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Chris has been working in Asia for about 10 years, and also spent about 10 years in the US primarily consulting to the electronics and high technology sector. He has done work throughout the supply chain, all the way down to some well known brands to mom and pop electro plating shops in the back corners of China. He is currently based in Hong Kong and works for a global consulting engineering firm called WSP.



1.       Working in manufacturing can be dirty and dangerous. What's the link between that reality and brand value today?


The link is intimacy.  We’ve come full circle in a way.  A hundred years ago, we used to know the families who made the stuff and see where it was being made. Then for a long time nobody knew and, frankly, not many of us cared.  Today, we may not know the families in China who send their daughters to the coastal manufacturing zones to work in manufacturing, but we can feel that we do.  Labor rights groups, labor unions, news reporters, even governments, all have interests in “reconnecting” us with the world of manufacturing in a way that drives standards of care throughout the supply chain.


How far will this intimacy go?  Maybe not that far. But we’re in a period of change in the equation. Labor around the world wants better treatment, labor in the developed world wants to keep the manufacturing jobs that are still there, and brands…well brands want you to trust them. And trust comes from a sense of intimacy. So brands actually want their consumers to feel like they know what’s going on in the manufacturing plant—up to point, of course—because it creates a stronger bond to the product.


2. So if the link is more important, what should companies that value their brands be doing differently?


Training their suppliers.  Most suppliers, particularly 2nd and 3rd tier suppliers, are ill-prepared to deal with an intimate relationship with the American or British consumer.   This will take time and in some ways will never be complete.  But if brands want to outsource more and more of the management of brand risk to their supply chain, they need to accurately recognize the gap in awareness in the supply chain of what constitutes a risk to a brand.  I meet factory owners who may get this but not usually beyond that.


3. And what about suppliers to those brands?


The opportunity, or the risk, depending on how you want to focus on it as a supplier to a leading global brand these days figuring out how to stay one step ahead of their competition with real change in manufacturing conditions, not just certifications. What is the change going on in your particular subsector of manufacturing in your country? Who is doing what? Who is able to implement best practices when it comes to health and safety risk? Who is able to attract and retain the best workers and have the workers saying good things about the manufacturing environment, outside of the factory, speaking to the media, labor groups and NGOs? Who is doing is doing this and still able to meet the price and delivery requirements of their brand customers?


No matter your type of business, those are companies you need to know who they are and what they are doing differently from what you are doing, and trying to stay one step ahead of them. It has always been a competitive environment in the supply chain with people watching each other, but this is a whole new area. Few companies, typically in each subsector, have figured out a formula that works to meet the health and safety and social responsibility of brands and still deliver on-time and at the low prices their customers expect. However, they are out there and Chris’s company increasingly runs across those types of companies that are setting the standard for their country in that subsector.


4. How is this risk factor different from or similar to other kinds of supplier risk factors?


What Chris is finding himself saying to a lot of suppliers and brands these days is that health and safety risks in the supply chain properly managed has a lot to do with quality management. Quality management has been around for a long time. It is a continual improvement process. It is not necessarily about getting to perfection, although everyone agrees it would be nice and a worthwhile goal to strive for. Some companies do get there. You do find manufacturers out there that experience zero injuries to their workers year in and year out. They do exist in almost every industry.


There is no such thing as an inherently dangerous workplace. Workplaces can be competitive and safe. However, that is no different than saying “if you want good quality you will have to pay for it”. But the consumer says “No I want good quality and I want low prices too”. The companies that win the manufacturing race are the ones that figure out how to do both.


How is worker health and safety different from other type of risk factors, such as defective products, product recalls or product contamination? Fundamentally, it is not any different and needs to be managed like a project. It needs to be managed with systems, processes, accountability, long term goals, management systems and information technologies to support it all, just like people do with other types of quality issues today.

This is also a paradigm shift for most businesses. Most businesses have looked at worker health and safety risk in the supply chain as something that is really not their problem. It is not something that the brands necessarily need to worry much about. They see it as something down there in the supply chain, out of view of the brands and consumers.


However, this has changed and continues to change and effect almost every business and every aspect of the manufacturing supply chain these days.



About Chris Hazen




Chris Hazen has been in the environmental consulting field since the early 1990s. He spent about half of his career in Asia, primarily in China – Hong Kong and Shanghai. The other half of his career was spent in Silicon Valley, working very closely with some of the leading electronics companies in the world to define environmental risks and opportunities for their companies and help them to manage them.



Christopher Hazen, Director (Asia)

WSP Environment & Energy

LinkedIn Profile



See Conflict Minerals and Electronics Sourcing




I recently interviewed Chris Zdunich who discussed bringing manufacturing back to America.


Chris has been in sales and sales management for the last 25 years. In the last 10 years he worked with 2 separate accounting firms which had a strong focus on manufacturing. For the last 5 years Chris has been with Porte Brown LLC, a mid-size regional accounting and tax firm in Elk Grove Village, Illinois. They are right next to Ohare Airport. They specialize in manufacturing and Chris has taken a special interest and has a strong passion for working within the manufacturing industry with manufacturing clients.



Why Manufacturing is Needed in the US to Propel the Economy Forward


Manufacturing has been a great way for the middle class to support their families, own a home, have benefits and insurance, drive a nice safe care, feed and clothe their children and primarily provide higher education for their children. When they are able to educate their children in a way that they may not have been or the generation may have not been able, it helps them raise the standard of living. If everyone has a higher standard of living and are able to bring more manufacturing jobs back to the US, that prosperity and wealth will trickle down to other areas of the economy. There will be more industry; retail, services and more to help propel the economy forward.


Overcoming the Barriers


Chris believes there are 6 main barriers:


1. Long Recession

2. High Taxation

3. Regulation

4. Lack of Skilled Labor

5. Off-shoring

6. Disruption of the Supply Chain


Chris thinks that to overcome them, the recession, high taxation and regulation are up to Washington to work on and take care of. However, recently John Engler from the Association of Manufacturing and his group put forth a number of key points which they believe would propel the economy forward and bring manufacturing back to the forefront of our society.


Lack of skilled labor is a huge issue right now. Manufacturers are finding it very difficult to find the skilled labor to operate high tech machinery. Manufacturing is no longer the 3 Ds (Dirty, Dark and Dangerous). It is now high tech, clean, lean, and advanced technology. We need people who understand computers, technology and engineering, math & science. It is difficult finding those people.


Finding skilled labor has been difficult for a number of reasons. One reason is it has been a long time since parents and schools have promoted the trades or manufacturing to today’s youth and young adults. We are doing our best in a variety of areas to educate everyone why manufacturing is a viable career opportunity and something that will help our society.


Also, off-shoring and outsourcing have become prevalent. Many products are being made overseas and shipped back here or made by other companies and shipped back here. This is causing trouble in its own right.


Recently, the disruption in the supply chain has been brought to the awareness of many, as seen by what happened recently in Japan. Also, if you are outsourcing or off-shoring your product in China and they are shipping it back in a freighter that sinks to the bottom of the ocean you will have a problem.




Chris recommends taking a closer look at Harry Moser and the Re-Shoring Initiative. Harry Moser was recently elected to the Manufacturing Hall of Fame by Industry Week Magazine. He is an experiences man who has a passion for bringing manufacturing back to America. It is based on the theory and the fact that the total cost of ownership will help determine if you should off-shore your product. Many times what has happenned is that off-shoring and outsourcing to China became important but also became a safe bet. The logic was that if everyone else is doing it, it is ok for us to do it. The rational was that since it cost less money and made more profit it could be justified.


However, what was happening in that process was that in their off-shoring analysis many of the manufacturers were looking at rudimentary costs, almost an 80/20. They were not realizing that the outside 20% may be enough to tip the scales for a manufacturer to realize that in the total cost of ownership, it would cost the same or possibly less or slightly more. It would include the additional benefits of allowing me to continue to manufacture in the United States.


What is happening locally is that manufacturers are beginning to buy from their neighbors. Especially with the recent disruptions in the supply chain in Japan, some of the manufactures Chris and his company work with, including some who are right in the industrial park near their office, are making efforts to work with manufacturers around the corner that support what they do. They are finding they can get very high quality products at a good price with fantastic turn-around with Quick Response Management (QRM), and can practically walk the product over to the customer.


To learn more about the Re-Shoring Initiative by Harry Moser you can see his website at or you can email him at harry.moser (at)


About Chris Zdunich




Sales Manager at Porte Brown LLC:

CPAs and Tax Experts for Manufacturing and Construction Companies

LinkedIN Profile

I recently interviewed Kiho Sohn who discussed that while cutting costs and doing things efficiently is important, it is also important to step back and think about whether it is the right thing to do.



To Kiho, systems thinking really helps him whenever he tries to do something personally or in a work environment, he thinks about how what he is doing will affect the larger system. Within a company he thinks about how his project will impact or help the company. It is not always thinking about optimizing the local or individual parts, but always thinking in terms of the whole. The sum of the parts is not the same as the entire whole.

Systems thinking generally helps him think about how to approach a project and how to initiate it.


To provide a high level summary, systems thinking is thinking about the big picture and how your small project will impact the entire organization.


How can people implement or use systems thinking in their work?


