Six Elements to Find in a Digital Roadmap

A large producer of canned fruit items installed a brand-new radio-frequency identification (RFID) system at its manufacturing facility.  The RFID system aimed to streamline the producer’s inventory management system. 

The canned fruit producer’s workers stuck RFID tags on every case of canned fruit and on the pallets where the cases were stacked.  As forklift operators picked up the pallets and brought them to the warehouse, RFID scanners tagged each pallet and automatically added the cases into the finished goods inventory.  When a warehouse worker picked a case of canned fruit to be staged for shipment, an RFID scanner at the door tagged it and immediately deducted it from inventory. 

The point of the RFID system was to update inventories accurately and in real time.  It would improve inventory record accuracy and information timeliness compared to the traditional system in which workers entered data manually via pen and paper and accountants computed the inventories which took time to do.

The accountants of the canned fruit producer, however, distrusted the RFID system and insisted the workers continue doing the manual system.  Hence, even as the RFID system tagged incoming and outgoing pallets and cases, the workers continued to fill out forms to record what they produced and what cases they brought in and out of the warehouse.  The RFID system ended up not delivering any tangible benefits and gradually, it became useless. 

The canned fruit producer’s executives liked RFID technology for its features but didn’t take into account the complexity of building it into its business.  The executives thought that installation of an RFID system was easy.  They didn’t realise that putting in RFID was more than just buying tags and installing transmitters, receivers, and additional computer hardware.  It required adoption of a system that involved acceptance not just by production and logistics but also by accounting and other functions as well. 

RFID is a digital technology, one of many hyped by The Fourth Industrial Revolution, also known as Industry 4.0.  Unlike a new computer system or a new machine, digital technology taps data for visibility and productivity improvement.  It’s what McKinsey cites as “creating value in the processes that execute a vision of customer experiences.”

Building in digital technology like an RFID system applies principles from project management but at a much wider scale.  It’s not as simple as constructing a new warehouse or installing a new machine.  It requires fitting in with functions that will be affected. 

It’s like a human organ transplant.  One cannot just outright replace a heart, liver, or kidney with another.  A transplant entails a multitude of diagnostic tests, procedures, and regimens pre- and post-transplant to ensure success. 

The canned fruit producer brought in an RFID system that was liked by supply chain managers but was rejected by accountants.  Like a failed organ transplant, the enterprise’s “body”, its organisation, did not accept the RFID system.    

Bringing in digital technology requires what one would call a Digital Roadmap, a plan that considers the unique characteristics of new technologies. 

A Digital Roadmap emphasises the following elements:

  • Terms of Reference (TOR)

TOR is a narrative of what an enterprise’s organisation envisions a new technology will contribute.  It isn’t a scope of work or detailed specifications.  Rather, it’s a set of features, functions, and criteria that the organisation wants.  A TOR is the foundation for decision-making when it comes to choosing from technological options. 

  • Dedicated Team of Qualified Individuals

There should be a team of dedicated individuals to plan, decide, and carry out any new technology.  The team should not only have skilled members but also members who are recognised as authorities in their fields.  Note that members need not be employees of the enterprise; they can be contractors, consultants, or just plain advisors.  It’s important that each member has the devotion and expertise to participate. 

  • Consensus

Consensus is a necessity for the organisation to be enrolled into the introduction of new digital technology.  Consensus will likely be tough to attain because digital technologies are new and will entail significant changes in the workplace.  Debates and disagreements are inevitable.  Executives will be expected to lead and enrol everyone to adopt and accept new roles and responsibilities.   The Digital Roadmap cannot progress without consensus and commitment. 

  • Useful Content

The Digital Roadmap should define the needed content from any new digital technology.  Content is the information gleaned from data and software that would be useful to apply for productivity improvement.  With an RFID system, for instance, the data gathered from scanned tags provide the content for real-time inventory visibility which leads to the opportunity to turn over inventories faster. 

  • A Cash-Flow Schedule

New digital technologies often need much investment in capital.  Other than time and human resources, the enterprise will be spending money to pay for software, hardware, and the expenses that come with implementation, including education for everyone in the organisation.  The Digital Roadmap should therefore include a schedule of cash outlays that tells how much and when budgets will be needed and spent.

  • Competitive Timeline

A Digital Roadmap shouldn’t have too long a timeline lest newer technologies render obsolete the digital technology the roadmap was aiming to achieve.  Digital technologies don’t have long life cycles.  What seems state-of-the-art today may be obsolete tomorrow.  Artificial intelligence (AI), for example, has grown in popularity versus RFID systems.  A Digital Roadmap should therefore be swift in rolling out a new digital technology that will ensure its applicability and competitive edge. 

Digital technologies marry data and operations for productivity improvement and have become popular thanks to Industry 4.0.  Yet, enterprises hesitate to delve into digital technologies and when they do, often encounter difficulties. 

A Digital Roadmap resolves this by providing a pathway that stresses a TOR, formation of a dedicated team, encourages consensus, clarifying useful content, a cash-flow schedule, and a competitive timeline. 

New technologies are always exciting but just like anything new, it requires acceptance by all. 

Ten (10) Examples Towards Building Better Supply Chains

For years, experts have cited the urgent need for supply chains to adapt and get better.  In 2005, Paul Michelman via the Harvard Business Review wrote:

“Threats to your supply chain, and therefore to your company, abound—natural disasters, accidents, and intentional disruptions—their likelihood and consequences heightened by long, global supply chains, ever-shrinking product lifecycles, and volatile and unpredictable markets.”

Fifteen (15) years later, amid a pandemic that has wreaked economic havoc, executives are hearing the need even louder.  Supply chains must become resilient and robust in a new normal of constant disruption.  Supply chains must change

Experts have urged enterprises to map their supply chains, identify risks, review their networks, and innovate via technologies such as robotics and automation.  But what does an enterprise do when it’s got the maps, identified the risks, and has the network review results? How does an enterprise innovate via technologies? 

