Tag Archives: Strategy

The Most Popular Supply Chain Cowboy Articles of 2014

We’ve seen significant growth this year – online traffic and subscribers have more than tripled from 2013. It’s great to know there’s so many people working together to tame the wild west of supply chain management.

Below is a list of our five most popular articles from the past year:

Number 5 – How Skullcandy Rocked S&OP

How Skullcandy Rocked S&OPFor Supply Chain Cowboy’s first podcast, I had a great interview with Mark Kosiba, former VP of Operations at Skullcandy. He shared a ton of great advice on how small companies can leverage their nimbleness to grow and become world-class operations in competitive fields. If you haven’t yet listened to what Mark had to share, be sure to download it now so you can listen to it during your next commute.

Check it out here: How Skullcandy Rocked S&OP

Number 4 – Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 1 of 2

Mark DwightWant an example of what supply chain excellence and lean production really look like at a San Francisco bag company? Then be sure to check out this Q&A interview with the CEO of Ricksaw Bagworks. The article received a lot of positive social media attention, especially from people passionate about US-based manufacturing and small business entrepreneurs.

Check it out here: Startups, Sourcing, and Sustainability with Mark Dwight of Rickshaw Bagworks – Interview Part 1 of 2

Number 3 – One Easy Excel Formula to Track Shipments

Ship Track Excel FromulaIf anyone in your organization tracks packages, then they’ll definitely want to take a look at this article. It reviews a free excel add-in that lets you track shipments from most major carriers with a single formula. Even if you’ve shied away from tracking your shipments in the past because of how much work it can be, the article shows how that might now be possible.

Check it out here: One Easy Excel Formula to Track Shipments

Number 2 – Tips for the APICS CSCP Exam

Tips for the APICS CSCP ExamSupply Chain Certifications are growing in popularity to not only help build an educational base, but distinguish job seekers looking to advance their career. This article details what I learned while preparing for the APICS CSCP exam, including useful advice for how to tackle the test. The first section about whether the exam is even worth pursuing is a great read for supply chain managers wanting to develop their team’s skills.

Check it out here: Tips for the APICS CSCP Exam

Number 1, the Most Popular Article in 2014 – Build an Awesome Vendor Scorecard Program in 4 Easy Steps

Vendor Scorecard ExampleThis vendor scorecard how-to article won by a wide margin, attracting one in every four visitors during 2014. As supplier relationships become more important to a firm’s success, scorecards provide a simple and effective method of managing those connections. The downloadable template, included in the article, is a great place to start in building your vendor metric program. If you’re looking for the best bang for your buck in improving your supply chain, be sure to check this article out now.

Check it out here: Build an Awesome Vendor Scorecard Program in 4 Easy Steps

What’s Coming in 2015?

Here’s a sneak peak to a few articles and podcasts coming in the next couple months.

  • The First Steps in Improving Small Business Operations
  • Fighting Fires – a How-To Guide
  • More Business and Lean Quotes
  • Bringing Lean into Your Organization

What else would you like to see as topics for articles? I’ve had some great conversations with readers this past year, and I’d love to hear from you too. What topics are you interested in – and what challenges are you up against? Shoot me an email, or post in a comment below.

As always, thanks for reading, and have a great holiday season and a happy new year! Grab your cowboy hat and join me in riding your forklift into the sunset of 2014.

“I Fight for the Users!” – What Tron Taught Me about Serving Customers

A Review of the Movies

In the Disney movies Tron and Tron: Legacy, the character for whom the movies are named famously declares, “I Fight for the Users!” In the world those movies create, the Tron character is passionately loyal to the humans who designed and use the computer program. It’s been a few years since Tron: Legacy came out, so here’s a short clip to remember the movie:

Tron - UserYouTube – Tron Recognizes a User

Toward the end of the clip, Tron (also known as Rinzler) sees his opponent bleed and realizes that his opponent is a user (human). Because of his loyalty to users, Tron refrains from killing the human. At the end of the movie, Tron sacrifices himself to save the humans from being killed:

Tron - I fight for the UsersYouTube – Tron Realizes He Fights for the Users

The reason I’m fascinated by Tron’s loyalty to the users is that my supply chain should have equal loyalty to the customers. In all our efforts to fight waste and inefficiencies, we should boldly declare, like Tron, “I Fight for the Customers.” For some reason, however, I often ignore or stop paying attention to the voice of the customer and find myself fighting against, instead of for, the customer.

