Thirteen (13) Do’s & Don’ts in Supply Chain Envisioning

Before we change, improve, or build our supply chains, we must first have a vision.  We must first agree with our partners what we want our supply chains to become.

Envisioning is not an activity of a single individual or enterprise when it comes to transforming our supply chains.  It requires consensus between stakeholders of our organisations and our partners, who include our suppliers, service providers, and customers.

We as human individuals have different personalities.  Some of us are extroverts and some of us are introverts.  Some of us are assertive and some of us are shy.  When it comes to social interactions, some of us dominate the discussion while others remain silent.  Hence, it is always a challenge to collaborate to envision, especially for our large, complicated supply chains. 

Nevertheless, for envisioning to succeed, we all must participate.  We each must have our say and contribute.  If any one of us and our partners don’t agree with the majority on a common vision, we won’t fully realise our desired future state. 

A large aviation company decided to streamline its supply chain. Top management decided to outsource a large part of its in-house production operations.  The aviation company contracted vendors to fabricate thousands of aircraft parts and arranged with 3rd party service contractors to put the parts together into modules such as fuselages, cockpits, wings, and passenger seating areas.  The aviation company would then join the modules into completely assembled aircrafts at their main facility.  The aviation company would benefit from shorter production lead times as vendors & 3rd party contractors would be given deadlines and quotas to deliver parts & modules. 

Things did not go as the aviation company envisioned.  Vendors could not meet deadlines & quotas.  Contractors were not delivering modules within the aviation company’s time frame.  When modules did arrive at the aviation company’s assembly site, inspectors found that some did not meet specifications.  Contractors had to rework modules.  The aviation company mandated more frequent inspections of parts & components which in turn caused more delays. 

The aviation company did not consult its partners about its vision.  It simply told vendors and service providers what they wanted from them.  Partners (which in this case were treated more as subordinates) were just told to comply otherwise the aviation company will find someone else to do the job.  As much as partners tried, they could not immediately comply with the aviation company’s standards and the aviation company could not find better suppliers than the ones they already had. 

Over a period of months, the aviation company worked with its suppliers and contractors to communicate concerns and fix the problems.  Finally, suppliers and the aviation company would share common goals.  The company was able to shorten lead times and deliver to customers.  Both the aviation company and its suppliers still had many challenges to hurdle, but at last, they promised to work together. 

Envisioning is a group effort, not in which an enterprise does and dictates to others.  No matter how large or reputable our enterprise may be, it is always best to work with suppliers and customers, rather than tell them what to do. 

True, it can be and is difficult to work with partners.  They are after all differently managed and have agenda of their own.  We may even unfairly prejudge them as inferior in how they manage their organisations.  But our partners are there because they are our key connections in the supply chains which we are part and parcel of.  As much as they may be willing to kowtow to our standards, they don’t answer to us.  We must not subjugate them but instead, we should treat them as associates which we could cultivate mutually beneficial relationships. 

Envisioning is a collaborative process.  And because there will be much communication and negotiation as we hammer out accords for a shared vision, we should take care with some do’s and don’ts in how we interact with our supply chain partners: 

  1.  Do Our Homework

Before we negotiate with partners, we must understand the supply chains we are a part of.  We should be familiar not only with the operations of our enterprises but also with the activities that precede and come after ours.  It saves time when we invest in understanding what is happening in our supply chains, both inside and outside the walls of our businesses. 

2.  Do Get Our Acts Together

We should know what we want before we communicate our interests to partners.  We also should ensure that we and our in-house colleagues are aligned to our enterprises’ objectives.  In short, we and the people of our organisations should be united, if not at least aligned, to our enterprise’s standards and goals.  

3.  Do Take a Stand

We know what we want in our enterprises, and this should be basis for the positions we present to our partners.  Having a stand becomes a springboard for discussion and negotiation. 

4. …But Do Be Prepared to Bend

As much as we have standards which are non-negotiable, we, at the same time, should be willing to bend some for the sake of give-and-take negotiating especially if it would lead to win-win agreements which would provide gains we won’t get on our own. 

5. Don’t Hold Back But Do Be Polite

We should be blunt but respectful.  There’s nothing to lose by being tactful and polite.  It may be wise to be hesitant to present privileged data, but we should be prepared to voice our views with supporting information if it would help negotiations progress. 

6. Do Give or Take

Negotiations is always about give-or-take.  It’s about accepting to do our share of work and sharing information & resources.  But it’s also a two-way street.  Partners should also agree to do their share and we should insist what we believe we deserve to take from them. 

7. Don’t Give Up

Stalemates are expected in any negotiation.  We and who we talk to may come to disagreement in which we each would refuse to give what one asks.  We, therefore, should give each other time and leeway to think things over.  But we should not give up or quit.  We should always seek some innovative alternative because our supply chains’ future depends on it. 

8. Don’t Delegate

Do not ask someone else to do the negotiating especially if we’re the supply chain leader of an enterprise. Because when we do, it immediately sends a message we, who supposedly are in charge, are not serious in the first place.

9. Don’t Overly Assert

Don’t push partners too hard even if we perceive that they will easily cede to whatever we ask for.  Partners, as mentioned earlier, are not like us.  They may just say ‘yes’ to our every request to ensure they have our business but we both may not end up what we were aiming for.  We are after benefits for them as well as for us and if we push without considering their interests, it would surely backfire. 

10. Don’t Come with Closed Minds

Listening is essential in the joint activity of envisioning.  It isn’t just about hearing or about empathic understanding; it’s also about having an open mind to ideas the other side may propose. 