We cannot just manage supply chains to make them better.  We need to build them. 

It’s like a house.  When we manage our houses, we do things like fix a leaky roof, replace lightbulbs, and unclog drain pipes.  But we can only do things ourselves up to a certain extent. 

When the job gets too big to handle, we seek experts.  Civil engineers help us replace the roofs and retrofit the foundations.  Electrical engineers help re-wire our electrical circuits. 

The analogy applies for supply chains as well.  We can manage supply chains only so much.  When we need to make significant improvements, when we can no longer just manage them, when we need to rebuild them, we’d seek engineering help.  The most qualified to do so are Industrial Engineers (IEs), or more specifically, Supply Chain Engineers (SCEs). 

How can SCEs help rebuild our supply chains? 

The following are examples:

  • Developing the Digital Supply Chain.   

With the advent of Industry 4.0, enterprises, more than ever, are investing in new technologies that marry data and process productivity.  SCE’s can help enterprises implement state-of-the-art technologies into their supply chains which will provide the means towards real-time operations visibility and automated process improvement. 

  • Setting Up Flexible Manufacturing Systems (FMS)

SCE’s can help integrate flexible manufacturing systems (FMS) into supply chains.  FMS is an alternative to traditional production systems in that it focuses on short-run small-lot-size manufacturing versus long continuous mass production.  SCE’s can build in flexible systems into supply chains via integration with logistics, production planning, and procurement. 

  • Improving Inbound & Outbound Logistics

Supply chain engineers can streamline the flow of goods coming into and out of storage facilities.  They can identify and ubblock bottlenecks, and recommend how manpower and facilities should be laid out such that merchandise can flow continuously and smoothly.  SCE’s can also study the economics of procurement and delivery practices that underlie their impacts on logistics flow. 

  • Simplifying Storage & Handling

Storage and handling are very high on the list of many supply chain managers’ preoccupations.  Enterprise executives don’t like them because they connote cost and they’re seen as not adding value.  But with the SCE’s help, enterprises can turn them into the assets they really are. 

  • Tuning Up Transportation’s Last-Mile Productivity

SCE’s can offer options that would boost the productivity of last-mile freight deliveries and services.  These include recommending changes in transportation structure, improving route planning & scheduling, and balancing loads maximisation with delivery turnarounds.

  • Perfecting Order Fulfilment

SCE’s can come up with order fulfilment systems that seamlessly connect anticipated customer demand with available-to-promise (ATP) inventories.  The goal is perfect orders: deliveries that meet 100% of customers’ service requirements 100% of the time.  

  • Factoring the Worker in the Workplace

Enterprises want efficiency but need to be mindful of the welfare of their workers.  Popularly known as ergonomics, SCE’s apply human factors engineering to improve labour productivity by adopting the workplace to the person, rather than adopting the person to the workplace. 

  • Re-Implementing Total Quality

It’s an old buzzword from a bygone era, but Total Quality still serves as an applicable approach to ensuring supply chains deliver what they’re supposed to.  SCE’s provide the in-depth tools and means to make sure processes work right the first time. 

  • Re-Defining Cost Engineering

To many enterprises, it’s a glorified clerical function that estimates job expenses and checks the billings from vendors and contractors.  But it’s more than that and SCE’s can show how cost engineering can not only tame the expenses but also provide competitive value for supply chains.

  • Pruning the Value Stream

Value-Stream Mapping (VSM) is the basic tool of Lean, and it tells us where the non-value added and value-added activities are.  SCE’s show how to optimise the value stream after we know the results of VSM. 

Enterprise executives have heard the need to reform their supply chains.  But they can do only so much managing them.  Enterprises would need the assistance of Supply Chain Engineers to build in better structures and systems. 

The ten (10) examples described above illustrate how SCE’s can help enterprises change their supply chains for the better.  And given the ever increasing clamour for change in these challenging times, we could use all the help we can get. 

About Overtimers Anonymous

The Four (4) Priorities of Business

San Miguel Corporation (SMC) is the largest business enterprise in the Philippines and is among the top 2,000 global firms listed by Forbes magazine.  SMC’s gross revenue was PhP 384 billion ($USD 7.6 billion approximately) in 2018 earned from its diversified portfolio that includes food & beverage products, real estate properties, and infrastructure & energy investments.

Steering the SMC behemoth is the corporation’s president and chief executive officer, Mr. Ramon Ang, who has been actively overseeing not only the growth of the corporation but also its investments in infrastructure and contributions to rural communities.  Mr. Ang has received accolades for the continuing profitability of SMC but he stands out for his pursuit of high-capital projects such as construction of a new international airport and the building of an elevated expressway passing over the heart of Manila. 

Mr. Ang apparently recognises the challenging responsibilities of running the largest enterprise in the country.  He demonstrates that profit cannot be the sole priority. He recognises the value of SMC’s standing in society while at the same time makes sure the corporation maintains its competitive edge over rivals and continues to grow in the industries it does business in. 

Every business enterprise has four (4) priorities.  These are:

  1. accumulate wealth;
  2. attain & sustain competitive advantage;
  3. establish esteem;
  4. grow in influence.

Accumulate Wealth

The aim of an enterprise is not only to make a profit but to reap cash from that profit and ensure that the amount it earns exceeds the minimum rates of return of investments.  Furthermore, the wealth that’s gained should translate into cumulatively higher net worth in the form of increased cash liquidity and added equity or stakeholders’ value as invested into the enterprise. 

The priority of the enterprise, to put it another way, is to make money and increase it. 

Attain and Sustain Competitive Advantage

A successful enterprise gains competitive advantage and maintains it.  An enterprise would wither if it cannot compete versus its counterparts in the marketplace. 

