Should Auld Acquaintance Be Forgot?

Even in this (relatively) new century, someone fueled by an abundance of high-test eggnog will attempt to sing the traditional New Year's Eve hymn Auld Lang Syne at roughly midnight on December 31st.  Translated, the phrase means - more or less - days gone by ("old long since").

The advent of a new year is generally a time of introspection and reflection as prelude to setting out objectives and new directions for individuals and organizations.  If you're in that mode, business-wise - and I hope you are - here are a few perhaps-relevant questions as you look back on the year gone by:

• Have your dealings with key customers been as positive and encouraging as you'd hoped, considering the economic challenges we've all been facing?
• Have your key suppliers helped you develop creative and value-adding solutions to build up your positions with important customers and in target markets?
• Are your other supply chain partners - 3PLs, IT and MH suppliers, business consultants - part of your team in creating new value propositions for you to take to market?
• if "yes" to all of the above, how do you plan to continue to excell in the emerging economic recovery?
• If "no" to any of them, what are you going to do to change things?

Reality check: Simply swapping out new relationships for old isn't really a solution all by itself.  the real questions are how you are going to identify the right partners, build the right kinds of relationships, and then deliver results out of the new equations.

The crux of the issue?  Will the coming year be more of the same auld, same auld?  Or, will it be a new way of doing business with new kinds of business relationships?

'Tis The Season . . .Yikes!

Celebrations at about the time of the winter solstice have been a staple of many cultures across the millenia.  North Americans' and Europeans' versions have powwerful religious roots, however much they may have morphed into secular adventures in retailing.  The movement of goods stresses supply chains and relationships, and, as we ride the crest of this year's tsunami, business publications are making much of the struggles (including DC Velocity's perspective on toy sales, Toys: A Supply Chain Christmas Story, available at www.dcvelocity.com).

While we think of this annual surge of merchandise as a retail phenomenon, affecting B2C supply chains, there are many upstream B2B relationships that feel the pain of capacity, resources, and capability shortfalls.  Suppliers take the hit a little earlier in the season, but their pain is real.  Other supply chain partners caught in the riptide include carriers (in all modes), and those third parties providing warehousing, distribution, and fulfillment services  to meet consumer demand.

Failure would not seem to be an option, but failures do occur.  In toys, in apparel, in electronics, in confections - the list goes on.

Next comes the returns peak, which inexorably follows the outbound surge, and brings the potential for even more involvement by third-party logistics service providers (LSPs) and the strength of relationships with them.

This would not seem to be the time to be randomly selecting supply chain partners, and certainly not from the shallow end of the gene pool.  It would seem to be the time when carefully built and nurtured business relationships with capable and committed partners pays off with exceptional execution, flawless recovery from challenges, the vision and stamina to get through the toughest times, and the reserves to really rev up performance after the storm has passed.

Have you been burned trying to get by with arm's-length performance in arm's-length relationships?  Has the heat been turned up during seasonal peaks?  Is this the time to re-think how you prepare to collaborate for a better peak next season?

Zero Sum or Zero Some?

I traveled once again to the State of High Dudgeon this past week.  The impetus was a review of purchasing negotiation strategies as practiced by a respected Fortune 500 company.

The prescribed approach was a rigorous application of the principles outlined in Getting To Yes: Negotiating Without Giving In, by Roger Fisher and William Ury.  Good - even great - material in its time, but its time was 1981.  I struggle with the application of tools and tactics that are nearing 30 years of age, without honing, refining, and adapting them for the requirements of 1) a new century, and 2) a radically altered supply chain landscape.

While somewhat enlightened, in that the aim is merely to hobble, not cripple, the other party to negotiation, the core premise remains that the parties are still on opposite "sides."  This limitation severly inhibits the possibilities of what might otherwise be a collaborative - and winning - joint approach to the market.

Ultimately, the Getting To Yes model rests on a restricted (mis)understanding of game theory, as described in the breakthrough work, Theory Of Games And Economic Behavior, by John von Neumann and Oskar Morgenstern.  Too many people look only at the zero-sum element of this 1944 seminal work.  They see only the idea that one's gain can only come from the other's loss.

