Skip navigation
2017

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.

Arrival_TheMovie.jpg

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.

 

Follow us on Twitter: @RKLeSolutions and @RDCushing
LIKE us on Facebook: RKL eSolutions and GeeWhiz2ROI

We come across four different categories of supply chains. I don’t believe we have ever encountered a company or supply chain that cannot be placed pretty accurately on the accompanying matrix. The four classifications are

ROI v Growth Matrix.png

  1. Flourishing – These are the companies and supply chains that show consistent growth, year after year. Not only is their top-line growing, but they are also consistently growing their bottom-line.
  2. Risking – We see quite a few of these. These are companies and supply chains that are growing their top-line—sometimes rapidly—but have not discovered the secret to making more money. They are handling more money year after year, but can’t hold onto more profits.
  3. Competing – Competing companies and supply chains are sometimes improving their ROA (return on assets) without growth. But, they are generally in decline. Many times the reason they are seeing improvements in ROA is only because their assets are being depleted while they are still making some profits.
  4. Starving – These are the saddest cases. Oftentimes, the starving companies and supply chains were once flourishing. Now, however, they have lost the ability to grow and investments in “improvements” (often, ill-considered) may be driving assets up while bottom-line growth is lagging or missing entirely.

Lost in the woods

The companies and supply chains we meet that find themselves risking, competing, or starving frequently remind me of a funny story I heard some years ago:

 

A family had become lost in the woods, and after a considerable time searching for them, they were finally discovered by some park rangers. One of the rangers, out of curiosity, asked the father, “How did you come to get lost in the woods?”

 

The father matter-of-factly replied, “We didn’t come to get lost in the woods. We came to have a picnic.”

 

Like the family lost in the woods, I don’t know that we’ve ever met a company or supply chain executive where their business plan was designed to keep them in the risking, competing or starving quadrants. In fact, their business plans almost always are plainly written with the intent of their being in—or, moving themselves into—the flourishing quadrant.

 

Yet, way more than 80 percent of the clients we meet are “lost in the woods” and unable to find their way out of the competing or risking quadrants.

 

Their goals are right. Their aim is high enough. But, they are constantly failing in planning and execution.

 

Many times they find themselves unable to execute due to conditions such as:

  • Uncertainty about whether planned improvements will actually be met with higher demand
  • Unexpected lag-time between expenditures on improvements and the forecast benefits (sometimes the lag-time is forever—the payoff they calculated never becomes a reality)
  • Every time they reach for a bigger top-line, they find themselves swamped by working capital demands
  • They make significant investments in “collaboration and coordination,” but discover no bottom-line payoff for the investments

Finding the way out of the woods

The only way to assure that top-line growth will contribute to real and effective growth in the company’s (or, supply chain’s) return on assets is to also assure that your planning and execution will lead to:

  1. Uncovering the hidden capacity that almost every company and supply chain has—capacity that allows for dramatic increases in Throughput while holding the line on operating expenses (and little or no additional net investment)
  2. Discovering how to create offers in your market that will allow you to maintain an adequate book of open orders without cutting prices
  3. Finding ways to create disproportionately higher capacities from relatively small investments

We are able to help companies do just that by helping them to think in new ways. (After all, the ways they had been thinking for the last decade or longer are precisely what had gotten them trapped in risking, competing or starving conditions.)

 

By helping to install new thoughtware, we help them uncover hidden capacities and to create innovative new offers in their markets.

 

Now, it’s your turn

Where do you see your company or supply chain on the matrix above? What are you doing to change your position? What has worked? What hasn’t worked?

 

We would like to hear your stories about finding your way “out of the woods.” Leave your comments below, or feel free to contact us directly, if you prefer.

 

  Follow us on Twitter: @RKLeSolutions and @RDCushing
LIKE us on Facebook: RKL eSolutions and GeeWhiz2ROI

I can almost guarantee that, if you are managing a supply chain today, you are doing your very best trying to avoid stock-outs on the one hand and over-stocks on the other. And, I will with almost the same certainty, venture a guess that you frequently feel like you’re fighting a losing battle.

 

VUCA World.png

You (and I) live in a VUCA world

You, I, and your supply chain live in a VUCA (volatile, uncertain, complex and ambiguous) world today.

 

All too often, however, we find that supply chain managers and executives are trying to achieve better performance and improved profits by leveraging tools that are no longer really effective in this environment. They are not well-suited for managing against VUCA events in their companies and supply chains.

