March 2023 - Page 9 of 13 - BOLLYWOOD SURKHIYAN

Business Process Reengineering – When to Use It

As companies grow and establish themselves, over time they will have developed a set of processes that are specific to their core business. This set of processes is what defines the company and how it runs their operations. It becomes almost predictable. These processes may be very well suited to run every day activities, and may even be sufficient to cope with changes in the markets they are operating in, however eventually the pace of their competitors and the markets will outrun them. That is, if they do not adapt accordingly and swiftly to these ever present and continuous changes. They will start to notice that they are no longer performing as efficiently as they were doing when they founded the organization.

For an organization to remain competitive or even lead in the markets in which they operate, it is vital to analyze if the foundation on which it was built and as it was once laid out, is still a good match to the current landscape they are in. The methods which have been developed and most likely extended during their existence may need to be reviewed, analyzed and re-built, as they lose efficiency.

This is where Business Process Reengineering – many times abbreviated to BPR – steps in. It is an analytic thinking which helps to understand and view how one can optimize the processes on which the company is built. In other words, optimizing them to today’s market conditions, and clearly also to those of tomorrow. Although sometimes people tend to refer to this endeavor as improvement of business processes, for it to be really effective, reengineering is a technique that is way more dramatic than just improving existing processes; it is a complete redesign. This extensive and impactive exercise recognizes and analyzes the core processes, the goals it is trying to achieve, the services and products, and the customers and stakeholders. It will then re-align the business processes to these areas of focus.

The analysis is generally carried out on a broad and wide range of processes, ideally all processes of the enterprise. The reason for doing so is because the intention of the exercise is to make major improvements in the company’s presence by incorporating changes that will strip inefficiency from the entire set of processes, i.e. in its totality. This will lead to results with more impact than when assuming an approach of parallel processes being analyzed and optimizing each of them separately and independently. The real and major benefit of the entire undertaking is that by applying a broader and more holistic view, the changes will be bigger than optimizing each process on its own.

Multiple Revenue Streams Keep A Solopreneur Solvent

To build a successful career as a Solopreneur consultant requires courage, resilience, possession of marketable skills and relationships with people who are willing and able to refer or endorse you for paid project assignments. Solopreneur consultants must have a talent for selling, the discipline to create and pursue business goals, a knack for big picture thinking and implementing strategies and an understanding of human nature and motivation. The ability to attract good luck and dodge bad luck helps, too.

Precious few Solopreneurs are able to just “go to the office” everyday and delve into the usual work. In order to generate the preferred amount of business revenue, we understand that creating multiple revenue streams may be necessary and to make that possible, we must recognize the marketability of our skill sets, in aggregate and in segments. As well, we must learn to package, promote and sell our skills and value to prospective clients.

Consider my revenue streams, for example. When asked, in my short form elevator pitch I say that I’m a self-employed external consultant who provides business strategy and marketing solutions to mid-size for-profit and not-for-profit organizations. What that means in reality is that I’ve facilitated strategic planning meetings at not-for-profit organizations; edited a 100 page nonfiction book and also served as its photo editor and project manager; developed curriculum for a series of 90 minute sales skills training workshops; and periodically I teach business plan writing.

I’ve been fortunate enough to regularly win business strategy development or marketing campaign assignments, but the fact is that there are often gaps and in response, I’ve learned to branch out and offer segments of my skill set to clients or employers as a way to maintain my required cash-flow and, whenever possible, also enhance my brand. In my experience, it’s the ability to leverage one’s perhaps infrequently promoted competencies that help Solopreneurs to create and sustain a profitable business venture.

My friend Adela is a busy educational consultant who works with college bound high school juniors and their parents to identify suitable colleges for the student and navigate the application process. Adela’s business appears to be thriving, yet she nevertheless teaches Spanish at a local university (she was born and raised in Mexico and came to the U.S. to attend Notre Dame University).

Jackie, a friend of many years, is the founder and manager of a small, full-service fitness center that became very successful in that highly competitive market, yet she teaches a fitness class at another gym a few miles away. Why? Because she gets to observe another style of fitness center management from the inside, she receives training in new fitness techniques that she can evaluate for inclusion in her own gym and she earns a few extra dollars each week, something that a mother of four can always use. Sometimes you can get paid to research the competition!

My friend Carole toggles between freelance marketing gigs at technology companies and corporate positions in that sector. She’s a Lotus alumna who’s also worked for tech giant EMC, distinctions that command respect and open doors in the tech industry. In between corporate gigs, Carole goes out on her own to develop marketing strategies for tech start-ups. A couple of years ago, she was offered a position as director of marketing at one of those start-ups, but when the inevitable reorganization occurs, she’ll re-enter Solopreneur life.

So, Solopreneur friend, I invite you to put on your thinking cap and brainstorm how you can create additional revenue streams by exploring how certain segments of your skill set can be packaged and promoted to current and prospective clients!

Thanks for reading,

Kim

Preparing A Wine Business Plan

Getting started on a wine business plan can be very complicated. It would take months for businessmen to brainstorm over the idea before beginning the actual process. In fact, there are a variety of studies involved when the goal is to generate boundless income. For those who have been in the business for a number of years, it is undeniable that they have regained part of their revenues. This is because consumers continue to demand for more thereby the speedy production of supply. If you want to be successful in this business field, it is important to know the different ways by which you can prepare to take part of the wine industry.

