Ellery's Essays

Building the Entrepreneur’s Business via Supply Chains

All businesses begin from entrepreneurship, in which creative individuals turn ideas into profitable realities. There had been many who tried their luck as entrepreneurs. Many failed; some succeeded.

It didn’t matter if the products or services entrepreneurs introduced seemed mundane or looked grandiose. What mattered was that entrepreneurs worked hard to develop their ideas into items which they could sell & prosper from.

Entrepreneurs need supply chains to ensure their products will be available to their targeted customers. It’s one thing to create demand with attractive products; it was another thing if entrepreneurs couldn’t fulfil demand with items absent from their markets.

Supply chains consist of the relationships which entrepreneurs establish between their operations front-liners and their vendors, customers, and service providers. Activities respective to each supply chain link drive the flow of goods from sources to customers.

Many entrepreneurs, unfortunately, ignore the importance of supply chains in their strategic planning. Whether it be because many entrepreneurs don’t want to bother with their supply chains’ step-by-step operations or because they’d rather focus on what they believe are more ‘important’ stuff, entrepreneurs tend to delegate supply chain management to other individuals or groups.

When entrepreneurs don’t recognise the importance of their supply chains, they unsurprisingly run into trouble immediately. Troubles include out-of-stock, runaway costs, shoddy quality, merchandise losses, and too much inventory. Entrepreneurs should focus on supply chains as much as they do the development of their products. This is because a product isn’t only what it’s made of and its features (i.e., its core) but also includes what surrounds it (e.g., delivery reliability, after-sales service):

Ref: The Handbook of Logistics and Distribution Management, 3rd Edition, Rushton, Croucher, & Baker, Kogan Page, 2006, page 35

Whereas delivery and service may only take up 20% of a product’s total cost, 80& of its impact is in how it is made available to the enterprise’s customers. Supply chains are therefore crucial to the entrepreneur’s business.

Supply chains surpass the boundaries of enterprises. Enterprises are subsets of supply chains and not the other way around. Supply chains offer the awesome opportunity to build an enterprise’s business, even if entrepreneurs may get the impression they don’t have much clout, especially if they are small start-ups.

We who want to be entrepreneurs can utilise supply chains by starting with how we set up systems & structures in procurement, manufacturing, & logistics.

Our systems & structures, however, shouldn’t be focused inward but outward. We could invest in data & communication systems which allow for quick two-way sharing of information with vendors & customers. Our planning systems should begin not from the receipt of orders or from vague forecasts but from when we first anticipate customers’ interest in our products. We should define the processes of our manufacturing and inbound & outbound logistics operations. And we should have organisational structures which allow department heads to autonomously manage processes and at the same time invoke ownership of the end quality and total cost of our products.

It’s a bad idea to exclude supply chains when we as entrepreneurs plan and introduce our products. How we make available our products matters just as much, if not more than what they are, how much they cost, and what we can use them for. At the onset of beginning our businesses, we need to plan our supply chains as much as we develop our products.

Our starting points are the systems & structures we set up. We should always consider how they will relate with their total supply chains in which enterprises are the connections.

We shouldn’t downplay supply chains as mere operations internal to our enterprises.

About Ellery’s Essays

Who’s Responsible for Collections?

It’s a question that bothers many organizations. Who should be responsible for collecting debts from customers?

Some people say it should be Sales, because a sale to a customer ends not with an order that is delivered but with an order that is collected.

Others say it should be the Supply Chain, particularly Logistics, or the people who deliver to the customers. The one who delivers the goods should be the one who collects.

Other people say it should be the Finance department, specifically those in Treasury or the ones who manage the organization’s cash resources. Finance managers track unpaid collectibles from customers and Treasury accounts for the cash. They’re the ones who should collect.

Sales executives would say their job is to develop and increase business. Collecting from customers distracts them from this focus so collecting from customers should belong to another department.

Supply chain managers would say their job is to make available products, deliver the goods, and satisfy after-sales requests such as warranty fixes—activities that meet customer needs. Collecting doesn’t fall under this scope.

Finance executives would say their job is to record transactions and manage financial assets. As much as they report how much debt there is to collect, that doesn’t mean they’re supposed to do the collecting.

Some chief executives tend to try to answer the question of collection as quickly as possible, thinking it’s just a matter of finding out who’s accountable. Other executives would simply pass it on to a third-party like a debt collector or via creating a stand-alone department devoted to debt collections.

Debt collection efficiency doesn’t necessarily get better even when there’s a third-party or even if the enterprise has assigned the accountability to either Sales, Supply Chain, or Finance. In several corporations I’ve observed, it sometimes gets worse, with debts not only soaring but also with conflicts becoming more frequent between departments.

This is because when whoever starts to collect more intensely, issues start to arise between enterprise and customer. For example, in one manufacturing corporation, customers refused to pay debts because their orders weren’t delivered complete. Another customer protested that they weren’t credited for a return of rejected products to the corporation. While another customer said she shouldn’t be paying because she had a pre-arranged agreement with her sales representative.

In other words, the problem of collection accountability is in many cases not the real problem. The real problem is the policy of collection and how it is being implemented.

Many corporations do have collection policies, which are usually built into their billing policies. The policies dictate allowable terms of payments and qualifications for credit for customers. It is the topmost echelon of an enterprise’s management who formulates the collection policy and oversees its enforcement.

Collecting from customers is therefore a process founded on policy. It starts with the terms of payment agreed with the customer upon sale. It continues with the enterprise checking the status of customer debt before delivery, then with the customer receiving and confirming the delivery, and it ends with the customer making the payment in conformance with the terms.

Sales, Supply Chain, and Finance have their roles to play in the collection process. The policy guides the conduct of the process and each function’s role.

To answer who should collect would be to ask who is the one who would pick up the customer’s payment. But as one can see from the bigger picture, that’s the one final step that depends on how well the other ones did before it.

This post originally published on August 2019

About Ellery’s Essays

What Are We Responsible For?

An old shop proprietor was lying sick on his bed. His wife and children, fearing the worst, were at his bedside.

“My dearest wife, are you here?” the proprietor asked weakly.

“Yes, I’m here, my husband,” the wife replied.

“My dear eldest son, are you here?” the proprietor asked.

“Yes, father, I’m right here,” answered the eldest son.

“My dear second son, are you here?” the proprietor asked feebly.

“Yes, father, I’m here,” the second son responded.

“And my dearest youngest child, my daughter, are you here?” the proprietor asked in a strained voice.

“Yes, papa, I’m here, and I won’t leave your side,” said the daughter.

