I have been asked this question a lot on Quora, as well in my board and other speeches. A lot of supply chain commentary is becoming too technical and mysterious. Supply Chain Software sellers have a vested interest in creating the mystique – similar to what McKinsey used to do about 20 years ago. But Supply Chain Management (SCM) need not be mysterious. Remember, if someone cannot explain it easily enough – they do not understand it well enough. The purpose of one of my books – Unchain Your Corporation – was precisely this – to demystify the supply chains. This books is written for layperson, can be read in 2–3 hours, and had more than 200 stories and anecdotes to help the readers use complex concepts. At its core, SCM is just about two things – integration, and optimisation. Integration of various functions (purchasing, production, logistics, inventory management, finance, sales) within a company. And, Integration of of various companies that form a supply chain together to serve an end consumer. Optimisation – is the art of getting the best results from the same inputs. You will be surprised to know that most GPS software do not even give you the optimum route even if they have real-time traffic information. The key to testing optimisation is by doing the same exercise manually and comparing against the results of the software. There are clearly degrees of Integration and Optimisation. Higher levels of Integration and/or Optimisation will lead to higher level of efficacy in supply chains. See the figure below – that comes from one of my board speeches:
If you supply chain consultants are not telling you these two simple truths, then all the talk of automation, big data software and driverless vehicles is a pipedream without a purpose. And, if your Supply Chain MBA is not teaching you these two basics then you might have wasted 2 years and thousands of dollars. Here is why… …Everything else in supply chain stands on those two foundations. Your supply chain relationships are part of integration effort, and automation is part of optimisation effort.
One of my posts on LinkedIn sparked a lot of interest and a healthy debate. I am not sure about the reason for interest but seems like people agree with the above statement, as well as its reverse:
The person who does less than s/he is paid for, will soon be paid less that s/he does.
So, what do you get paid for? And, are you getting paid for what you are worth? What skills do you bring to the job? What attitude to you bring? Are you being rewarded for the two? What can you do? Use the figure below as a guideline: You can find comments on LinkedIn.
I cannot claim to know everything in the universe of workology. But after starting work at the age of 17 and worked almost continuously (barring a few short breaks for full time studies), for the last 34 years I do have a perspective. And, I do not hesitate to share it when the need arises. Recently, someone approached me to mentor her about the salaries, levels and what is required to progress. I narrowed down the answer to the last question to two critical factors – skills and dedication. If you have the skills, and you apply them with dedication, no employer would want to let go of you. Within reason they will be willing to pay much higher than to someone else you fell short on either of these two counts. To discuss the levels and remunerations I drew the above 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.
Extract from the book “The 5-Star Business Network”, written by Vivek Sood
There was a time, not more than a few decades ago, if you were General Motors you would attempt to own every part of your business. The assembly lines, the parts manufacturing plants, the stamping units, the ancillary units and even the software that runs the business, the dealerships that sold the cars, the steel mills, even the mines that produce iron ore for the mills. This was for good reason – you either could not trust others to be savvy enough to produce and send you the material you wanted when you wanted it, or the margins in each of those businesses were big enough for you to try and own all those operations.
There was only one thing wrong with this structure. Your business became an insular behemoth – far removed from the customers and moving slowly in a marketplace going through a rapid transformation. Your more nimble competitors, with loose networks of aligned companies, could easily run rings around you in no time – both in terms of developing and launching new products, and producing and selling high quality products at lower prices.
Eventually, realizing the truism inherent in the folk wisdom of farmers when they say that you do not have to own the cow if all you want is the milk, you would investigate ways of carving out parts of your business into independent entities that could be run as loosely aligned network of businesses, similar to what your competitors had evolved into. This is not a book extolling the virtues of Keiretsu, chaebols or similarly exotic-sounding Japanese and other Asian business structures. It is, however, useful to take some lessons from the evolution and success of these business networks.
Over the past several decades, both the global economy, as well as business structures have evolved dramatically to such an extent most businesses have no recourse but to create business networks akin to those mentioned above (notify on the book). So what is the magic of these business networks? Why are they so important? What makes one business network better than another? Is there a way to systematically assess, measure, report upon, improve and monitor the quality of your business network? What outcomes should you expect out of a well-tuned business network? These are some of the questions we will answer in this book.