 

Rami Goldratt, CEO of Goldratt Consulting, explains why:

 

Let’s take the consumer goods industry and uncertainty. We need to forecast the sales of a certain product in a certain place in a certain time. Based on this we would know how much to produce. One would expect that, over time, our ability to make an accurate forecast would improve, with more information on recorded consumption and more sophisticated IT tools; but reality shows us it’s exactly the opposite—it’s getting worse. We have more and more surpluses and shortages. This is because there are three dynamics in consumer behaviour that makes it almost impossible to predict accurately. The first is that consumers are becoming more sensitive to get the products they want, and this puts pressure on retailers to work with wider assortments, else they will lose sales. The wider the assortment, the harder it is to have a good forecast of what you will sell, because you’ll stock more units and managing the depth of this inventory becomes difficult. The second is consumer tolerance. Consumers are willing to wait less and less for the product to become available, which means that retailers need to have it in the stores, not in the warehouse. Finally, product life is becoming shorter, with new products constantly being introduced and retailers needing to offer discounts to sell the older version. This puts a lot of pressure on brands. Unless the new launch is a star product like the iPhone, there will be a clash between your old and new offerings. All this makes our ability to forecast and have the right inventory impossible.* [Emphases added.]

 

FOCUS and FLOW have become everything

George W. Plossl postulated:

 

All benefits will be directly related to the speed of FLOW of materials and information.

 

Chad Smith and Carol Ptak have added an elegant and important caveat to Plossl’s law:

 

All benefits will be directly related to the speed of FLOW of relevant materials and relevant information.

 

When everyone in your supply chain is guessing—read: attempting to forecast demand—then there will be a lot of irrelevant information (read: incorrect forecasts) driving the flow of irrelevant materials. When the information and materials flowing in your company or across your supply chain is largely irrelevant (i.e., wrong), it makes little difference how fast it might be flowing.

 

In the same interview quoted above, Rami Goldratt reminds us of the importance of FOCUS. He says, “There are always many areas that can be improved; however, not everything that can be improved should be improved. FOCUS starts with what not to do.”

 

One of the things most companies and supply chain managers should not be doing is trying to improve forecasting.

 

Most of the last decade has shown supply chain managers and executives that the pursuit of more and more costly and complex forecasting mechanisms has been a futile pursuit. For every margin gain in the algorithms that might improve forecasts, new levels of VUCA have reduced the net gains to zero (or below). Irrelevant information still clogs our manufacturing and distribution resources with irrelevant materials—products for which there is no actual demand.

 

Goldratt reminds us that, “the only way for companies to survive is to reduce the reaction time to market [changes].” We “need to capture signals from reality of what is selling [actual demand] and react to it as fast as possible. Companies [and supply chains] that can’t dramatically improve response times will not exist in the future,” warns Goldratt.

 

New methods improve FOCUS and FLOW

New methods promoted by the Demand Driven Institute have proven themselves effective at dramatically improving FOCUS and FLOW. These new and innovative methods create a high-visibility collaborative supply chain where the FLOW of relevant information stimulates the constant flow of relevant materials. This allows companies and supply chains to rapid achieve much higher rates of ROA (return on assets) for their investments in inventory and other resources.

 

These are the methods we no bring to our small to midsized clients struggling with improving their supply chains and profits.

 

Let us hear from you. Are succeeding or struggling at improving profits in a VUCA world? Leave your comment below, or feel free to contact us directly, if you prefer.

 

****************************************

* From an interview with Rami Goldratt, CEO, Goldratt Consulting by Priyanka Sangani (TimesGroup.com - India) published 27 Feb 2015

****************************************

Follow us on Twitter: @RKLeSolutions and @RDCushing
LIKE us on Facebook: RKL eSolutions and GeeWhiz2ROI

Recently I had some correspondence with another thought-leader in supply chain management on the matters of supply chain effectiveness versus supply chain efficiency.
Efficency v Effectiveness.png

 

It brought to mind the fact that, when we begin working with clients, they are nearly always focused on efficiencies, which they are typically defining in terms of some calculation of cost per unit.

 

For example, they may say, “This item costs us $16.24 per unit for inbound freight.”

