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The core idea of lean manufacturing is actually quite simple and that is to work on eliminating Muda (wastefulness) from the manufacturing process. Every manufacturing process will experience some kind of waste, it could be time, it could be material or it could be productivity.

So what is a waste? Waste is defined as any activity that does not add value from the customer’s perspective. According to research conducted by the Lean Enterprise Research Centre (LERC), fully 60% of production activities in a typical manufacturing operation are waste – they add no value at all for the customer. The core objective of any business process is to add value and realise the value (through tangible outcomes)

The good news is that through lean six sigma tools every company has a tremendous opportunity to improve, and other manufacturing best practices. Techniques that enable you to deliver higher quality products at significantly lower costs. The competitive advantage in the market place is differentiating the organisations. Lean manufacturing techniques help us to minimise waste and improve productivity.

Graphic by NEWCASTLE Systems

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“Business must have an appetite for category management…and procurement must create that appetite” – CPO, FTSE 100 Engineering Company, UK

We often hear the word category management, what is it? And is it different to procurement? These questions are quite common in the minds of non-supply chain professionals. We also hear sourcing, is it procurement? It is not complicated, let clear the clutter.

Category Management

Let us establish clarity about category management first. It is an organisational strategic tactic to organise the procurement function to focus on specific areas of spend. It is a silo approach to procurement. Each category is considered as a profit centre and to ensure value addition and value realisation is achieved. This approach enables the category managers to conduct in-depth market analysis to fully leverage competitive product differentiation. In summary, it is a silo approach to procurement to focus on a specific category and it could be a direct or an indirect category.

Sourcing

Sourcing, as the name implies, is a finding a source from where the goods and services can be procured. It is a subsection of the procurement, where, procurement is a function and concerned with acquiring of goods and services, sourcing is proactive activity in finding the least expensive supplier for those goods or services. Since the business profits heavily rely on finding the best source of suppliers it is considered to be the first step taken by the business before its first sale.

One can observe from the graphic that the steps involved in identifying a new component or product or service as the first step starts with requirements definition and ends with supplier management. This is very popular in the NPI (new product introduction) process.
Graphic Source:http://www.tendersinfo.com

Procurement

Finally, what is procurement, as mentioned earlier, it is a function of acquisition of the products or services identified either through category management or sourcing function. It is time to discuss a myth that one of the procurement function is to identify the need for goods and services. In the ERP/MRP era, it is the MRP that defines what product and quantity to be purchased from the selected vendors based on demand forecasting input. Whereas services are procured based on procurement requisitions. Apart from the function of purchasing, procurement function also takes care of vendor selection (in the absence of category management and sourcing function), negotiating contracts, regulatory compliance and the critical aspect of the procurement function is the total cost of ownership (TCO). What is the total cost of ownership should be explained if not this article will not be incomplete and people have to go back to google?

“Total cost of ownership (TCO) is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system. It is a management accounting concept that can be used in full cost accounting or even ecological economics where it includes social costs.”

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Michael Eugene Porter is an American academic known for his theories on economics, business strategy, and social causes. He is the Bishop William Lawrence University Professor at Harvard Business School. Michael Porter coined the term ‘Value Chain’ was first used in his book “Competitive Advantage: Creating and Sustaining Superior Performance” (1985). The value chain is a process of translating organisational activities and its performances to gain a competitive position in the market place.
In any process, we find Core activities and Support activities that collectively deliver performance outcomes in the form of margins. Here margin refers to the profits earned for a product or service through sales revenue which is more than the sum of the cost of all activities in the value chain. Porter’s basic model as shown below identifies direct and indirect activities in any organisation which drives margins.

Porter’s value chain emphasizes on the process of how inputs change the outputs purchased by consumers which delivers competitive advantage and targeted margins of the organisation.

Core Activities (Primary Activities)
The core activities relate directly to the manufacturing, service, sale, maintenance and support of a product or service. And they consist
o Inbound logistics
o Operations
o Outbound logistics
o Marketing and Sales
o Service

Support Activities
These activities support the core functions identified above. In the above diagram. For example, procurement supports operations with certain activities, but it also supports marketing and sales with other activities.

• Procurement (purchasing)
• Human resource management
• Technology
• Infrastructure

My Perspective

In my opinion, the fundamental difference between supply chain and value chain is the element of “margin” part of Porter’s value chain. Supply Chin never deals with margins, it deals with SMART Goals, KPIs, deliverables – Quantitative and qualitative. The supply chain cannot assure margins which largely depends upon sales and sales is outside the purview of supply chain and whereas Porter’s value chain the core activities include Marketing and sales which could drive improved margins with other elements such as inbound logistics, Operations and Service supporting the improved margins.