Being an expert in the specific business field chosen is by far the most vital contributor to success. This rule plays as well in the wine trade. To be able to achieve excellent results, you have to first understand the stages involved in wine production. This should not be a problem for people who have had the experience in a similar arena. On the other hand, those who aspire to expand their pool of knowledge would definitely have to go through a series of studies that will help in the mastery of the subject. Only then will you truly comprehend the essentials of a wine business plan.

It is advised to connect with individuals who have had the experience of working in the wine industry for some time as they possess vast knowledge on the topic. Look for advisors who will offer tips in starting your plan. They can guide you in accomplishing objectives through effective strategies, and steer you away from making common mistakes. Make sure though that the person is not into the business anymore otherwise you could be taking the advice of a competitor which is not really a pleasant scenario.

Financial boundaries matter in the preparation stage of the plan. It would be wise to initially lay out a capital and make this the basis of your plans rather than the other way around. Upon establishing a plan, always keep in mind that wine businesses necessitate considerably large amounts of money. It would be wise to plan according to the money on hand. Never push too hard. On many instances through your brainstorming, you may need to revise your plan from going for a solely-owned company to a wine store franchise instead. As a starter, this is good enough. You can always make improvements later on with sufficient funds.

Strategic Sourcing – A Bridge Too Far?

You are missing out!

It is no secret that purchasing has a significant influence on cost. External purchases represent over half of cost in many firms. While savings of up to 40% or more can be realized on these cost [Anderson and Katz, 1998]! Most companies have spent significant energy on volume consolidation and supply base optimisation, thus realizing up to 15% savings. Good sourcing processes and sourcing as a true strategic function can help your company realize up to 25% more saving. It can even help increase revenue. Imagine, sourcing as a profit centre, not just a cost centre.

A lack of sourcing skills can have dramatic results, as the recent Dutch government construction fraud case shows. In the past years, the government paid 30% too much for its construction projects. Public opinion speaks of fraud from the construction companies. However, a good government sourcing function might have prevented this from happening. Structural supply analysis and a thorough insight in supply cost structures could have made a whole lot of difference.

Introduction

The concept of sourcing is gaining popularity and impact in both organisation and management studies. There is no argument about that. Yet sourcing is still as far away from becoming an autonomous discipline as ever. The term sourcing is used for too many different purposes. There is just not one definition. Sourcing might be used in dialog with the purchasing process, or as a part of this process. Sourcing might be used for the process of acquiring input from multiple countries. Or sourcing is used as a synonym for outsourcing. When the concept of strategy is being introduced to sourcing, the definition becomes even more confusing. How can strategic sourcing be used if there is not even common ground on what sourcing actually means? This article will first create common ground by analysing definitions in search of a common denominator in order to suggest a new definition. Secondly, it will show that strategic sourcing is, in many cases, not as strategic as it is claimed to be, and suggests how strategic sourcing should be defined. Furthermore, a conceptual framework will be presented on how sourcing can be used as a true strategic function. Sourcing has come a long way; this article tries to make a first step on an even longer road that is still ahead.

Sourcing: finding a definition

As stated earlier sourcing is becoming increasingly popular and a very relevant topic in organization and management studies. Basically, the goal of all companies is sustainable and competitive selling of goods and/or services. In order to produce these goods and services input is needed. This input can be tangible, like raw materials or employees, or intangible, like information or skills. They all originate from some source and this is were sourcing activities come into play.

Several definitions of sourcing have been given in literature. ‘Sourcing is researching the market for potential input sources, securing the continuity of these sources, searching for alternative sources and keeping the relevant knowledge up to date’ [Vollman, Berry, Whybark, 1984, p. 148; van Weele, 1994].

Sourcing Management (Kraljic, 1983) is labelled as ‘Bottleneck Supply’ and consists of supply that is also uncertain, but of relatively low importance for companies in terms of volume purchased, total purchase cost, or impact on product quality or business growth. Bottleneck suppliers can be found in Figure 1.

‘Sourcing is the way an organisation acquires its needed goods and services in such an integrated manner that functional and hierarchical organisational boundaries are permeated’ [Groeneveld, Hofstra, 1995].

‘Sourcing is the process of finding and subsequently managing a source for the input of production’ [Mol, 2001, p. 1].

Figure 1: Supply Management Model. Source Kraljic (1983)

The definitions are different but have some things in common, for example, ‘sources for the input of production’.

The definition used in this article is:

“Sourcing is the process of analysing potential input sources, choosing and securing the continuity of these sources for input of production and, subsequently, managing these sources”.

This definition is chosen for several reasons. First, for the purpose of analysis of potential sources, not just existing sources. Secondly, there is an emphasis on continuity. Thirdly, because it concerns not just closing a deal, but true management of the source. This article emphasizes both external and internal sources.

Historic overview

As can be concluded from the sourcing definition, sourcing is a specific topic but highly related to purchasing. The rise of sourcing is also related to the way we think about purchasing. For a short historic impression, some points of development of purchasing are presented here [Ellram, Carr, 1994]. In the early 1970s Ammer noted that top management looked at purchasing as playing a passive role in business organization. Ansoff supported this view, stating that purchasing could be described rather as an administrative than a strategic function. The 1973-74 oil crisis and related raw material shortages drew significant attention to the importance of purchasing and sourcing. However, in spite of the crisis, the role of purchasing and sourcing did not improve. Later on Porter, in his seminal work on forces that shape the competitive nature of industry, identified buyers and suppliers as two of five critical forces. Thus, the strategic importance of suppliers and the company as a purchasing entity (acquiring sources) began receiving recognition in main stream strategy literature. In the 1980s many authors noted the benefits of greater strategic involvement of the purchasing function. However, until late in the decade only limited gains appeared to have been made. During the early 1990s the research focus appeared to have shifted towards integration, and how the purchasing and sourcing function can become recognized as a more significant contributor to the company’s success.