Michael Porter defines competitive advantage as one’s position and degree of advantage possessed by an organisation over its competition.[1]

According to Porter, an enterprise gains competitive advantage via either of the following strategies:

  • Cost Leadership
  • Differentiation
  • Focus

Enterprises that position their products or service as the lowest cost in the market are applying the Cost Leadership strategy. 

An enterprise adopts a strategy of Differentiation when it positions its products or services as superior in quality or utility versus others in the market.

Firms that target a certain group or niche of society are using a strategy of Focus.  When firms use a Focus strategy, they either offer products at the lowest cost for that particular group or niche or they advertise superiority but to a specific audience.  In other words, firms apply either the generic Cost Leadership strategy or a Differentiation strategy but for only a specific target market.

An enterprise can only adopt one strategy though large conglomerates may apply an exclusive strategy for each of its business divisions.

Porter’s Generic Competitive Strategies1

Esteem & Reputation

Enterprises have learned that public perception has bearing on how their products and services will perform in the marketplace. 

How a firm presents itself in public has become a management requisite.  When it comes to esteem and reputation, managers are bound to address the following:

  • Corporate Citizenship
  • Community Relations
  • Communications
  • Environmental Stewardship
  • Global Citizenship

Corporate Citizenship refers to a firm’s compliance to laws and regulations.  These include paying the right taxes, cooperating with regulators and government agencies, providing transparent information on finances and operations, and following the spirit and letter of the law in all manners of conduct. 

Community Relations is the enterprise’s outreach to its neighbours and to charitable institutions.  Enterprises receive and provide feedback from and to community leaders and with private associations especially those directly affected by the enterprise’s operations (e.g.  factories and distribution centres).  Enterprises also proactively donate time and resources for those less fortunate.  The purpose of all of these is to establish cordial and synergistic ties with communities the enterprises co-exist with. 

Communications take the form of public bulletins via media as in printed (newspapers), broadcast (television & radio), and social (internet networks). Communications may either be external or internal.  Either the audience is the outside world (the external) or for the benefit of employees and their families (the internal).  The purpose of communications would be to present an enterprise’s positive agenda whether it be clarifying a stand on controversial issues, or the quick dissemination of information on product issues (e.g. details on product recalls, clarifications versus rumours). 

Environmental Management has has to do with the enterprise’s initiatives in regard to environmental protection.  It is more than just compliance to existing laws.  Enterprises are expected to show effort in appeasing the ever growing movement to protect the planet Earth and its resources.  These include the participation in programs such as waste recycling, energy conservation, anti-pollution projects, and in public activities such as tree-planting, placing of artificial coral reefs, and hearings on environmental impact studies. 

Global Citizenship goes one step further especially for enterprises that are involved with suppliers and/or customers in different countries and territories.  Whether the involvement is foreign-based operations, partnerships or joint ventures, or sourcing of materials and labour, enterprises are expected to exercise compliance with domestic and international laws and treaties.  They are also expected to respect cultural and economic differences and proactively reach out to local communities they co-exist with.  It is complicated and comprehensive work but it helps the enterprise attain a reputation of admiration on a global level.       

Influence & Growth

Despite the pressures to deliver results in the short-term, enterprises have to plan for long-term sustainability and growth.  They also realize growth isn’t just about numbers in the balance sheet; it is about expanding their sphere of influence in the markets they compete in.

Enterprises need to have strong influence not only with their customers but also with their stakeholders, their suppliers, their employees, and with the communities they work with.  Having influence assures lasting stability and sustenance.  Successful enterprises therefore always plan for the long-term even as they may have to deal with the demands in the short-term.

Typical approaches for long-term influence and growth are business leadership, and vertical and horizontal integration.  Business leadership includes dominating markets with superior products and services. Vertical integration means gaining influence over suppliers on the upstream and customers or distribution channels on the downstream.  Horizontal integration means widening influence with firms with similar industries or expanding one’s business to new markets.  This often means mergers and acquisitions of other enterprises to gain greater market share and capital.

The four (4) priorities apply to all enterprises.  A start-up business may perhaps work more on wealth while a global manufacturing firm may busy itself boosting its reputation.  The level of importance an enterprise gives may not be evenly spread among the four (4) priorities.  Despite whatever emphasis given to each of its priorities, the enterprise should not lose focus altogether on all, lest it risks the potential downsides.      

The four (4) priorities and the level of focus an enterprise places on each sets the foundation for an overall direction that inspires the subsequent strategies in operations, organisation, marketing, and finance. 

About Overtimers Anonymous

[1] Michael E. Porter, Competitive Strategy,  (New York, N.Y. : The Free Press, 1980), p. 35

Do We Really Need New Capacity?

Do we really need a new highway?

Metropolitan Manila, Philippines, has one of the worst urban traffic congestions on Earth (at least before the pandemic of 2020 forced people to stop travelling).  This has led to a number of corporations and wealthy individuals to propose new roads, bridges, and tunnels. 

The proposals cite the obvious problem of traffic gridlock and the resulting negative effect on productivity.  The city’s leading agency, the Metro-Manila Development Authority (MMDA) believes the country’s economy loses an estimated PhP 3.5 billion ($USD 70 million) daily due to traffic congestion.

For so many years, the Philippine government has extended expressways north and south of Manila, built or refurbished new bridges, and even initiated river ferries to reduce travel times within the city.  At the end of 2019, however, people were still complaining about being stuck in traffic for hours.  This has led the government, investors, and private corporations to propose and initiate new projects.  These include elevated expressways, more bridges, and a subterranean commuter train that will traverse underneath the city. 

Government and some so-called experts believe these new projects when completed will ease traffic and alleviate the woes of commuters and automobile drivers. 

But will it, really? 

