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Category Archives for "For Supply Chain Automation and Property Groups"

How Far Would You Go To Make Your Supply Chain More Secure?

Let’s start with a story illustrating how supply chain security irrevocably altered the fortunes of a company that was global leader in a very popular consumer electronics industry.

A High Profile Industry

This story is in public domain and involves two behemoths of the mobile phone industry at that time – Nokia and Ericcson. I tell this story in my book THE 5-STAR BUSINESS NETWORK.

Think of the time before Iphone and Samsung phones came along and conquered the supply chains of the industry, and the minds of the users. I tell that story elsewhere.

Here we focus on the simpler times.

An Uncontrollable Event

A seemingly trivial random event, on a fateful day in March 2000, changed the destiny of the industry.

Both Nokia, and Ericcson, the stalwarts in the mobile phone industry at that time, were equally impacted by the same event – a lightening fire in the chip manufacturing plant of their common supplier, Philips, in New Mexico.

Both Nokia and Ericsson experienced business disruption to an equal extent as a result.

Fire damage to the stocks was extensive

More importantly, the manufacturing capacity of the plant was damaged and it was difficult to estimate the time for repairs.

This is where the events take an interesting turn. Not everyone thinks of supply chain security beyond the physical security of goods in transit. For example only a few people think in terms of continuity of supply.

In fact, all the security experts who have no background in supply chain security fail on this count – they never think deep enough in terms of the layers of supply chain, while they do think deeply in terms of layers of physical security. Look at what happened in our real life story next.

Nokia had invested months, if not years, in creating and perfecting a robust and responsive supply chain security, while Ericsson’s business network was relatively a middle-of-the-line affair that worked well when things were good.

Ericcson staff were content to go with the flow, without too much care and worry about this part of supply chain security.

Nokia Sees the Future Before Ericcson, or Even Philips

After the fire, Nokia was able to see the full impact of the chip shortage on its own business, as well as the entire industry with a lot more clarity than Ericsson, and even Philips.

Moving quickly, it activated other parts of its business network to shore up supplies, to redesign some of the chips to manufacture them in other plants, and to take pre-emptive steps in the network.

Ericcson Did Not Move to Secure The Supply Chain; It Lost Out For Ever

Ericsson let the situation evolve at its own pace and made decisions more reactively.

The resulting gain in profitability and market share for Nokia and the loss of these for Ericsson tipped the balance of the industry to an extent where within a few years Nokia pulled far ahead of the Ericsson which never caught up with its erstwhile equal rival.

So, Why Do I Tell This Story?

It does have some anecdotal entertainment value.

But the moral value is even higher. Here are some things to ponder:

  1. Supply Chain Security is a layered affair – for the best results organise it as such:
    1. Supply Chain Layers
    2. Physical Security Layers
    3. Virtual Security Layers
  2. A random event can change the fortunes of an industry
  3. Better prepared companies generally wins in such events
  4. You do not need to be perfect, you just need to be better than your competitors
  5. If you don’t work to keep the supply chain advantage, you will lose it in a jiffy:
    1. Ericcson lost out to Nokia
    2. Nokia eventually lost out to IPhone (that is a story, I tell elsewhere in my posts)
  6. Supply chain advantage, when you have it, translates into industry leadership, fat margins and cushy life.
  7. Supply chain security is directly corelated with supply chain advantage. DO NOT IGNORE SUPPLY CHAIN SECURITY.

I could easily turn this above 7 point list into a large magazine article (listicle), but my readership is wise enough to connect the dots themselves, and do not need ot labour through the obvious.

Given the quality of my readership – I have created a 350 page report on supply chain security – which is available at a small (or relatively trivial) expense by sending an email to info@globalscgroup.com

If you really want to pay due attention to supply chain security there will be nothing comparable on this globe – get this report NOW by directly emailing me.

Opportunities for Start-ups in Supply Chain Security

People often wonder where the best opportunities for start-ups are. Supply Chain Security space is getting a lot of attention in this regard.

In fact, just today someone asked me on a popular platform about opportunities for start-ups in Supply Chain Security space . They wonder whether these were more in software, or consulting arena.