The proprietor suddenly stood up and shouted, “Who, then, is watching the store???”

We hear it every day from people who we see as successful.

‘We should do what we love.’

‘We should pursue our passions.’

We make bucket lists to see places or go to events we want to experience.

We travel to see the world. We emigrate to other countries to start new careers.

Meanwhile, who takes care of our parents & grandparents? What happens to the relationships we had with relatives, friends, co-workers, and neighbours? How do we turn over the projects and routines when we leave our current jobs? How loyal do we remain to our countries or communities we move away from?

We can imagine the variety of answers to these questions. I’m sure they would differ from individual to individual, given each of us would have our own opinions.

We should not be restrained to do what we wish whether it be working for a cause or chasing a dream.

We, however, have duties to our families, our countries, and our heritages, which we should not shirk from.

Are we irresponsible when we uproot ourselves from the routines we have been doing for countless years, from the positions given to us by our employers or by the heads of our families? Aren’t we fulfilling our talents and ambitions when we chase after our visions and goals?

What does it mean to be responsible?

The dictionary has several meanings.

re•spon•si•ble

adjective

accountable, as for something within one’s power.
involving responsibility: a responsible position.
chargeable with being the source or occasion of something (usually followed by for).
having a capacity for moral decisions and therefore accountable: a defendant not responsible for his actions.
able to discharge obligations or pay debts.
reliable or dependable, as in conducting one’s affairs.

The words associated with responsible are accountable, chargeable, reliable, and dependable. On top of that, the dictionary states that being responsible means being “able to discharge obligations or pay debts.”

But who determines what we are responsible for? And who judges how responsible we should be and are?

In the free societies we live in, we opt for the responsibilities we adopt. Acceptance of responsibility is a choice. We decide whether to stick with our responsibilities or give them up when we believe it is time to.

Consequences arise when we don’t live up to our responsibilities and in the free societies we live in, we only have ourselves to blame.

In not-so-free societies, other people or parties impose responsibilities on us. Autocratic governments enact laws which they expect and enforce their citizens to follow, no questions asked, no avenue to deny. Groups with strict traditions such as families or churches with strong religious beliefs dictate detailed rules which they command members to obey to the letter. History is replete with charismatic leaders who lay down strict obligations on their followers. Authorities or elders determine the consequences of non-compliance, which in some instances, can be severe.

The rewards of routinely doing our responsibilities consist of harmony in our relationships, peace with our community, and even benefits of the financial sort. We get paid better for being responsible employees, for example.

Responsibilities do tie us down when we commit to routines and causes. There are trade-offs when we take on responsibilities and after some time, we are tempted to give them up.

When we observe we’re going nowhere with some of them, when we sense we are not climbing our career ladders, or when we’re losing touch with whom we want to be close to, we feel the urge to chuck our responsibilities, to escape. Our responsibilities become chains that tie us down rather than catalysts for growth.

When we become unwilling to continue with our responsibilities, the first thing that comes to mind is to get away from them. We rationalise that we have our own interests to pursue, that our lives are passing us by, and we need to do more for ourselves. We do need to love ourselves as much as others, after all.

So-called self-help experts (e.g., online coaches, self-certified gurus) would tell us that we need to examine our values & principles and reconcile them with our responsibilities. In more ways than one, these so-called experts would tell us to chase our dreams and leave everything behind. Most of the advice from these people would be likely consist of them abandoning previous lifestyles which led to their own success stories, never mind if they leave out the costs of doing so.

Sometimes, however, the difficulties we encounter with responsibilities stem from challenges, obstacles or issues. We don’t live in a perfect world after all, where everything falls neatly into place for us every day. We do run into roadblocks. This is more so frequent for those of us who live and work rife with unforeseeable events.

Traffic today can be smooth but in gridlock tomorrow. Power and water supply may be consistent for many years but a cutoff could happen anytime. There are governments that put out laws that change business conditions more than once a year. A storm may cancel that annual trip we always take. A new technology (e.g. artificial intelligence) may come along to threaten the jobs we held for decades.

Disruptions have become more common (at least we perceive them to be more common) as our lives move faster from the pressures of competition and advances in information & communication technologies.

Rather than simply escape or abruptly cede our responsibilities, it may be proper to first consider trying to find out and solve the problems that may be hindering the carrying out of our responsibilities.

If we can’t take care of our aging parents because we ourselves are getting older or busier, perhaps we should seek assistance from caregivers. (I personally think sending aging parents to a nursing home more as a cop-out than a solution, unless the nursing home offers special skills or medical care which our parents may require).

If we are becoming frustrated with our careers, we should maybe evaluate not only our job descriptions but also our performances. Have we been slacking without realising it? If we don’t like the assignments given to us, maybe we should find out what it is we don’t like and discuss options with our superiors? Are our jobs lacking challenges or meaning? Have our jobs become no-win scenarios? Are we harbouring ill feelings for that promotion we didn’t get?

It may be nice to figure out what really is bothering us about our responsibilities than to outright quit them.

A problem-solving approach may help:

Enumerate the issues
Define the problem
Lay down criteria a solution must fulfil
Study & test options
Decide on the solution
Invest in the solution

We decide whether to accept or avoid responsibilities. Consequences await those who don’t perform. We feel the temptation to escape our responsibilities and some of us do, to the detriment of those who had been counting on us to carry them out routinely.

The progress of our modern times has been accompanied by frequent disruptions and pressures such that it has been getting harder to execute our responsibilities.

Many of these disruptions and pressures have root causes which we can identify as problems. Problems can be solved and with a patient approach, we can find solutions that can be win-win for both our personal aspirations and for those who rely on us to do the right things.

About Ellery’s Essays

Why Does It Take So Long?

I looked at the bottom of a dog food can at the pet shop to check its expiration date. It said “10/26/2026,” but the production date said “10/27/2023.” I concluded the dog food was safe as I bought the can of dog food on May 25, 2024.

I thought, however: why was the production date more than six (6) months ago? Why did it take so long for the product to be purchased by me, the consumer, from the time it was canned at its factory?

We see the same discrepancy in dates not only in canned pet food but in other products as well. Pharmaceutical prescription tablets I bought on May 02, 2024, show an expiry date on August 2026 but a manufacturing date of August 2023. Why did it take nine (9) months from the time the tablets were packaged to when I bought it from the pharmacy?

Time study after time study has shown it doesn’t take more than a week to make most products from scratch. Items like my prescription medicine and dog food don’t take more than a day to pack or can. Why then does it take so long for merchandise to move along supply chains?