Kiho always promotes the idea of colleagues doing the right thing. When he was a Chief Knowledge Officer promoting knowledge sharing a lot of employees believed that hording knowledge would bring their individual value to the company. Therefore, they believed that sharing of knowledge is not benefiting individuals. However, from a company perspective it is obvious that when employees share their knowledge with each other there is benefit.


Kiho offers employees 2 scenarios:


1. You are part of my department with 20 people working together. You are a “go to person”, a subject matter expert. The other people in your department when they have questions want to come to you to ask questions. If you truly believe knowledge is power and you hoard your knowledge rather than taking your time to answer questions, what will be the result?


2. You believe in systems thinking and you share your knowledge. Therefore, you take your time to answer all of their questions.

As a manager, when I look at these 2 different scenarios, under which scenario would I value you more?


When put in these terms, people understand right away that by sharing their knowledge they raise their value to the company. This is what Kiho calls systems thinking. Don’t think in terms of individuals, but rather in terms of the big picture and the company.


A follow up question Kiho would ask is that when you share your knowledge with your peers, will your peers respect you more or less? It is an obvious answer. Another question Kiho asks is when your peers have other questions will they come to you for more answers or will they not come to you? The answer to this question is also obvious.


Contrary to what many people believe, that knowledge is power that needs to be held on to, when put into a different perspective by Kiho’s questions they get it right away; that real power comes from sharing their knowledge. This is where Kiho emphasizes to think about the big picture and the whole company. All employees in one company should share their knowledge with each other.


The biggest barrier to applying systems thinking


It is a matter of understanding and to think in a different paradigm. People just have a wrong perception of how the hording on to knowledge plays a harmful role within a company. Once they understand true systems thinking, they then understand. Over the last decade when talking to many people on an individual basis about this term, they understand it right away and change their paradigm, their thinking.


A lot of people unfortunately are not exposed to proper concepts of systems thinking. This can be applied between departments. A lot of companies create internal competitions between departments, which is good up to a certain level. But if you truly apply systems thinking all departments need to work together to benefit the company.


Successful application of systems thinking related to supply chains


Kiho likes the story about Toyota 10 to 15 years ago.  One of Toyota’s break valve suppliers experienced a fire at their factory over a weekend. They had to shut down their assembly line. The Toyota executives got together to discuss the issue, since the supplier was supplying 80% of their break valves. They sent engineers to their suppliers and discovered one of the sewing manufacturing companies nearby who offered to shut down their assembly line and convert it to make break valves for Toyota. There was no written contract.


From Toyota’s side it is interesting to look at how they treated their suppliers as partners so that they gain trust. The suppliers are not thinking about their own company but rather with the big picture in mind to benefit the whole country of Japan.


Doing things right in the supply chain


Kiho always emphasizes that nowadays people are so focused on efficiency and doing things very fast. Peter Drucker introduced the concept of efficiency versus effectiveness. Efficiency deals with doing things right. Effectiveness deals with doing the right thing. People generally understand the difference between the two. However, they don’t have a good understanding of how they are different.


Russell Ackoff asks that “if you do the wrong thing right, what happens?”. When Kiho asks this question people struggle. Ackoff introduced a new word called “wronger”. If you do a wrong thing right you become wronger. If you do the wrong thing right very efficiently you become “wronger” very fast.

On the other hand, if you do the right thing wrong, then you know and realize you made a mistake, correct and learn. Therefore, if you do the right thing wrong it is much better than doing the wrong thing right, from the big picture perspective. Ackoff is extreme in that he says the only way to learn is from mistakes. A lot of people agree that they learn from their mistakes, but it isn’t the only way to learn.


We need to learn to be less afraid to make mistakes. As long as we focus on doing the right thing, whether we do it right or wrong, we gain from it. If we focus on doing wrong things, it is a losing situation. To Kiho, systems thinking is about asking ourselves if this is the right thing. Whether we do it right or wrong is the next step. The first question to ask is whether it is the right thing for oneself and for the company. Kiho always promotes Ackoff’s ideas and tells people to focus on doing the right thing. Always ask yourself if this is the right thing to do.


While cutting costs and doing things efficiently is important, it is also important to step back and think about whether it is the right thing to do. We are all smart people and things will become obvious to us.



About Kiho Sohn



Innovation & KM Consultant who uses a unique knowledge driven approach to innovation


LinkedIn Profile


Kiho was trained in engineering and he worked at an aerospace company for roughly 30 years. After 15 years of technical work he moved into systems engineering and program management. He then became an internal consultant on innovation for approximately 12 years. Soon after he studied knowledge management and became the Chief Knowledge Officer.


Kiho is currently an independent consultant helping people and organizations to develop innovative solutions and to manage their information and knowledge resources. He is currently very active giving lectures at universities and giving speeches at conferences and international organizations.


Formerly the Chief Knowledge Officer at Pratt & Whitney Rocketdyne (PWR), nation’s premier provider of space propulsion and power systems, Mr. Sohn was responsible for developing strategic planning and implementation of Knowledge Management (KM) and Innovation processes for the company.

Timothy was born in Hong Kong and spent 18 years there. He went to Taiwan for 10 years to see how productive engineering and innovation were there. Timothy also spent 4 years in Japan. At that time the US was being kicked out by Japan because of quality issues. Japan became number one in the world. He went to Japan to see how and why. After a few years he then transferred the technology aspects of Japan to Taiwan. A few years after this Timothy started to see the limitations in Asia in terms of innovation. In 1997 Timothy moved to Dallas for the purpose of observing the innovation process in the US.


Timothy would read things such as the Product Life Cycle and different aspects of product innovation. He went back to school a few years ago, studying engineering management. He has a PhD degree in systems, called Supply Chain Systems Engineering. Timothy tried to combine the traditional supply chain and technology processing and the systems engineering. He did this because he sees a lot of problems with today’s supply chains.



Manufacturing Should be Done in the US


1. Engineering Capability is Needed for Innovation: Do we know how long we need to train an engineer? For engineers to build their proficiency to an adequate level of maturity it generally takes 5 years. This is especially true for very complicated projects and innovations. It would take 3 to 5 core discipline capabilities for engineers to become very innovative. If the US does not have factories it will have no place engineers to stay long enough to become good. Without job openings in engineering the science in school has no foundation since there would be no jobs for those students studying in science.


2. Innovation is not equal to creativity: Those who that advanced countries only need creativity are wrong. Without a rock solid engineering foundation, creativity is nothing but an idea. Without the full set of capability to carry out the product, revenue is not yours. In the PLM cycle, every position is expert who needs experience from the factory.


Creativity is not equal to innovation because you have no way to implement it. Innovation not only involves being creative. You also need to be capable with engineering capability, team work, a good culture, etc. If you are missing any of these, innovation just won’t happen. Any country that does not have engineering capabilities, even if you have ideas, will not be able to implement them and this means no revenue.


3. Only "produce" can make the international trade "balance": The US model to keep consumer expenses in US and to keep importing is the source of debt and deficit. That is not sustainable. A lot of people are arguing about surplus. However, a surplus will not generate a real product. There is a ripple effect with things related to engineering. Some people argue that a surplus will generate revenue. However, it has limitations. Without factories in the country the chain will be broken.


4. Social hierarchy needs engineering, both white and blue collar and middle class experts. Without a large enough population of the middle class and with no factories for people from school to climb up the social hierarchy, the society is turning into today’s problem: not much jobs for new graduated students and enterprise in the upper class earns more from global resources/marketing.


Why Manufacturing Globalized


Globalization expanded roughly 30 years ago. Manufacturing moved to lower labor cost areas. There was a focus on cost reduction. A lot of executives have MBA degrees and they put their attention on numbers. Timothy put a plan on LinkedIn showing the numbers which demonstrate the return on equity. It is very easy to sell assets and create good financial reports. Some top executives just find an easy way to make the financial reports look pretty. Thus, they start selling assets.


Globalization of manufacturing started to become doable after IT made geographical factors less of a barrier. You could control from the headquarters in the US and put the factory anyone in the world. IT enhances the manufacturing patterns and really does enable globalization of manufacturing.


Manufacturing in the US


The US is the place for innovation. Manufacturing needs discipline. You need to work very hard 24 hours a day because in production, volume is critical. Discipline in the US is average. Productivity in the US is also average. However, in other parts of the world there really are people working 24 hours, in 3 shifts. Engineers will be working 18 hour days. There is discipline because they don’t know how to think. They are good at listening.


From the manufacturing point of view Timothy’s personal opinion is that the US needs another way to do the manufacturing discipline. What is needed is more systematic automation and procedures, team work etc., to make manufacturing excellence better.


In Asia because they are more disciplined more command or military system works. Manufacturing can be done differently, from culture to culture.


About Timothy Tsai


MEMS Supply Chain Network at Texas Instruments

LinkedIn Profile

I interviewed Bryan Larking who discussed that smart companies see the recession as a reason to revisit best practices tied to managing their supply chains.





Supply Chains Should be Made a Top Priority



Bryan Larkin believes smart companies see the recession as a reason to revisit best practices tied to managing their supply chains. Because supply chains directly affect product availability and cost, and either directly or indirectly affect customer satisfaction, Bryan advises companies to make supply chain a top priority -- especially in a recession. For example, Bryan said, "Supply chains are essential for an army to win a war, and, in fact, better supply chains have significantly influenced the outcome of battles. So it’s not a coincidence that these types of issues are important for companies to help win their business battles." Bryan Larkin also points to the AMR Research Supply Chain Top 25, which indentifies companies that best exemplify the demand-driven ideal for global supply chain. What Bryan finds interesting is that AMR's Top 25 consistently outperform the rest of the stock market, often quite handily, even in recessionary periods. For that reason alone, Bryan suggests companies pay particular attention to these top performers and emulate their best practices.