11. Don’t Pretend

We should come into any envisioning process with authenticity, that is, without masks which disguise our true selves.  Honesty is the best policy. 

12. Don’t Leave as if Nothing Happened

It’s not a good idea after meeting partners to go back to work as if nothing happened.  Just like #8 above, it makes us look phony as much as we have wasted time and effort. 

13. Don’t Rebel

The worst thing we can do is go back against what we promised to our partners.  It’s one thing to work out an elegantly shared vision; it’s a way bad thing if we treat it nothing more than a scrap of paper & ink which we mean to not comply or oppose subsequently.  That is one sure way of ending relationships and going backward in our supply chain efforts. 

Envisioning is a collaborative process.  But it’s not necessarily a smooth easy one.  There will be disagreements as we hear views & see data we may not like.  Our partners are unlike us as we each are individuals with our own agenda.  But because we are connected via the supply chains we are embedded in, it’s at least worth the try to formulate a common future state for what we want our supply chains to become. 

About Ellery’s Essays

Engaging Engineers in Supply Chain Envisioning

Engineers are accustomed to working with tangible things like machines, electrical circuits, infrastructure (e.g., roads, bridges), plumbing, and information & automated technologies.  They don’t quite get involved with intangibles like supply chains.  Nevertheless, there is a need for supply chain engineers. 

Supply chain engineers (SCEs) study the input & output of activities occurring within and between links, not to mention they also examine the interactive relationships that make up these links. 

Building supply chains has some similarities with building houses. 

Before we build a house, we first not only envision what it would look like inside & outside, but we also imagine what it would be like living in it. 

Do we foresee, for example, a multi-level residence including a basement and attic?  Or do we favour a one-storey bungalow with a spacious backyard?  The house we dream of would not just be a physical and aesthetic structure, but it would also be a place that would be in line with the routines we plan to do when we move in. 

We typically consult architects about our visions for the houses we want to build.  Architects are trained & experienced in designing buildings and bringing them to life in the form of drawings and models. 

After we & the architects finalise what we want our house to look like, we then would seek contractors, typically engineers, to help us how we will build it.  Engineers draft detailed blueprints, bills of materials, project schedules, & cost estimates based on the approved architectural plans.  Construction follows when we sign off on the proposals and the contractors get to work. 

We deal with multiple relationships when it comes to supply chains.  It wouldn’t be logical to envision what we want our supply chains to be without discussing it with our partners, who not only are the neighbouring departments to our workplaces but who also are our suppliers, service providers, and customers.   The purpose of communicating our ideas with our partners is to work together with them towards a common vision.  It is not only us but also our partners who have stakes in the overall supply chain in which our enterprise is only a part of.

When we start exchanging ideas with our partners, I would advise that a supply chain engineer (SCE) already be in the loop of the conversation.  Like our consulting an architect to designing a new home, SCEs should be present when we and our partners are envisioning the supply chain we want. 

SCEs help us picture what and how our and our partners’ operating relationships would be like.  SCEs visualise and assess operations via their expertise via tools such as value-stream mapping (VSM) and process flow diagrams. They help establish monitoring systems, and analyse performance from these systems to assess the health of supply chain relationships. 

SCEs embed themselves in the relationships between supply chain partners.  They strive to understand individual partners’ views of supply chain operations and find out the ideals they pursue.  Unlike projects where engineers work with single clients, SCEs work with partners from one supply chain tier to the next, as they find the common ground which would become the foundation for a shared vision. 

The supply chain engineers’ role is not to build teams but to build supply chains.  SCEs don’t get involved in interpersonal issues.  If there are partners who have personal conflicts with one another, it’s best they iron them out first with the help of their superiors or via consultation with organisational development professionals.

SCEs, however, can assist partners in addressing crises in their operations, especially if the crises are negatively affecting operations of other partners upstream or downstream the supply chain.  SCEs solve problems as any other engineer does; they help partners fix supply chain crises and put out burning platforms. 

The purpose of envisioning with supply chain partners is grounded on mutual benefit. It’s not charity, nor should there be hidden agenda for the self-centred aim to get something out for oneself.  It is about individuals cooperating to achieve results in which everyone reaps positive gains. 

Supply chains are comprehensive and complex. SCEs help partners make sense of the intricacies of individual operations and how they all tie in together.  They can feedback insights to help supply chain partners cultivate ideas about what and how their supply chains should operate. 

When we build our houses, we have a vision.  The same holds true when we build supply chains, except the vision must be a shared one with partners.  It’s not teambuilding, but collaboration towards mutually beneficial outcomes. 

Envisioning via engagement with SCEs is a crucial first step in building the supply chains we want.

About Ellery’s Essays

Envisioning:  The First Step to Building Supply Chains

Supply chains are big, long, comprehensive, and complicated.  Managing them means dealing with multiple customers, vendors & service providers.  We buy and deliver from and to distant places or just next-door.  We sell many types of products and handle much more in raw & packaging materials and in-process inventories.  We move merchandise via elaborate sea, land, and air transport networks.

We encounter so many problems with supply chains, which if we solve, lead to huge benefits, but if left unsolved, cause costly setbacks to our organisations.

We’re realising that supply chain management by itself is no longer sufficient in solving operational problems.   As much as we have been lured by digital information technologies, cutting-edge automation, and buzzword concepts like Just-in-Time, Lean, & Six Sigma, we have not been made significant strides in improving the productivities of our supply chains.  We have even forgotten about productivity itself as fickle domestic & international trade policies, increasing industrial labour strife, and divisive political & social activism distract us in our management of supply chains. 

