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Of Whiskey and Snake Bites

Posted by RDCushing Apr 26, 2017

Attempting to Answer the Wrong Question

Traditional MRP (material requirements planning) systems fail again and again. As Simon Eagle reminds us, writing in Demand-Driven Supply Chain Management:DDMRP Buffer Calculation.jpg


[D]riving replenishment execution through materials requirements planning (MRP)-dependent demand network with today's high levels of forecast inaccuracy inevitably leads to unbalanced inventories that cause supply chain and production instability, or variability, as schedules frequently have to be amended to prevent service issues. This leads to the development of excessive inventories, excessive lead times and necessitates the use of unplanned capacity. However, adoption of the Demand-Driven Supply Chain Management (SCM) approach, especially in 'make to stock' supply chains, allows planned service levels to be achieved from half the average inventories, with far higher overall equipment effectiveness (OEE) and significantly shorter lead times. [2]


If you work in supply chain management, inventory management, production planning or purchasing, you’ve experienced the reality of this day after day.


The reason driving supply chain execution off MRP and forecasts fails, I believe, is because it attempts to answer the wrong question.


Forecast-driven MRP attempts to tell you precisely what to build or buy, and when. It is always precise and it is virtually always precisely wrong.


Is There a Better Answer?

Writing in the outstanding book The Theory That Would Not Die, Sharon Bertsch McGrayne offers this tidbit regarding Bayesian thinking:


Bayesians could… combine information from different sources, treat observables as random variables, and assign probabilities to all of them, whether they formed a bell-shaped curve or some other shape. Bayesians used all their available data because each fact could change the answer by a small amount. Frequency-based statisticians threw up their hands when Savage [Jimmie Savage] inquired whimsically, "Does whiskey do more harm than good in the treatment of snake bite?" Bayesians grinned and retorted, "Whiskey probably does more harm than good." [1]


NOTE TO READER: If you’d like to have a gentle, non-technical introduction to Bayes’ Theorem, watch this YouTube video from Veratasium.


Keep reading. I not trying to convert you to a statistician or mathematician--really!


Combining information from different sources

There are some key factors to be noted in the statement above. Bayesian thinking allows us to better understand our world, our situation, and make proper adaptations incrementally as new information is made available. It does this by combining relevant information of different types, from different sources, and then guiding incremental adjustments to our thinking.


This really works!


Real-world applications of Bayesian thinking cracked the “unbreakable” German Enigma code in World War II, helped us hunt down Russian submarines during the Cold War, and guided the calculations that provided a sound basis for starting the U.S. Workers’ Compensation Insurance program.


Answering the Wrong Question the Wrong Way

Going back to the Jimmie Savage question in the passage above: Traditional MRP approaches try to use statistics to answer the question:


“Does whiskey do more harm than good in the treatment of snake bit?”


The answer from this approach must be binary. It’s “yes” or “no.” Traditional MRP wants to tell you to act—or not act—based on forecasts and statistical analysis.


Answering the Right Question the Right Way

Demand-driven MRP (DDMRP) as promulgated by the Demand Driven Institute shows us a better way.


Strategically placed and sized buffers are built and maintained by combining relevant information from different sources and treating observables as variables in the maintenance of the buffers themselves. Here is a summary of the kinds of data that are combined into the day-by-day maintenance of buffer sizes and statuses:

  1. Average Daily Usage (ADU)
  2. Demand Variability Factors
  3. Replenishment Lead Time Factors
  4. Planned Adjustment Factors (based of foreseeable future events)
  5. Demand Spikes within a predetermined Spike Horizon
  6. Minimum Order Quantity (where applicable)


Combining these relevant data into the calculation of the buffer size and its current status, DDMRP provides the answer to the right question the right way.


Instead of trying to answer in a binary way, DDMRP can tell you:


“Whiskey probably does more harm than good in the treatment of snake bite.”


More directly, a glance at the status of any buffer tells everyone the answer to the truly critical question:


“How effectively is this buffer—at this moment—protecting FLOW in my supply chain and what actions, in what priority, will probably protect FLOW in my supply chain most effectively?”


Based on this bit of data, and looking at this bit of data across all the buffers in the supply chain, managers can rapid make accurate and timely decisions about execution priorities and quantities.

DDMRP Dashboard NetworkPlanningPriorities.png


As Robert E. Kass, a Bayesian at Carnegie Mellon University says,


"Bayes Theorem…. says there is a simple and elegant way to combine current information with prior experience in order to state how much is known…. It makes full use of available information, and it produces decisions having the least possible error rate." [Emphasis added.] [3]


Decisions with the Least Possible Error Rate

Wouldn’t you like to start making supply chain execution decisions that have the highest likelihood of being right, and with the right priorities to protect FLOW (read: profit)?


Then we suggest that you become truly demand-driven (which does not mean, make-to-order, by the way), and we can help. Leave your comments below or feel free to contact us directly, if you prefer.



[1] McGrayne, Sharon Bertsch. The Theory That Would Not Die: How Bayes' Rule Cracked the Enigma Code, Hunted Down Russian Submarines, and Emerged Triumphant from Two Centuries of Controversy. New Haven: Yale University Press, 2012. – Referencing Erickson W.A., ed. (1981) The Writings of Leonard Jimmie Savage: A Memorial Selection. American Statistical Association and Institute of Mathematical Statistics.

[2] Eagle, Simon. Demand-Driven Supply Chain Management: Transformational Performance Improvement. New York: Kogan Page, 2017.

[3] McGrayne, ibid.


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A thought experiment

Imagine that you are a person who has grown up your entire life in a cave. You have never, ever seen the sun, nor do you know anything about the sun.sunrise001.jpg


However, one day, you walk out of your cave and experience your very first sunrise.


What you would not know is whether this is a one-time event, or something that happens more than once.


About 24 hours later, you would experience your second sunrise, and you might be pleasantly surprised after your falling into darkness at the end of the preceding day.


By the third sunrise, you would probably begin to recognize a pattern—sunrise and sunset. You might be delighted and hope that this pattern continues.


As the days turn into weeks, weeks into months, and months into years, you would become virtually certain that sunset today will be followed by sunrise tomorrow morning.


