It is common knowledge that the failure rate of complex outsourcing arrangement remains stubbornly over 50% depending on which survey you read. With such a long history and accumulated lessons from outsourcing, this is simply unacceptable.
However, it is not only outsourced projects that fail. Internal projects – especially large scale IT systems development or technological developments have an equally unimpressive track record. For an amusing example of the reasons, I encourage the reader to peruse this blog post:
So, what exactly do we do in the preparation stage? We should ask and answer several key questions:
So what happens when you fail to prepare? The obvious answer is that the outsourcing arrangement turns out to be sub-optimal, and sometimes even disastrous.
Note: Stuart Emmett co-operated with our very own Vivek Sood to co-write the book GREEN SUPPLY CHAINS – AN ACTION MANIFESTO. This book was one of the first books in the world on the topic of Green Supply Chains, and as such is used in Universities around the world for executive training and research purposes.
Introduction – Why are so many companies constantly rethinking supply chains? Why many other companies are out of step?
Many people do now understand what is involved when following a supply chain approach. However, ensuring the supply chain is optimised for the benefits of all participants; will mean a re-thinking of traditional ways. This article will explore some of the changes in thinking that are needed. This re-thinking may not be an easy process for some individuals in some companies and this may therefore limit the optimum development of supply chains. It would seem a possibility that Supply Chain development in the UK may well falter because of the prevalent way of management thinking. One thing is very sure; what worked for many years may not work for many more.
The supply chain approach is now well documented and at any level of development will require changes to “the way we do thing around here”. It is not the purpose of the article to discuss these changes, which have been well documented elsewhere; however the following briefly illustrates some of the needed changes
|Changes||Some of the needed “ends” are:|
|“Silo” functions to “holistic” processes||Decision integration, organisations of extended enterprises, collaborative management approaches, web connected, real time focus|
|Product “sells” to Customer “buys”||Demand pull, order driven, low to zero stock holding, involved suppliers, short production runs, real time visibility, short product life cycles, fewer suppliers, market segmentation|
|Transactions to relationships||Dependency , commitment, cooperation, collaboration, aligned company cultures, extensive trust, proactive managemen|
The way we look
A Supply Chain approach will require a business to change and this, in turn, will mean changing the thinking from a current and known position, towards a possibly unknown but planned for future. As the way we think affects what we do, then the way we think, is an important process to be considered. Research suggests our brain is in two parts – the left hemisphere and the right hemisphere. At least, this is the simple view – front and back, upper and lower quadrants are other “divisions”. Indeed, research into brain activity, continues to contribute to our understanding at a rapid pace. Meanwhile, the left and right view suggests we have a Logical Left side Brain and a Creative Right side Brain. The Left side brain will firstly conduct an Analysis, will then Act, and finally will Feel, (for example, is the action “correct” and “right”). The Right side brain however, works the other way, Feeling, then Action, then Analysis. Most people are relatively flexible in this brain wiring and of course the influences of environmental forces and the way we are nurtured, treated, handled etc also has a powerful impact to our thinking and to our personal behaviour. In exploring the simple left side-right side brain differences, then the following is revealed:
|Logical left brain side people||Creative right side brain people|
|Prefer written, mathematical, science based approaches||Prefer musical, art/visual based approaches|
|Objective, linear thinking, short term views||Subjective, wholes/parallel processing, longer term views|
|Analytical, step by step “head” thinkers||Creative, free flowing “heart” thinkers|
|Rational “facts” based reasoning that converges||Emotional “feelings” synthesis that diverges|
|Summary: Analyses-acts-feels||Summary: Feels-acts-analyses|
Most individuals can usefully recognise which side is the most personally representative one.
The way companies manage
As companies are collections of individuals; it is therefore possible to see left side and right companies. Following on from the above individual brain sided view, then company’s can be viewed as follows:
|Left brain sided companies||Right brain sided companies|
|Task based “today.”||People based and a long term view.|
|Problems reoccur as only the symptoms are treated ;(“Elastoplast” solutions).||Problems are tackled by looking at the thinking that causes the problems.|
|Making/selling products-services has the priority.||Make people before products-services.|
|The way forward is with Science/technology.||The way forward is by Motivating/empowering people.|
|“The numbers speak for themselves.”||“It is how we connect together that is important.”|
|Incremental results/parts.||Holistic, whole results/parts.|
|More Western cultural based.||More Eastern and Latin cultural based.|
Left sided companies will often work with fixed assumptions for development and growth as they are incapable of “going outside of the box”. When they are pushed to change from “tradition”, they will react negatively as they fundamentally believe the way forward is “more of the same” and they see the only solution to for example, company growth, as needing a bigger share of the existing market.