We maintain short-term relationships with partners (i.e., vendors, service providers, and customers), instead of working with them toward long-term ones.  We rationalise that it’s hard to peg lasting relationships with partners because our enterprise strategies & portfolios are constantly evolving.  Products change, our needs change, and our operations change, so how can we develop lasting relationships with our partners?  We can’t figure out how our supply chains should be set up because we don’t know what the situation will be like tomorrow. 

We’re not getting the results we want and many of us don’t have a clear idea of what we want in the first place.  We’re more reactive than proactive when it comes to managing supply chains.  There are too many day-to-day things to address or worse, there are burning platforms, that are overwhelming and keeping us from taking the initiative to improve our operations.   

So, what should we do?  How do we get the upper hand over our supply chains such that we can manage them to be better? 

Answer:  we rebuild them.  We rebuild supply chains to what we want them to be.  Better, more productive, and beneficial to all, that is, we and our partners.

Building better supply chains is not the same as constructing new facilities or inventing new machines.  Supply chains are intangible.  Even though they have tangible components like transportation vehicles, production lines, storage facilities, & material handling equipment, these components taken together, as in a series of connected operations, are not readily perceptible.

We as individuals view supply chains differently.  What one enterprise executive sees would not be the same as what another perceives.  It is a challenge therefore for stakeholders (i.e., enterprises, suppliers, customers) to have shared points of view of their supply chains. 

Building supply chains, therefore, requires collaboration among partners.  Collaboration begins with alignment towards a vision, in which we agree to a single set of supply chain objectives.  The very first step to building supply chains is, therefore, envisioning. 

Envisioning is not the same as the visioning activity many organisations do via their teambuilding sessions.  Teambuilding sessions are often activities where organisations aim to foster employee camaraderie and morale.  From experience, many so-called visions from these teambuilding sessions fall flat; they never make it as seriously pursued work goals that go beyond the fancy posters on bulletin boards.  Employees in many firms go back to what they were doing as soon as they walk into their workplaces and face the hard realities of their jobs.

Envisioning would also not apply for entrepreneurs who are just starting up or who are struggling to survive.  It doesn’t make sense to envision when survival is the immediate goal.  Most successful entrepreneurs have clear & set dreams when they begin their businesses; envisioning just after we commence business wouldn’t therefore be logical. 

Envisioning is an activity in which we and our supply chain partners work together to visualise a mutually beneficial future state.   We and our partners develop and deliberate on what we imagine would be our ideal supply chains, ones in which everyone would stand to benefit from in productivity and in achievement of shared goals.   

It is not about one (1) individual’s or enterprise’s vision but one that is shared among partners, in which we all are active stakeholders in the enterprises that make up our supply chains.  Every partner should therefore contribute to the task of envisioning. 

We face many challenges with our supply chains.  So much so, that we should consider rebuilding them to be better.  The first thing we need to do when building our supply chains is to work with our partners to envision a common future state for our supply chains. 

If we can establish something in common to shoot for, it would be a big first step as we and our partners seize the initiative in rebuilding our supply chains. 

About Ellery’s Essays

How We Look at Life in Four Ways

There are four (4) kinds of people:

  1. Pessimists
  2. Optimists
  3. Realists
  4. Hypocrites

Pessimists see only the bad in life.  Optimists look for the good in things.  Realists balance both good and bad.  Hypocrites don’t have a view about good or bad; they see life as a means to gain benefits for themselves.   

Pessimism, optimism, realism, and hypocrisy are how we look at and approach life. 

Pessimists stress adversity in whatever scenario.  They don’t like surprises of the negative kind; they believe there’s a possible catastrophe lurking around the corner.  Pessimists, thus, tend to be over-cautious and avoid adventures.  Pessimists hate risk; they’d rather stay far from it if they can’t mitigate it. 

Optimists, on the other hand, endeavour for the positive in their daily activities.  What pessimists see as dark clouds; optimists see silver linings around those clouds.  Optimists believe there’s good even in the worst of anything, and thus are motivated to drive for changes they trust will result in a better world.  Optimists embrace risk & dive into adventure, as they trust something great will come out of either. 

Realists balance both the good and the bad in their daily lives.  If a pessimist, optimist, and realist were facing a tunnel, the pessimist would see a dark tunnel; the optimist would see a dark tunnel with a light at the end of it; and the realist would see a dark tunnel with a light at the end of it and another dark tunnel after it.  Realists look for what they think reflects the starkness of reality: that there will always be positive & negative outcomes.  Realists plan for the bad and the good.  They calculate risks and assess for beneficial rates of return before making their moves. 

Hypocrites don’t care about the positives or negatives in life; they only pretend they do.  Hypocrites will side with either the pessimist, optimist, or realist if they sense some benefit from doing so.  Hypocrites don’t see good or bad, nor do they bother to calculate risks or assess rates of returns.  They ask questions like ‘what’s in it for me?’, and ‘how can I benefit from someone else’s work?’.

Pessimists won’t jump into a pond; they’ll say it’s too dark or dirty, and likely will catch a cold.  Optimists would jump right in, saying the water will be fine and it will be fun.  Realists would circle the pond to check its condition and carefully wade in.  Hypocrites would wait until everyone had made their decision about the pond, and then jump in and claim credit for the fun, or they will condemn people and say ‘I-told-you-so,’ if something bad happens. 

