Tuesday, January 31, 2012

Of Dabbawallas & Supply Chain Leaders: What does it really take to be good?


The article below caught my eye as I was browsing through the latest news on supply chain.  In a gist, it talks of a book that professes to be the go-to asset in helping supply chain leaders improve their game.  Having just read the articles on the dabbawallas of Mumbai  for tomorrow's class, it got me wondering if such a book boasting of an innovative approach to supply chain management is really the treasure of knowledge it claims to be?  Mukadams rose from the ranks of the dabbawallas to become respectable supply chain managers of the wide network of the dabbawalla industry.  I am quite sure they did not go through any formal schooling to learn supply chain by the book.  Rather, they learnt to apply its concepts to the art of exceptional food delivery the hard way -- through actual experience.  In the end, they proved to be just as effective, or even better, in supply chain management enough for the world to notice.

While the type of work will always be different for every problem requiring a solution, the basic concept of simplicity as set by the dabbawallas must serve as a guide for us to always keep in mind that customer satisfaction may be achieved in many ways, but the most important thing is that we DO achieve it.  Do we really need all the jargons of the trade that we so often hear?   Maybe.  Maybe not.  I do believe simplicity holds the key, and we are better off just understanding the basics - like what our clients really need.  That's not a bad place to start.  If you think about it, customer satisfaction is and remains to be the ultimate goal of all supply chains anyway.


    New Procurement Book Revolutionizes Learning For Supply Chain Leaders

    Pittsburgh, PA - January 3, 2012 - While many of the procurement books out there are dry and often snooze-inducing, an exciting, new book released today has finally made learning how to implement procurement best practices fun. Next Level Purchasing founder Charles Dominick, SPSM, SPSM2 and Dr. Soheila Lunney, SPSM, have co-authored, "The Procurement Game Plan: Winning Strategies and Techniques for Supply Management Professionals" - a fresh, innovative text that combines step-by-step procurement techniques with sports analogies for a reading experience that is as entertaining as it is educational.

    Sure to become a go-to asset, "The Procurement Game Plan" encourages procurement leaders and practitioners to "take the ball" by offering an easy-to-follow game plan with strategies that can be implemented to improve supplier relations, achieve measurable cost savings, reduce risk, and attain operational efficiency. These strategies ultimately lead to improved margins and competitiveness for the organizations of the procurement leaders who implement them. "The Procurement Game Plan" is the guide that all procurement professionals need to take their performance to the next level.

    "The Procurement Game Plan" has already begun receiving rave reviews from industry leaders, including R. Gregg Brandyberry, a Senior Advisor for A.T. Kearney Procurement and Analytic Solutions, who called the book "a purchasing classic, a tutorial that everyone will want to have close by," and Westinghouse Electric Company's CPO, Juan Molina, who dubbed the book "A candid and comprehensive look at how to succeed in procurement-a must read for procurement professionals and everyone from college graduates to CPOs."

    "Dr. Lunney and I set out to provide procurement leaders with something that they were sorely missing - actionable strategies in a format that is both practical and enjoyable," said Charles Dominick, SPSM, SPSM2 - the President and Founder of Next Level Purchasing, Inc. "I think we have accomplished that with 'The Procurement Game Plan' and we are looking forward to seeing the measurable benefits it brings to procurement organizations throughout the world."

    "The Procurement Game Plan" is available directly from J. Ross Publishing at jrosspub.com or Amazon.com.

Supply Chain Management Solutions: An extract from personal experience

Supply chain was one of the key market verticals for my ex employer - Motorola Solutions, which has an array of technical gadgets to manage and optimize supply chain. Mobile computers, RFID, WiFi infrastructure in the manufacturing plant, warehouse and even in retail shops ‘attempts’ to provide an integrated approach to supply chain for any business.
Even within the developing market there has been increasing demand for tools and processes to manage the supply chain of businesses ranging from medium scale to large scale operations. To quote from my own experience there have been instances of very interesting deployments of technology for supply chain improvements such as, a mining company in India employed RFID tag based truck and load tracking to have transparency to the fleet operation, Indian arm of Unilever has empowered its distributor’s agents with mobile computers to better track the inventory at mom-n-pop shops and feeds this data back to the ordering system and sometimes even funny attempts such as to RFID tags in a restaurant to track the meals sold! (thankfully, this one never passed the Proof-of-Concept stage).