Supply Chain thinking
The ways of thinking will also translate into all management approaches including how supply chains are managed and structured, for “as a person thinks then so they are” (Proverbs 23.7). The following three diagrams represent a thought process for the past and future of Supply Chain management.
1) Older Approach/Linear thinking
This model has given proven benefits, as will be shown later in this article, to the previous non supply chain ways of functional silo management, It will be seen that this approach represents linear thinking, which is classically left brain mode. This is also a major model currently used in the UK for supply chain development. By following the above left brain explanations, we can see that this means having short term task centred approaches with an incremental view of the supply chain, with relationships to the next level only. This may or may not involve a collaborative approach and will more than likely have fixed arrangements and contracts in place. The supplier may also feel that the supply chain coordination’s are all one way and that “coercive power” is being used. It will tend to use a rigid and reactive approach to customer service with scheduled and rational replenishment.
2) Newer approach, network thinking.
Here there is some attempt to go further into the supply chain using collaborative approaches and extending beyond the first supplier level. Fixed arrangements with boundaries/contracts may exist but the collaboration will be more open and sharing. Customer service can be more responsive and flexible with real time replenishments.
3) Emerging Approach/Systems Thinking
In this model, much more fluid arrangements occur with systems thinking recognising the complex interactions that affect each other player in the specific supply chain. Right brain thinking concentrates on the wholes of the supply chain and perhaps uses seamless collaboration and virtual arrangements. Collaboration will be totally open and shared, and is unbound and innovative. Each specific supply chain could be viewed as a small company in itself comprising of cross internal functions and jointly managed with suppliers / customers, maybe following a matrix/project management structure organised into specific supply chain cells with decentralised control and shared responsibility from all involved. This following the basic principles of “small within big” that has for example, worked successfully when adopting TQM and JIT methods for production cells internally within product manufacturing/assembly organisations. Interestingly, such approaches were pioneered in Japan, a more natural right brain culture but of course have been actively adopted and managed in the UK culture. Some changing in thinking went on! A summary of the three models on supply chain thinking follows:
|Old Supply Chain approach||Newer Supply Chain approach||Emerging Supply Chain approach|
|Linear thinking||Network thinking||Systems “links and loops” thinking|
|Maybe collaborative at first level only||Collaborative and maybe beyond first levels||Collaborative and seamless in scope|
|Fixed contractual arrangements at “arms length”||Fixed arrangements/boundaries/contracts||Virtual arrangements, unboundand innovative|
|Horizontal flow chart shape“Rigid”||Venn shape“Connected”||Petal/Shamrock shape“Fluid”|
Changing how we think
There have been many well known examples of former company sector leaders who have slipped from the number one position and former state owned monopoly companies that no longer exist. Companies can therefore be slow to change their thinking. In Supply Chain management, the consequence of “sticking to the knitting” thinking can be as follows:
Companies are however a collection of individuals and it is the thinking of the individuals in companies that needs to change. As has been noted above, individuals will tend to be more “happy” in one of the brain sides. This then means they can miss out on the other side. To be complete, we therefore need both sides. This is the classic whole brain thinking. Clearly many companies do try to reflect such whole brain thinking through their recruitment policies and in the way they structure the organisation of the business. But for efficient and effective supply chain management then perhaps, companies and the individuals in companies need to take conscious responsibility for the thinking. Business channels change and when taking the view that supply chains now compete, this can mean thinking in a different way. Those individuals/companies who do not do this may well find that they will not be “invited to the party” in the future. An example here is where some supply chain approaches acknowledge that the supplier numbers will be reduced; yet, some suppliers maintain a “head in the sand” ostrich incremental approach, perhaps believing the reductions could not possibly affect them.
Our brain is actually very similar to everyone else’s – but the difference comes from, how we use it. Individuals and companies should be challenged to use the brain differently. If more on the creative right side, then the need is to be more of a logical left. You could try the following: –
If you are more on the logical left side, then the need is to be more of a creative right. You could try the following: –
The Future: the right or the left sided company?
