Tuesday 31 July 2007

European Strategies for LCCS

Low-cost country sourcing is probably one of the most powerful means for realising cost-savings opportunities. In March 2005, Ariba Inc. and Supply Management Institute (SMI) conducted a collaborative research project on the topic of low-cost country sourcing (LCCS) to investigate how procurement officers are using this to improve competitive advantage. The research questioned 200 Chief Procurement Officers at large companies from France, Germany, Italy, Spain and the UK with the aim of investigating how they carry out low-cost country sourcing activities to improve competitive advantage. More specifically, the study addressed the following questions:
  •  Which locations are most important for sourcing today and five years time?
  •  Which supplies are suitable for sourcing in low-cost countries?
  •  What risks are associated with low-cost country sourcing?
  •  What measures have companies taken to facilitate low-cost country sourcing?
  •  What is the impact on corporate performance from low-cost country sourcing?

The findings show that low-cost country sourcing can have a positive impact on company performance in terms of cost and quality although the time dimension remains to be a challenge.

Moreover, the findings suggest that low-cost country sourcing activities must be carefully planned, executed and evaluated in order to cope with risks and other types of costs that may offset benefits if not done properly. Some of the key findings are:
  • Companies are still sourcing extensively in the home country, followed by neighbouring countries. Thus, nearshoring is highly prevalent today and the situation will persist to a large extent until at least 2010. 48 percent of the respondents rank their home country among the three most important sourcing countries.
  •  Over the next five years, the value of goods and services sourced in low-cost countries will increase by 64 and 60 percent, respectively. In other words, low-cost country sourcing will increase dramatically by 2010.
  •  China is the most important country for low-cost country sourcing today, and its position will strengthen even further by 2010. The number of respondents rating China among the top three most important sourcing countries is expected to increase from 30 to 45 percent.
  • 48 percent of the respondents align LCCS strategy to the corporate strategy to a high or very high extent. 61 percent of the respondents claim to involve senior management in formulation of visions for LCCS to a high or very high extent.
  •  Quality and total landed cost savings are the two most widely implemented performance metrics. These are implemented to a high or very high extent among 56 and 45 percent of the respondents, respectively.
  •  70 percent of the respondents have experienced positive impact on total costs, 61 percent have experienced positive impact on transportation costs and 50 percent have experienced positive impact on labour costs.

Wednesday 25 July 2007

How a simple Letter of Credit Works

Imagine that one of our UK companies from time to time imports computers from a business called Beijing Computers, which banks with the Shanghai Business Bank. Our company ("XCo") holds an account at HSBC. XCo want to buy $500,000 worth of merchandise from Beijing Computers, who agree to sell the goods and give XCo 60 days to pay for them, on the condition that they are provided with a 90-day LC for the full amount. The steps to get the letter of credit would be as follows:
  • XCo goes to HSBC and requests a $500,000 letter of credit, with Beijing Computers as the beneficiary.
  • HSBC can issue an LC by XCo funding it directly with a deposit of $500,000 plus fees (minimum 1%+ can run as high as 8%).
  • HSBC sends a copy of the LC to the Shanghai Business Bank, which notifies the Beijing Computers that payment is ready and they can ship the merchandise we have ordered with the full assurance of payment to them.
  • On presentation of the stipulated documents in the letter of credit and compliance with the terms and conditions of the letter of credit, HSBC transfers the $500,000 to the Shanghai Business Bank, which then credits the account to the Beijing Computers by that amount.
Note that banks deal only with documents under the letter of credit and not the underlying transaction.

Many exporters have misunderstood that the payment is guaranteed after receiving the LC. The issuing bank is obligated to pay under the letter of credit only when the stipulated documents are presented and the terms and conditions of the letter of credit have been met accordingly

1. After a contract is concluded between a buyer and seller, the buyer's bank supplies a letter of credit to seller.
2. Seller consigns the goods to a carrier in exchange for a bill of lading.
3. Seller provides bill of lading to bank in exchange for payment. Seller's bank exchanges bill of lading for payment from buyer's bank. Buyer's bank exchanges bill of lading for payment from buyer.
4. Buyer provides bill of lading to carrier and takes delivery of goods.

NB: Typically, the documents a beneficiary has to present in order to avail himself of the credit, are commercial invoice, bill of lading, insurance documents. However, the list and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped.

Strategies for Working Together When Positioned a World Apart

Around the world, a wide range of corporate tasks are being performed by teams of employees who rarely if ever meet in person.

The rise of so-called virtual teams is hardly surprising, given the vast investments corporations are making in internal communications and networks. Technically, it's no longer a challenge to work closely with colleagues in distant locations or to hold meetings with participants scattered around the globe.

