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What Causes Supply Chain Confusion

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.

1. Supply Chain Confusion created by service providers:

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!

2. Supply Chain Confusion created by those who mistake the a small part for the whole (of supply chain)

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):

i. It was six men of Indostan To learning much inclined, Who went to see the Elephant (Though all of them were blind), That each by observation Might satisfy his mind.
ii. The First approached the Elephant, And happening to fall Against his broad and sturdy side, At once began to bawl: “God bless me!—but the Elephant Is very like a wall!”
iii. The Second, feeling of the tusk, Cried:”Ho!—what have we here So very round and smooth and sharp? To me ‘t is mighty clear This wonder of an Elephant Is very like a spear!”
iv. The Third approached the animal, And happening to take The squirming trunk within his hands, Thus boldly up and spake: “I see,” quoth he, “the Elephant Is very like a snake!”
v. The Fourth reached out his eager hand, And felt about the knee. “What most this wondrous beast is like Is mighty plain,” quoth he; “‘T is clear enough the Elephant Is very like a tree!”
vi. The Fifth, who chanced to touch the ear, Said: “E’en the blindest man Can tell what this resembles most; Deny the fact who can, This marvel of an Elephant Is very like a fan!”
vii. The Sixth no sooner had begun About the beast to grope, Than, seizing on the swinging tail That fell within his scope, “I see,” quoth he, “the Elephant Is very like a rope!”
viii. And so these men of Indostan Disputed loud and long, Each in his own opinion Exceeding stiff and strong, Though each was partly in the right, And all were in the wrong!
moral

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.

There Are No Natives in This Land

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.

  1. Logistics – 3PL service providers,warehouse staff, or internal logistics staff – also include people who confuse ‘logistics’ with supply chain’
  2. Procurement – or Sourcing, or strategic sourcing – also includes people who easily confuse ‘supply’ with ‘supply chain’3
  3. Production Planning – or Scheduling – also includes people who easily confuse ‘production planning’ or ‘sales and operations planning’ with ‘supply chain planning’
  4. Inventory Management – also includes people who confuse ‘inventory planning’ or ‘sales and operations planning’ with ‘supply chain planning’
  5. Materials Management or Materials Handling – also includes people who confuse ‘materials management’ with supply chain management
  6. Demand Forecasting – also includes people who confuse demand forecasting with demand management with supply chain management

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.

Related Reading:

  1. https://globalscgroup.com/supply-chain-confusion/
  2. https://globalscgroup.com/how/
  3. https://globalscgroup.com/the-single-biggest-mistake-in-business-transformations/
  4. https://globalscgroup.com/the-second-biggest-mistake-in-business-transformations/

Why Executives Underestimate the Impact of Supply Chains?

CFOs are not the only ones who underestimate the impact of Supply Chains on modern corporations. CMOs, COOS and even CEOs are not fully aware of the full potential of supply chain management. When the potential is not fully known, expectations are too low and results are even lower. This speech and will show you the impact of Supply Chain Management in Modern Corporations. Here is the video of a keynote speech on Impact of Supply Chain Management in Modern Corporations. To know more about Vivek Sood, make sure to visit the website viveksood.com or Global Supply Chain Group. For any questions or comments, feel free to contact us at contact@globalscgroup.com. You can find comments on Why Executives Underestimate the Impact of Supply Chains? article on LinkedIn.

What Do Roads in Rural Bali Have to Do With Supply Chain Digitization?