When the Tsunami flooded the eastern coastal stretch of Japan in March 2011, the ensuing nuclear disaster combined with the devastation caused by the ocean to disrupt businesses around the world. The Japanese economy sits right in the middle of the global business network and it was natural for businesses as diverse as auto manufacturing, electronics, chemicals, petroleum products, computers and metals to experience the disruptive shock. For example, the price of the Toyota Prius went up by nearly $2,400 after rumours of shortages. While it is natural for a variety of businesses to experience the disruption, it was remarkable to note that those, which had the most responsive and resilient business networks, were the ones to recover from this catastrophe the quickest. Later on in this book, we will see how to recognize the quality of business networks and make them more resilient and responsive at the same time.
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.
As everybody knows, three giants in the tech and software world have amassed an incomparable power in recent years from their networks and their strategies. With a vast range of products, they have stitched up the market amongst themselves. But what are the strengths and weaknesses of each giant?
What are the deep business and supply chain implications of the battle of these Titans?
Each one of them is a Business-to-Business Network in its own way with excellent partners and supply chain participants. Apple has its own ecosystem, which is not just their customers, but also thousands of programmers and app developers as well as millions of sellers on iTunes. That is Apple‘s biggest strength.
The same goes for Amazon, with an ecosystem including a very large customer base as well as thousands of sellers that sell their products on their website.
On the other hand, almost everybody uses Google as a search engine, which means they have the largest market share now in the mobile operating systems with Android. Google also owns YouTube and many other digital properties. Each one of them has a formidable Supply Chain, Business-to-Business Network or Supply Network in its own right.
Yet now, all three of them are facing problems in different ways.
Apple is facing problems because its success has always been based on creating the next big product, especially if you look at Apple’s history (iPod à iPhone à iPad). Now, Apple is launching the new Apple watch, which is not a very successful product in my mind. IPhone 6 is obviously just a minor update of the previous successful iPhone. That is where Apple is currently failing. However, they are creating some really innovative services such as Apple-Pay, which allows you to use your mobile as a NFC-based payment option, and Apple-SIM, which allows you to roam at a very low cost in foreign countries.
Apple continues to profit from past supply chain and product successes, and sits on top of huge pile of cash. Amazon, on the other hand, does not make much profit, although it has a very high growth rate of revenue (it grew by around $24 billion in two years) and still growing.
But they invested in a number of things, which did not turn out that well. This type of experimentation is in the DNA of the company, and at the moment, it is not a big problem, at least not yet. Nonetheless, a couple of these investment, noted by analysts and commentators, have raised red flags in my mind. Amazon Fresh seems to be a resurrection of the business model of an failed company called Webvan, which invested $1 billion in this field and went bankrupt in two years.
Amazon also continues to invest in expanding its business in India, which is a very competitive environment. With local market players who know the local characteristics much better, and a chaotic marketplace, this is perhaps the most uncertain field for Amazon in my view. The competition may not even be from other B2C e-commerce companies; every man with a mobile phone and a bicycle is a potential competitor. Amazon persists in investing in these two markets.
This could be much more harmful to Amazon than their mobile phones or other hardware devices that they keep creating every few months. They are losing money on those but for a purpose: they are trying to lock customers into the Amazon Network. Nevertheless, these products will never replace iPhones/iPads or equivalent Samsung products and will always be number two in customers’ minds.
The question is: Where is Amazon’s next platform for growth?
Amazon’s “unsexy” B2B business, a “$8 trillion bet”, has been growing silently in the background, perhaps making it eight times bigger than Alibaba and the biggest 5-STAR Business Network on earth.
AmazonSupply, a wholesale and distribution hub, started in 2005 and has grown to carry 2.2 million products, ranging from office equipment to industrial components, materials and more. After nearly 15 years of languishing on the wayside, the B2B exchanges are finally coming true, slowly.
Already, wholesalers are whispering about the threats from AmazonSupply; although many specialty wholesalers and distributors are somewhat confident that their turf is safe from the giant’s claws due to their highly segmented market.