Now, ask yourself this

Chances are, if you are like 99.44 percent [1] of supply chain executives and managers you have experienced—literally, day-after-day—the repeated cycles of failure in your supply chain.

  • All our forecasts are going to be wrong (you know it and I know it—we just don’t know by how much or in which direction)
  • Wrong forecasts cause our supply chains to waste resources buying, making and shipping the wrong stuff
  • Even the right stuff gets shipped to wrong places
  • Some of the right stuff gets shipped to the right places, but at the wrong times
  • Our inventories become unbalanced—too much of the wrong stuff and too little of the right stuff
  • Customer service levels are threatened
  • Expediting cause us to interrupt schedules and break setups
  • Disruptions consume otherwise valuable capacities
  • Lead times must be extended
  • Virtually all our management attentions are drained away in firefighting—there’s no time, energy or money left to think about improvement


So, ask yourself this:

Why aren’t we as smart as the caveman?

Why don’t we learn from cycles that repeat themselves again and again and again and again?

Next, watch this

I think you will benefit from setting aside less than ten minutes to watch this YouTube video about Bayes theorem.


"If we internalize that something is true, and maybe we're 100 percent sure that it's true, and that there's nothing we can do to change it; well, then we're going to keep on doing the same thing, and we're going to keep on getting the same result. It's a self-fulfilling prophecy…. A really good understanding of Bayes' theorem implies that experimentation is essential. [Emphases added.]


"If you've been doing the same thing for a long time, and getting the same result that you're not necessarily happy with, maybe it's time to change."


Now, think about it


If you’ve been doing the same thing for a long time, and getting the same result that you’re not necessarily happy with, maybe it’s time to change. Maybe it’s time to at least “experiment.”


Begin by reading this great new book: Demand-Driven Supply Chain Management: Transformational Performance Improvement by Simon Eagle. [2]


Start an experiment that might just rescue your company and your supply chain into a huge transformational improvement. Perhaps something more than you have can imagine.


We can help. Contact us to talk about it. Or, just leave your comments below.




[1] I made that number up! But you and I both know it’s not far from accurate!

[2] Eagle, Simon. Demand-Driven Supply Chain Management: Transformational Performance Improvement. New York: Kogan Page, 2017.



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RubeGoldberg_AlarmClock.jpgWikipedia tell us that Reuben Garrett Lucius "Rube" Goldberg (July 4, 1883 – December 7, 1970) was an American cartoonist, sculptor, author, engineer, and inventor.


He was best known for a series of popular cartoons depicting complicated gadgets that perform simple tasks in indirect, convoluted ways, giving rise to the term “Rube Goldberg machines” for any similar gadget or process. Goldberg received many honors in his lifetime, including a Pulitzer Prize for his political cartooning in 1948 and the Banshees' Silver Lady Award in 1959.


Complexity sometimes start simply enough

Many times our ideas for improvement start simply enough. However, over time, what was once simple evolves—unintentionally—into convoluted complexity.


Right now I am working with two different companies where it seems apparent that technologies intended to aid in the execution of fairly straightforward tasks have become “Rube Goldberg machines.”


However, over time, we see (or, hear) that the description of the requirements evolved along these lines:

  • “We just need it to do this….”
  • “Oh. We need it to do this, too….”
  • “And, this…”
  • “But, not like that…”
  • “And, it should end up with this outcome…”
  • “Instead, it should work around that, and come to this result….”


There is no planning or design. There is just a lot of adding onto, tweaking, and adjusting as goals and concepts change over time.

This rapidly turns what was a simple idea (“We just need it to do this…”) into something very complex and frequently unwieldy.


Complexity more potential points of failure

As Scotty—the faithful engineer on “Star Trek”—once said in an early Star Trek movie, “The fancier they make the plumbing, the easier it is to stop it up.”


This is true. The more complex a computer program or individual algorithm is, the greater the number of potential points of failure that are likely to exist in it.


Complexity leads to higher costs

Complexity in software and other systems almost always leads to higher maintenance costs. This is frequently because

  • The causes of failure are more difficult to diagnose
  • The causes of failure are more difficult to rectify
  • Fixing the failure is more likely to cause some other part of the system to fail or function in a way other than anticipated


As a result, complex systems frequently cost more for each “repair,” and require more repair effort over their lifespan.


Helping companies and supply chains return to Inherent Simplicity

We are working now to help two major clients restore their “evolved complexity” to inherently simple capabilities. We help them

  1. Figure out what the system really needs to be able to do
  2. How to leverage standard code and modules to meet as many requirements as possible
  3. Design modular systems to meet their additional or custom requirements
  4. Manage the development in order to prevent the unintentional evolution of needless and wasteful complexity


While there is an up-front investment to return to inherent simplicity, the long-term savings in operating expenses can be very, very large. Plus, there is frequently improvement gained from just re-thinking what is being done today—along with the how’s and why’s.


Your turn

Do you have systems and processes that have become needlessly complex? A good sign that you do is when your “levers” and “management actions” are no longer producing expected results, or error rates are high and increasing. If what you’re company is best at is firefighting—and you don’t have a fire station as an office—then chances are you are fighting complexity that’s hurting your chances at making more money.


Tell us about it below. Or, feel free to contact us directly, if you prefer.



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The North Carolina State University Poole College of Management Supply Chain Resource Cooperative offers the following definition for order management:maarten-van-den-heuvel-126551.jpg


Order management involves the seamless integration of orders from multiple channels with inventory databases, data collection, order processing including credit card verification, fulfillment systems and returns across the entire fulfillment network. For proper execution the process involves real-time visibility into the entire order lifecycle starting from the placement of order and ensuring that orders (SKUs) are not lost, delayed, or corrupted during the fulfillment process. The system may also comply with and support parcel carriers and provide sophisticated, centralized freight management and tracking/tracing capabilities. Clients, Customer service representatives account managers and suppliers will thus have the ability to track real-time inventory levels for each SKU and inquire about order and shipment status via the web – anytime, anywhere.


An analogy

Let’s consider an analogy. The fulfillment of the demand for fuel made by your car’s engine involves a “fulfillment network.” That fulfillment network includes you—at the tail end—assuring that you have sufficient inventories of fuel in your fuel tank to satisfy the demand.