In practical terms, however, plenty of hurdles remain. Among them: time-zone differences that make quick exchanges difficult and cultural miscues that can cause misunderstandings. Teams that don't meet in person are considered less likely to develop the kind of chemistry seen in teams that do -- an element that's often seen as a key factor in making teams productive.

Related Links

Video: WSJ's Carol Hymowitz interviews Lynda Gratton, professor of management at the London Business School, about the challenges of managing and overseeing global virtual teams.

Discuss: Have you or your company set up a virtual team?

A recent study of virtual teams at multinational companies -- teams ranging in size from four to nearly 200 -- found that many of the groups were beleaguered by just these kinds of long-distance challenges, to the point of being in continuous danger of breaking up. Other virtual teams, meanwhile, were high performers, virtual hot spots of innovation and energy.

Why does one virtual team thrive while another stumbles? What differentiates the two?

It's an important issue, as companies become more reluctant to bear the expense of frequent in-person meetings -- and employees increasingly resent the burdens travel places on their health and personal lives. Finding a way to make virtual teams work better is therefore crucial if companies are going to get the most productivity out of their far-flung work force.

This research began with in-depth case studies of successful virtual teams at a number of companies, including BP PLC, Nokia Corp. and Ogilvy & Mather, a unit of WPP Group PLC. In addition, a research team at London Business School surveyed more than 1,500 virtual-team members and leaders from 55 teams across 15 European and U.S. multinational companies.

Based on our findings, we have identified certain traits and practices common to the most successful virtual teams and their employers. Here, then, are 10 golden rules for making virtual teams more productive:

1. Invest in an online resource where members can learn quickly about one another.

Because of their physical separation, one of the biggest challenges virtual-team members face is an inability to easily learn about one another and what each person brings to the project. Online tools can help, in the same way that social-networking Web sites help college and high-school students get to know other members of their communities. Our research showed that such practices are often unfamiliar to those who graduated from college years ago, but they can be enormously powerful when used in virtual teams.

Take the advertising company Ogilvy & Mather. Its late founder, David Ogilvy, placed enormous emphasis on sharing knowledge within the company. More than a decade ago he invested in an internal IT-based community he called Truffles. As a gourmet, Mr. Ogilvy appreciated the rich taste of a truffle, and he believed that people should search for knowledge with as much energy and enthusiasm as a pig searches for truffles in the oak forests of France.

Truffles gives access to shared projects and a database of company knowledge. It provides forums for the many hundreds of communities of interest that have sprung up in the firm, where ideas and insights are shared. Truffles also features a detailed and frequently updated directory of all Ogilvy employees, giving each an opportunity to list the aspects of work that he or she is passionate about.

Such capabilities help ensure that even virtual-team members can rapidly get to know something about one another. For instance, when a big Ogilvy client wants to launch an ad campaign simultaneously in all of its global markets, a virtual team can start working together effectively within days.

2. Choose a few team members who already know each other.

Virtual teams are much more likely to be productive and innovative if they include some people who already know each other. So-called heritage relationships are crucial to rapidly building networks among the team members.

A word of warning, though: If a majority of the people on a team already know each other, the team can become stale and predictable. It's often through the unexpected insights of new colleagues that innovation is sparked.

3. Identify "boundary spanners" and ensure that they make up at least 15% of the team.

Boundary spanners are people who, as a result of their personality, skills or work history, have lots of connections to useful people outside the team. BP has a long history of colleagues from different business units working together to span the corporate boundaries that separate them.

Another word of warning, though: Having too many boundary spanners risks giving the team so many connections to the outside that it loses its sense of identity and its shared goal.

4. Cultivate boundary spanners as a regular part of companywide practices and processes.

The networking role that boundary spanners play -- not just on virtual teams but in the company at large -- is so important that companies should try to keep them in continuous supply.

At Nokia, for example, a huge range of routines and processes support and encourage employees to expand their personal networks. To start with, new hires are formally introduced to at least 10 people both within and outside of their departments. It's an effort that extends outside the company as well. Nokia has strong working relationships with the faculties of more than 100 universities, co-hosting conferences, sharing research initiatives and supporting postgraduate work.

Growing boundary spanners throughout the company helps ensure that when virtual teams are pulled together, at least some of the members likely will have met before.

5. Break the team's work up into modules so that progress in one location is not overly dependent on progress in another.

Coordinating work across distant time zones can be a continuing battle. Many teams we studied sank into acrimony as one part of the team waited for another to complete part of a task, or as one group worked faster than another.