Nonetheless, AmazonSupply, Alibaba, or B2B exchanges, could become so powerful that they will suck small players into their enormous vacuum of suppliers. The process can even accelerate if trust keeping mechanisms are built into B2B exchanges.
Seller and buyer ratings, as well as seller/buyer protection seen on sites such as eBay and PayPal are not enough to cover the sheer size of B2B transactions. Even the current rating system on Alibaba will not suffice, should this attractive market grow in the years to come.
Looking at Google, basically revenues of advertisements relating to search engine are stagnating/saturating. Fake clicks are being identified much more easily. People are becoming more careful of what they are spending on online advertisements. Android and YouTube are two engines of growth for Google. Google has declared a strategy of continuing investment in its YouTube products
It is easy to argue that Apple has the best chance of leading the pack in 5 years’ time depending on what kind of new hardware they manage to create in the next 2-3 years. Google and Amazon are probably equal second depending on whether Amazon succeeds in its strategy to capture Business-to-Business markets or whether Google manages to monetise YouTube as much as they can.
Equally likely, new competitors might emerge on the horizon – like superUber! That will be very interesting to see.
ABOUT VIVEK SOOD:
Vivek is the Global Supply Chain Strategist and Author who works globally with large and mid-size corporations to FIX their Business-to-Business Networks in order to their multiply profits.
In that last 14 years he created several new breakthroughs in Supply Chain – including business transformations led by SCM 3.0. His more than 400 projects have spanned approximately 84 countries on five continents, with clients ranging from fortune 500 companies to innovative green technology companies.
Get free extracts of his books and see why thousands of executives at the world’s leading corporations trust Global Supply Chain Group to build brilliant business-to-business network strategy.
We are rapidly growing and hiring. Exceptional (world’s best) Outsourcing Experts, Logisticians, Strategists and Supply Chain should contact me directly.
Follow Vivek here and @GlobalSupplyCG
If you are a HR professional, recruitment or HR consultant – and you think your clients might benefit from these insights about business transformations – feel free to forward this blog series via email or linkedin. The nature of your industry is changing rapidly as a result of forces mentioned in this article.
I came across the following picture on the blog of Thaku Huni and the thought struck me about a situation I encounter quite frequently:
If you asked any objective person about the KPIs of the group of six men above – most people will agree that at least on quality (meeting customer specifications about the rails) this team will rate 0%.
Yet, if you asked this team, they might in all honesty, claim that at least one rail is meeting the opposite side – so their quality rating should be 50%.
Time and time again I encounter this situation. Let me give you one example. I have to fly frequently for client assigments, and Qantas our national carrier rates its on time performance quite highly. Yet, numerous times they have just cancelled my flight and moved me to the next flight, or done many similar things to meet their publicly declared on time performance targets.
And, Qantas is not the only airlines to do this. Over the years, I have noticed that the tricks employed by airlines have included blaming mechanical failures, blaming weather, moving the departure times in case of delay, coming up with a plethora of ‘exclusions’ to maintain their impeccable on-time departure record.
Almost all KPIs are suspect till you get to the depth of how they are defined, how they are calculated, how the data is collected and analysed. A quick example to make it real.
A large logistics company was the preferred supplier for our clients – a multi-billion dollar fast moving consumer goods company. The logistics company would every month send reports proudly claiming on-time delivery track record of close to 100%. When our team delved into the details it because clear that the due dates/times for any deliveries likely to not meet the target would be quietly changed to indicate the new delivery times. Voila – near 100% track record.
Obviously, the deliverables must be pre-agreed and held firm barring exceptional circumstances. KPIs must not be allowed to be doctored to shore up the numbers, lest they become meaningless exercise in data collection and analysis.
BAD KPIs are WORSE than no KPIs. I would rather navigate a ship without a gyro compass, than with a faulty gyro compass – because I can do better with a reasonable magnetic compass than with a faulty gyro.
Now, I am sure that I am not the only one who has come across these type of incidents. In fact most experienced business people will have their own experiences – some more colourful than others. If you want, share your favourite tricks in the comments section below. You might even win the best entry get a prize – my latest book.
