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:
Several years ago it was this:
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.
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.
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.
“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.”
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.
Naturally your business infrastructure is fixed, rigid and cost accruing. Your business networks, on the other hand, are evolutionary, flexible and revenue accruing.
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.
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.
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.
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.
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.
Supply Chain Segmentation Drives Today’s Digital Marketing – This is how I explained the situation to a group of a senior executives of the company I was consulting to recently.
The profitability was falling, and customers were abandoning the company (I cannot go into too much specifics of the case for obvious reasons of confidentiality). Let us say that each customer segment was unhappy.
They would place or order and get a very mediocre service (from their point of view). I do not want to go into too much detail of their frustration because I do not want to reveal more details of the company. But suffice it to say that the experience was akin to paying for a sports luxury vehicle, and getting a cheap low-end vehicle.
This was surprising! Everyone in the client’s team was astonished to see the data. But the truth could not be denied. A number of focus groups revealed that they were unhappy because they could get the same product for much lower price elsewhere.
The results were predictable – high customer churn, accompanied by falling profits.
The main reason was that all these various customer segments were being served by a single supply chain that was a happy medium of all their requirements.
No wonder, none of the customers felt that they were getting what they deserved. The company was clearly not showing their customers that they cared for them, and as a result most customers simply voted with their feet.
So, what is the solution?
Clearly, a segmented supply chain is required to demonstrate to each customer segment that the company is going beyond the marketing and positioning statements, to actually serve them with care that evokes trust and loyalty. This is not the only company that is in this situation. About 60% (estimate) companies I observe are not very far from this reality.
It is relatively easy to segment the market and come up with catchy marketing slogan for each segment that resonates with them. The hard work involves to follow up that marketing message with a tailored supply chain that delivers what your promised.
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.
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.
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.
Business Network is now the engine of the society and it will need newer models of commerce to fast track the recovery.
Hollowing out of skills out of entire societies without replacing them with another set of useful skills, very high level of youth unemployment (frequently disguised by serious looking play on iPads and tablets), growing economic imbalances risking implosions of unrest, civil commotion or even a great war have all combined to create a very alarming set of circumstances.
Whatever transpires in the short term, eventually the business people will have to lead the way to recovery around the world. It is evident that I am passionate about newer models that work better. In my projects and work around the world, I have noticed that in almost all circumstances there is always some way to make things better. We only have to look around and see where the guidelines are, what the trends are and which models will suit the trends.
Eleanor Roosevelt (1884-1962) famously said – Great minds discuss ideas, Average minds discuss events, Small minds discuss people.
While it is very tempting to discuss just one of the three key ingredients of life – either ideas, or events or even people, I prefer to discuss all three because all three of these are inextricably linked. People make events and create ideas. Ideas create events and help people become successful. And events shape people and give impetus to ideas. A book full of concepts and ideas but with no stories about people or events would be extremely boring and dry.
On the other hand, a book with just chronicles of events or people would hardly be worth bothering to read unless its authors possessed immensely entertaining style of writing (which I do not) and even then would be of little practical value besides entertainment. I mostly use events and people to illustrate ideas and concepts to make them more tangible for the readers.
Primarily, then, this book is about ideas and concepts – yet you will see enough discussion about people and events to be able to use the concepts. Most of the people and events discussed are relatively well known so that background contextual information is already present in the readers’ domain and I do not have to supply it. Occasionally I had to use events from case studies based on our work – only because we could not find a well known event illustrating the concept.
I do not make apologies for that or for disguising some data or names of the entities for obvious reasons of confidentiality. Every couple of decades powerful juxtaposition of the trends leads to unique and revolutionary way of commerce. Contrary to the portrayal by the gushing accounts and adulation of the commentators, most pioneers merely stumble on the these trends by a process of trial and error. Other companies, the more nimble and hungry ones, follow the pioneers closely and build strong businesses in their lead.
More established companies then follow suit and try and recover lost ground using their financial muscle and market power sometimes succeeding and sometimes failing in this. Many other companies are so caught up in hubris of their past success or internal politics or some other such attention sapping device that they fail to move at all, or move too late, often with disastrous consequences. Chronicles of such disasters would perhaps be more instructive than the starry eyed accounts of success. As Daniel Coyle points out in his book The Talent Code, the only way to succeed massively is by failing repeatedly at progressively more complex smaller tasks till you master them.
However, most writers and authors persist with the formula that has succeeded since the first bard told stories of the victories in war, and I have no doubt that we will continue to see many starry-eyed accounts of success for centuries to come. It is difficult not to get caught up in the current of adulation that surrounds a particular company at a point in time.
Any such apparent adulation in this book is despite my effort to be objective and cognizant of the cyclical nature of success. As defined earlier, the aim of this book is rather more solemn. It is to take a wide and deep perspective on business trends, define the useful trends as seen from user perspectives, and come up with useful information for the business executives and managers.