Process Improvement and Visibility



Bryan Larkin isn't convinced that the recession will drive innovation. Instead, he believes it will drive companies to borrow best practices from other areas, such as implementing a continuous process improvement model to provide assurances that shipping, warehousing, financing and purchasing are all revisited on a regular basis with an eye toward overall business optimization.



Recently, Bryan says he has seen increased interest in multi-tier visibility, or as Bryan put is, "The ability to see your supplier’s supplier’s supplier’s production and your customers’ customers demands."  This, Bryan believes, is an emerging capability that is going to differentiate competitors and put early adopters far ahead of laggards.



More Rail, More Sustainability and More Automation


As a consequence of the recession, Bryan Larkin says political and economic uncertainty will drive more companies to utilize a combination of nearshoring and offshoring, as opposed to all offshoring. He also agrees with Warren Buffet's decision to acquire BNSF, because as the economy recovers, Bryan believes we're going to see more goods traveling by rail, and as part of the continuous process improvement review he mentioned earlier, he sees companies revisiting where their warehouses are located.



In the near future, Bryan Larkin says we're going to see an alignment of environmental sustainability with operational and financial sustainability. Again, pointing to the AMR Supply Chain Top 25, Bryan believes it is important to note that companies on the list are also seen as leaders in environmental sustainability, and because sustainability is all about reducing waste, it is also tied to how products get to shelves -- financially and operationally.



As a former employee of GXS, a global B2B e-commerce and integration services company, Bryan knows firsthand that many companies in the AMR Supply Chain Top 25 utilize GXS for their managed services, which leads him to believe we'll see more supply chain leaders engaged in industry-leading automation around supply chain communications.



Excess Inventory Masks Poor Inventory Management


In Bryan Larkin's opinion, one of things we'll be missing in the "new normal" is excess inventory. Over the years, excess inventory has hidden the poor order and inventory management systems of many retailers. Speaking from personal experience, Bryan says he has placed at least a half-dozen orders where it appeared that the item was in stock on a website, but he was later notified -- sometimes hours, days or even weeks after the fact -- that the item had been backordered. "This isn't just with small shops," he said, "this is with the largest players on the Internet as well, so we know there's problem with their inventory and their supply chain visibility." Consumers are going to have to live without the level of confidence that what they order will actually be delivered.



Three Disciplines That Require Your Attention


To avoid consequences in the future, Bryan Larkin reiterated the importance of revisiting supply chain operations by taking the continuous process improvement approach that we've seen in manufacturing improvements and applying it to supply chain visibility -- extending it beyond just the one link upstream and downstream of most company's supply chain visibility solutions. He also says he can't say enough about the importance of adopting a sustainable approach to supply chain management that ties operational, financial, and environmental sustainability targets together, because those goals all align. Finally, Bryan believes we'll see more activity in B2B outsourcing.



B2B outsourcing, sometimes called B2B managed services, refers to outsourcing the management of a company's trading program, including partner onboarding, data translation, visibility and exception management. In short, all orders, acknowledgements, change orders, shipping notices, invoices and payments move electronically, and the majority of the work that makes this happen is outsourced in a B2B Managed Services environment. Most of the world’s transactions today are not automated, but of those that are, approximately 90% move via EDI (Electronic Data Interchange). Bryan says people tend to think of B2B outsourcing from a traditional EDI standpoint, wherein companies invest in software, and then hire staff to manage it.


Unfortunately, with companies facing both internal (ERP upgrades, new markets in new geographies, embracing production in new regions) and external (customer demands for changes in automation, fluctuating energy prices, competition introducing new challenges) demands, it can be difficult to stay ahead of the game. B2B outsourcing, Bryan says, can solve the problem because the outsourcing company is an expert in keeping all the automation up to date and can share resources across businesses, thus moving staff to meet demand spikes across multiple companies as they occur.



For example, Bryan worked with an entertainment company that incurred fines approaching $250,000 a month imposed by their retail customers for improper EDI documents that resulted in supply chain problems. By outsourcing, they eliminated the penalties by catching up on requirements and saved themselves nearly twice what they paid for their solution. The solution, Bryan added, decreased the amount of time internal staff spent dealing with B2B, decreasing their need for software, and their need for hardware to support it -- not an uncommon outcome when companies dedicate themselves to making sure their supply chain communications are as advanced and efficient as the rest of their supply chain.



With regard to multi-tier supply chain visibility and its potential to bring efficiency and effectiveness to supply chains, Bryan Larkin says, in the United States, the Consumer Products Safety Commission has new product history requirements, which means companies will, at the very least, need a limited form of multi-tier visibility. "But," he cautions, "if your company is found to have a product that is going to endanger the consumers of this country, then it really, really behooves you to have much more than just the basic capabilities if you want to minimize the negative impact of such events."



People who know Bryan know he has a passion for data validation and data accuracy in business transactions. Most companies, he says, don't spend enough time making sure their data is valid. The result is an increase in operational costs, and unnecessary supply chain costs and delays. As proof, he offered the example of a confectionary manufacturer who confided that its retail fines would reach $100,000 per shipment if data inaccuracies led to bad shipments. "The yearly cost to insure accuracy of that data is far less than just one of those fines," Bryan added.



The bottom line, Bryan says, is accurate data, extended visibility throughout your supply chain, and automated business communication are necessary to pull you out of recessionary times.




About Bryan Larkin



BryanLarkin.jpgAs a chief supply chain strategist, Bryan Larkin is tasked with building a supply chain practice within the federal government for Digital Management, a consulting and services firm specializing in transformational business practices -- helping the federal government in e-gov initiatives and transforming their manual processes to automated processes. The company also offers similar services in the commercial space.



LinkedIn Profile

I recentely interviewed Kirk Ritchey who discussed the disruptive nature of open source models to the proprietary software industry. He also explored the possibilities for open source for supply chain software. Is there no stopping of open source?



There should be a discussion about open source in general and what open source is, and what is taking place in the market place. There has been a tremendous amount of attention being placed on open source in the evolution of open source in the market place. There has been an evolution, initially in the infrastructure domain around the operating systems and the web servers, languages used for programming and the databases. We are all familiar with Linux, Apache and MySQL, and programming languages such as php, Ruby and others. All of those are successful open source projects. Linux and MySQL are perfect examples of a very successful open source project.


There are a number of other projects emerging that are more oriented towards the enterprise application - the ERP suites and the CRM. Another example may be Sugar CRM. These are classified as super projects meaning they have grown and are successful.


The community has grown. Communities grow around open source projects consisting of developers and users. The more successful a project becomes, the more developers and users are attracted to that community, leading to more contributions, enhancements, improvements and capabilities.


All of this evolves into what is commonly called a super project. Examples from the past include Linux and others which are now quite successful.

Interestingly enough, there are applications around Enterprise Resource Planning (ERP). There are super projects around Sugar CRM, or specific aspects around the enterprise. Interestingly however is that there is not a lot of success in the supply chain arena, as far as a super project. Kirk thinks we will see this in the near future.


One of the things Kirk points out is that in his experience in supply chain, one of the things which is a common obstacle to a successful supply chain project is that applications oriented around supply chain are very operational oriented. They really touch a lot of operational systems. Consequently, there is a lot of need to integrate into existing systems.


It is the successful proprietary software that has enabled easy coupling into existing systems. There is also the Big Bang approach where you rip out everything and replace it with a full solution. It takes a long time for a return on investment to occur in this case. Kirk has come to see that there is a need for rapid implementation of whatever system is there on the supply chain side. That rapid implementation often requires data integration.


One of the most successful experiences Kirk and his team has had in using open source in supply chain is using an open source data integration tool. It is essentially taking existing systems and making them more optimized to the business goals. There are some evolving and emerging elements of open source in the supply chain, but there isn’t a single application that is starting to draw attention. There are tools and open source communities that are enabling integration of open source solutions to the supply chain value chain.


Open source solutions would be able to easily integrate across the enterprise; whether it is post production, demand planning & optimization of networks and inventory management, or pre-production from a supplier perspective, managing suppliers, or actual manufacturing and developing BOMs and MRP optimization and things related to manufacturing and shop floor management.


Business Benefits of Open Source Approaches


There are 2 or 3 main drivers.


1. The total cost of ownership of IT systems using open source is significantly less. You can drive down IT ownership costs significantly by utilizing an open source solution. The reason for this is that the software is sometimes substantially less. It is just the model that is being used in the open source community. Often times the traditional maintenance and support which you paid for with proprietary systems are also available with open source solutions. However, the percentage of maintenance is in the single digits from 3 to 5 percent on a yearly cost from an original investment. This amount compares to what you typically find today in proprietary software of 15 to 20 percent or more. You have a significant different in long term or total cost of ownership for an extended period of time. There is a great gap between the cost of the proprietary and open source systems.


2. Flexibility. Open source is tremendously flexible and can be altered to fit the business needs and requirements. That is huge, especially in supply chains! Every organization has a slightly different environment based on the specific issues they are facing within their industry.