 

They have a deeply-held belief that, if they could find a more efficient way of shipping these items, that they might be able to reduce their shipping costs by, say, one dollar per unit. They then extrapolate from that in their minds—or on a spreadsheet—and calculate: $1.00 per unit savings (through shipping efficiencies) times 30,000 units per year equals a saving of $30,000 per year. They also, generally, equate that savings in their calculated costs to additional profit on their bottom-line.

 

Your experience probably proves this

Unfortunately, such calculations related to efficiencies and cost-per-unit almost never produce the calculated bottom-line outcomes. I would wager that your experience proves this (were I a wagering man).

 

I think you have already had this experience—not once—but over and over again.

 

You and your team have repeatedly come up with ways to improve efficiencies—to reduce cost-per-unit according to your calculations—only to find that, in the final analysis, the true effect on the bottom-line was zero, near zero, or even negative.

 

Nevertheless, like a good soldier, you persist in trying to find efficiencies—making cost-cutting your chief aim—in the vain hope that someday you will discover the “efficiency” that really works at improving the bottom-line.

 

Why doesn’t this work?

There are lots of reasons attempts to improve efficiencies doesn’t work at bringing real, effective and durable improvements to the bottom-line. You can read about them in books like The Measurement Nightmare where author Debra Smith writes:

 

The ability to implement an organization's strategy is dependent on aligning internal resources so that they act in concert to improve and execute the strategy. Resource contention between competing initiatives, programs, and investment decisions must be resolved and their interdependencies understood and prioritized. Improvements in one area cannot be gained at the expense of another area of the business, if both are necessary for the business to succeed. Unfortunately, that is precisely what happens when individual improvement programs are put in place at local levels. To achieve our inventory reduction goals, we cause stockouts and delays in manufacturing. To cut our costs, we harm our quality or ability to deliver on time. To ensure that one product or project is brought in on time, we expedite over other products or projects, causing them to be late or delayed. Accounting systems and financial and incentive measurements focused on local improvement or cost collection or allocation continue to be one of the biggest stumbling blocks to companies wishing to improve their financial performance with the above-mentioned improvement processes. This is because they fail to recognize the interdependencies of the local actions and programs on the performance of the business as whole. [1]

 

Or, you can read about the problems with calculated unit costs and efficiencies in Relevance Lost where the writer says:

 

The management accounting system also fails to provide accurate product costs. Costs are distributed to products by simplistic and arbitrary measures, usually direct-labor based, that do not represent the demands made by each product on the firm's resources. Although simplistic product costing methods are adequate for financial reporting requirements--the methods yield values for inventory and for cost of goods sold that satisfy external reporting and auditing requirements--the methods systematically bias and distort costs of individual products. The standard product cost systems typical of most organizations usually lead to enormous cross subsidies across products. When such distorted information represents the only available data on "product costs," the danger exists for misguided decisions on product pricing, product sourcing, product mix, and responses to rival products. Many firms seem to be falling victim to the danger. [2]

 

You could also read about why these efficiency and cost calculations continually mislead executives and managers like you in Lies, Damned Lies and Cost Accounting where the author opines:

 

When trying to cost a product, service, or activity in an analysis period, since each approach available to use assigns costs differently, you can create different values for the cost. The cost of a pen you manufacture, for example, may be calculated to be $ 1.12 with standard costing, $ 1.27 with activity-based costing, and $ 1.35 with overhead costs spread equally. This can be disturbing but understandable because each approach emphasizes different things. However, even if you talk to three people about using one approach such as activity-based costing, you will likely receive three different costs as well. What is even more puzzling is that if you use a fairly standard procedure, the approach will pass an audit performed by your CPA (certified public accounting) firm. Had you used another standard approach and calculated a different number, it, too, would pass the audit. So, what is the right answer? [3]

 

The real bottom-line profits come from “the system” and effectiveness

Going back to our example above: if your efficiency that you believe drives a one-dollar-per-unit reduction in shipping costs causes “the system”—read: the supply chain—to adjust, adapt or change in such a way that FLOW is in any way reduced or disrupted, or other costs or expenses must be increased, then any one of several thousand factors could mean the calculated positive effect on the bottom-line is negated.

 

Real and effective bottom-line profits in your supply chain come from the ability of “the system” (the entire supply chain) being able to sustain FLOW that supports THROUGHPUT [4].