The biggest trend sweeping the world – business and non-business – today is networking. Just last week Facebook has announced its IPO filing, valuing the company at $100 Billion. Analysts, pundits and business school professors are still debating what entitles it to that kind of valuation when many others with similar business model – Orkut, MySpace and a plethora of wannabes – have failed to monetize the eyeballs to any great extent. It is not even validated how many of those numerous Facebook accounts are authentic.
— Excerpted from the introduction of THE 5-STAR BUSINESS NETWORK
To read a synopsis of the book, please click here
To buy the book, please go here
My last post “Supply Chain Confusion could kill your business“ generated several great comments from highly qualified professionals around the world, and in this post I want to explore the reasons for the confusion. Obviously, the confusion is debilitating, and unprofitable. I am sure readers will have their own experiences with the confusion in supply chain world, and can add to the discussion by commenting below.
In my previous article I mentioned the examples of trucking companies (or warehousing companies) who have painted over their old trucks from XYZ Trucking/Transport to XYZ Logistics to XYZ Supply Chain Solutions without any material change in their capabilities or service offerings. While this kind of ‘branding’ exercise seems harmless enough, and most customers are not ‘fooled’ by such over-representation of the capabilities – it does have several deleterious effects. To give you an example – I was recently asked to answer a question on quora.com by a recent entrant into one of these companies who had entered the ‘field of supply chain’ to make a glamorous career. S/he was disappointed when s/he found that most of the work was rather mundane execution level work in transportation and warehousing. To exacerbate the situation they did not see any prospects of getting even remotely involved in the ‘sexier stuff’ such as supply chain modelling or business transformation. Evidently, then, this type is hurting careers, reputations and perhaps even the entire industry when these companies represent that what they do is all there is to SCM!
No doubt strategic sourcing, logistics, warehousing, production planning, inventory management, demand forecasting all are parts of good supply chain management. Yet almost all of them are quite capable of representing that they constitute the entirety of supply chain management. Look at the way that a number of professional bodies have renamed themselves and pretend to represent the entirety of ‘supply chain’ professionals. Their antics remind of the ancient Hindu tale of 6 blind men which was so well captured by the American John Godfrey Saxe in the The Blind Men and the Elephant (Source: Wikipedia):
So, oft in theological wars The disputants, I ween, Rail on in utter ignorance Of what each other mean, And prate about an Elephant Not one of them has seen!
Amusingly, the confusion in supply chain management also involves 6 different streams of thoughts.
Supply chain is a relatively new field. Especially at a higher level, there are no people who ‘grew up in supply chain management’.
Traditionally, supply chain professionals have come from one of the three or four streams in businesses.
I have worked closely with all 6 type of pedigree – and each of them have distinct foibles, strengths, weaknesses and biases.
One bias they all have in common is that they tend to have a soft corner for their own pedigree. For example, I spent my own formative years in shipping, logistics and transportation, and for some reason I am still a shipping person at heart. As they say once you spend time at sea – the salt water starts running through your veins.
However, all 6 type of pedigrees also have a great majority of people who are happy to represent their own specialisation as the entirety of supply chain management. That is what causes the confusion.
I could probably write an entire chapter of each of these 6 type of people, and their biases – including the impact of the confusion they cause to damage the profitability and ‘brand supply chain management’. But if you are from within the folds of supply chain management – you will easily recognise most of what I have to say here.
And, if you are not from with the folds of supply chain management then more explaination is no use to you – because you are better off reading my other articles on use of supply chain management for business transformation – just search for those keywords in the search bar next to the tool bar on top.
I will cover the rest of the cause of confusions in my next post. These are rather esoteric models and we will raise the level of conceptual thinking a few notches in that article.
Many professionals in the business world wonder how to increase income, at least every few weeks.
No doubt, in the long run, you get paid for your results.
Results are derived from two critical factors – skills and dedication.
If you have the relevant skills, and you apply them with dedication, you are in a position to ask for, and get paid, more.
To determine whether you are getting paid less, more, or right amount, and to chalk out a future earning path use the following rough picture showing 9 levels and commensurate daily remuneration.
Whether you are in the corporate hierarchy, or in corresponding consulting hierarchy, everyone has to find their own level on a totem pole, and this may serve as a rough guideline.
Let me take some time to explain the diagram above, even though most of it is self explanatory:
Let’s start with the two extremes first.
Clearly if you are low on both – the skills, as well as dedication, you do not have much chance to figure anywhere on the totem pole. That is why you see a lot of blank space in the left bottom quadrant of this diagram.
On the other hand, if you are very high on both the scales – the skills and well as the dedication – you will among the top income earners, as shown by the orange tip of the pyramid.