Accenture just did a survey which interviewed some of the top CIOs across the industry of very large organizations. The adoption has been shown to be rapid, more than previously know. One of the main drivers was the flexibility of the software. As most people are aware, when you use open source software you actually have the source code, which is not possible with proprietary software. You will never get the source code with proprietary software, unless you have an enterprise agreement with the proprietary vendor.


With open source you have source code available which allows you to customize, which allows the flexibility to occur.


Do contributors to open source projects get paid?


They don’t get paid. The contributions made in open source are very minor. You have one person who makes a minor, yet valuable contribution. You have incremental improvements, a type of crowd sourcing model of the crowd making incremental contributions which add up to a tremendous amount of improvements across the board.


Whereas in a proprietary model you have an R&D group and the number of people in that group is based on the budget of that company and the size of their budget for R&D. That group is responsible for contributions. No matter how smart those people are you could never outperform the crowd of contributions making small amounts. Contributors are not really expecting payment because their contribution has just taken a little time for them. They feed the contribution back to the community and are able to benefit from their own contributions, as well as everyone else’s. Everyone benefits.


Would open source concepts work in non-software environments?


P&G uses an open source model of multiple contributors and a loose network of contributors across the globe in their new products development. Nike is another example where they put out a competition, people from around the world participate. The winner of the competition gets paid an award. Out this comes a plethora of contribution for a new shoe design. Nike could never do this internally. The ideation which gets generated internally within their own group could never match the amount of ideas generated from crowd sourcing, which is just one aspect of open source which is used in other ways.


About Kirk Ritchey


Kirkpic.jpgPresident at Open Source Business Consulting, LLC

Kirk has 2 decades of experience selling enterprise solutions; ERP, Business Intelligence and Supply Chain Management Solutions to large multinational and global companies.


LinkedIn Profile

I interviewed David Ryan, a senior operations executive who discussed that beyond layoffs and slowdown, the recession has had a major effect on supply chain. Progressive companies, with forward-thinking supply chain leaders are not just surviving, they're thriving.





How Recession Has Impacted Supply Chains



David Ryan believes the most noticeable consequences are people being laid off, supply chains being perceived as overhead, and supply chain initiatives stalling out or slowing down. The consequences of the recession regarding supply chain innovation, are that progressive companies will actually continue to pursue innovation and supply chain initiatives, because they’ll perceive it as an opportunity to mitigate the circumstances associated with an economic downturn or an economic cycle. In other words, they’ll be using supply chain to reduce lead times, inventory requirements, working capital investment, and to free up cash.



The most important thing about this is that it applies to the entire chain, and it’s not a win-lose kind of a proposition. If it’s properly implemented, a progressive company will understand it’s going to help everyone from raw material, freight forwarders, freight carriers, all the way through to the end customer. It’s going to become more efficient and better positioned to deal with tough economic times.


Recession Inspires Innovation



With regard to supply chain tactics and strategy, David Ryan says, "It’s not a win-lose supplier versus customer proposition." In David’s opinion the entire chain benefits through reduced inventory requirements, reduced balance sheet investment, and reduced resource requirements. Not to mention improved lead and cycle times, improved quality, improved cash flow and increased cash generation, which makes the chain iteratively becomes more competitive.



"So, those are the good consequences I see when someone responds in a positive and proactive manner to a recession or to tougher economic times or economic cycles. We are better off in the sense that some of the things you would otherwise tend to ignore if your sales are really growing become very important and become focal points for progressive companies. "



Another recession-inspired innovation that David Ryan sees is that companies are improving freight capacity utilization in their long-haul trucking, primarily because there are services that now work freight on return trips for long-haul carriers that were otherwise coming back empty. 'An excellent example of innovation spurred by not only need, but also an opportunity to improve the chain in this case logistics.



Functioning at a New Level



Without the cushion of inventory, we're having to think and work differently. The complacency, the procrastination, the solving problems we did when we were carrying more inventory, that’s what we’re going to have to live without, and those are the things we’re going to have to change.



David also believes, as leaders, we can no longer afford to take reactive approaches to economic downturns, or to any other type of business disruption. "Leadership," is responsible for forward-thinking strategy and for tactical execution, and in that regard a progressive company, or a progressive company functioning in a vigilant and predictive mode, can mitigate the effect of economic cycles and weather the storm better than some, if not most, competitors and be better positioned to capitalize when things do turn around and the cycle starts swinging back up.



Good Examples



David Ryan pointed to California-based RW Lyall as one company that he believes is doing it right. RW Lyall manufactures piping distribution products for the natural gas and propane industries ,and is heavily reliant on the housing marketing. But, when the bottom fell out, company leadership wasn't worried. Why? Because they've always been progressive, and have inculcated lean and supply chain strategies into their organization form the start. As a result even in these difficult times, even in a company that’s very focused on the housing market as the end customer, is positioned to grow.



Supply Chain a Tool for Business Development



Supply chain runs all the way through value creation, from the person who digs ore out of the ground to the people who haul it, process it, and all the way up to the end customer that uses the finished goods that flow in through multiple suppliers. Supply chain strategy can go up the chain, and it can go down the chain. Regardless of what link you are in a supply chain, you can have tremendous influence not only on the success and prosperity and effectiveness of your company, but you can actually have a dramatic effect on your downstream suppliers and your upstream customers to the point where supply chain actually becomes more than just a function or a discreet strategy. It actually helps as a business development tool in bringing sales and in enhancing the brand of an organization.




About David Ryan



DavidRyan2.jpgDavid Ryan is a turnaround executive and consultant with 26 years public, private, and entrepreneurial company experience, 14 in executive level. David’s background includes positions as a COO for an OEM vehicle manufacturer, and supply chain, operations, and finance executive-level multi-site experience. Since 2001, David has assisted three organizations to acquire investment or to be acquired; two turnarounds, and one, a startup.


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I recently interviewed Mike Fitzgerald who discussed how to make America's supply chains more dynamic and innovative.



Dynamic American Supply Chains


The big thing with supply chains in the US is that there really are no rules, in Mike’s opinion. We need to truly understand what the client needs, not wants, but really needs to deliver to their end consumer. Then you need to mirror into those needs, focusing on very targeted specialties. Mike would not get very broad or try to cover all different aspects of an industry or segment. Mike’s suggestion is to move into a very specific defined core area.


Small Supplier Innovation


Small suppliers should focus on what they do best, rather than trying to be everything to everyone. They should truly understand the value that they bring to a corporation and should focus on that when speaking to large multinationals.


Large Firms Working with Small Suppliers


Mike hesitates to say that the large firms have a tendency to want to minimize their supply base. In recent times they also have a tendency to work with larger firms that are more comparable in scale and have global reach.


In actuality what they should be doing, and many companies have taken this approach effectively, is to segment the best firms that can deliver what the large firm needs. The large firms then forget about how many suppliers they have. While there is a cost to every supplier to their system, if you scale back your suppliers and rationalize your suppliers to the point that they can’t deliver, it won’t work.


They need to reach out and be members of associations which consist of groups of companies that can deliver what they need. The large firms should also make sure they post their needs on their company websites.


Looking at Examples


In terms of the large multinationals reaching out to smaller suppliers, the area that is best understood and documented, at least in the US culture, is when you started to deal with supplier diversity. Mike knows it is regulated and mandated, especially if you are dealing with government contracts. However, companies have successfully reached out to minority owned businesses. It does take effort. If you look at some of the businesses which have grown, especially in the food segment, some have become significant players in the US. It all started out with multinational companies making a commitment to develop small businesses.


On the other hand, small businesses which Mike has seen where they have models that provide a niche service to a large corporation. One particular company was dealing with Mike’s former employer Amoco Oil. This firm was based out of Richmond Virginia. It was a 2 person shop that identified a need inside of Amoco. From there they networked, found the right individuals who were willing to listen to their story. Their story was very benefits based. They started piloting. The pilot grew and the firm became a very significant player in the software area.


About Mike Fitzgerald


Mike_Fitzgerald.jpgMike Fitzgerald spent 33.5 years with British Petroleum. Prior to this he worked for the Amoco Oil Company. For the last 3 years he has been doing independent consulting with a variety of Fortune 500 companies in the area of supply chain, procurement and sourcing contract administration. Mike’s career started out in marketing. He went from marketing, to training, to real estate to international business development, alternative fuels, performance management and finally ending up in the area of procurement about 17 years ago.


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I recently interviewed Bill Grimes who discussed small suppliers providing innovation to large companies in the healthcare industry.



How to make America’s supply chains more dynamic and innovative.


There are a lot of good things happening right now with products. There are some real problems getting products into the mainstream. The barriers to entry for a lot of companies are pretty significant. During the years that Bill has worked in healthcare he has seen a dramatic decrease in the number of companies. There are certainly some new players in the market, but it is difficult for these companies to get into a position where they can have broad exposure in the market place.


A lot of the companies have the goal of coming up with something innovative and then get bought out. That is certainly one strategic plan, but for companies looking to stay in business it is very difficult.


They just don’t always have the access to the distributors and to the full marketplace. The GPOs have brought a lot of good things to the marketplace. To some extent it makes it difficult for companies who do not have access, or the ability to become a nationwide supplier to sell. It takes a lot of hard work on part of the companies and sales reps.


