Articles

GM and Toyota launched their joint auto plant where GM's work force had been at its worst. Here's what happened next.

Despite the importance of innovation to a business's success, only recently have companies not only established internal environments conducive to innovation but also begun identifying, cultivating and taking advantage of a wide variety of external sources for innovation. Among such sources, suppliers are recognized as having especially large innovation potential because they know what the companies that is, their customers--are doing and need and also because mechanisms for knowledge transfer from supplier to customer are typically in place. However, while it is one thing for a mechanism to be available by which suppliers may transfer innovation to customers, it is quite another for the suppliers actually to do the transferring. The customer, the prime mover in building and maintaining the relationship, can move in two different ways to encourage the supplier to innovate to the customer's benefit. First, it should reduce or eliminate three kinds of problems: (1) conflicting objectives among the customer's functional areas, (2) excessive and often late engineering or specification changes and (3) price-reduction pressures on suppliers that consider only the customer's financial needs. Second and most importantly, the customer should initiate directly positive and trust-building activities.

For most companies, the single largest cost category is the total spend with suppliers. However, figuring out how to identify the best areas for supply savings--and then how to measure and report them--presents major challenges. Both understatement and overstatement of supply savings gaps signal the wrong reality, leading to an overemphasis on low-yielding cost saving initiatives, misdirected corporate resources and employees being rewarded for the wrong behavior. Moreover, supply savings gaps conceal the strategic contribution suppliers can provide. In studying the supply management practices at 30 large North American and European companies, the authors identified a variety of measurement and reporting practices for supply savings. They conclude that correct measurement of supply savings is almost impossible and that there are frequently gaps between reported savings and reality. They explore why gaps exist, what practices lead to under- and overstatement of savings, the consequences of poor supply savings measurement and what can be done to recognize supply savings gaps. To overcome the measurement and reporting challenges, the authors recommend that executives do three things: Focus on the total cost of ownership; categorize the different types of savings; and hardwire savings to the budget.

Supply chains should be designed and managed to deliver one or more of six basic outcomes.

A new book examines the challenges — and potential benefits — of government programs designed to foster entrepreneurship.

The current economic recession has provided managers with a tempting environment for acquiring "star" employees on the cheap. But the track record of such acquisitions of human capital has been mixed, with many companies failing to integrate their new talent. Apparently, an organization can't just hire star employees and then expect those individuals to automatically shine in their new environment. But how, then, can companies ensure that they get the most out of the talent they hire? The authors have found that, to build a top-notch organization of star employees, companies can't simply hire the best and brightest and then turn those individuals loose into a Darwinian competition. Instead, organizations need to provide and maintain the right environment for those employees to flourish. And that means avoiding a number of common pitfalls, such as falling for the "lone-star myth" (companies often mistakenly believe that one individual can single-handedly turn around an entire department or organization), overestimating the importance of pay (businesses frequently overpay for hiring top talent), allowing stars to go solo (high achievers are over-scheduled almost by definition, so managers should never assume that collaboration will "just happen"), focusing too narrowly on a single department or group (stars need top colleagues throughout the organization in order to do their best work) and neglecting homegrown talent.

Managers need to learn from history about what they can and cannot predict, and develop plans that are sensitive to surprises.

Organizations can pick price points that provide both profits and long-term value to suppliers.

How have strategies for supply chain design changed? Two leading thinkers offer insights.