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2012

I began the last discussion by calling out the three types of benefits that can be used to justify a new initiative, or program;

  • Hard benefits – these can be grouped into cost savings types of benefits that deliver cost reductions directly to the bottom line, or sales increases which will deliver additional profits.
  • Soft benefits – these can be grouped into categories that provide improvements in working conditions, coordination or communication.  They could provide financial benefits but they are generally so minor as to not be measurable.
  • Compliance, or Legal – these can also be defined as a cost of doing business based on legal or regulatory requirements.

 

In this discussion I will discuss the types of soft benefits that you may be able to document as additional justification after your hard benefits for building a collaborative network to support and extend your extended supply chain.  The soft benefits discussion comes across as ‘squishy’ and should be used as a type of supporting benefits list to your hard benefits and your compliance, or legal benefits.  In this business environment soft benefits will not justify a project.  Your soft benefits however can be used as a means to define your framework for future initiatives in developing your collaborative supply chain network.

 

So let’s discuss a justification strategy for your collaborative extended supply chain program.  In order to gain leadership acceptance and approval you must have hard benefits to provide a quick ROI, in fact the quicker your ROI, the higher the priority your program will be given.  I suggest that you define your soft benefits to support a framework of continuing improvements that will ‘seed’ the future improvements that can be achieved in your collaborative network.  In other words, you should define benefits such as flexibility, extendibility, a robust architecture that can support discontinuous growth and spikes in usage.  As you can see, all of these ‘benefits’ are actually supporting a framework that will support and prepare for the future of your collaborative network.

 

Now let’s break these down a little more to help flesh out at least the concepts.  I say ‘flesh out the concepts’ because each instance of the initiative will be different than the others, just like each node in your collaborative network will be different than the others.  So let’s start with flexibility; this should be viewed as providing the ability to support multiple methods of integration quickly and efficiently.  The objective of a flexible architecture is to provide ability to quickly and efficiently add, modify or remove new partners and methods of communication without impacting your current environment and partners.  Next we have extendibility; the objective of extendibility is quite straight forward, provide the ability to extend your network of partners and types and methods of communication quickly and efficiently without impacting your existing partners or methods.  The last point is related to the robust architecture, as I stated above the objectives of the robust architecture is to support the discontinuous growth and spikes in usage in an efficient manner without impacting the flow of information or functionality.

 

As you can see, the soft benefits that I’ve suggested above focus on your network’s current capabilities and efficiency while implementing the framework that will support the future needs of your collaborative extended supply chain network.

In my next installment I will discuss compliance, or legal justifications that can drive the initiative on their own.


Now for the audience participation portion of this program…….

 

Have you identified your key suppliers from both a product perspective and the transportation services perspective?

 

Have you evaluated your extended supply chain from a functional cost perspective?

I began the last discussion by calling out the three types of benefits that can be used to justify a new initiative, or program;

  • Hard benefits – these can be grouped into cost savings types of benefits that deliver cost reductions directly to the bottom line, or sales increases which will deliver additional profits.
  • Soft benefits – these can be grouped into categories that provide improvements in working conditions, coordination or communication.  They could provide financial benefits but they are generally so minor as to not be measurable.
  • Compliance, or Legal – these can also be defined as a cost of doing business based on legal or regulatory requirements.

 

In this discussion I will discuss the types of hard benefits that you may be able to document as justification for your building a collaborative network to support and extend your extended supply chain.  It is probably easiest to identify cost reductions first, then I would move into inventory reductions and then I would suggest bringing these all together with sales improvements.  These will build on each other and also provides a method to move through the order to cash process from a benefits perspective.

 

My personal favorite type of benefit is the cost reductions because these benefits and reductions go directly to the bottom line and provide an extremely powerful incentive to support any initiative.   One thing that you should remember is the 80 – 20 rule; in this case 20% of your suppliers will most likely support 80% of your inventory.  So the first point of the exercise is to simply identify your top suppliers, this will allow you to more quickly identify and quantify the cost reductions.  From a control perspective it is also much easier to control a smaller number of moving parts.