Voice of the Customer and Putting Away Christmas Decorations

A poignant example of ignoring the voice of the customer happened recently while I was putting away my home’s Christmas decorations. The Christmas lights are especially time-consuming to neatly organize, so I instead gathered everything into a giant ball and stuffed it into a plastic bin. I just wanted to get done as quickly as possible, so I told myself,” I’ll deal with untangling this mess next year.”

However, this is exactly what a good supply chain shouldn’t do. I’m creating a local optimum (putting away my decorations as quickly as possible) that will cause pain to my customer (in this case, me in 11 months). Since I am my own customer, I know the voice of the customer quite well. I remember untangling the lights just weeks before, and I know exactly what I should do to please the customer. I don’t though. Since it’s a hard task and it pays off now to just throw everything into a box, I do the minimum to get the job done when I could increase customer satisfaction.

“I Fight for the Customer”

This same type of local optimization occurs every day along the supply chain. As we get busy or deadlines get scrunched, we naturally reduce the effort we put into pleasing our customers. Whether it’s our internal customers or the end consumer, it’s easy to forget that how we stack a pallet or design a product can negatively affect our customer down the line.

Each day, I need to repeat “I Fight for the Customer” throughout process improvement and Kaizen efforts. As you and I battle inefficiencies and reduce waste, we should have the same natural instinct to stop what we’re doing when it threatens customer satisfaction. For example, I can reduce airspace in packaging boxes, but as soon as my product’s quality is compromised from being too tightly packaged, that’s the blood that should force me to rethink my initiative.

The Empty Chair at Amazon.com

In the early days of Amanzon.com, Jeff Bezos, CEO and customer service champion, reserved an empty chair at all important meetings. He told his team that the chair was reserved for the most important person in the company – the customer. He asked everyone to imagine the customer was sitting there and to keep her in mind in throughout all their decisions. Later, Bezos hired someone to sit in the chair and passionately represent the voice of the customer. This practice helped to guard Amazon against any initiatives that didn’t help its users, and kept everyone’s thoughts centered on who kept them in business.

How Can I Better Fight for the Customer?

What ways can you better proclaim “I Fight for the Customer” in your supply chain? Here are some questions to consider:

  • Do I have adequate channels that bring the voice of the customer to me?
  • Do I frequently review how process changes affect the customer?
  • Do I address both the external and internal customer experience in all major meetings?
  • How can everyone in my organization feel closer to our customers?
  • How can I prioritize initiatives more closely to fit customer needs?
  • How can I better share my voice, as well as my customers’ voices, with my vendors?

By bringing the customer back into focus with your daily efforts, your organization can better solve the needs of those that keep you in business. Building the resolve to fight for the users of your product and services will result in a more loyal and pleased customer base.

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.

You Should Read This Book Every Year – A Review of It’s Not Luck by Eliyahu Goldratt

If Plato and Socrates enrolled in a top MBA school, they’d likely drop out and produce something similar to It’s Not Luck by Eliyahu M. Goldratt. Written as a sequel to The Goal, It’s Not Luck uses an extended story approach to teach Goldratt’s problem-solving technique called the Thinking Process. Specifically, Goldratt shows how the Thinking Process can not only help sales and marketing revitalizing stalling businesses, but also help solve personal problems. The principles the book explores are so critical, that you should add this title to your list of books to revisit every year.