There are only two system-wide metrics of your supply chain’s effectiveness at producing profits for its participants. They are:

  1. Return On Assets (ROA)
  2. On-Time Performance (customer service levels)

 

We help our clients achieve high-levels of performance of these crucial metrics (key performance indicators) by helping them assess a simple formula:

 

Effectiveness (system efficiency) = Sum(Throughput) / Sum(Operating Expenses)

 

The great thing about this system efficiency calculation is that it can be measured within your company, in collaboration with any supply chain trading partners, or across the whole supply chain where collaborative participants are willing to share a minimal set of data.

 

The bottom-line is…

The bottom-line here is that typical efficiency metrics do not always contribute to the bottom-line according to our calculations. In fact, they almost never do.

We need to be focuses on THROUGHPUT and FLOW to maximize the profit and cash-flow benefits to our company and to our supply chains.

 

Let us know how efficient or effective you and your supply chain have been in producing lasting and effective improvements to your bottom-line. Please leave your comments below, or feel free to contact us directly, if you prefer.

 

****************************************

[1] Smith, Debra. The Measurement Nightmare - How the Theory of Constraints Can Resolve Conflicting Strategies, Policies, and Measures. Boca Raton, FL: St. Lucie Press, 2000.

[2] Johnson, H. Thomas, and Robert S. Kaplan. Relevance Lost - The Rise and Fall of Management Accounting. Boston, MA: Harvard Business School Press, 1991.

[3] Lee, Sr., Reginald Tomas. Lies, Damned Lies, and Cost Accounting: How Capacity Management Enables Improved Cost and Cash Flow Management. Business Expert Press. Kindle Edition.

[4] Here we define Throughput as revenues less (only) truly variable costs—that is, only those costs that vary directly with every change in quantity of units produced, transported and/or sold.

****************************************

 

Follow us on Twitter: @RKLeSolutions and @RDCushing
LIKE us on Facebook: RKL eSolutions and GeeWhiz2ROI

I went to see another film recently. Hidden Figures is a great film, and because I’m pretty lousy at writing movie reviews, I thought I’d borrow this one, because I concur with especially the opening line: “Go see this movie.”

HiddenFigures_theMovie_2.jpg

Go see this movie. It’s wonderful. It’s enlightening. It’s a true story. Taraji P. Henson and Octavia Spencer are perfectly cast. I think Janelle Monáe, who I know as a singer, commands the screen. She is beautiful, smart, funny, and steals the show in the best way possible. There’s a part in a court room that will make you weep with joy. There’s another part with a “Colored Ladies Room” sign that will give you chills. And when Kevin Costner says, “We all pee the same color at NASA,” you may applaud.*

 

No spoilers here

I won’t spoil it for you. But, the story surrounds three Black women who work at NASA in the early 1960s in Virginia: Katherine Goble (later, Johnson) (Taraji P. Henson), Dorothy Vaughan (Octavia Spencer) and Mary Jackson (Janelle Monáe). All three work in a department labeled “Colored Computers.” Their job was doing the mathematical calculations that guided the design, development and execution of the U.S. space program—including the trajectories for launch and recovery.

 

Katherine Goble gets moved to the Space Task Group, which is desperately trying to figure out to beat the Soviet Union in the space race. Al Harrison (Kevin Costner) is in charge and has at his disposal, not only the “Colored Computers,” but also a roomful of the top minds in science, mathematics and engineering managed by Paul Stafford (Jim Parsons). Oh, and they were in the process of installing a new IBM 7090 mainframe system to assist with the calculations.

 

Having completed several unmanned and, later, manned suborbital flights—and already behind the Soviet Union, which had successfully orbited the earth at least once with a manned spacecraft—Harrison, Stafford, and their team face now the challenge of solving the math of transition from orbital flight to re-entry. They must be able to determine the go/no-go point in space and time that will allow for the splash-down to earth at a safe and predetermined point. No one knew how to make such calculations. It had never been done.

 

Prejudice keeping us from the solution

Paul Stafford and others demonstrated significant prejudices against the “Colored Computers,” at first. They saw them as tools, but did not value them for new ideas or innovation.

 

Nevertheless, it was Katherine Goble Johnson that brought in the breakthrough thinking that allowed orbital-to-re-entry calculations to be accurately made.

 

In a telling and insightful scene, Al Harrison is having a discussion with Paul Stafford after another long, hard day of trying to solve the problems of manned space flight and catching up to and surpassing their competition (the Soviet Union).

 

Harrison says, “You know what your job here is, don’t you, Paul?”

 

Paul Stafford hesitates, and Harrison continues, “It’s to find the genius in the geniuses we’ve got working for us out there.”