Purchasing and Supply Management Trends

So the position of purchasing and sourcing in management literature changed over time. Purchasing was once regarded as a reactive activity capable of only neutral or negative contribution. Nowadays the purchasing and sourcing process at leading companies is at the forefront of responding to and creating change. The ability of purchasing and sourcing-often in collaboration with other functional groups to affect cost, quality, time, technology and ultimately customer satisfaction-is substantial.

Now what trends influenced this change in view? Based on a research survey among purchasing and sourcing executives the following categories of change and trends can be identified [Trent, Monczka, 1998]:

1. Performance improvement requirements;

2. Supplier and purchasing and sourcing importance;

3. Organization;

4. Systems development;

5. Performance measurement;

6. Supply base management;

7. Purchasing responsibilities and activities.

Performance improvement requirements

The need for continuous improvement is a widely accepted necessity. Commonly expected targets are continuous improvement of cycle time, cost, quality and delivery performance, both internally and from external suppliers. While quality and cost have always been important, time-related capabilities are rapidly becoming the next generation of ‘order winning’ characteristics.

Supplier, purchasing and sourcing importance

The shift in supplier importance is a result of at least five factors which affect most industries:

– The need to control unit cost;

– The need to reduce the total cost of acquisition;

– The increasing influence that suppliers have on the purchaser’s ability to respond to end customers particularly as it affects time-related requirements;

– An increased reliance on fewer suppliers;

– A willingness of purchasers to rely on suppliers to design and build entire subassemblies and subsystems.

Organization

The right organizational structure is essential for implementing leading-edge procurement strategies and plans. Today this often means using higher level teams to evaluate, select, manage and develop sources. Furthermore, there is a shift towards end-item focus instead of commodities, which results in hybrid structures reflecting a growing need for purchasing and sourcing to become more integrated with other parts of the organization.

System development

There is an emphasis on purchasing and sourcing systems development due to the need to co-ordinate purchasing and sourcing activities across buying locations, assuming an organizational rather than a functional perspective, and take on complex and strategic responsibilities with existing staff.

Performance measurement

Performance measurement is essential for gauging the overall effectiveness of functional and team-based strategies and plans. Specifically, purchasing and sourcing managers should rely on measurement systems to identify:

– supplier performance and opportunities for improvement;

– performance trends;

– the best suppliers to select, both for routine purchase requirements and critical items that would benefit from long-term purchase agreements;

– where to commit limited supplier/source development resources, the overall effectiveness of source management improvement efforts.

New measurement areas will emphasize purchasing and sourcing effectiveness rather than efficiency, reflecting a shift toward an increasingly strategic sourcing perspective.

Supply base management

Not long ago, it was common practice for buyers to play suppliers off against each other, switch suppliers frequently and offer only short-term contracts. Now changes are occurring in the way companies approach and manage their supply base. Most companies will continue to reduce the total number of suppliers they maintain. Another related trend is to rely on larger full-service suppliers to design and build entire subsystems, instead of many suppliers providing components of the subsystem. Many supplier base reductions involved a smaller group out of the original group of suppliers. Supply base improvements might have been greater if purchasing and sourcing had broadened their supply/source search. Supplier/source optimisation can create a foundation to pursue more complex activities that will further accelerate improvement.

Purchasing and Sourcing responsibilities and activities

If an increase in purchasing and sourcing importance is taking place, then shifting responsibilities over time should reflect this importance. A continued increase in strategic and external focus can be expected. Furthermore, a decrease in tactically oriented tasks can be expected.

Case: Siemens

In 1997, purchasing at Siemens Medical Systems was a strictly local affair [Carbone, 2001]. It was then decided that a strategic purchasing organization should be created. Its mission would be to leverage Medical Systems group material purchases with suppliers, tap into their technical expertise, and form long-term relationships with them. The idea of strategic purchasing was to reduce cost, guarantee supply and making sure Siemens had access to the latest and best technology needed for medical equipment. In order to make the reorganization a success, Siemens developed a survey in order to identify problem areas it needed to address. This survey was based on a benchmarking study of the purchasing organizations of IBM, Hewlett-Packard, ABB, Ericsson, Nokia and others. The survey was used at Siemens’ various purchasing departments at various facilities. The results were evaluated and the departments were rated to determine their strengths and weaknesses.

Strategic sourcing

So historic developments and trends all push towards a more important role for sourcing and show a need for a more cross-functional and strategic focus.

What is this new strategic role of sourcing and what sorts of strategies are possible? It appears that there are three distinct types of strategies for purchasing [Ellram, Carr, 1994] which can also be used for sourcing:

1. Specific strategies employed for the sourcing function;

2. Sourcing’s role in supporting the strategies of other functions and those of the company as a whole;

3. Utilization of sourcing as a strategic function of the company.

While these three issues are related, they are distinct areas in terms of their execution and impact on the sourcing function. At the first level sourcing draws up its own strategies and plans, while at a larger level these might prove to be dysfunctional for the organization as a whole. At the second level the sourcing strategies are drawn up to maximally support the company strategy. At the third level sourcing is an integral part of the strategic planning process of the company. One of the statements in the introduction was that strategic sourcing is in many instances not as strategic as it is claimed to be. Two gaps can be identified to explain this.