They have to have a good product. There are a lot of commodity like products out there. Bill is not sure how a company can succeed bringing out a commodity type product, like 4x4 or a latex or non-latex exam glove. Most innovation Bill saw working in a hospital was coming out of small companies with niche type products for surgery or cardiology, which are expensive businesses to get into.


To bring innovation to the market they will have to partner with someone or a lot of hard work and deep pockets to start out with.


Insights into small suppliers providing innovation to multi-nationals


The small suppliers can introduce a product that makes the large multi-national companies products more valuable and usable. Who you are really selling to are the physicians in many cases, with some of the high end specialty items. Hospitals without the physicians have no need for these items.

If a small company has something that is unique and if they can piggy back into the distribution and sales chain of the large company, they can bring benefit to both organizations. However, a lot of small suppliers are looking to get bought out by a large company but then they would just become part of a large company.


Large firms reaching out to small suppliers


Large companies by looking at a market place to find holes in their product mix or if there is some type of innovation that would make them more valuable, would go to the small suppliers. There are a number of reasons for going to small suppliers. It would certainly increase their profit margin and would help the distribution network use excess capacity. They also could bring in a minority company which would be beneficial to them. A lot of hospitals want to show their support of their local community, certainly the minority community. That could benefit all the parties involved.




Any company these days has to deal with the demand on hospitals to continue to deliver high quality products to their patients, clinicians and physicians. At the same time they have to bring value. Reimbursements continue to fall. Whether there is real health care reform or not it is safe to say we will see less reimbursements in healthcare.


A materials manager needs to get the best quality product for the best price. The materials manager will not get paid more by offering a more expensive product. Instead they would lose more money in many cases. We need to bring the best product at the best possible price. This is what companies need to understand and drive for, more value for the same dollar.


About Bill Grimes


Bill Grimes has 19 years experience in the supply chain, in one area or another, including materials management information systems. His most recent position was Vice President of materials management for a small hospital system in Maryland. Currently due to re-organization he is looking for a position within the healthcare supply chain field.


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I recently interviewed Peter Balbus who discussed how to grow a small company strategic supplier network.



1.      Please provide a brief background on yourself.


·         While I formally would describe myself as a business strategist with an emphasis on helping clients better manage and commercialize innovations, I’d like to think of myself more as a business growth enabler and translator of promising new technologies into solid, profitable and sustainable businesses.  I focus on helping clients accelerate their speed to peak revenues from new business opportunities.


·         My educational foundation includes an undergraduate degree from MIT in chemical engineering, and completion of the University of Chicago executive program in finance and strategy.  I also hold professional certification as a master business innovator through Illinois Institute of Technology.


·         My clients are varied in terms of their size and the industries in which they compete, but all are either market leaders or serious up-and-coming establishment threats.  Most of my clients are in industrial segments such as manufacturing, chemicals, polymers and advanced materials -- but an increasing number are in emerging areas such as nanotechnology, solid state lighting and alternative energy.  I’ve also done some significant recent engagements for clients in the food & beverage, financial services segments as well as working with a couple of major private equity firms.



2.      Why would a business want to specifically develop a small-company strategic supplier network?


·         Based on my client experience, I strongly believe that strategic sourcing is or should be a major starting place for strategic innovation.


·         Very few companies truly have the ability or capacity to sustain high levels of innovation relying solely on internal resources, and external small companies often have great new product and service ideas, prototypes and market-ready offerings that can be quickly ramped up and distributed through your existing go-to-market channels.  It’s usually less costly and certainly less risky to partner with small companies in your strategic supplier network rather than attempt to take on all of the risks and costs yourself.


·         Smaller companies tend to attract more innovative and entrepreneurial personnel who might be deemed as being difficult to control in a larger company or unwilling to buckle down and observe tight corporate policies and guidelines.  Yet very often, these kinds of people make the best innovator and they appreciate the freedom and breadth of opportunities that a smaller company can offer them.


·         Smaller companies overall tend to be more nimble and streamlined in their decision-making processes -- and more willing to take on higher risks to gain competitive advantage over their larger, more established rivals.  They also have the ability to develop and commercialize innovations that have small initial market potential; what might be a rounding error for a large company’s revenues can be a 10x grow target for a smaller company or supplier in the same industry.


·         Size counts in other ways, too.  If your company is significantly larger than your small company suppliers, you can not only drive lower supply costs with increased volumes going to fewer suppliers, you can also have some real influence over the future direction of their business, including, new product or service development efforts.



3.      What types of companies do you think will benefit most from having a small-company strategic supplier network?


·         Virtually all types of companies can benefit from this approach; there are very few industries that I’m aware of where innovation isn’t a primary objective and source of competitive advantage.  Perhaps if you’re a franchised business owner, work for one of the big retail chains, or own a single-location restaurant or dry cleaner this isn’t for you.


·         While all types of companies can benefit, the ones that are most likely to get the most benefit from this approach really fall into two major buckets – small companies on a rapid growth trajectory that simply don’t have the resources to do all of their own internal innovation, and fast-growth mid-size businesses who could do most of their own innovating, but are better off focusing the bulk of their internal resources on serving existing customers and can look to their strategic supplier network to help develop their new and next-generation products and services.


·         Very large company will likely benefit the least from this approach – not because they couldn’t take advantage of this concept, but because the speed with which they make decisions, the tendency of the line organization to reject externally-generated ideas and change in general, and the ubiquitous presence of the corporate legal department and their tendency to kill good external relationships due to an overemphasis on the potential risks.  Every business relationship carries risks with it.  That’s the nature of business!



4.      What are the risks or downsides of using a small-company strategic supplier network?  How do you advise clients to mitigate these risks?


·         The most common risks arise from the failure of one of your key small-company suppliers either through the death, retirement or poaching of one or more key employees or through unforeseen financial challenges.


·         A second major risk arises from overestimating the capabilities and capacities of your small-company suppliers, or taking their word for critical representations of their capabilities, capacities, financial well-being and other key factors, without your doing your own due diligence.


·         The best way to mitigate your risks, as in all business relationships, is to make sure you do your homework in checking out your potential small-company suppliers.  Use outside resources and subject matter experts to augment your own personnel to do this.


·         Always have more than one supplier for each element of your supply chain, preferably more like 3 or 4.  Let them compete against one another on both price and features.  But also ensure that your own R&D staff, if you have them, or at least your own product development management are involved with their counterparts within your suppliers on a regular basis.



5.      What’s the best way to get started with this approach?


·        Apply the principals of strategic supply chain network design:  first identify, locate and rationalize the facilities within your supply chain, determining the capabilities and capacities of these facilities, and then defining and optimizing how to strategically source current demand.  Then coordinate with your corporate development strategic product development personnel to understand upcoming changes to the future direction of your business.


There are also a set of critical questions the senior management of your company should be asking, with a 3-5 year planning horizon


  1. Who are our customers today? What do they expect from us?
  2. Who will our customers be in 3-5 years?  Who do we want them to be? What will they want from us?  How will we meet their expectations?
  3. What are our deficiencies?
  4. What do our competitors have that we don’t and which places us at a competitive disadvantage?
  5. What do we have that our competitors don’t?  How important is that to our current customers?  Our future customers?
  6. What functions, roles and services that we provide are crucial to our business and our customers – and what should be kept in-house?
  7. What functions/roles/services could potentially be outsourced?


·         Based on the answers to these questions, a roadmap for executing your small-company supplier network will become established.  Revisit these questions on a regular basis to ensure that your supplier strategy maintains alignment with your marketing strategy.



About Peter Balbus


PeterBalbus.jpgPeter has been an active participant in the wonderful world of strategic innovation for about 25 years, working with clients across a wide range of industries. Most of Peter and his team’s focus is on harnessing the power of their supply networks to foster what he would call Real Innovation in their business. By Real Innovation he means taking bold moves that yield sustained competitive advantage and profits, not just incremental improvements that are quickly matched by the competition. Peter’s formal education includes a degree in chemical engineering from MIT and completion of the executive program in corporate strategy at the University of Chicago.



Twitter:        @2020_Innovation



I recently interviewed Jefff Sipes who discussed his views on horizontal thinking in a vertical world.




1.  What do you mean by Horizontal Thinking in a Vertical World?


Think of the 4 or 5 words “Horizontal Thinking in a Vertical World”. When you look at how we operate many times we are working within our functions or silos/stovepipes. You are really acting in a vertical sense, looking up at the boss and figuring out what he wants. At the same time we are professing we really need to work horizontally, across our functions and companies up and down the supply chain. It is a challenge for organizations who have traditionally operated in that vertical world to begin thinking about and actually execute operating in a horizontal world.

This tagline really captures the essence of the idea.



2.  What is the business motivation to act horizontally?


Simply to be competitive. To be competitive today may be different than being competitive decades ago. To be competitive today we are operating in a global economy. The loyalty to customers is less today. This is not a good or bad thing, but simply a fact of life, particularly as we work through tough economic situations and cycles in whatever country we are in. To be competitive we must begin to think about getting the best of ourselves and our suppliers and customers so that we maximize each other’s strengths and weaknesses.

When we are strong at something and our supplier is weak at something we can maximize that relationship, and vice versa. Many times our suppliers are going to be stronger at something than we are. Why not leverage that strength that is a win-win for both of us?


3.  Is this idea applied across multiple companies in supply chain or could it apply within a single company across multiple functions?


