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2012

I interviewed William Leo who discussed the trends in supply chain IT in Asia over the last 10 years. William has almost 19 years of experience in the supply chain IT industry since he implemented his first supply chain system at his first job. His first part of his career was in the end-user environment. He was helping companies manage their warehousing, distribution and transportation planning process. He also worked at a large food and beverage company working on production planning, procurement planning, material planning etc. After this he become a consultant where he was doing a project for a company in Korea, Japan and Malaysia. He then joined various supply chain software companies like Adexa, SAP, Red Prarie and Infor. William has been heavily involved with supply chain IT for the last 8 years.

 

Opportunities for supply chain IT in Asia

 

William sees that the growth has been very much in China for the last 10 years in supply chain IT. Companies are maturing and there is a need for planning and optimization, as well as execution. Most of the opportunities are in the WMS (WarehouseManagement Systems), as well as TMS (Transportation Management Systems). Supply Chain Planning is up and coming right now.

 

Challenges for supply chain IT in Asia

 

Some of the challenges are the readiness of the customers themselves. There is a lot of opportunity to improve operations using IT. However, not all companies are mature enough. They don’t have the competency to manage it. In fact, a lot of companies are still using spreadsheets for planning, especially for supply chain.

 

The WMS and TMS the customers are more mature and it is very much execution based. Therefore, there are less complexities compared with a planning solution.

 

Over the last 10 years what transformation has taken place in China in terms of supply chain IT?

 

10 years ago many Chinese customers did not understand what logistics is. They had a very vague understanding that it was just warehousing and transportation. However, today a lot of customers are very well versed in warehouse (WMS) and transportation (TMS) areas. Also, 10 years ago there was very little design for supply chain planning, even for demand planning, supply chain planning or production planning.  Today demand is increasing. More companies see the value of supply chain planning.

 

Although there is demand for supply chain planning in China, customers are still not mature enough. A lot of customers are trying to replicate what they are doing with spreadsheets.

 

Trying to replicate what you were doing with spreadsheets is a challenge for any customer or software vendor to do it properly.  A lot of customers are still very traditional and hope that the supply chain solution they invest in is a replicate of what they were doing the past 10 years. This undermines the true benefits of having business systems. If the spreadsheet could do the job, why would you buy the software?

 

There are a lot of errors and limitations to spreadsheets for doing planning. More education is needed for Chinese customers. They need to know why they need change management and process change. If you want to maximize the supply chain solution, you must be willing to change. The change management piece is very important.

 

Conclusion

 

If you do well in supply chain planning using IT, the benefits are huge. I personally have implemented Adexa for a Unilever joint venture in India. India is very backwards in terms of infrastructure and IT systems. When I did the Unilever project in 2001 there was not even a forklift in the warehouse. Unilever achieved a $55 million saving. They implemented the demand planning, supply chain planning and strategic network planning solutions. The project took about 6 months to complete. There was a huge improvement in profits and cost control.

 

My advice is to take a good look at supply chain planning because it really helps with the bottom line. The savings are continuous forever.

 

About William Leo

 

William Leo.jpg

William Leo has over 19 years experience in supply chain management with focus in manufacturing, logistics and retail industry in Asia Pacific, especially in Greater China.

 

Mr. Leo started his career as Distribution and Warehouse Manager (Fuchs Lubricants) and then worked successively as Planning Manager (YHS Ltd.), Global Supply Chain Consultant (GlaxoSmithKline), Project Director (Adexa), Regional SCM Manager (SAP Asia), Country Manager China (Intermec Technologies), Country Manager Greater China (RedPrairie), SCM Director Asia (Infor Global), VP Sales (Kewill) and now Country Manager Greater China (Mahindra Satyam).

 

Over the years the SCM projects that Mr. Leo has been involved and implemented are GITI Tire, Fanhang Logistics, Haier Logistics, Shanghai Tobacco, Shanghai GM, Nansha Logistics, Sony China, Digital China, Hansol CSN, LG Home Shopping, San Miguel, Unilever, Chartered Semiconductor, Mitac, KYE etc.

 

Mr. Leo graduated from National University of Singapore with a bachelor’s degree in mathematics and computing, and received management training at Gemini Consulting. He was trained and certified at SAP, Adexa, Manugistics, Kewill, Infor and RedPrairie, and is a board member with International Supply Chain Education Alliance (ISCEA) and consultant member of the China Federation of Logistics and Purchasing (CFLP) associations. He is also the expert advisor on SCM and ERP for Gerson Lehrman Group Council, DeMatteo Monness LLC and PrimaryInsight.

 

LinkedIn Profile

I interviewed Motty Perel who discussed how if employers would offer employees the opportunity to share in the profits and losses of the company it would solve our unemployment and recession problems.

 

 

Capitalism is the best system ever invented. The problem now is not that capitalism is bad, but that employment came together with capitalism. In the beginning employment was the best system possible because it was after slavery and serfdom. Employment is a mode of labor utilization and in principle it is not compatible with capitalism.

 

Capitalism is where someone who invests money and/or labor and if successful should make a profit. Employment excludes this. A person is hired, paid a wage and for this wage the employer expects him/her to do his best on the job. This in itself is against human nature because human nature is to gain something from the work done.

 

300 years ago when capitalism and employment were introduced employment was a wonderful thing because an employee didn’t have anything but the shirt on his back. The employer offered a job and gave the employee the means to have a place to live and even to have a family. For that the employee was very grateful and saw the employer as a benefactor. The labor invested in the enterprise didn’t have value to the employee because the employee couldn’t do anything with his labor.

 

After 200 years labor became valuable and could be invested in things like entertainment. When social benefits came in, labor became more valuable because if he didn’t work he wouldn’t starve. The first recession was at the end of the 19th century and was a time when over production happened.

 

Before, productivity was so low so there was no over production. Demand was higher than supply. For example, in the Soviet Union when wages were so low there was starvation the supply couldn’t meet demand, even though demand was low. There couldn’t be a recession because there was no advertisement. People were paying others who would tell the buyers where they could buy products. In such a situation of under production, there could not be a recession.