My concept of the value chain bit different from Porter’s version. I firmly believe that People, Process and Technology is the support functions and the core functions are Supply Chain, Operations, Marketing and Sales and I firmly believe that customer service is part of Marketing and sales. If we integrate these functions and work towards organisational goal effectively we can achieve targeted margins. I am not critical about Porter’s view, but I am presenting my views as a Supply Chain professional.
Today’s world is collaborative in nature. No function is superior and no function can attain organisational goals independently. It’s a team approach. In my theory, people, process and technology enable supply chain, operations and marketing and sales to achieve competitive advantage in the market place. One more point is that the communication channel between support functions and core functions is two-way. Listen, Respond and React is the communication strategy for achieving targeted goals.

“Synergy – the bonus that is achieved when things work together harmoniously.” – Mark Twain

My value chain model:

I appreciate your views and comments.

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Leader vs. Leadership

A leader’s job is not to work for others, it’s to help others figure out how to do it themselves and successful, to succeed beyond what they thought possible. A leader is at his best when people barely know he exists when the work is done, and the objective is fulfilled, they will say: “we did it”. When “I” is replaced with “we”, the leader’s presence is sensed.

“Leaders become great, not because of their power, but because of their ability to empower others”

Leadership is something you earn, something you’re chosen for. Leadership is all about doing the right things, millions saw the apple fall, but Newton was the one who asked why. Ultimately, leadership is not about glorious crowning acts. It’s about keeping the team focused on a goal and motivated and achieve it, especially in dynamic and challenging conditions. It is about laying the groundwork for others’ success, and then standing back and letting them shine.

The difference is that leaders embody leadership mindsets and actions. It’s who you are as a person that makes you a leader. Managing leadership actions or merely holding a leadership position does not make you an individual a leader.

To develop a vision for the organisation is leadership. To be visionary is to be a leader.
To drive people towards organisational goals is leadership. To be influential is to be a leader.
To coach others, the right things are the leadership. To model how to determine the right things is to be a leader.
To recognize opportunities is to be leadership. To solve problems is leadership.
To be wise decision-making is to be leadership. To make decisions is the leader’s job.

Some interesting quotes on leadership.

1. A leader is best when people barely know he exists when his work is done, his aim fulfilled, they will say: we did it ourselves. —Lao Tzu

2. Where there is no vision, the people perish. —Proverbs 29:18

3. I must follow the people. Am I not their leader? —Benjamin Disraeli

4. You manage things; you lead people. —Rear Admiral Grace Murray Hopper

5. The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant. —Max DePree

6. Leadership is the capacity to translate vision into reality. —Warren Bennis

7. Lead me, follow me, or get out of my way. — General George Patton

8. Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others. —Jack Welch

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We hear this phrase “Change Management” as frequently as “Excuse me”, one has to be really excused because change management has become a fad, far from reality. Change Management is a process and a journey towards desired future state from current ineffective state. This could involve mostly people, but other elements that go through a change and they could include Business Processes, Technology, Business Activities etc.

When leaders or managers are planning to manage change, there are five key principles that need to be kept in mind:
Principle1- Different People React Differently To Change
Principle2- Everyone Has Fundamental Needs That Have To Be Met
Principle3- Change Often Involves A Loss, And People Go Through The “Loss Curve“
Principle4- Expectations Need To Be Managed Realistically
Principle5- Fears Have To Be Dealt With

Miracles do not happen, we the people and transformational leaders make it happen. Change management should be as simple as changing your attire. However, it is complicated because it deals with human behaviour and the change draws people out of their comfort zone and creates anxiety stemming out of fear of failure.

In my opinion, change management is not a business process but mindset management process. As soon as people feel comfortable with what is called as change will embrace it without any mental blocks.

It is not as simple as said and done. What it takes it to make it simple and easy to achieve? Few interesting dynamics pop-ups in my mind and they are emotional intelligence, listening skills, communication skills, ability to walk the talk. One could question that listening is part of communication skills. Technically no, practically yes. The technical definition of communication is “the imparting or exchanging of information by speaking, writing, or using some other medium”. As you can notice, listening is not part of communication. When you are unable to listen to other’s perspective, how can you exchange information effectively? Listen and Silent are spelt with same letters. Think about it. Practically, listening is part of communication because when the exchange of information is considered as an interactive process, one cannot exchange information effectively unless one understands other party’s thought process. See what happened to the patient (below graphic) on the operation table.