About It’s Not Luck

The book starts with a corporate board meeting in which a conglomerate decides to sell three of its companies, of which Alex Rogo, the main character, is in charge. Using the principles he learned from the Theory of Constraints, Rogo discovers unique ways to turn around each company quickly by dramatically increasing sales with no additional resources. He does this through mapping out the current reality of each company and then logically addressing the issues that keep them from truly solving their customers’ pains. An excellent summary of the problem solving method, called the Current Reality Tree, is available on a site by Jim Davis. What results from using this method is a logical formula for success. While not a prescriptive checklist, the answer is instead a set of principles general enough to carry far beyond the situations presented in the story.

Positive Impressions

This book is an enjoyable and motivating read because of its format, its broad application, and its evidence that success is not luck. Goldratt takes some rather complicated subjects and slowly spoons them out through a well-written story. While not quite Victor Hugo in symbolism, the story is engaging enough that you look forward to picking it up again. Particularly interesting is watching Alex Rogo apply the problem solving techniques to issues in his family life before applying them to business issues. Deciding whether to let his son borrow his car, helping his teenage daughter navigate boyfriend drama, and evaluating the purchase of a car to share with a friend are all canvases that Goldratt uses to paint the logic-tree method. Once introduced, the methods are much easier to follow later when they take on sales and marketing problems. The most positive takeaway is the assertion and evidence that success in business is not luck, but instead disciplined and creative problem solving that can be reproduced in nearly any industry.

Memorable Quotes

As concise snippets of wisdom, quotes have a powerful way of helping us remember important principles and lessons. Here are five quotes from It’s Not Luck that provide special wisdom.

“I can’t rely on [management] alone. And there is no point waiting for developments. I’ll have to find a way to influence them in the right direction.” p. 14

Often when we are not in charge, we rely on others to make tough choices and act. Equally often, however, we should act and make positive changes happen, even if it’s someone else’s responsibility.

“You’ll always find her busy, but never without time.” p. 58

Alex Rogo said this about his wife. She had embraced the problem-solving techniques espoused in the book and become a successful marriage counselor. This description exemplifies a constant life goal that many of us, myself included, strive to reach: busy, but always available.

“If you are constantly fire-fighting, you have the impression that you are surrounded by many, many problems.” “[But when] you follow the recipe, and you end up with a clear identification of the core problems.” p. 94-95

Referencing the problem solving techniques explained in the book, Goldratt captures the pain of constantly fighting fires. After careful analysis, we often realize that just a few root causes create most of the pain and emergencies we deal with each day. Using the 5 Whys is an excellent way to reach those problems. Incidentally, the Current Reality Tree method is closely related to the 5 Whys technique.

“It’s very important not to ignore these nasty reservations. Each one of them is a pearl, because if we do take them seriously, if we write each reservation as a logical Negative Branch, we can identify everything that can go wrong.” p.173

This quote ties precisely into another excellent quote, that problems are gold to be treasured. Without acknowledging and addressing problems, improvement relies solely on luck. Fortunately, the reverse is also true: addressing problems ensures improvement will occur.

“We didn’t have time for mistakes, so we had to spend extra time planning.” p. 265

Although I enjoy jumping into problems and live testing ideas, some extra time planning up front usually saves a large amount of pain later on. The old adage is often true – haste make waste.

Concluding Thoughts

The final pages elaborate and revise The Goal‘s key conclusion. The goal of a company isn’t just to make money. Rather, all companies have three basic goals:

  • “Make money now as well as in the future”
  • “Provide a secure and satisfying environment for employees now as well as in the future”
  • “Provide satisfaction to the market now as well as in the future”

Often, important decisions benefit only one or two of these goals. The key to building a great organization then is to find creative solutions that accomplish all three goals. Only then, can a company endure challenges and grow to thrive through them.

The business climate will only continue to grow more competitive and difficult to navigate. As supply chains grow and problems seem to multiply, It’s Not Luck reminds us in a powerful way that any challenge can be overcome. Whether you need to remember how to use the problem solving techniques explained in this book, or you just need to revisit examples of how to successfully jolt a company to triumph, It’s Not Luck is an excellent source of motivation and problem solving tools to review each year.

What thoughts do you have? Please share in a comment, and subscribe to future posts.