The optimum and the whole will only of course be found by using parts from all sides of the brain. The concern however is that remaining with traditionally British left side thinking that this will very likely mean that the trends and ways forward for supply chain management are never realised. This can mean, for example missing a future of:
The way of thinking and the way the supply chain is structured and managed are therefore critical. The reported benefits of following a supply chain approach have been usefully documented; it will be noted that different approaches give significantly different results:
It will be seen that by following a supply chain approach, then the inventory costs fall, profit increases and the service fulfillment increases; the “best of both worlds” for the company undertaking the approach. It is very clear therefore that supply chain management “works”. What is especially interesting here is that the structure of the supply chain is shown. Additionally, the network thinking supply chain that goes beyond first level suppliers and the “future” one of systems thinking should indicate savings beyond those of the supply chains that stop at the first level integration only. Thinking differently and looking for more creative and innovative ways to manage the supply chain may be a future only a few companies are able to undertake. For example, moving to more collaborative approaches involves win/win and involves trust; this remains a difficult aspect for left sided rational thinking companies who prefer to use the German word for partnership of partnershaft. It would seem a possibility that Supply Chain development in the UK may well falter because of the prevalent way of management thinking. One thing is very sure; what worked for many years may not work for many more. Therefore there is a real challenge to learn anew and in so doing, to change. Learning and changing are indelibly connected; you cannot have one without the other. References: Signals of Performance: the Performance Measurement Group Volume 4.Number 2-2003 Anderson & Lilliecreutz: The Change in Supply Chain Innovation. 2003 Emmett S: Improving Learning for Individuals and Companies. 2002 Emmett S: Getting the people right in ILT Focus. April 2003
All written by Stuart Emmett,
after spending over 30 years in commercial private sector service industries, working in the UK and in Nigeria, I then moved into Training. This was associated with the, then, Institute of Logistics and Distribution Management (now the Chartered Institute of Logistics and Transport). After being a Director of Training for nine years, I then chose to become a freelance independant mentor/coach, trainer, and consultant. This built on my past operational and strategic experience and my particular interest in the “people issues” of management processes. Link for the blog: http://www.learnandchange.com/freestuff_23.html
Jumia started with a relatively similar aim and manifesto to Amazon, which puts customers at the heart of its operation. In the same vein, the Nigerian site also reaps benefits from being one of the pioneers in Africa’s emerging online retail market. “Being first is good, but it is not everything. What fuels Jumia’s success so far is somewhat akin to Amazon’s evolution into a Five-star business network” – said Vivek Sood, CEO of Global Supply Chain Group.
Jumia is not shy of innovation either, given the fact that people are still skeptical about online retailing as well as online payment in Africa. The Lagos-based retailer launched a range of online payment options but steers its technology-shy consumers by accepting cash on delivery and offering free returns. “It’s very important that people know it’s not a scam,” said co-founder Tunde Kehinde. They even take a step further and deploy a direct sales team of 200 to educate Nigerians about secure online shopping, which also serves as a means to build trust. Now with pick-up stations spanning over 6 locations, a warehouse facility, 200 delivery vehicles in Nigeria and 4 other country-specific microsites, Jumia seriously strives to become a one stop shop for retail in Sub-Saharan Africa. “Here you are collecting cash and reconciling payments almost like a bank desk, here you are building a logistics company,” said co-founder Raphel Afaedor.
Both co-founders and Harvard Business School graduates built the business from $75 billion in funding and are bringing “a couple of million” dollars in monthly revenue, a growth rate of nearly 20%. Vivek Sood, author of the book “Move Beyond the Traditional Supply Chains: The 5-STAR Business Network”, said: “Jumia is taking the right steps towards building the five cornerstones of a super networked business: innovation, efficiency, profitability maximisation, product phasing and result-oriented outsourcing. With the promising results so far, perhaps we could see the next perfect example of a 5-star business network besides Amazon.”
Yesterday (on 2nd November 2017) I happened to briefly glance at the Australian Financial Review – the key finance newspaper in this country while I was waiting in the lobby for a meeting. Almost the entire paper was devoted to just one single topic – AMAZON’S THREAT TO AUSTRALIAN RETAILERS!
No more do I subscribe to this newspaper, because it appears to be growing more and more out of touch with business reality, and becoming more a shill for vendors with deep advertising budgets, and small brains. Its content, in terms of financial and economic news is excellent, but somehow the financial journalists always seem to miss the major shifts in the business models – inclduing the latest move towards B2B Networks.
Yesterday’s newspaper seemed to be predominantly dedicated to a conference on e-commerce related subjects. I do not remember the specific topic of the conference, and it does not even matter because the entire debate was centered around Amazon’s entry into Australian market place, and the threat it poses to the Australian retailers and businesses.