Firstly, although the sourcing function is reported to be strategic there is no empirical evidence of this.

Example: the intention gap

The purchasing function is caught in a gap between strategic intentions and tactical realities [Moody, 2001]. In a study called “Purchasing’s strategic Role and team usage” researchers looked at what purchasing leaders regard as important strategic work, applying their knowledge about suppliers and technologies to help the company make decisions on outsourcing, new product development and market planning, and compare it with what their organizations actually do. Their findings indicate a wide gap between intentions and reality. To determine purchasing’s role in strategy, the researchers asked chief purchasing officers to rate their involvement in 13 major corporate activities using a five point Likert scale. Even top-ranked outsourcing was rated at 3.46, only a moderately important level; the 13th parameter had a 2.01 standing, indicating that purchasing departments were only slightly involved in marketing planning. Clearly the buzz about strategic purchasing is supported by the data.

Secondly, while strategic sourcing or purchasing is being reported, the question is what type of strategy is being referred to.

Example: Strategic buying

An article on strategic buying [Sherer, 2000] has the subtitle: ‘nine steps for getting the right IT system for your organization’. Instead of dealing with the strategy of the sourcing function or sourcing as a strategic function, a nine-step method is being described which secures the right purchase of an information system for a healthcare organization. In light of the three strategy types, this would be at best a ‘type one’ strategy.

The authors claim that most of the employed strategies are of type one or two and that strategy of type three is still very unusual.

In this article strategic sourcing is considered to make an explicit contribution to the organizational strategy and long term success. Therefore it is either level two or three.

The definition of strategic sourcing used here is:

The process of analysing potential input from internal and external sources, choosing and securing continuity of these sources for the input of production and subsequently managing these sources in order to create sustainable competitive advantage for the organization.

This definition contains the popular activities of in- and outsourcing.

Some differences between traditional sourcing and strategic sourcing are presented in Figure 2.

Figure 2: From traditional to strategic sourcing. Source Nolan Norton Institute (1999)

Pathway to improvement

There is probably no such thing as a ‘big bang scenario’ to introduce strategic sourcing from scratch. The development of strategic sourcing within an organization is more like an evolving process. Most literature refers to several ‘phases’ or ‘stages’ sourcing must go through before it can truly become strategic in nature, and contribute to organizational strategy. This evolving process includes development of new skills for the sourcing function and a different mindset by top management and other functional areas. Sourcing must be considered an important contributor to the organizations long-term success and strategy. Now if sourcing grows in strategic posture, what kind of gains can be realized? In figure 3 several levels of procurement development are discussed. In order to achieve higher levels of development, the sourcing function must also gain in sophistication and strategic posture.

Figure 3 Source Anderson (1998)

For each level of development, higher value adding for the organization can be achieved. The first three levels are mainly focused on cost, taking a total cost of ownership (TCO) view, and furthermore on quality and making time related issues predictable. Level 4 is focussed on achieving higher extra value for the end customer, thus realizing higher revenues. Value drivers in level 4 are again cost and quality, but also shorter time to market and leverage technology and skills from the entire value chain.

Case: Siemens

Forming a strategic purchasing organization allowed Siemens to improve its purchasing coordination and streamline its logistical and information flows. This took Siemens into to the second improvement level. However, the strategic purchasing project did not stop there. Siemens formed eight material groups to handle its strategic sourcing issues. This resulted in reduced complexity and increased standardization. Furthermore, suppliers were involved in the process of new product development, thus taking Siemens into the third improvement level. All these reorganizations did not go without reward. Siemens reduced its material costs by 25% over a three year period and brought products to the market quicker.

What do these levels mean for the three types of sourcing strategy? With a specific strategy for the sourcing function an organization can reach level 1 or 2. To really make the most out of level 2 and reach level 3 the sourcing strategy must really be aligned with the organization strategy. In order to make more out of level 3 and to reach level 4 sourcing must be fully integrated within the organization’s strategic planning, thus really achieving the strategic sourcing posture.

Example: why improve?

By improving the sourcing function significant benefits can be realized. Reaching level one yields cost savings between 5-15%. Level two 5-25%. Level three varies widely and level four will increase revenue. Leaders in procurement are highly developed at the first three levels. Level four is a “new frontier”; few companies are pursuing its potential in their situation [Anderson and Katz, 1998]

Concluding Remarks

Enterprises are increasingly turning to multiple internal and external sources, making sourcing a hot topic within companies. Each company must define its intended sourcing strategy and most appropriate implementation in order to create sustainable competitive advantage for the organization. There is probably no such thing as a ‘big bang scenario’ to introduce strategic sourcing from scratch. The development of strategic sourcing within an organization is more like an evolving process.

As can be concluded, different levels of improvement in the sourcing function can be attained. Each higher level yielding an increased payoff. Attaining a higher level does also acquire a more sophisticated sourcing function. Most companies do not seem to surpass the basic cost cutting level and are losing out on additional cost savings and increased revenue. Acquiring your input for less is only the beginning. A company should assess how strategic their sourcing function really is. Changes are the sourcing strategy comes closer to transactional optimisation than a cross-functional process to attain competitive advantage. Furthermore a company should asses its sourcing goals. Most likely the goals will correspond with buying for less or taking the total cost of ownership view and thus try to buy better. Most companies do not make the most of their sourcing function and are losing out on a change to gain competitive advantage.