 

So now that we’ve got a ‘control model’ target, let’s start to define the types of benefits that we will target.  The next consideration is what actions will allow us to achieve the benefits?  This point is pretty straight forward; based on implementing a collaborative network across your extended supply chain a key objective is improved communications and collaboration.  So, your first area of qualification should be improvements in your overall transportation costs due to improved collaboration and management of your inbound and outbound transportation.  You should be able to reduce your transportation costs by consolidating shipments across your suppliers, based on location, product and order size.  To further improve your transportation costs your can include an initiative to improve your internal procurement planning and coordination.  One suggestion is that you can gain transportation consolidation opportunities by simply coordinating your procurement, or ship by dates.   The point to these benefits and savings is that as your collaboration and partnerships improve, your transportation costs should be reduced.  I would suggest that a 5% - 10% reduction in costs is reasonable.

 

So now that you’ve improved your transportation coordination we can focus on how that can drive additional benefits to the organization?  A key target area for improvements should be inventory reductions that can be achieved through just –in-time inventory management.  In this case, as your supply chain collaboration and communications increase, your procurement and shipment efficiencies will increase.  This increase will support a just-in-time inventory initiative that will produce a reduction in both on-hand inventory needs along with a related reduction in inventory overstock that drives liquidation costs.  Additionally and as a result of the just-in-time inventory management you will increase your inventory turn to drive additional cost benefits.

 

The next target for improvements should be increased sales that can be realized by having the right product in the right place at the right time.  You can see that the first two objectives or benefits will naturally result in this third improvement.  However, while this improvement will definitely result in hard benefits from increased sales, I suggest that you refrain from attaching a value to this benefit.  The reason for this is that it will be hard to forecast an increase in sales, unless of course you have an idea of your lost sales ratios.

 

In my next installment I will discuss soft benefits with a target of potentially turning them into hard benefits.

 

Now for the audience participation portion of this program…….

 

Have you identified your key suppliers from both a product perspective and the transportation services perspective?

 

Have you evaluated your extended supply chain from a functional cost perspective?

In today’s business environment it goes without saying that in order for any initiative, or program, to be initiated and be considered successful you must first identify and qualify the return on investment, and building your extended supply chain collaborative network is no different.  I would say that it is even more critical due to the nature of this type of initiative, that your collaborative extended supply chain program must include achievable benefits in order to obtain, and maintain, leadership support.   These benefits must be reasonable in the sense that they are not stretching the imagination or boundaries of reason and they must be proven to be achievable through the delivery of the program.  In other words you must prove that the benefits cannot be achieved unless your program, in this case the collaborative supply chain network, is delivered.

 

There are generally three types of benefits that can be identified or used to justify a new initiative, or program;

  • Hard benefits – these can be grouped into cost savings types of benefits that deliver cost reductions directly to the bottom line, or sales increases which will deliver additional profits.
  • Soft benefits – these can be grouped into categories that provide improvements in working conditions, coordination or communication.  They could provide financial benefits but they are generally so minor as to not be measurable.
  • Compliance, or Legal – these can also be defined as a cost of doing business based on legal or regulatory requirements.

 

The challenge for this discussion is to be able to clearly define reasonable and achievable hard benefits to justify the investment in this program.  This type of program will require at a minimum an initial investment in order to start the program and then a continuous, or long term, investment to ensure the continued success.  The collaborative extended supply chain network program will deliver a multitude of soft benefits but the challenge is to identify and quantify hard benefits.  The soft benefits in this case should be carefully reviewed with the objective of converting soft benefits to hard benefits.  This will require careful analysis and imagination to identify how the soft benefit will be able to be converted to a reasonable hard benefit that will deliver either improvements, or reductions, in cost or improvements, or increases, in sales.

 

The optimum phrase that will be utilized to drive this exercise is ‘reasonable and achievable’ benefits.  Your definition along with the hard benefits definition must be developed with the goal of passing a financial review from auditors, in other words this is no time to list stretch objectives that don’t have a reasonable chance of realization.