Process flow charts have revealed that merchandise spend a lot of time in inventory, either in storage or in transit, i.e., inside vehicles like container vans on ships.

Is it worth the time and effort to shorten the period from when a product is created to when a customer buys it?

For products like newspapers and perishable food, the first thing that comes to mind is yes. Newspapers published more than a day ago or fruits harvested more than weeks ago don’t sell; hardly anyone buys to read yesterday’s news or eat over-ripe fruits.

It also makes sense to not have products languish in inventory when customers clamour for them. Aircraft manufacturers and shipbuilders, for example, don’t hesitate to deliver their finished planes & ships to impatient customers who usually wait for years for their orders.

Enterprises that customise items logically avoid keeping products in stock. Tailors tell their clients to pick up and pay for their bespoke suits when they’re done. Some bake shops penalise customers who order but are late in picking up their cakes.

For those of us who sell mass-market items like consumer goods, we opt to keep inventory equivalent to several days of sales, which can be either based on historical or forecasted demand. The stock levels we keep depend on how expensive the product is and how regular customers buy them. The more expensive the product (e.g., luxury wristwatches), the more reluctant we are to tie up our cash in inventory for long periods of time. The more predictable our products sell (e.g,, multivitamins), however, motivates us to keep more stock of them.

We do not stock items which experience erratic demand. We make-to-stock items that move frequently or steadily. We make-to-order items which customers don’t purchase often, or which differ in specifications or requirements from one buyer to the next.

The risk of keeping low stock levels is we may not have enough items immediately available to sell. Customers don’t go to supermarkets to wait for groceries to arrive. Customers want their items now, otherwise they’ll go somewhere else or buy other items.

This hasn’t stopped us from counting on customers to wait anyway. Customers who like our products may prefer to wait rather than buy items from rivals. They’ll also wait if they have no other choice (we can’t easily find alternatives to supply our electricity & water, for example).

We keep inventories to buffer against demand variations which we don’t expect or can’t forecast accurately. We try to keep enough items to serve customers as soon as they want them as much as we try to not to keep stock that would end up idle for months or worse, unsaleable due to obsolescence, degradation, or damage.

Managing inventories is as much an active endeavour as it is for managing purchasing, manufacturing, and logistics activities. We plan, organise, direct, and control inventories as much as we do the operations of procurement, inbound & outbound logistics, and production. We minimise the time it takes to make items as much as we strive to reduce the quantities of items that sit in our warehouses.

So, why then does it take so long for items to flow from production to customers if we are already working hard to optimise our operations & inventories?

Many of us would have different answers to that question and we would rationalise them depending on the industries our products are in. Here are some of them:

Answer #1: Time adds up from one inventory location to the next

As items move from one location to another, they accumulate time waiting in one storage facility to the next. The total time adds to the length of time from production to when the customer buys the item.

Some items also undergo quality inspections & sampling testing at different locations and are therefore intentionally put on hold until they are cleared or certified. This adds more time to a product flowing through the supply chain.

Answer #2: Items wait for orders before they’re served

Many manufacturers wait for middlemen like dealers or distributors to order products before they are shipped. If dealers or distributors don’t order, items sit in inventory and wait.

Answer #3: The time to transport can be long

If products are coming from far off places, the time to transport them would add to an item’s production-to-customer journey. If products are passing through international gateways, there would be additional time spent for customs inspections & clearances and perhaps for other government requirements.

Given the answers mentioned above, a product would take some significant time from when a factory makes it to when it reaches buying customers.

But as much as supply chain managers may offer answers such as these, should we just accept that it takes as long as six (6) months for products like canned god food and prescription medicines to reach customers from the manufacturing lines?

Some executives would just say ‘yes,’ and that would be that.

Many supply chain managers focus a great deal on activities within the enterprises which employ us. We don’t manage entire supply chains but those that lie within the borders of the businesses we work in.

Hence, we optimise the operations of our employers, but we don’t optimise the supply chain flows upstream or downstream from where we’re at. Whatever productivity improvements we implement are mainly for the interests of our organisations.

We, therefore, would not concern ourselves about products taking too long to flow from production to customers, at least unless it becomes relevant to our business or jobs.

At the height of the coronavirus pandemic from 2020 to 2022, many customers took to social media to complain about orders taking so long to be delivered. Orders for computer chips, exercise gym equipment, medical personal protection gear, frozen meat, and groceries were taking so long to deliver.

Answers from supply chain managers, like those enumerated above, did not placate irate & impatient customers.

The outcries from many customers were loud enough for not only enterprise executives but also government leaders to seek action. Meetings were held. Quick-fix measures were applied.

Supply chain managers pushed vendors, manufacturers, and transport providers to speed things up. Demand shifted as some customers gave up or found alternatives. The problem faded but it wasn’t solved, if not even defined in the first place.

Asking questions like ‘why does it take so long for a product to reach customers after it’s manufactured?’ leads us to see how our enterprise’s operations relate with others in a supply chain we are participants in. It gives us an opening to know what our relationships are like with vendors & customers who are upstream and downstream from where our enterprises are.

It also forces us to evaluate the productivity of the entire supply chain. We may be productive in our operations but is the supply chain outside our enterprises’ scopes benefiting from our productivity?

Customers don’t care about what cause delays in deliveries; what they care about is getting the items they ordered and paid for. Hence, the onus is on us, the supply chain managers, to fix the flow of goods from procurement, production, logistics, to delivery to fulfil the demands of our customers.

We need to recognise that our jobs aren’t limited to within the boundaries of our operations but also includes our relationships at least with our vendors, service providers, and customers. What we do productively for our enterprises, we should ensure it contributes to the productivity of the supply chain; otherwise, our products, for what it may have been worth when we shipped it, would lose value to the final end-users.

Solving supply chain problems begins by asking questions and then getting stakeholders to enrol into identifying, defining, and working on solving the problems together.

About Ellery’s Essays

Flagships & Anchors

Every enterprise has a flagship. A flagship is an enterprise’s leading product. It’s the brand that customers identify with the enterprise or it’s the enterprise’s number one item in terms of customer popularity or sales.

We know The Coca-Cola Company by its flagship namesake, Coca-Cola. Likewise, we know the Pepsico corporation from its Pepsi line of beverages.

We know the Clorox company from its bleach products of the same name.

We relate McDonald’s with its Big Mac hamburgers, Wendy’s with its signature bacon cheeseburgers, and Burger King with its Whopper menu.

Some corporations, especially big conglomerates, try to promote more than one flagship to seize greater market share and revenue.