Digitization is the buzzword of the moment in Supply Chain. Going by the number of articles and posts on digitization, you would think that the pope has just discovered religion. In fact, I recently read an article which used the word ‘digitization’ nearly 100 times in about 4 paragraphs. It talked about demand digitization, supply digitization, inventory digitization, fulfillment digitization, planning digitization, and many such things. Is this really that new? Since the days of SAP (late 80s), or before, digitization has been gradually gaining pace. Yet, current articles are making out as if there is a switch you flick – and suddenly you have ‘light – aka digitization’ Reality is far more interesting and juicy. Thinking of digitization, I was reminded of our business transformation projects and trouble with getting accurate data. Despite spending hundreds of millions of dollars on ERP systems, (and in many cases over a billion dollars), most companies still fall way short in terms of their data – both in terms of accuracy and completeness. Before starting almost every project we are assured that the data will be in our hands within a few days – at the most. Typically, we count ourselves lucky if the data extracts are available within 3 weeks, and are accurate enough to be useful for analysis. But, this blog post is not about the barriers to digitization, rather it is about the nature of digitization itself. Why the data is not readily available, and why is it of such poor quality that it is barely useful for most analysis – this discussion will open up a pandora’s box of pent up feelings within the companies. Most technology companies are clueless about the human element, and continue to plough ahead in darkness – and blame their customers for technology failures. Reading the recent spate of articles on digitization left me with a distinct impression that another element which they show a marked ignorance about is the nature of digitization itself. The belief that it is a binary switch where you get technology and suddenly your company is ‘digitized’ is far from reality. Recently, I had the occasion of spending nearly a month on a sabbatical and family holiday in the island of Bali. I happened to travel over the entire length and breadth of the island during this period and noticed the state of the roads varied significantly depending on how far I was from the ‘touristy Bali’. What started as paving over the village footpaths, would gradually morph into high quality road, which would later be widened to accommodate growing traffic, and later replaced by a highway/motorway in parts. Most island roads were however, still narrow village paths paved over for modern transport. All this existed simultaneously at the same time and will continue to exist well into the future – with gradual upgrades from one level to next over the years. That is the state of digitization of supply chain and will continue to be, with gradual upgrades from one level to next well into the future. We have no Y2K type crisis (remember that?) that will force upgrades, and dollars are scarce in most companies that do not enjoy some historical or political advantage. No amount of hype from IT vendors is going to change this reality. Also, CEOs and CFOs of long memories of past IT projects that failed to fully deliver. Perhaps the next generation of executives will be gullible enough to fall for the same hype again. You can find comments on “What Do Roads in Rural Bali Have to Do With Supply Chain Digitization?” article on LinkedIn.

Changing Role of Supply Chain Management in Digital Economy

In the rapidly changing world – role of supply chain is constantly evolving. There are now at least three generations of supply chains and the confusion about the roles and expectations is leading to massive losses inside the corporations. Here are some insights and excerpts from my speech on this topic. You can see the video on Latest Advances in Supply Chain Management – a Keynote Speech. Everyone has a circle of influence – in LinkedIn, Facebook, Twitter, contacts and colleagues. If these ideas make sense to you, share them far and wide. If they do not – make a comment here. To know more about Vivek Sood, make sure to visit my website viveksood.com or Global Supply Chain Group. For any questions or comments, feel free to contact us or email at contact@globalscgroup.com. You can find comments on this article on LinkedIn.

My Experience With Freight Cost Reduction Using Supply Chain Software

One of the reasons I invest so much time and resources of our company in keeping current with the information technology is that good supply chain depends almost entirely on good information.

And, your information is only as good as the technology deployed to collect, collate, store, parse and reproduce the information on demand. It is no secret that most of our supply chain transformation projects are highly time intensive and heavily data driven.

We trust all participants in the supply chain, and we verify everything – from several angles. However, if you have been working in freight cost reduction for over 30 years like I have been, you know the reality on ground. But that raises a big question about the data.

A data scientist can only be as good as the data s/he has.

In most projects the data is woefully inadequate – even today in 2016.

Rather than talk about our current freight cost reduction projects, I will give an example from several years ago (for sake of propriety and confidentiality I will disguise some details).

When our team completed the initial 8 week diagnostic on that project for an industrial corporation with $1.3 Billion supply chain, it was clear that despite heavy investment in SAP, supply chain data was far from adequate. In fact for ocean shipping it was so inadequate that we had to employ temporary staff in to digitize a paper trail of transaction details in order to conduct our analysis.

I could probably spend another 5,000 words just writing about how difficult it was to get hold of the data, and then how difficult it was to verify the veracity of that SAP extracts. After all my team was sharing their travails with me on a daily basis.

We had signed a fixed price 10 week contract for completing the work.

We anticipated the usual data problems for the first week or 2. What we did not anticipate was a 5 week run around to get hold of the SAP extract, and then another 2 weeks to verify its veracity. As a result our team had to find additional resources, and time, to conduct a 6-7 week analysis in 3-4 weeks in order to meet the deadline for senior executive off-site meeting scheduled for the end of the diagnostic.

I asked the team to make full record of all the inadequacies they found in the SAP set-up so that we could provide recommendations on system upgrade to facilitate good supply chain planning, control and decision making.  While this was not something our company worked on, and it was not even part of the project brief, it was going to be extremely useful for future SAP upgrades in the company.