This article gives the initial impetus to the overview of strategy in sourcing. While the topic strategic sourcing is not a new phenomenon, much research is still needed.

As the concept of sourcing matures, a need to validate and build on sourcing concepts exists. There is still much academic work required in creating sophisticated concepts that will help organizations to actually acquire higher levels of improvement for their sourcing function.

Literature

– Anderson M., Katz P.; Strategic sourcing; 1998

– Ansoff, H. I. (1965). Corporate Strategy: An Analytical Approach to Business Policy for Growth and Expansion

– Carbone J.; Strategic purchasing cuts cost 25% at Siemens; 2001

– Carter J., Narasimhan R.; Is purchasing really strategic?; 1996

– Degraeve Z., Roodhooft F.; Determining sourcing strategies: a decision model based on activity and cost driver information; 1997

– Diromualdo A., Gurbaxani V.; Strategic intent for IT outsourcing; 1998

– Ellram L., Carr A.; Strategic purchasing: A history and review of the literature; 1994

– Ellram L., Maltz A.; The use of total cost of ownership concepts to model the outsourcing decision; 1995

– Garr D.; Inside out sourcing; 2001

– Giunipero L., Monczka R.; Organizational approaches to managing international sourcing; 1997

– Groeneveld J., Hofstra N.; Strategic sourcing; 1995

– Groot E., Leewis P.; Strategic sourcing; 1996

– Henderson J., Venkatraman H.; Strategic alignment: leveraging information technology for transforming organizations; 1999

– Laseter T.; Balanced sourcing; 1998

– McFarlan W., Nolan R.; How to manage an IT outsourcing alliance; 1995

– McIvor R., Humphreys P.; A strategic model for the formulation of an effective make or buy decision; 1997

– Mehltretter S.; Strategic sourcing means just that-sourcing strategically; 1996

– Mol M.; Outsourcing, supplier relations and internationalisation: global sourcing strategy as a Chinese puzzle; 2001

– Monczka R., Carter P.; The future of purchasing and supply : A ten-year forecast ; 2000

– Monczka R., Morgan J.; Competitive supply strategies for the 21 Century; 2000

– Monczka R., Trent R.; Worldwide sourcing : assessment and execution ; 1992

– Moody P.; Strategic purchasing remains an oxymoron; 2001

– Nooteboom B.; A balanced theory of sourcing, collaboration and networks; 2002

– Penner R.; Sourcing strategies and spatial patterns of production in the automotive industry: a dutch survey; 1990

– Oudijk, S.; Niet meer wachten op alle handtekeningen; 2000

– Quinn J.; Strategic outsourcing: leveraging knowledge capabilities; 1999

– Schorr J.; Purchasing in the 21st century: a guide to state of the art techniques and strategies; 1998

– Sherer J,; Strategic buying: Nine steps for getting the right IT system for your organization; 2000

– Sislian E., Satir A.; Strategic sourcing: A framework and a casestudy; 2000

– Trent R., Monczka R.; Effective cross-functional sourcing teams : Critical success factors ; 1994

– Trent T., Monczka R.; Purchasing and supply management : Trends and changes throughout the 1990’s; 1998

– Venkatraman N.; Beyond outsourcing: Managing IT resources as a value center; 1997

– Venkatraman N.; Five steps to a dot com strategy: How to find your footing on the web; 2000

– Weele van A.; Inkoop in strategisch perspectief; 1997

– Zee van der H., Wijngaarden van P.; Strategic sourcing and partnerships: challenging scenarios for IT alliances in the network era; 1999

– Dreyfuss C.; The promising journey towards the sourcing offce; 2002

– Da Rold C.; How good is your sourcing strategy, 2002

– Stone L.; Management update: The chief sourcing offcer- a new role and a new reality; 2002

– Harris K.; Sourcing and strategic knowledge management; 2002

– Da Rold C.; The five dimensions of strategic sourcing; 2001

– Da Rold C.; Sourcing strategies: evaluate your ability before moving; 2001

– Freling R., Romeijn E., Morales D., Wagelmans A.; A branch and price algorithm for the multi-period single sourcing problem; 1999

BB Chart: A Method for Targeting Benefits and Barriers in Business Opportunities

Business leaders are always looking for new opportunities to reduce costs or increase profits. However, these opportunities may only be discussed during strategic meetings, often by doing an analysis of Strengths, Weaknesses, Opportunities, Threats (aka SWOT). SWOT is a great tool for leaders to see where the business has been, where it is now, and where it could go. However, the result of SWOT falls short when some of the opportunities identified may not be immediately pursued. This can be due to management feeling they need to do further research before proceeding with an opportunity. This follow-up research can take lots of time, effort, dollars, and possibly result in lost opportunities. Instead, decide if additional research is necessary and which opportunities are immediately implementable by following the SWOT exercise with a quick Benefits and Barriers (BB) review.

To do a BB review, simply make a T-chart with each opportunity listed on the top of a separate page. Then put the words “Benefits” on the left side of the T and “Barriers” on the right. Once the chart template is ready, leaders can begin to brainstorm ideas to place into each side of the chart.

Benefit examples: rapid influx of cash, easy to do, profit increase, already have expertise, low cost to implement, matches long-term goals/objectives, can use existing equipment, cost savings, strong market for product, easy to sell, fits into corporate values, improves customer satisfaction, etc.
Barrier examples: costly to implement, do not have expertise, requires training, quality concerns, special equipment is necessary, expensive to implement, takes too much time, government restrictions, outside current customer base, legal issues, requires additional insurance, more space needed, etc.

