Risk – scary word but we deal with it every day

Risk, the word connotes so many things. Some people want to avoid it at all costs while others love being “risk takers.” These folks look risk in the eye and laugh, take chances and defy the odds. Or do they? Aren’t we all risk takers by just waking up every day and going about our lives? Risk is all around us, risk is in everything we do. What we wrestle with is the degree of risk we are willing to tolerate.

But the simple act of drinking a glass of water entails a degree of risk. Did the reservoir from where the water was collected contaminated? Are the pipes that brought the water to your home free of bacteria? Is your glass damaged because your 4 year old ran accidentally dropped his Tonka truck on it and a small shard of glass broke off? I realize that these events are an extreme and the probability they would occur is minimal. But, instinctively we weigh risk every day of our lives, both personally and professionally.

So let us look at another area where there is always risk, much more tangible and real risk: your supply chain. The art and science that comprises supply chains are really looking to deal with three areas of concern – cost, revenue and mitigating risk. Risk is really the element that impacts both cost and revenue. It is also much more elusive in regards to how to measured and control.

You might take on a strategy to eliminate safety stock in order to reduce costs and free up cash flow, but the risk is if your forecast is wrong or your cannot produce in time you will suffer in terms of lost revenues or even financially having to pay SLAs.

So what are steps you can take to put in place the tools that will address your exposure to risk?

- Gain greater visibility. Okay I know this is everywhere, and as the old adage goes: I can’t fix what I cannot observe. The real question becomes, can you observe what is important and can you handle the deluge of data and information available? Risk comes from many angles and extended supply chains have an every growing and shifting number of blind spots. Shining light on a greater area allowing you to see more, is vital to understand how to deal with risk.

 

- Understand what you are observing. Sometimes just seeing something isn’t helpful. You need to also understand from where you are observing how is your situation impacting what you observe. There has to be contextual understanding of what you are observing, what am I am viewing and how does it relate to the environment and other events.

 

- Put in place simple triggers: simple rules are important to have place to bring color to what your see. Gartner has started to speak about pattern recognition within your supply chain, but doing so in a real time manner being able to look at events as they are happening, not looking at historics which could very well be irrelevant by they time they are acted upon.

 

- Trust your people. At the end of the day the human still remains the greatest tool to manage risk. But the human needs with the appropriate tools can make a better decision. Technology is not the panacea but allows for the decision makers to be better armed to take corrective action. Ensure that your people have the tools as well as the knowledge to empower them to be able to function in a world full of risk.

 

- Practice practice practice: Just like many things in life the more your prepare the greater the chance you will be able to react quickly, decisively and appropriately when situations do arise. Scenario planning will not guarantee that you will cover every possible situation, but having rehearsed and practiced will allow you to be ready when you have to act.

Risk will always be with us whether in our supply chains or in our every day lives.  Our instincts allow us to make the necessary trade offs and analysis to deal with this risk. When it comes to our supply chains we need to make sure these instincts translate into procedures and tactics that will ensure we can mitigate whatever risk we may incur.

Plan Do Check Act – coming to a Supply Chain near you

I have been fortunate enough to have had worked for some incredible visionaries and leaders during my career. One such person is Sanjiv Sidhu, one of the founders of i2 Technologies. I learned a tremendous amount from my time spent at i2 and much was gained from the passion, intelligence and vision exhibited by Sanjiv. One simple, yet powerful, mantra Sanjiv preached was the notion of “Plan – Do – Check – Act.”

Granted this was not original to Sanjiv but rather a process by which companies can seek to find continual improvements to business processes. The beauty, as in many things, is in the simplicity of this saying for supply chains. The need to be able to plan well – how will I determine my end goal, allocated resources, make investments and distribute my assets. Then being able to do – execute towards the end goal, in a expeditious and profitable manner. Once the execution begins the need to constantly monitor how the process is trending – establishes milestones or alerts to indicate whether or not I will be able to achieve the goals I set. And finally to be capable to act – if and when events impact my ability to achieve my goals, can I take the appropriate actions to re-sequence my supply chain and get back on track. The simple process of PDCA allows enterprises and their supply chains to have a constant feedback loop on where they stand with regards to completing the goals they established.

When it comes to supply chain management we have spent much treasure and effort in giving solutions for planning and doing – just take a look at the landscape of solution providers that allow you to plan and then execute. The ability to do the check and act has not been as evident within supply chain management. I realize vendors and service providers have tried to bring true visibility to end to end supply chain processes – with minimal success.

Today with flexible applications, the cloud, greater mobility and other advances with our systems and architecture we are closer to being able to finally round out PDCA. As we start to have true extended supply chain visibility coupled with complex event processing – tied to business process management – supply chains can truly check their process, understand the impact of events and act or re-sequence to ensure their end goals are met.