 

However, the socialist system is a horrible thing. Yet, when there is no over supply there is no recession.  In order to avoid recessions you need to create demand higher than supply. The supply today is high despite the fact the employees work at the level of corporate survival, which does not benefit the supplier. Total productivity is growing due to automation, but machines don’t buy anything. There are not enough rich people to create demand.

 

The solution is to increase the productivity of the workers. In order to do this the employer has to offer the workers to take responsibility for corporate losses. The people who take this option can make a profit on their labor.  The employer should understand that the employee risks a lot coming to work. The worker is investing. If the company loses money, the worker loses money. Once he gets profit on his labor he is working on the basis of profit maximation. The employee compensates the employer on the profit on labor and is increasing the profitability of the company.

 

At the same time the worker is earning more. This worker/entrepreneur is increasing his productivity and profits. The higher demand absorbs the supply of products and services which couldn’t be sold in the past. In this case, there can be no recession.

 

Recommendations

 

The entrepreneurial mode of labor utilization, after the employer mode of labor utilization is a natural step. It will happen eventually. Western society cannot live without it. It was supposed to happen about 100 years ago before Carl Marx came up with the idiotic idea of socialism.

 

If one employer with 100 or more employees offers them to take responsibility for corporate losses and let them have the profit on their labor. At least 10% of the workers will accept this option. The employer will forfeit 10% of the profit on the labor which is a small amount because the 10% of worker entrepreneurs will maximize their investment in labor and will make sure the other employees do a good job.

 

The enterprise will move to the forefront of industry. The rest of employees will also eventually join and as a result the company will become more flexible. The products will better suit the customer. Any other company in the industry will have to quickly have to accept this system or go bankrupt. In general, all industries will switch from employment to the entrepreneurial mode of labor utilization and the wealth of society will increase significantly.

 

Workers will love coming to work for the challenges and self actualize themselves. The workers will be respected for being more productive.   Motty knows from experience. He was a worker at General Motors on the production line. He suffered because he tried to get more information on the production. He speaks from personal experience.   Talented people become the most frustrated. Motty wanted to enjoy his work but the peer pressure at work minimized his effort. Since he needed a job he even participated in sabotage. When he was a production manager at General Motors he would put covers on the engines inside the bed. He regularly would find problems but he ignored them. He participated in order to save his job and position at work.

 

Conclusion

 

The next mode of labor utilization is the entrepreneurial mode of labor utilization. It is inevitable and will happen. It will come with great pain of recessions, depressions and unemployment. Capitalism is built to create wealth and happiness, not the horrible things that socialism produces. Socialism was a mistake by Carl Marx. His ideas would not have made it far if it wasn’t for Lenin who was a good salesman. He sold socialism to Russia and killed productivity and the social life in the Soviet Union for 70 years.

 

People will not only be able to make more money and buy much more, but also will pay less in taxes. Tax rates will go down because the government will be able to survive on less taxes. There are no drawbacks to the new system, just like the previous system of employment. Employment was a tremendous step forward which brought freedom, travel and technology. However, starting from 100 years ago when workers needed to derive their dignity from the union, rather than their work, employment became obsolete.

 

The entrepreneurial mode of labor utilization allows the worker to earn a profit on his investment in labor. The employer he starts this will be gaining on the basis of becoming more prominent in industry without investing a single penny and with little effort.  Motty Perel advises visiting profitonjob.com , from there you can buy his book on Amazon ‘Smiling for Profit’.  The book provides the simple mathematical equation you can use. If you have questions on how to use the equation you can email Motty at MottyPerel@gmail.com .

 

About Motty Perel

 

Motty.jpg

I spent the better part of my life in studies of human behavior at work.  I discovered the motivating factor that moves a person to be at his  best at work and elsewhere. I find Employment to be obsolescent and less  then productive. I am looking for an opportunity to help an employer in  implementation of the post-employment Mode of Labour Utilization (MLU)  -- the Entrepreneurial MLU. The new MLU brings more profits, more market  flexibility, better labour relations, erases unemployment and ushers in  a new era of higher general wealth.

I interviewed Carl Melville, a B2B Demand Strategist and Fortune 100 Executive who discusssed innovation in business development within the supply chain industry.

 

 

How can companies in the supply chain innovate in terms of business development?

 

It depends on the company. Some of those firms are highly innovative already, and these are the companies which are already the market leaders, or soon will be. The belief that you need to be a great operator (and you do) is not enough. A great operator alone doesn’t get you there. The marketplace has evolved to such a degree that bad operators don’t last long. They either shrivel and die, or go out of business overnight. You need to be good, but you also need to innovate in terms of business development, and that has changed.  Innovation produces change, which in turn produces more innovation.

 

When it comes to business development in the supply chain a lot of firms seem to forget about it.  Imagine being a superstar right before the invention of the telephone. Your tool set would not be adequate for the new world, nor would your beliefs, practices and capabilities (things that brought you there). It is the same with every juncture; PCs etc. That is the same type of frustration that a lot of people are dealing with today.

 

We are living at a point in history when business innovation, in terms of business development, is going through a radical change.  An example can be seen in our business. We used to have two distinct market offerings, one on business identity and the other on business development.

 

The first one dealt with creating new enterprise value by creating perceptions where we help companies create millions of dollars in new enterprise value through marketplace perception. The other offering was business development. These two areas have become welded together. I had nothing to do with that. It is us responding to changes in the marketplace, where now you really can’t do one without the other. Part of this is due to changes in social technologies, some due to the Web etc. It isn’t the technologies. It is the way people deploy and use them to change the face of the marketplace.

 

Companies can innovate in terms of business development first making sure they are not so much just using state of the art technologies, but that they are using state of the art best practices in business development because they are going to really get run over if they are not. The other is that they give business development the proper seat at the table.

 

Alignment is really a big problem today in the supply chain. When I talk about alignment, I call it SMO alignment (sales, marketing and operations). It is the single biggest factor of failure I see when I visit firms that are having revenue problems. If I see a firm with a revenue problem I guarantee there is an alignment problem. This is one of the first areas to innovate.