But, there are non-zero-sum games, as well, and there are models of coalitions that succeed.  These are much closer to the reality of modern supply chains.  Today, supply chain leaders and their key partners are on the same "side" in economic battles with other supply chains.  And, in fact, competing supply chains can both win in a non-zero-sum universe, with the better coalition simply winning more than its competitor.

Maybe the Getting To Yes thing more-or-less works for arms-length transactions with non-esssential commodity providers.  It seems to me to be a losing strategy for the long term when key product and service providers are kept on the other side of the table, and in the dark about where the future lies.  Another critical misunderstanding in this arena is that a longer purchasing contract isn't remotely close to being a long-term relationship, with all the power and value-add the term implies.

What do you think?  Are you locked in a zero-sum game?

Leadership, Liedership, And Liederkranz

First, some definition.  Lieder are love songs of primarily Dutch and German origin, with lyrics that evidence literary aspiration.  I first encountered the "liedership" term a dozen or so years ago in connection with productions at London's South Bank Centre.  The celebration commemorated the 200th birthday of Austria's Franz Schubert, an iconic master of the genre.

Leadership, on the other hand, wasn't in great demand in the earliest days of physical distribution.  How much leadership was really needed when all we did was move stuff from Point A to Point B, and put it someplace once it had arrived?  Slowly, but thankfully, some leaders in the field began to emerge.  They began the processes of extending our understanding of the scope of logistics and supply chain management, and they elevated our appreciation of the value of our role(s) in organizational performance.

 In today's complex and interconnected supply chains, leadership - strong leadership - is an absolute necessity.  For the really good supply chains that are built on the foundations of well-managed business relationships, leadership is the magical mystery ingredient.  The process of building strong business relationships is not a grass-roots movement, although it does require grass-roots execution.  Only leadership can provide the vision for future state success, as well as command and commit the resources of people, programs, and time needed to keep relationships  working at high levels.

And Liederkranz?  For some of us, it means a funny little American cheese, characterized by an indelibly pungent aroma, and now extinct.  But liederkranz  ("wreath of songs") is actually a singing society, and is far from extinct wherever German heritage and tradition are preserved.  Curiously, a liederkranz may be one of the few environments in which both liedership and leadership are vital to sustainable success.

Lessons From The Bailout - A Teachable Moment?

It might be difficult, the first time through, to get one's head around the notion that business relationships are assets.  I believe that they are, and, when done right, are built on investments of time, money, and reputation.  This is especially true in the host of relationships that makeup a functioning supply chain.

Our friend Wayne Bourne, in a recent column, Rounding Third And Heading For Home, pointed out the stress that a difficult economy can put on working relationships.  He suggested that supply chain partners who have learned how to weather the storm together will be strong partners when economic recovery is a reality.  Wayne was dealing immediately with shipper/carrier linkages, but the core issues transcend specific supply chain roles.  What he didn't say is what happens to partners who haven't kept their bonds strong during the tough times.  Or to those who have abandoned underlying principles and values in order to take advantage of a partner's economic vulnerability.

He didn't have to.  We can all probably figure out what happens to relationships that have become toxic.  The only real questions are "When?" and "How hard?"

There are few options in dealing with toxic assets (relationships, in this case).  Underperforming at best, and risk-the-business at worst, one could turn a blind eye to them, and let the bad apples poison the rest of the barrel.  Or, the losers might be cut loose, resuming business as usual with the "A-Team" relationship partners.

My own inclination would be to perform a form of triage, focusing on, and investing in, rescue and recovery of those relationship assets that can deliver a reasonable "bang for the buck," and have promise for the long term.  That might leave awkward questions of a degree of risk in allowing some relationships to recover - or not - on their own, and of figuring out how to proactively jettison those that might be beyond hope.

Realistically, it's easier to contemplate making those who have to go walk the plank when seas aren't quite so rough.  At the moment, it's unlikely that many will cut precious revenue from the top line.  So, we're back to "When?" and "How hard?"

What do you think?  Are you ready to treat key supply chain relationships as assets?  Can some assets become so toxic that dramatic action is the practical approach?  What has worked - or not worked - for you?