We may brand ourselves as optimists, pessimists, or realists, but we’d be reluctant to identify ourselves as hypocrites.  We don’t like to be called hypocrites because we equate them with parasites, traitors, or do-nothing individuals.  Being named a hypocrite is an insult, even if many of us are. 

The trouble is just as much we are pessimists, optimists, & realists, we are hypocrites too. 

Examples:

We ride gas-guzzling jet planes to travel to other cities to join climate change rallyists protesting against fossil fuels.

We bring our pets to be blessed by priests, but we support the same priests when they ban or rid our churches of stray animals.

We commit to teamwork at an employees’ corporate seminar, but we will run to be the first in line at the dining room buffet table. 

We complain about motorists stopping suddenly on highways, but we grumble when traffic police won’t let us park in front of the school where we wait to pick up our children as they come out. 

We whine about how slow the ticket booth attendant is as we wait to claim free tickets to the local movie theatre. 

The big difference between optimists, pessimists, & realists and hypocrites is authenticity.  We are honest about ourselves when we are either of the first three, but we would be offended if people call us hypocrites. 

Hypocrisy is about not being authentic about our opinions and approaches to life.  Hypocrites fake themselves to be pessimists, optimists, or realists so that they will get a cut of the benefits the other three supposedly will get. 

Hypocrisy is why we join clubs and make friends with people whom we really don’t care about.  Hypocrisy is when we insist our sons join the family business or demand our daughters stop dating boys who we don’t share religious or political beliefs with (or worse, who are of different ethnicity).  We notice much hypocrisy when corporate executives and government politicians release rosy press statements about themselves. 

But as much as we stigmatise hypocrisy as an evil, we apply hypocrisy purposefully as an alternative to pessimism, optimism, and realism.  This is because sometimes we don’t want to show our true colours as an optimist, pessimist, or realise, especially if doing so would lead to confrontations with others who don’t share the same outlook.  We, instead, opt to be hypocrites and pretend to be a member of the majority, such that we avoid conflict and have a better chance of getting some benefit out of it. 

We are either pessimists, optimists, or realists, based on our outlooks about life.  We either see only darkness, light, or the balance of the two, and we would be authentic about it.  Hypocrites have no outlook; they don’t see positive, negative, or balance, and pretend to be either of the other three. 

Hypocrisy has a bad connotation, but we often are hypocrites, even if we won’t admit it.  We become hypocrites to be socially acceptable and benefit from relationships, never mind if we don’t really care about them or we’re just pretending to. 

Some people preach against hypocrisy.  But it isn’t a sin, as much as it is a way we see and deal with life’s challenges. 

In more ways than one, we are all hypocrites. 

About Ellery’s Essays

Strategic Planning as Problem Solving: Why Not?

We sometimes create problems more than we encounter them.

A large conglomerate builds a huge packaging facility in the outskirts of Manila.  When I visited the plant, I asked the operations manager why such a big facility was built?

“We built the facility to attract customers,” the operations managers said.    

“So, it was built, so customers will come?”  I asked. 

“Yes,” the manager said. 

“And have they come?” I asked. 

“Not yet,” said the manager.

The operations manager was in charge of entertaining potential clients and making sure the facility was efficient in production and cost. 

The large conglomerate advertises the available capacity of the plant through its network of contacts.  Over a few years, it got some clients but still had excess capacity. 

A large developer constructed a complex of high-rise residential and commercial buildings.  The developer depended on brokers and marketing employees to sell the buildings’ office and residential spaces even as construction was hardly underway.  The developer provided incentives for every unit sale but despite the efforts, sales was sluggish.  Worse, the building complex was beside a man-made river that overflowed during a heavy rain storm.  The complex was flooded for a short while but it was enough to turn off would-be customers.  To this day, the complex remains low on occupancy.  The developer’s marketing team continues to work hard to sell the complex. 

Meanwhile, a nearby building complex enjoyed brisk demand even before it was built, and occupancy remains high.  The competing complex is located near a major highway and successfully wooed several multinationals to set up their headquarters in several buildings. 

A bank opened a new branch in the neighbourhood. The bank assigned the branch manager a minimum monthly quota of new clients and a monthly target of new deposits for the branch.  To find the clients, the branch manager went door-to-door around the neighbourhood to sell her branch’s services.  Up to the present day, she sometimes meets her monthly targets, but sometimes she doesn’t.  “It can be quite hard,” she says. 

In the above-mentioned examples, the success of the packaging facility, the high-rise building complex, and the bank branch was measured on how well they got customers.  The packaging facility did get some clients but still had capacity for more.  The high-rise building complex constructed near an overflowing river ended up a failure.  The bank branch and its manager struggle month after month to meet quota. 

It is common in business for executives to invest in large projects and then hope that the returns of such investments will be realized right away.  In many cases, the executives delegate the responsibility of realizing the returns to their subordinates.  The executives package the responsibility as a challenge.  For the subordinates, it’s more of a problem given the pressure to perform to meet expectations. 

In these three examples, the subordinates work to solve problems stemming from the strategies of executives.  The strategy is the real problem and subordinates are stuck with the symptoms. 

In many organizations, executives expect their subordinates to just fix the problems even if the executives know their strategies are the causes.  To the executives, the strategy is a given and the subordinates just have to solve the problems a strategy may have created. 

Strategy shouldn’t be a given and executives should take responsibility for their strategic decisions.  The common pitfall in strategic planning is jumping into a plan not only without enough study but also without considering whether it will solve problems or create many more. 