Consumer goods giant P&G has flagships in the categories of laundry (Tide), personal care (Safeguard), hair care (Head & Shoulders), and oral care (Crest, Oral-B), and uses them to compete with Unilever’s detergent products (Breeze) and soap line (Dove), and Colgate-Palmolive’s Colgate oral hygiene products.

Apple fights on multiple fronts in the smartphone business (iPhone), tablets (iPad), and personal computers (MacBook, MacAir).

Airbus is a leading aircraft manufacturer via its flagship A300 fleet of jets ranging from the widebody A350 to the narrow-body A321neo, and strives for market share against Boeing’s best-selling 700 series passenger airliners such as the 777, 787 Dreamliner, and the 737-MAX.

Because flagships typically carry the bulk of enterprises’ businesses, executives would tell supply chain managers to make sure there’s always enough available stock of their leading products. At the same time, they’d tell the same supply chain managers to prioritise flagships not only in the servicing of orders but also in keeping costs within strategic targets.

Executives normally are aggressive in expanding their enterprises’ product lines via their flagship brands such that they would expect supply chain managers to support such initiatives by managing their operations productively.

We can imagine executives banging conference room tables telling supply chain managers to fix issues such as out-of-stock or shortfalls in production. The last things executives want to hear are their flagships being weighed down by unserved orders and higher-than-expected costs.

Supply chain managers would, therefore, be led to believe that their focus should be on flagships. That would be a mistake.

Whereas executives may indeed emphasise flagships, supply chain managers, on the other hand, should be identifying and focusing on anchors.

Anchors are those items which matter the most in how the supply chain shall flow and perform. Anchors are those highly valued items in an inventory line-up that make or break not only an enterprise’s working capital but also its delivery reliability.

Anchors, like flagships, vary from one enterprise to the next.

For the Coca-Cola Company, its anchors would be the concentrates and syrups which are the main ingredients in the bottling and canning of its flagship beverages.

The aluminium company ALCOA anchors on the raw material of bauxite for the manufacturing of its products.

Bauxite

Starbucks’ anchors are the beans it buys for all its coffee products sold from its shops worldwide.

Toyota Motor Company’s anchor in Southeast Asia are the chassis which are the platforms for its Fortuner, Hi-Lux, and Innova brands.

Toyota Innova Chassis

Philippine-based conglomerate, Jollibee, learned the hard way that not only beef for its hamburgers but also chicken is an anchor when it suddenly could not source the latter in the middle of 2022 and ended up not being able to sell its flagship Chickenjoy items at its branches.

Anchors could either be raw materials, work-in-process, or finished products. It all depends on the business and operations of the enterprise.

The inventory of every item in a business is, of course, important. Manufacturers cannot produce unless all components, ingredients, materials, and supplies are complete and available. We can’t sell a car with one less door handle as much as we can’t produce beauty soap without perfume.

Anchors don’t diminish the importance of other items that flow through supply chains. But they do require more focus and they usually determine how we manage our inventory planning & control systems.

For example, a Japanese metals fabrication company sells a wide line of steel angle bars and flat bars of various grades, sizes & thicknesses. Sales managers would insist that the operations department keep stock of sixty-four (64) SKU (stock keeping unit) items which are the company’s best-sellers.

The operations department didn’t agree. The operations managers, instead, focused on sixteen (16) types of 6-ton metal coils which were the raw materials for all the company’s products. The operations department’s manufacturing & logistics plans centred on the procurement & processing of the coils which were imported from China.

The operations managers kept stock of the coils but not the finished products. When customers ordered, the operations managers would immediately schedule fabrication of the needed products.

It wasn’t because it was easier to manage sixteen (16) coil raw material items than it was for sixty-four (64) finished product stock-keeping units (SKUs). It was because it was easier for the company’s operations managers to focus & flex production from the tons of metal from the coils than on the number of pieces needed per product SKU. It was simpler to make-to-order products and buy-to-stock the raw material coils, than it was to keep inventories of both products and coils.

Coils were the most expensive raw materials of the company, but they were also its fastest moving items. The company could not afford to having no stock of coils at any time but at the same time had to balance cash that would be tied up in buying and waiting for the coils to arrive from abroad.

Anchors vary along the supply chain from enterprise to enterprise. If coils were the anchors for a metal fabrication company, iron ore would be the anchors for the vendors who manufactured & sold the coils. The fabrication company’s products of flat bars & angle bars would be the anchors for customers such as machine shops and construction contractors.

Enterprise executives may put a lot of priority on flagships but for supply chain managers, managing anchors matter more when it comes to productivity and customer service.

Anchors determine how we plan and execute operations and in so doing, they support the flagships enterprises market & sell.

About Ellery’s Essays

Beware the Balanced Scorecard and Other Buzzwords

Executives of a multinational corporation mandated the roll-out of the Balanced Scorecard (BSc) throughout the organisation. Departments such as Sales, Marketing, Research & Development (R&D), Human Resources, Manufacturing, Logistics, & Purchasing were required to present key performance indices (KPIs) to upper management and show corresponding targets & action plans.

Department managers immediately attended BSc seminars & workshops. They drafted long lists of objectives, performance measures, and action plans and presented these to their superiors. Executives applauded the managers for their commitments and promised support.

In less than a week, the corporation’s BSc drive was a thing of the past. Executives nagged managers about getting more sales, reducing costs, and resolving customer complaints, which was what they did before the BSc was introduced. The KPIs managers had presented and committed to were forgotten.

The executives occasionally (like once a year) asked for a review of BSc performance measures which were presented in that first workshop. Managers would cram and invent figures to accommodate for presentations which executives would again applaud but afterward forget. For the executives, having a BSc presentation gave them a security blanket that their organisation remained sold to the concept, even though they no longer (if ever) were not.

The Balanced Scorecard is a popular concept among enterprises. Its thrust is to unite the departments of an enterprise by implementing performance measures under four (4) broad categories: learning & growth, business processes, customers, and finance.

With BSc, executives can analyse non-financial and financial information in single reports as sourced from various departments. The aim is to give executives an up-to-date picture of performance which would result in greater control and identification of improvement opportunities.

Enterprises who have enrolled into the BSc do not disagree with its philosophy; it’s just that many enterprises implement it differently from what its creators, David Norton & Robert Kaplan, had written in their book.

For example, some enterprises use totally different categories other than the four the Balanced Scorecard originally preached (i.e., learning & growth, business processes, customers, and finance). Some would instead classify their KPIs based on operations, functions, market category, etc.

Some companies implement KPIs via a top-down approach, i.e., executives dictate to managers, supervisors, and staff what performance measures to use. The executives would then instruct the managers, supervisors, & staff to come up with action plans to meet goals tied to those performance measures.