 The limits of any machine are only discovered when it is being used at its limits.

(Now that upgrade is a subject for another blog, at some other time). It was clear to all that SAP was set-up mainly for financial reporting purposes, and supply chain management was an afterthought to the transaction recording.

As a result, the system did a marvelous job of providing aggregate data on financial well-being of the organisation. It also facilitated adequate drilling-down of financial transactions. Yet linking those financial details to actual supply chain movements was less than adequate.

In fact, for ocean shipping, nearly 25 hand-over points in the transaction workflow were all aggregated into one single SAP transaction.

Our team diligently recorded all the issues with supply chain transaction processing that we found during our strategic diagnostics of supply chain. Several pages of tables similar to the one below were cross-checked, verified and created.

Data Issues in SCM

Not just that, an annex report with high level requirements for future upgrade of SAP was also created, even though this was not part of our original project brief. Unfortunately, I am disinclined to publicly share even sanitized version of a sample extract out of this report .

Privately, I might be able to share sanitized extracts in case your team is going through a process of making your SAP installation more user friendly to your digitized supply chain.

I chose this case example for several reasons.

Firstly, it has gone through a full cycle of business and information technology outcomes, which are now well known. On business side our supply chain transformation project was a massive success. In fact the global head of supply chain (who later became the CEO) wrote this in the foreword to one of my books:

When I engaged Vivek’s services for supply chain transformation in one of the companies I was heading, we expected the careful and methodical approach that he was famous for. Outsourcing was only one of the components of our supply chain, and at the time we did not think it was even a particularly important one.

I was already convinced that critical business turnaround can only be achieved by taking an end-to-end supply chain approach to this transformation. I was pleased to note that the original target set for 3 years was surpassed by almost 70% in just 18 months – providing graphic evidence of the full power of these ideas in action.

On the information technology side, the supply chain requirements were never fully translated into a usable system resource base.

I will not go into the reasons in this blog. SAP has since invested in Ariba – a procurement management software.

Unfortunately, the confusion between procurement and supply chain management continues to persist. A number of journalists, and even business professionals use the terms interchangeably. On the IT side the supply chain workflow still remains inadequately supported.

A few newer companies are starting to crop up, yet a great majority of them (to some degree) seem to be falling into the same traps that their predecessors fell into above.

In my next blog I will cover this in more detail. Meanwhile, share your experience with SAP, Ariba or other so called supply chain transaction processing software systems.

Not only will you add to the accumulated IP on supply chain system, but also you may earn a copy of the book quoted above.

 

You can find comments on My Experience With Freight Cost Reduction Using Supply Chain Software on LinkedIn.

A Revamped Business Model: The Introduction of Customer Centric

New challenges need new responses. The common organizational model looks like the generic drainpipe structure, meeting the mammalian need for an ordered hierarchy and flow of power within a business. Most companies have evolved in the last 2 decades and their functioning has become almost entirely customer centric.  Their customers’ priorities drive most of the business workings.  The traditional drainpipe model frequently stifles customer responsiveness and innovation, therefore there is a clear need for a new standardized customer centric model of business. The new customer centric model starts with customers at the apex of the organization.  It is the customers’ needs which the organization is trying to serve, so directly aligned with the customers is the sales team.  The function of the sales team is to have an https://www.viagrapascherfr.com/le-viagra-vente-libre/ intimate understanding of the customers’ needs.  Only then can an organization create successful products.  An organization can outsource almost everything else it does, but it can never outsource its sales. Two other key functions which are equally important and support the sales team is marketing and research & development.  Between these three we form the top tier of the modern organization’s structure.

sales and marketing

The Customer Centric Business Model

If Your Business Has Too Much Internal Focus, You Could Be Missing Out

It’s no surprise that customers hate companies with too much internal focus.  As organizations free up their inter-departmental planning from rigidities, the communications start to bloom.  Efficiency improves considerable and everybody starts running together, faster.  However, a higher set of problems emerge due to lack of external focus – on suppliers, customers, and end-consumers. Many times everybody inside the organization is running together, faster, but in the wrong direction.

Departmental Silos: The Achilles Heel of Your Company

Businesses are gradually being chained by a number of forces so ubiquitous and accepted by all of us, that we fail to notice their impact on businesses, economies, and people. Today, most organizations become veritable bureaucracies as they grow bigger. Every person sits inside his/her own department and is very careful about making sure that their department doesn’t carry the blame if there is a mix-up. Covering the tracks becomes the norm. The resulting departmental silos create stilted communication.