Los Angeles County, California, USA, has lots of highways.  Over many years, the city has seen more freeways built, expanded, and improved.  It takes only minutes to travel from one place to another, even if the distance is 30 to 40 miles (48 to 64 kilometres) across the county.  LA’s freeways is just a subset of the United States’ Interstate expressway system which allows people to drive across the country seamlessly. 

In recent years, however, traffic along the Los Angeles freeways have gotten worse.  Gridlocks are common not only during morning and evening rush hours but also even during weekends.  And even as the state of California adds more to its freeways, the traffic has grown longer year after year. 

Expanding road capacity doesn’t necessarily reduce traffic; it actually may increase it.  It’s called Induced Travel Demand (ITD).  As more roads are built, more drivers together with their automobiles emerge and eat up the added capacity. 

ITD has been proven in urban centres not only at Los Angeles but in cities around the world such as Beijing and London.  It puts truth to the adage: “if you build it, they will come.”

The phenomenon of ITD, however, doesn’t apply to all places.  The Louisville-Southern Indiana Ohio River Bridges Project in the USA, for example, saw travel demand reducing instead of increasing despite forecasts to the contrary.  

In brief, increasing capacity can cause a corresponding increase in demand.  In contrast, increasing capacity can result in decreasing demand.  In both scenarios, engineers don’t get what they expected in terms of beneficial results. 

Adding capacity always seemed to be an obvious solution to increasing demand.  In reality, however, it’s not. 

Enterprises often invest in additional capacity when supply chains fall short in deliveries due to reasons such as production not being able to keep up with orders or because there were not enough trucks to load items. 

It’s obvious, the executives would say.  Manufacturing is running flat-out and we need more trucks. 

It goes further.  Logistics managers would say they need more storage space and more forklifts, on top of more trucks.  Purchasing managers ask to hire more staff to find more vendors.  Manufacturing would want their facilities expanded to accommodate more equipment. 

Justification is supposedly straightforward.  Engineers extrapolate present-day numbers with trends into the future.  Space will run out.  Production capacity will continue to run behind.  There will be more truckloads. 

The extrapolations that engineers use to justify added capacities aren’t even based on simplified mathematics but on elaborate algorithms certified by experts and established as valid for years. 

So, why then do projects fail to reap benefits?  Why does demand suddenly increase and traffic get worse?  Or why does demand fall off after new capacity is installed?

Because the forecasts, simply put and for what they were worth, are wrong.  Or to put it more concisely:  the forecasting is wrong. 

Urban planners often don’t take into account Induced Travel Demand because their forecasting only considers historic trends in demand.  They fail to see that sociological factors come into play when new roads and bridges are built.  Simply put, when people see a new road, they want to drive on it.   And the more a city boasts about the added capacity of a new road, the more the people are encouraged to change their habits of commute to use it.  More people drive and more cars are bought.  Congestion on the new road increases. 

In the Louisville-Southern Indiana Ohio River Bridges Project, the forecasting model engineers used assumed traffic would increase because there would be more commuters and motorists.  The forecasting model was based on surveys and mathematical algorithms. 

What the forecasting model didn’t take into account was that people’s behaviours change.  They don’t remain necessarily constant.  Hence, as the Louisville economy and demographics evolved, the patterns of commuters and motorists also changed.  Demand actually fell.  The forecast was wrong.

Engineers in the United States now realise that justifying new capacities whether it be for new highway infrastructure or for new machinery for manufacturing should not be based on forecasting alone.

It should be based on what the problem is. 

Capacity is not the problem when it comes to traffic.

Capacity is not the problem when supply is not meeting customer demand. 

For urban planners, it should start from questions like:

  • Where do we want people to reside and work?
  • How much public transportation do we want?
  • How many high-rise buildings should we allow to be built and where?
  • Where do we locate our airports and seaports?
  • Do we really need a new highways and airports?

For supply chains, questions arising about capacity shortfalls should focus toward:

  • Do we need more or less customers to deliver to? 
  • Who do we want to sell and deliver to in the future?
  • Who are the customers that are buying more or less of our products? 
  • Do we need to sell more new products or do we need to sell fewer?
  • Are our manufacturing facilities too big and too far from customers?
  • Should we centralise or put up satellite depots and service centres?
  • Are we satisfied with our transportation set-up? 

Forecasts are the bases of justification for new capacity projects.  Unfortunately, forecasts cannot be depended on to be precisely accurate.  In the first place, forecasting by itself, despite the modern-day algorithms, can never be counted on to provide a clear picture of the future. 

The error in justifying new capacity is in using the shortfall of capacity alone as a reason.  Engineers have realised that they should look at the causes behind the capacity shortfall and not by its symptoms.

We won’t ease traffic if we just build more roads. 

We won’t benefit by just adding more machines or trucks. 

We need to address the causes that underlie the effects. 

We build not only to accommodate.  We build to solve. 

About Overtimers Anonymous

Reducing Losses, Whatever the Type, Whatever the Scale

Material losses happen in every industry.  From the time a raw material is mined, extracted, or harvested, to the point where it finally is transformed and delivered as a finished product, there will be some loss along the way.  Not all merchandise that comes into an operation comes out 100% intact in the finished product. 

There are two (2) ways of looking at losses:

  • Loss in Quantity:  materials or items are destroyed, discarded or removed.  Examples include:
    1. machine scraps from milling, drilling, & cutting;
    2. discarded material left from painting & coatings;
    3. evaporation;
    4. spills;
    5. gas leaks;
    6. items that are thrown away such as soiled paper;
    7. over-usage of materials;
    8. pilferages.
  • Loss in Value:  otherwise known as degraded, these are materials that have deteriorated or have lost their primary utility.  Examples include:
    1. residues from chemical reactions such as refining;
    2. expired product;
    3. under-cooked or over-cooked ingredients;
    4. contaminated material;
    5. damaged goods during transport or from handling.