 

One area I suggest you should not underestimate is compliance or legal benefits, or requirements that can be related to this program.  You should start by defining all of your supply chain regulatory and legal requirements such as import regulations, audit and financial reporting or business continuity.

 

I’m confident that you can find the benefits to justify this type of program through a methodical and thorough evaluation.  In fact, this can be your first step in developing your extended supply chain collaborative network if you involve both your internal and external partners in this exercise.  In my next series of entries I will provide my thoughts and suggestions for each of the key types of benefits.

 

Now for the audience participation portion of this program…….

 

What are you supply chain legal and compliance requirements?

 

Have you evaluated your extended supply chain from a business continuity perspective?

tbrouill

Lessons From A Meltdown

Posted by tbrouill Oct 21, 2012

This week was very interesting for a couple of reasons; the Presidential Debate for one and the second interesting thing that happened was that my personal laptop melted down.  Obviously this is not the forum for a political discussion, aside from the fact that I want to state very strongly that the next two weeks will probably seem like one of the longest periods made up of endless commercials and news programs.  One more debate and then it’s all downhill except for the wailing!  Again, this week the melt down I am referencing is my laptop.

 

I’ve had problems with my hardware in the past, it seems like once every 18 months or so there is an ‘incident’, sometimes small and simply annoying and sometimes major and extremely nerve wracking!  This incident was major, but it was also very interesting because it was not as nerve wracking as past incidents.  Don’t get me wrong, the hardware issue with my laptop is major and will take 7 – 10 days for the repair shop to determine how, and if, it can be resolved.  So, my anxiety level is higher simply because of the unknown, can it be fixed or will I need to purchase a new laptop.  On the other hand, my anxiety level is not nearly as high as it could be, or has been in the past during one of these melt downs.  I’m sure that everyone reading this has experienced a similar incident.

 

This time, however, my anxieties regarding data loss is much lower and for the most part a non-incident.  This is because over the past 2 – 3 years I have been moving more and more of my activities and data into the cloud.  One reason for this is that the move to the cloud has been driven by collaboration with partners and clients.  The second reason is my move from a Blackberry to the Android smart phone, I’ve been steadily transitioning the remaining activities to the cloud, and Google specifically.  So, the result of this most recent melt down has been much less stressful.

 

So how does this relate to the extended supply chain, and especially the collaborative extended supply chain?  Well, what I’ve learned from my recent melt down experience is that an additional benefit of the collaborative extended supply chain is the recoverability that is inherent as a result of sharing with your extended partners.  This results in an almost self recovering network through your extended partners.  Don’t get me wrong, it’s still critical to perform regular backups on all of your internal data; you must protect your company’s critical data.  The lesson from your extended collaborative supply chain, however, is that a failure with one part of a node can be recovered quickly, and here’s the critical benefit, the recovery can be achieved with little impact to the functionality of your extended supply chain.  The recovery is achieved simply by the other partners within the network re-publishing the impacted data.  In fact, I would even say that your level of risk to your extended supply chain can be mitigated through the thoughtful and extended utilization of the cloud for the data necessary to drive and support your extended supply chain network.  In other words, a failure in a node of your extended supply chain that experiences a meltdown can be quickly recovered by replacing the hardware and then ‘plugging in’ to the collaborative network!

 

It is important to take this benefit into account when building the case for your collaborative extended supply chain network.  It is also important for you to seriously think about the benefits of the cloud and cloud based services to protect your personal data.  The benefit of these capabilities is that you are not tied to a specific machine – you can perform any activity from any device that can be connected to the Internet!  This is also why I am interested, and publishing interviews with leaders from some of the most promising collaborative software vendors that I have identified.

 

Now for the audience participation portion of this program…….

 

Have you experience a hardware meltdown and what was the impact?  Were you backing up your data, or were you caught unprepared?

 

Have you been taking advantage of the cloud services for data storage and functionality?  Are you planning to utilize more?

In my last series of posts I discussed the 3 keys to a collaboration framework, or the three nodes of the collaborative network;

 

  • Internal technology and capabilities,
  • Value added networks providing the ‘glue’ between partners and
  • Third is the technology capability of your partners.