Whenever possible, assign tasks to team members in different locations that allow them to move ahead at their own pace. Depending on the type of work, try designing the work flow so that contributions from different locations can be assembled into a whole toward the end of the process.

6. Create an online site where a team can collaborate, exchange ideas and inspire one another.

Strong virtual teams often have a shared online workspace that all members can access 24 hours a day. This ensures that while different team members or groups are working relatively independently at times, they can continuously follow the progress and insights of other team members.

At Ogilvy, Truffles includes sites dedicated to individual projects in which virtual teams are able to share their plans, modify a shared piece of work, and informally exchange ideas. This ensures that at any time, people can rapidly understand where their own work is, and how it fits with that of others.

7. Encourage frequent communication. But don't try to force social gatherings.

Members of successful teams communicate with one another often. Interestingly, the mode of communication doesn't seem to be important. At Nokia, for example, the preferred communication tool was text messaging, while in other companies it was email or voice mail. What is most important is that communication be frequent and rapid.

We encountered few negative comments about the amount of communication that went on -- although conventions about the use of e-mail were much appreciated. At BP, for example, team members said that a whole set of rules, such as who should receive emails, who is copied and expectations of reply time, made it easier to work together.

Similarly, a few simple rules can be applied to team gatherings. Virtual teams often make an effort to get the members together at some point during an assignment. We discovered that the timing of such events can be crucial to their success.

Meetings with a strong social element can be resented, for example, when held early in the team's existence. It seems that in the early phases, creating exciting work with a meaningful goal is seen as more useful than hosting social events. But once the virtual team is up and running and has begun to establish a shared working style, then a collective event can play a key role in the building of trust and goodwill.

8. Assign only tasks that are challenging and interesting.

Because the work of virtual teams is often unsupervised, their tasks should be stimulating and challenging -- otherwise the team risks disintegrating under the weight of uninterest.

Indeed, we found that one of the biggest reasons virtual teams fail is because the members don't find the work interesting. They simply fade away, with fewer and fewer dialling into the weekly conference calls or posting ideas on the shared site. It's not that the members don't like one another. It's simply that the atmosphere becomes more like a country club than a dynamic collection of inspired people.

9. Ensure the task is meaningful to the team and the company.

Ideally, a virtual team's mission should resonate with each member's values -- both as individuals and as professionals who want to develop their skills -- and be of clear importance to the company.

We found that when virtual teams really buzz, it is because they are ignited by a question or a task so compelling and exciting that people from across the company are drawn toward it. This happened, for example, at BP when, more than a decade ago, former Chief Executive John Browne asked everyone in the company how BP could become what he termed "a force for good." His question sparked a whole host of virtual teams to gather around the question.

For example, one team of young people, the self-styled "Ignite" team, looked at the idea of trying to shift more energy production to sustainable resources, such as solar power and wind. It was this team's energy and focus that resulted in BP's early commitment to a sustainable-energy agenda.

The importance of meaningful work and inspiring visions is clear in the widely known results of two virtual teams: the collaboration that has produced the online encyclopaedia Wikipedia, and the creators of Linux, an open-source computer operating system.

While neither is a company -- each is made up of large numbers of volunteers -- both owe much of their success to having inspired a sense of devotion and mission among their team members, or contributors. Both have ignited energetic and innovative communities with compelling and powerful questions: How do we create a way of bringing the wisdom of the world to everybody? And how do we build an open-source operating system for the world?

10. When building a virtual team, solicit volunteers as much as possible.

As Wikipedia and Linux have shown, virtual teams appear to thrive when they include volunteers with valuable skills -- people whose proof of commitment is their willingness to join the team on their own.

Nokia, for one, sees a connection between a virtual team's success and its openness to volunteers. The company says a significant portion of its teams that are working on strategic challenges of the future are made up of people who volunteered for the task.

-- Dr. Gratton is a professor of management at London Business School. She can be reached at reports@wsj.com.