 

Why should companies innovate?

 

First, this industry is always going to be a relationship business. There have been all of these attempts over the years to quantify and standardize it with cookie cutter RPFs and commodity approaches. It hasn’t worked and has occurred. But it can’t change the fact that people trust people. In this industry, products are consumed in a unique way. They are consumed over the life of the contract and there is no way to go but down, meaning every single day your entire business relationship is at risk. It is different from the way a lot of other companies sell.

 

Why should you innovate?

 

Well, because if that is the relationship model then the turn over to that point is that what you are doing to bring new people in is absolutely essential to you. The first thing you want to be able to do is embrace the cultures, practices and technologies of the market leaders. If you do that you will be able to put yourself in a position to drive innovation in business development, which will enable you to attract the best possible prospects for the lowest possible cost.

 

Another reason to innovate is that we don’t live in an era of unlimited budgets. We never have. We have to increase revenues without increasing the cost of attracting those revenues. One reason you innovate is to keep the cost of sales low. This is a discussion I get into with a lot of clients who say that can’t afford to spend more. I am good with that and say maybe we need to look at what you are spending now and spend it differently. That is one of the things that innovation is all about. I call it lowering the cost of business development, meaning increasing revenues without costs going up.  The main reason you should innovate is that you will get run over if you don’t. You innovate in order to keep up and have a new stream of new business and projects. There are only 4 places in the universe where you can get new business and all 4 of them require innovation.

 

Who needs to innovate?

 

Everyone always everywhere is the simple answer. You need to innovate if you need new business to survive and thrive. If you are a 3pl with one customer that provides 90% of your revenue and everything is stable and they like you your innovation in business development probably is pretty well taken care of. If you are seeing any change in the 4 quadrants where business exists you need to be going out and innovating. Innovating isn’t just a new brochure or website, those are artifacts for business development and marketing. They are important, but are not the main thing.

 

What are your service products? What do they look like? How do you position them in the market? How well are they positioned?

 

These are the things companies need to take a closer look at. The people that need to be innovating is anyone who wants to get margins that are above industry standard and get a share of business that is above industry standard, who wants to grow at greater than market rates who want to keep their marketing costs in line, as opposed to having them escalate.

 

When I say marketing, I mean the total cost of business development. Anyone who needs to do this also needs to innovate.  All you have to do is look at the market leaders. They are always innovating while others copy them while the big players are already on to the next thing. In our industry, which is an industry of followers, it is a recurring situation.

 

Where have you seen the biggest need for improvement?

 

The single biggest need is where you have to start, which is SMO alignment (Sales, Marketing and Operations). If your business is not changing then you don’t need alignment and you are likely aligned enough already to do that business. It is only when you seek growth and change that the lack of alignment becomes evident and bringing it back into alignment is essential.

 

The best companies I see, whether I work with them or not, are always well aligned. The middle to poor performers almost never are, even if they are great operators. It isn’t easy or obvious and frequently gets glossed over. Concurrent with doing that alignment there needs to be a shift in leadership to commit to your new strategies for business development because if you just align with what you had before you will be out of alignment as soon as you change. These things need to happen concurrently. Without alignment you can’t really do the other things. You can spend the money but you won’t really see the improvement.

 

About Carl Melville

 

carl_melville.jpg

 

Founder, Chief Strategy Officer at The Melville Group

LinkedIn Profile

 

Carl is originally from Chicago. Today his company the Melville Group  is based in San Diego. He has been helping companies compete in and  across the supply chain for 16 years, in roles of such as Vice President  of marketing for some of the industry’s largest and fastest growing  supply chain companies, as well as an external advisor on strategy and  execution.

 

Most recently, prior to founding the  Melville Group, he served as Vice President of Marketing for Total  Logistics Control, which is now part of Ryder. During his time with the  company they grew revenues from $130 million to $400 million. It was the  last time he used the tools he built up over a number of years for a  single company.

 

What they do at the Melville Group is  to take these same tools, practices, capabilities to help multiple  supply chain companies. Today, their client roster includes 3pls,  warehouse operators, transportation firms, supply chain companies,  automotive, US-Mexico cross border, refrigerated distribution, contract  manufacturing and a number of private equity firms that either own some  of these firms or who are looking for acquisition targets and who are  asking Melville Group to help them.

I interviewed Mark Gatenby to discuss supply chain IT in Asia. Mark has been working in the IT world for the last 17 years,  the vast majority of which being in logistics and supply chain systems.

 

How is supply chain IT in Asia different?

 

In terms of the systems used it is different. In the US you have a lot of freight coming in on the west coast and a lot of demand on the east coast. There is a lot of coast to coast freight movements. In Asia, there is not a land transport. A lot of the countries are islands, such as Australia. Other countries with land borders are not used a lot, such as countries in Southeast Asia. In China, inward trucking is only starting.

 

Asia has lacked maturity for land freight shipping models. The classic mainstays of the western work such as Oracle and i2 are systems which have not been quite as successful due to the differing models.  The other big problem is that Asia changes so rapidly and if you have a 2 year cycle to implement a grand system, by the time you finish the logistics chain would have changed and you need to re-implement the system. Instead, what people have done in Asia rather than go with big automated IT systems, they go with smaller planning systems that give control back to the user.

 

Mark has seen interesting systems that still allow a big human component so that as the market changes the flexibility can be built in quickly by the human users. It does mean slightly less optimization, but at the moment that flexibility is needed.

 

China spends 20% of its GDP on logistics, which is an enormous amount compared to the US which is 10% and Europe which spends roughly less than 13%.  The situation is different in other countries in Asia which are not as economically hot, such as India or Southeast Asia. While India has all of the IT experts in the world, its transport and logistics environment is very fractured with lots of small players.

 

It makes it very difficult for big system implementations to get any grip, especially because most of the logistics players in India have very rudimentary IT logistics infrastructures themselves. Therefore, it is difficult to link them up into a ‘grand unifying system’ as you might see in the US or Europe.