Indeed, the organisers, and the newspaper, had identified the burning issue of the day for Australian businesses. They had not only highlighted all the right red flags, but had clearly heralded Amazon’s threat to Australian Retailers as the key front shaping the battle into the next year. Looking at the issues, I almost reconsidered my decision to stop subscribing to the newspaper.
But, alas, a little more unpacking of the pages revealed that almost all the solutions (to Amazon’s threat to Australian retailers) were merely window dressing costing a lot of money. Most of them were marketing and sales related, or new age technology related.
What people forget is that Amazon’s success is even more dependent on its incredible supply chain. Amazon’s threat to Australian retailers in not based on its new age technology, as much as it is based on its carefully crafted integral supply chain.
Fighting this successful behemoth without an equally effective supply chain is akin to deciding to fight against nuclear missiles with swords.
Sad reality is that most people, even in the lofted positions such as boards, still do not still know what supply chain really means. If you doubt me – just watch the short (1.5 minutes) video below, and conduct the experiment with 10 people you know:
Lest I leave you with a wrong conclusion, I am not totally writing off these marketing and technology solutions. Indeed, they do have a place in the overall campaign.
But, if you get an impression from the newspaper (or the conference that seemed to dominate yesterday’s paper) that somehow you are going to outmarket Amazon just using such solutions – you better think again.
Whether you are a corner store, or the world’s largest retailer of the decade – one reality stands firm above all else: Nothing beats a carefully crafted supply chain strategy, executed with precision and flexibility. This point cannot be emphasised enough.
If, it is your job to combat in your company the looming Amazon’s threat to Australian retailers, read the following line 100 times.
I have written extensively in many other blog posts on how to do just that – all you have to do is explore a bit in the categories and tags on the right of this page. Some of the titles from over the year are in the image on top of this page.
For substantive business leaders, who want to make real and deep positive impact – I do recommend my book The 5-STAR Business Networks.
If you have the budget, it is also worthwhile asking for a workshop based on the same material – but we only have limited slots, and normally have a big backlog for that.
He wanted to encourage us to do the same thing. We listened to him politely, thanked him for his opinion, and refused to go down that path.
He was firmly in the camp of people believing that you have to fake it till you make it.
Obviously there is a huge contingent of people who follow this philosophy. To justify themselves they often quote Richard Branson saying this:
I don’t know if this phrase was truly said by the man himself. However I would feel a little bit uneasy if pilots in their airlines adopted this mantra. It basically means that they accept the job as a pilot hoping to figure out how it works later, meanwhile they are going to fake it till they make it.
I know I have carried the example to an extreme, and pilots do need certification before anyone offers them a job as such.
However, I am also aware that there are more subtle considerations such as aircraft types, routes and even airport characteristics where most pilots will not accept command of an aircraft till they know for sure they can do the job.
Like them, I am firmly in the camp which says ‘make it real and keep it real.’ The risks are far too high; and the numerous opportunities to train and learn without exposing your passengers (or business network partners) to the unnecessary risks make it almost callous to do otherwise.
Yet, many people persist.
This belief – fake it, till you make it – is usually based on the assumption that nobody will offer you a job if you’re perceived as not qualified for it.
On the contrary, you are the best person to judge whether you are truly competent enough to take on a job. At the same time, with the job offers comes the responsibility of choosing, whether to accept it, or not; the responsibility of evaluating your own skills, experience and competence for this particular job.
Unfortunately, there are far too many people forsaking this responsibility that can only apply at a personal level.
That is also the reason why there is a lot of trust deficit in the business world.
If you are faking it, your reader, your audience, your client, your customer will most likely know that you’re faking it. It is just a matter of time.
Whether you are a motor mechanic who’s faking the knowledge of the type of motor that you’re repairing or you’re a heart surgeon or any job in between. Faking it is definitely not going to make you happier or more successful for the simple reason that your customer will always be uneasy with you. Furthermore, in your heart you will always know that you are faking it, which is not the best thing for your self-confidence and self-respect.
Supply chain management is not a unique field which requires a large amount of trust between people to collaborate. In fact, trust is a fundamental requirement for all collaboration, cooperation and joint activities between human beings.
It becomes even more significant in supply chain management where it is both individual trust and institutional trust.
Why is trust so important anyway?
There is an important reason why I mention it.
As supply chains become more and more sophisticated, as they become more entangled and evolve into business networks, the need for trust within the supply chains becomes more and more intense.
Let’s take a specific example to make this generic statement more real.