 

In conclusion of this series I think it’s important to discuss the importance and the relationship of the three points in the collaborative network that I covered.  I chose these three points for two reasons; one because I believe that these truly are the key factors to a successful collaborative network, and two because I believe that there is a need to define frameworks based on a ‘tripod factor’ for a greater level of stability.  The tripod provides a much more stable foundation, or framework, for building and delivering successful initiatives or missions.  For example, it is a common understanding that projects or programs are supported by three factors; time (effort and duration), requirements and budget.  These are all tightly related and any impact on one leg of the tripod will impact the other two.

 

In my reviews and other experiences I’ve noticed that this ‘tripod factor’ has been proven over and over again to be of critical importance to success.  Now just as critical to the success derived from the ‘tripod factor’ is the identification of the three legs of the tripod!  I believe that the single most important factor, and value, delivered by the three keys to success or three legs of the tripod is the careful identification of those three keys.  I know that once I’ve said this it sounds like a ‘no brainer’ – the fact of the matter though is that sometimes the ‘no brainer’ concept is the most difficult to identify and also the most difficult to maintain.  I would even go so far as to say that a critical success factor to the identification of the 3 keys, or legs, of the tripod is to define the ‘no brainer’!  You must boil these keys down to a ‘no brainer’ concept that your audience will accept and embrace as a matter of course.

So, how does this bring me back to the 3 Keys of Collaborative Framework?  Well, I come to this because during my previous entries and discourses regarding the collaborative framework, I came to understand that, and reinforce my belief in, the 3 keys that I identified, in other words, I’ve come to believe in these three nodes of the collaborative network;

 

  • Internal technology capabilities,
  • Value Added Networks that provide the glue between partners (what I’ve suggested we should begin calling Value Added Partners),
  • The technology capability of your extended supply chain partners.

 

I believe that these are the ‘no brainer’ factors that have the capability to resonate within the extended supply chain community to build and grow your collaborative network.  I’ve come to this realization and belief that if you embrace these 3 Keys to your collaborative network success you’re rate of success will increase dramatically.  I also believe that it was very important to lay out this framework in a logical and progressive manner to provide the foundation to this concept of the ‘tripod factor’.

 

Now for the audience participation portion of this program……

 

Do you agree with these three factors that I’ve identified as critical to the success of your extended supply chain community?

 

What technologies do you utilized to support your extended supply chain?  Do you have a partnership with a VAN and how do you take advantage of their services?  How does EDI transactions and the EDI network play into your current extended supply chain and future plans?

Have you identified any other foundational concepts that can be identified as a type of ‘tripod factor’?

Steve Christensen is CEO of BabbleWare, an exciting new technology company that focuses on helping their clients improve collaboration and achieve value through the ability to leverage disparate systems and technology with innovative process harmonization and data synergy; simply and quickly.

Steve is a self professed Supply Chain geek and a Strategy wonk. He is proud of his ability to evaluate an existing situation and make it better. The book Blue Ocean Strategy framed what he feels is essential to the long term success of any enterprise. His driving mission is to combine strategy with supply chain opportunity in order to reinvent an industry to make the competition irrelevant.

He is also a Technology hack; knowing just enough to be dangerous.  He finds himself drawn to technology in the supply chain space. So he combined Supply Chain, Strategy and Technology and started BabbleWare. Babbleware allows simple, incremental, grass-roots innovation that you design on your desktop to be converted, published, as businessApps. Available in any cloud for mobile/browser use and desktop integration (email, excel, etc.), you can Create an App for That!

BabbleWare takes the technology out of technology.

Can you describe your viewpoint for developing a collaborative framework?

1.       Focus

2.       Reality

3.       Adapt

4.       Collaborate

 

The first step in developing a collaborative framework is to define the scope or focus.  Are you looking at an entire company, soup to nuts?  Are you focusing in on a particular aspect of that company?  Ideally the latter as the former is too broad in scope to be able to succeed.  Business doesn’t have the time to wait for results in a full make over, so being able to narrow the focus to actionable areas is essential. 