Also involved in the “fulfillment network” are your local gas stations, bulk fuel depots (perhaps), regional refineries, fuel pipeline and long-distance transport companies, and even the companies that extract the crude oil and explore for underground reserves.


Given this analogy, let’s rewrite the opening sentence of this definition in concrete terms:


Order management for the vehicle owner [to keep it properly supplied] involves the seamless integration of orders from multiple channels [e.g., wife and children who may also make demands for fuel by using the vehicle] with inventory databases [i.e., the fuel gauge on the vehicle], data collection [e.g., keeping track of fuel purchases and mileage of the vehicle], order processing including credit card verification, fulfillment systems [e.g., the gas stations’ purchasing and replenishment operations]… across the entire fulfillment network [read: all the way back to the crude oil producers].


This is clearly nonsense!


What I really need to know

As a driver, I really need to know only two things:BufferPerformanceMeter_Execution.png


  1. How well am I managing my inventory buffer (the fuel level in my tank) in comparison with available supplies (including lead times) and variations in demand?
  2. How well does my supplier do at managing his or her inventory buffer in light of available supplies and variability in demand?


For most American drivers, the second question is (with very rare exceptions) one we rarely worry about. We expect to be able to go to the local gas station and fill our buffer (fuel tank) on demand.


For question number one, we use our fuel gauge to tell us how well our inventory buffer is coping with variability in supplies and demand. We know this at a glance and we use simple metrics (i.e., full tank, half-a-tank, and so forth).


So, take a look at this last figure.

BUFFER as Tank Metaphor.jpg

Strategic buffers

Beginning with my position in the supply chain, I really need to know how well my buffers (stock, time and / or capacity) are performing relative to changes in supply and demand.


If I have concerns about upstream or downstream performance in the supply chain, having my trading partners share information with me about the performance of their buffers can help me take appropriate actions that will protect FLOW across the entire supply chain.


I do NOT need…

What I do not need is all of the complexity that would be attendant with “the seamless integration of orders from multiple channels with inventory databases, data collection, order processing including credit card verification, fulfillment systems and returns across the entire fulfillment network.”


That is overkill! It would be costly and would probably give me no more relevant information that knowing how the neighboring buffers are doing in support of FLOW.


Invest in your supply chain where it supports the flow of relevant information, not a flood of irrelevant data.


Your turn

Give us your thoughts. We would really like to hear from you. Leave your comments below.


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At TechTarget, their definition of supply chain visibility (SCV) is…


…the ability of parts, components or products in transit to be tracked from the manufacturer to their final destination. The goal of SCV is to improve and strengthen the supply chain by making data readily available to all stakeholders, including the customer.


Let’s just think about this for a minute



Let’s say you manage 10,000 SKUs and half those SKUs pass through twelve different waypoints that you track for arrival and departure. That means you will be monitoring 240,000 data points for half your SKUs. Let us hope that the other half of your inventory is easier on you.


By the way, just a reminder: 240,000 data points is very nearly a quarter-of-a-million!


What do you really need to know?

Do you really need to know every arrival and departure of your inventory as it traverses your supply chain?


You don’t.


I will say that flatly: No. You don’t.


What you really need to know is how well the stock buffers, time buffers, and capacity buffers in your supply chain are doing at their task of protecting FLOW.


If your supply chain requires buffers at half of the twelve waypoints, then you need to have visibility into just 60,000 data points—not a quarter of a million!


It still sounds like a lot, though, doesn’t it.


But, what if you could easily see priorities and positions in a clean, easy to comprehend way?


What if your list for monitoring your buffers looked something like this?

DDMRP Dashboard NetworkPlanningPriorities.png


The easy-to-read combination of a color (red, yellow or green) and a single number (remaining buffer) can help you readily determine priorities, even across a multi-echelon distribution or supply chain network.


In the accompanying figure, I can very easily see that…

  • More NJ buffers need attention than any other location
  • SKU #1004 is a priority (RED) in three different buffers (NJ, IL and WA)
  • The buffer for SKU #1002 in WA is top priority with only 7 percent of the buffer remaining, followed by…
  • SKU #1003 in NJ at 9 percent

Wow! That was fast!

No more combing through pages and pages, or screen after screen, of columns, tables or charts.


Simply look at the color and the number and know precise where management attention needs to be focused, and in what priority.


Isn’t it time that you and your supply chain team began to see supply chain visibility as sometime simpler and more achievable than ever before?


It means you can finally become truly demand-driven. No more excuses.


We can help.


Please feel free to contact us directly, or leave your comments below. We look forward to hearing from you soon.



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Reading the sign to the right of the page here is easy.Semasciographic_example3.png


If we asked readers to translate the sign into French, Spanish, English, Germany, Japanese or Chinese, each of the translations would mean the same thing, but the words and sounds would be different.


The sign is said to be semasciographic. Semasciographic writing or communications systems are independent graphic languages not tied to any one spoken language.


The written language of mathematics using Arabic numerals and standard signs is semasciographic.


Semasciographic communications mean that no translation is necessary. Like this sign, while the sounds of the words relaying the meaning of the sign in English, German, or Chinese may sound vastly different to the hearer, the underlying concept or message is plainly understood when heard in the hearer's native (spoken) language.


The language of mathematics is universal, but…

Even though the language of mathematics is universal—that is to say, eight times eight in any language computes to 64—lots of numbers and mathematical formulas used on a page do not necessarily mean you are communicating or are being understood.


For example, as a supply chain manager, if you share applications, spreadsheets, reports, or whatever that are complex like the one shown here, those to whom you are trying to communicate may fail to understand—even if they are in your own office in the same company. What do you think might happen with the intended recipient if he or she is half-a-world away and speaks another language altogether?


The semasciographic language of supply chains

On the other hand, if you provide your supply chain with easy-to-read (and decode) data in the form of colors (red, yellow and green) and a single number (per SKU-location) that conveys simply and effectively how well the buffer (whether stock, time, or capacity) is protecting FLOW in the supply chain, the recipient can probably digest the information and take appropriate action without “a translator” or long conversations.

DDMRP BufferStatus PlanVsProd.png

From the SUPPLY SIDE, those supplying the buffers can know immediately the how well FLOW is being protected at this moment, and how to set priorities for actions when comparing the colors and numbers for any two or more buffers.