 

I think one could safely add: No matter the color, shape or size, you need to find the genius wherever it’s available to create an effective solution.

 

We can’t afford to let any prejudice keep us from finding the solutions we need. If we do, we will just keep falling behind our competition—maybe not the competition we face today, but the competition that will surely arise tomorrow, or next month.

 

We have all kinds of prejudices that keep us from new thoughtware

  • When the reason for the need for a new solution is unclear, we will be prejudiced against it. Just like Paul Stafford and the other mathematicians and engineers in the Space Task Group who may not have seen the need for a “colored computer” to be added to their group, we often take a defensive position until the need is made clear to us.
  • When we have not been consulted about the solution, we are likely to harbor some prejudice against it. We like to discover that we need change on our own. Perhaps this is even more especially true of men (recalling the men’s pledge from The Red Green Show: “I am a man, but I can change… if I have to… I guess”).
  • When a solution threatens to modify established patterns of working relationships, our prejudices will rise up against them. Having a “colored computer” in their midst threatened a lot of “established patterns” in Stafford’s working group—especially since it was a woman and a “colored.”
  • When the benefits and rewards for accepting the solution are not seen as adequate for the trouble involved our prejudices will surely take hold of us.
  • When we believe that the solution threatens jobs, power or status, we are likely to be strongly prejudiced against it. This was certainly the case where the presence of a woman “colored computer” threatened the white male status quo in Stafford’s team in the Space Task Group.

Here’s the kicker!

Without spoiling the film for you, I’ll just say this: the solutions contributed by these women, and especially Katherine Goble Johnson in the Space Task Group, were huge and it took a long time for many of them to be recognized. But, they were recognized.

 

Yes, we can fight against new thoughtware! We can try to struggle on without it—trying to apply all of the same methods that have led our companies and supply chains to various levels of mediocrity again and again. We can raise our prejudice against “consultants” (some of which, we admit, have earned their bad reputations). We can say, “We don’t need any new solutions” and bury our corporate heads in the sand. We can refuse to consider new thoughtware because we perceive it as a threat to the status quo, or our fiefdom, or our status in the organization.

 

But, how much will that hold us back? How much will that keep our company from gaining on the competition? How long will that attitude keep us from achieving breakthrough solutions that can help us leapfrog the competition?

 

How much? How long? Will our prejudices keep us anchored in the past?

 

 

Tell us how you are fighting the kinds of prejudice that may be keeping you from breakthrough solutions and new thoughtware in your organization and supply chain. We would really like to hear your comments. Leave the below, or feel free to contact us directly, if you prefer.

 

Notes:

* Ray, Lincee. "IHGB Movie Reviews: Sing, Passengers, Hidden Figures, and LaLa Land." IHateGreenBeans | Blog of Lincee Ray. January 20, 2017. Accessed January 27, 2017. http://www.ihategreenbeans.com/ihgb-movie-reviews/.

 

Follow us on Twitter: @RKLeSolutions and @RDCushing
LIKE us on Facebook: RKL eSolutions and GeeWhiz2ROI

Here are seven books that I would highly recommend if you want to begin installing the new thoughtware that is going to make you a better, more effective executive or manager in today’s new normal of global competition, emerging markets and high volatility.

 

Death_to_stock_Marzocco_Coffee_9.jpg

Relevance Lost - The Rise and Fall of Management Accounting

 

Read this one first.

 

Why? Because, when it was first published in 1987, U.S. industries were, for the most part, losing a heated battle for participation in a rapidly emerging world economy. Today, the emergence of third world economies as both threats and opportunities places your company and supply chain in a reprise of many of those challenges.

 

Several who reviewed Relevance Lost are convinced that the underlying cause for (perhaps) most of the weaknesses and failures manifested by American companies and their supply chains are exposed by this insightful work by H. Thomas Johnson and Robert S. Kaplan. In it they reveal why modern corporations and supply chains just like yours must make major changes in the way they measure and manage if they are going to survive and thrive. I believe it is critical for managers and executives to discover information that is timely, accurate, and relevant—as opposed to latent, questionable and irrelevant.

 

The Measurement Nightmare

 

This should be the second book you read. It picks up where Relevance Lost leaves off.

 

Debra Smith's compelling work will help you understand why today's competitive environment is forcing your enterprise and supply chain to compete on factors other than cost and price. Smith illuminates a proven pathway to dramatic improvements in on-time delivery, reduced cycle times / lead times, and durable competitive advantages.