Others, like the example of the multinational corporation, would delegate department managers to formulate their own goals & KPIs and present their plans on how they would meet those goals Executives would just simply approve what the managers would present and observe the managers’ performances from time to time.

Some enterprises would use the Balanced Scorecard as the basis for performance appraisals of managers. Managers would be expected to meet scorecard objectives and be subsequently rewarded if their scores meet or exceed expectations or be punished if they don’t.

In most cases, the Balanced Scorecard implementation doesn’t prosper. Organisations would regress to what they were doing before. As in the example of the multinational, executives would backslide to their perceived urgent issues such as meeting sales targets, controlling costs, and addressing customer complaints.

History is replete with enterprises pushing popular buzzword business concepts only for them to fall flat and fail. Examples include Total Quality, Just-in-Time, Manufacturing Resource Planning (MRP II), Lean Six Sigma, Enterprise Resource Planning (ERP). The concepts sounded good, and they were successful for a few companies who seriously used them; it was just that what the executives were trying to put in wasn’t really addressing pertinent problems.

It’s not that the idea of implementing the Balanced Scorecard is a bad one. The Balanced Scorecard and all other management concepts come with methodical approaches to solving problems. They are not meant to be philosophies to adopt but relevant ideas to address issues.

The executives in the multinational example were preoccupied with getting more profits and market share and thought that enrolling their organisation into the Balanced Scorecard would automatically bring about a boost in results.

But it didn’t. Executives got impatient and slid back to what they were doing before, which was to nag their managers on sales, costs, and complaints. The BSc approach just didn’t suit what the executives really wanted.

Especially for enterprises with supply chain relationships, buzzword business philosophies won’t be cut out for success unless we apply their approaches appropriately as solutions to problems. We shouldn’t force fit our organisations to concepts; we should tailor them to fit into our organisations. (Analogy: we don’t force ourselves to wear small-size pants so that we can look thin; we either find the right-size pants or physically exercise to really get thin).

With the barrage of information from numerous people who think they know better than we do, we’re tempted to try things which attract our attention and spur our interest. What we should ask ourselves whenever we see these so-called ideas, is how they can be solutions to whatever our problems are.

It would, therefore, be to our advantage to know what our problems are. We should define them as we observe and experience them. We should seek them out as we develop goals and strategies. We should be aware of the challenges and potential disruptions as we formulate the roadmaps to our visions.

The famous automotive industrialist, Henry Ford, once said:

“Obstacles are those frightful things you see when you take your eyes off your goals.”

Some would say we should therefore keep our eyes on our goals. We’ll run into problems and get stuck if we don’t. Keep our eyes on the road and we’ll be there at our destinations before we know it.

But we can also say: let’s solve the problems, especially those that are right there blocking our path, the ones disrupting our driving, and even the ones that may open a shorter and faster route to where we’re going.

Obstacles may indeed be frightful, but we should face them when they challenge us. All we need is some courage and commitment, without the need of a buzzword.

About Ellery’s Essays

My Car Gets a Day Off; How Come I Don’t?

I work every day of the week. This comes from having several jobs or responsibilities, which is typical not only for myself but also for many Filipino workers, employees, and professionals who eke out what they can for a decent living.

True, there are some lucky people who don’t work as much. Many court judges, for example, work only during hearings or trials and leave much of the grunt work to clerks. Bank employees have weekends off. Some families of overseas workers simply sit back and wait for the hard-earned remittances of their hardworking foreign-based bread-winners.

Aside from these lucky people, there’s also my car. It has a day off at least once a week. This is thanks to the Metropolitan Manila Development Authority’s ordinance known as the Unified Vehicular Volume Reduction Program (UVVRP) or what people call the Number Coding scheme.

The UVVRP’s purpose is to reduce the number of vehicles on the road during daytime hours as a means to manage traffic in Metropolitan Manila. Private vehicles such as cars and vans are not allowed to use public thoroughfares one day of the working week, which is from Monday to Friday. The assigned day of the vehicle’s exclusion from the streets depends on the last digit of the vehicle’s license plate and the numbers assigned for that day. Cars with last digits of 1 or 2 are banned on Mondays, 3 and 4 are banned on Tuesdays, 5 and 6 on Wednesdays, 7 and 8 on Thursdays, and 9 and 0 on Fridays. My car’s license plate ends with 3 so I’m not allowed to use my car on Tuesdays.

The UVVRP ordinance has become quite complicated as cities and towns surrounding Manila adopt their own intrinsic rules. Some cities lift the UVVRP from 10am and 3pm but in Makati City, the UVVRP is enforced the whole day. The ordinance is suspended during holidays but cities like Makati and Pasay sometimes keeps the ordinance enforced, thus causing confusion to motorists, especially the ones who get caught.

I drive to work every day but because my car isn’t available on Tuesdays, I borrow my sister’s or uncle’s car to drive to work. Many families essentially buy an extra car to cope with the UVVRP because simply, they have to go places every day of the week. Cars get a day off but people don’t.

The UVVRP is, therefore, ineffective since people would find another vehicle to drive and work around the scheme. Despite calls to repeal the ordinance, the MMDA adamantly stands by the UVVRP. The MMDA instead insists that motorists take public transportation on days their cars are banned to help reduce traffic.

Several years ago, concerned citizens with the help of a few senators and congressmen loudly pushed for the end of the UVVRP. The MMDA refused and justified their position based on a study they conducted. The study consisted of counting the number of vehicles on the roads when the UVVRP is in effect and when it isn’t. The MMDA lifted the UVVRP for one week to allow its personnel to count the vehicles on the roads. When the UVVRP went back into effect, the same survey was conducted.

According to the MMDA, the study showed that the UVVRP reduced the daily number of vehicles by 20%, which was expected since the number coding scheme forced every car out of the streets 1 out of 5 days a week.

But the study was flawed. The MMDA survey when the UVVRP was lifted happened during a normal work and school week. The vehicle counting when the UVVRP went back into effect was done when schools are closed. It was obvious that the reduction in traffic when the UVVRP was back in place wasn’t due to the scheme but due to less traffic at schools.

Counts were also done haphazardly usually on one or two roads over a brief number of hours conducted by traffic enforcers untrained for the study. In other words, it was an un-scientific survey which wouldn’t pass any statistical test of significance.