Enterprise managers use measures such as variances and yields to monitor losses. 

Variance is the difference between what is actually used versus what is supposed to be used.  It’s what some managers would call actual usage versus standard usage. 

Yield is the percentage ratio of output versus input in an operation or process.  Output is the quantity of quality-accepted product.  Input is amount of all of the material put into the process.   Operations managers always strive for the ideal of 100% but in most cases, they’d settle for 95% or greater. 

Variance and yield provide managers the yardsticks to how well their operations utilise the materials and product that pass through them.  The lower the variance or the higher the yield, the more efficient the operation is said to be. 

Manufacturing managers apply variance and yield in their operations but both can be useful to measure losses throughout the supply chain, at least from when an enterprise receives its materials to when the final finished product arrives at the customer’s doorstep. 

Manufacturing managers work to reduce variances and increase yields through improvements in production operating parameters.  Purchasing managers help improve yield and reduce variant losses via collaborations with vendors to improve materials’ conformities to desired specifications. 

Logistics managers work with their quality control counterparts together with vendors, logistics providers, and freight contractors in setting standards and methods that would improve merchandise shelf lives and at the same time mitigate risks in materials handling & transport. 

From another viewpoint, losses are either anticipated or un-anticipated.

In manufacturing, losses are generally anticipated, that is, they are expected to occur given the nature of an operation.  Losses usually happen during the transformation of materials into finished product.

Unanticipated losses are those that occur infrequently, unpredictably, and at scales much wider than that of anticipated losses.  Unanticipated losses tend to happen more often in logistics operations, as in materials handling and transportation, where there is an absence of direct monitoring. 

Amid the coronavirus pandemic of 2020, Philippine farmers threw away vegetables because they suddenly couldn’t find buyers for their produce.  Buyers didn’t show up at the trading post where they typically transact with farmers as people could not leave their homes due to mandated quarantine lockdowns.  Meanwhile, locked down Filipino households were complaining that they couldn’t buy food. 

Unanticipated losses can be catastrophic especially when it comes to the global supply chain trade. 

In early September 2020, a ship carrying 6,000 cattle and 43 crew sank amid bad weather as it approached the coast of Japan.  Only two crew members of the ship, the Gulf Livestock, were rescued. 

A crew member believed to be from Gulf Livestock 1 is rescued by Japan’s coastguard. Photograph: Japan coastguard/Reuters

An investigative article by the Guardian published on January 2020 speculated  significant losses of live animal livestock on sea transport.  The article’s writers observed that a number of ships have less than adequate facilities in transporting live animals but there was little in the way of data on the scale and frequency of losses.  Unanticipated losses can not only be disastrous but also could be happening more often than one thinks.

Whereas managers might find variance and yield applicable in reducing anticipated losses, they are quite less effective when it comes to unanticipated losses.  Enterprises fall back on insurance to offset unanticipated losses but they don’t solve the problem.  Losses would still hurt especially if lives are lost other than the loss in resources. 

This is where supply chain engineering can be helpful. 

Supply chain engineers can assess the storage facilities, material handling equipment, and transportation assets and seek improvements in how merchandise are worked through them. 

Supply chain engineers can be instrumental when enterprises accredit the 3rd party providers who take custody of products for deliveries to customers, especially those that require meticulous handling and long-distance travel.  Supply chain engineers can devise operating standards for the proper storage, handling, and transport of products.   SCE’s can reconcile manufacturing, procurement, and logistics protocols in the management of merchandise that would minimise variance, increase yields, and mitigate the risk of catastrophic losses.

Losses happen throughout the supply chain.  Some get lost in quantity and some lose in value during a process.  Managers use variance and yield measurements to mitigate anticipated losses but unanticipated losses represent a blind spot especially as they occur more often in the logistics realm where there is less visibility. 

Supply chain engineers have the skills and knowledge to combat unanticipated losses by auditing the assets and systems that store and deliver the goods of enterprises.  SCE’s can propose standards that would encompass the entire supply chain and put more productivity in the transformation and handling of merchandise. 

Losses can be heart-breaking especially when they are catastrophic such as when a vessel sinks in the high seas.  Executives might try to cover their losses via insurance or by simply taking a blind eye but it would still be worth the effort to ensure not only most of what is procured, produced, and shipped reach their final destinations in one piece but also that human lives are not wasted for nothing.   

About Overtimers Anonymous

Hoarding and How to Discourage It

When people buy a little more than what they usually need, we call it speculation.  When they buy much, much more, we call it hoarding.

What happens when people hoard?  Do the enterprises that supply the goods gain in sales and profits?  Do hoarders make money?

Hoarding happens when people perceive they might not be able to buy the items they essentially will need in the very near future.   They end up buying a lot, to the extent consumers empty grocery shelves or businessmen use up all of their storage and look for more. 

Hoarding is not the same as building up buffer stocks or safety stocks.  Buffer and safety stocks take into account estimated variations in demand and supply.  These would be based on statistical formulae, as in like standard deviations if one recalls his or her education in statistics. 

Hoarding doesn’t have any statistical basis.  It is pure over-speculation borne by exaggerated perceptions of a current reality.  It often is a reaction to an adverse situation. 

A typhoon threatens to hit town.  Residents panic and buy based on what they believe they would need when the storm hits and afterwards.  How much they buy is based on fear and perceptions.  Perceptions are based more on emotion than it is speculation.  Hence, people buy as an emotional response and they tend to buy a lot more than they really need. 

Hoarding doesn’t benefit anyone.  Having too much of anything either eventually results in wastage or in having cash tied up for too long in the stuff bought.  Hoarders believe they would profit a great deal from selling the excess stuff that would become scarce but even then, the money earned is just a one-time bonus and the windfall doesn’t necessarily come at once.  Hoarders pay for the additional cost of storing the stuff and the opportunity cost for the cash they expended would be sunk into the goods they probably would be keeping for some time. 