 

Maturity in the IT landscape in Asia

 

Outside of logistics there have been investments in the past in terms of supply chain and manufacturing systems. There is a lot of vendor managed inventory in Asia, in a finished goods style rather than a retail style, which means people don’t quite trust the suppliers with the Just In Time (JIT) model in Asia.

 

Instead, they developed the VMI model where they are technically pushing the demands onto the suppliers, they are not wholly trusting them to keep the supply levels correct. What they do is build big supplier parks where they have to rent warehouse space from a vendor. They then keep track of their inventory levels. However, they are not quite trusted to do that and there are large IT systems which allow the principle, such as an OEM like Foxconn or Flextronics or a big brand name like Apple or Nokia, to actually look at the inventory levels themselves and make sure suppliers have the right levels of inventory.

 

At the same time the principle is not paying for that inventory. It is still paid for by the individual suppliers who generally don’t like the model. The big problem they have is that they get stuck into lot of these models for any number of big global suppliers, which causes them problems. If you are a big name component supplier such as Intel, they create big virtual VMIs where they keep a single central warehouse and portion stock for each of the big principle OEMs or manufacturers so that they then can keep their stock in one place, but they reserve stock for each of their customers and keep it available in terms of visibility and Vendor Managed Inventory Systems (VMI). They can be quite sophisticated in some areas, while in other areas they are less so.

 

In the US there are a lot of freight audits and reverse auctions for freight payments. They are around in Asia, but not at the same scope and style. This is mainly due to the lack of infrastructure for the cheaper vendors. The cheaper vendors are not able to get into the system sometimes. People sometimes create portals so that even if you don’t have the best infrastructure to get onto these systems, you can at least logon with a laptop or PC and take part in some of the more technical areas normally done through EDI integration in the EU or US.

 

Conclusion

 

The IT maturity landscape in Asia is definitely there, but patchy.

 

There are not too many legacy systems which you would see in the US or Europe. Asia is quite willing to invest if they can see value. In the big markets like China which is rapidly growing there are a different set of management problems. Having systems that can wring those few extra cents out of transport costs is not seen as a high priority yet. They are also not worried too much about carrying too much inventory because they have been growing where excess inventory can easily be swallowed up.

 

However, there are signs of this changing. For example, we have seen in the sports fashion area have been copied by Chinese brands. They have gotten themselves into an over inventory position, which has been almost unheard of up until now. It will be interesting to see how CEOs and CIOs in these companies respond to this and what system changes they would like to make, whether they follow a more American or European centric model and trying to squeeze costs down using IT, or whether they will go back to using actual physical systems.

 

About Mark Gatenby

 

Mark_Gatenby.jpg

Associate Partner at ESI

LinkedIn Profile

 

Mark Gatenby has been working in the IT world for the last 17 years,  the vast majority of which being in logistics and supply chain systems.  He worked with WMS and TMS systems which started in the UK about 17  years ago. He worked with quite a few American companies and they  developed a full range of logistics systems, starting out with shipping  systems back in 1969. From there Mark moved to warehousing, transport  and purchasing ordering and this brought the company into Asia.  In those days purchasing software was key. The company worked with OOCL  logistics who worked with companies such as Toys R Us and Marcs and  Spencer’s in the UK who were sourcing a lot of goods in Asia. They  needed to control the purchase orders and bring them back via the  cheapest possible freight rates. It was a classic freight consolidation  model.

 

If you were bringing in less than containers  loads and go with a classic 3PL they are the ones who make the profits  from the consolidation, whereas the software which Mark’s company  provided consolidated within the world of the specific client and then  brought the product back as full container loads.  After this Mark become more involved with supply chains. He worked as  head of logistics and supply chain for a 200 store health and beauty  chain in Hong Kong. Then he went to work for the supply chain division  of DHL in Singapore, which specialized in warehousing and domestic  transport world-wide.


I interviewed Fernando Santiago who discussed Reverse Innovation in Mexico and the opportunities to develop new ideas and products first in Mexico, followed by roll-out to the developed countries such as the US.

 

What is reverse innovation and how can it be applied in Mexico?

 

The classical notion of innovation is something that happens in the developed economies. The products and services are exported and the technology matures. The capabilities to do innovation lied in developing countries.

 

However, reverse innovation looks at the needs of the developing markets. You take into account demand and characteristics of local markets. The idea is to produce products affordable for local communities, which does not mean they are low quality products. The assumption is then to complete the cycle and market the products in the developing world. This can apply to any economy with a growth market such as China and Brazil.

 

Companies need to identify the market niche. Mexico is an interesting market. Products developed in Mexico can then be sold in developing countries.

 

Where do you see opportunities for reverse innovation in Mexico?

 

In the pharmaceutical industry Mexico allows the use of vaccines not approved by the FDA in the US.  Vaccines have been released in Mexico and the idea is to develop generics in Mexico which are then later sold in the developing world. In Mexico diabetes is a big problem and there is a growing middle class that can afford the drugs. The drugs can be tested in Mexico and re-formulated.

 

You also have beer, glass and tire manufacturers trying to increase their export markets. Cars are a big export market from Mexico. These would be some areas for opportunities.

 

How can companies pursue reverse innovation?

 

The experience you gain in a market is an important issue.  You can learn consumer tastes and how people operate. This can give you ideas for new products.

 

You need to look at the pressing needs which the country faces. Understanding the consumer market is important. Products can be developed in a more affordable way. In addition, you start to see with more appreciation of the local resources available, such as university alliances and partnerships.

 

Reverse innovation is connected to looking at the bottom of the pyramid. People may have already found a solution to a problem and need to scale up or find funding. The assumption which is troublesome is that the capacity to innovate is within companies from the developed world. However, you can see that the capacity to innovate is not limited to the developed countries.

 

You now have multinationals from China, Brazil and some from Mexico. They understand markets and the needs. There is specialization where they are able to compete.

 

About Fernando Santiago

 

Fernando Santiago..jpgSenior Program Officer, IDRC, Canada

 

Fernando has been working with issues related to Science and Technology for over 10 years.  He earned his masters degree from the University of Sussex. Fernando worked for the Council on Science and Technology Mexico for roughly 1 year. The core of his experience in innovation was in 2003 where he earned his PhD. Since then he has been dealing with the issues of technical change, innovation, science and technology policy. He now works at an agency that supports innovation and how developing economies use these activities to improve economic prospects and opportunities. His background is in economics and managing R&D.