Both. Jeff thinks it is important to think about both.


1. Multiple companies across the supply chain.


Think about going from the OEM to the tier 1 to the tier 2, going down as far as you want. The idea here is that if I am sitting in that tier 1 situation, providing a system to an OEM, I want to figure out how I can best serve that OEM customer so that we can maximize the strengths and weaknesses of each other. I am also thinking about upstream what I can do to maximize the strengths and weaknesses of my suppliers in that direction. It clearly can work from company to company in the supply chain, or tier 1 to tier 2 etc.


2. Single company across multiple functions.


Within an individual company it gets even more interesting and personal because we are  now talking about the idea of going from a customer order to procuring material, to getting material in house, making the product and getting it shipped. You can begin to think of this as your internal supply chain. Think about the number of situations where you see suboptimal decision making because you might be operating in a stovepipe. You will do everything you can to be successful in your stovepipe, but it very well could drive you to do something that is suboptimal for your whole business.

It works in both places. It gives you a different perspective when you look at the aggregate or the large supply chain, versus the internal or more micro supply chain.


4.  What are the inhibitors to acting horizontally?


One of the most significant inhibitors is our set of performance metrics that we use in a company or function. If we really understand what our performance measures are driving us to do, not only what we think they are but what they actually are doing, it helps to begin to think horizontally. For example, if I am sitting in the logistics function and I am thinking about that stovepipe with a performance metric of driving the freight cost down as low as possible. I would be trying to save money on freight.


I could act unilaterally and might do some things to reduce the number of trips the logistics carriers make. It might reduce the frequency and number of miles paid for. However, it will also drive up the amount of inventory and possibly the amount of bulk dunnage, as opposed to dunnage that is better for presenting parts for the point of use. The unilateral decision I make may drive freight costs down, but at the same time I am causing costs to go up somewhere else within my internal supply chain.


The performance metrics are the greatest inhibitor. Another inhibitor is that if we are not thinking about supply chain as a horizontal process, it is unlikely the people making procurement decisions up front are incorporating the design for manufacturability ideas up front. Therefore, we may go out and commercialize an arrangement with a supplier around the low unit piece price, which would be a suboptimal decision when you look at the whole.


5.  Which improvement methodologies help to move companies and supply chains towards horizontal performance?


Jeff brings up 3 improvement methodologies and positions them to give some meat to this answer. We can think of Lean, Six Sigma and Business Process Management as three distinct improvement methodologies, although we could argue that there is a lot of overlap. If you are looking at a Venn diagram of these 3, you would see overlap.


However, if I take those 3 improvement methodologies all of them will help to begin to address the horizontal issue or opportunity, if we know how to apply the right tool. Many times as we look at Lean and think of it in the tactical sense, we are probably working on things within a function or a few functions within a company. This has some impact on horizontal thinking, perhaps at a more local level in terms of the tactical execution. Lean thinking is something that should permeate the entire relationship.


The Six Sigma proven methodology is very valuable in going in and in particular looking at laser beam strikes where I need to drive variation out of the process. We tend not to use Six Sigma on a broad project but on something that is more narrowly defined. There is a very important role for this in the overall structure of the horizontal process.


Business Process Management (BPM) is an improvement methodology that is particularly valuable if you are looking at transactional processes in the sense of moving information more so than a physical product or widget. This especially becomes important when I start going across not only my functional boundaries within my company, but looking at information going upstream or downstream to my supplier or customer company. This is a bigger picture enterprise level at this point.


All three improvement methodologies have a role and are important. They are much like your tool box in your garage with a hammer, wrench and screwdriver. They have their place and you need to know which tool you need to attack a particular issue and how to create a portfolio of improvement initiatives that gets you to the point of thinking in terms of a horizontal supply chain.


About Jeff Sipes




Adjunct Faculty for Lean Supply Chain On-Line Course at University of San Francisco


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I recently interviewed Tom Brouillette to discuss the social supply chain.





Definition of Social Supply Chain



Tom prefers Supply Chain 2.0 over Social Supply Chain because of the ‘business serious’ stigma related to the word ‘social’.  Supply Chain 2.0 is the sub-set of what Tom calls Enterprise 3.0 (the social enterprise) which focuses on the supply chain operation.



There are two aspects, or views, of the social supply chain and these views describe the perspective of the collaboration:



The ‘Social’ aspect focuses on developing the relationship with the end customer to integrate into the supply chain and mainly in the product development.


The Business’ aspect focuses on the collaboration of the enterprise with their partners and suppliers.  This is what Tom refers to as the E30 aspect focusing on the business support of the 4 ‘C’s.


Objectives of Supply Chain 2.0



The objective of Supply Chain 2.0 (also the objective of Enterprise 3.0)  is to support the 4 'C's (Content, Commerce, Community, Context), plus Personalization and Vertical Search, through a framework that supports the integration and connection of the business enterprise with their partners and suppliers. The tools and concepts driving the social network revolution must be harnessed in a framework that extends business relationships in a safe and secure environment.


Challenges of Supply Chain 2.0



While the collaborative and communicative aspects are very important to the business and supply chain, the word social still causes fits with many.  The supply chain, and business in general are broken down into 3 categories:



1. The ‘old man standing on his porch yelling at the kids to stay off his lawn’ – people who stop listening after ‘social’ and firmly believe there will never be a place for it in the supply chain due to many valid concerns, especially security.


2. The middle of the road – people who are open to the concept and still require someone to provide the direction and guidance.  These are generally younger people (30’s – 40’s) that are open to the potential and getting over their skepticism.


3. The bleeding edge – people who have immersed themselves in the concept and are focused on delivering value.  These are generally young, recent college grads, these are the people that grew up immersed in the social technology and their expectations blend into the professional aspects.

This current era of social network that is driving the collaboration and communication both internally and externally within the enterprise can be compared to the dawn of the Internet.  There was great hesitation and reluctance to embrace the technology also, many simply viewed it as a way to waste time just like many people view the social enterprise.  There is a tendency of senior leadership, in many cases IT, to view the social enterprise only as a risk or a way to waste time.


The acceptance of the social enterprise will be driven by an understanding of the role and value of the capabilities that can be delivered with the social toolset. This would include integration with multiple platforms, systems, partners, customers and the increasing utilization of the cloud (SaaS, Paas, IaaS, etc). Security is also a critical requirement that must be addressed in order to encourage acceptance in the enterprise the security of the business relationships, enterprise content and customer information must be protected.

About Tom Brouillette


Tom_Brouillette.jpgTom Brouillette is a respected business and technical leader with a prominent 25+-year career providing strategic enterprise  solutions in the Supply Chain, eCommerce, CRM, B2B and B2C domains.  Tom has a proven track record of delivering solutions bridging the gap between strategic needs of business and available tools and technology. Recognized for successful strategy development and delivery of Supply Chain Management, eCommerce, B2B, B2C and CRM initiatives.  Tom has recognized the importance of the collaboration, communication and content delivery capabilities of the social network tools and is working with a global group of colleagues to define a framework to effectively deliver the capabilities within the enterprise.



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I recently interviewed Mark Munson who discussed why manufacturing should be done in the US.



Why should manufacturing be done in the US?


Manufacturing is really an industry which has been in decline in the US, but it is something as a country we should not allow. This industry is key to the security and national stability of our nation, which we have seen over the recent recession. Even with the decline manufacturing is the key driver to the economies in most states. It has one of the highest multiplier rates of any industry and pays the best wages of any industry.


The US can’t compete with the world on labor rates or low tech manufacturing. However, the US can certainly compete and dominate the industry through innovation automation, going into high tech manufacturing requiring precision building and quality products with short lead times. There is no reason why the US can’t compete. It is also vital to the security interests of our country.


Collaboration in the industry helps manufacturing


Once upon a time manufacturers had suppliers nearby. For example, manufacturers in Atlanta had suppliers in and around Atlanta and their customers were in Georgia. This is no longer the case.


Mark currently has clients with engineering and sales department in Georgia. They do manufacturing in China, quality assurance in Hong Kong, and they coordinate logistics in San Francisco. It is a new trend to simply outsource everything offshore. Whereas in the past everyone thought they had to outsource overseas in order to compete. Today, people are coming back to more of a balance. The blend of a value chain to truly leverage and make the best possible use of resources across the globe is making the work flat. If you have not read The World is Flat by Thomas Friedman, Mark strongly suggests you do so.


Collaboration allows us to bring all of those pieces across the globe together in concert to deliver good quality product.


Bringing all the parties together in the value chain


When you talk about the value chain you will probably get 5 different definitions from 5 different people. Mark defines the value chain simply as your supply chain plus manufacturing plus your demand chain. With globalization of manufacturing process supply chains are really getting stretched. It is more important than ever to have quick communications and collaboration because we have stretched ourselves so much geographically.


Companies need to really focus on connectivity between geographically disparate operations and suppliers that can span the globe. Companies need to create redundancy in the supply chain, focusing on quality, forecasting, minimizing lead times, and logistics.


The same is true on the demand chain side. Most US manufacturers either can or are selling on a global basis. They really access to markets, the sales and logistics to support those operations. They need customer relationship management solutions which they can scale on a global basis. They also need warehousing and logistics capabilities. They need to understand the market and the unique demand of that market for the global customer base they may serve.