Once the ideas for the chart are exhausted, leaders can easily see where benefits outweigh barriers to quickly implement some opportunities. If barriers are much larger than benefits, those opportunities may not be worth pursuing at this time. Where benefits and barriers appear equal, further research may be warranted to make a decision and determine potential for return on investment. For those opportunities that will not be immediately implemented and still look promising, the leadership can now make a plan for overcoming the barriers so that the business can reap future benefits.

An alternative method to quickly analyze each opportunity during a strategic meeting is to break the leadership team into sub-groups of three to four people. Each sub-group would be assigned two or three of the most interesting opportunities to do a BB chart for in a short period of time. Once the charts are complete, the sub-groups would re-unite into the larger leadership team to vote on which opportunities to pursue, which to research more, and which to abandon for now.

SWOT analysis is a useful tool for business leaders to determine where the business is and where they want the business to go. However, do not stop there as it can let easy opportunities slip through the cracks by trying to do too much research before starting them. Instead, use the BB chart to target the benefits and barriers of potential opportunities. This charting method allows for quick execution of those opportunities that will quickly result in immediate benefits to the business. As well as identifying which opportunities are worth the time and effort of additional research versus those that may not be as advantageous as they appear when brought before the business leaders.

Mind Mapping and Information Gathering For Successful Drafting Of a Business Plan

Information Gathering Prior To Drafting the Business Plan – The planning phase.

Business or hobby?

A question begging an honest answer is, “Is it a business you want to start or is it a hobby?” This is a vitally important question because these are two very different enterprises or entities. To start and run a business takes a lot of extensive, in depth analytical thinking, legal steps need to be taken, and a lot of planning and budgeting needs to be done. One can’t stress this enough.

Entrepreneurial skills

Entrepreneurial skills are naturally inbred in very few people. The Indians and Chinese seem to have it as a natural trait. Many people think that because they’re starting a trading business, that it should just succeed because they are buying at a low cost and selling at a higher price. So, therefore then, a profit should be shown and all should be in order. Not true in many cases, many hidden costs are not taken account of. Hidden costs exist such as telephone, petrol/transport, stall or rental, packaging, owner’s salary, and so forth.

Many times the business owner uses the money, which should be in reserve for purchasing more stock, for his personal use and then he wonders how all the money or profit has “disappeared”. Now he would need to raise more money somehow to purchase his next batch of stock and/or raw materials. Such a business owner is actually getting poorer each day and he is hardly aware of it.

If one approaches only one’s friends and family with a business idea, and none of them have the necessary knowledge to advise one, the rot will begin to set in. Wrong or ill-informed advice is not what you need.

Drafting a complete and accurate business plan is a very important step that anyone can take who wants to start any new business, or expand an existing business. The business plan covers all the important steps, decisions, reports and forecasts needed to assess the likelihood of success or failure in the new venture. At least one then has a foundation from which to work. It can always be used for reference purposes during the life of the business and it can easily be adjusted for future expansions or changes to the business process.

Planning the business, mind mapping and information gathering

The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.

Bankers and financiers presume that one means business when one approaches them in this regard and they expect to receive honest and accurate information. There is no quick and easy way to deal with this; it’s their way or no way.

We all have skills, talents and learned abilities. These can be used to operate a business, which will generate an income. Extensive, in depth analytical thinking and planning is very important though because, without it one is destined to fail.

Discuss your business plan with people who can give you advice; Bankers, Dept. Trade and Industry, Business Partners Inc., other institutions who grant money for small business initiatives, an attorney, an accountant and various other people who have a wealth of experience in their fields of speciality.

When planning to start a business take the following steps:

Speak to product specialists for their advice concerning your products and/or services.
Speak to bankers, a lawyer, an accountant and a number of institutions offering grants or loans to small business initiatives.
The above people will give you a blank Business Plan form, among other forms, to complete.
The business plan is normally of great assistance in planning and budgeting for the business. And it is a good guide to all that needs to be done and decided upon.

Meet with whoever your partners will be, if any, and discuss the whole planned business process, including:

The type of business ownership best suited to your business
The products or services to be offered
The premises needed
The machinery and vehicles needed
Start up expenses need to be established and discussed
Capital requirements and directorship of the business
Decide on who will perform which functions in the running of the business.
Your target market
The environment of your area to be covered
The economy relating to that area, current demand, future growth, etc.
Determine what barriers exist at present which may hinder your success
Promotion of your products and/or services
Distribution channels
Operational plan i.r.o purchasing, production, sales, etc. needs discussing
Legal environment and requirements
Inventory and suppliers
Insurance and other professional advisory requirements like, lawyer, accountant.
Establish a system of record keeping
Bank services needed
Personnel requirements and Human Resource policies
Do the costing of each product very accurately.
Calculate selling prices based on all costs plus mark up
Draft the projected financial plan or budget for twelve months
Draft the projected cash flow for twelve months
Draft a starting balance sheet

This key information will then be used to draft a meaningful business plan. And the information is all inter related an in sync. In closing, the pre-planning phase takes time and effort but it is very necessary as a step to ensuring success.

3 Keys To Starting A Small Business

Since the majority of startup small businesses fail, how can you succeed?

Before we answer this, who am I? I have set up and sold 4 small businesses over the last few years, all of which continue to be successful, so I know a few things about the subject.