Here is my view:

It would be neither of those two. Rather it will be a combination of hardware and software – initial application know-how will have to come from the user side.

Let me explain.

Post-2001 (911) the world of supply chain security has changed dramatically. The regulatory environment has evolved dramatically (as we explain in my report Global Supply Chain Group’s SUPPLY CHAIN SECURITY REPORT). But that is not the only change. Almost everything – customer innocence, political and cultural norms, technology and particularly technology – has evolved dramatically as is explained in this report.

Most importantly – the threat perception has evolved considerably. Look at the diagram below which summarises the supply chain threats over the decades:

So far, this is common sense representation of common knowledge. What is not common knowledge is how technology has evolved in response to these trends.

There are at least 6 technological streams which find applications in supply chain security. You will find them in the report, or in this survey on supply chain security – Supply Chain Security Survey

But the most interesting insight in the report is that almost all the opportunities offered are in combinations of hardware, software and some know-how in the application.

That is not to say that pure-play companies do not exist. In fact, many companies have evolved to products with a considerable component of application know-how. In mature products that is always going to be the case.

But, for a start-up, a combination of hardware, software and some application know-how is the best bet

How Supply Chain Strategy Can Help You Resolve The Innovators’ Conundrum

This is a million dollar question for most companies – start-ups or conglomerates. A lot of time and money is wasted either because the companies do not bother to ask this question in time, or try to answer it in the wrong way.

“What Comes First – Make, or Sell?” – this is a conundrum from millenia – akin to the chicken and egg question. Indeed, this may be the genesis of that famous question. I call this the “Innovators’ Conundrum.

Here is my answer to a similar sounding question on a popular forum.

A Good Story

Let me tell you a story from my book The 5-Star Business Network – Vivek Sood | Global Supply Chain Group :

One of our large corporate clients faced exactly this dilemma when investing in the renewable energies sector.

In simple words, the dilemma was whether or not an entrepreneur with a good idea should go looking for customers or go looking for the ability to build the product/deliver the service.

Innovation can be driven either by demand or supply

Depending on the choice made at this point in time, the two models of innovation will look very different as shown in the figure below:

Alternate models of innovation

There are enough proponents for both types of models. In our work with clients, this conundrum has frequently surfaced and is always argued quite passionately by different senior executives in either of the two camps.

On one hand, there are the proponents of the Reaganomics supply-side theory – arguing ‘if you build it, they will come’. On the other hand are the more traditional thinkers arguing unless we have the customers and services pre-defined, how can we build anything?

Objective analysis of key drivers of demand and supply will show the basis of innovation

In this story, as a way out of this dilemma, we listed the factors on which the decision was dependent. Among the factors were questions related to the certainty of the customer demand, such as:

• Are the real customers properly identified?

• Do the real customers know exactly what they want?

• Have the real customers communicated their demand to the market explicitly?

• How likely are real customers to change their minds?

• How easy is it for real customers to change their preferences?

On the other hand, there were several factors related to the level of innovation itself – whether it was just an incremental innovation or a giant leap. Key questions in this realm were:

• By what factor (multiplier) does this product/service improve the customer life?

• What are the existing means of getting the same value in use?

• What makes the new product better than the existing product?

• What tangible measures can be used to measure the superiority of the new offering?

• Do the real customer really value the new offering as superior as the provider does?

The board agreed that innovation will only succeed if the Supply Chain structure matches the demand and supply drivers

Based on these factors we developed the following matrix to enable answering the question:

Figure: Innovation Drivers and Supply Networks

Red box (Box 1) is the danger zone

In box 1 (red colour) – in a situation where the level of innovation is only incremental and the certainty of customer demand is very low – massive investments are required for customer education as well as for building a viable supply network.

This is because most potential supplier will see the situation as high risk and will only respond to monetary inducements to buy co-operation. A very high percentage of innovative efforts are in this square and, as a result, fail because of lack of deep enough pockets and difficulty of fighting the battle on two fronts simultaneously.