Mark Munson


Mark_Munson.jpgMark has been in solution sales for over 20 years. He started his career on the IBM and Lotus side of the world, which at that time was a solution that really introduced the whole groupware concept to computing, as well as the collaborative nature to software and solutions. Collaboration was a big thing which Lotus brought to bear 12 years ago. At that time Mark decided to make a change and went to the Microsoft channel where he saw this business solutions mature and the pricing was more in line with the small and midsized market which he likes to serve. Mark has been in the Microsoft channel since then.


From an industry standpoint Mark has focused on manufacturing and distribution for the last 10 years. He really sees innovation and automation as the key to success for manufacturing in the US to remain competitive in the global market. Mark has tried to work with this industry on a local and regional basis.


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I recently interviewed Peggy Daniels, Ph.D.. Peggy brings a unique blend of corporate and academic experience to the topics of networking and supply chain integration. In this interview, she delves into the practice of Social Network Analysis, a mapping and measurement tool she believes can shed new light on the way actors within the supply chain communicate and share information, which in turn, will spotlight areas where improvements can be made. The process begins with understanding that it isn't companies, organizations or departments communicating with one another, it is people communicating one another.




Social Network Analysis as a Supply Chain Integration Tool


Having worked in both corporate and academic worlds, Peggy Lee brings a unique blend of practical and theoretical experience to the topic of networking.



In her corporate career, Peggy was focused on strategic planning and project management in the areas of inter-organizational, interstate and international networks, primarily "connecting machines" that would allow people to process calls across multiple boundaries. Her academic career began some 20 years later when she left the business world to pursue a Ph.D. in logistics operations and materials management from George Washington University. She achieved that goal in 2001 and has taught logistics and supply chain management ever since.



Peggy says she has always been interested in how people, entities and organizations are connected to one another, and what methods they use to facilitate specific results. Supply chain management, she says, fell into that category, and fit her vocational interests, which is why she chose cargo clearance procedures through select ports in developing countries as the topic for her Ph.D. dissertation. Her objective was to determine whether privatization caused clearance flows to move faster, in a more collaborative, concerted, cooperative manner, and its effect on supply chain integration.



To meet her objective she developed a questionnaire, which, because she was talking to everyone about their interactions with everyone else in the supply chain, formed a sort of matrix. After presenting her findings at a conference, someone suggested that she consider scrapping the matrix in favor of using social network analysis.



Social network analysis (SNA) is the mapping and measuring of relationships and flows between people, groups, organizations, computers, websites and other knowledge-based entities. In essence, it is both a visual and mathematical analysis of human relationships' which was exactly what Peggy Lee needed to put more rigor to the concept of supply chain integration.



Peggy Lee is convinced that SNA is something both academicians and corporate practitioners would find useful, because the final product is an easy-to-read "diagraph" that indicates who is talking to whom and the degree to which actors in the supply chain, or any other type of network, are connected.



How Can Supply Chain Networks Become More Integrated?


Technology alone will not deliver supply chain integration unless (to use the social network analysis analogy) it facilitates people connecting with people. "So, rather than using the term 'supply chain,' which implies a sequential discussion between Point A to Point B and from Point B to Point C," Peggy Lee said, "we must start to look at supply chains as networks of people."



The way to accomplish supply chain integration, she believes, is to leverage technology, and then lower the unit of analysis down to individuals, or at the very least, down to departments, because it isn't companies or organizations talking to one another, it is people talking to one another. "Once we understand how and when people and groups communicate, then we can work on moving up the food chain to look at how the organization communicates,” Peggy added.



Do Supply Chain Organizations Need to Change the Way They Operate?


Peggy Lee doesn't believe supply chain organizations need to change the way they operate, but they should recognize the fact that there are multiple modes of doing business and interconnecting.



Face-to-face meetings consume time and money we can't afford, so Peggy recommends harnessing the power of non-traditional tools such as Facebook, which allow people to get to know each other, especially within organizations that operate across vast geographical distances. She is not a fan of Twitter, however, because she sees it as too impersonal, but overall, Peggy strongly advises supply chain organizations to embrace new and different ways to communicate and collaborate.



As a university  professor, Peggy often works with her students in virtual spaces, specifically Second Life, a virtual world that enables its users, or "residents," to interact and socialize with each other by way of avatars. In addition to creating and trading virtual property, the online world offers a three-dimensional modeling tool that residents can use to build virtual objects. "The learning curve can be steep," she says, but it is just one example of how people can interact and share ideas in a unique and rich environment.



Peggy Lee also recommends a book called Total Engagement: Using Games and Virtual Worlds to Change the Way People Work and Businesses Compete, by Byron Reeves & J. Leighton Read, who believe the psychology behind gaming could be the key to engaging people more fully in their careers and increasing productivity.



"I think embracing new technologies, especially those things that we used to think of as kids’ games, can be really helpful," Peggy says. "Work is changing, it’s no longer get up in the morning, stay there ’til whenever and go home. I know I do a lot of my work from my kitchen table. So, embracing new technologies, especially social networking sites, is important for supply chain organizations, because the people that they’re hiring take these things for granted,” she added.



Meet Peggy Daniels Lee


peggy.jpgPeggy Lee has what she describes as a "nontraditional academic background," which is an apt description when you consider that she spent approximately 20 years in the telecommunications industry before leaving to pursue her Ph.D. in logistics operations and materials management from George Washington University, which she completed in 2001. After teaching operations and supply chain management at Penn State University from 2001 to 2009, Peggy stepped into her current position of Clinical Assistant Professor of Supply Chain Management at Indiana University's Kelley School of Business.



Peggy Daniels Lee, Ph.D.

Clinical Assistant Professor of Supply Chain Management

Kelley School of Business

Indiana University

I recently interviewed Grant Michaelson to discuss how small and large suppliers can collaborate for more dynamic supply chains in America.



How can we make America’s supply chains more dynamic and innovative?


The simplest thing is that senior leadership at manufacturers need to buy into the fact that supply chain is a terrific means for developing savings to the bottom line, whether purchasing, transportation, or logistics, there are many opportunities to shore up the basic back office operations. To make it more dynamic and innovative, senior leadership; CEOs, need to buy into the concept that the supply chain is a major element in manufacturing and retailing operations.


Grant has seen more retail operations embrace this. However, the manufacturing side of the business, especially in America, does not seem to be catching on as quick. Whether it be large raw materials or finished product for retail, there are tremendous opportunities to not only provide savings to the bottom line, but to make the entire operations more efficient. It is a top to bottom process.


The opportunity to make your supply chain more visible, and more importantly more responsive to the changing needs in a global environment is absolutely necessary for manufacturing to be successful today. Those companies that have embraced the concept seem to be enjoying the fruits of their labors, while other companies are struggling.


Within the last 10 to 15 years as more companies have outsourced overseas, companies are feeling the growing pains of not having a flexible supply chain.


How can small suppliers provide the innovation to large US multinationals?


Small suppliers are typically more flexible, nimble and they have a tendency to embrace levels of technology that benefit their small organizations sooner than the large corporations. Whether responding to supply chain disruptions or the needs of large manufacturers to adjust their orders, the visibility and flexibility that the small suppliers provide is a definite benefit.


How can large firms reach out to the small suppliers?


Grant’s experience has shown that business relationships are not one-sided. For so long, especially in American industry; large multinational corporations ran over smaller suppliers or even their middle and large suppliers. The large multinationals would push their conditions, rather than taking the approach that business has to be mutually beneficial in order to be successful.


Whether you are a small or large supplier, you need to partner and embrace the concept that I win not by beating someone, but by working with someone well.


Whether you are talking about your child or your business, if you co-exist and benefit one another both parties win. Opportunities for greater innovation and more importantly; better reliability among your suppliers, is greatly enhanced. The large firms can reach out to small suppliers simply by embracing the idea that they are a partner. For both of us to be successful, each side has to win.


That may mean the larger manufacturing may pay a little more to keep the small supplier margins at a point where they can actually benefit. It may also mean the smaller supplier takes on new products and is able to act as a laboratory or experimental center for a large manufacturer. These are ways the two can co-exist together and mutually benefit one another?


Grants’ experiences


Grant’s recent experience with Enjoy International is that there is a pattern to operate from. The first order of business is you need to evaluate the supply chain operations with a fit into your entire manufacturing operations, including sales to manufacturing. Supply chain is the oil that makes it go.

If you produce great product but can’t get it to market, then what is the point?


You will have some difficulty if you need certain products in order to manufacture your core competencies but you can’t get them in a reliable fashion at a competitive price and good quality. Enjoy International moves the product, manages vendors and logistics. However, the first line of business is to evaluate strategically and tactically how your supply chain is currently organized. A strategic plan is then developed to address those particular weaknesses and to maximize those strengths.


About Grant Michaelson


Grant is a Chief Operating Officer of Enjoy International Consultants, which is a supply chain consulting group based in Nanjing, China. He has over 25 years of experience directing global business operations and executing corporate strategies. Prior to his time at Enjoy he worked as the Director of Supply Chain Management for Amcol International, which is a major bentonite manufacturer. Grant also was a manager for supplier diversity and global sourcing for CNH America based in Illinois. Prior to this he was the director of ocean operations for Seko Worldwide.



I interviewed Ron Rod who has 30 years expereince in operations, consulting and now as a business owner serving the Fortune 500.  The subject area of innovation and the processes involved in developing innovative ideas are a passion of Ron's.





