Omanoff Consulting

Q&A: high-profile former CPO says social media is key to procurement’s development.

Key Takeaways

1) Social media tools have a key role to play in improving supply chain visibility, which in turn can feed into S&OP decisions. 2) These same tools should feed information back to key suppliers also, creating a more

responsive, agile channel of communication. 3) Social media can offer closer alignment between customer and supplier, influencing product cycles. 4) Giving the right technology tools to a developing team can improve training, responsiveness and help the right individuals thrive.

For many, social media means Facebook, Twitter, Pinterest and a few sites beyond that. It’s possible to point to events of global significance like the Arab Spring, a movement that made heavy use of social media for its organisation, as pivotal moments when even the more senior generation of executives took notice of the power of the tweet.

Still, the question of ROI and the difficulty in understanding how various well-known tools might fit in, in practical terms, with the complex world of supplier relationships and stakeholder alignment present problems rather than solutions, especially for the technologically averse.

Dennis Omanoff, president at Omanoff Consulting, formerly CPO of McAfee and SVP, supply chain and procurement at Seagate, takes the view that this is an opportunity that procurement can’t miss out on.

Why should procurement executives be investing time in social media?

DO: For me it breaks down into aim and drive: customer loyalty, ROA and

ROI and employee engagement – and there are factors that correlate between those.

When you think about the way procurement used to, and perhaps still does in some cases, deal with suppliers: a business might send over a PO number and suppliers would confirm. Then circumstances might change and the supplier might be left with a load of stock on their hands or they might not have the stretch to meet the demand. There’s potential for a bullwhip effect; very small schedule changes could have big effects on suppliers especially when multi-sourced.

Mature Sales and Operations Planning (S&OP) is all about managing all these changes and making alignments so that at each point you have visibility of what decisions have been made and what that impacts. That way, if you’re a supplier and you’re looking at your own capacity and your inventory and you’re making decisions on what to make, you can share that trade-off with a customer so the decision can be a collaborative one.

S&OP has evolved to become siloed – those are part of a huge opportunity. Most procurement departments can see the opportunity but can’t capture it in topside revenue. Utilising social media can help organisations achieve breakthrough performance by breaking through those silos.

But why is social media the tool for that and how can it be relied on?

DO: It’s about using data in motion rather than sequentially, and that’s actually a huge change. Especially if you’re able to align financial plans, other suppliers’ capacity and customer inventory, you can use that communication and collaboration to see things from and end-to-end view.

Look at hard drives and the flooding in Thailand: businesses lost revenues because they didn’t know where their parts were and what they had in the system, so that though a particular supplier may have been disrupted, the larger problem was that there were loads of parts in the system and they just weren’t aware of those and what their options were. A heightened ’sense and respond’ network would have made a significant and material difference.

How do you trace the benefit and combat that old problem of ROI?

DO: In terms of ROI, when you consider SaaS (softward as a service), it wasn’t a huge upfront investment. We had a license per user so if we hadn’t used it, we wouldn’t have paid for it.

If you see the existence of these social media tools you realise that it can affect market capitalisation if you adapt to a more modern approach and can use every asset to generate revenue and customer loyalty.

Suppliers get tired of getting jerked around – they can get frustrated, especially if they’re in a VMI situation. Often if information is available sooner, they can produce what businesses need and create greater revenues without the long lead times. There is something in it for them and if they’re able to see into inventory systems without having to react to plans being pushed to them from buyers, it opens doors to more controlled inventories, avoiding risk, creating innovation.

A lot of our content was delivered digitally and you probably come across that space everyday and you’ll know how quick the feedback is. If you think about people reacting to a product, you’ll see how different customer reactions are when they respond online, compared to the relatively slow process of phoning customer support.

Could it contribute to product lifecycle times? That’s one thread to it.

What kind of impact can social media have on alignment?

DO: Alignment is like the spinning plates acts that used to be in circuses, it is incredibly difficult to gain alignment across an entire organisation as it means something different to different people. People don’t understand things in the same way, they don’t learn in the same way.

We found that you can reach them more in a social media setting and that was something we used to create a space in the cloud, whether through Twitter, blogs, or less-universal collaborative tools to try and reach people and give them a chance to reach us and converse on a particular project.

Abstinence is not a fair rationale and its fatal to transformations as it results in rejection of strategy. We need to align goals and objectives (specific, measurable, attainable, relevant to the business, and timely with clear priorities,) roles and responsibilities - but then we’re able to use social media to deploy our process and make sure everyone involved has a way of contributing and communicating.

The potential for engaging employees is immense – you can really up the performance level, think about a work force that people are; Say, Stay and Strive! (Saying great things about the company and their management, striving to achieve their personal best and voting with their feet by staying.)

If you’re talking about driving value, that ability to respond to the customer and particularly to react to time-sensitive demand, which is often where there’s highest profitability and opportunity to create loyalty.

Where I’ve worked, we created the highest performing team and the highest engagement – part of that was giving them the tools to be responsive and to look at the processes. On the other side, we’re able to see who has engaged and where we had opportunity to refine and reach out.

