Interview for Bank of America Article

A couple weeks ago, I did an interview with Robert Lerose, who writes for the Bank of America blog. His article was posted this week, and it has some great advice for small business supply chains.

Check it out here:

Optimizing The Pipeline: Managing your supply chain more efficiently

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    Everything is a Change Management Problem

    ChangeManagement

    Back to Marketing Class

    In a recent marketing class, we discussed a case of a startup company segmenting its customers. The startup had two primary customer types that were beginning to require different solutions. The company had to decide which segment to focus on and which one to let go.

    Running through the numbers, we came to a clear conclusion that customer segment A would be more profitable with the largest growth potential. The class wrapped up, and we all felt good about successfully using our marketing tools. Marketing lesson accomplished.

    After class, I asked the teacher what actually happened to the company. She replied that even though segment A was more profitable, the company went after segment B. The founders and investors all felt better about Segment B, so they decided to take the riskier option and drop A.

    I joked to the professor, “Oh, so it really wasn’t a marketing case – it was an organizational behavior and change management case.”

    With a smile, she quickly responded, “Every case is a change management case.”

    Everything is a Change Management Problem

    My teacher’s response has stuck with me. On one hand, it seems so obvious and something I already knew. On the other, it seems like a deep insight – words a wise, gray-haired sage would whisper from the shadows. Everything we try to do within our own team, across the company, or personally depends on changing current behavior. The hardest goals of all require us to change ourselves so that we can then change others.

    Change Management in Supply Chain

    When skilled change management leaders enter supply chain and operations, companies tend to do quite well. Toyota, for example, rose to prominence through its culture of embracing constant change toward improvement. The Toyota Production System (TPS) is a systematic way to enact change on a recurring basis. Just as McDonald’s realized in the 1950s that their main product is a franchises rather than food, Toyota realized its product isn’t just cars but an improvement system.

    As I’ve tried to make changes, I’ve looked to Toyota as an example. The temptation I’ve faced is to take Toyota’s tools and copy their processes completely. When changes weren’t implemented as quickly as I’d like (or not at all), I would get frustrated and wonder if Toyota’s tools really held the answer.

    Eventually, I realized they don’t.

    Toyota’s problem-solving tools work at Toyota because of its culture of embracing changes TPS suggests. Those tools are great if you’re in that type of environment, but most companies’ cultures are very different.

    In fact, the actual tools, numbers, or improvements often become much less important than how you manage the proposed change.

    The best ideas, implemented poorly, will always lose to decent ideas implemented well.

    How to Change

    So how do you effectively lead change? The right answer varies by situation and personal style. Here’s five suggestions to help you find what works for you.

    (1) Remember the Primary Issue is Always Managing Change

    No matter what type of problem you think you’re trying to solve, there is always a bigger question of “what will I do to get to enact this idea.” Figuring out the right segment to target is one thing, convincing the company that it’s the right thing to do is the real issue.

    (2) Spend a Ton of Time Getting Buy-in

    I’m an ‘act now, fix it later’ kind of guy. I’m constantly running experiments to improve processes. When I see an improvement, I jump on it and move forward. Why waste time with a less-efficient process? This is often a common mentality within groups of operationally minded people. It’s a skill that helps reduce costs and improve efficiency. But this can also be a weakness when working with others.

    Change management often requires a much different approach. People take a lot of time to prepare of major changes. Communicating all the knowledge you’ve gained to the rest of your organization on why the change needs to happen is very challenging. Resistors, supporters, and bystanders emerge, and it takes a lot of work to convince others to change their behavior.

    A common thread throughout change management literature is the time it takes to get buy-in. Getting buy-in from your own team of five may take a five-minute conversation, but an organization of just fifty people can take five months of meetings. Bigger companies can take five years. Investing in buy-in upfront can be a frustratingly slow change of pace, but it’s the best way to enact significant changes in larger organizations.

    (3) Give Others Credit

    If you really care about the change, don’t care about who gets credit. Make others look good, especially superiors, and you have a better chance of your mission moving forward. Even if you’re name is never mentioned, most people will recognize your role if you repeatedly bring others success.

    (4) Show Leadership by Following

    My favorite TED talk is only three minutes long, and it’s called How to Start a Movement. It shows how a lone dancer at a concert creates a movement to get everyone at the concert dancing. With that dancing movement happening in the background, Derek Sivers explains the characteristics the video exemplifies of how to make change happen.

    It’s a fantastic video – take three minutes watch it here: TED Talk – Derek Sivers, How to Start a Movement

    My favorite insight from the video is, “The first follower turns a lone nut into a leader.” There’s lots of people trying to enact changes. By becoming their first follower, you can make those changes happen. You can pick which “lone nut” to follow and pick which change succeeds.