1. How common is it across companies to see processes within a business with respect to innovation?


If you look at almost any company, from a single business owner to a Fortune 500, you will normally find some process.  It may be institutionalized in the culture, it may be formalized into a department, it may lie in the responsibilities of one person, or it may be part of collaborative documented program with forms and templates or software tracking solutions and decision making formulas.



2. Are there differences in processes across industries dealing with innovation?


Absolutely, while almost all companies have some process, the visibility and use of the process varies greatly.  There is a trend that is seen within major industries:


a. Retail and consumer products usually have specific departments with formalized processes, analysis tools, and such


b. Service Industries tend to use more outside resources on a project base to analyze the customers, competitors, current operations and help determine the direction and innovative solutions. 


c. Industrial operations organization tend to look at innovation not from what the ultimate customer needs, but rather from how they can be innovative in their internal processes.   You will commonly find cross collaborative teams put in place to come up with innovative ideas, suggestion boxes, etc.



2. Do companies with processes for innovation have of competitive advantage?


Having processes in place is not the total solution.  The goal is to have a structure in place that looks at market trends, customer input, internal operations improvements and assess and quickly determine the validity of each idea. Those companies which are laser focused on just doing tomorrow what they are great on today may end up producing the lowest cost buggy whip while the market shifts underneath them.  History is filled with companies that have forgotten this element.  IBM, Kodak, Chrysler,


However, caution should also be given to over innovation without controls.  Enron, worldcom, Lehman, Adelphia were all very innovative perhaps to the point of out of control.




3. Are there any "best practices" that you believe exist relative to these processes?


a. Have a strategy and governance structure for approaching innovation within your company.  It could be your company has a robust 365 day a year program.  Or it may be a once a year “innovation week”.  Both extremes can be very effective in producing results.



b. Speed - make initial decisions quickly - most innovative ideas have short lives



c. Acknowledge the source of innovation....whether an employee, a department, a team, a customer or a supplier. This demonstrates the value of each across the organization



d. Fluctuate the viewpoints– Bring people in and out of the process.  Use all resources, customers, suppliers, internal resources and outside specialists. Look across industries.



e. Revisit ideas - Things change in every aspect of business - the supply base, the customer needs, the technology and the issues.  Keep a "repository" of the non-approved innovative suggestions - revisit accordingly. These can serve as a catalyst to trigger future innovations.



f. Make it part of you culture across the company - from customers and suppliers to the all internal operations ....not just part of your processes.  When it becomes natural and common place, you have succeeded.


About Ron Rod



Executive Vice President


The Tagos Group


LinkedIn Profile


Kiho’s Unique Knowledge Driven Innovation Technique


Kiho started out as an innovation consultant. One thing he realized early on is that innovation processes can be improved if people have easy access to knowledge bases. By knowledge bases he is referring to people’s knowledge, experiences, collections of the ideas of others, technical concepts from multiple disciplines, etc. This was the genesis of why he got involved with developing knowledge management programs. He wanted employees to have efficient means to the company’s tribal knowledge.


Kiho developed a unique technique of the innovation process utilizing the knowledge bases, created from well-defined knowledge management programs. He calls this the ‘knowledge driven innovation’.  You have people generating new innovative ideas based on the utilization of the knowledge bases.


The reason Kiho recommends this approach


In his innovation process the actual idea generation technique is called TRIZ. TRIZ was developed by a scientist. Since he was a scientist he understood how typical scientists or engineers think. Kiho calls them left brained people. TRIZ is a very systematic and organized technique so that people can easily follow its guidelines and develop innovative ideas, as long as they have access to a good knowledge base.


TRIZ already contains a good set of knowledge bases, with technical evolutions etc. However, it is always better to have company’s unique knowledge bases that influencers can have access to. Since it focuses on knowledge bases beyond those who are involved with generating ideas, people can often get ideas from disciplines other than their own.


The way TRIZ works is that it forces you to convert your specific problem to a TRIZ general problem. Then it guides you to access knowledge bases to find TRIZ general solutions, using several tools within it. You can then convert TRIZ general solutions to your specific solution.


For example, when people gather together to solve a mechanical problem they tend to focus on the mechanical discipline to get mechanical solutions. However, TRIZ can help people to get solutions from other disciplines such as biology or chemistry.


Kiho has been applying this technique long enough to learn that it works for technical issues, but also for business issues. He helped a medium sized consulting company that wanted to increase its revenue stream. The technique was used to facilitate the workshop for them. His clients were very satisfied with the solutions generated from this technique.


This approach is recommended for anyone who wants to develop innovation processes or to solve problems with innovation solutions.


Application of the TRIZ Technique


There are several theories related to the TRIZ technique. Many people say it is a very difficult technique to master and apply. However, Kiho would say, based on his experience with the workshop format, that what is important is to focus the application of the technique on getting results. They shouldn’t get too focused on learning the technique. There is a huge difference between the two. Whenever a company hears of a new technique they tend to master the technique. Kiho’s approach is to not worry about mastering it. If you are able to use it to get results, just focus on getting results.


There are many sources for companies to learn about the TRIZ technique. However, if they focus on the right thing, namely applying the technique to get results, then many companies will easily be able to apply it and get results.




Kiho’s personal recommendation is to utilize his 2 day workshop. In the long run a 2 day commitment is not too much of an investment. He has witnessed many times where companies who had been struggling for several months with certain issues; technical, business or new product development. Once they finished the 2 day workshop they realized effective solutions. Kiho is a student of Russell L. Ackoff, who said.



"Errors of omission, lost opportunities, are generally more critical than errors of commission. Organizations fail or decline more frequently because of what they did not do than because of what they did."- Russell L. Ackoff



The impact of error omission is much greater.


Kiho’s recommendation is that when you have the opportunity, just try and do it and starting getting results, rather than just thinking about it and not doing anything.


About Kiho Sohn


Kiho.jpgInnovation & KM Consultant


LinkedIn Profile


Kiho was trained in engineering and he worked at an aerospace company for roughly 30 years. After 15 years of technical work he moved into systems engineering and program management. He then became an internal consultant on innovation for approximately 12 years. Soon after he studied knowledge management and became the Chief Knowledge Officer.


Kiho is currently an independent consultant helping people and organizations to develop innovative solutions and to manage their information and knowledge resources. He is currently very active giving lectures at universities and giving speeches at conferences and international organizations.


Formerly the Chief Knowledge Officer at Pratt & Whitney Rocketdyne (PWR), nation’s premier provider of space propulsion and power systems, Mr. Sohn was responsible for developing strategic planning and implementation of Knowledge Management (KM) and Innovation processes for the company.


This KM program focuses on the overall process of mapping, capturing, organizing, transferring, and utilizing the tribal knowledge for the company.  The Innovation process at PWR focuses on problem solving and product improvements through unique workshop approach.  Mr. Sohn has integrated KM into Innovation process to support the company’s rapidly growing need. This unique approach has led to be recognized as one of the best practices in industry, and has been benchmarked by many organizations around the world such as NASA, Boeing, Raytheon, Nestlé, and Rolls Royce.


The biggest problem today is that supply chains are facing the fact that we need to move faster, be more agile and somehow be able to innovate. Tim believes America’s supply chains need to focus more on business intelligence and getting the ability to have better forecasts. Some of the best companies today are only 75% accurate.


We need to look at how small companies can become agile enough to support the larger companies, or any company if we are in the supply chain.

The key today is how to integrate our business philosophy with our IT infrastructures and management systems so that we can respond to changing demand as it happens in the world today.


Small Suppliers Providing Innovation to Larger US Multinationals


Most suppliers are not large enough to be a single or front line source. However, many of them can be secondary or third suppliers within the chain to help out. The biggest thing they need is to be agile enough to support the fluctuations. They also have to develop the relationships.


The days of going to trade shows are largely behind us. Today everything is done by referral marketing and relationships. Small suppliers can flourish a lot more if they form those relationships with the multinationals, providing a niche supply or source within the supply chain where they can better supply their customer or client with what is needed, when it is needed.


Larger Firms Reaching Out to Suppliers


With the recent natural disasters such as tornadoes and earthquakes, a lot of large factories were shut down. Larger firms need to reach out and look for small suppliers in localities so that they have sources they can go to when needed. They need to develop the relationships with the suppliers who can be the buffers for variations in demand.


If one supplier can’t keep up with demand a smaller supplier can come in and add some additional quantities.


Talking from Experience


Some of the things Tim has seen in the past is that smaller companies helping larger companies need to bring their unique talents to bear. There was one company Tim dealt with that did electrical electric devices and provided engineering support to the larger clients.


When the larger clients wanted to change the specifications of a design a smaller supplier could provided them with that talent when new products hit the market. For example, LED lighting replacing some of the incandescent lighting. There may be some circuit design changes that need to be made which the smaller suppliers presented as solutions for the new product.


About Tim Donovan


TimDonovan.jpgTim is known as the competitive advantage architect. He helps companies prosper by taking advantage of innovative ways to increase the unique competitive advantage so that they can compete in today’s global marketplace. He has worked with major companies such as AT&T and Hewlett Package. As an employee he learned a lot about managing teams and working on projects. Tim also learned about leadership at the U.S. Army. He earned his Certified Production and Inventory Management designation in 1987.


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