A straightforward textbook application taken from the Operations Research field would probably have been more effective in seeing whether the UVVRP worked or not. This would involve identifying choke points, timing the waiting time at those choke points, surveying the volume of traffic, and comparing the data with and without the UVVRP on normal work and school weeks. Chances are the study would show that it’s the choke points where viable solutions can be found to unlock Metro Manila’s traffic, and not in a number coding scheme which probably didn’t have much of an effect.

The MMDA with the backing of Metro-Manila city mayors, unfortunately, would have none of any other argument and has kept the UVVRP running. So up to the present, my car gets a day off 1 day out of the week but I don’t.

The UVVRP illustrates a phenomenon where organizations such as government agencies implement rules that result in assets becoming idled for wished-for beneficial results that don’t not really come about in the first place. The price of reducing traffic, which is likely insignificant, is manifested in the cars and vans that sit idly in garages on days they cannot be used. For some economists, this might not be an issue; rather it probably can be construed as a benefit since as families buy extra cars, the purchases spur the local automotive industry.

But the UVVRP doesn’t just affect families. It affects as well delivery vehicles of small businesses and company cars used by people such as sales persons and real estate agents. Businessmen have to invest more in extra vehicles to ensure that deliveries are done every day and field personnel can conduct their daily business.

The MMDA argues that if the UVVRP is repealed, Metropolitan Manila will end up in a much worse gridlock as 20% more vehicles will be out on the roads daily. There likely could be a build-up but probably not as much as 20% more. There are after all only so many drivers in the city and they, like most human beings, will learn to adapt to the heavy traffic and find ways to beat it, which is what we are already doing every day anyway.

About Ellery’s Essays

This essay was originally written on May 26, 2013

It’s Not Only About ROI

Residents of Addition Hills in Mandaluyong City, Manila, queue to recieve water distributed on water tank truck and fire trucks on March 15, 2019. Manila has been hit by its worst water shortage in years, leaving bucket-bearing families to wait hours for a fill up from tanker trucks and some hospitals to turn away less urgent cases. -Noel Celis / AFP

The chief executive officer of a multinational consumer goods corporation handed down an edict: he won’t approve any project unless the proponent presents a justifiable return on investment (ROI). Whether it be an investment in new facilities, hiring of additional staff, or a promotion of a new product, the CEO won’t let an undertaking push through unless the ROI is attractive, i.e., the benefits outweigh what the company would get back in interest if money for the project was saved in the bank.

The CEO’s edict forced managers to carefully study their initiatives before bringing them up for approval. But it did also lead to managers hesitating to suggest improvements in which they couldn’t outright determine the ROI. Engineers didn’t replace machines even though they were often breaking down; some departments stuck with their head counts despite heavier workloads; and logistics managers squeezed as many items as they could into warehouses even if storage was already beyond capacity.

Should everything we decide on be based on ROI?

The CEO of the multinational consumer goods corporation argued that if a manager couldn’t compute a justifiable ROI for any proposed undertaking, it’s because:

The manager wasn’t thorough enough in quantifying the benefits of his proposal, or;
There actually are no worthy benefits from the proposal to speak of, or;
The manager’s proposal is not feasible in the first place.

Computing the ROI can necessitate some study from different angles.

Take the following case for example:

Transportation managers of a logistics enterprise studied whether they should repair an old delivery truck or replace it with a new one.

The cost to buy a new truck was $USD 25,000. Estimated life is five (5) years.

The cost to overhaul the old truck and extend its life for another five (5) years was $USD 2,000.

Estimated annual expenses for operating the new truck or the old truck for the next five years were as follows:

New Truck Expenses ($USD)
Fuel	2,400
Tires & Battery	400
Maintenance	800
Yearly Total Expense	3,600

Old Truck Expenses
Fuel	4,800
Tires & Battery	600
Maintenance	2,000
Yearly Total Expense	7,400

Sticking with the old truck would incur higher expenses totalling $USD 7,400 per annum. Buying a new truck would cost $USD 3,600 per annum and would save the enterprise $USD 3,800 [7,400 – 3,600] annually or $USD 19,000 in five (5) years.

The savings of $USD 19,000, however, would hardly justify the cash outlay of $USD 25,000 for the new truck as the enterprise wouldn’t get its money back within the truck’s five-year life. The ROI is 15% ($USD 3,800 divided by $USD 25,000) but it doesn’t hurdle the annual depreciation of $USD 5,000 (the accounting expense of the new truck’s reduction in purchased value over five [5] years).

Even if the transportation managers argued that they could still operate the new truck beyond five (5) years, expenses would still end up equal to that of the old truck by that time, as the new truck would already be considered old.

There is, however, another quantifiable benefit to having a new truck versus an old one.

A new truck would have less downtime from maintenance and breakdowns, and because it’s brand new, would be available for more trips a week. A new truck could provide 50% more trips a year than the old one, such that it can add more income than if the enterprise stuck with the old truck:

New Truck Income ($USD)
Gross Receipts @$USD 80/trip; @375 trips/year	30,000
Expense
Fuel	3,600
Tires & Battery	600
Maintenance	1,200
Sub-Total Expense	5,400
Net Income Per Year	24,600

Old Truck Income ($USD)
Gross Receipts @$USD 80/trip; @250 trips/year	20,000
Expense
Fuel	4,800
Tires & Battery	600
Maintenance	2,000
Sub-Total Expense	7,400
Net Income Per Year	12,600

A new truck would add $USD 12,000 ($USD 24,600 – $USD 12,600) in net income annually. Cashflow from the new truck’s income would return its investment in a little more than two (2) years. ROI computed would be 48% [straight line of dividing 12,000 by 25,000].

The transportation managers would need to commit that they’d use a new truck for more trips and earn additional income than with an older truck. At least, the transportation managers should confidently tell their superiors that a new truck is worth one-and-a-half times more in delivery capacity than that of the older truck.

The lesson from this case of the new truck versus an old truck is that we shouldn’t limit our decision-making to the ROI from cost savings. We should consider other benefits such as what could be gained from the opportunity of additional income.

We also should not solely rely on ROI when it comes to projects that deal with risk.

In 1997, the Manila Water Company, was granted as concessionaire to supply water to Eastern side of Metropolitan Manila, Philippines, which included the neighbourhood where I lived. MWC had upped the water pressure and improved service as soon as they came on board and almost overnight, I and my neighbours no longer needed to pump & store water in 30-foot-high water tanks which we previously used when water supply was not dependable.

As MWC provided strong water supply & pressure continuously, many of my neighbours dismantled their tanks, pumps, & cisterns as a result.

But we in my family’s household didn’t; we continued to maintain our water tank & pumps even though we hardly used them.