    (5) Read Switch

    Finally, read my favorite business book:

    Switch: How to Change Things When Change Is Hard

    This book is simply fantastic in every way. It’s entertaining, easy to read, and the advice applies to changes of all types. Whether you want to change your personal diet, change how we address world hunger, or change your company’s procurement policies, Switch has real-life advice you can use right after you read each chapter. I can’t recommend this book enough.

    If you’ve already read Switch, Decisive is an excellent follow-up about how to make better decisions.

     

    As you tackle your problems this week, choosing between A and B, remember that the biggest issue is how you manage that change.

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      How Yelling at Your Employees Brings Better Results

      How Yelling at Your Employees Brings Better ResultsLet’s pretend you manage Chuck. He’s a fairly good employee most of the time, but occasionally, he really messes up. Whenever this happens, you bring him into your office and yell at him for a bit. Chuck’s next assignment is much better. You’ve done your job as his manager. It’s not fun to yell at people, but someone has to do it.

      Or do they?

      Yes, it’s true – when Chuck does an unusually bad job, and you yell at him, his performance will almost always improve. What’s equally true, however, is that Chuck’s improvement has very little to do with your shouting. Instead, it has everything to do with random variation and statistics.

      Being in supply chain and operations, I have a healthy respect for statistics. Much of the Toyota Production Systems (TPS), lean, Six Sigma, and quality improvement tools are a direct result of applying statistics and the scientific method to production. However, what I haven’t thought of much before is how those same principles of random variation apply to office coworkers just as much as to assembly lines.

      What started me thinking about this was a great book I just finished called The Drunkard’s Walk: How Randomness Rules Our Lives by Leonard Mlodinow. In it, he tells the story of Daniel Kahneman, who won the Nobel Prize for Economics in 2002. Mlodinow writes:

      In the mid-1960s, Kahneman, then a junior psychology professor at Hebrew University, agreed to perform a rather unexciting chore: lecturing a group of Israeli air force flight instructors on the conventional wisdom of behavior modification and its application to the psychology of flight training. Kahneman drove home the point that rewarding positive behavior works but punishing mistakes does not. One of his students interrupted, voicing an opinion that would lead Kahneman to an epiphany and guide his research for decades.

      “I’ve often praised people warmly for beautifully executed maneuvers, and the next time they always do worse,” the flight instructor said. “And I’ve screamed at people for badly executed maneuvers, and by and large the next time they improve. Don’t tell me that reward works and punishment doesn’t work. My experience contradicts it.”

      What Kahneman realized, however, is that while the yelling preceded improvement, it did not cause the improvement.

      The pilots in training were all slowly improving, but you wouldn’t be able to see that improvement from one maneuver to the next. Instead, their performance was a random variation around an average skill level that was rising over months. When one maneuver was unusually bad, it was just random variation. The same held true for the exceptionally good performances – random variation around the true average skill of the training pilots.

      The name of this statistical principle is regressions toward the mean. Whenever an observed results is far from the average, the next result will likely be much closer toward the average. Observations tend to gather around the average in a bell shaped curve.

      This principle is widely used in production quality. We calculate upper and lower control limits on a process and expect random variation to occur. It’s only after several repeated outlying events that we intervene and investigate. If processes are within their limits, we just leave them alone. Even if several measurements are below average, we have faith that the next measurements will be higher.

      Process Control Chart

      Realizing that this principle holds true with humans as well is powerful. All of us will have random good and bad performances simply as a result of random variation. The majority of our performance will regress toward our true average skill level without any outside influence.

      So next time Chuck has an outlying bad performance, you could yell at him, and he’ll do better the next time.

      You could also watch online cat videos together – the improvement will still occur.

      Why not save your lungs some stress?

       

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        Are Your Reverse Logistics Leaking Profits?

        Reverse Logistics Leaking One of the issues many growing companies face is obsolete inventory and customer returns. These have a nasty habit of sucking up cash and bringing otherwise profitable firms to their knees. In this episode of the Supply Chain Cowboy Podcast, I talk with Curtis Greve to get his expert advice on how best to handle reverse logistics.

        Reverse logistics are kind of funny in that they tend to fly under the radar. Returns usually aren’t thought of as one of the most attractive parts of operations. However, improving how you handle obsolete inventory and returns by just a fraction could be the best thing you can do for your bottom line.

        You can listen to or download the podcast from the link above, or check out the full transcript. Also, please subscribe to the podcast through iTunes to receive new episodes automatically.

        About Curtis Greve

        Curtis Greve managed returns for Walmart, ran the 3PL GENCO as its CEO, and started his own consulting firm, Greve-Davis. He’s also one of the founders of the Reverse Logistics & Sustainability Council (RLSC), the premier group on advancing the field of reverse logistics.

