Executive Interview: Dun & Bradstreet President Jim Lawton

 Q & A with Jim Lawton, President and General Manager of Supply Management Solutions,  Dun and Bradstreet, and IT Pioneer

            When Jim Lawton was with Open Ratings, having come from HP and Optiant by way of MIT, the opportunity to work on the leading edge of supply management held great promise.  We checked in with Jim and found that things are even better for supply management professionals than we had hoped.

 As a President at Dun and Bradstreet, Lawton reports that things are good, “Its a great time to be in this space -  so many innovative things going on -  I love spending time with customers -  some are pretty progressive.  It’s very energizing.”

Question:

So what has changed?

 Answer:

At some level the entire supply chain and manufacturing operations are the little engine that could.  The  red-headed stepchild has come into its own and those of us in it enjoy it now.  Supply management matters and we are getting the press.  Six months ago I did an interview on Bloomberg TV!  Until folks got it into their heads that this isn’t just about the supply management function, it has real business implications and it really hurts when supply chain is not done well, we were the red-headed stepchild, an afterthought.  Sure some of it is out of our control, but we’re at the point where companies want to try to step up and do something. 

Question:

So what do you think about lean?

 Answer:

Back in the time of the tsunami last year, one of questions I got was "does this mean that lean is dead, that JIT was a one-time deal, that Six Sigma is not good?"  It became an intriguing question.  I think they wanted the anti-story.

But my answer was “No, lean is not dead, there are fundamental principles that look at what we’re trying to get done and how to get there.  And some of the specific practices we should be revisiting, recognize they are right for the business we are in.  But at the core, we absolutely must leverage the supply chain.  For many of these kinds of strategies the key is not the concept, it’s the implementation.  The guys that misapplied lean, they are the ones that are finding they have exposed themselves in ways they hadn’t realized.  The reality is that not everybody is at the high end of the bell curve - some people deployed solutions that weren’t quite  right for them.

 There is what I call “Easy Lean” – take all the inventory out - but what does that do to customers?  It has to be more thoughtful.  While others have just cut they found out the hard way that there are a lot of ways to get hurt.  What started out largely as financial concerns for big companies that would always be there opened up folks’ eyes.  And what they saw was that it’s about a lot more than financial concerns.  There are non-compliance issues with cost cuts and quality and reliability issues, and those are not pure financial issues.

Question:

So what does that mean for companies discovering there’s a lot of risk out there?

 Answer:

Companies have to learn how to figure out more than their financial status.  People sat down and said ‘Wow, there is a lot of other stuff out there and we don’t even know how to think about that.”  When you layer that realization on top of what has been happening for the last ten to fifteen years with varying degrees of capabilities in organizations focusing solely on doing cost removal, it means unfortunately that we don’t have groups of people who really have a sophisticated concept of risk.  It means understanding, for example, “what would be disruptive to my company?” and “what’s the process we need to think about that?” 

 You’ll find many companies can over-engineer a solution and become ineffective, or they get hit with a tsunami.

Question:

Who are the really good ones?

 Answer:

There are companies and pockets of companies, a handful of folks who have done some pretty thoughtful work.  I always respected Ken Marcia at United Technologies.  Ken has moved on to Dresser Rand.  He understands the metrics and I've found that what he has done has always been thoughtful.  It’s clear that he was always thinking that there are a few core issues his business needed to be concerned about, including how to think about risk, and how technology offers information and intelligence to arm the organization.  He understands that there are places where we can get out in front, or we can sense and respond.  We need to mentally get a framework around that.  It means developing new skills for a new organization.  

 In retail I see Wal-Mart – they have a unique situation with hundreds of thousands of suppliers.  It’s amazing - if you get in the channel, you can build a company.  Wal-Mart has hundreds of companies pitching their wares, but frankly, the media isn’t always so kind to the guy on top. So I’d say we need to have processes in place to prevent bad things from happening, especially with these kinds of volumes.

 In high tech, look at Cisco.  For parts that arrive in the US then move to overland truck shipments, the biggest impact can be the weather.  So the question here is should I incorporate weather in my categories of risk, and how can we do it effectively. 

Question:

What are the essential technologies to manage the global supply network?

 Answer:

In addition to paying attention to things beyond financial issues, and we used to find this at HP, companies have got to look beyond their current tier.  The reality is if you have core competencies that have been distributed up and down the supply chain, you can still be stuck, even if you button up your contracts. If you miss the window, you’re going to have angry customers.

 One other thing – it’s not enough to just think about the supplier.  Even if it’s a great supplier,  it could be located in an earthquake or  tsunami-prone  place, or there could be country-based risk – the economics, a debt problem or a bad regime, for example.  But it’s even more basic, if you want to do business with a supplier in a particular country, and you develop a good contract but there is a judicial process in place that allows them to steal the IP or otherwise violate the business relationship leaving you  no way to process the problem legally, that’s a concern, a big concern. 

Question:

So is technology the answer?