Hoarding regularly also isn’t really a good idea.  On top of the added cost of storage and lost cash liquidity, having a lot of inventory drives up expenses.  Costs for security and upkeep creep in and eat away profits. 

Successful wholesalers especially of consumer goods and food items should not be classed as hoarders.  One wholesaler I know stocks up on canned goods and liquor starting July of every year.  He stocks up enough quantities that would meet likely demand for the year-end holiday season.  He bases his projected sales on the demand histories of the products he stocks.  And he’s often right.  The goods he bought and stocked up end up practically sold out before Christmas. 

Hoarders on the other hand don’t base their purchases on demand forecasts.  More often than not they end up with inventories that last for months and even years.  Hoarders buy based on irrational reasoning.  Wholesalers buy based on rational estimates. 

Hoarders likely won’t listen to advice to not stock too much.  Some enterprises, therefore, control how much inventory they make available to their customers, especially if the products they sell are fast-selling essential commodities.  Suppliers will ration and allocate to discourage hoarding.  Or they’ll ask for cash up front as hoarders, just like everyone else, would have limits in their financial capacities to pay. 

Hoarders can be very persistent in procuring the stuff they want to keep for themselves and satisfy their irrational urges.  Enterprises should distinguish who their customers are from the hoarders that put away products and refuse to share with others who may need them just as much, if not more.    

Customers may be always right.  Hoarders never are. 

Improving the Customer Experience and Gaining Higher Productivity

This Photo by Unknown Author is licensed under CC BY-SA

An automotive service centre in Manila, Philippines advertises that it opens at 8:00am. The doors actually open, however, around 8:15am.  Employees time in before and after 8am but pass through the washroom before heading to their desks.  A waiting client who would have arrived at 8:00am would probably be served earliest at 8:30am. 

The automotive service centre is part of a dealership that sells Japanese cars, vans, and motorcycles.  The dealer represents the final point of a Japanese automotive company’s global supply chain.  The Japanese company is heralded as a market leader but that view is far from the mind of the customer waiting for a half hour for one of its dealers to open the doors of its service centre. 

The Japanese owners of the automotive company wouldn’t likely be aware of the experiences of their Manila dealer’s customers. 

They probably wouldn’t know how customers felt for having to wait for 30 minutes.  And they probably wouldn’t know some customers would have to wait even longer because the supervisor who would decide on specific service requests hasn’t arrived yet. 

Many executives don’t know first-hand what their customers are experiencing with their enterprise’s front-liners.  They would rely on feedback, surveys, and statistics but they would hardly see the actual experiences of customers. 

Improving the customer experience can catapult an enterprise’s competitive advantage.  But it’s not only because customers will flock for the better service but also because when one improves the structure and processes that improve that experience, it uplifts not only customer satisfaction but the enterprise’s productivity. 

The automotive service centre has a competitor down the street.  The competitor advertises that its service centre opens at 8:00am but at 7:30am, the service representatives are already checking in customers and inspecting cars.  At 8:00am sharp, the service representatives are already interviewing the customers for their specific complaints and requests.  Service representatives provide the first group of waiting customers diagnoses and estimates within a few minutes.  The service centre would immediately begin work on cars as soon as the customers sign on their approvals.  Customers who were at the service centre at 7:30am for routine service checks would be checking out as early as 9:30am. 

The automotive competitor serves more cars than the one who keeps customers waiting.  It’s not because the competitor has more poor-quality automobiles that need fixing, but it’s because the competitor sells more cars than its neighbour.  The competitor does not keep its customers waiting and makes sure all the cars that come in the morning are served as soon as possible. 

Customers at either service centre may not be very loyal to the automotive brand they buy but they will remember their experiences.  This would have an impact on what automobile they will decide to buy in the future.

But more than that, the competitor has a higher productivity than the neighbour who opens late.  The higher productivity assures no backlogs in service jobs that would not only drive up expenses but also make it difficult to keep the customer experience consistent.

The competitor didn’t just add staff to engage waiting customers right away.  The competitor also invested in multiple maintenance bays to service more cars simultaneously.  The competitor also laid out the facility to have two types of bays: one for quick routine service and the other for longer, more complicated jobs. 

The routine service bays were closest to the facility’s doors so service attendants can move cars quickly to customers who can leave immediately.  The other bays were located deeper which made them closer to parts storage and special equipment. 

The competitor has seen the challenge for consistent customer experience and productivity grow.  Sales has gone up and down in recent months.  But because the competitor has made sure he has enough staff and bays, customers haven’t been complaining. 

The automotive service centre that kept customers waiting for 30 minutes, however, had obviously not paid attention to how promptly its staff reports in the morning.  And one could see there was no system of assigned bays or facility plan when it comes to maintaining customers’ cars. 

Companies are fickle when it comes to customer experiences.  Every so often they harp on it, but when times get tough, they sometimes forget about it. 

When one connects a consistently good customer experience with higher productivity, one can see the immediate benefits.  The intangible advantages of satisfied customers result in the tangible paybacks of having a productive work-place. 

About Overtimers Anonymous

Why and How Banks Should Improve their Services

In the late 1990’s, Asiatrust Development Bank, a relatively newcomer to the Philippine banking industry, expanded its banking hours from 8:30am to 6:00pm.  It was a break from the traditional 10:00am to 3:00pm schedule that was the mainstay of other Philippine banks.   Many small businesses and individuals particularly those who worked until evenings, flocked and opened accounts with Asiatrust. 