From the DEMAND SIDE, those relying upon the buffers can immediately and effectively assess just how well protected FLOW to them is being protected. They can easily determine if they believe they need to take any actions that might be indicated if there is the possibility of a disruption in FLOW from the buffer.


Demand Driven principles have introduced us to the universal language for supply chain management

Like the semasciographic language of the sign above, demand driven MRP’s language is easy to read, understand, and act upon regardless of your native spoken language.


Now it’s your turn…

Wouldn’t you like to be able to communicate status and priorities simply, yet with extreme effectiveness, up and down your supply chain? Wouldn’t you like to be able to see this effectiveness take hold across company boundaries and even in collaboration with supply chains extending around the globe?


You can. And we can help.


Contact us directly, if you wish, or leave your comments below. We would be delighted to hear from you.


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This is HARD…AvercastScreenshot.png

Having your supply chain management team make decisions about questions like the following is HARD if they are looking at screens like the one you see here.

  • What to order?
  • When to order it?
  • In what quantities?
  • With what priority?

On the other hand, this is EASY…

Having your supply chain management team answer the same questions while looking at something like the accompanying dashboard is EASY:

DDMRP BufferStatusBoard.png

You really don’t even need to know how to read the language. If the dashboard were in French or Polish, you would still be able to figure it out probably.


You would think to yourself:

  • RED before YELLOW before GREEN
  • Smaller percent values before larger ones (Why? Because you see that the first YELLOW value—38.06%–is larger than the largest RED value—29.88%.)
  • Replenish the quantity indicated in the quantity column

Buffer Status as the “universal language” of supply chain management

This easy-to-decipher language, when applied in a demand-driven MRP (DDMRP) or demand-driven S&OP environment in accordance with the principles articulated by the Demand Driven Institute is not only intuitive and universal, it also incorporates everything your supply chain managers need to know at any given moment:

              1. Quantities on-hand
              2. Quantities on open replenishment orders
              3. Quantities in demand spikes within each SKU’s spike horizon
              4. Quantities required to cover average daily usage
              5. Quantities required to meet demand today (plus any open backorders)
              6. Quantities estimated to meet any anticipated changes in demand (e.g., seasonality, promotions)
              7. Quantities required to cover typical demand variability
              8. Quantities required to cover typical supply variability


Yet, with all that included, still no complex screens! Just a color and a number to indicate priority, and another number to tell you the current actionable quantity.


It really is that simple.


Why isn’t YOUR supply chain that simple?



We would be delighted to hear from you. Please leave your feedback below, or feel free to contact us directly.


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The following paragraph caught my attention when it appeared in an article on the TechTarget Web site.


A more efficient supply chain is almost, by definition, more fragile. An inefficient supply chain is characterized by extra inventory, which can be deployed to cover up errors and unexpected disruptions. As supply chains become more efficient -- that is, they have less extra inventory sitting around -- any disruption in the flow of goods can have an immediate effect on customer service and the availability of goods downstream. [Emphases added.]


Most supply chains have a bi-modal stock distribution

DDMRP Bimodal Inventory Distribution.jpg
Most supply chains live in a constant state of their stocks (inventories) being distributed bi-modally. By that we mean that they have many SKU-Locations (SKULs) with too much inventory, many SKULs with too little inventory or out-of-stock entirely, and very few SKULs with just the right quantities to sustain FLOW.


Common misconception about supply chain efficiency

The paragraph from the article (above) is indicative of common misconceptions about what constitutes supply chain "efficiency."


First, it should be noted (and, if you are a supply chain manager or executive, you are probably very aware) that the supply chain with “extra inventory sitting around” is just as likely to have shortages, out-of-stocks and disruptions in FLOW right alongside the excess inventory. We almost always see—and hear from our clients about—supply chain and inventory managers being faced with "too much of what we don't need, and too little of what we do need."


Second, the true efficiency of the supply chain as an operating system cannot be measured by raw quantities of inventory. One man’s treasure is another man’s folly.


Your supply chain’s true efficiency is indicated by two factors: Throughput delivered and operating expenses. Here we define Throughput narrowly as: revenues less (only) truly variable costs. (See more on Throughput Accounting here for details.)


When these two factors are put into the following formula, you have the supply chain efficiency ratio:


Throughput / Operating Expenses


Add up your total Throughput for a given period, divide it by your operating expenses over the same period of time, and you have your supply chain efficiency. It is a direct measure of how profitably you are operating your supply chain. When this number is increasing, you are improving. When this number is declining, you are falling backwards.


It really is as simple as that.


The supply chain that delivers the greatest amount of Throughput, while holding the line on operating expenses, is the most efficient supply chain.


This means it is the supply chain where FLOW is effectively sustained in the absence of excess overhead is efficient.




Because both inventory overstocks and inventory shortages lead to increases in overhead expenses (e.g., carrying costs, stock movements, expediting, overtime) with no corresponding increase in Throughput.


Your turn

Are you confusing “lean” or lower inventories with efficiency?


Let us know how you determine “efficiency,” and why you believe it is a valid measure by which to manage. Is the metric continuously leading you on a path of ongoing improvement (POOGI)?


Leave your comments below, or feel free to contact us directly, if you prefer.





Figure adapted from Demand Driven Performance Using Smart Metrics by Smith and Smith



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Are your supply chain planners and production decision-makers constantly evaluating, examining, considering, checking and double-checking screen-after-screen, row-after-row, column-after-column of numbers in printed reports, in your ERP system, or in Excel™ workbooks trying to make decisions that are timely, accurate and effective?DDMRP BufferStatus PlanVsProd.png


If you answered, "Yes," then chances are they are looking at numbers like…

  • Quantities on-hand
  • Quantities on open replenishment orders
  • Quantities required for open sales orders or work orders
  • And more….

The Genius of Simplicity

The genius of DDMRP (Demand Driven MRP) and its closely-related DDSOP (Demand Drive S&OP) is that it boils metrics down to two easy-to-understand elements: a color and a number.