 

This outstanding work will get you started on the implementation of new thoughtware--a prerequisite for real and effective change, in my opinion.

 

Orlicky's Material Requirements Planning - Third Edition

 

Next read this one. The Orlicky’s original edition predates any of the other works above, but this third edition is a must-read for improving the performance of your supply chain.

 

Joe Orlicky's classic tome from 1975 (Material Requirements Planning original edition) detailing MRP has been brought up-to-date with new information and concepts on supply chain synchronization. Carol Ptak and Chad Smith have thoroughly revised this new Third Edition. It reviews the poor business results produced by most of today's business systems, covering the core problems leading to such results; then Ptak and Smith discuss an alternative pull structure for planning and controlling materials flow. The book includes case study information revealing results from actual implementations of the updated methods. This excellent new edition reveals a revolutionary step for materials and supply chain synchronization in the today's new normal.

 

Demand Driven Performance - Using Smart Metrics

“The significant problems we face cannot be solved at the same level of thinking as when we created them.” -- Albert Einstein

 

Most companies and supply chains today are "also-rans." They are all using the same kinds of thinking with the same kinds of metrics and achieving very similar—mediocre—results.

 

The insights provided by Debra Smith and Chad Smith in this outstanding book can help you begin to see that the fact that "everyone's doing it that way" doesn't make it any less wrong or ineffective at achieving your goal. This book can help you gain new insights—if you'll let it.

 

The Missing Links

Time to take a break. Read this enjoyable, and very enlightening, business novel in the genre of The Goal.

 

The Missing Links delivers a powerful message on pathways to business improvement coupled with international mystery and intrigue. I recommend it highly if you're serious about finding new and innovative ways to improve your business and supply chain. It's a good read for all levels of employees, not just top management.

 

Lies, Damned Lies and Cost Accounting

Okay. Back to work. Read this hard-hitting, thought-provoking work covering why the math we use for most of our business metrics may be fine, or at least necessary, for GAAP-compliant reporting purposes. But, the methods employed by GAAP are generally unsuitable for long-term, effective management decision-making.

 

Accounting was designed to report financial performance, not model cash flow. Accruals disconnect cash flows from the timing and extent to which they occur. Statements of cash flow do not provide insight into what was purchased or how effectively it was employed in the process of money-making.

 

Read this book and I can assure you that you will come away with new insights, and these insights can make you a better, more effective executive and manager.

 

DDMRP - Demand Driven Material Requirements Planning

Pay attention to what you learn reading this book. Put what you learn into practice, and DDMRP will help you plan and manage inventories and materials more effectively and profitably in today’s highly complex supply chain scenarios. Put what you learn to work for you and you will enable your company to decouple forecast error from supply order generation; synchronize your supply chain with actual market requirements; and promote better and more effective decisions and actions at both the planning and execution levels. The concepts and methods unveiled in DDMRP are already in use in several major Global 1000 companies.

 

 

So, read. Enjoy. Learn. Make more money.

 

Let us know what you’re reading to become better at what you do. What new thoughtware have you installed at your company and in your supply chains lately?

 

We would like very much to hear from you. Please leave your comments below, or contact us directly, if you prefer.

 

Follow us on Twitter: @RKLeSolutions and @RDCushing
LIKE us on Facebook: RKL eSolutions and GeeWhiz2ROI

We like the term “supply chain.” And, it probably isn’t going away any time soon.Chain NOT a Chain.png

 

The term is convenient, even though “chains” have evolved into “networks,” and, more recently, there is a growing realization that the “levers” that we used to think would help us control our supply chains just aren’t working.

 

We like the term “chain,” I think, because it reminds us that goods and services flow from source to consumer in a series of dependent events. But we are increasingly aware that the concept of a “chain” simply does not adequately describe what actual transpires.

 

The biggest body of evidence that we have that our supply chain isn’t a “chain” can be found in our ready admission that everything in our supply chain is in a constant state of flux. We have grown to recognize that our supply chain needs to have built-in agility, flexibility and resilience to really support FLOW.

 

Complex Adaptive Systems (CAS)

It is not even sufficient merely to refer to our former “supply chains” as “networks” or “systems.” They are networks and systems, but they are more than that, as well.

 

Scientists have come up with a term to describe what our supply chains really are: complex adaptive systems or CAS, for short.