Now, to even get on the totem pole you reed either above average skills, or above average dedication, or a reason combination of these two attributes. Those would just get you a foot in the door, as a Business Analyst – at the bottom of the pyramid.
As you climb higher on the corporate totem pole – you will need to increase the combination of your skills and dedication in some measure of combination.
Next time one of your employees comes to you for a raise – you can whip out this blog post and show them the way to earn more.
Every time I fly out of Australia to Europe, I face a choice – whether to fly the national airlines Qantas, or another airline such as Singapore Airline or Emirates.
However, when it comes to its alliance partners, Qantas leaves a lot to be desired.
Most of the time I choose Qantas because of my long association with the airline, and the trust it has built with me over those 25 years. However, when it comes to its alliance partners, Qantas leaves a lot to be desired. Iberia managed to lose my baggage and left me with no clothes to wear to an important meeting.
British Airways and Heathrow almost always continue to amaze me with how low a company can fall in short space of time – and then continue to fall further almost on every experience.
I wonder how many other passengers – especially frequent business travelers – feel the same way about their preferred airline where they dislike the alliance partners so much that they are switching loyalties just for that reason.
On the other hand, the rival alliance has some strong airlines – Singapore Airlines, Lufthansa to name a couple – that will beat any of Qantas alliance partners hands down. This creates dilemma for me every time I fly internationally out of Australia. My latest experience with British Airways and Heathrow Airport has convinced me that no matter how much I love Qantas, I have to stop allowing that to interfere with my comfort, safety and convenience in other locations where Qantas hands over the relationship to its alliance partners – who do have to keep the same standards.
Most industries have now morphed into business networks of supply chains that compete with other business networks of supply chains for customer dollars.
But the airlines are not the only companies that lose customers, or suppliers because of their partners.
Most industries have now morphed into business networks of supply chains that compete with other business networks of supply chains for customer dollars. This transformation in business world is best highlighted by my using the sports of soccer and hockey as an example.
While many companies are still grasping the full implications of this massive shift in the business landscape, others have already adjusted to the new reality where A-team players only play the game A-team while the others are left to play with the rest. This not only applies to your supply chain partners, but also to the knowledge intermediaries such as the universities, consultants and brokers.
They used to say that a person is known by the company s/he keeps.
I think, in the modern commercial world of networked businesses, we have come to a stage where a company is known by the company it keeps.
All the attempts at social media corporate manipulations are futile if your business network and supply chain partners carry a millstone of bad reputation around their neck.
Some of that bad reputation will rub off on to your business – no matter how much you try the social media management.
By Doug Hudgeon
The Cost Reduction Tip
In the Eric Carle children’s story, The Mixed Up Chameleon, a chameleon attempts to become the perfect animal by adopting the best parts of different animals e.g. an elephant’s trunk, a giraffe’s long neck etc. At the end of the book, he’s so mixed up that he cannot catch flies for dinner.
As obvious as it is that an animal has evolved to work well only as a whole, when companies outsource their back office operations, they often try to keep favoured parts of their current operations.
For example, they may outsource payments but keep their approval processes or outsource claims but keep their task management system. This inevitably increases costs and regularly leads to the failure of the entire outsourcing project. Clients aren’t wholly to blame here.
Often outsourcing vendors, to close a sale, will pander to the requests of their clients to create a mixed-up chameleon and not properly recommend that they implement the complete chameleon.
If you are going to outsource a function at the lowest cost with the least change management then you need to find a vendor with a process that you can adopt completely.
Don’t select a vendor based on some other criteria (e.g. they are the market-leader) and ask them to implement only parts of their process.
If you cannot find a vendor whose process you can adopt completely then don’t outsource the function.
Doug Hudgeon who is lawyer and vendor management professional who has branched into finance and accounting shared services management.
By Doug Hudgeon
The Cost Reduction Tip
Over the past 12 years I’ve looked at the sourcing, procurement and payments processes in 150+ companies spanning every continent except Antarctica. At a detail level, the best of these companies took very different approaches to managing their suppliers – approaches tailored to the subtleties of their industry, geography and economic climate.
But the best shared one common trait: Their supply chains were as simple as possible given the constraints of their operating environment.
That’s not to say they weren’t sophisticated – often they were (in a surprising number of cases they were not) – but they were all simple.
Commonly, but not universally, the best companies regularly tendered categories that didn’t matter much. Commonly, but not universally, they would set up longer term relationships (with both parties incentivised to meet a common goal) in the categories that were critical to their ability to deliver value.
In all categories, their sourcing, ordering and payment processes were as invisible as possible. Many of the best companies did not even view their supply chains as strategic. I
n their drive to reduce costs, keep their operations as simple as possible and eliminate bureaucracy they just ended up with an efficient supply chain.
Doug Hudgeon who is lawyer and vendor management professional who has branched into finance and accounting shared services management.