A basic supply chain would be the only possibility in this instance – where the organization has to move on two different fronts to build demand and supply simultaneously. This is shown in figure 8.3 (of the book mentioned above).

The key lesson for the players in the red box is that you need very deep pockets to fight the battle on both fronts – demand and supply.

If you lack that financing ability, try and move up or right – either find a niche of customers with pent-up demand looking for the right product/service by moving up, or move right in the matrix by creating a step change in the users’ lives by creating a product that far surpasses anything else available in the market place in terms of the customer experience.

If you cannot do either of these two things, keep looking for ways to make one of these two moves; or, consider scrapping the idea altogether.

Light Green Box (Box 2) needs more customer intimacy and/or supplier agility

Recall our client case study; the company, in this case, was in box 2 (light green colour) – with massive innovation but uncertain customer demand due to competing technologies promising similar magnitude of innovations.

In such a case, the business suffers from a chicken and egg situation. The customers do not buy because of some uncertainty, perhaps regarding which technology will ultimately win the battle; after all, no one wants to be stuck with a Betamax VCR and find that VHS standard has won the battle.

At the same time, the company is not in a position to invest too much in production capacity unless the customer demand is certain. Most businesses in this type of situation try and work with customers on a conditional basis – promising to build capacity if the orders are placed.

However, customers are not inclined to place orders because of the factors driving uncertainty in their own world. A way out of this situation then is to work with the supply network on a conditional basis – promising and delivering massive returns as the demand materializes.

The key is to find the right suppliers with the superior world-class capability and flexible capacity who are willing and able to understand the situation and work in it.

At the same time, flexible product design and investment in customer education to reduce demand uncertainty and increase buy-in also yield good results.

The need for flexibility, adaptability, ability to hold supply in readiness for the demand that builds up through education, clarity and events results in an adaptive supply chain that looks like alternative number 2 in the round figure above.

The key strategy is to make sure that suppliers and co-developers of technology and production capacity are fully on board with the plan and work alongside your business – as part of your 5 STAR Network.

If you have any doubts about any of the co-developers or suppliers, it is better to continue looking, negotiating and influencing till all the members of the 5 STAR Network are fully on board with you.

Consultants, think tanks, industry organizations, academia, research laboratories, brokers play a critical role in bringing together businesses that could form part of the same 5 STAR Network.

They play an even more important role in keeping the network humming smoothly, ironing out any wrinkles in the relationships. Such an adaptive supply chain is shown in Figure 8.4 of the book.

We have already seen how, in such an adaptive model, several organizations work together in an adaptive network to think and solve problems of their common customer/s.

Our client, an entrepreneur with massive innovation, used this model to work alongside some of the largest and best heavy machinery and engineering corporations in the world in order to bring their technology to the market successfully.

This was also a good example of the Fire-Aim-Ready (FAR) Innovation, but we will use yet another case example – of a much more ubiquitous product, an iPhone – later in this chapter to illustrate that effect.

Dark Green Box (Box 3) needs more supplier intimacy and/or customer flexibility

In box 3 (dark green) above the situation is exactly the reverse. Imagine a pharmaceutical company trying to find a cure for cancer or a number of other old age infirmities.

As the population ages, the demand is already present and growing. However, on the supply side of the equation, the research and development are being carried out in the laboratories of large pharmaceutical companies and their collaborating partners in academia, scientific establishments, consultancies and other organizations.

The patent system, to some extent, restricts the collaboration – barring this anomaly every company would be keen to collaborate much more openly to gain part of the returns of a first mover advantage in a blockbuster product.

However, in any scenario, an adaptive supply chain similar to the figure above will result in far quicker and more effective innovation at a much lower cost. In fact, that is the reason for collaboration, despite the patent laws.

Successful strategies in this scenario will hold demand in Supply Chains till supply eventuates. At the same time, the business will make massive R & D investments to build further product innovation and sell limited quantities to early adopters under limited conditions – which is indeed the case in the pharmaceutical industries.

We will not discuss the box 4 (yellow box) in this article because such a scenario, where demand is highly certain and the level of innovation is mammoth, is rarely encountered in real life. Such opportunities are snapped up in a jiffy.