“We have two ears and one mouth, so we should listen more than we say.” Zeno of Citium

The idiom emotional intelligence is becoming more popular recently. But what is it? “the capacity to be aware of, control, and express one’s emotions, and to handle interpersonal relationships judiciously and empathetically.” If we dissect the definition, the critical words are aware, control, express and handle are the keywords of emotional intelligence. Be aware of the other person’s emotional state, control your emotions, express without hurting other’s emotions, and handle emotional conflict effectively. And finally, show empathy and focus on the issue and not the person.

“As more and more artificial intelligence is entering into the world, more and more emotional intelligence must enter into leadership.” – Amit Ray

In the change management mode, the leaders and the change managers talk a lot to convince people about the change and that is ‘talk the talk’. However, to make the change successful, it is absolutely necessary to ‘Walk the talk’. This means actions speak louder than words. Words are critical as all the people involved in the change process may not have very good comprehending abilities. Hence, it is absolutely necessary to convey the change in as many ways as possible. It could be a good idea to display posters about the change with motivational quotes such as, “Be the change that you wish to see in the world.”; “Everyone thinks of changing the world, but no one thinks of changing himself.”; “The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking.”; “Yesterday I was clever, so I wanted to change the world. Today I am wise, so I am changing myself.”; “He who rejects change is the architect of decay”; “We can do it together”; “We can do it!”.

In this article, I have put the cart in front of the horse. I should have discussed the barriers to the change management before addressing those challenges. I have worked for a CEO who wanted the solution first and the problem next. I have followed his philosophy in articulating about the change management. Now let us look at the barriers.

“The only walls that exist are those you have placed in your mind. And whatever obstacles you conceive, exist only because you have forgotten what you have already achieved.” Suzy Kassem

In my opinion, there are no barriers to change, they are virtual barriers, let us examine them. The first one is “Resistance to Change”. The resistance could be political or mind block arising out of fear of failure. And the direct resistance could be due to fear of unknown and indirect due to political reasons.

Before embarking on the change it is necessary to understand the current state (organisational cultural scan) even before thinking about the change. Some traditional organisations may not be ready for change, they are used to doing things in their own way and style. The culture, processes and systems of large organizations dwarf the complexity of a change management idea/attempt. Please remember that an architect wouldn’t renovate a building without looking at the existing blueprints. The current state of the organisation is the blueprint for the change management process.

Managing changes in any organization can be compared to repairing an aircraft when airborne. Change is always a moving target because as we travel through the change journey, expectations change, business dynamics change and outcomes also could change. Long drawn change process may have many integration points that are potential to fail.

In current globalised economy, business is dynamic and fast paced which initiates change management. External factors such as competition play a vital role. In many cases, external forces drive organizational change. Competition, external threats, technological change, market conditions and economic forces are all common drivers of change. Organizations may expedite a change in response to external threats.

Change is not compulsory and at the same time one cannot exist and grow without change. Change is inevitable.

“After all, if you do not resist the apparently inevitable, you will never know how inevitable the inevitable was.” – Terry Eagleton

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The decision of implementing an integrated all-in-one ERP package is not always an easy one. Some companies have decided to invest in an all-in-one ERP package, as Colgate-Palmolive did with SAP R/3. For some other organizations committed to SCM, an ERP integrated package may not provide the best solution for a function of the business they believe is crucial. The organisational excellence exists within three critical elements, People, Processes and Technology.  If we summarise it, the bottom line is the people who make it happen.  People who create or customise processes aligning with organisational goals, Technology may come with some bells and whistles but the critical aspect is the people who make the difference and make the technology work in alignment with the processes that were customised to organisational goals.

Sadly, in search of competitive advantage organisations search for the best-of-breed SCM or demand-forecasting software. Let us be clear the best of breed ERP cannot address your organisational functional needs in total. For example, BOEING, uses demand-forecasting software by i2 Technologies, ERP by Baan and product data management by Structural Dynamics Research while developing EDI links and Internet applications to be used by its suppliers and customers (Source: Stein and Sweat).

Did your Company address the ERP implementation roadblocks?