From the SUPPLY CHAIN PLANNER and MANAGER’s point of view all the quantity factors are already included in the visual elements presented. The factors incorporated are:

  1. Current On-Hand Quantity (in any given SKU-location, designated a “Buffer”)
  2. Quantities on any open replenishment orders
  3. Quantities required for any open demand that is scheduled for shipment or consumption today or before today (e.g., backorders)
  4. Quantities on any qualified demand spikes within the determined spike horizon [1]
  5. Planned adjustments for any known or anticipated changes in demand (e.g., special promotions) [2]
  6. Average daily usage (ADU)
  7. Minimum Order Quantities (MOQ), if applicable [3]
  8. Demand Variability
  9. Supply Variability


No more looking at rows and columns of numbers. For any given item, the planner might be looking as something like this:

DDMRP Dashboard Planners.png

This SKU-Location (SKUL) has a PLANNING buffer in the YELLOW ZONE at 36 percent of total buffer.


From the Execution Viewpoint

The folks whose responsibilities are related to execution—say, production or shipping—would be seeing something entirely different, however.


Someone on the shop floor might be seeing something like this (below) with regard to the same SKUL the planner is viewing above:

DDMRP Dashboard Execution.png

Since the execution team is interested only in quantities on hand necessary to serve immediate demand, they would be seeing a different version.


From a PLANNING perspective, the actual on-hand quantity will normally reside in the YELLOW ZONE (typically, the lower half of the YELLOW ZONE). Therefore, from the EXECUTION perspective, quantities in that range are GREEN ZONE positions for them. The top portion of the PLANNER’s RED ZONE becomes the YELLOW ZONE for execution, and the lower portion of the PLANNER’s RED ZONE is RED for both PLANNING and EXECUTION. (See first figure above.)


Measuring the Performance of the Protection of FLOW

This simple arrangement does not seek to bog down PLANNING and EXECUTION personnel in the review of hundreds or thousands of numbers on a page or screens. Instead, this gives both team clear indication of the PERFORMANCE of the BUFFER that protects FLOW, Throughput and profits.


It also allows the PLANNING and EXECUTION teams to easily set priorities for actions—again, without looking at rows and columns of numbers.


Because both teams get a COLOR and a VALUE, each team can readily and effectively prioritize actions based on the following two very simple rules:

  1. RED before YELLOW, and YELLOW before GREEN
  2. ACT on BUFFER STATUS PERCENT in ASCENDING ORDER (e.g., 3% before 17% before 27% in the example above)


Simple. Yes?


Simplify Your Life and Work

So, simplify your life and work. Stop spending hour after hour pouring over rows and columns of numbers until you’re dizzy.


Get a COLOR and a NUMBER and know immediately where your precious TIME and ATTENTION should be spent.


What are you doing to simplify your life and work?


Let us know by leaving your comments below, or by contacting us directly, if you prefer. Thanks.



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[1] For more information on how qualified demand spikes and the spike horizon are determined, contact us.

[2] For more information on how planned adjustment factors are determined and employed, contact us.

[3] Want to know more about how MOQ gets involved? Contact us and we will fill you in on the details.

For years I have joked with folks saying, “I wish my doctor would stop practicing medicine. I want to go to him when he’s done practicing!”TedEd_HowToPracticeEffectively.png


However, I have to confess, now, that I’ve been wrong about that. It’s a clever joke, but built upon a wrong assumption about what it means to “practice” something.


Watch this TedEd video on practicing and you’ll learn why.


Define “Practicing”

In the video, we learn that practice “is the repetition of an action with the goal of improvement. And it helps us perform with greater ease, speed and confidence.”


There are some crucial considerations here.


Practice is not (or, at the very least, should not be) just the repetition of actions to satisfy the instructor or someone else in authority. Although, I must confess that, in my youth, some of my practicing of various things was precisely that and nothing more.


Real practicing, however, is repetition with the goal of improvement!


This means, of course, that firefighting in our companies and supply chains is not practice.


Firefighting, by definition, is an action intended to rescue us from a negative condition and restore whatever can be salvaged to some state of normality. Firefighting has nothing whatsoever to do with improvement.


Nevertheless, I meet lots of executives and managers who have invested (I use the term loosely) far more in firefighting within their organizations and supply chains than they have invested in practicing in their supply chains and companies.


Perform with greater ease, speed and confidence

Likely, you recognize—now that I’ve brought it up—that nothing about firefighting is helping your company or your supply chain perform with greater ease, speed or confidence.


However, if you are like most of the executives and managers with whom we work day-in and day-out, their fondest wish is that their companies and supply chains could and would perform with greater ease, speed, and confidence.


Unfortunately, the typical state of their supply chains are more likely…

  • Dis-eased (disease is, also by definition, an abnormal state with regard to the intended function of a system)
  • Sluggish (especially with regard to the flow of relevant information and relevant materials, despite much frantic activity)
  • Lacking in confidence (almost never certain that the actions planned and executed will actually achieve the desired outcomes)

What to do

The video actually points us in the right direction. It says,


We…know that mastery isn't just about the amount of hours of practice. It's also the quality and effectiveness of that practice. Effective practice is consistent, intensely focused, and targets content or weaknesses that lie at the edge of one's current abilities. [Emphasis added.]


Look at these points:

  • Effective practice is consistent
  • Effective practice is intensely focused
  • Effective practice targets… weaknesses that lie at the edge of one’s current abilities


We seldom see this in many of the supply chains we are invited to help. Instead, we frequently see lots of management oscillation.


Today the emphasis is on cost-cutting. Tomorrow, the emphasis will be on customer service. Today the emphasis is on larger batches for improved efficiencies; but tomorrow batch setups will be broken intentionally to allow crucial orders to be completed on-time. Today the emphasis is on volume buying to get the best deals; but tomorrow we will be told that we have too much inventory. This kind of inconsistency goes on ad nauseum.


“A house divided against itself….”


Inconsistency will never achieve effective practice in your supply chain.


Intensely focused

Focus is also a big problem—or, rather, the lack of focus is the problem.


A great many of the executives and manager we meet and work with have so much data available to them that they are unable to separate the relevant data from the irrelevant data. As a result, their attentions are diffused, not focused.


If you do not know what you need to focus on to achieve improvement, you cannot practice management effectively.