We are getting closer to true closed loop supply chain management.

Facebook timeline – another end around on privacy

Sigh, the Facebook team is at it again, changing the UI. One aspect of Facebook that has received constant scrutiny is the interface, which at times is a bit underwhelming. So the millionaires over at Facebook (well soon to be once they IPO) have come out with a new format – timeline. The time line is suppose to give all the activity you have been doing on Facebook a better visual feel – allowing all those posts, likes, pictures, relationships, schools, events and on and on – to have a visual sense of time and timing. Great. I think. Do I really want to see the time span between posts? Or that I liked Adidas in November?

To me this smacks a bit of trying to get around privacy issues. Why? The new change will force users to go in and edit what they want to have private and what is public. The organization of all the activity you have done since day #1 (even prior to FB day 1 since they post when you were born) means there could be events/posts you thought and hoped were buried will now be cleanly displayed. Oh you said you had a family issue to take of and that is why you missed work, oops now it is nicely displayed that you were drinking a few dark lagers with your friends. I realize all this data is out there, Google, Yahoo and Bing make sure it is searchable, but now Facebook will “organize” it for us to leverage or be leveraged.

Having my activity organized should be a personal decision. Forcing an organization to our activity feels like an imposition from the 800lb gorilla – do this or else. And if things becoming public in the process so be it, allows us to sell richer layers of data to our advertisers.

What South Carolina can teach us about crisis management

I avoid writing politics on this blog, I will admit that I had a political blog a few years back and it became too much of burden to keep up. I also felt that to do it properly I needed to research and be much more attentive to the blog. But this post will not be about politics but more about some lessons we can learn, for business and marketing, from what has happened in the Republican primary in South Carolina.  As of this writing it would appear that Newt Gingrich pulled off what, a week ago, would have appeared as impossible. What can be attributed to this swing? To me it is how the two candidates handled what I would call crisis management.

Let’s look at the front runner Willard Romney. His crisis revolved around his releasing of his tax records as well as the attacks on his time running Bain Capital. Newt flashed some brilliance in releasing years of tax returns the morning of a debate, knowing full well the question would be posed to Willard. Romney, when asked if he would do as did his father and release 12 years of returns, uttered “Maybe” as his first word…then laughed and gave some confusing answer that wasn’t really an answer. This go him a round of boos from the audience. During the week he also answered a question about his tax percentage with some cryptic response and even had the audacity of saying “oh and some speaker fees…which weren’t very much.” I guess when those add up to close to $400k those are not seen as “very much.”   Just for perspective, the median national household income for 2010 was $50,000.

On the other hand, Newt Gingrich had his own crisis, specifically a bomb shell interview from his second wife about his moral compass. How did Newt deal with it? Head on. When asked this as an opening question he tore right into it, attacking the “liberal media,” Obama, CNN and those that wanted to see him fail in one swoop. He took a negative and turned it into a soap box to give his southern Republicans some red meat to chew on – look at the standing ovations.

Two different ways of handling what were difficult situations, and two apparent different results. Just like in a crisis – poor corporate results, scandal, hostile acquisition, executive turn over to name a few – one has to get ahead of the message. One must be aggressive in sharing information, because there is no hiding in today’s connected world. One cannot always hope for the results Newt enjoyed, but one certainly can avoid the gaffs from Mitt.

Sometimes the light of day makes events appear less important than when constantly trying to dodge the issue and appear evasive.

5 Things to Look for in 2012

I know my previous post was about supply chain trends in 2012, but since I was in the airport today with a number of travelers heading to Las Vegas for CES, I thought…hmmm what are some things to look for in the technology world for 2012.

1. RIM and Blackberry will fade away and could even be acquired by another technology player…maybe HP? I realize that HP has the Palm system for mobile, but with RIM they will have the devices and network to bolster their mobile play. RIM has been in trouble with Apple and Google eating their lunch when it comes to the smartphone space. RIM has to find more stable and far reaching backer to reinvigorate their sagging business.
2. Apple TV is the next big thing…okay I have been speaking about Apple TV for a long time and how it is the last frontier for Apple to be a player in the entire entertainment game – get into the family room and control the TV. I do think that 2012 might finally be when Apple breaks out with their TV play. Rumor is that after CES, Apple will be announcing their iTV. Google is already moving into the family room with Google TVs, Microsoft and Sony are there with their state of the art gaming platforms…Apple is actually playing catch up. Not anymore.
3. Speaking of tablets, look for Amazon to emerge as the real counter to the iPad. Others have tried, remember the Blackberry Playbook, Samsung Galaxy or the HP TouchPad, while some have had mild success they continue to chase the iPad. Their main issue – chasing the iPad with a me-too device is not working. Amazon has, on the other hand, gone after the smaller form factor market offering the 7in tablet. While others have also moved down size, they have not done so rapidly allowing Amazon to corner that market. In addition to the fact the Kindle has the power of the Amazon content backing the device, it has a wide lead and will continue to build on that segment of tablets. Will Apple move towards that form factor? Doubtful, especially not now. Oh and Barnes and Nobles is chasing that space as well…but once again a dollar short and a day late with their Nook tablethingamjiggy….
4. There will be a big move with the old school technology players – Yahoo, Microsoft, eBay – being the old school players will make some splashes. Look for the Yahoo – Microsoft marriage to rear its head again. Yahoo might even be a player to acquire RIM. Microsoft could even make another play in the B2B space and look back towards SAP. As Facebook, Google and Apple continue to own the headlines, the old school tech companies will make moves to recapture some of their mojo.
5. Hyped IPOs – some good, some bad. Okay we all have heard that Facebook will IPO for somewhere close to $100 gazzillion….but on the other hand companies like Groupon will have egg in their face as they IPO, probably look back to the offer laughed down from Google. Tech will continue to make some IPO plays in 2012, it will not be like 1999 again but not as dire as the past few years either.