Now, let’s get to the main points:

Planning

It is important to know what, when, why, where and how you are going to start your business. Unless you have clear focus, don’t even try, it will just be a waste of your time and energy.

In addition, you will want to do whatever courses are available that might help you achieve your goals. For instance, in my case, before starting my most recent venture, I completed a Certificate 3 in Business Studies, a Diploma in Digital Marketing, a Diploma in Sales, and, a Diploma in Project Management.

Practice

What I mean by practice is not to just dive straight in and learn on the job, no, what will really help you is to observe how SUCCESSFUL people have started the same kind of business that you are attempting to start. How can you do this? One effective way is by getting a job in the industry where you intend to work. Once you have done this, observe the process. If it truly is a successful business, they will have a highly organized and effective process.

Another possibility is actually starting the business. I know, I know, I said don’t do this, however, this suggestion has a little difference. Start the business with no expectations. Become the marketing director, accounts manager, sales director etc… do everything yourself. The problem with this approach is that it will take up huge amounts of time, amounts of time that will be saved, if you are able to work in a successful business that someone else has started. Yes, this suggestion is the harder of the two routes, however what it does do is go from theory to a complete practical knowledge of the industry, to become fully immersed in it.

Pursue

There is a reason why 4 out of 5 small business start ups fail, the rewards are hard to achieve and take inordinate amounts of time to achieve. How can you get over this obstacle?

The key is to Pursue. You need to be focused on your goal, and, never to look away or be distracted from this purpose. How long can you focus on your goal? Only you can answer that! However, realistically, it will take you some years to truly progress in your endeavor. If you are someone who gives up easily, you should really not try to start a business. Instead, look for a well paying job.

The Benefits

If it is all such hard work, why bother? The rewards can be huge. Consider just a few:

*Time – Have a flexible schedule, spend more time with your family or other priorities.

*Passive Income – Depending on the type of business you intend to start, it may keep paying you even when you are not working.

*Capital Gains – You have the possibility of achieving significant R.O.I on the outlay involved in starting your business.

Want to start a business? Go for it! But, remember to Plan, Practice and Pursue!

CFO Succession Planning – 3 Tactics to Use If You’re Not Being Groomed for the CFO Position

CFO succession planning doesn’t exist in a majority of companies. As a result, talented mid-level executives are left with considerable uncertainty about their opportunities for continued professional advancement. However, there is a way for aspiring CFO candidates to prosper and grow within this environment of uncertainty.

It’s very natural to want to be your company’s next CFO. After all, you’re smart. You’ve worked hard. Your college degrees and professional designations have provided you with the insight and skills required for success. And deep down, you know you deserve the promotion plus the recognition and rewards that go with it. As country music superstar Tim McGraw accurately sings, “Everybody wants to be the big dog, Wanna wag that big dog tail.”

But, to position yourself as the candidate of choice the next time a CFO position opens up (and they tend to open up rather frequently), you must do much more than shape the company’s balance sheet. You must understand the company’s business. You must understand the company’s politics. You must understand your own strengths and weaknesses. And last but not least, you absolutely must play a very active role in the long-term succession planning and candidate grooming process.

Here are the facts. The November 2007 issue of CFO magazine reports that your company’s current CFO is not planning his successor. And, on a more personal note, neither your company nor your CFO is actively grooming you to assume the duties of the CFO. This article is based on interviews with 1,400 CFOs who were asked, “Have you identified a successor for your position,” and the results were astonishing. A full 83% of respondents indicated that they have not identified a successor for the CFO role. And further, when asked, “If not, why not,” 74% of the respondents replied, “Not planning on leaving in the near future,” and 12% answered, “No qualified candidates currently working in the organization.”

Bottom line, only 17%, or less than one in five companies, have identified a successor for the CFO position. Their reasons may vary, but CFO turnover statistics indicate that companies would be wise to have a well defined CFO succession planning process in place. And that spells opportunity for you.

Although 74% of CFOs may not be planning to leave in the near future, the reality is that the average CFO tenure is less than five years, which is south of recent years when the average tenure was seven to twelve years. Regulatory liabilities and overall business pressures have driven CFO tenure downward simultaneously with the increased complexity of CFO recruitment. With the average executive tenure decreasing you can expect the number of internal promotions to decrease also, unless a real and robust succession planning process exists organizationally. Your career is in your hands.

Prior to evaluating your succession planning goals, answer this question, “Am I ready and capable to be the CFO of this or another organization?” Your ego and confidence will say yes. However, for greater clarity you should talk with mentors, cross-functional leaders and an executive recruiter you have developed a relationship with. They see you in comparison to the broader CFO ranks and will give you candid feedback to balance your self-perception with market demands. Once you are certain of your readiness to become CFO you can assess your company’s succession planning process.

With more than 225 executive searches behind me, I’ve identified three key areas that you can explore to help you better evaluate your personal CFO succession planning preparedness, as follows:

1. How long have the current CEO and CFO been in place and what was their previous tenure? CEOs turn over more frequently than CFOs and often, a new CEO will bring his or her own CFO. While it’s hard to predict CEO and CFO tenure, the best future predictor is past performance.

2. Does your CFO have a track record of successfully developing others into a CFO role, either internally or externally? The fact that your CFO has been there a while or looks to be settling in is not necessarily bad for your development. In fact, this can be positive situation as long as your CFO has experience developing leaders to the point they are recruited away.

