use the brain differently. If more on the creative right side, then the need is to be more of a logical left. You could try the following: –

As Individuals For Companies
Be on time for appointments. Keep promises and commitments.
Practice and plan a step/step approach. Get the parts and processes working well, together
Time plan each step. Use time based KPI’s.
Have a work space that is ordered and structured. Reorganise the flows in the supply chain.

If you are more on the logical left side, then the need is to be more of a creative right. You could try the following: –

As Individuals For Companies
Brainstorm to create ideas. Look at the whole supply chain beyond first level suppliers
Make visual mind map notes to enable free flowing visual images. Make a supply chain map of the business and its supply chains
Explore a new neighbourhood. Explore how to get the people relationships “right”
Try and understand your pet’s feelings. Try to understand how the staff “feel”

The Future: the right or the left sided company?

The optimum and the whole will only of course be found by using parts from all sides of the brain. The concern however is that remaining with traditionally British left side thinking that this will very likely mean that the trends and ways forward for supply chain management are never realised. This can mean, for example missing a future of:

  • A few long term suppliers and joint action teams in the whole supply chain
  • Short production runs with quick changeovers
  • Minimal stockholding, JIT type supply through the supply chain
  • Being able to serve more demanding customers
  • Obtaining right first time quality throughout the supply chain
  • Having process and flatter cross functional management structures
  • Empowered proactive fire lighting managers
  • Continuous improvement and change

The way of thinking and the way the supply chain is structured and managed are therefore critical. The reported benefits of following a supply chain approach have been usefully documented; it will be noted that different approaches give significantly different results:

No Supply Chain: Functional Silos

Internal Integrated

Supply Chain

Plus, External Integration to

the first level only

Inventory days of supply Indexed

100

78

62

Inventory carrying cost

% sales

3.2%

2.1%

1.5%

On time in Full

deliveries

80%

91%

95%

Profit % Sales

8%

11%

14%

It will be seen that by following a supply chain approach, then the inventory costs fall, profit increases and the service fulfillment increases; the “best of both worlds” for the company undertaking the approach. It is very clear therefore that supply chain management “works”. What is especially interesting here is that the structure of the supply chain is shown. Additionally, the network thinking supply chain that goes beyond first level suppliers and the “future” one of systems thinking should indicate savings beyond those of the supply chains that stop at the first level integration only. Thinking differently and looking for more creative and innovative ways to manage the supply chain may be a future only a few companies are able to undertake. For example, moving to more collaborative approaches involves win/win and involves trust; this remains a difficult aspect for left sided rational thinking companies who prefer to use the German word for partnership of partnershaft. It would seem a possibility that Supply Chain development in the UK may well falter because of the prevalent way of management thinking. One thing is very sure; what worked for many years may not work for many more. Therefore there is a real challenge to learn anew and in so doing, to change. Learning and changing are indelibly connected; you cannot have one without the other. References: Signals of Performance: the Performance Measurement Group Volume 4.Number 2-2003 Anderson & Lilliecreutz: The Change in Supply Chain Innovation. 2003 Emmett S: Improving Learning for Individuals and Companies. 2002 Emmett S: Getting the people right in ILT Focus. April 2003

All written by Stuart Emmett,

after spending over 30 years in commercial private sector service industries, working in the UK and in Nigeria, I then moved into Training. This was associated with the, then, Institute of Logistics and Distribution Management (now the Chartered Institute of Logistics and Transport). After being a Director of Training for nine years, I then chose to become a freelance independant mentor/coach, trainer, and consultant. This built on my past operational and strategic experience and my particular interest in the “people issues” of management processes. Link for the blog: http://www.learnandchange.com/freestuff_23.html

 

What Two African Entrepreneurs Have Learnt from Amazon.com – Globalization in Action Serving Humanity

Boasting exponential growth since its inception in 2012, Jumia became the first e-commerce site to bring the coveted Play Station 4 to Nigeria. The company announced the offering after just two days of the release in the US. The Nigerian would-be Amazon is following the global giant’s footsteps in becoming a super networked business, although there is still a long way to go.

Jumia started with a relatively similar aim and manifesto to Amazon, which puts customers at the heart of its operation. In the same vein, the Nigerian site also reaps benefits from being one of the pioneers in Africa’s emerging online retail market. “Being first is good, but it is not everything. What fuels Jumia’s success so far is somewhat akin to Amazon’s evolution into a Five-star business network” – said Vivek Sood, CEO of Global Supply Chain Group.

Jumia is not shy of innovation either, given the fact that people are still skeptical about online retailing as well as online payment in Africa. The Lagos-based retailer launched a range of online payment options but steers its technology-shy consumers by accepting cash on delivery and offering free returns. “It’s very important that people know it’s not a scam,” said co-founder Tunde Kehinde. They even take a step further and deploy a direct sales team of 200 to educate Nigerians about secure online shopping, which also serves as a means to build trust. Now with pick-up stations spanning over 6 locations, a warehouse facility, 200 delivery vehicles in Nigeria and 4 other country-specific microsites, Jumia seriously strives to become a one stop shop for retail in Sub-Saharan Africa. “Here you are collecting cash and reconciling payments almost like a bank desk, here you are building a logistics company,” said co-founder Raphel Afaedor.

Both co-founders and Harvard Business School graduates built the business from $75 billion in funding and are bringing “a couple of million” dollars in monthly revenue, a growth rate of nearly 20%. Vivek Sood, author of the book “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”, said: “Jumia is taking the right steps towards building the five cornerstones of a super networked business: innovation, efficiency, profitability maximisation, product phasing and result-oriented outsourcing. With the promising results so far, perhaps we could see the next perfect example of a 5-star business network besides Amazon.”

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