LinkedIn Profile

I interviewed Paul Tasner who discussed sustainable packaging. Paul has been involved in supply chain operations for most of his career. He has managed practically every link in the supply chain, with most of his experience in manufacturing, packaging and procurement. His work has been both formal employment with companies large and small, including Clorox company as well as in consulting. Paul has worked for dozens of companies large and small in many sectors, including food, beverage, pharmaceuticals, electronics etc. His experience has been both broad and deep.

 

 

What is sustainable packaging?

 

The word ‘sustainable’ is over used today. Generally, I believe it means packaging that does more good than harm. It is packaging that will not be a burden on our planet or for future generations, as opposed to the packaging that continues to be such a burden on the environment.

 

Why is sustainable packaging important for supply chains?

 

There are many supply chains that don’t consider sustainable packaging to be a compelling opportunity for them. These are supply chains that are extremely bottom line focused. In many cases the sustainable packaging choice is not the economical choice. There may be a cost difference. It is obviously pennies, but pennies are important to many companies. They don’t consider sustainable packaging to be an important factor in their supply chains. In fact, many companies see the cost barriers as an issue.

 

I think that sustainable packaging is important to supply chains because sustainable packaging is important to our planet. Our supply chains are important disciplines within companies, companies that are part of our planet. I think it is a growing case and is becoming a more compelling case.

 

Walmart has shown that the sustainable packaging choice is the economical choice. They have billions of dollars, units, miles, tons etc. behind them. Any choice they make can quickly become the economical choice. But for many companies it is not the economical choice just yet. The more volume we get behind sustainability in packaging, the more it will become the economical choice. We certainly haven’t reached that point for everyone who wants to make a sustainable packaging choice.

 

How can supply chains become more sustainable through packaging?

 

There is enough information for anyone in supply chain and procurement to feature and highlight sustainable packaging choices. If you are in the business of putting items in boxes, it is fairly easy to find those suppliers that offer packaging composed of recycled content, waste material etc. It is not hard to find with the use of the Internet.

 

There are sustainable choices available, or at least relatively better choices. If you are compelled to use plastic, there are opportunities to investigate bio-plastics. If you are still forced to look at petroleum based plastics, there are all different grades of petroleum based plastics which are more recyclable and that are less toxic than others.There are a lot of choices to be made. The information is readily available. It is a matter of economics for most companies.

 

Conclusion

 

Paul is passionate about sustainability and he thinks we are a long way from seeing sustainability  “where everyone turns”. Economics are at the heart of the decision for many companies. It important to keep pressing forward. As the volume grows the economics will shift and it will be easier for companies to make that right choice.

 

About Paul Tasner

 

Paul is a senior executive with 35 years of experience in all facets of supply chain management.  Paul has held leadership positions in procurement, manufacturing, and logistics in ventures ranging from start-up to Fortune 100, including The Clorox Company, Method Products, Hepagen Vaccines, Two Degrees Food, and the California Closet Company.  His career focus has been on supply chain sustainability, strategic sourcing, and establishing reliable third-party infrastructures.  In 2008, Paul founded and continues to lead the San Francisco Bay Area Green Supply Chain.  Paul has authored many papers and presentations on supply chain sustainability and currently lectures on this timely topic in the MBA Program at San Francisco State University.

 

paul photo small MB.JPG

 

Chief Operating Officer & Co-Founder

PulpWorks, Inc.

LinkedIn Profile

I interviewed Harriet and Charlotte who provide some great insights into hierarchies and how they affect organizational performance. Harriet and Charlotte have worked in corporations and wrote the book ‘Clueless at the Top’ because they looked at the corporations and what makes us all tick and what didn’t. They consistently found hierarchical behaviors throughout our country and corporations that keep us from being productive and more happy.

 

 

Harriet has a PhD and Charlotte is an engineer. They have 5 masters degrees between them.  Wherever they went they found this system that interfered with productivity and happiness. When they first started researching this 30 years ago they didn’t necessarily know they were looking for hierarchies. However, they found there was something that was getting in the way of what they wanted and what the people they worked with wanted.

 

As a result they kept researching until they came up with the system. They characterize the system which is a result of their 30 years of research – which is a hierarchy. A hierarchy, as described in the book, is different from an organizational structure. It is how people communicate their attitudes and behaviors.

 

They found this out by looking at a lot of different hierarchies. Some inequalities which you typically think of are race and gender. However, others include income inequality or different levels in corporate jobs. Harriet and Charlotte began to see what all of these have in common. The book presents many hierarchies. Seeing the big picture allows us all to eliminate those behaviors because it goes past the personal.

 

For example, if you have two organizations or two people who are not communicating, you can get past them by pointing out the hierarchical behavior.

 

We all participate in hierarchical behavior in our culture and usually in our companies. We all participate in it, so we are not ‘good’ or ‘bad’ people. We can just learn to behave differently. Pointing out the hierarchy takes the personal out of the problem so that they can be solved without a lot of bad feelings.

 

What is the problem with hierarchies and how pervasive are they in the business world?

 

Hierarchies are pervasive everywhere. They are pervasive in the business world. Harriet and Charlotte looked at hierarchies and found the 32 clues, most of which can be found on their website Clueless at the Top.

 

They found that people act by these 32 clues and it creates bad feelings in the hierarchy.

 

“Our country is supposed to be founded on equality and when you go into a job you think you will be treated fairly, or you think you will be treated in a way that makes you productive.” 

 

However, when a hierarchy gets involved (which is different from a reporting chart) there is a disproportionate channeling of resources to the top. You also have a situation where the top, or the boss, is not held accountable. The people lower than the boss, even though they didn’t have an input into the decision, have to pick up the pieces where the boss made bad decisions.