 Answer:

When you think about all those things from a technology perspective, the question becomes how quickly can I access and analyze the information.  What are all the things that could cause a problem, or what are the compliance problems.  We need to be able to lay out all the stuff the company needs to worry about,  and identify what information I have today, and what do I need to supplement so we can create solutions.  Understand if it can be done cost effectively.  But the reality is, it’s hard to get all the info, so the next step is to think about what are the reasonable things to do and where can we get reliable information. 

 Remember, with all these challenges  “he who has the information first wins.”   I learned early in my career with allocation situations if there was even a hint of a problem, I was on the plane to the customer.  There was always a bag packed in the corner of my office!  Think about it, if I got there first we would get a good fair share – if not, we could get beaten by our competitors.

 It’s the same with information.  If I can get the information sooner and integrate it into a useful form - and in some cases we have thousands of chunks of data – I can plunk it on the desk of the supplier who does MRP.  It has to be good useable information, of course, like scorecards that are a synthesis of all the disparate information.  Ask yourself  “what could I use that would help me understand?.”   And if I can bring that intelligence together and get it to right people, however it is used, whether I have more or more complexity, more tiers, more countries, or even  fewer buyers, I’m going to need a way to “exception  manage” through this process.  You can’t just rely on an on-site audit -  even if we pick the top 10% suppliers to visit once per quarter,  we can still get hurt by a “C”  part – believe me, that’s painful, I’ve had that experience.  And we can’t have two hundred suppliers monitored constantly by fifty or even five hundred people.  

Speed is crucial

Ask yourself, “Do I want to create the solution, or do I want to leverage solutions in the marketplace.”  Then think through the framework of a solution – start with analytics and scorecards –but be thoughtful about how to do that.

As a group we tend to be pretty conservative, yet companies are getting forced on it.  I’ve been in the room when the Chief Procurement Officer and executives are forced into it because they say, “We don’t want to have that situation happen again.”  Companies make the decisions to protect themselves.It’s not easy, but there are some things executives can learn from the companies that have been out front.

Question:

What is the biggest challenge you see for US global supply networks?

 Answer:

The biggest challenge is that people don’t understand or draw comfort from the fact that if you are located in the US an inner-connectedness exists.  They don’t understand the ripple effect that happens across thousands of companies, or they simply chose to ignore it.  An example of this situation is the Ford/Japan paint story when the company was outsourced to China.  They wanted to understand their exposure -  that’s one of the issues about taking on more risk.  As we were going over this, the CPO stopped us, “You’re highlighting a risk,” we told him.  “Your China supplier is outsourced to Africa.”  Well, the CPO didn’t realize it.  There is a level of thought that ‘hey, I can hand off my orders to supplier and we’ll build a good contract,’ but that is not a replacement for understanding the process.  If Africa has problem, you can go back to China and the reality, that piece that people may be ignoring or they are just not aware of, is that there are multiple tiers across the global supply chain.  Companies are gradually becoming aware of these factors. The reality is when you have strategy applied at scale and you’re focusing on core, other things can kill you. 

Question:

Then what is the role that procurement organizations need to play?

 Answer:

In the more progressive ones we are seeing models that move beyond supplier centric lenses because there needs to be wider responsibility, whether its ten or one hundred suppliers, end-to-end it has to work.

 There is a shared responsibility for the success of the supply chain.

 Ultimately, there is no question there will be companies that will not be here in five years. 

 Here’s another example of the problems that will shut companies down.  If you are, for instance, not getting parts from Japan, you may now be getting them from a high tech company in Malaysia - lots of people have had to move to their second source.  But now all of a sudden other guys also coming to Malaysia.  It eats up capacity, so now it’s not four guys sitting at the table, now its forty guys at the table.  Sourcing operations are still trying to get their heads around this phenomenon.

 The big chasm when I was at HP was a very engineering type problem - we made a lot of our products.  And manufacturing was seen from that perspective – in one operation I ran manufacturing, and another time I ran procurement.  But from the manufacturing perspective we were doing all the right things - the problem was the supplier or somebody else!  So interesting stuff has arisen from procurement and supply chain.  And those leaders who see how these pieces interrelate understand a lot of the problems come out in the white space, as opposed to the manufacturing space.  A lot of major tech companies have come from that model, but now they’ve widened their focus. 

Question:

There’s a lot of emotion out there.   Is this shift in the enterprise from a focus on manufacturing to a focus on supply chain good news?

 Answer:

We’re seeing the rise of procurement and supply chain and the mental model they use to think about categories and opportunities.

I think there is also a talent and organizational shift.  Procurement used to be subservient to manufacturing, or maybe they were parallel.  And there are different leadership skills and requirements, so some of what we are seeing is fear – people want to be hyper-confident, they over-compensate, and it’s because they are afraid.  They’re asking themselves, “What do I do to make this work?  The problems are more analytical – you can’t get there with intuition.  But there’s this other stuff - they are afraid for their jobs.  The fear is blinding them to what the world is becoming.  If you are just swinging from vine to vine, if you won’t let go to get the next vine because you are afraid, you’re just going to get hit.

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