3. Ask for a specific succession plan and the relative frequency and style of communication you can expect throughout the process. Lack of a plan or lack of interest to discuss a plan will give you flashing lights of caution. In addition, ask for a thorough annual or semi-annual evaluation relative to your capabilities, experiences and acumen from cross-functional leaders. These individuals will share breadth they see valuable to a successful CFO. If your company is committed to a succession planning process, these steps will be built into it and will be relatively easy to self-administer. On the other hand, if your company is not actively involved in a succession planning process, your efforts will typically be recognized and rewarded with an informal roadmap to success. Either way, you win!

It’s crystal clear that you are responsible for assessing your company’s succession planning and driving your career into the CFO suite. Answering the above questions will give you a better understanding as to whether you are in control of your career trajectory or whether others are planning the process with you.

Cartesis Business Performance Management Solutions

Most financial executives use some form of rolling forecast to guide their financial planning and budgeting efforts, but do so in rudimentary fashion, employing mostly manual business performance management processes and spreadsheets that inevitably fail to deliver the accuracy and manageability they are seeking.

A recent survey of more than 320 senior finance executives in North America and Europe showed that over 68% of companies have developed and deployed rolling forecasts. However, most of these executives still feel they need to improve the accuracy of their financial forecasts as well as the time it takes them to produce these forecasts.

The study, conducted in September 2006 by CFO Research Services (Boston, MA) and Cartesis also showed that:

Companies need better forecasting methods, which solutions such as Cartesis Business Performance Management software can provide. These solutions allow the expanded use of operational drivers, better what-if scenario creation and increased collaboration throughout the forecasting process
Finance executives — hampered by a shortage of time and resources — endorse an incremental approach to changes in their forecasting technology and business processes

Forecasting With a Moving Horizon

The manner in which a company forecasts its financial and operational activities is a key factor in how efficiently and effectively that company can allocate its resources, make investments, guide shareholders and achieve and measure results. Finance executives in the survey agreed that better forecasting would lead to tangible benefits, such as reduced risk and increased profitability.

The survey also showed that two-thirds of respondents who use rolling forecasts utilize a basic 12-month time horizon, when 15 months or more is actually preferred. And nearly one-half of respondents use only spreadsheets for financial forecasting, while an additional 21 percent use custom applications built around spreadsheets. Less than one-fourth use a dedicated financial planning, budgeting and forecasting application, such as Cartesis Planning, or a fully integrated business performance management software solution, such as Cartesis 10.Steps to Better Budgeting and Rolling Forecasts

In order to help companies address the financial forecasting and budgeting challenges discussed above, Cartesis recommends a pragmatic approach. The approach ensures that early wins will save time and money, which can be later “spent” on additional improvements that create long-term value.

Quick wins through automation — The use of planning and forecasting applications, such as Cartesis Planning, enables companies to automate processes and reduce reliance on spreadsheets for immediate benefits.

Ease of use as a priority — Rolling forecasts are simple to create, even for multi-year horizons; forecast templates adjust to each business unit; and benchmarking and what-if analysis are easy, enabling managers to better predict and measure business performance.

Collaboration with flexibility and control — Collaboration, made easier with workflow management, results in forecasts that are more accurate and aligned with the corporate strategy.

Adaptive financial planning for continuous change — Adaptive planning involves continuously improving the planning process to capitalize on previous gains.

Introduction to Strategy and Strategic Management

What is Strategy?

We hear the term strategy almost every day in some context or the other. Business leaders lay out their strategies for the years ahead and military generals speak of strategy to contain and conquer the enemy. Even as individuals, we often use the term strategy to describe a set of actions that we would take to control the future and arrive at outcomes that are beneficial to us. Hence, strategy is an integral part of our world and it can be defined as a general, un-detailed plan of action, encompassing a long period to arrive at a complicated goal. It is also defined as the set of actions to realize intent as a ploy, part of a plan. It follows from these definitions that strategy and strategizing involve drawing up plans to arrive at a predetermined goal.

What is Strategic Management?

We have defined strategy. Turning to strategic management, it can be said that the term refers to the management of strategy by having dedicated, detailed, and descriptive plans of actions that form the strategy. It is also the field in management thought that deals with planning, executing, controlling, and closing out the strategic moves.

If a firm has a strategy in place to realize its targeted revenues and profits, the management of the process by which it hopes to realize its goals falls under strategic management. An ongoing process evaluates different sets of strategies, assesses competitor moves, sets goals and targets, and actualizes the feedback loop to incorporate learning’s into its strategies. Indeed, it can be said that strategic management identifies the purpose of the firm and helps organize the plans and actions to actualize the purpose. By definition, it is a long-term process and it is the business function that is considered the repository of the firm’s future.

Strategy/Strategic Management and their place in the Firm

The previous sections have discussed how strategy and strategy management are integral to the success of the firm. In any organization, strategic management is a level of managerial activity that is below setting goals but above tactical planning. Strategic management in a firm is thus concerned with the future direction that the firm takes and hence, it is an important function of management.

Typically, the corporate planning function in any organization draws up the strategies and sometimes-outside help from management consultants is sought in this regard. In recent years, it has become the norm in the corporate world for the senior management to get actively involved in the formulation of strategy.

Hence, it can be said that strategic management is no longer the important function but has become the most important function. This has happened because of the uncertain and unpredictable world that we live which has resulted in organizations scrambling to devise ways and means of controlling future outcomes. In this regard alone, strategic management has become a valuable function without which no organization can hope to succeed in the turbulent marketplace.