2012 should be interesting once again for technology. It will be fun to watch and to see how the devices we carry and the technology we use evolves in 2012.

Happy New Year – 12 thoughts on supply chain for 2012

Supply Chain Top 12 predictions for 2012: I published this on my corporate blog, click here, but wanted share on the Thinking Frog as well, Happy New Year!

1. Planning is dead – Long live planning! You must have planning to establish your goals and allocation of resources, however you need to have better respond and reaction to have greater execution. The promises that advanced planning brought to the supply chain space in the 1990s was unfortunately an empty dream (event today, the best supply chain plans yield less than 50% accuracy). While the advances in planning brought the industry some remarkable promises it also proved how difficult it was to predict the future by simply relying on historical data. Having said that, without going through the planning exercise, businesses and their supply chains cannot determine an end goal and some path to get them there. So planning is not dead, but we need to use it for the purpose it serves – setting the end goals and giving the direction in which to head.
2. Supply chains will continue to require wide elasticity – more will move on shore while more will shift parts off shore and all will willfully give up control over different aspects of their supply chains. Many of us have read Thomas Freidmans famous book – The World Is Flat – the basic premise of the book is that with technological improvements and in particular telecommunications, our planet has become “flat.” When you are going through the McDonald’s drive through in Chicago the person on the other end of the microphone could be in Vietnam or sitting in Montana. The flatness of the world has been felt in supply chain for a while – we source in all corners of the world, chase low cost manufacturing, distribute to clients in emerging markets and find and train new labor in any market we can access. Supply chains have realized that the race to the bottom with regards to cost is not necessarily the best course of action. For that reason supply chains have sometimes sacrificed low cost for being closer to their customers – for example manufacturers moving their plants for low cost centers in Asia to Mexico or Latin America to reduce the time from production to shelf for their North American market. 2012 will continue to see this as companies weigh the savings in a low cost strategy with the ability to get product to market faster. In addition, a number of these “low cost” countries have themselves become the end client. The supply chains will have to continue to demonstrate a level of bidirectional elasticity necessary to address the both the wide reach of production as well as the growing mix of customers.
3. Companies will look to shift their supplier strategy, but fail – companies will remain tied to specific suppliers and find shifting to be difficult. The tsunami in Japan the flooding in Thailand, these natural occurrences have given the world a string of wake up calls when it comes to the sensitivity and risk exposure certain supply chains have when reliant upon a small number of vendors, some of which are located in volatile environments. Here is the problem – finding and on boarding new suppliers remains daunting. Developing relationships, business and overall trust does not happen over night. While companies will look to avert risk and try and take out volatility from their supply chains, their ability to do so will remain a challenge. There will be a lot of heat around multiple vendor sourcing, but the ability to truly minimize this risk will remain a moving target.
4. Predictive time horizons will shorten – supply chains will look to add some short window predictive analytics for real time event processing. Business Intelligence solutions promised the ability to take data, analyze it, understand correlations and provide the user with a deeper understanding of what cause and effect were within their business. That is nice, but hindsight is 20/20. Of course I can tell you from a historic perspective why you did not meet your customers’ SLA or why you stocked out of a certain inventory. With the maturation of such technologies as the cloud and improvement in applications, we are moving to an ability to render short window predictively to the process. Supply chains will demand the ability to constantly look over a short time horizon with real-time analytics, allowing them to better understand how events are affecting their business…right now.  Now the ability to do a deeper post-mortem remains important, the ability to understand in the now how events will impact your business will play a prominent role in enterprises ability to succeed.
5. Centralized command and control will find a home in supply chain – supply chains will continue to seek a centralized system of command and control. Unlike nation-states, who have moved away from Marxism and centralized economic policy, supply chains would like to have a true form of centralized command and control. This will remain a challenge as many supply chains still leverage a number of siloed systems and instances of the same “software,” yet with the evolution in technology we are constantly moving closer to an ability to seamlessly view what is happening across the supply chain network and do something about events that impact the supply chain. This will also require supply chains to find a way to encourage collaboration amongst all the disparate parts that comprise the process, but at least the technologies to make this a reality are themselves a reality.