Strategic planning can be viewed as a form of problem solving.  To put it anther way, the approach to strategic planning can apply similar to problem solving.  That is:

  1. Recognize a fuzzy situation
  2. Define the problem;
  3. Brainstorm ideas or solutions;
  4. Set criteria for the chosen solution;
  5. Decide on the solution. 

Change the word “solution” to “strategy” and one would have an approach to strategic planning. 

About Ellery’s Essays

Why We Need to Collaborate & Not Accommodate in Improving Supply Chains

We formalise our supply chain relationships via agreements we forge with our partners, who are our vendors, 3rd party service providers, & customers.  We manage our supply chain operations to ensure we perform to the agreed expectations of our partners. 

Most supply chains have existing infrastructure in place when we negotiate with our partners.  Our manufacturing & logistics facilities are set up and running.  Our fleets of delivery vehicles are available and ready.  Our telecommunication & information systems are in place and operating. 

We adapt our supply chains to terms & conditions of the contracts we have with our vendors & service providers, or to the commitments we made with our customers.  We plan, organise, direct, and control our systems & resources and enlist & work with people to establish standards & achieve objectives to ensure we meet our ends of the deals. 

It is a norm in many of our organisations to accommodate to what we agreed to with our partners.  We accommodate buying large volumes of inbound materials and receiving them into whatever limited storage space we have available because we want to qualify for vendors’ discounts.  We accommodate to individual customers’ preferences in delivery schedules & quantities, never mind if we make repeated deliveries in less-than-truckload (LTL) quantities which result in higher freight costs. 

A large beverage supplier offered a multinational retailer an additional 10% discount if the latter buys more than three (3) times its regular monthly ordering quantity before the end of the calendar year.  The retailer agrees to the deal and immediately leases out all the storage space it could find to accommodate the additional volume the beverage supplier delivers.  The retailer’s logistics expenses soar but the savings from the beverage supplier’s discounts more than make up for the costs.

But as much as the benefits seem to beat the costs, other trade-offs from the deal become manifest.  The multinational retailer distributes the excess merchandise bought from the beverage supplier to all its stores nationwide.  Three (3) months later, the stores return many of the beverage products, either due to damages or because some had overshot their shelf lives.  The retailer tells the beverage supplier it is returning the damaged or expired merchandise.  The beverage supplier refuses to accept the said merchandise all at once such that the retailer is forced to extend its warehouse leases to store the cannot-be-sold merchandise.  The retailer tells the beverage supplier it won’t be buying its regular supply of beverage products until the former is able to return all the unsaleable merchandise.  For three (3) months, the beverage supplier’s products are nowhere to be seen at any of the retailer’s stores. 

This cycle between the retailer and its suppliers has occurred every year.  Retailer buys plenty; ‘saves’ from sizable price discounts; incurs larger storage & transportation expenses; its stores return excess merchandise; retailer & suppliers get into conflict regarding returns.  For whatever the retailer and the retailer gained from savings and additional sales respectively, both parties lose in not meeting the demands of consumers.  Over the long run, competition from rival retailers and other beverage suppliers seize more market share from both enterprises. 

When we agree to new deals with our partners, we often put the cart before the horse in managing our supply chains.  We adjust our plans and operations to accommodate to whatever we agreed to.  Partners, on the other hand, also accommodate their operations to meet what we expect from them.  They also adjust their production and logistics activities to suit whatever we insist.    

Accommodation is not bad, but it exacts a price especially if it requires us to change our operations significantly and frequently.  How much is it worth when we change production schedules abruptly, arm-twist our vendors to deliver materials earlier, or deliver LTL quantities often?  It may look like that the benefits outweigh the costs but are we sure we got all the costs covered?

We should not accommodate when we make deals with our partners.  We should instead, collaborate, that is, we and our partners should work to adapt our systems & structures jointly, cooperatively, and rationally. 

Collaboration can only be a huge success in the supply chain field when we and our partners not only cooperate but also when we deliberately tailor our systems & structures together.    

Tailoring our and our partners’ systems & structures requires not only management but engineering expertise.  Supply chains are complicated, and we and our partners can’t just outright keep accommodating to whatever deals we both agree to.  We need to engineer our supply chains to customise them to the fast-changing business environments we work in. 

About Ellery’s Essays

Bridging the Supply Chain Management-Engineering Gap

Engineers turn scientific ideas into reality.  They do it by identifying problems, studying the data, and finally solving them. 

Engineers apply concepts from the pure sciences, such as Physics, Chemistry, Mathematics, & Biology.  We see these concepts come to life in the fields of civil, electrical, mechanical, & chemical engineering, and in their sub-specialties such as nuclear, aerospace, biomedical, metallurgical, telecommunications, & software engineering. 

Engineers are inventors and builders of tangible systems & structures, like buildings, factories, machines, roads, bridges, chemical processes, pipelines, dams, & data networks.  They create stuff we could sense, i.e., see, touch, hear, and even smell & taste.  If we don’t sense it, we’d have a difficult time appreciating it as an engineering marvel.  Seeing is believing when it comes to engineering. 

Supply chains are models of operative relationships which enable the flow & transformation of merchandise and services from their sources to their final consumption.  They, however, aren’t tangible.  As much as there are physical components to them such as warehouses, factories, equipment, and transportation, we can’t visualise supply chains in their entireties except via maps or flow charts. 