All innovation must have an effective business network

We have seen how the super-networked businesses use their 5 STAR Business networks to build adaptive supply chains and gain a massive advantage in the field of innovation. But this does not happen only in the fields of pharmaceuticals or high technology.

Apple, Amazon, Inditex and many other case studies dispersed throughout this book demonstrate clearly how super-networked businesses innovate better than the rest of the businesses in their industry.

Consider the case of Apple once more. Whether it is iPads or Apple TV, the company has never shied from firing first and then taking aim towards the target.

For example, the much maligned and a total flop Apple Newton, released around 1995, served as the key platform for the eventual success of iPads. Just because the technology or the public was not ready for the product, Apple did not shy away from testing, learning, improving, testing again, learning more and eventually succeeding.

As it succeeded with other products and learned the lessons (get the iTunes and iPod ready before launching iPhone) it has had less number of flops along the way.

Eventually, Apple will be ready with a unique, highly personalized and anticipated experience for each customer – which is the holy grail of the modern era. Most successful companies have followed similar Fire-Aim-Ready (FAR) trajectory to innovation, and examples abound.

Your Company’s Innovation

If you have questions about your own company’s innovation strategy, send me an email on info@globalscgroup.com or take our diagnostic survey. The results are always enlightening for senior executives, as they always bring up some blind spots. Covering these spots will save you a lot of heartache, time and money.

I write about The Supply Chain CEOs, The 5-STAR Business Networks and Unchain Your Corporations. My website is at http://viveksood.com

How To Get The Biggest Bang For Your Technology Buck

There were only 24 hours left. Tomorrow the board would pull the plug on the project which had continued for well over 3 years. The total costs as per internal calculations had run into hundreds of millions of dollars.

External consultants reckoned that when you included the costs of internal resources seconded to the project from rest of the organisation, and other costs buried elsewhere in P&L’s the real total was at least double of that.

However, the project had built a momentum of its own. No one was willing to point at the elephant in the room, let alone to lead it out. Careers were at risk. Good careers – built over several years.

I will talk about the outcomes later in this piece. Before, I do that I want to spend some time talking about how did the company arrive here?

How did so many competent people miss obvious and easy signs that the project was not on track. More importantly, where did it all go off the rails?

Was this a unique situation – with no lessons for  others grappling with technology outsourcing?

Of course, I have covered these, and other similar questions in my book OUTSOURCING 3.0, and in my blogs and videos. The book, in particular, carries a very comprehensive model and diagnostic tool kit, which is value for money.

In this piece, I want to focus on only a few key points. And, I want to frame it as a positive affirmation of key things that would build momentum towards success.

  • Create Congruence in Thinking

Three kind of congruence is important:

  1. Congruence between business strategy and supply chain strategy
  2. Congruence between supply chain strategy and IT strategy
  3. Congruence between IT strategy and business strategy

In the case quoted above, while minor lapses occurred in all three, several major gaps very readily apparent in #2. It appeared as if IT team was working in total isolation from the Supply Chain and Business Transformation team – though their projects were closely linked.

  • Think Beyond Tactics

Short term, tactical thinking – predominantly related to cost savings and control issues and considerations tend to dominate. It is quite easy to lose track of the big picture in the process. All the initial discussions and dreams of gaining competitive advantage are thrown out of the window at the first opportunity.

Then, what is the point in spending all the money? The project appeared like a lot of effort, just to stay in the same place.

  • Visualise How The Life Will Change Once The New Systems Are in Place

This takes more than a flight of fancy. A lot of things will change when one thing changes. You cannot ever do enough of visualisation and preparation. Every time you do this exercise, you will discover some more things that need to change in parts of the processes, infrastructure, skill sets, SOPs, contracts, warehouses, etc. Change it.

  • Do Not Underestimate the Time and Money Requirements

That brings me to my last point. All this difficult work is highly specialised; it also takes considerable time and money.  It needs skills rarely found inside organisations, or even in IT service providers.

