CPSM Blog

Hire,develop retain train supply management - the HR interface

As a supply management leader this section asks you to look at the supply management people from a HR point of view for the entire life cycle of the employee. Start at recruiting and here the right recruit can really do the trick. If you can find a good fit with the person and your teams' aims and the organizational priorities - you have a winning situation. But then the world is changing so rapidly that everyone needs training to deal with globalization, green issues, technology,recession to just name a few. So how do you decide training needs for each person? Keeping in view the training budget and employee/organization needs.Do you have the right mechanisms to share and implement what the colleague brings back from training? Do you consider in-house training so that the team moves together and develops a similar world view?

Developing a climate for energizing and keeping effective people is the retaining piece. Loosing your best people can be disastrous even when you can find a good replacement. The replacement might take months to understand the informal organization, for example.

Finally, the rather difficult and work of disciplining and dismissal of employees who do not come around after training,feedback etc. This should be rare and infrequent as disciplining one employee that is perceived as unfair- can really bring everyone down. Also following legal processes is important to avoid litigation in the future.

In short this section wants you to wear the HR hat as a supply manager.

Marketing and communicating the strategic value of supply management to top mangement and internal customers

This is a bridge exam topic as well and is designed to empower and enhance the visibility and impact of supply management. Here the supply manager reaches out to two sets of audiences. The first is top management who are primarily interested in cost savings - so when you talk try to highlight cost savings as a percentage of current costs. So your graphs and charts should very clearly and simply demonstrate the benefit in terms of costs that your new strategy will involve. Think of it this way- just as sales needs to emphasize revenue increases either by the increase in quantity or price - the supply manager has to figure out the quantity- price-terms combination including other aspects of total cost to emphasize what the net impact of a strategic change should look like. Naturally, if sales can sell more units its not a problem but if supply is short it can be - a big problem! One more technique of getting top management buy-in is to allow top managers to take credit for some of your ideas, although it might seem hard initially. This way, research suggests that many initiatives roll along much better.

Users or internal customers are the second constituency you need to reach out to. Here too the more the awareness of what you can do as a supply manager and what good things you are doing, can go along way in enhancing the visibility and importance of supply management. Feedback, good presentations and 360 degree surveys are appropriate methods of communicating and marketing the value of supply management to internal users.

Representing the Supply Management Profession- Externally

Continuing on the leadership theme, this section ( Task 3-A-7) urges the supply manager to take a leadership role in communicating and demonstrating what supply management can do. In one survey over 50% of managers felt that supply managers were only good for minimizing cost i.e. squeezing down the supplier on price. However, the entire purpose of the CPSM certification is to elevate the profession. So you have to be more visionary in your approach to the profession. If the CEO and the Board is interested in getting somewhere and supply management can help,even indirectly,its important to articulate that contribution and step up and make that contribution. In addition, this enhanced role of the profession should be communicated whenever opportunities arise in non-supply settings like industry meetings. Thus if you are in pharmaceuticals and have an opportunity to speak at a pharmaceutical industry conference, you should highlight the strategic role of supply management beyond mere price negotiation for your industry.

This changed mind-set is particularly important for the CPM Bridge exam takers who have two bridge exam topics in  this section.These are the issues of Confidentiality ( Task 3-A-7- part 5) and Legal Restrictions ( Part 6 in the section). Once again the focus is on elevating the perspective of the supply professional from tactical to strategic. You keep your company's plans confidential because you understand that suppliers may talk among each other and inadvertently your organizations' strategic intent might be communicated to competitors.Similarly, you need to be aware of anti trust laws and avoid revealing prices obtained from a smaller supplier to a dominant supplier. By doing so, you could strengthen the dominance of the supplier, who could possibly cut price drastically and maintain monopoly control of the market.

On the legal restrictions part , the topic includes knowledge of US export restrictions particularly
US Export Licensing. It may seem confusing why export laws are included in the syllabus here- seems like outbound logistics and therefore the purview of marketing and distribution people. My guess is that - supply managers are anyway responsible for imports (incoming goods in the supply chain) and therefore become the "go to" people for export laws within the organization.

Corporate Acquisitions, Mergers,Divestitures and Supply Management

This is another topic from the Exam 3 that takes the supply managers role to the next level in acquisitions,mergers and divestitures.

Supply managers have a role in advising the top management team about the supply aspects of planned acquisitions,mergers and divestitures. You tend to know from suppliers in your industry about others they supply to and the strength or otherwise of the supply chain of a potential acquisition target. Here confidentiality is important and the important thing is to step up in your organization with inputs that might help, Similarly there are enormous challenges with mergers and trying to merge supply chains and supply managers between two organizations. Here is an interview regarding the Pfizer Wyeth merger.

Think of all the supply management integration that is required in such a mammoth merger !

Supply Management Policy and Organization policy

There are five questions from this section and it covers the advantages and disadvantages of having supply management policies in the context of the organization and managing change in these policies.