Slash Obsolete Inventory with this Simple Hybrid Purchasing Strategy

Obsolete inventory, the stock of products that you’re not actively selling anymore, holds back many small businesses from future investment and growth. It ties up cash and hogs valuable warehouse space. While small businesses can certainly implement various methods of liquidating old products and move on, the best solution is to stop over-purchasing in the first place. Of course, never buying obsolete inventory is an obvious solution, but it’s a very elusive goal. Obsolete inventory has a way of sneaking into warehouses. As a cowboy would say, “how did all those sick cows wander onto my ranch – and how can I avoid them in the future?”

In order to reduce future stockpiles of obsolete inventory, you can work with your supply chain team to implement a simple hybrid purchasing and manufacturing strategy that combines small-batch validation with high-volume price discounts. It combines the power of validation and speed to market with the cost benefits of large-batch, long lead-time outsourced manufacturing. We’ll look to a calendar company to explain the hybrid strategy.

Hybrid Strategy Example: ABC Calendars

ABC Calendars sells a wide variety of unique and fashionable calendars. Each year, some of its styles do very well and sell out, but some of its styles barely sell at all. In July, ABC doesn’t know which of its styles will sell well, and in February of next year, its leftover inventory will drastically drop in value. Not too many people buy new calendars two months into a new year. In the past, ABC Calendars has moderated focus groups to forecast the winners. Based on forecasts, ABC sent out large purchase orders to its Asian vendors. These vendors produce in large batches with long lead times, but their low cost helps keep ABC’s margins high. ABC needs these margins to offset the money it loses from the styles that don’t sell. Historically, ABC has done pretty well picking winners, its right about two-thirds of the time. However, as the competitive market changes, ABC needs to do much better.

The real problem ABC Calendars is facing is that the low-cost, outsourced vendors require long lead times and high order quantities. This forces ABC to guess the winning styles before it has any real sales data. To make a good margin, ABC can’t rely on local or in-house manufacturing because it costs so much more. Nevertheless, ABC is trying a new hybrid strategy that will give it quick and valuable validation while still enjoying the lower margins that outsourced vendors offer. The following graphic and explanation show how ABC utilizes a hybrid purchasing and manufacturing strategy to reduce inventory and better calibrate which products deserve a large purchase order.

ABC defines the first step in each product’s life cycle as the prototype phase. More than just a working prototype to proof and pass around the office, this is a chance for ABC to get some initial customer feedback and validation. Even at a very high cost, this phase enables ABC to print around a hundred of each calendar design. It then places them in a few test stores to see how they sell. This first wave of customer voting with their pocketbooks will guide ABC to know which styles show promise.

Based on initial sales in the prototyping phase, ABC begins low-volume, higher-cost manufacturing. Whether ABC manufactures itself or uses a local company, it can slowly increase volume with smaller batches. It can then continue to sell to its early customers and obtain more validation. Usually the higher cost of local manufacturing erodes ABC’s profits. However, before it jumps into the investment of a large outsourced order, ABC doesn’t mind paying a higher price to gain market insight. It actually prefers giving up some margin to avoid piles of obsolete inventory later.

Now that ABC knows which styles have the most positive momentum, it’s ready to place the large orders and capitalize on the lower price from higher volumes. However, before placing goliath-sized orders, ABC plans its exit strategy for the items it’s ordering. ABC orders a substantial amount to carry it through most future demand, but not enough to sustain demand through February. Instead, ABC orders enough to satisfy around 80% of projected demand, planning to run out of inventory around mid-January. Then, when inventory starts to run low, ABC switches back to the local manufacturing option. Again, this decreases margin, but it helps guarantee its warehouse will be nearly empty when March 1 comes and demand disappears for its product.

In addition to printing calendars, any business that produces a large number of SKUs and relies on slow but cheap outsourced manufacturing can significantly benefit from this hybrid strategy. It’s certainly not a lean, one-piece flow or a built-to-order supply chain strategy, but it’s a realistic step in an effort to reduce inventory through hybrid purchasing strategic shift.

What are your thoughts? Please add your experiences or thoughts in a comment below. Additionally, please subscribe here to receive our weekly insights.