basictraining

sweat the details

FACE IT: THOSE OF US TOILING IN THE SUPPLY chain vineyard don’t always have an easy time getting approval for our projects. We’re neither as sexy as the marketeers nor as mysterious as the IT people. We often don’t know how to put together an irresistible sales pitch. And we’re entering a milieu in which the competition for funds is vicious.

How can you frame your arguments to come home with the cash? In the business world, the end game is always to increase profitability and shareholder value. So logically, it should be a straightforward matter of translating your initiative’s projected impact into solid bottom-line results.

Unfortunately, it’s not that simple. While you certainly can’t skip the calculations, presenting the numbers is just the half of it. The other part is to take the core proposition out of the realm of impeccable logic and into the rough and tumble of politics and show biz.

Among other things, that means playing to your audience. Keep in mind that every manager has hot buttons, and yours is no exception. Make sure your project pushes all of the boss’s hot buttons at some point. You might shudder at the thought of being manipulative, but, trust us, your project won’t see the light of day if you don’t.

Start with what the boss gets measured on, and follow up with whatever he or she measures others on. This might be headcount, budget, total supply chain cost, return on assets employed, inventory turns, return on investment, cost per unit, perfect orders, or order fill rate—anything from the trivial to the cosmic. Whatever the metrics are, play them as if your project’s life depended on them. It does.

Speak the language

Then it’s time to think about the boss’s boss’s hot buttons. If the project is sufficiently big and robust, you’re going to have to think about the things that get the attention of CEOs and CFOs. Couch your project proposition in their language. C-level executives aren’t going to take the time to understand your world, so you’re going to have to learn C-speak if you intend to communicate successfully with them.

In addition to hitting all the operational hot buttons, it’s critical to put your project’s costs and benefits in the context of the company’s financial performance. It’s vital to talk about return on investment (ROI); return on assets (ROA); earnings before interest, depreciation, and taxes (EBIDT); cash flow; and the like.

A tip—even in the world of corporate finance, it helps to use pictures,

charts, and graphs instead of columns of figures.

Data, in person, is mind-numbing, even to people who love data.

It takes some work, but presenting the benefits of a supply chain initiative from an economic value-added (EVA) perspective can have a big payoff. To illustrate with an oversimplification, the idea of a $1 million inventory that costs $250,000 a year to carry might or might not excite the top decision-maker. But the idea that it takes closer to $2 million in pre-tax dollars to build that inventory—and between $400,000 and $500,000 in pre-tax dollars to carry it—could tip the balance.

Learning C-speak is well worth the effort, but all your hard work could be for naught if your knowledge of the underlying costs is sketchy. You and your team have got to know each and every component of supply chain cost. That’s everything—inbound, outbound, facilities, inventories (and all the elements of carrying costs), acquisition/procurement, conversion ( manufacturing), customer service, planning, and anything else that’s part of your supply chain’s execution and management.