 

So, what is a CAS?

 

A complex adaptive system consists of many diverse and autonomous components or parts (called agents) which are interrelated, interdependent, linked through many (dense) interconnections, and behave as a unified whole in learning from experience and in adjusting (not just reacting) to changes in the environment…. Each agent maintains itself in an environment which it creates through its interactions with other agents. [1]

 

As executives and managers, we like to—well, you know—manage.

 

But here’s the thing about CAS:

 

Every CAS is more than the sum of its constituting agents and its behavior and properties cannot be predicted from the behaviors and properties of the agents. CAS are characterized by diffused (distributed) and not centralized control and, unlike rigid (mechanistic) systems, they change in response to the feedback received from their environment to survive and thrive in new situations. In inanimate world many phenomenon behave as CAS, such as fashion trends, stock markets, traffic jams. [2] [Emphasis added.]

 

On the positive side, a CAS is greater than the sum of its parts. In business, some economists and management theorists refer to this as the X-factor (the inverse of x-efficiency). [3] It is that unidentifiable element that means that one firm may succeed (or dominate) and another fail (or be mediocre), even though both have essentially the same resources and skills available to them.

 

Also, on the positive side, each agent (say, supplier or customer, in a supply chain context) is able to respond independently to inputs from its environment in order to survive or thrive. That means, as a supply chain executive or manager, you don’t have to take responsibility for the survival of trading partners. (That doesn’t mean you don’t have an interest in their survival. It only means you are not responsible for their survival.)

 

You get what you measure

There is an old management axiom that reminds us that management “gets what it measures.”

 

This old saw was intended to be a positive reminder—and, it is.

 

But what too many executives and managers fail to consider is measuring what they really want to get.

 

Consider the recent debacle at Wells Fargo Bank. Well Fargo’s executives decided to measure employee performance based the number of new customer accounts that were opened. And, what did they get? Lots of new—mostly fake—customer accounts opened. It cost them millions of dollars and a good deal of their reputation.

 

What did Wells Fargo executives really want? They wanted more customers and more accounts. They wanted to grow their business.

 

But, their employees were not machines. They were agents acting independently in a complex adaptive system. They adapted to the inputs from their management environment and did what achieved the best outcomes for themselves—read: they didn’t get fired and / or they received bonuses.

 

Learn to appreciate the difference

Your supply chain is not a chain. It is a complex adaptive system.

 

If your supply chain is going to survive and thrive in the coming years, you will probably need to learn to manage it with an entirely different set of tools—and different thoughtware, most likely.

 

Unfortunately, most executives and managers today do not really comprehend the difference and are still trying to manage using machine thinking. [4] They are still trying to understand their supply chain by breaking it into pieces, managing each piece, and assuming that their supply chain is the sum of the pieces. It is not.

We, here at RKL eSolutions, are intent on helping companies get a new view of their supply chains. We help executive and management teams acquire and install new thoughtware—that is, new ways of seeing and managing.

 

The new demand-driven approach we bring is fully aligned with the CAS theory of supply chains. The DDMRP approach has proven to be not only easier to implement and smoother in operation, but also more effective at providing rapid return on investment than traditional planning and execution approaches.

 

Your turn…

How are you learning to manage your supply chain as a CAS? What have you done to move off traditional approaches and onto new, more effective means for seeing and managing what is happening?

 

Please tell us by leaving your comments below, or by contacting us directly, if you prefer. We look forward to hearing from you.

 

You can sign-up to receive blog updates by email, as well.

 

****************************************

[1] "What Is Complex Adaptive System (CAS)? Definition and Meaning." BusinessDictionary.com. Accessed January 16, 2017. http://www.businessdictionary.com/definition/complex-adaptive-system-CAS.html.

[2] BusinessDictionary.com, ibid

[3] [M]otivational advantage will often decide the success or failure of enterprises... otherwise equally endowed. Harry Leibenstein of Harvard has presented a large body of evidence which shows that the key factor in productivity differences among firms... is neither the kind of allocational efficiency stressed in economic texts nor any other measurable input in the productive process. The differences derive from management, motivation, and spirit; from a factor he cannot exactly identify but which he calls X-efficiency.

Gilder, George F. Wealth and Poverty. New York: Basic, 1981. Print.