In this series, I will address the second question raised at the start of the previous blog series – “What are the benefits of supply chain 3.0?” Before answering that question, let me go over the three type of responses I generally get when I explain to people that supply chain 3.0 is real.
Most of the McKinsey (or their clone) trained strategists ask me to show data to back up this assertion. On the other hand, more intuitive executives (mainly from sales and marketing background, as I observe) ask me to explain the benefits of supply chain 3.0. Finally, the third group – those who I call the transformational leaders ask a simple question – how can we use the power of supply chain 3.0 in effecting beneficial business transformations.
First a caveat – no benefit accrues to those who do not act. And, not just any random action will suffice (though, in most cases, any action is better than no action); you need action based on cohesive, strategic thinking. That is the reason for the word “can” in the title of this post – all benefits are just potential energy till converted into reality by your kinetic energy.
Of course, I have not yet talked about how supply chain 3.0 differs from its previous version – supply chain 2.0. While the full detail of that is a subject for a future blog post, it will be necessary for us to know that these are different, and that supply chain 3.0 is a step change above supply chain 2.0. So, we will briefly delve into various avatars of supply chains as we look at the benefits of supply chain 3.0.
To understand the potential benefits of supply chain 3.0, let us look at the current business context. The best way for me to get you thinking along the same line as me is show you the following slideshow with just 14 slides from UNDERCURRENT:
It will probably take you no more than 7 minutes to quickly peruse this material and I have no intention of taking credit for the original thinking by the makers of this slideshow. That is why I am neither paraphrasing it, nor taking from it – something I see happening with my material more and more, even in the erudite circles.
My personal takeaway message from the above slideshow is that something immense is happening across the world of business. Combination of globalisation, bandwidth, rising standards in the east and financial adjustments in the west are creating both opportunities and threats everywhere.
Recently, someone sent me the link to a cartoon by marketoonist.com, which I show below for comment. They quipped to me that retail business model is toast. I agreed, but asked in return “which model is safe”. Think deeply enough, especially in line of the material in the slideshow and you can see the same threat lurking everywhere in many different forms.
But the old cliché is right. Every threat does hide an opportunity. I believe this despite the fact that I do not know enough Chinese language to attest to the fact that the Chinese character for threat and opportunity is the same (unfortunately, I could not learn any Chinese through-out the translation of my book into that language).
There is a lot of talk about VUCA – Variability, Uncertainty, Complexity and Ambiguity – when strategists discuss the business environment today. It is a bit ironic that so many military terms get incorporated in the strategy parlance during the time of duress.
However, one thing is clear – that old organisational models are not adequate anymore. New challenges need new responses. In the next entry of this blog series, I will discuss about business models, how they have changed and the effects on supply chain.
Consider this, if you are a typical company your imports and exports have grown at least 20% over the last 10 years. If you are one of those unique companies who prefer to deal with local suppliers then all that is happening is that there is a layer of rent-seeking middleperson who is importing on your behalf and supplying to you. When the concept of the supply chains originated in late 70s, most supply chains were still national – while were moving towards a regional structure. In fact, it might be fair to say (I have to confirm with Dr. Wolfgang Partch – one of my colleagues in Munich and originator of the concept) that the Pan-European regional expasion of companys’ supplier footprint led to the origination or at least quick adoption of the concept in the business world. Here was a practical solution to a real business problem, created by practical people working in the consulting industry. That was before everyone else, including the academia jumped on the the band-wagon and over-complicated things for their own purposes. However, the purpose of this post is to explore what happened to supply chain when the supplier network moved from a regional structure to a more global structure. Hardly a company exists (at least not a large one) which does not have suppliers located outside its immideate regional footprint. No wonder the supply chain models of 80s and 90s are finding it very hard to cope with the globalisation of the supply chains. If you are reading this – what is your view on the matter? Do we need to move beyond supply chains (And please don’t talk about supply network or supply clusters – they are really same things in a more expanded format, merely semantics in most definitions) – into the realms of something totally new. Or, do we need to just expand the reach of the current supply chain models? Or, do we need to expand the supply chain models? Please express your opinions below or by email to me..