6. Large brand names will become the conductors of the supply chain – rather than actually touch the product, large brands will just orchestrate all the moving parts that comprise their supply chain. Follow the model of Apple, how much of the product do they actually “touch.” Very little. Yet they are able to produce world-beating products. Keeping all the moving parts in harmony is no small feat, but being able to master this is what makes Apple who they are. Companies will continue to gravitate towards this, even in some cases looking to outsource the management of the supply chain itself.  Which leads to the following point.
7. Logistic providers will seek to be the information and management hub – they will be looked upon by their clients to do more with the information they have. This is not new I realize, logistic firms have sought to be the data brokers for their customers already, but this will take on a greater role moving forward. Logistics providers will be seen as the perfect outsourcer for the supply chain, they should be able to see all the movements of inventory at every stage of the supply chain, open up more data (within the factory walls, at the DC or the store shelf) and you have an entity that has the opportunity to run the supply chain process.
8. Finance will continue to increase in their involvement in supply chain. It is not surprise that the CFO’s office has become increasingly interested in the day-to-day activities of the supply chain or operations departments. Why? Because at its core those departments are manipulating and managing inventory or better said – working capital. In many cases they have their foot on the accelerator, and the brake, that controls the velocity of free cash flows. While I am not sure we will see supply chain departments migrate completely underneath the financial organization, the joint work between the two will only intensify.
9. Discrete manufacturers will tackle the service side of the supply chain – to further clear out carrying costs as well as leverage service as a competitive advantage. More and more we are seeing companies, especially in high technology manufacturers who recognize the importance of better managing their services. It is more than simple spare parts management, while that remains an integral component. The way to truly maximize the opportunity is the ability to manage inventory, human capital all the while orchestrating the service level agreements you have with your client base. Smart companies will continue to push the knowledge they gain from this end of their supply chain all the way back to the beginning – the planning side. High Tech and other leading edge discrete manufacturers will look to tie in their PLM and development systems with information gleaned from the services. But the first task will be giving the service side of the business the attention it deserves to become a profit center rather than a cost center.
10. We will be able to tackle the “C-A” in “P-D-C-A”(PDCA stands for Plan, Do, Check, Act) – first I believe that we should expand the “Check” into two categories one about checking and one about correlation – not just checking the progress but correlating the impacts on the supply chain.  However the ability to tackle the checking and acting simultaneously will become more of a reality in 2012. Forrester Research authored a piece earlier this year talking about the need to bring visibility coupled with the ability to act on supply chain events as vital to the success for enterprises and their extended supply chains. The combination of greater access to computing, always on, unobtrusive technology add-ons and an acceptance by businesses into this capability make it the perfect storm.
11. Greater usage of unstructured data, think of social media will act as one of your leading indicators. Much like what AMR Research coined a few years ago – the Demand Driven Supply Chain will creep closer to reality as supply chains leverage increased access to unstructured data coupled with their existing understanding of how to maximize information from structured data. This combination will allow companies such as Best Buy to monitor in real time and anticipate which products will sell, allowing demand to drive their supply chain. The obvious first movers will be retail and CPG companies, but others like Dell and Verizon will continue to leverage these signals to manage the service side of their supply chain. Even life science companies will gravitate to usage of unstructured data as they can look to anticipate where flu breakouts or colds or rashes of sun burn will rise through unstructured data mining. Of course this will only increase the wave of Big Data that will only continue to grow.
12. Finally, that iPad, iPhone, Droid or even yes Blackberry are not just for Angry Bird, eMail and Netflix but will integrate into supply chain. We are all mobile now, whether you choose to embrace it or not. A September report from Forrester Research states that over 50% of all workers today are working either at multiple locations or only remotely. This spills over into the supply chain space.  Mobility will impact supply chains in two ways. First the growth of tablets and smartphones will make the number of nodes where decisions can be made and executed that much greater. The person loading a truck at the receiving dock can instantly update via a tablet, the factory worker can monitor the through put of her assembly line via a smart phone, the person doing inventory in the hospital will be able to scan with an QR code reader from their smart phone and the list goes on. Second, the explosion of mobility will add to the glut of data that can be had. Whether it is communicating directly with clients or positional data, the rise of mobile devices will continue to

Merry Christmas!

Happy holidays and Merry Christmas to all. May the end of 2011 be full of joy and happiness and all the best wishes for a wonderful 2012