Tag Archives: Challenges

Stop Fighting Emergency Fires in Five Steps

Whenever I find myself spending most of my day fighting fires, I try to step back and understand why. A great framework that I like to use comes from the Malcolm Baldrige Performance Excellence Program. The firefighting example takes a process through five steps, going from “emergency crisis mode” to “no problem mode.”

The Malcolm Baldrige Performance Excellence program is a government sponsored award that focuses on promoting quality in US organizations. You can see the images below and other great resources on their graphics page.

Step One – Running and Reacting

1The first stage is where most of us start when we think of fighting fires. We react to emergencies that pop up by dropping everything and running to what’s urgent. If this only happens once or twice, then it might not be worth the effort to improve the response. However, the problems that occur frequently or have large impacts are the ones that need to move beyond step one. Focus on those problems for moving them through steps two through five.

Step Two – Running Less and Reacting Quicker

2If fires pop up in the same places frequently, then installing extra hoses in that area can really help. Likewise, if you repeatedly face the same emergency, making additional resources available in those areas can cut down the size or length of an emergency. Taking a few minutes to create simple, small countermeasures makes reacting easier.

Step Three – Response Game Plan

3Once countermeasures are in place, how can we get everyone on the same page? When the next emergency strikes, who contacts whom? Addressing these issues by making a game plan can make the response much more effective. More importantly, getting others involved makes the emergency less dependent on you. If you can’t ever leave the office because you’re the only one that knows how to handle certain problems, then this step can free you from that burden.

Step Four – Automated Response System

4Just like a sprinkler system automatically dousing flames, you can build a system that handles emergencies automatically. Basic computer automation or alerts can take care of many problems that frequently pop up. Emergencies that are more complex may require some IT investment, but many of those solutions are worth the price tag. Conversely, significant investment may not be necessary if a manual response system will work just as well.

Step Five – Innovate Emergencies Away

5This final step is not “brainstorm how this emergency doesn’t happen again.” That type of thought should happen at any stage. Instead, this is a systematic change in the design of work flows, products, and systems so that unexpected problems are less common and less damaging. A product’s cost can often be reduced by 70% when the designers’ goal is to make the product easier for manufacturing. Similarly, perhaps 70% of your emergencies could be avoided by focusing on internal customers and avoiding downstream emergencies. Of course, balancing the needs of internal customers with those of external customers is difficult. Nevertheless, keeping the needs of both customers in mind will help reduce emergencies for which you can’t plan.

How to Use the Five Steps of Firefighting

Whenever a problem arises, I look at where in the five steps my response to the emergency is. Based on the size and frequency of the problem, I can then look at options for moving the response to the next level. Few fires need all five steps; such investment would be overkill. However, simply knowing at what stage each of my problems is helps me prioritize my improvement efforts. Soon the categorization becomes second nature, and process improvement becomes easier, quicker, and more effective.

Best of all, there’s less fires to fight. And the fires I still have to fight are easier to put out.

At what stages are the recent emergency responses you’ve initiated?

[Images Source]

When Semi- is Better than Fully Automatic

semi-auto
Christopher Hatcher published a great article over at 21st Century Supply Chain about when semi-automatic processes are better than automatic ones. As an example, he talks about the exciting day in army basic training when he switched his gun from semi- to fully automatic. His observation is important: accuracy often goes down dramatically. He says,

“I can’t remember if I actually hit any targets that night, but it was so cool to try the automatic setting.”

Many companies go through a similar exciting phase – especially young companies that are learning how to expand their operations. Instead of taking time and really thinking out each move, we often want to find an automatic process that will “just make everything work and not bother me anymore.” When making investment decisions, it’s tempting to buy the Ferrari solution with all the options when the less glamourous bicycle product might actually work better.

In addition to spending too much on the automatic solution, we often create additional problems or miss valuable opportunities by letting processes run on autopilot. Many opportunities for improvement present themselves through deep understanding of how processes work. That understanding can only happen when we participate in the process.

What processes in your business would benefit from switching to semi-auto for a trial period? Which might benefit from a permanent semi-auto setting? Could less automation make some of your processes more efficient in the long-run?

For example, I often learn more from updating important metrics by hand than metrics that update automatically. That extra attention frequently brings me important insights.

Hatcher’s article includes these wise words:

“Running most operations in automatic mode is likely a wise choice, but it’s important to understand which parts of the process can trigger the responsible party to intervene when necessary. Automatic sometimes just scatters lots of bullets with a great deal of sound and fury, but semi-automatic usually hits the target every time.”

Check out the full article here: Will that be automatic or semi-automatic to manage your supply chain?

[Image Source, modified]

5 Questions on How Startups Should Begin Improving Their Supply Chains

Improving Your Supply Chain
Hundreds of businesses are facing the exact same problems as you right now. Many are figuring out how to take their supply chain to the next level. What are some ways other companies have tackled what you’re up against?

In this latest podcast, I address five questions that have come up repeatedly in my conversations with small businesses:

  1. What are some ways to reduce costs and improve performance without sacrificing quality?
  2. How can a small business use technology to improve its efficiency?
  3. How can small business owners get employees and others to buy into managing their supply chain better?
  4. How can a small business oversee and boost the performance of their supply chain partners?
  5. What are some of my best suggestions for making the management of a supply chain more efficient?

Download or listen to the podcast from the link above, or check out the full podcast transcript. Also, be sure to subscribe to the podcast through iTunes or your other podcast app.