Problems With Silos

Problems With Silos

ERP Unraveled: Why Your Business Might Suffer From Inadequate Planning

To combat the symptoms of departmental silos many organizations implement a very rigid Enterprise Resource Planning (ERP) system. This helps run their internal processes and coordinates inter-departmental communication. By their nature, these systems are very formulaic and prescriptive with a one-size fits all approach to planning. Now a different bunch of problems start surfacing as a result.  If you’ve ever wondered why you see so much chaos, anxiety, blame game, and other such dysfunctional behaviors in businesses, this is the key reason.

The Effects of ERP

The Effects of ERP

In my newest book, Unchain Your Corporation, I explore the reasons for this perceived chaos in greater detail.  Feel free to visit unchainyourcorporation.com for more information.

Business Model Transformation: Lessons From Soccer And Hockey – Part 2

In the previous blog in this series I wrote about the Brazilian soccer teams transformation from an individualistic style of play to a network style game.

In early 90s, more than two decades since the last World Cup championship title and Brazil faced an interesting juxtaposition – continue with what led to past success of PELE and his peers, or move on with the new rules of the game.

The new rules were clear – minimise the individual wizardry of foot play, dribbling and nimble dexterous touches, and replace these with the power-play of networks of players moving in formations to conquer the opponents by outwitting them, by outsmarting them, and by outnetworking them using a better method. Having lived and worked in South America – Chile, Argentina and Brazil in early 90’s I witnessed this transformation and saw how Brazilians successfully lifted the cup in 1994.

Many other South American teams continue to struggle between the past and the future, despite the knowledge and example of Brazil’s successful methods. Uruguay, Chile and Colombia come to mind as good examples.

What keeps them from making a full transition to the future method? That is a topic for a future blog post.

In this blog I am thinking about another sport which I personally played growing up in Punjab, India.

Indian hockey crisis

Dhyan chand statueJust as success stories provide impactful learning opportunity, stories of failure are sometimes provide even bigger learning opportunities. Seeing where others fall, the traps and landmines they encounter can also guide you to the right path. Take the story of India’s hockey for instance. I grew up in India which was mad with field hockey at that time.

And for a good reason.  Believe it or not, at one stage India was the top team in field hockey in the world. In fact, the boarding school I went to in Punjab was in a Maharaja’s palace, not very far away from a dusty village which had the unique claim of having sent 5 out of 11 national hockey players who won the a gold medal for India.

The peak of India’s hockey was from 1928 to 1956, during which six consecutive Olympic gold medals were brought home.  Their exploits were legendary. Even today you can talk to the Indian hockey affectionados – or simply google the name Dhyan Chand – to get a flavour of what I am talking about.

However, at some point in the early 50s, the nature of hockey started changing. The grass field was replaced with Astroturf; the wooden hockey sticks were replaced with the ones made of composite fibre or other man-made material. As it happened to soccer, the way of playing hockey was also changing from individual wizardry with a stick to network of players playing in formations, passing a ball rapidly to each other in order to outwit their opponents.

For a multitude of reasons, Indian hockey players, coaches, administrators and other staff members never managed to get their act together. Many said it was a lack of commitment, pure ignorance or a rest-on-laurels attitude. I still remember training for hockey at a young age where the coaches emphasised individual skill, practice and dedication over formations, teamwork and game-plans.

In their mistaken belief that what worked in the past will also work in the future, they continued to tell us legends about individual players practicing barefoot for whole nights in the moonlight with misshapen wooden sticks. The Indian Hockey Federation (IHF) did not encourage practicing or even building Astroturf facilities.

Moreover, instead of having the will to change, there seemed to be more of the will to blame. Fingers were pointed without any point made or scored. Even though still considered as a national sport, field hockey has failed to capture its own golden age essence and the glory seems to have been transferred to cricket.

From being a default player in every final of hockey, India is nowhere to be seen on the world’s hockey map today. So what can be learnt from this sad tale of Indian hockey? Are the lessons same as those from the happy story of Brazilian soccer? Which story make the lesson more graphic and useful?

Can businesses use any of this knowledge for the changing business landscape?

What is changing in the business landscape that makes transformation necessary?

Is there a better method for business transformations?

We will address these questions in the third and final blog in this series.

If you would like to read the full article in PDF format, please click Hockey-and-Soccer-5.

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