Supply chains are not easy to understand, and we have different points of view regarding them.  We manage them differently from firm to firm, industry to industry. 

Because supply chains aren’t tangible and because they’re founded on relationships, we don’t engineer them.  Instead, we manage them.  By management, we, together with people via partnerships, plan, organise, direct, and control resources to achieve targets consistent with our enterprises’ missions and goals.  Management has been our go-to approach to optimising supply chains. 

We, however, seems to be getting to the point that management may no longer be enough when it comes to improving supply chains.

As supply chains have become more global and complex, managing them has become more difficult.  Adversities are becoming harder to address as broader supply chains become more exposed to risks and uncertainties.  These adversities range from day-to-day issues (e.g., delayed deliveries of raw materials, infighting between functions) to crises (e.g., pandemic, wars, labour strikes). 

We are also dealing with more items, more activities, and more territories to cover.  Some of us oversee the operations for thousands of products.  Some of us negotiate with numerous vendors and service providers from all over the world.  It doesn’t help that enterprises continue to expand product lines, or to merge or acquire other businesses.  

We did, however, accomplish a lot thanks to supply chain management. 

We transformed our enterprises to adapt to the realities of global supply chains.  We collaborated with suppliers and set up supply, information, & logistics networks which enhanced visibility.  We reduced lead times in production and transportation.  Our enterprise superiors have appointed chief supply chain officers who changed organisational structures to break down functional barriers.

We adopted cutting-edge technologies from blockchains to artificial intelligence.  We began to use drones & self-driving vehicles to deliver products to customers within the day they order and we automated our warehouses and production via robots and automatically guided vehicles.

But despite our investments and our initiatives, our supply chains remain far from their productive potentials.  Even as our enterprises have grown in wealth and influence, our supply chains aren’t much different than they were at the end of the 20th century.  Inventories swing from high to low or worse to out-of-stock.  We fall behind in serving when our customers clamour for our products.  And we frequently have to fight fires from ‘burning platforms.’

To put it simply: we’re stuck. 

Engineering is where we go when we want to improve what we’re managing.  Engineers help increase our capabilities especially in tackling overwhelming adversities.  They help getting us out of where we’re ‘stuck’ in. 

We, therefore, need engineering to help us become better in optimising, if not at least managing, our supply chains. 

But before anything else, we must realise and accept that engineering is no longer limited to the application of the pure sciences but the tapping of lessons from the social sciences as well. 

We must consider the relationships that are the foundations of our supply chains.  If we are to engineer improvements into our supply chains, we’d have to improve those relationships. 

This is kind of uncharted territory.  Industrial Engineering (IE) is the closest to of any engineering discipline to handle supply chains.  IE evolved from the accomplishments of Frederick Taylor in his introduction of workplace standards and his subsequent publication of his Principles of Scientific Management.  Taylor bridged the gap between engineering and management with his efforts to apply science in the improvement of worker productivity. 

We don’t hear much about Frederick Taylor or his Principles of Scientific Management in our present day, but the lessons we learned from him echo in how we improve the productivities of our workplaces.  We do time studies to determine value-adding and non-value-adding activities, for example.  We track the turnaround times of transportation vehicles.  We minimise idle times of our production lines and utilise the most we can get from our machine capacities. 

Many of us don’t appreciate Industrial Engineering as an engineering discipline because it addresses problems that are more intangible than what other engineers solve.  IE works on stuff like methods, procedures, movements, operator-machine interfaces, & organisational hierarchies, which are the kinds of things that are not easy to see or grasp outright. 

Industrial Engineering is more of an application of social science than pure science.  We don’t do as much physics, chemistry, & biology in uplifting workers as much as we apply economics, sociology, and even politics.  We associate IE more with improving the efficiencies of people via simple techniques like time & motion studies.  We don’t appreciate that IE does substantial engineering such as in ergonomics, facilities planning, and operations research. 

Industrial Engineering, nevertheless, has proven to be valuable in improving overall productivity.  Frederick Taylor’s Principles of Scientific Management have made us not only more conscious of efficiency in what we do but also more proactive in finding the most optimum means to achieve our goals. 

We as Industrial Engineers have our work cut out to detach IE as a subset of management to a discipline of engineering.  We need to cross the bridge from seeing ourselves as management engineers (an oxymoron) to engineers who are builders of not only the tangible but also the intangible. 

The opportunity to prove ourselves as builders of both the tangible and the intangible lies with supply chains. 

As Frederick Taylor and Industrial Engineering has done with the human workplace, we can do the same with supply chains.  We can apply scientific thinking to improving the productivity of supply chain operations. 

We can bridge the gap between supply chain management and supply chain engineering.

About Ellery’s Essays

Relationships are What Makes Our Supply Chains

Supply chains are models of the relationships within and between enterprises which govern the flow of merchandise and services from their sources to end-users. 

We build our supply chains based on these relationships.  The systems and structures of our organisations and with the enterprises we do business with stem from strategies and policies resulting from our relationships.  

Our policies on inventory and customer service, for example, reflect the levels of relationships we have with individual suppliers and with our customers.  We keep more buffer stock if we don’t fully trust the delivery reliabilities of vendors.  We produce and deliver in small batches to ensure we deliver in accordance with agreed customer order schedules & quantities. 

Relationships are what supply chains are made of. 