Recognition is also a positive, both by other functions and the recognition of our own team members.

What are the prospects for CPOs who don’t choose to adopt this technology?

DO: I’d advise CPOs not to get too wedded to old ideas of technology – huge shifts and disruptions are occurring. CPOs have to think about those disruptive changes and be conscious that what may have seemed like a crazy idea before isn’t now. Some companies are not built to allow innovation, but a business that can leverage technology to get an end-to- end view of its value chain and focus on adapting to changes there is going to have a huge competitive advantage.

Interesting piece on Risk quoting me in my blog….

The continued news on the financial and employment losses of Hurricane Isaac is a poignant reminder of the threat natural disasters pose to business and economic growth. Last year alone, global economic losses from natural disasters totaled a remarkable $370 billion (U.S.), according to Swiss Re. Many businesses aren’t able to recover from the devastating losses that often accompany a natural disaster. In the U.S., for example, more than 40 percent of businesses never reopen after experiencing a natural disaster.

Your best business plans can go up in smoke if you’re not planning now for the ‘worst case scenario,’ says this blogger.

Every company needs to protect its business from the “worst case scenario” in order to grow because, as the last few years have shown us, the worst case can easily and quickly take us by surprise. (Read More: 11 Nuclear Meltdowns and Disasters)

Having a well thought-through business continuity plan that addresses risks in areas such as physical property and the supply chain can help mitigate potential losses and keep a business in business. With a complete business continuity plan, a company becomes more resilient and can weather a disaster while its competitors are left wading through the damage trying to recover.

In 2011, the floods in Thailand severely impacted the hard drive industry. Water damage shut down operations for several major players in the market. Some hard drive companies – Toshiba, for example – found that as the floodwaters rose, their ability to meet customer demands plummeted. Unlike most situations where floodwaters recede after a few days, chest-high water was in some commercial buildings in Thailand for 45 days. The flooding also temporarily affected the hard drive maker’s business results and financial condition. In the immediate aftermath of the flooding, Toshiba [TOSBF  3.39  —- UNCH   

For Seagate, the flooding in Thailand created an opportunity that helped improve its business while competitors like Toshiba struggled to restore their manufacturing capabilities. Unlike its competitors, Seagate suffered relatively minimally, in part because some of its key production facilities were located on higher ground. As a result, Seagate regained its position as market leader—one it hadn’t held for more than two years, according to market researcher iSuppli. Computerworld noted that Seagate’s fiscal year revenue increase of 36 percent over the prior year was attributed – at least in part – to the misfortunes of its competitors during the Thailand flooding.

Even though they fared well through this crisis, the company seems to be recognizing that it may not be as fortunate the next time disaster strikes. Seagate is now accelerating initiatives to make its supply chain “even more flexible, robust, resilient and responsive,” according to a recent blog post by Dennis Omanoff, the company’ s senior vice president of worldwide supply chain and procurement.

As this example demonstrates, being prepared for a crisis – whether it’s a devastating hurricane, crumbling infrastructure or political upheaval – is vital to the growth, operation and resiliency of your business. These are the types of situations that we at FM Global advise our clients to prepare for and to manage. Even a small amount of planning can have a huge impact.  For example, FM Global clients who had facilities in the path of Hurricane Katrina and prepared adequately in advance of the storm reduced their average dollar loss by 85 percent. The steps taken were inexpensive too—US$7,400 in improvements per facility to avert an average of US$1.5 million in property damage per location. (Read More: The World’s Worst Oil Disasters)

Business continuity planning is not glamorous, however. It is a complex and often tiring process that takes time and costs money. But it works. Seagate is a great example. By addressing its vulnerabilities – including its factory location in a flood zone, the location of its suppliers, its material requirements and internal resources – and planning for a “what if” scenario that went beyond obvious issues within the business, Seagate had a way to adapt to a new situation quickly and efficiently. (Read More: Natural Disasters Sink Lloyd’s of London’s Profits)

Executing cost-saving measures that present growth opportunities – such as shifting operations to cheaper production locations like Thailand with less robust building codes and risk management standards can have grave consequences for any company that isn’t prepared for the risk that may accompany these decisions. In-depth business continuity planning is vital to ensuring your business stays afloat and competitive. When developing a business continuity plan, ask yourself these questions:

• Do your senior managers view continuity planning as a competitive advantage?
• Have they made the necessary commitment to addressing supply chain risk, and does your company collaborate with its suppliers to assess and mitigate risk?
• Have you designed risk mitigation into your product design and manufacturing processes?

The record number of major events in 2011, along with the natural disasters of this year – from the Italian earthquake and Colorado wildfires to Beijing flooding and Hurricane Isaac – is a clear indication that the worst case happens more often than we’d like to think. Hoping the worst won’t happen is not an effective business plan. The best way to weather the storm is to start planning today.

Jon Hall, Executive Vice President FM Global. As executive vice president, Hall is responsible for various divisions at FM Global, including claims, engineering and research, marketing and enterprise learning, underwriting and reinsurance, and Affiliated FM (a member of the FM Global Group)