A deeper look at these sorts of technology and tool deployment suggests that businesses are keen on investing to improve the supply chain processes. Client meetings and system studies conducted by me during my tenure at Motorola Solutions projects a clear idea that motivation for supply chain improvements is not mere ‘getting the product fast to customer at the cheapest cost possible’. The articles ‘Outcome driven supply chain’ and ‘Best value supply chain’ provides the backdrop for this surge of investments in supply chain improvements. As supply chain gets more integrated across functional areas and even more importantly across enterprise involved in delivering a product/service to customer it is imperative that collaborating organizations synchronize their production, ordering, dispatching and storage cycles. For doing so, supply chain information systems are an absolute necessity. Considering the Unilever example: The confectionery division of the conglomerate had started to face severe competition in the Indian tier-1 and tier-2 cities. The pricing and quality was just right and in fact the brand name still commanded respectable lead in terms of market share. However, declining market share meant that Unilever had to take actions on the lines of market mediation to make sure that retail shelves are filled with its products without giving a chance for the competitor to overload the retail shop owners with their products. To achieve this goal, Unilever had to obtain the real time inventory figures and feed the data back into their ERP systems to sync their warehouse operations. Motorola Solutions proposed a solutions where in mobile computers were used by sales agents to collect the inventory details and feed the data in real time to Unilevers ERP system. The outcome of this deployment was multi folded. Firstly it increased the visibility, which in turn led to increased revenues. But beyond that this activity also stimulated flexibility in the warehouse operations of Unilever, in response to varying demand. However, while we were enjoying the success of this project, the irony stuck. Motorola solutions own supply chain was in bad shape. With delivery time standardized at 6 weeks (sometimes stretching to even 12-15 weeks) it was time for us to look internally. The same set of tools, gadgets and systems were in place within Motorola, but then we still have this ridiculous delivery times! That calls for an investigation. The devil was in the system for sure. The systems used to track orders from partners, to distributor to the vendor company was entangled that the end gadgets, tools and processes couldn’t offer any help. So in essence, the tools are just that - tools. As indicated in the reading material, out of the 6 possible outcomes of supply chain optimizations, one value should stand out that would be the main focus area and driving factor for the project. And, tools and processes have to aligned to achieve the desired goal. In Unilever case the key focus area was responsiveness and the solution was built around it. But in Motorola’s own case there was no single focus area which resulted in chaos and sub-optimal performing structure.

As consultants, we need to ensure that the supply chain issues which we are trying to solve are clearly defined and more importantly the expected outcomes are unambiguously listed down. But the question is how? I am wondering if there are any frameworks for the same. If so, I hope to bump across them during the course study.

Supply Chain Disruptions from Natural Disasters in 2011

In 2011, we have experienced a couple of natural disasters that had impact on supply chain performance and risk management.

Due to the earthquake and resulting tsunami in Japan disrupted the automotive supply chain,. Especially Toyota and Honda were majorly affected with supplies extremely affected for months.
Thus, Toyota lost it's tittle of major car producer for the year 2011.
Also, some companies were drastically affected by the disruption from their relative sources. For example, many industries were hit hard by the shortage of obscure chemicals which accounted to be small and still a vital component of their manufacturing process. This was largely sourced from Japan. Most of the suppliers lost their production capabilities for months, manufacturers around the globe were rushing in search of other sources and alternative materials.

Post to the second half of the year the floods at Thailand had an effect on the high tech sector especially the disk industry which was staunched for many weeks. For example, Intel claimed to have lost $1 billion in Q4 sales. The computer OEMs were not buying the chips from Intel as they were not able to source the hard drives needed to make new machines.

I agree with the savants and believe that this is the time companies should once again rethink and revise their supply chain risk management. The companies should be looking beyond their first tier suppliers' suppliers, for improvements.

After almost a year, the awareness among the companies of new supply risks has increased, but there have been to major changes in the supply chain practices. Making changes that cost money for unsure risk which may or may not occur is not popular.

The awareness of new supply chain risks "hasn't necessarily led to action," the Wall Street Journal (WSJ) piece says. "That's partly because boosting inventory even slightly to provide a cushion against supply disruptions can cost big companies millions of dollars, taking a noticeable bite out of the bottom line."

The WSJ quoted the vice president of global supply chain at German genetics-testing company Sean Cumbie saying, as "If we're lucky, [we get] absolutely zero return" from such risk mitigation moves. The implication: often the moves cost money in the short term, and even the long term if certain feared risks never materialize.

Even beyond the potential cost impact another barrier is the time taken to perform the analysis and develop alternative contigency plan. Time is the most crucial factor and is in short for most supply chain executives.
In the HBR, Supply Chain Risk: It's Time to Measure It, states :

Clearly, it is extremely important that a supply chain outsourcing strategy identify risks. But HBR research concludes to have lack of any process to identify, prioritize, manage, and mitigate risks. In the HBR database of hundreds of companies, it was found that most firms ignore risks, sometimes with dire consequences. Their data show that when companies analyze global outsourcing decisions, they fall into three categories. Those who:

  1. add a risk assessment, 10%
  2. look at unit cost plus transportation only, 35%
  3. include inventory as part of the assessment, 55%

In other words, 90 percent of the firms do not conduct a risk assessment when outsourcing production. Yet, sourcing offshore carries myriad additional risks such as political instability, port disruptions, currency swings, demand swings, and more. Unforeseen events occur more frequently in very long global supply chains.

And it's not just the global environment that creates supply risk. There's plenty of it in almost every major initiative. For example, a supply chain professional from a toy retailer told of trying to implement a new fulfillment system that went far over schedule and budget. The Christmas spike exploded before the fulfillment system was complete, resulting in an inability to process orders. People throughout the company worked 50 days straight, including Sundays, to try to stay ahead, yet the firm was forced to send thousands of letters saying, "Sorry your toy order will not arrive before Christmas."

Do you think most companies have made real changes to their practices to reduce risk as a result of recent major disruptions?