In March 2019, MWC abruptly cut water supply for up to 20 hours a day, citing critically low water levels at reservoirs. Taps ran dry and people in my neighbourhood desperately sought water for their basic needs. They queued up to wait for water trucks that sometimes never arrived or bought bottled water from vendors, if they could find anyone selling in the first place. Despite assurances from MWC that service would normalise, the water service cut-off would last for more than two (2) weeks. People couldn’t go to work or even sleep as they had to look for water to meet their daily needs.

But at my residence, we had no problems thanks to the stored water in our tanks. We had enough water to last at least five (5) days. And we replenished our tanks when MWC did supply water even if it was only available for very few hours a day.

We avoided the nightmare of disruption to our daily lives, as we continued with our businesses and even shared some of our water with friends and employees.

From 1997 to 2019, I religiously maintained my residence’s tank & pumps. It did cost me money and time as I sometimes had to ask a plumber to replace older pumps or repair rusty pipes & valves.

There was no reward, no financial return, for my efforts to upkeep our water tanks and corresponding plumbing while my neighbours enjoyed MWC’s continuous water supply. But it all paid off that fateful month of March 2019, as I and my family avoided the inconveniences from MWC’s sudden & disastrous water interruption.

The purpose of investing in tanks & plumbing was to counter the risk of experiencing no MWC service at any given time. An ROI computation would show it wouldn’t have been worth the investment but it turned out the opposite if we consider the avoidance of disruption.

Enterprises exist to make money and ROI is a key measure in determining whether we will from the decisions we make. But as much as it is an important economic parameter, ROI should not solely be the deciding factor especially when we are taking advantage of opportunities or when we are mitigating risk from possible adversity.

We shouldn’t ignore the potential benefits which we wouldn’t be able to quantify an ROI from, especially when we are betting on opportunities or hedging against adversities.

About Ellery’s Essays

Solving Problems Before They Become Calamities

https://imageio.forbes.com/specials-images/imageserve/65adeae8d5e6436b71755865/Pedestrians-walk-past-the-American-multinational-chain—/960×0.jpg?format=jpg&width=1440

Starbucks Corporation had reported lower sales in the second quarter of its fiscal year ending March 31, 2024. This led to the coffee chain company’s stock price tumbling by as much as 12% on April 30, 2024. Starbucks’ chief executive officer, Laxman Narasimhan, cited customers abandoning their app orders because of very long waiting times at Starbucks stores.

“The chain’s executives said that they are working to speed up service during the morning hours to better meet customer demand, including for orders placed ahead of time on its app. Too many customers are abandoning their app orders because of long wait times and menu-item unavailability, CEO Laxman Narasimhan said.”

CEO Laxman Narasimhan had been credited for spending time at Starbucks branches. He immersed himself in the front-line business of Starbucks, as he operated espresso machines, served coffee & food to customers, and held dialogues with baristas. From what he learned, he promised to improve working conditions and customer service. He recognised the difficulties of baristas such as when they needed to serve coffee drinks within company-specified lead times or when they ran out of cups or menu items.

CEO Narasimhan’s initiatives, however, did not pay off before its fiscal quarter ended on March 31, 2024. Sales had dropped together with income as well. And according to observers and Starbucks management, it was not because demand had declined. It was because Starbucks hadn’t been able to serve customers fast enough before they gave up on their orders.

The fall in stock price was a calamity for Starbucks. Executives and stockholders were obviously disappointed as company leaders promised to “speed up service” especially during the morning hours, when customers looked for their daily wake-up drink before going to work. But the idea of shortening service times sounded more like a knee-jerk response than an actual solution.

Was inefficient customer service really a major root cause for the unexpected bad financial news?

Customers clamour for Starbucks coffee products because of their quality, and excellent store service & ambience. But was a failure to maintain that excellence (i.e., serving customers quickly) the primary reason for the subpar quarterly financial performance?

Many executives prepare ready answers when calamities strike their corporations. They immediately identify causes and promise to solve problems. But are the causes they identify the problems that should be pursued?

Starbucks is a global company. Observers had noted that upstart coffee shops had been challenging Starbucks’ market share in China. There have been some price increases in coffee and food items, and prices of coffee beans had also been rising, putting pressure on Starbucks’ profits.

Could the stock price of Starbucks have dropped not only because of the reported lower sales but also because of the higher costs? Higher costs were likely contributing to reductions in income as much as higher prices may had played a role in declining same-store sales.

How do we solve problems? Do we wait for them to happen before we try figuring them out? Or do we anticipate them, ready with our teams to take them on? Or, do we ask questions, gather information, identify them, and figure them out?

We don’t welcome problems. It’s a common message we managers send to our peers and subordinates: don’t give me problems. And because we avoid problems, we only address them when they happen, which is when they manifest themselves as calamities, disruptions, or heaven forbid, catastrophes.

Worse, we are typically impatient in getting anything done. Therefore, when calamities strike, we rapidly seek remedies to mitigate them or just ride them out.

We are reactive, instead of proactive.

Proactive has been a popular buzzword. We say we are proactive when we act without a stimulus. We take initiative from a cause, which we make succinct via visions, missions, goals, & strategies.

The problem-solving approach is a splendid example of proactivity. Instead of waiting for calamities to occur, we seek out and solve problems such that we counteract, if not allay, their impacts. There is a plus side to imbedding such a mindset in our organisations.

But many of us don’t have one.

Most enterprises don’t have a policy, structure, or system which sees us seeking out problems, defining them, and painstakingly solving them. We, instead, tend to solve problems based on what happens in front of us, or more specifically, based on what happens in front of our leaders. Whatever the chief executives decide is the problem becomes our problem to solve.

A problem-solving approach requires a paradigm shift. It requires that we admit that there are problems out there which we have yet to recognise and we make an effort to identify them, clarify them, and find solutions. It requires we accept that we won’t have ready answers but that problems would be showing themselves as indications or symptoms which we should not ignore.

Starbucks had seen the symptoms. There was the growing & thriving demand, the longer lines at stores, the harder challenges baristas were going through in serving customers, and the runouts of supplies & menu items. The symptoms were there, and they indicated problems that were becoming potential calamities. Starbucks management just needed to detect them, dig into the data, and articulate the problems.

Executives immersing into their businesses are a good thing. But it would be a better if they did it with the intent to identify and solve problems. Immersing fosters better relationships with the people of our organisations but we could do a lot better if we also immersed to open our eyes to problems we could solve before they turn into calamities.

About Ellery’s Essays

Solving Problems in the Midst of Crises

We who are supply chain veterans have encountered many crises in our operations.