The implementation of ERP systems across the supply chain is a complex and time-consuming process. The biggest challenge for progressing as per plan in ERP implementation is the Change Management. Apart from change management various technological and organizational issues must be managed to mitigate the risk of failure. As mentioned earlier, for the successful implementation of ERP packages under SCM practices, the required organizational change, through corporate cultural transformation, is crucial.

Change Management: Change management is a collective term for all approaches to preparing and supporting individuals, teams, and organizations in making the organizational change. Source: Wikipedia.

Change Management made simple! 

Click the link to watch the Video

Trust between partners – Willingness for information sharing: In many organisations information is stored in individual brains instead of a repository. This makes implementing ERP very difficult. The answer is to prepare the SOP (standard operating procedure) and this will all to understand how the business process flows through the organisation seamlessly. It has been pointed out, that for any form of business structure that is built on partnership, the application of economic chain costing, and therefore business optimization, requires information sharing not only inside a company but between the companies that formulate the partnership. (Source: Drucker).

Team-work – Communication skills: “Talent wins games, but teamwork and intelligence wins championships.” Team-work is a critical element in the implementation of any ERP system. The key to the success is cross-functional teams working towards the common goal. The silo approach will deliver disastrous results, simply because the information has to flow through various functions of the organisation and supply chain management is the heart of information that collects and distributes throughout the organisation.

Transformational leadership: Every manager is not a leader and every leader may not be the manager. What we need is Transformational Leaders – “A little thing is a little thing but faithfulness in a little thing is a great thing”.  Thought leaders never ignore any little thing, everything in the process of implementing ERP is critical and the leaders have to be hands-on in handling and implementing the ERP.  If they take an off-line approach, the outcome could be devastating. Someone rightly pointed out that, “Intellectuals solve the problem, genius prevents it!”, the transformational leaders should be genius.  A transformational leadership, committed to the continuous effort needed for the successful implementation of ERP systems, must resolve conflicts and properly manage resistance not only to new technology but also to new work relationships. A true transformational leader may have to follow the people first to make them follow the leader. Coordination of individual needs and goals must be planned carefully first, then it is easier to coordinate individual technical skills required for successful ERP implementation.

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In summary, ERP is the unavoidable monster who can turn your business into a seamless organisation connected with the suppliers and clients and all cross-functional stakeholders.  The road to success is hard and people will resist, as the organisation crosses the point of no return, the leaders in every sphere of the organisation have to take the accountability to make sure that they reach the goal and successful.

 

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The agile supply chain essentially refers to the use of responsiveness to the customer demand, competence to meet the market requirements, flexibility to change to the market dynamics and speed to manage the day-to-day operation of an end to end supply chain. Unlike the lean supply chain, the agile supply chain uses real-time data and up-to-date information, as reported by Martin Christopher in Industrial Marketing Magazine, to optimize operations and data in real-time against demand forecasts. the productivity of the given entity.

The agility of the supply chain delivers balanced outcome by balancing service and cost in the form of optimising inventory. In simple, supply chain objective is to deliver what customer wants in a cost-effective manner. Today technology dominates how supply chains are executed and they play a vital role and makes things faster and more cost-effective, but it’s not perfect. It requires you to be as flexible as you can be. The below graphic explains how agility of the organisation offers higher service levels with lower inventory carrying.

McKinsey & Company identified areas where agile supply chains perform more effectively, thus resulting in supply chain excellence. The factors that influence any supply chain is the technology, process and people, and the below chart reveals the top qualities of agile companies excellence.

“In a report by McKinsey & Company, up to 94 percent of companies that had implemented supply chain practices with other solutions, are able to deliver DIFOT effectively, without keeping inventory in excess of 85 days. Similarly, companies that did not implement agile practices often had inventory levels remain in the warehouse for more than 108 eight days, and only 87 percent of deliveries were on-time. This does not even consider how many deliveries may not have been fulfilled, such as delays in shipping processes, customization, or errors in order picking processes.”

Agility in the supply chain is rapidly changing how supply chain entities work, but providers of supply chain management and management solutions need to understand how agile and lean concepts work together to produce more efficient demand-oriented supply chain. There is a myth that lean and agile supply chains are different, the truth is that understanding of agility in the supply chain must address how lean concepts are applied to the make supply chain agile. Failure to incorporate both agility and lean concepts can result in serious delays for a given supply chain entity. However, every factor in the agile supply chain can have a serious impact on the future trends of this series of positions.

Some companies indeed have change and improvement, they believe everything is fine for so many changes, why should we change?

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