The focus includes the process/business segment and the overarching goals to be achieved.  Goals should be measureable before and after to insure success.

 

The second step in developing a collaborative framework is to identify those pieces that already exist: people, processes & systems.  These pieces all work together in an ‘accidental tapestry’ that achieves X results.  The people include the Employees, Vendors and Customers.  The processes include how the work flows between the participants; the work can be defined as orders, inventory and administrative work.  The systems are the existing business applications, such as ERP, SCE/SCM, MES, DSD, TMS, etc. that track and define, or guide, the processes that the people perform. 

The third step in developing a collaborative framework is to select adaptive technology that isolates the legacy systems from change.  You cannot ask any of the participants to change their core ‘tracking’ of data that is performed in their legacy systems. This technology must contain translation, data, process, user interface and logic.  To be of any value it must be simple, rapid & either self or full service. BabbleWare created this new enterprise technology layer and offers it as a self-service or full with our Collaborative Supply Chain. 

 

The fourth step is where you actually Collaborate. Here you whiteboard the revised flow of the people and process.  It is likely the processes executed and data captured by these people will indeed change, but strive to leave the ‘legacy’ systems alone.

 

Collaboration is working together to achieve a goal.[1] It is a recursive[2] process where two or more people or organizations work together to realize shared goals, (this is more than the intersection of common goals seen in co-operative ventures, but a deep, collective, determination to reach an identical objective).” 

 

We have developed a process at BabbleWare to conduct very focused Collaboration Workshop.  In a matter of a few hours entire innovations can be FRAC’d and prototyped for measurement. 

How did you come to the point of building out your offering of collaborative framework and methods?

I have been in enterprise software for over 2 decades.  The legacy enterprise software packages were not developed to encourage change or collaboration.  Their architecture is inwardly focused & tightly integrated software.  Business success increasingly requires adaptability to new opportunities, threats, or regulations.  You can’t afford the cost, risk or disruption involved in changes to these legacy systems, so it is necessary to find a new way to help business embrace change and improve the capabilities.

 

How do you suggest ensuring the continuous growth of your collaborative network?  How can your methods help to ensure the growth?

Start small and succeed or fail early and rapidly.  Don’t worry about getting it perfect for the future…just get it better for now.  Collaboration is an on-going/continuous improvement process and once a proper framework and methodology are in place, it becomes self-sustaining.  Eliminating the barriers to collaboration that exist in every company can help it grow.  Without the need to modify, upgrade or replace the legacy systems, regardless of where they exist (employee, vendor or customer), you can knock down 80+% of the barriers: IT, resources, or, budget.  Culturally, you will find willing partners that want to either secure more business with you or have a need to improve their own business through the value that your collaborative framework can provide.  Starting small allows the success to build other success.  This creates the recursive environment in which growth of collaboration is wide spread and persistent.

 

Are there any key points that you look for in your partners from a technology and capabilities perspective?

Subject matter experts are very important.  Ideally they come from the resources that can already be found at the companies that are members of the collaborate framework.  In other instances, those experts are already serving the industry.  We have found a great degree of success through providers to an industry such as consultants, 3pl and infrastructure.  They are already serving their customers need and realize the potential for offering a new value to their customers.

 

Where do you see the capabilities in 5 and 10 years?

There will be a slow transition from ERP-centric business strategy lead by IT that prevents collaboration to an ERP-tangential business strategy lead by Operations that embraces, encourages and creates collaboration.  Hopefully that transition is well under way before 5 years and ‘mainstream’ in 10 years.  Nothing will ever remain the same – change is inevitable.  Gone are the days of planting a flag in the ground and saying this is the way we are going to do business for the next decade.  Agile, adaptive and opportunistic businesses will run circles around those that are still ‘imperial’ in their approach.

 

Now for the audience participation portion of this program……

 

How do you define collaboration?  Are you working with your extended supply chain partners to develop a collaborative network?

 

Where do you see your collaboration capabilities in 5 and 10 years?