 

We also see many situations where a few have a conflict that is based on two different groups of people that traditionally have hierarchical type relationships. You may have an African American and a White person, or you may have a heterosexual and a non-heterosexual. Those problems tend to get personal. However, once you interject a hierarchy into it and talk about it in hierarchy terms, it is much easier to solve the problems because everyone is high in some and low in others.

 

Instead of being in that particular hierarchy you can bring in another one that has different characteristics but a different group at the top and bottom. It is very enlightening to do this.If you have a situation that is problematic you can look at the hierarchies out in society and get people out of the personal issues to see they can change this.

 

This is training. It is not that someone is bad or poorly intended. It is just that we have some training we need to change. We need to change the programming.

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Is there anything we can do to change the structure of hierarchical organizations?

 

The reporting structure is not the problem. The problem is when the behaviors come out that reflect hierarchies. Then it becomes personal. Or you allow people that are higher than others to act in a hierarchical manner. For example, in a hierarchy the people at the top really don’t know much about the people at the bottom. However, the people at the bottom, because they have to make it work, know about the people at the top.

 

The people at the bottom watch the people above them. They have to watch what they do. It takes a lot of energy to do that because the bottom is responsible to make it all come together.

 

You can share the responsibility where people get to know each other. People can then have ways to understand what is happening when you put the burden on the people at the bottom. Then you understand why you need to share decisions, or at least share what is happening and increase the communications. It is not about telling people they need to communicate. It is so much better when people understand why their behaviors in a very big picture way are not working. They can look not only at the corporation but outside in the news or in their communities and see the same behavior.

 

What is wonderfully effective is if you have a manager that is creating hierarchical behaviors and people are not feeling very good; most of the time that manager is on a lower group somewhere else. You can ask the individual about how they felt and what they had to do when they were in that lower situation. Immediately someone else (called ‘role reversals’ in the book) can instantly see what the problem is. You don’t have to convince them because they say they felt that before. In the big picture they see that dynamic somewhere else. It is really magic.

 

Examples of success

 

When Harriet and Charlotte were working at a corporation they were working on an issue where the women got together as a bi-racial group. They were working on an issue they felt the organization needed to work on dealing with women. They had engineers, secretaries and managers. There were more white women than African American women. The African American woman came up to Harriet and said “well look at the dynamics of my own group”. Harriet couldn’t tell what she was saying at first. She went home and played the group situation out. She made those African American Women white women and made all of the white women men. She took the whole dynamics of the group and played them out so that she was in their position because she was a lower group in the hierarchy and everyone else was higher than her.

 

Instantly she saw what the problem was. This changed her life because they didn’t have to argue over race issues. She could see something from her own experience, which is by far the most powerful teaching tool ever.

 

Is there a way to not have hierarchies?

 

Harriet and Charlotte have tried many times to come up with a model that was more egalitarian. However, from a corporate point of view you need to have a boss and some incentive for people to work and do a good job, with promotion etc. This requires somewhat of a pyramid type of organization. There needs to be a reporting structure.

 

What makes a hierarchy, according to Harriet and Charlottes’ research, is the attitudes and behaviors. We probably cannot get rid of hierarchies in our lifetimes. However, to get rid of hierarchies you have to focus on attitudes and behaviors. They can be alleviated, because we talk about them in a way that is not personal. It is actually a systemic thing and we can see the entire system. We can alleviate things quickly when we talk about them.

 

Instead of saying the system is bad or good, you talk about your hierarchical culture and become aware of it.  Harriet and Charlotte have seen that at a corporation there may be a job where someone wants to be at the top. However, in non-organizational systems they have never seen anyone who wants to take credit for being at the top. Most people think being at the top is abusive. Everyone wants to be in the middle ground.

 

Even white males who are not at the top of the hierarchy can see this. For example, many men may not be tall, they are bald or come from a minority group. Even though they don’t see a lot of hierarchies, when you bring it on hierarchical level and ask “how did you like it when no one talked to you because you were short?” or “how did you feel when this person next to you had this beautiful head of hair and you were thinking that in our society bald people are not as high in the hierarchy?”

 

It is all not real. It is all made up in our society.  It is just a hierarchy, an assignment of something being better than someone or something else. That is traditionally where the hierarchy ideas come from. When you put these into corporations you do have reporting systems but the benefits of being on the top get out of kilter and the people at the top (or the bosses) are not held accountable. That is how it happens in so many other ways, not just in corporations.

 

About Harriet and Charlotte

 

twins-may2005.jpgHarriet and Charlotte are consultants, authors, and college faculty who have researched, written, and spoken about issues related to social and political change for more than two decades. They have presented their work in person to thousands of people through more than fifty seminars or speeches in ten states. Charlotte and Harriet have published two books and eighteen articles.

 

Phone: 541-868-1354

Email: childress@cluelessatthetop.com

Read the book: Clueless at the Top: Want real change? Turn your head - look OUT, not UP.

 

I interviewed Dave Webster who spent 25 years in the Air Force and has been in the oil industry for the last 8 years.He discussed maintaining proper inventory levels based on demand.

 

How to maintain proper stock levels based on demand

 

One of the primary things to look at is the difference between spares levels (1 year versus 3 years versus critical spares). This will determine your stock levels and how to maintain those levels within the budgetary guidelines set by the company you work for. You have long lead items which you predominantly want to get those in.

 

You have to batch manage those with expiration dates on them. You need to know their cyclic use. You can use those without destroying them before their time. Overall, your stock level is generated by the amount of spares based upon the equipment or the design of the products you have.

 

Why do you feel this is the best approach?

 

In our system in the oil fields it works this way. You have a lot of moving parts and the propensity for things to break and go wrong. In effect, this is a different concept from planned maintenance. Planned maintenance is based on the OEM’s specified time to do maintenance on a particular piece of equipment. Having the spares that the OEM recommends is usually the best way to maintain proper stock levels.

 

Who else could benefit by maintaining proper stock levels based on demand?

 

Certainly the oil fields will benefit. Also, manufacturing would be another one. I don’t think your day to day mom & pops operate under the same type of situation as the Walmarts of the world because their supply and demand is different, whereas ours is based totally on the operation we are doing. A Walmart for example could stock 500 Snicker bars and they would be gone tomorrow. The mom & pop could stock 500 Butterfinger bars and they might not be gone for 2 years. Their stock levels are based entirely different from what ours are.Most likely manufacturer’s stock levels would also different from what ours are.