If you have a policy ( say you start work on a new category buy request within 24 hours of receiving from the user) the advantage is that your users are likely to be more satisfied. The catch is that everybody in the supply team must understand the policy and execute it whole heartedly. Here the problem is of communicating that policy to the team. If you can do that well you will prevent problems with users if every buyer has a random action date on her/his buy indents. Examples of policies are Ethics (accepting gifts,meals etc.) Social Responsibility ( Diversity in Supplier base for eg.) and reciprocity policy. Reciprocity policy normally means that you  cannot decide to favor a supplier just because that supplier is also a customer because buy and sell policies normally operate independently -unless specified by management otherwise. In other words, if you are new to the organization you should know the rules, help make new better rules and help change the ineffective or outdated rules relating to supply management.

The bridge exam component of this section is about aligning the supply management policies to the organization policies. For example, if the organization has a principle of returning calls and emails within 24-48 hours for other stakeholders like customers and shareholders you need to have a similar policy for suppliers. In other words you need to align the goals of supply management to the goals of your organization.

Take the CPSM Diagnostic test before the exam

I owe it to my CAPM friends who told me to take the diagnostic exam before the CPSM. At that time the CPSM diagnostic test was not ready so Bruce Caldwell (then CPM now also CPSM ) was so kind as to drop off his old copy of the CPM diagnostic test. Thanks Bruce !

Before I got hold of the CPM diagnostic I was really going through the 3 books - reading a section and putting out a blog post in this blog (at least this blog was more regular). Once I took the CPM diagnostic - I immediately got to know exam topics where I needed to strengthen my studies.

The only problem was that the CPM syllabus and approach was limited and the CPSM was more like an MBA or GRE (Advanced)/GMAT  type of test in the broader supply management domain. In any case, the CPM diagnostic kit was invaluable.

Today, even if you have spent years in supply management and have read all the material I would strongly advise you to take the CPSM diagnostic test which is now available. Take the diagnostic test exactly as per the time allowed so that you get a real feel of the exam and take it ahead of the real thing so that you have time to review stuff that you need to strengthen. Check the ISM Website for more details here.

Controls and Business Continuity

Once you have a formal plan - this section is about keeping that plan on track. Controls can be before the fact, during or after the fact. For Example:

• Before the fact  you might have a target of reducing inventory of raw material by 20% through better co-ordination with production planning and the sales forecast in one year.
• During the fact (CPM Bridge Exam takers - note that "during the fact" is  what you need to know),  to keep this plan on track you might want to keep track two types of metrics, one inside the organization like variations in sales forecast and outside as to how the supplier delivery contract and transportation changes are being implemented. Maybe, the supplier is working on a nearer warehouse to cut delivery time and you are keeping track of progress on this metric on a fortnightly basis.
• After the fact when budgets and performance is being reviewed at the annual review meeting you are looking good if you have met or exceeded the 20% reduction of inventory target.

The other recent (also bridge exam) topic is about business continuity. Supply management plans must have continuity provisions. Have you addressed what happens if there is a power outage in a business process suppliers' organization? Do they have a generator? Or a second facility at a different place. Typically, supply managers need to have more than one supplier for both bottleneck and critical items like technology no matter how good the primary supplier is.

Strategic Supply Management for market conditions,business needs and available resources

This one is also an entire bridge exam topic that CPM's must take for the CPSM and is an example of how the CPSM pushes the "Board" (read "C" suite) for supply management. For example,instead of just "gloom and doom" in the current recession it charges supply managers to think about reviewing the strategic situation with respect to their function. Thus, if working capital is suddenly short and banks are not lending then is your plan agile enough? Are you able to put every buyer on trying to re-negotiate contracts for both quantities and payment terms making sure that suppliers don't collapse and supplies don't suffer. In other words:

• is your plan flexible?
• is it execution oriented?
• and is the plan being monitored ? -to deal with whatever is happening in the market, in your business within whatever resources you have

Elements of the operating plan include forecasts,budgets,staffing and metrics measuring how well you are doing. Examples of cost effectiveness metrics include cost changes and cost avoidance. If for instance you can line up your supplier to supply only when you have an order you have avoided both the inventory holding cost and the uncertainty of an order that will actually use the inventory.

The link between corporate plans,business plans and profit goals

Here is a section that the "leader" in you should enjoy. It explains how corporate goals need to mesh with business plans and operational tactics. These days budget cuts are being announced all around. While lay-offs form part of the action organizations are taking (the purview of HR) - Supply Management is being asked to help with reaching the targeted budget cut rate. The organizational budget cut is the corporate goal while a less expensive outsourcing contract is an example of an operational goal. Thinking through some of these things in your own organization and asking questions like:

• What are some of our company's goals?
• What is supply management doing to help achieve these goals?
• Can we measure supply managements' contribution qualitatively and quantitatively?

will help you understand the key message of this section.

You "represent" the supply profession in your organization

The important point to understand in this section (3-A-1 also in the Bridge Exam) is that as a supply management professional you represent the profession in your organization. The more you are able to create,project and expand the role of supply management- the more will be the respect for the profession in your organization.

A first step towards this is to have a Supply Management Department mission that is closely aligned to the mission of the organization. A good example is from South West Airlines.

This section also explores the need for supply managers to lead by being pro-active. The pro-activeness involves being alert to the needs and requirements of both your "internal" customers and also being aware of trends with "external" customers of your organization. Simply waiting for requirements is not enough - you need to reach out to internal users. If you do, you will be well regarded and will avoid situations where users by-pass supply management and simply buy on their own. The latter is called "backdoor buying".