Asiatrust also offered pick-ups of deposits from customers and post-dated check warehousing, in which post-dated checks can be safe with banks until their deposit dates.  These added conveniences helped the bank snare more clients, notably small & medium-sized businesses

Some banks took notice of Asiatrust’s meteoric capture of market share and also expanded their hours and services.  Asia United Bank (AUB) absorbed Asiatrust in 2012 but its legacy of services for small businesses and entrepreneurs lived on in the Philippine banking industry.

Almost thirty (30) years later, amid the pandemic of 2020, Philippine banks have reversed these services.  Citing the risks to public health, banks have shortened hours; some have even closed branches.  Banks have reduced staff, resulting in long queues of clients at branches and long waits when calling customer service hotlines. Bank internet services have slowed thanks to surges in online transactions. 

Banks serve an important function in ensuring enterprises and their supply chains keep running well.  Cash-flow transactions between vendors and customers transpire mostly via banks.  Foreign exchange dealings, such as letters of credit (LC’s) and wire transfers, happen in most cases through banks.  Philippine bank executives repeatedly extol their commitment to customer service but they balance that priority with that of managing present-day risks in order to maintain the health of their finances. 

When banks downgrade services, enterprises’ supply chain activities may suffer. When a bank is closed or the waiting line leading into it is too long, for instance, clients may find themselves unable to consistently do routine financial transactions.  This can result in delays in payments to vendors and depositing collections from customers.  Receipts of materials and deliveries of merchandise would be negatively affected. 

Cutting back services, especially those dealing with foreign exchange transactions, can hamper the timelines of enterprises to import materials or export products.  

Banks have a golden opportunity to grow if they would just focus on service. 

In the Philippines, more than 65% of adult Filipino households don’t have bank accounts.  That’s 65% in potential market growth for banks.  Many Filipinos don’t deal with banks because either it’s a hassle for them (branches are inconveniently far from their homes or places of work) or because it’s simply discouraging to open accounts (e.g. too many forms to fill, minimum deposits, low interest rates, restrictions on loans). 

Small businesses make up 99% of commerce in the Philippines.  Which means they also likely make up 99% of supply chain transactions in the Philippines.  Even if the remaining 1% of enterprises that comprise big businesses may hold a large share of the commerce, the revenue and investment potential of small enterprises cannot be discounted. 

Banks aren’t just important to supply chains, they are much like them and can even be managed as such.

Banks purchase and deliver cash to and from branches and require the logistics of armoured cars.  They not only tap the talent of managers and staff to serve clients but also have work systems that can be optimised (e.g. tellers and customer services). 

The science of determining how many branches to have and where to locate them are not much different from that for storage depots for manufacturing firms.  And finding out how much capacity a branch should have (number of staff and how many operating hours) isn’t far from the capacity computations for assembly lines and logistics operations. 

The risk management for banking operations which encompass safety and occupational health aren’t really unlike that for the standards and practices for supply chain operations. 

Organisations with supply chains have been continually adapting to risk and improving customer service, pre-pandemic and amid the pandemic.  If they can do it, banks can too. 

The science of supply chain management and engineering can work for banks as much as it has in many industries.  It just perhaps needs the insight to get it started.  

About Overtimers Anonymous

Competitive & Non-Competitive Priorities and How to Deal with Them

In several firms I’ve worked with, I couldn’t help but notice that supply chain managers would sometimes be engrossed with priorities regarding compliance to government-mandated occupational safety & health standards.  They would have long meetings and spend much time on the nitty-gritties of reports to be filed and procedures to follow.

But in the following week, the same managers would switch to issues regarding costs that were going over budget.  The general manager of their company was concerned about expenses and wanted a meeting so the supply chain managers would be rushing to prepare their presentations to explain their respective functions’ spending. 

Priorities would shift week after week, month after month.  One day it would be safety, the next day it would be quality.  When managers would ask which priority is more important, their boss would reply: “all of them.” 

There are two (2) types of priorities enterprise executives deal with.  These are competitive priorities[i] and non-competitive priorities. 

Competitive priorities are those when addressed add value to the enterprise.  Examples are sales, cost, quality, delivery reliability, and after-sales service excellence.  As the term suggests, these priorities directly contribute to an enterprise’s competitive advantage. 

Non-competitive priorities are those that executives do not recognise as adding value to the organisation but are too important to ignore.  Examples are safety, security, industrial labour relations, community relations, government regulation compliance, environmental safeguards, and employee health.  These priorities may not contribute to an enterprise’s competitive advantage but are imperative to its ongoing operations. 

Enterprise executives see competitive priorities as vital to the organisation’s growth.  Consumer goods executives, for example, would develop marketing and product initiatives to bring about higher sales. 

Enterprise executives, on the other hand, see non-competitive priorities as crucial to the organisation’s survival.  Executives, for example, would stress industrial safety as a program to prevent injuries.  They would expect their organisations to adopt safety practices so that people don’t get hurt, and not lead to disruption in operations. 

To put it in another way:

  • Competitive priorities address opportunities.
  • Non-competitive priorities address adversities.

Classifying priorities in either category may help enterprise executives not only what to tackle first but also determine who should be leading the respective priorities. 

Quality and safety are everyone’s jobs but if there are no quality control or safety managers to lead priorities in either one, then it would probably be chaotic for the executives trying to handle them on top of the other important things they have to do. 

It also pays to have awareness of the two types of priorities to know how they would affect the enterprise.  Classifying community relations as a non-competitive priority, for instance, may prove worthwhile for an enterprise who has a factory situated within a largely populated city.  It would encourage executives to invest in a manager who would engage with the factory’s neighbours and handle issues that might result in mutual benefits. 

Being mindful of competitive and non-competitive priorities also gives the organisation a constant big picture of the work it’s doing.  Engineers building a new storage facility, for example, would best have an understanding of what they want to accomplish.  It wouldn’t just be about building for more capacity; it would also be about the impact on working capital, better distribution of products, reduction in damages, and safer working conditions.