Targets weaknesses that lie at the edge of your current abilities

DDMRP Bimodal Inventory Distribution.jpgAs Carol Ptak and Chad Smith so cogently point out in DDMRP – Demand Drive Material Requirements Planning, what we need to learn and focus on in order to improve FLOW in our supply chains is at the edges of our inventory profiles. We need to have tools that focus our practice at the edges where we have too much inventory and too little inventory. We need relevant information that helps us understand why these conditions occur and, as we begin to improve, provides advanced warning when items are beginning to drift into one of these two edge states.


If we are not targeting our weaknesses at the edges, we are just trying to do what everyone else is doing. Everyone else is using traditional tools and methods and they are failing to achieve any real improvement.


They are still firefighting, and not practicing.


Isn’t time you moved from firefighting to practicing?


We can help.


Your turn

Now it’s your turn. Please leave your comments below. Let us know how you are improving your practice of supply chain management. If you would prefer, please feel free to contact us directly.



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I sometimes quip to people that I get most of my exercise by jumping to conclusions.


The fact of the matter is, we all do! (Of course, some people actually work out in a gym, jog, or take walks daily, too.)


Here’s a great YouTube video that explains the physiological reality behind our natural human proclivity for jumping to conclusions. Click here to watch the 12-minute “The Science of Thinking” video. It’s well worth your time.


If you watched the video, you can see that it is very natural for us to respond without really thinking, if we think we already know the answer.


Tools to Help Us Think

Because of this natural human proclivity toward not thinking if we think we know, Eliyahu Goldratt developed the Thinking Processes—a set of tools to help us really think about what we think we already know.


Let me give you an example.


Is this statement true or false?

If it is raining outside, I will get wet.


Many of you probably went through a thought process something like this:

  1. It’s true.
  2. Wait a minute… it’s not always true
  3. Other factors might come into play….


On the other hand, some of you may have concluded it was true, and left it at that.


This is where the Thinking Processes can help us.


We can put what we think we know down in a graphical format that serves to augment our discussions of what is based on sound logic and what is based on assumptions. Look at the accompanying simple diagram.


The round-cornered boxes are statements that include subject and a predicate. We call them entities in a generic sense. The arrow represents a logical cause-and-effect relationship.


The diagram is read from the bottom up as:


IF it is raining, THEN I get wet.


Since the arrow represents a logical IF-THEN relationship, we can begin a discussion about any assumptions that may underlie the arrow. We can begin making those assumptions explicit in our diagram. It may progress to this…


Note that we could have connected an arrow directly from “I go outside” to “I get wet,” but that would not have been true. We cannot say, “IF I go outside, THEN I get wet,” if it isn’t also raining. So, we use the AND conditional join for the two statements. It can now be read as:


IF it is raining AND I go outside, THEN I get wet.


Still, someone might object and the diagram might become something like this:



Helping us engage in real thinking about what we think we know

As you can see, having the Thinking Process tools to use, we can begin to have discussions about the assumptions that lie beneath the things we already think we know and understand. We can bring an end to jumping to conclusions about how things work—or fail to work—in our enterprises and supply chains.


This has meaningful business applications.


Below are two excerpts from what we call Current Reality Trees (CRTs). Developing and discussing CRTs help our clients begin to really think about the underlying assumptions their management teams hold about the causes-and-effects across their enterprises or their supply chains.



By beginning to make the cause-and-effect connections explicit in the diagram, the door is opened to discuss the underlying assumptions that various team members have about why this leads to that in their system.


Once the real cause-and-effect relationships have been agreed upon, and necessary assumptions stated explicitly, the process of really thinking about solutions—instead of firefighting and finger-pointing—can begin. This is real power of the Thinking Process tools.


We use them to help us help you think through to breakthrough solutions and real, long-lasting improvements for your enterprise and your supply chain.


If you would like to see an example of a full Current Reality Tree (CRT) and talk about developing one for your organization or supply chain, leave your comments below, or feel free to contact us directly, if you prefer.



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Thinking really is hard work. If you don’t believe me, try the “brain damage” of this YouTube video.ThinkingIsHardestWork_HFord.png


It leaves you scratching your head even though the narrator tells you precisely how to think it through!


What we think we know

Another great YouTube video found here explains why thinking is so hard. In short, it says we’re lazy.


(Uh. Go back and watch the video. You'll get a lot more out of the rest of this if you do. Thanks.)


No. I'm not saying lazy in the sense of being consciously unwilling to labor at problem-solving.


Rather, our physiology is such that (literally) if we think we know the answer to a challenge we are facing, we will fall back on what we think we know, rather than putting forth the energy to really think through the problem.


You don’t believe me? Did I hear you say that? If so, then you need to go take a look at this video one more time.


How we (typically) spend our energies

I believe Henry Ford got it right when he opined:


Most people spend more time and energy going around problems than trying to solve them.


Think about what firefighting is in your enterprise and your supply chain.


Firefighting is a euphemism we use to describe “going around a problem” rather than solving it. We know that, when we take extraordinary means to put out a fire, it is very likely we will be fighting that same fire again (perhaps in a slightly different form, or with a different SKU or different supplier) quite soon.


Problem solving (read: thinking) stops with what we think we know

Eli Schragenheim offers sage advice when he reminds us:


Never say, “I know.” Never say, “I don’t know.” You know something, but not everything.


Most frequently, we know many things about our situation. We understand much about the challenges we face in our supply chains, or in making our enterprises more profitable.


What we don’t know—most commonly—is how all of the things we know are connected and related.


The best consultants

This is why we constantly remind our clients that the best consultants don’t come to bring you the right answers.


We don’t know the right answers.


We come to help you ask the right questions!


Because, the right questions will help you set aside what you think you know long enough to get you really, actively thinking.


You can engage Drew, instead of Gun, and begin making real progress.


By the way, if you don’t understand the “Drew” and “Gun” references in the preceding paragraph, try this link.



Please leave your comments below. We'd like to hear what you have to say.



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I went back again to watch the film “Joy,” which was originally released at Christmas 2015.Joy_TheMovie.png


JOY is the wild story of a family across four generations centered on the girl who becomes the woman who founds a business dynasty and becomes a matriarch in her own right. Betrayal, treachery, the loss of innocence and the scars of love, pave the road in this intense emotional and human comedy about becoming a true boss of family and enterprise facing a world of unforgiving commerce. Allies become adversaries and adversaries become allies, both inside and outside the family, as Joy’s inner life and fierce imagination carry her through the storm she faces. Jennifer Lawrence stars, with Robert De Niro, Bradley Cooper, Edgar Ramirez, Isabella Rossellini, Diane Ladd, Virginia Madsen, Elisabeth Röhm and Dascha Polanco. Like David O. Russell’s previous films, Joy defies genre to tell a story of family, loyalty, and love.