[Image Source, modified]

‘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]

Five Supply Chain Mistakes that Kill Companies

Supply Chain Epitaph
Any good cowboy knows to be wary of rattlesnakes and stampedes, but the wild west of supply chain also has some precarious situations to avoid. A great supply chain strategy can help you dominate the market over time, but big mistakes can destroy your company in just days. Dozens of smart managers have unintentionally killed or maimed their businesses from these five blunders.

1. Automation – Too Much Too Soon

Supply chain professionals face strong pressures to reduce cost, and automation is an attractive option to accomplish that goal. However, jumping into a new technology without thinking through the strategic process could blur the fundamental problems and goals you face, which often results in investment misalignment. Seven of the incidents described in Supply Chain Digest’s 2006 list of the 11 Greatest Supply Chain Disasters involve poor implementation of new technology and automation. Specifically, the systems were unjustifiably large, unhelpful, or just didn’t work. Sometimes in our zeal to reach the shiny future, we become overly optimistic. Whenever I hear that investing in a new system will, “solve all our problems,” I pause and remember how many failed firms came to that same conclusion. The harsh truth is that the implementation of a new system is much more difficult than is usually anticipated. Furthermore, all too often, companies purchase a system before the demand justifies the investment.

How to Avoid the Mistake:

Don’t use technology as a replacement for a sound strategy and profitable processes. Instead, look to people and processes before technology to solve problems. If you determine that a new system is your best option, be sure to pilot it thoroughly before full implementation so that you don’t make unnecessarily large and risky jumps.

2. Trying to Do Everything Great Results in Doing Nothing Well

As customer needs diverge, you can quickly find yourself trying to provide a wide range of products through many different channels. Lacking a focused strategy can lead your supply chain down the dangerous path of trying to do too much. Richard Rumelt of UCLA compares this lack of a clear, focused strategy to an inept quarterback. If a quarterback were to conduct every huddle with nothing more than the words “let’s win,” then I doubt that team would score many touchdowns. Instead, by narrowing focus and developing a specific strategy of what your supply chain will do – and more importantly, what it won’t do– you can become great at a few objectives instead of being good at nothing.

How to Avoid the Mistake:

Create a supply chain strategy with focus. Strive for a few objectives with which to excel. Avoid vague, all encompassing “let’s win” goals and coaching.

Note: More thoughts on Rumalt’s strategy advice applied to supply chain available at Vivek Sehgal’s Supply Chain Musings.

3. Death by Inventory

Companies die when they run out of cash, and inventory has a nasty habit of eating cash faster than the cookie monster eats cookies. Small companies are especially vulnerable to stock piling inventory in anticipation of opportunities for growth. Never wanting to stock out, some businesses consistently over-order and over-build to capture all remote chances of demand. However, warehouses soon fill with obsolete or expired inventory that is essentially pallets of cash that you can’t use to pay the bills. Small companies aren’t the only ones with inventory issues; big businesses make similar mistakes. For example, Cisco took a $2.2 Billion write-down on obsolete inventory in 2001. More recently, Toyota, a company that prides itself on lean inventory, found itself with too many Trucks and SUVs that it couldn’t sell because demand for those vehicles dropped after the 2008 recession. However, less inventory isn’t always the answer either. Having too little inventory, or having the inventory in the wrong place, can quickly cut your market share and create angry customers. In reality, inventory is a complex creature that requires diligent attention to master.

How to Avoid the Mistake:

Don’t be afraid of politely turning away a few, less-profitable customers and custom items if it means freeing up significant amounts of cash through less inventory. Utilize data to back your decisions to avoid emotional purchasing. Build your company’s sales and operations (S&OP) process to ensure all departments are working on the same realistic forecast

4. Single Sourcing – “Help Me Supplier One, You’re My Only Hope!”

As supplier relationships become more collaborative, having only one primary vendor for key products can make financial sense. However, when your company’s destiny becomes married to your supplier’s future, you’re taking on unnecessary risk. Using one supplier for most of your business often makes good financial sense, but you must also stay vigilant in maintaining good back-up sources. Natural disasters, political unrest, or bankruptcy can quickly make your only supplier unavailable, leaving you in an uncomfortable predicament.

How to Avoid the Mistake:

Always have one or two back-up vendors for critical parts and services – preferably in different geographic locations or countries. Even if they are more expensive, give them a small percentage of your business so they stay engaged with you.

5. Complacency – If It Ain’t Broke, Why Fix It?

Last on the list of supply chain mistakes is complacency – getting too comfortable with a good solution. As Alex Rogo learns in The Goal, it’s difficult to push for improvements without a crisis encouraging change. However, remaining stagnate on a profitable model invites competitor disruption. New business models and supply chain improvements frequently disrupt the dominant firms in a market. Clayton Christensen, in his book The Innovator’s Solution, talks in detail about this phenomenon and offers advice on how to survive and prosper from disruptive innovation. To help our supply chains from losing their advantage, we should strive to improve and innovate before our competition forces us to do so.

How to Avoid the Mistake:

Become passionate about continuous improvement. Keep an eye on competitors, new business models, and emerging best practices. Work today to address risks your supply chain will face in the near and more distant future.

Which of these mistakes could your supply chain be facing – and what can you do to help avoid it? What other advice do you have to avoid these mistakes? Share your thoughts below, and be sure to subscribe free to receive future articles by email.