For the longest time, even before we coined the words “supply chain management,” we have managed these relationships.  How we set up our relationships varies from one organisation to the next.  Some of our enterprises base relationships on hierarchies and departments; we focus on functions and make sure they each perform to their exclusive targets.  Some of us work in teams that include members from different disciplines.  We collaborated with some vendors and customers to smoothen the stream of demand and supply of merchandise.

We have shuffled our organisational charts to accommodate our relationships.  We invested in sophisticated information systems to enhance data communication and integrate transactions.  We built factories and distribution centres closer to vendors and customers respectively.  We engaged with couriers and 3rd party logistics providers to transport our goods faster.  We have grouped and re-grouped the reporting lines of our operations and we wrote & re-wrote job assignments to cater to changes in our relationships. 

We had, therefore, re-engineered our supply chains based on our relationships. 

We essentially want our supply chains to be productive, in which we reap the maximum benefits at least cost aligned towards our objectives.  We, therefore, are constantly negotiating with the different connections of our supply chains, whether they are the operations next door to us or with faraway suppliers & customers. 

Much of our negotiations focus on price and performance.   We try to fix the costs, conditions, & margins of future purchases & sales.   We haggle to determine payment terms, accountabilities for risk, quotas, acceptable quality levels, and scopes of work. 

The formal agreements we make become the bases of our relationships and how we plan to set up our supply chain operations.  We build new systems & structures or adapt existing ones to the developing relationships. 

Supply chains, thus, are constantly changing as our relationships within and beyond our enterprises evolve or alter. 

How we establish and manage our relationships determine how successful our supply chains become. 

About Ellery’s Essays

Setting Up a System in the Face of Uncertainty

A large property management company set up a uniform accounting system for all the buildings it manages.  The accounting system utilized a customized software program in which each building’s bookkeeper is required to use.   The software allowed the bookkeepers to enter invoices and vouchers and update the building’s books of accounts in real-time.

The customized software, however, did not allow for exceptions or revisions. The system was rigid in terms of how transactions were entered.  Bookkeepers needed approval from the property company’s corporate accounting department if they wanted any change in the system.

A competing property firm, on the other hand, delegated the set-up of an individual building’s accounting system to the respective bookkeeper.  The bookkeeper was given flexibility to tailor-fit transactions and reports to the specific accounting needs of the building.  The different systems among buildings, however, made it challenging for the property firm’s accountants to audit each bookkeeper’s records given the absence of uniformity. 

For both property firms, their goals were similar but the approaches were different.  Both wanted bookkeeping systems that would facilitate transparency in transactions and reports.  Both had real-time updates in their accounting records. But as one firm wanted uniformity, the other stressed customization.

Which system was better?  There was no apparent answer.  Each company applied a different strategy.  Each system came with advantages and disadvantages.  Some buildings may have been satisfied with one system, while others may have not. 

One judges a system by its productivity and results.  A system is considered good if it delivers results as specified at the time needed and at the lowest cost.  In other words, it should be reliable and it should be optimal. 

The enemy of any system is uncertainty.  Uncertainty comes in many forms.  One form of uncertainty is customer demand. This is manifested, for example, in high sales one day and low sales the next. 

Another form of uncertainty is laws and regulations.  Governments, for example, may increase taxes and release new rules in how taxes are paid, which would require tax-paying businesses to modify their businesses to comply. 

And then there is uncertainty in competition.  An established consumer goods company that has been successful for years may suddenly confront an entrepreneur who markets products more effectively via a web-based ordering system.  The established consumer goods company’s supply chain system proves no match to the entrepreneur’s efficient e-commerce technology. 

Some companies work to have systems that are agile and nimble, while others settle for systems that are rigid but resilient. 

An agile and nimble system is fast and quick to adapt.  A rigid system emphasizes strict protocols in how things are done.  Either kind of system may work successfully or simply fail in the face of uncertainty. 

For example, Toyota banked on agile and nimble systems to become a globally successful automobile manufacturer.  From marketing to delivery, Toyota developed a system that produced cars in sync with customer demand.  Toyota’s Production System has become a model for business enterprise around the world. 

On the other hand, the Roman Catholic Church has probably the most rigid religious governing system in the world.  The Church has steadfastly practiced Catholic dogma via a system of catechism virtually unchanged for 2,000 years.  Despite opposition and challenges to her rules, the Church remains an admired global institution with a billion followers. 

What kind of system to set up, especially in an uncertain environment, undoubtedly would require comprehensive study.  But any such study, no matter how comprehensive, will almost always lead to decisions that will involve risk. 

The design of a system starts with defining what one’s goals are and what are the means to attain those goals.  This may be what is known as strategy which becomes the basis of how resources will be managed. 

Structure comes after strategy, not before.  Some companies make the mistake of setting up structures and then strategically planning their systems to conform to the structures.  It should be the other way around because systems are planned to directly take on uncertainty.  Structures are just the supports. 

One should design a system for the beneficiary.  Determining who (or what) the beneficiary is and what the benefits are can be more tricky than it seems. 

For instance, business firms would design systems to benefit their customers.  But who exactly are the customers?  Is it just the ultimate end-users or should it not also include middlemen, brokers, and stakeholders? Beneficiaries may not necessarily be people but other businesses, as in what business-to-business firms (B2B) target. 

And what benefits should the business firm pursue?  Is it customer satisfaction in the form of positive feedback?  Or should it be an overall positive customer experience that manifests in higher market share?

From another viewpoint, other organizations may believe that benefits should come in the form of what’s for the good of the recipient.  Hospitals and clinics, for example, may stress strict and expensive medical procedures that focus on curing patients despite apprehensions about confinement, painful therapy, and potential side-effects.