Why doing business with the dragon is a Chinese puzzle

Extract from Jeff Randall in Daily Telegraph
Are other British companies likely to attract Chinese money? Indeed, has Britain fully woken up to the opportunities and challenges of China's breakneck development? When it comes to commerce and education, are we looking in the right direction?
I put these questions to Richard Pascoe, Director of the China Policy Institute at Nottingham University, the first overseas institution to be allowed to establish a satellite campus inside the People's Republic. His concern is that too many British businesses fail to grasp the significance of our cultural differences.
"The rewards from doing business in China can be great, but so are the risks," he said. "You don't win business by cold-calling. To succeed, you can't just fly in and out. You need to spend a lot of time there.
"You have to demonstrate that you are in for the long haul, building something to last. China's legal system has developed rapidly over the past 20 years, almost from scratch. The regulatory environment can change quickly. All of which makes durable relationships very important."
The biggest barrier, of course, is language. Mandarin has no alphabet as such, but about 60,000 characters. Worse still for the untrained Western ear, words change their meaning according to tone. Ma, for example, has several translations, including mother and horse, depending on how it is said. Get that one wrong and you can be in serious trouble.
"Overseas businesses with a fluent Mandarin speaker have a huge advantage,'' said Pascoe. ''Going through interpreters is full of pitfalls. That is where misunderstandings happen and deals go wrong. Companies need bilingual and bicultural staff."
About 50,000 Chinese citizens are studying in the UK - and the numbers are rising. Unfortunately, too few Britons, it seems, are heading in the opposite direction. Our mainstream education system is simply not equipped to offer Chinese.
A handful of independent schools, such as Wellington College and Brighton College, make Mandarin a compulsory subject for new entrants, but it is almost non-existent in the state sector. Last year, just 729 pupils sat the GCSE examination.
Of Britain's 130 universities, only about a dozen, largely those in the premier league, including Oxford, Cambridge, Bristol, Edinburgh, Leeds, Manchester, as well as Nottingham, have centres for Chinese studies. Durham is closing down its East Asian Studies Department.
Nottingham University's Professor Shujie Yao says: "There is generally a lack of interest and understanding of China among British people. We're desperate to recruit British experts on China, but there is a shortage of talent. So we hire staff from Germany, Ireland and Australia."
Should we be surprised? Not at all. Given that 38pc of all pupils who sat English GCSE last year failed to reach C grade, and the number of schools abandoning French and German has never been higher, lessons in Mandarin and contemporary Chinese culture remain a luxury that very few can afford.

Saturday 14 July 2007

Fame at last

Traditional buildings 'more eco-friendly'

Charles Clover, Environment Editor
Last Updated: 6:01pm BST 13/07/2007
Traditional buildings with solid walls are more eco-friendly because they need less cooling in summer and less heating in winter than modern glass and steel structures, according to a study.

The computer-modelled buidlings, Heavyweight (top) and Glazed (bottom)
The study found that traditional buildings with solid walls cost 15-20 per cent less to heat or cool than modern designs with lots of glazing.It was commissioned by Robert Adam Architects, a firm of traditional architects, from a leading environmental engineering firm, Atelier 10, which has worked for Foster and Partners, which builds large buildings in glass and steel.The architect who commissioned it says it has implications for
the three million new homes promised by Gordon Brown.Researchers looked at two computer-modelled buildings of identical size, layout and orientation, the heavyweight building with a glazed area of less than 40 per cent of the fa├žade, the glazed building with glass facades to the South and North.
They found differences when the building was an office or residential - with residential made of heavyweight materials the most energy efficient.
Gains from extra daylight in the office building were offset because the users tended to close the blinds on bright days and put the lights on.
Both buildings improved their energy efficiency with triple glazing but the gains from very high performance glass filled with argon did not entirely iron out the differences in energy efficiency between the glass walled building and traditional methods of construction.

Robert Adam, the architect who commissioned the study, said: "Actually the architectural establishment do know this but they don't want it said - that traditional buildings are more sustainable. Environmental engineers know this too but they tend to work for architects. This is the great secret that no one wants to reveal.
"Glass and steel is a default position for the architectural profession but it is fundamentally unsustainable."
Glass and steel office blocks currently being built all over London "should have solid walls likely the early New York skyscrapers," he said.
Mr Adam argues that Modernist buildings have long been associated with glass and steel and these materials have become a "default mode" for all modern office buildings which was difficult to shift, even though truly modern buildings were "sustainable" buildings.
He is planning to build a skyscraper in Basingstoke with solid walls but local architects are trying to stop it because they want glass and steel.
Mr Adam said that pre-fabricated, industrially constructed buildings - such as some of the proposed designs for the £50,000 houses called for by John Prescott when he was in charge of planning - were likely to have far shorter lives than traditional buildings that make up most of our towns and cities.
In fact, the volume housebuilders usually built houses with solid walls, as that was what they market expected. "If you find a house with glass walls it is generally a house an architect has built for himself."
Mr Adam added: "The Government should "forget about tricks and gimmicks and build traditional houses and do it well.
"We know they work and we know people like them. But it will go to the architectural profession and get lots of tricks and gimmicks."
The Government has said it wants to see more architects being involved in the design of domestic housing and more economies of scale by manufacturing components off site.
Two housebuilders commented favourably on the report.
Graeme Simpson of Millgate Homes said: "At last, evidence that the kind of buildings we as developers know are most popular are also sustainable.
"This will stop planners telling us to be different to be modern. Nowadays, being modern is being sustainable and being sustainable is using traditional construction."
Ed Ware of, Edward Ware Homes, said: "This is the agenda for a sustainable future: simple buildings with windows and solid walls."
However, James Pickard, of James Pickard Architects, said the conclusions were "selective and over-simplistic."
"Traditional building is slow and inefficient. Government statistics show that 24 per cent of all UK waste comes from the construction and demolition of buildings. That is a shockingly high level of waste. The European Commission has done a survey of top industrial national looking at the efficiency of our construction industries and Britain came bottom with 25 per cent, less than Norway and Belgium.
"We're paying more for our buildings and homes than we need to and the reason given was lack of skills in the workforce and low levels of off-site manufacturing. We are still building by hand like the Romans did 2,000 years ago.
"Sustainability is now massively important. We have to deliver homes and buildings in a different way."