Suppose you are a soft drink manufacturer, and the suppliers of empty cans has a captive plant right next to your bottling plant, you have a good chance of hearing about their business ups and downs and know well in time about events that might affect your supply. Now just substitute this captive supplier of packaging by a bunch of suppliers half way around the earth who might have significant cost advantage (because of manufacturing cost, for instance), and see how important it will be for you to keep open clear lines of communication in order to run your business smoothly and efficiently.
Companies typically want to engage with supply chain partners who will be able to deliver on what they promise, barring a totally unanticipated event. If your business network partners are not fakes themselves, most likely they will not engage with you further when they find out that you’re faking it.
Although trust in supply chain management is a very popular topic, it is evident that establishing trust within the business network can be very challenging. It takes time, patience and effort of each and every supply chain partner. It can be even more difficult to maintain trust over time. As the concept of trust is rather abstract, it is also hard to measure. At the same time, despite all the difficulties and efforts you can be sure that developing trust with your suppliers and customers is worth the efforts.
So what is trust and what are the components of it?
How to make sure that there is enough trust between you and your supply chain partners?
Is it always worth the investment of your time and effort?
Is there such thing as too much trust within the business network?
First of all, trust in supply chain management, as in any other cooperation between people, includes numerous factors.
You should maintain good communication at all times between you and your partners. Communication also means honesty and openness. Fairness and loyalty can also be very helpful in establishing trust. Another integral part is the competence and your openness about whether you are qualified for this particular job or not. This kind of relationship requires goodwill and willingness not to exploit your partner’s vulnerabilities. This is even more important because of the confidential information which is shared between supply chain partners and with management consultants.
My colleague, who was at the meeting mentioned at the start of this article, wondered aloud about the advisability of trying to create some websites to generate additional leads for our training business.
And my answer was an unequivocal “no”.
The reason was very simple.
I like to make it real – and keep it real.
I gave my colleague an example of the difference between level of trust required for a pharmacist, a general practitioner and an open-heart surgeon.
When you go and buy a medicine from a pharmacy, you do need a certain amount of trust. You need to be confident that the pharmacist will indeed give you the formulation that the doctor has prescribed. You need to be sure that it is pure, unadulterated and sold at the market price.
However the level of trust required from a general practitioner is much higher. Because you will have to literally remove your clothes in front of him. In this case you need the confidence that your general practitioner is able to examine you, to find out what was wrong.
This trust requirement further multiplies when we are talking about a heart surgeon. You need to be completely sure of your heart surgeon as you need to entrust him your own body, because he will be actually cutting you open and looking literally at your heart. Imagine a heart surgeon who lives with the philosophy mentioned earlier.
In the situation where people need to share confidential information, where the profitability of your business depends largely on the competence and honesty of someone else, it is critical to make efforts in order to develop trust. A low level of trust in this case may give a bit more independence and space at first but later on it will definitely result in lower productivity and profitability in supply chain.
Management consultants by their nature need to establish a very firm bond of trust with their customers. The clients need to be able to entrust them with a lot of confidential data and information as well as their innermost strategies so that management consultants could work successfully and effectively.
To be able to establish this kind of firm bond of trust you have to make sure that there is no possibility that your customer misunderstands any of your marketing messages. You should be unambiguous about your market position. It takes us to the next point.
It is always better to say clearly and honestly if the required skills or competences for a particular project are not within your company’s skillsets.
Let me make it real with another example. Very often when we formulate segmented supply chain strategies for our clients’ business, we need to understand the customer segmentation criteria. As part of that activity we need market research data, which is obviously outside the competency set of our business. I am very clear with my clients when such situations arise. I also say that I am in a position to recommend a few good market research firms, if necessary, but customers are welcome to choose any others that they want to use so long as the required segmentation data is available at the end of the exercise.
Sophisticated clients always appreciate a consulting company which is honest about where their competency starts and where it ends. On the other hand there are consulting firms who pretend that they are able to magically do everything.
In most cases they end up doing nothing well enough, and in the long term they usually lose not only the trust of their clients, but also their own self-respect.
Looking beyond management consulting, as mentioned before, trust is important for collaboration between supply chain partners. When you are working with your supply chain partners – suppliers and customers – in innovation, in order to create new products faster, in enhancing the profitability and reducing the cash-to-cash cycle, you know that relying on fakes will only come back and bite you at the worst possible time.
Typically deep understanding of customer segments is required to be able to configure a segmented supply chain so that the end-to-end business strategy is in coherence. This activity obviously requires an immense amount of trust running all the way through the entire business network.
However, similar to the example comparing a pharmacist, a general practitioner and a heart surgeon, the required trust will always depend on the situation and on the level of collaboration that we need from each participant within the 5-STAR Business Network.