While it is well known that most IT projects run into time and money problems, the scope adjustment problem is less well articulated. Yet, taken together, these can wreck havoc on your business outcomes.

supply chain management

The above graphic – taken from my book OUTSOURCING 3.0 sums up the situation nicely.

In the case study quoted at the start of this post, the outcomes were a lot different than what was expected by the majority. The board made a bold decision and pulled the plug on the project in the middle. That single decision most likely saved the company in the long run. They could have saved a lot more money if, at the outset, they are created governance structure to ensure just a few key points.    After all, prevention is better than cure.

 

What Supply Chain Managers Can Do About Safety Recalls?

If you are in Australia, it is more than likely that you already know this saga. If you are not in Australia, or do not follow the news cycle, take a look at the video below:

This happens all too often. Once every few months, in some part of the world, a crisis of similar nature emerges.

Several years ago it was this:

I could keep finding a lot of similar videos about products and places – but you get the point. And, it is a not a new problem either. Take a look at this story from over 3 decades ago:

The point is that the lack of supply chain security hurts the company, the industry and the economy significantly.

Some band-aid solutions are rolled out – mostly to restore public confidence and get the demand up again. However, a comprehensive supply chain security regime is never put in place.

Having done large scale supply chain transformation projects for companies as sensitive as explosives, chemicals, fertilizers, food stuff, soft commodities, bakeries, meat, dairy, livestocks, and many others, we have seen both – the vulnerabilities and some really cutting edge supply chain security in practice.

Unfortunately, supply chain security, in conceptualisation and training, has not kept paced. There is no university course that covers this topic sufficiently. Conferences skirt this topic. Books cover it sketchily. Regulatory framework is patchy and officious.

And after complying with the regulatory burden most people relax in the belief that they have done enough.

In fact they have no basis to go beyond regulatory requirements, lest they are accused of being paranoid or overzealous about security.

Yet, dozens of incidents have demonstrated that regulatory framework is never enough. Each company has to develop its own supply chain security framework, based on its own particular circumstances. Even compliance with insurance requirements is not enough. Reputation damage to your business is a non-insurable loss in most cases.

How do you develop your own supply chain security framework?

Complying with regulatory and insurance requirements is a good start. You also need a more robust, holistic and comprehensive supply chain security framework that provides the guidelines for your own company’s supply chain security model.

Our report titled  SUPPLY CHAIN SECURITY – A COMPREHENSIVE, HOLISTIC FRAMEWORK provides the information to get you started.

Better still – run a one day workshop based on the content of the report. It will be the best 20K your company ever spent.

 

Consequences of Confusing Between Supply Chain and Logistics Can be Painful

Recently, obstetrician Dr Liu Hongmei hit global headlines when she disclosed the story of a young couple who came to her after four years of intense attempt to get pregnant.

As it happens in these cases – when the wife could not get pregnant even after 4 years of marriage, the family pressure was piling on. Speculation and rumours abounded. The desperate couple were ready to try anything – including visiting a doctor.

That is when obstetrician Dr Liu Hongmei got to examine the couple. They spoke about their intense desire for a child. They spoke about their struggle with painful sex at a very high frequency. And, they spoke about the family pressure.

The events unfolded village in Bijjie city in the south-western Guizhou province.

When Dr Liu examined the wife, and was confused to find that she was still a virgin.

I know, now this story gets a bit hard to believe. I had the same reaction.

For those who want to verify it – here is the story. This is not the only place you can read it, you can also find it in many other places, including here, here, or here.

If you have not read the entire story, then you should do so before continuing.

Now coming to the main point of this blog post –

To all those people who think of supply chain as something vaguely to do with logistics or procurement, my message is this:

Exactitude is equally important in supply chains.

Technique is vital. While, in the case quoted above, it comes naturally to most people, it does not come naturally in case of  business transformations using supply chains.

Vague attempt in the general direction does not lead to success. Read the news story linked above again to know about all the futile pain the poor lady had to go through.

I wrote this blog post so that I can refer to it in future posts when writing about case studies I have seen over the last 22 years of supply chain transformation projects where companies confuse between supply chain and logistics, or between supply chain and procurement.