[4] Franz, James K., and Jeffrey K. Liker. "The Toyota Way: Helping Other Help Themselves." www.sme.org. November 2012. Accessed September 9, 2013. http://www.sme.org/MEMagazine/Article.aspx?id=69059&taxid=1415.

****************************************

Follow us on Twitter: @RKLeSolutions and @RDCushing
LIKE us on Facebook: RKL eSolutions and GeeWhiz2ROI

All right. I confess. I’ve always been a bit of a science / science fiction buff. When I was in elementary school, and John Glenn had just made his history-making orbits of the earth, I was sure I wanted to become an astronaut.arrival-movie.png

 

I was never a big fan of any kind of fiction as a reader, but I consumed books on the margin between fact, fiction, fantasy and forecast. I can recall reading some nonfiction of the works of the famous science fiction writer, Arthur C. Clarke, including The Exploration of Space and Profiles of the Future: An Inquiry into the Limits of the Possible.

 

When someone asked me, “Is that science fiction?” I replied, “No. It’s more like science-prediction.”

 

In movies and television, though, I enjoyed science fiction. I was enthusiastic about (only the original) Star Trek series on TV and subsequent movies (though never so about Star Wars). And movies like Andromeda Strain were a fascination.

 

Arrival

So, anyway, I saw the trailer for the movie Arrival and decided to go see it.

 

Without spoiling it for those of you who have not yet seen it, it’s a story about aliens who contact humans on earth. A linguistics professor, Dr. Louise Banks (Amy Adams) is called upon by the U.S. government to help communicate with the heptapods (seven-legged creatures).

 

These aliens have, of course, shown up unannounced and parked themselves in their oddly shaped vehicles in twelve different locations around the globe. Dr. Banks is summoned to Montana to open a dialog with their presence there.

 

The government, of course, wants an answer to one simple question: “What is your purpose for coming to earth?”

 

Instructive for us

Early in the film, we are introduced to the fact that Dr. Banks has written that “Language is the basis of civilization.”

 

Another scientist and her assigned co-worker in this challenge, Ian Donnelly (Jeremy Renner) offers his counter opinion: that science, not language, is the basis of civilization. Donnelly wants to start by trying to find out from them the physics that got them to earth.

 

Banks wisely suggests, “Maybe we should just try having a conversation with them before we start throwing algebra equations at them.”

 

Before long, with what seems like slow progress, the government officials are getting impatient. They want more and faster progress in the dialog with the creatures.

 

In a crucial and telling scene, Dr. Banks points out to Colonel Weber (Forest Whitaker) something very fundamental. The dialog goes something like this:

 

Dr. Banks: You want to get to this—am I right? [Writing on the whiteboard: “What is your purpose in coming to earth?”]

 

Colonel Weber: Yes. That’s right.

 

Dr. Banks: Well, to get there we need to first understand if they know the difference between a question and a statement. Second, we need to understand if they know the difference between a personal “you” and a collective “you.” After all, we don’t want to know why these two individuals came to earth. We want to know why, as a collective civilization, they came to make contact with us. And thirdly, “purpose” implies “intent.” We need to understand if they have a concept for “intent,” or if what they do is so instinctive that they do not deliberate on “intent.”

 

How does this help us?

We want to build collaborative supply chains? Right?

 

But, how do we open the lines of communications in a real and effective way?

 

When we first make contact with a supplier in order to try to create a collaborative connection, we may appear like aliens speaking an entirely different language.

 

We show up on their doorstep, and they don’t know if we’re there as friend or foe. They don’t know if our intent is to truly help them by building a truly collaborative and symbiotic (mutually-beneficial) relationship, or if we are there merely to woo them into submission while we plunder them.

 

While they are being cordial, in the back of their minds may be this nagging question: “What is your real purpose in coming to our planet (our company)?”

 

Since, for hundreds of years, most customer-vendor relationships have been at arm’s-length, having a participant show up looking for something more can seem, at first, quite threatening.

 

We need to open the doors by finding a common language.

 

We need to start by trying to “have a conversation with them, before we start throwing algebra (or, supply chain) equations at them.”

 

They need to 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.

 

Let’s start with a conversation. Collaboration can follow when the comfort level increases.

 

Now it’s your turn

How are you opening the doors for collaboration? Are you having difficulty finding a common language? Chances are, we can help. We actually have a new language you can try.

 

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

 

 

Follow us on Twitter: @RKLeSolutions and @RDCushing
LIKE us on Facebook: RKL eSolutions and GeeWhiz2ROI