Determining the beneficiaries and the benefits lays the foundation of the system’s design.  It becomes the basis for building a productive system.  What is meant by productive is that the system should deliver benefits at optimal efficiency and effectiveness. 

For most businesses, a productive system is one that delivers benefits at a competitive advantage.  Non-profit institutions, on the other hand, would probably favour a productive system that delivers benefits successfully to a targeted group or community. 

Building a productive system is similar to building a house.  There has to be plans.  There has to be a sequence of steps that starts logically with the setting of the foundation.  There has to be specifications and clear details on the scope.  There has to be a timeline for each step of the construction.  And when it is done, one has to inspect and test the system if it is working properly. 

A good system starts with a clear end in mind:  who benefits, what are the benefits, and how productive should it be.  A good system that has clear answers for what it will deliver would have a strong grounding to take on the challenges spurred by uncertainties.

After all, when it comes right down to it, everything is uncertain. 

Except maybe for death and taxes. 

About Ellery’s Essays

The Challenge of Working Together in Sales & Operations Planning (S&OP)

Many of our enterprises do Sales & Operations Planning (S&OP). 

And each of us does it differently.

Because we each have our own way of doing S&OP, the results vary from one organisation to the next.

It’s no surprise, then, that there would be criticism over S&OP.  The absence of uniformity drives us to compare how one enterprise plans versus another.  This is compounded when there’s no working integrated platform (i.e., Enterprise Resource Planning [ERP]).  Planners would set up their own systems, most of which are spreadsheet-based (i.e., Microsoft’s Excel).  When planners change, the individual planning programs likely change too. 

But is this a problem?  What’s wrong with planners having their own way of submitting production and material requirements to respective operations?

When planners have their own systems down pat, it’s hard for them to switch, especially if they’ve grown comfortable with what they’re working with and they feel they are delivering to their superiors’ expectations.

Sales & Operations Planning (S&OP) is one step in the planning process of enterprises, but it is an important, if not the most important, one.  It is in S&OP where managers from Sales, Marketing, Finance, and Operations share information and align on what to do next, that is, figure out how much in customer orders to gather, what & how much items to produce, how much of inventories to stash, and how much should be shipped. It is here where targets are set, any issues or concerns resolved, and selling & operating plans are agreed upon unanimously.

S&OP involves people from different places in the organisations working together and this is where the problem usually lies.  Getting people to work together has been an age-old problem in all organisations; S&OP is no exception.

Thus, it comes to no surprise when S&OP fails because:

  1. The chief executive (CEO) of the enterprise delegates S&OP to a lower-level subordinate. 

The executive vice-president (EVP) of a manufacturing firm initiated a weekly S&OP meeting.  The senior managers of finance, sales, and supply chain operations including support staff were compelled to prepare and present their plans in these meetings.  The president & CEO, however, chose not to attend, instead leaving the agenda and chairing of the S&OP meeting to the EVP. 

Whenever the EVP conducted an S&OP meeting, the CEO at the same time would be calling field sales and logistics to prioritise deliveries.  Whatever plans were agreed in the S&OP meeting would be superseded by the CEO, rendering the S&OP useless and a waste of time.  After a few weeks, the S&OP meetings stopped. 

When CEO’s delegate S&OP away to other people, it at once indicates the executive’s disinterest in the enterprise’s departments working together to align towards a common sales & operations plan.  As much as it may continue among middle managers, S&OP loses its importance. 

  • S&OP meetings become battlegrounds of division instead of venues for consensus.

Different heads and staff representing at least finance, sales & marketing, and operations should participate in the S&OP process.  The objective of participation is to work together toward common plans to sell and deliver merchandise & services for the attainment of strategic goals. 

In several S&OP meetings at a consumer goods multinational corporation, sales managers would accuse logistics staff of not delivering their orders.  Logistics managers would pointedly shoot back at poor sales forecasting as the reason for unserved orders.  The chief finance officer would scold sales for uncollected receivables from customers and chastise supply chain managers for overstocked items.  Meetings would end with bitter ill feelings between department personnel.  Instead of alliances, the organisation became rife with rivalries.  After a few months, people would find excuses not to attend S&OP meetings or even prepare for them, as they rather not be in the same room with people they’ve come to dislike.

  • S&OP becomes a one-sided process of instruction than one of shared discussion of data, issues, & recommended solutions.

In that same consumer goods multinational corporation as mentioned above, a new expat who was just assigned CEO declares at the start of a S&OP meeting that he wants shipments to reach 1,000,000 cases that current month.  No questions asked.  At that moment, the S&OP meeting ended. 

When the S&OP becomes not a meeting but a one-sided affair where the CEO is the only person who has the floor, then it is good as dead. 

The consumer goods corporation reached its 1,000,000 cases that month.  Six (6) months later, customers were returning 10% of those cases, citing various reasons from expiration, inability to sell, or plainly just being unable to pay. 

S&OP is important for our enterprises in the planning of how much we will sell and deliver.  But it requires we of different backgrounds & disciplines work together to make & execute those plans. 

Yes, we as planners must have the right tools (e.g. software).  Yes, planners must have some leeway or autonomy in how they will plan.  Integrated systems such as ERP are nice but if the system isn’t simple to use, planners will just revert to what they would be most comfortable with.

But what planners use is the tip of the iceberg in getting S&OP to work.  The bigger task is to break down the walls between departments and getting them to work together to plan together. 

About Ellery’s Essays