Why Business Networks Are Important?

“Call it a clan, call it a network, call it a tribe, call it a family. Whatever you call it, whoever you are, you need one.”

-Jane Howard

Business Networks are important to accelerate and sustain success for any individual or organization. It is imperative to learn from the evolution and success of business networks. Business structures have evolved radically to such a degree that nowadays, most businesses have no option but to create business networks.

Business Networks are more important than your business infrastructure

Naturally your business infrastructure is fixed, rigid and cost accruing. Your business networks, on the other hand, are evolutionary, flexible and revenue accruing.

Business Networks make your business more resilient and responsive – at the same time.

Those businesses which had the most responsive and resilient business networks were the ones to recover from any downfall the quickest. See who survived the global economic downturn during 2008 – 2009.

When Cash is the King – Business Networks Triumph

Data is visibly conclusive that in times of cash crisis, the quality of their business networks saves companies. Those with more robust business networks have far more superior cash conversion cycles, nearly 6 times better. In fact, as pointed out by Aberdeen Group, business network masters improve their cash to cash cycle leading up to the Global Financial Crisis while the rest of the industry went backwards.

In boom times Business Networks Give You Speed

Even relatively smaller businesses can achieve remarkable results quickly based on the responsiveness of their business networks. In economic booms, whether accompanied by economic volatility, or economic stability, business networks allow you to realize higher profits, quickly. The potential of your company’s capabilities are multiplied many times over, by the leverage effect provided by your business network. This is only possible through extensive utilization of business networks that the company has built, nurtured and managed effectively. Most executives grossly under-estimate the value and efficacy of business networks in ramping up capacity rapidly in boom times.

Business Networks Help Smooth out Volatility

Especially during times of extreme volatility, we see airlines and shipping companies forming global service alliances to ride out the season and economic peaks and troughs. In such volatile business environments, budgeting and planning can become a nerve-racking exercise for all companies except those which use their business networks to cushion the lean periods with long term contracts and find scarce capacity during boom periods. Supply chain is unique to every company and industry, formulated over a number of decades in many cases, and is worth several trillions of dollars in value.

Valuation of Business Networks is Astronomical, Though Difficult to Quantify

Estimates range into trillions of dollars, and yet may be underestimating the full extent and power of these hidden business resources. The magic of business networks has made it possible to design, build, launch and sell revolutionary products in less than one-third time of the industry. If you cannot make your business networks more visible and manage them more proactively, you may be silently yielding the competitive advantage to others who can. It is, after all, the obtainable magic.

Want to start now? Create your own 5-Star Business Network today.

Finally, An Innovation from Apple That is Worthy of Steve Jobs’ Name

The Apple watch left me underwhelmed as did the plethora of me-too tablets and phones which are barely struggling to keep up with the ever more nimble competition. I wrote a blog about the Apple Watch here wondering whether the company had lost its mojo.

When I found out about Apple SIM, having written a book on The 5-STAR Business Networks, I suddenly realized the true potential of this great leap forward by Apple. Obviously, there are more than several ways to skin the cat. While everyone was looking for the next innovative product, that Apple has produced every few years in the past, what slipped our attention was the innovative service which will make Apple tablets so much easier to use – especially by its target, high end market.

If you do not know much about Apple SIM – you are not alone. In fact there was not a tweak about it in the usual Apple staged events where the Apple Watch and other new gizmos were introduced. The service (product) was launched quietly as one of the embedded features in the new generation Apple tablets. So what is Apple SIM? As per Apple:

The new Apple SIM is preinstalled on iPad Air 2 with Wi-Fi + Cellular models. The Apple SIM gives you the flexibility to choose from a variety of short-term plans from select carriers in the U.S. and UK right on your iPad. So whenever you need it, you can choose the plan that works best for you — with no long-term commitments. And when you travel, you may also be able to choose a data plan from a local carrier for the duration of your trip.

Clearly, if you are a frequent business traveler, this service will fulfil your CFO’s dream. The international roaming charges are so high that in most cases you have to mostly restrict your time on line to when a WiFi network is in reach. Is this a big deal? Steve_Jobs_with_the_Apple_iPadFrom the customer’s point of view, their ability to be online wherever they are is necessary for using all cloud based applications including emails and messaging systems.