All the drama of real life—because it is real life

This film encapsulates all of the supply chain drama that, I am certain, you and your company have gone through in various stages. Maybe, these dramas are being repeated over and over in your real life:

  • Betrayal
  • Treachery
  • Loss of innocence
  • Intense emotional and human comedy
  • Facing a world of unforgiving commerce
  • Allies becoming adversaries and adversaries becoming allies

Without too much exaggeration, I can say this sounds like some of the companies I’ve visited and worked with over the last couple of decades.


Okay. Maybe “betrayal” and “treachery” are too strong. But, there certainly were company politics at work with people saying one thing behind closed doors and quite another thing in the more open meetings.


To paraphrase Abraham Lincoln and the Bible, “a company divided against itself” will find surviving and thriving to be all the more difficult.


All real success begins with a dream

At the outset, the dream is just to start a business and become successful.


However, year after year, the executives and managers usually go through some kind of planning exercise in which they are invited to dream about what the future will look like for the company in the coming year, two years, or even three to five years.


The film, Joy, opens with Joy’s grandmother, speaking as the narrator, saying,


“Everybody starts out with some kind of dream….”


I can tell you this, I have never, ever sat with a team of managers and executives who said, “Next year, or in the coming five years, let’s make plans to be mediocre, just like we have been for the last five years.”


Nevertheless, I can tell you that is precisely how the vast majority of companies end up.


Why is that?


Joy asks that same question in the film. In a heart-to-heart conversation with her best friend, Joy asks, “What happened to us, Jackie; all the things we used to dream about? I think they keep getting further and further away.”


In a flashback, Joy recalls a conversation with her then soon-to-be first (and ex-) husband. In the conversation, Joy enumerates many of the things that had gone wrong—certainly differently from her dreams—that seemed to be keeping her from moving ahead.


He consoles her by saying, “Maybe your dreams are on hold, right now. Huh?”


Smiling halfheartedly, Joy replies, “That’s a nice way of putting it.”


Are your supply chain (or corporate) dreams on hold right now?

We are sure you didn’t dream, or make your plans, to achieve mediocrity. We are almost positive that you’d like to reach higher than that.


So, what’s holding you back? Why are your dreams “on hold, right now?” Huh?


In the book Scaling Time, the authors write:


“Discovery consists of seeing what everybody has seen and thinking what nobody has thought.” [1]


In a crucial scene from the film, Joy has a discovery moment. While cleaning up spilled wine and broken glass, she cuts her hands again and again as she wrings out the mop. But, despite the apparent hardships she is facing, she thinks what no one else is thinking!


Her discovery in that moment became the basis of all the future success for herself, for her family, and even for her friends.


No spoilers here

I’m not going to give away the story-line here. You really ought to watch this film yourself.


Nevertheless, I will tell you this: that moment of discovery did not bring instant success.


She faced opposition from within her own family—much like those trying to bring new ideas often face opposition from within their own enterprises. There was no shortage of nay-sayers and “Doubting Thomas’s” surrounding her—even openly telling her that she could never succeed.


When success came, however, all those who opposed her were more than willing to jump on board and join in celebrating rewarding outcomes.


Real success comes from dreaming that the future can be different from today

Real success comes from dreaming that the future can, indeed, be different—better, even dramatically better—if we stop doing the same things we have always done and the way we have always done them!


If any of the methods we have been using could dramatically improve the performance of our supply chains, and dramatically increase our return on assets (ROA), then they would have done so long ago (since it is likely we’ve been trying small variations on the same methods for many, many years already)!


Everybody is seeing the same things.


But only those who learn to think what others are not thinking will break out of mediocrity.


It is time to get out of the day-to-day angst in your supply chain management and operations and find some real joy.


We are firmly convinced that becoming truly demand-driven (as advocated by the Demand Driven Institute) is the new thinking that can bring you, your company and your supply chain the joy you have been seeking.


What is “joy,” by the way?


Joy is "the emotion of great delight or happiness caused by something exceptionally good or satisfying." [2]


Isn’t it time you got some of that in your enterprise and in your supply chain?


We can help you dream and bring into reality some joy—and help you bring an end to that nagging angst.


Your turn

Tell us about your dreams, successes or angst. We would like to hear from you. Leave your comments below, or contact us directly, if you prefer.



[1] Weilert, Matthew; Watau, BonnieRobin. Scaling Time: How I Learned to Love Logistics: A Straussian Adventure of Cross-Disciplinary Insight (Blue Two™ Series Book 7). Skerja Press, an imprint of STI Press. Kindle Edition.



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An article by Lora Cecere appearing on the Supply Chain Shaman website offers this warning:


Disruption in supply chain planning is happening. My angst is that it is not happening faster. We are on a path to reinvent decision-support technologies like supply chain planning. The third act is starting. This will make traditional approaches obsolete. The rate of adoption will be fast for early adopters (next five years), but much slower for conservative followers. The barrier for all is traditional thinking.



What we think we know

Think back over the course of history.


It doesn’t really matter what history. It could be your personal history. It could be the history of your company. Perhaps, it could your history in managing supply chains. You could even look back at the history of any nation, or culture.


No matter where you look, I believe that—if you’re honest—you’ll be able to recognize a problem. One might even safely label it a “danger.”

It is almost always what we think we know that becomes…

  1. The anchor that holds us back from making great progress; and
  2. The causes of most of our great failings.


It was what Napoleon thought he knew about defeating the Russians that caused him to lose more than 400,000 men on his tragic march to and retreat from Moscow.


It was what people thought they knew about the earth that kept them—for centuries—from traversing the globe and discovering new lands and the wealth that could be gained from creating “supply chains” between the Old World and these newly discovered lands.


It's what we think we know—what Lora Cecere refers to as “traditional thinking”—that is our biggest barrier to achieving great things.