        RLSC’s upcoming annual conference will be held on January 19-21, 2015, in Dallas. More information on the conference, as well as a wealth of advice and information, is available at ReverseLogistics.com.

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          ‘The Johnny Tightlips’ and Two Other Popular Approaches to Supplier Relations

          “Before you send that email, there are a few lines I want to take out. We don’t want to share that information with that supplier.”

          “Really? But this supplier has done so much for us – shouldn’t they know what’s going on?”

          “Not yet. Maybe later – but we don’t want to put any tension on our relationship right now.”

          Three Approaches to Supplier Relations

          Most companies have a list of key suppliers that you just couldn’t live without. Your dependence on them reminds you of the support you get from best friends, siblings, or even your spouse. But sharing personal information with family and close friends is often easier than sharing business information with your suppliers. What if they take advantage of you? What if they share that information with your competitors? What if they become your competitor?

          Navigating your supplier relationships depends a great deal on your business model and the character of the suppliers you work with. Perhaps you could benefit from increased information sharing. Or – perhaps you should hold back a bit more. Here are three approaches to supplier relationships to consider.

          The Johnny Tightlips

          Johnny Tightlips

          Johnny Tightlips is one of my favorite characters from the Simpsons. His catchphrase, “I ain’t sayin’ nothin’,” characterizes the attitude that a surprisingly large number of businesses take. While this arms-length relationship seems cold, it also has served many companies quite well.

          The stories of suppliers moving upstream and becoming a direct competitor with their customers are numerous and instructive. For example, Asus was Dell’s supplier when they announced their own brand of personal computers that would compete directly with Dell.

          If you’re a fan of poker-like negotiations, then keeping your cards close is highly advisable. Millions of dollars have been won by letting the other party speak while you sit quietly and listen. In fact, using a “pained pause” may be a great tactic to try next time you’re in negotiations. This tactic is described as, “When your negotiating partner makes a too-low offer, sigh, look him or her in the eye and say nothing.” Your silence puts pressure on them to do better, negotiate with themselves, and make a better offer without a word from you. For more on the Pained Pause, check out this Lifehacker Article.

          However, relationships with Johnny Tightlips suppliers are only good as good as the benefits they bring. Unless you have most of the power in a supply chain, it’s unlikely that your suppliers will sacrifice much for you. When hard times come, they’ll more likely to switch to your competitors since there’s no loyalty or relationship in place.

          Here’s a couple of my favorite Johnny Tightlips appearances:

          The Open Book

          The Open BookOn the opposite end of the spectrum is the open book approach. Your suppliers provide valuable services to your company – much like your employees. Treating them the same as employees, especially in regard to information, makes a lot of sense.

          Being open has a myriad of benefits. Suppliers are able to collaborate with you on new ideas. Because they’re higher up the chain, they bring valuable insights about what efforts they’ve seen previously work or not. They also may have innovative ideas that they’re more likely to share with you because of your relationship with them.

          An open policy also can be lifesaving when the road gets bumpy. Suppliers are much more patient when they know what is going on – why payment is delayed or orders are down. Though the rough spots are often the most difficult times for honest communication, that’s when it’s most impactful. A detailed email explaining the situation openly can open the door for more lenient payment terms and with the relationship intact.

          Before your open your books completely, here are some important questions to ask:

          • Has your supplier proved their trustworthiness yet?
          • Is there any specific information that poses an unusually high risk if shared?
          • Have sufficient contracts been signed to prevent unauthorized sharing outside the business?
          • If you are a public company, are SEC guidelines – especially insider trading rules – being followed?
          • Have we sufficiently explained the policy to those who interact with our supplier?
          • Are your instincts prompting you to hold something back? Why?

          Despite the risks, opening up communication often yields impactful results.

          The Game of Kingdoms

          The Game of KingdomsA middle ground is a philosophy I call the game of kingdoms approach. Imagine your company as a kingdom – complete with a castle and city walls. Your suppliers and customers are also kingdoms. Some are bigger than you, and some smaller. Just as a king engages with other kingdoms, you work with other companies.

          The much larger kingdoms – the ones you’d like to have on your side if a war starts – merit investment in open communication. You want to build those ties in diplomatic ways by sending emissaries and fortifying trade routes. The smaller kingdoms may require less work. Taking a diplomatic game approach and envisioning various castles often helps me make better decisions on supplier relations.

          Besides, “inter-kingdom diplomacy” just sounds more fun than “supplier relationship management.”

          What’s Your Weapon of Choice?

          Which approach do you currently use with your suppliers? How might you benefit from adjusting your communication style?

          Share your thoughts in a comment, and be sure to check out our recent podcast where we talk with the former VP of Operations at Skullcandy about vendor relationships and metrics.

          [Image Sources: Johnny Tightlips (modified) | Open Book | Castle]

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