 

Recommendations

 

I would say one of the primary things is that you need an ERP system, a supply chain management system that you can adapt to help you. SAP is a good system. I have used it. I have used Maximo, AMOS and JD Edwards. I found that if you have a relationship between your program that manages your supply and manages your maintenance, that helps maintain your stock levels.

 

Companies need to look forward. That is one of the key areas in managing your stock levels properly, it is to look forward, especially in the maintenance part and the manufacturing in the whole business.

 

About Dave Webster

 

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Matertials Specialist, Corporate

Pacific Drilling Services, Inc

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I interviewed David Nordfors, President at IIIJ Innovation and Communication.  He discussed how innovation is strongly related to how we can create new shared language, particularly in the international context.

 

 

Reverse innovation in Mexico

 

David worked on innovation projects in Mexico and Pakistan. In the information technology area the cost barrier is very low. There are several collaboration projects for open source software which have strong roots in developing countries You have a number of good entrepreneurs in Mexico. You also have a strong diaspora in Silicon Valley. There are many Mexicans in Silicon Valley which are not innovators. However, there are a decent number of start up entrepreneurs in Silicon Valley, more than from countries like Sweden.  Some people in Mexico are trying to leverage this. They have some very good educational institutions.

 

Like all developing countries Mexico struggles with the issue of having good innovative entrepreneurs and those that are not innovators.

 

Communications and language innovation

 

All innovation is language innovation because everything that is new needs a name and a story. They need names and a story so we can relate to it. Just to come to the stage where an innovation launches and becomes a product, the stakeholders need to develop a narrative across business development, technology, marketing etc.The cultural ability and affinity to develop new narratives and storytelling is closely linked to the ability to innovate.

 

You can’t innovate faster than you can create new narratives that cross the different stakeholder groups.

 

The need for simple relevant language has gone up. It used to be that we thought innovation was primarily a new technical advance. Usually this would be left to the ‘techie guys’ who would put it on the desk of a communicator after they were done. This doesn’t work anymore because we have to co-develop the business model and the technology.

 

When it comes to technology it doesn’t mean replacing an existing model with something better but creating a new user scenario. You have to know psychology of people marketing, what technology can do etc.   All of the people involved need to develop a simple language together, otherwise people won’t understand what is going on. The key task to be innovative is to be able to find simple and relevant stories which the different experts, who usually don’t talk to each other, can use to talk to each other.

 

About David Nordfors

 

David Nordfors.d.jpgDavid started studying physics and he enjoyed interacting with people  studying other things. When he was doing his post doctorate in physics  he decided he was more interested with how people interact and how new  knowledge is created when people interact together. He became the editor  of a computer magazine and brought together computer engineers in  Sweden with what physics does for computer science.

 

He  then became a director of a foundation which funded collaboration  between industry and universities. Their funding always involved  innovation.  David got more involved with how communication between different  stakeholder groups is important  for innovation to happen. He ran a  center in Stanford about this topic for 7 years. He is now running a  non-profit where they work globally on these topics. A recent topic  includes innovation and job creation.

 

LinkedIn Profile

I interviewed Chuck Intrieri who discussed his experience with Third Party Logistics Implementation.

 

 

In order to partner with a 3PL, instead of building your own warehouse, the following is the successful method:

 

  • Create a 3PL Project Plan with a target date and Project Leader/Manager
  • Create a cross-functional team to address all 3PL implementation issues
  • Investigate all 3PLs and consider which 3PLs will have the best fit for you
  • Have Sales do a frequency distribution of which of your commodities is sold in which states and place the 3PL close to those most frequently shipped to states If you import your commodity, insure that there is a major port near the 3PL and that you have an effective Freight Forwarder and Customs Broker to monitor your imported shipments and clear your freight through US Customs
  • Choose at least three (3) 3PL candidates
  • Send an RFQ (Request for Quotation) to all three (3) 3PL candidates, including your estimated volumes Always have a fail safe/fall back plan should any of these 3PLs fail.You have to have other 3PL ready to use should any of your chosen 3PLs fail during negotiations/visitations.
  • Analyze your IT requirements in order to integrate your current ERP system to the 3PL’s Warehouse Management System (WMS) or integrate and use their WMS system only Analyze prices from your RFQ: who has the best value for you? (A cheap price brings cheap service) also remember that your estimated volumes will be matched against your actual volumes, and prices will be adjusted if the two: estimates versus actual volumes are far off: Negotiate a Change Process Clause to review the SLA/KPI and pricing every 30 days, especially during the “honey moon period.” Put together a Service Level Agreement (SLA) to manage your 3PL’s service level and add Key Performance Indicators (KPIs) to the services you require to be monitored by both parties.
  • Some KPIs are: Customer Service, Inventory Levels, Inventory Records Accuracy, Returned Material Authorization(RMA) Process, Cost Reduction Expectations, LTL Customer Service/Turnaround time/Future Cost Reduction, Penalties for missing KPIs and a Change Process Clause to Negotiate SLA/KPIs and Prices frequently Negotiate Prices face-to-face along with Miscellaneous Pricing from the 3PL: pallets, banding, labor rates, and overtime, etc
  • Negotiate the contract and terms an conditions with the 3PL, before the lawyer reviews the contract to look for obvious problems in the contract. Visit the local 3PL facility with an agenda sent in advance to see their warehouse organization and initiatives: 5S, Cleanliness, Location Control, Organization, OSHA Requirements, Kaizen/Continuous Improvement, Kanban, Gemba, Six Sigma, Safety, etc
  • After the tour, critique the 3PL warehouse and organization in the 3PLs Conference Room Visit the 3PL out of state facility you choose to warehouse your commodity to insure all specifications are met and that you have good chemistry with the management and staff of the 3PL facility you will be using.
  • Visit some of their customers in the area after you have a long list of customers so the 3PL does not know which customers you will visit. Ask these customers about the pros/cons of the chose 3PL When all areas are negotiated and prices are set, have your lawyer review the contract, with your suggestions, before it is signed by your CEO. It is good business to have your Project Leader/Manager stay at the out of state 3PL for a month to monitor all 3PL activities and report back to the CEO and the 3PL cross-functional team. You have met your target date and have the review periods set.