Some have broken through—and broken away from the pack

Cecere offers cogent warnings that ought to be considered. The coming changes “will make traditional approaches obsolete.” Further, she accurately declares, “The rate of adoption will be fast for early adopters…, but much slower for conservative followers.”


So, let’s take a look at what some “early adopters” are saying about demand-driven material requirements planning (DDMRP) and demand-driven sales and operations planning (DDSOP):

Unite the entire organization [2]

"DDMRP not only offers a comprehensive methodology for improving the flow of operations (both finance and product), but has a powerful conceptual force to unite the entire organization around customer satisfaction." -- Felipe Gonzalez, President, Acerias de Colombia - ACESCO

Short lead time and 100% service

Demand driven planning “was a cornerstone of our lotion pumps business transformation. We now offer much shorter lead times (down by 75 percent) with 100 percent service." -- Vincent Thibault, Global Lean Director, ALBEA Group

Big wins for a distribution network

After implementing demand-driven planning “methods, …backorders as a percent of sales dropped from 16.3 percent to 1.1 percent with a 54 percent inventory reduction. It works." -- Steven Montgomery, General Manager: Supply Chain & Projects, a.b.e.s Construction Chemicals (PTY) LTD

We won a supply chain award!

"The Demand Driven planner program led us to completely overhaul our planning processes. The results were great and we won the 2015 King of Supply Chain Competition!' -- Laurent Vigouroux, VP Quality, Bernard Controls Group

On-time deliveries and low stocks: we did it!

“The Demand Driven Planner Program eradicated our stock-outs transforming us from constant expediting into on-time shipment. Everyday life is now much easier." -- Leila Bouhali, Supply Chain Manager, SAMES KREMLIN

High visibility

"With DDMRP we have nearly eliminated expedites, inventory down is 25 percent in four months, and we have no stock-outs." -- Fernando plaza, Manager, IFAM

We transformed a supply chain

"l was able to take the [demand driven planning] concepts… and leverage them with our suppliers and customers for better flow through the entire chain." -- Lindsey Fountain, Supply Chain Manager, Rex Materials Group

Strongly recommended!!!

"Demand driven [planning] provides a very disruptive approach to deal with the uncertainty, reducing financial risks and increasing service level. Strongly recommended!!!." -- Jaime Hernandez, Supply Chain Manager, Industrias Haceb


Where is the brilliance of demand driven planning?

The brilliance and effectiveness found in demand driven planning comes, not from attempting to make forecasts more accurate, but from applying forecasting where it makes the most sense—for longer-term capacity management decisions and for scaling short-term adjustments to dynamically-managed and strategically-placed buffers. The buffers themselves are strategically placed and sized in order to decouple variability on both the upstream and downstream sides of the supply chain.


Sound. Proven. Effective.


What’s hold you back? We would be delighted for you to join the conversation by leaving your comments below. However, if you prefer, you may contact us directly.



[1] Cecere, Lora. "Different Strokes for Different Folks (to Yield Better Results?)?" Supply Chain Shaman. February 10, 2017. Accessed February 13, 2017.

[2] All quotes from "The Demand Driven Institute - World Leader in Demand Driven Education." The Demand Driven Institute. Accessed February 09, 2017.



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A short while ago, I wrote on the topic of communications and collaboration after having watch the film Arrival. You can read that article here.


In that article, I pointed out that successful collaboration requires, first of all, successful communications. And this means that the companies and trading partners with whom we must communicate must first “become comfortable with our intent, and that comfort level is built on our language. How we think; how we act; how we respond is very much based on our understanding of the language being used to communicate.”


I mention this again because I recently came across a book entitled Scaling Time, co-written by a friend of mine, Matthew Weilert, along with BonnieRobin Watau.


Watau and Weilert set forth in the opening portion of this book the concept of business intimacy.


This concept is not entirely foreign. Tim Sanders wrote on a similar topic in his Love Is the Killer App: How to Win Business and Influence Friends.


In it, Sanders writes: “Be a lovecat…. And that means: Offer your wisdom freely.  Give away your address book to everyone who wants it. And always be human.” [p. 3]


Here are some quotes worthwhile things to remember from Scaling Time:


[B]usiness intimacy is the recipe’s chief ingredient for the pies all businesses want to bake:

      • Innovation
      • Integrity
      • Effective governance
      • Sustainability
      • Reduced waste
      • Short cycle-times
      • The list is endless….


Every aspect of businesses achieving excellence requires knowing and using aspects of business intimacy, because people have to trust us enough to tell us what we need to hear, rather than what they think we want to hear.


[B]usiness intimacy….is a secret ingredient to business success as objectively true as gravity or the sun rising in the east.


[L]ove is essential for communication. By immersing partners in rich dialog, we spin the fibres of acquaintance into threads of friendship. With diligence, character and respect, we can weave these threads into a magic carpet which carries us over the shallow gullies of minor mistakes, as well as the canyons of major blunders.


And then there’s this one:


Why have we buried our faces… in technologies which turn us inward on ourselves? Does it seem our so-called modern digital life feeds selfishness? Does it separate us—both business and family—from everyone else, so we’re lonely in a crowd, connected but not in touch with what matters?


This is a particularly poignant, I believe.


Sadly, we see hundreds of people every day now with their heads down fiddling with their smart devices while real life goes on all around them. Too many end up in car crashes because they can’t put down their technologies long enough to live other vital parts of their lives.


And what about our enterprises and supply chains?

How many companies, executives and supply chain leaders have buried their faces in technologies that turn them inward on themselves?”


How many have spent hundreds of thousands of dollars—perhaps millions—plus tens of thousands of man-hours in an increasingly vain effort to accomplish through technologies what might be gained at a far lower cost if they merely opened up innovative, integrity-based, effective, and sustainable communications with their trading partners?


Shouldn’t we try the simple, less costly, things first?


Shouldn’t we try immersing our trading partners in a rich dialog, spinning fibers that convert arms’-length transactions into bonds of friendship? Are not those collaborative friendships much more likely to carry us over the gullies of minor mistakes and, even, the canyons of major blunders than any technology in our grasp?


What do you think?

We would like to hear your opinion. Leave your comments below, or feel free to contact us directly, if you prefer. We look forward to hearing from you.


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