If it costs an arm and a leg, as it currently does, customers will grudgingly put up and restrict usage to a bare minimum – while trying to find work-arounds. Some companies, such as Vodafone or Globalgig do provide similar services so this is not a new offering.

Yet, I would characterize the state of the play as akin to the digital music players market before the original, cute looking iPods came along and made all the rest look like clunky dinosaurs. I must admit, I have not used the Apple SIM yet, because of its current limited ability.

Nonetheless, I have used many of its competitors’ and I can attest to the fact that their services work with a lot of clumsiness. Thus, therein lies the opportunity, and challenge, for Apple.

If Apple can make the service as user-friendly and seamless as the rest of its offerings, it will win big in the next tablet war. Well, at least till Samsung and Google figure out a way to beat Apple in this new business network game.

Supply Chain is the New Electricity – You Cannot Run Business Without It

Recently I did a small but quite interesting thought experiment with one of my sons.

We were discussing the invention of electricity and he asked me: “Dad, what would happen if there was no electricity?”

Since I actually had such an experience, I recounted to him my life in a remote village in Himalayas when my mother had taken a one-year assignment to teach economics to children in a school nearby.

I told my son that there was no internet, no computers, no telephones, no television, no radio and no light bulbs. Even more so, there was no electricity in that village at all. As a result, the whole village would get up at sunrise, go through their daily routines and were go to bed just after the sunset. People used kerosene lamps to light up for an hour or so after dark and only in case of necessity.

My son is only 8 years old, and grew up in Australia. Hence, obviously enough he found this life almost completely incomprehensible.

On my part, this conversation inspired me to think about life without supply chain management.

I have been lucky enough to have the opportunity of working closely with Dr. Wolfgang Partsch –  who is one of the co-inventors of supply chain management (SCM) in the early 80s. I have had a number of discussions with him about how the business life has changed compared to the life before SCM was invented.

No doubt, the division of labour was one of the biggest and most popular concepts which came out of the industrial revolution. The principle is that every job is divided into its constituent parts to the lowest possible level, so that each person can specialise in what he does best, this would increase the productivity of the overall system immensely. By the late 70s, the division of labour had totally taken over the business as well as governmental work.

Unfortunately, bureaucratic complications combined with the division of labour had created a world in which every department within any company was running as a small fiefdom.

Imagine that a purchasing clerk would issue a purchase order. Then he would let his boss know that he has issued the purchase order as per the boss’s instruction. Then his boss will countersign the purchase order and would inform his boss that such and such item has been purchased, who would then inform his boss, who would most likely be the head of purchasing.

The department head of purchasing would inform the head of manufacturing, who would inform his subordinate, assistant head of manufacturing, who would inform his subordinate, the factory manager, who would inform the manufacturing planner that the purchasing order had been issued.

There were 6 to 8 different links in this communication chain running from the purchasing clerk to the manufacturing planner or production planner. Each message would go up the chain in a department, right up to the department head, and then across to another department head who would filter the message down all the way to a person who would act on it. In such a world with these eight or more different links in the chain, the time difference by itself was enough for the message to lose its effectiveness.

Combine that timing issue with the possibility of a message getting garbled in a long chain of communication, due to the differences of intentions and possibility of misinterpretations of messages, suddenly you realize what a nightmare it would cause.

Not only that, the departmental heads were almost always the biggest bottlenecks in such a communication scheme where nothing would go up, down or sideways without a departmental head’s approval. Obviously, their capacity to process information was only limited by how much time they had.

Problems of the organization without supply chain management

Now before you think of this as a ludicrous, and imaginary situation – let me add that I encountered exactly this situation in an Island airlines where I had the opportunity to participate in a business transformation exercise a few years ago.

Many other organisations I have had the opportunity to serve exhibit at least some symptoms of the same malaise.

So, what would be the typical complications you could encounter if there was no SCM?