Over the decades since Keith Oliver (and Mr. Van t’Hoff) coined the term, supply chain management, we have had our share of challenging crises. But even as many enterprises recognise their critical importance, supply chains remained a not well understood branch of business.

That changed at the height of the CoVID-19 pandemic.

After the World Health Organisation formally declared the coronavirus pandemic on March 11, 2020, nations enacted lockdowns which shut down supply chains around the world.

Panic-buying consumers emptied grocery shelves almost overnight. There were shortages of food and hospital supplies as demand spiked and vendors were unable to deliver provisions.

When pharmaceutical scientists developed vaccines to counter the virus, governments finally relaxed restrictions. Supply chains were able to flow again.

The crisis from the pandemic, however, had thrust supply chain management to the forefront of global media attention.

Events relating to supply chain disruptions became headlines:

Suez Canal, March 23, 2021

The Ever Given container ship runs aground at the Suez Canal blocking shipping traffic between Asia and Europe. The incident dominates global news headlines and even though salvage crews finally were able to dislodge the ship in less than a week, newscasters and analysts fanned speculations of increased costs in freight and merchandise arising from delays caused.

Bloomberg Supply Lines, September 22, 2021

“The amount of time it’s taking for chip-starved companies to get orders filled stretched to 21 weeks in August, indicating the shortages that have crippled auto production and held back growth in the electronics industry are getting worse. Chip lead times, the gap between ordering a semiconductor and taking delivery, increased by 6 days to about 21 weeks in August from the previous month, according to research by Susquehanna Financial Group. Volkswagen’s truck division Traton SE became the latest manufacturer to warn the global shortage of semiconductors has jeopardized deliveries.”

Ukraine, February 24, 2022

Russian military forces invade Ukrainian territory, setting off alarm bells in global commodity markets. Prices of wheat skyrocket as nations sought alternative sources. It didn’t help when Western nations from the United States to European countries slapped sanctions on Russia, further crimping supply not only of wheat, but also of crude oil and various minerals.

The war degraded into a stalemate that resulted into bitter divisions among global traders. Businesses adapted to the fighting but the war and the growing political divide between East and West remains a looming risk for supply chains.

Panama Canal, August 25, 2023

Panamanian authorities announced restrictions in the passage of ships through the Panama Canal, a vital waterway shortcut between the Atlantic and Pacific Oceans. Low water levels from a drought in Panama had limited canal lock operations, resulting in long queues of ships waiting to pass through. Shipping lines re-routed their container ships either through the West or East Coasts of the United States or via the long route around the Southern tip of Latin America. Shipping cost increases and delays resulted for customers and vendors in North America and Europe.

Panamanian authorities announced an ease in restrictions on April 15, 2024, as they welcomed optimism that the upcoming rainy season will revive water levels at the Panama Canal. Supply chain professionals were cautiously hopeful.

Pfizer Plant, Rocky Mount, North Carolina, USA, July 19, 2023

A tornado ripped through a Pfizer pharmaceutical facility. Fortunately, there were no fatalities, but the damage and resulting shutdown of the facility had aggravated the already-strained supply of drug products to US hospitals.

The Rocky Mount facility was able to restart operations four (4) months later, although not yet in full swing.

Red Sea, November 19, 2023

Houthi rebels based in Yemen began attacks on shipping at the Red Sea, starting with a hijacking of a commercial ship and later via drone & missile strikes on merchant vessels.

The rebels continued their attacks despite retaliation from a coalition of American and Western forces. Shipping lines, meanwhile, suspended passage of their vessels through the Red Sea, which has added expense and lead times to transportation between Asia and Europe.

Baltimore, Maryland, USA, March 26, 2024

The container ship, MV Dali, departing from Baltimore’s harbour, collided with the Francis Scott Key bridge, causing it to collapse. Quick thinking port authorities within minutes stopped traffic from crossing the busy bridge, preventing hundreds of motorists from falling into the Baltimore port’s bay (unfortunately, six [6] construction workers didn’t make it out). In the aftermath of the collapse, salvage crews removed enough debris to open a temporary channel for stranded ships to pass through and allow some operations at the port to resume.

Commentators and so-called expert analysts had urged enterprises to prioritise resilience and sustainability. Their rationale is that supply chains need to prepare for risks and adversities. They have pushed organisations to adopt renewable energies, cutting-edge technologies (e.g., artificial intelligence), and risk management.

Supply chain managers should invest in better planning & information systems such that they could be more flexible to changing demand, especially given global events (e.g., war, calamities) may affect our business environments.

So-called experts and wannabe consultants offer a lot of solutions. Many, however, don’t tell what the problems are in the first place. They equate crises with problems without understanding that crises are likely more the effects from problems which we failed to identify and solve.

We usually don’t solve crises; instead, we manage them. We try to moderate effects, counter threats, or minimise risks. We move to get ourselves and others out of harm’s way or work to reduce the inconveniences. We hunker down or we try to escape.

In the aftermath of crises, we recover and heal. If a crisis festers (e.g., burning platforms), we look for quick fixes. We pick up the pieces, but we skip solving problems exposed by a crisis. We urgently find ways to get things back to track to where we left off, but we don’t review what happened, how we responded, and what we should do better next time. If we do, most of the time we implement solutions without first defining the problems.

The strength of our supply chains lies in not in how well we weather crises but in how well we identify problems and implement solutions which contribute to our operations’ productivities despite the risks and adversities.

Problems accompany crises. The trouble is we don’t solve them as much as we manage crises.

Enterprises and economies have experienced many supply chain crises and survived, if not even prospered.

But despite what we may call resilience in our operations, we have not really made our supply chains more productive. We did not really identify or solve many of the problems that underlined the crises we experienced.

Because we have not yet addressed, if not even sought out, these problems, we have not optimised our supply chains, at least to the extent that they would be well-prepared for the next crisis.

Most of us don’t like problems because we equate them with crises and the disruptions they bring.

But crises are not problems. They either give us problems or they are the results of them. Problems are the root causes of crises or weaknesses in our systems and structures which crises expose.

We don’t want to experience crises, but we should seek and identify problems so that we can develop solutions to either mitigate, counter, or defend against crises.

In crises, we may turn to our leaders. In problems, however, we need the right people to solve them.

Executives manage crises. Inventors, entrepreneurs, & engineers solve problems.

Organisations should have the talent, systems, & structures to not only weather crises, but also the incentive, initiative, and creativity to find and solve problems.

It starts with us not only counting on executives to manage crises but also enrolling all of us in the supply chain hierarchy to participate in the problem-solving process.

About Ellery’s Essays