 

About Chuck Intrieri

 

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Very Experienced Supply Chain Optimization Consultant

LinkedIn Profile

I interviewed Hendy Sitompul, Managing Partner *** Management Consultant at The Big 5 Company. He discussed why we need a generic platform for supply chain management.

 


1.    Why do we need supply chain instead of business as usual?   

 

Supply Chain starts from natural resources and ends up to users or consumers. Supply chain is integrative in nature, thus, it does not exist automatically; we must build supply chains. Supply chain is the result of integration within and across business units or firms, involving vertical and horizontal industries. Supply Chain must be interconnected, interdependent and continual, just like a metal chain. Business as usual operates under separate functions, independent of each other, within a firm or a business unit involving single industry, working in alternate with other firms.

 

Supply Chain has huge potency to attain and sustain superior performance, while business as usual is not. True, Supply Chain is hard to build and not every firm can and will. Although they say they do, in fact, they don’t; what they do is business as usual.

 

2.    What progress do we have on supply chain today?   

 

Since Oliver & Webber introduced supply chain in 1982, it has been so focused in manufacturing industry. Further, supply chain has been degraded to Logistics or combination of Logistics and Production, with too many variations of understanding.

 

Supply Chain Management (SCM) has become aggregate functional management in Logistics or combination of Logistics and Production. Actually, SCM is part of business management; It is not aggregate functional management. SCM is really duties of managers to manage supply chain within and across business units or firms.

 

Since its inception, Supply Chain is still in its infant stage, due to its degradation to Logistics. Tremendous progress in development of information and communication technologies has only improved internal transactions in most instances. Interconnections for joint-planning, visibility of activities and external transactions have been slow, due to lack of standard protocol and lack of trusts. In most cases, what Supply Chain we know today is only to be supply chains; they are not truly supply chain. Most of them are still far from interconnected, interdependent and continual.

 

Since Supply Chain involves vertical and horizontal industries across business units or firms, it is almost impossible to manage supply chain together with too-many-variations of our understanding on supply chain. We have to put the supply chain back on its original tract and the way it should be managed. We also have to expand its domain to other industries. To be able to manage Supply Chain together, we have to have a generic supply chain platform.

 

3.    What would the platform look like?  


We can easily find supply chain platform like Entity Platform (Supplier-Manufacturer-Customer), Process Platform (Source-Make-Deliver), Asset Platform (Transport-Warehouse-Factory-Warehouse-Transport) or Logistics Platform (Planning, Procurement, Warehouse, Transport, Customer Service, Export/Import, Material Handling and Inventory, depending on industry). These platforms are not readily applicable to every firm in any industry, say, in retailing, logistics services, trading, plantation or mining. True, Supply Chain involves assets, functions, process, entities, and, even people, but most of them are not the same in all firms and in all industries. We know one size does not fit all, but so far, people keep guessing what size it is or they force to fit the one to all.

 

As stated early, Supply Chain starts from natural resources and ends up to users or consumers involving vertical and horizontal industries across business units or firms. To have a platform, it is necessary a common denominator. Every industry has sets of supply activities. It is supply activity the common denominator. We can build the connections among supply activities within and across business units or firms into task and stage. One stage is like one ring in a metal chain. It does not represent an industry or entity, but between two stop points or stock points.

 

Like a metal chain, supply chain must compose of at least 3 interconnected stages. The connections are not at functions, entities, assets or among logistical functions, but at activity.  We call this Activity Platform. This platform solves the problems of too many variations of understanding on supply chains today and tomorrow.   The same activity, task, stage or supply chain at different inter-industries or inter-entities setting may require different competencies of men, form of money, materials, machines, methods, energy, tools, information, infrastructure, facility and rules. No one size fits all.

 

4. How would we manage the supply chains using the platform?   

 

SCM does not belong to Logistics Manager, although it plays important roles and functional managers within Logistics involves in managing supply chains, but every other functional manager within and across business units or firms has its own roles, with top manager of business unit or firm the captain. This is the original concept clearly stated by Oliver & Webber in 1982. Hence, there is no title such Supply Chain Manager at any seniority, since SCM is business management, not functional or aggregate functional management.

 

What is modus operandi in managing supply chain? It is value creation.  Value creation in simple equation: Value Created = Value of Benefit  Generated - Value of Capital Deployed to generate the Benefit. The more  value is created, the more productive the supply chain is. The purpose  of Supply Chain Management is to realize potency in supply chain to be more productive as to attain and sustain superior performance. Managers must seek to combine capitals among firms, make joint efforts to  maximize value creation from total combined capitals, synchronize  planning, execution of the plans, and control of activities across  supply chains to achieve the plans at three stages minimum. In managing  Supply Chains, managers must also make trade-offs, which can be Internal  and external, to be able to create superior value.


5. What factors determine the success in attaining and sustaining superior business performance through supply chains?  

 

Well, first, make sure your people have the same understanding on supply chain and the way to manage it. Then, make sure people at your business partners have the same understanding too, so that internally and externally, you can talk at the same page. The Activity Platform serves the purpose. Second, make sure your people have high competencies in technical, administrative, financial, managerial and interpersonal. Third, make sure your management team have leadership of leading by example rather than of power gaming. Fourth, make sure your firm and your business partners have intercultural fit or have willingness to adjust each other. Fifth, avoid pursuing short-term gain at the expense of mid and long-term successes.

 

About Hendy Sitompul 

 

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Hendy M. Sitompul serves Managing Partner *** Management Consultant at The Big 5 Company, a management consulting firm specializing in the supply chain field. His firm helps Enterprise, NGO and Government in supply chain matters. Prior to founding the firm, he had worked in petrochemicals, industrial gases, consumer goods, industrial goods and plantation.

 

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