You would notice that some easy five-minute jobs could quite possibly take days to accomplish, for a simple reason of the lengthy communication chain required to get the cooperation. You would also see a lot of confusion, because of the possibility of the message getting misrepresented. You would see some coordination, but not a lot of it because of the nature and length of the communication chain.

You would see a lot of bureaucratic nonsense with people hoarding information and only giving it to their bosses or their subordinates in a very selective manner. In many cases, this information hoarding would be pointless and even harmful. The rationale behind the behaviour might simply be a cultural norm or an expectation in such a hierarchical organization.

You would also see too much command and control in this type of organization, for the simple reason that when everything has to pass through a departmental head, he becomes an ultimate arbiter of what information filters through and what does not.

You would also see that the departmental head would have to make all the decisions. Even the smallest scheduling decisions, or planning decisions, or execution decisions, which could have easily be made by people several layers lower than him/her, would need to be made by the departmental heads themselves, again for the same reasons.

You would also see such systems as very rigid with no adaptive capabilities to changing needs of the market place. If you notice any of these symptoms within your company, then there is bound to be a problem with how the supply chain functions in your company.

No matter whether you have somebody with a title of supply chain director or vice-president, your company does not act as an organization with an effective supply chain which cuts across the departmental silos.

As this is a very important subject, in another article I will talk about how supply chain helps to alleviate the silos mentality and integrate departments to act as one company.

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From NASA space suit to Lego Toys – Why crowdsourcing should be part of every supply chain strategy

Supply Chain Strategy Gets a Boost from Crowdsourcing

We are starting to hear about the need for innovation in supply chain strategy.

Crowdsourcing is proving its value in boosting innovation. The magic of this idea is that it ties new product launches with customer wants and needs.

NASA recently turned to the public for the design of its latest space suit, allowing people to choose among three prototypes.

The Z-2 space suit is an update of the Z-1, which was named one of Time Magazine’s Best Inventions in 2012.

“After the positive response to the Z-1 suit’s visual design we received, we wanted to take the opportunity to provide this new suit with an equally memorable appearance,” NASA says on its website.

Legos Ghostbusters-inspired toys will hit shelves in the US this June at US$49.99. The set is also a product of crowdsourcing. 

Lego Cuusoo – the crowdsourcing platform run by its Japanese partner – has helped the company with product ideas since 2008. Lego reviews product ideas that receive at least 10,000 votes and the winner gets 1% of net revenue from the toy.

“While swallowing smaller companies and their readily available technology is one way big corporations refresh their innovation strategies, some decide to turbocharge consumer involvement early through crowdsourcing. Although the late Steve Jobs may disagree by saying customers do not know what they want, crowdsourcing has its place in many supply chains. With in-house curating, involving customers more intimately in the supply chain can be a powerful combination,” says Vivek Sood – CEO of Global Supply Chain Group.

Recently, Hasbro, the maker of globally popular game Monopoly, ran a crowdsourcing campaign to choose new “House Rules”. The new “House Rules” set, to be released later this year, is an attempt to refresh the game after nearly 80 years.

Just over 10 days of the crowdsourcing initiative on Facebook, several thousand people have given their comments.

“There are a lot of Monopoly purists who want to play by the classic rules and don’t want to change it, but we love the idea of there being some optional rules in there that can mix up the game a little bit,” says Jonathan Berkowitz, vice president of marketing.

A lot of companies have successfully adopted crowdsourcing, such as Samsung’s Open Innovation Program, Dell’s IdeaStorm, and Phillips’s Simplyinnovate.

Crowdsourcing can range from simply asking for consumer opinions about existing options, to allowing people to come up with workable ideas.

“In a way, crowdsourcing represents the Fire-Aim-Ready (FAR) model of innovation, as it lets companies test new ideas and then continually fine-tune them, while choosing the right partners to realise consumer wishes in a profitable manner,” says Sood – author of the book “The 5-Star Business Network“.

Traditionally supply chain has never been considered as part of the innovation drive, but the FAR innovation concept flips that model on its head – dramatically reducing the time to market, and effectiveness of innovation.

Crowdsourcing is one way to do this.

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