Monday 2 July 2007


accountable - Wiki entry.
responsibility or capable of being held responsible for something; capable of being explained; being held to account, scrutinised, and being required to give an account or explanation.

Noun1.accountabilityaccountability - responsibility to someone or for some activity
responsibleness, responsibility - a form of trustworthiness; the trait of being answerable to someone for something or being responsible for one's conduct; "he holds a position of great responsibility"

empower (meaning)

tr.v. em·pow·ered, em·pow·er·ing, em·pow·ers
1. To invest with power, especially legal power or official authority.

2. To equip or supply with an ability; enable: "Computers ... empower students to become intellectual explorers" Edward B. Fiske.

empowerment n.
Usage Note: Although it is a contemporary buzzword, the word empower is not new, having arisen in the mid-17th century with the legalistic meaning "to invest with authority, authorise." Shortly thereafter it began to be used with an infinitive in a more general way meaning "to enable or permit." Both of these uses survive today but have been overpowered by the word's use in politics and pop psychology. Its modern use originated in the civil rights movement, which sought political empowerment for its followers. The word was then taken up by the women's movement, and its appeal has not flagged. Since people of all political persuasions have a need for a word that makes their constituents feel that they are or
are about to become more in control of their destinies, empower has been adopted by conservatives as well as social reformers. It has even migrated out of the political arena into other fields.·
The Usage Panel has some misgivings about this recent broadening of usage. For the Panelists, the acceptability of the verb empower depends on the context. Eighty percent approve of the example We want to empower ordinary citizens. But in contexts that are not political the Panel is markedly less enthusiastic. The sentence Hunger and greed and then sexual zeal are felt by some to be stages of experience that empower the individual garners approval from only 33 percent of the Panelists. The Panel may frown on this kind of psychological empowering because it resonates of the self-help movement, which is notorious for trendy coinages.

empowerment - the act of conferring legality or sanction or formal warrant
management, direction - the act of managing something; "he was given overall management of the program"; "is the direction of the economy a function of government?"
sanction - the act of final authorization; "it had the sanction of the church"
permission, permit, license - the act of giving a formal (usually written) authorization
certification, enfranchisement - the act of certifying or bestowing a franchise on
commissioning, commission - the act of granting authority to undertake certain functions
delegating, relegating, relegation, delegation, deputation - authorizing subordinates to make certain decisions
loan approval - formal authorization to get a loan (usually from a bank)
rubber stamp - routine authorization of an action without questions

Getting empowerment into perspective: a three-stage training framework

Abstract: Empowerment is a powerful concept that is in danger of being debased by over-hyping. It is important to realize that empowerment is a slowly-created state of mind, rather than a verb – one does not “empower” by some magical, one-shot injection. The old, authoritarian, “macho” management attitudes are hard to dispel. Rather than overcoming them by exhortation, proposes a three-stage training framework. The general framework is that empowerment occurs as the organization sincerely “engages” with people and they progressively respond to this engagement. In operational terms, the scope of a person's job/task is progressively extended, leading to a growth in that person's personal capability. The first stage of this process is for the manager, as an enabler, to use people's current capability fully in their current job/task. In the second stage, the manager leads as a coaching enabler, extending people beyond their current capability, developing their full potential. Finally, the visionary enabler creates a broad climate of commitment in the organization through a sense of belonging and excitement in the job.
Author(s): John Nicholls Journal: Empowerment in Organizations ISSN: 0968-4891 Year: 1995 Volume: 3 Issue: 2 Page: 6 - 11 Publisher: MCB UP Ltd