It is as though the corporate memory has
been erased, and the same suicidal mistakes are made every three years. Don’t the senior lemmings remember anything?
The lemming isn’t the only species that embarks on such impulsive, instantaneous group-decision-making behaviour. There’s another animal that consistently displays tendency to take spontaneous group action, even when individual animals may be hundreds of kilometres apart.
Those animals are New Zealand businesses. Many are desperate to take advantage of whatever awaits them on the great new business-to-business plains. So, it’s not surprising that in recent Deloitte survey, the majority of respondents reported that business-to-business connectivity is their primary e-business focus. Business-to-business connectivity is without doubt, the strongest growing area of e-business.
But before getting caught up in the excitement and hysteria, it’s worth pausing and asking some serious questions before joining the lemmings. Where are we all going, and what are we trying to achieve? Is everybody else’s direction consistent with my own? Do I even want or need to be part of this, and am I going to get value for money?
Adopting business-to-business capabilities is an important and strategic business decision that must be supported by clear decision making process, and supported where possible by supply chain that is optimised before business-to-business initiatives are implemented.
Some successful businesses have recognised this, and carefully considered the issues before joining the herd. It’s worthwhile taking notice of their practices and strategies because important knowledge can be gained.
Dairy Board e-procurement
The Dairy Board’s activities represent 25 percent of New Zealand’s exports. The Board has set itself some ambitious targets, such as to double revenue every five years, and to achieve 10 percent efficiency gains year on year. Also included is four percent productivity improvement target.
Trevor Cameron is the Board’s manager of global procurement strategy. He says: “We are seeking excellence in all aspects of global supply chain management to help dominate our key markets. We view business-to-business as critical in achieving our goals. Over the next five years we plan to phase in an e-procurement environment that will generate savings of $5 million to $27 million.
“This is not technical initiative, it is business initiative. We have learnt from experience elsewhere, where failure to have supply chain processes and relationships in place has lead to an inability to meet increased customer demands. We are also aware of the risks of simply automating inefficient or sub-optimal processes. Our aim is to ensure that our purchasing decisions achieve the best possible value for money for our shareholders, and that spending power is leveraged to maximum advantage.”
Cameron anticipates that e-procurement will reduce administration costs, will result in better quality of spend and will introduce business rules that no paper-based system could ever impose. It will also give world-class intelligence that can be used to quickly analyse spending and identify areas for performance improvement.
He acknowledges that introducing new ideas into such large and traditional organisation won’t be easy. “We have learnt that it is not practical to attempt to effect change of this magnitude in short period of time. Rather, the project will be managed in ‘bite-sized chunks’ that are cognisant of the needs of individuals in the organisation.”
The Dairy Board direction is endorsed by Alasdair MacLeod, former CEO of First Electric, and now e-business champion at Deloitte Touche Tohmatsu. Under his leadership, First Electric was practically “virtual” company that embraced e-business completely. It outsourced almost every aspect of its operations, from call centre, customer management and bill production.
MacLeod says: “For an existing business, e-business means managing change. It’s not sufficient to tweak the existing business and hope to work online. E-business means reinventing your business. And this means the underlying business processes and relationships must be squared away.”
The following supply chain questions should be asked before embarking on e-business programmes, says MacLeod.
• How can I profitably support growth?
• What specific improvements can I make in my supply chain and what benefits can I achieve?
• How/where should I invest in my supply chain?
• How can I rationalise capital investment opportunities?
• How much will the changes benefit my stakeholders?
Prior to joining the stampede, think about taking the time to:
• Identify goals and objectives.
• Produce compelling business case that outlines the advantages and benefits.
• Address supply chain issues and relationships to eliminate unnecessary or repetitive processes.
Mike Menonca works for Deloitte Touche Tohmatsu and is the acting director of Massey University’s Centre for Supply Chain Management.