Executives can sharpen their enterprise strategies with their awareness of both competitive and non-competitive priorities.  The trick is to have balance and brevity.  Some company mission statements tend to stress too much on quality and leave out the rest.  Other corporate philosophies overdo it with numerous paragraphs that overwhelm the organisation. 

We all have priorities.  We just need to understand which ones are competitive and non-competitive in which the former addresses opportunities while the other takes on adversities.  Both are too important to ignore so it would help if we classify the things we do as either competitive or non-competitive. 

If we can’t do things all at once, we may need to check our structure and resources.  We also should try to make sure our overall strategies aren’t complicated or overwhelming for our own organisations. 

[i] Davis, Mark M., Aquilano, Nicholas J., and Chase, Richard B., Fundamentals of Operations Management, 1999, Chapter 2, p. 25

About Overtimers Anonymous

What Collaboration Is and Is Not

Collaboration denotes a cooperative working relationship between parties which leads to mutual benefits.  It’s not commonly observed in industries and supply chains despite the potential benefits it can bring.  This is because it’s not easy to do and in the first place, many business executives don’t think it’s worth the trouble. 

Many enterprises, small businesses especially, don’t have the leverage to collaborate.  Big companies look down at small ones, for one thing, and see no worth in pursuing collaborative relationships with enterprises that contribute little to their revenue or cost. 

Even if a small business grows larger, it would still have trouble earning trust from suppliers and customers.  It’s just natural to be suspicious and wary when dealing with others outside of our own organisation, if we aren’t already to those within our own workplace.  Our parents did tell us not to talk to strangers when we were children.  We were taught not to trust just anyone.  

Collaboration has to start between individuals within an organisation before it can expand to those outside it.  An organisation has to establish internal collaboration before it can externally collaborate with other enterprises such as vendors and customers.[1]

Internal collaboration is when “sales, marketing, and operations find a way to align and focus on serving the customer in a way that maximises internal profit.”[2]

When internal collaboration is achieved, then an organisation can move to external collaboration.  External collaboration “consists of a supplier and a customer working together to achieve mutual improvement.”[3] 

We should know what collaboration is and what it is not. 

  1. It isn’t a meeting.  It’s not several representatives of one company meeting with those from another.  It’s not enough also that representatives draw up agreed action plans or sign a contract after a series of meetings.  Agreements and contracts aren’t collaborations; they’re just formalities to existing business arrangements that don’t outright lead to mutual improvement; 
  2. Collaboration isn’t an internet link.  When an enterprise can order materials from suppliers via email or customers can order merchandise via a dedicated electronic data processing (EDP) network, that is not collaboration.  That’s a connection.  Such a network that eliminates time-consuming documentation may be a manifestation of enterprises working together but it’s really nothing more than a wired conduit between information systems; 
  3. Collaboration is about multi-function cooperation, not just one department with another.   It’s about representatives from every relevant function of an organisation cooperating with counterparts from another.  Suppliers and clients in collaboration wouldn’t be limited to price and order issues; they’d be discussing inventories, payables, quality, and operations reliability;
  1. Collaboration is working together.  It is about enterprises huddling as one in developing common mutually beneficial objectives and strategies;
  2. It isn’t a merger.  Collaboration doesn’t mean becoming one enterprise.  There’s still a distance to maintain because there would still be diverging interests.  A customer who’s into retail may not want to really involve herself too much with a supplier who’s into manufacturing, for instance; 
  3. Collaboration is dedication via leadership.  Enterprise executives must lead by showing initiative, investing time, and developing trust with their counterparts.  When executives dedicate, they show how serious they are to the organisation.  Naturally, the organisation would follow the leaders; 
  4. But it’s dedication not commitment.   Collaboration is more like a friendship, in which individuals come together as a team to explore opportunities and come up with common goals.  But it’s not a marriage where an enterprise wholly commits itself to another.  We don’t sell our souls when we collaborate; 
  5. Collaboration is not for everyone.  Small businesses may not have much leverage to collaborate but who cares?  Some firms may be perfectly fine without collaboration, for now or for the meantime.  A hardware store dealing with thousands of items wouldn’t spare the time to collaborate with a vendor of very few items, even if the items make up a significant bulk of sales;
  6. Collaboration is an activity that requires preparation and structure.  Dealing with counterparts, whether internally or externally, with other functions or with vendors or customers, requires planning, policies, and a framework of assignment, accountability, and performance measurement.  There must be a front-line team who will work with another from the other side.  That team must know what it wants, what its limits are, and what it must answer for; 
  7. Collaboration is a system.  At least it should evolve into one.  Collaborating is not just a meeting of minds and just getting things done together.  For it to be worth it, it has to result in a continuous mutually beneficial relationship.  Each side should establish a shared routine of communications, negotiations, and transactions that point toward higher levels of performance that give rise to ever increasing benefits. 

Collaboration is not only about getting two parties together, ironing out differences, and coming out with an agreement.  It’s not a meeting.  It’s not something that leads to a contract or even a merger.  It’s an activity where counterparts work together toward a common purpose for mutual benefit.  But it’s not a marriage; counterparts should respect each other’s individual personality and path.  It requires a team with a set agenda and that’s dedicated to perform.  It eventually becomes a system where the parties perform and grow together in a shared environment. 

It’s not easy to start, not easy to sustain.  But it might be worth the effort.  Because two heads are always better than one.  Working together is better than working alone. 

About Overtimers Anonymous

[1] Reuben E. Slone, J. Paul Dittman, and John T. Mentzer, The New Supply Chain Agenda: The 5 Steps that Drive Real Value (Boston, Massachusetts: Harvard Business Press, 2010), chapters 5, Kindle.

[2] Ibid, chapter 5, Kindle.

[3] Ibid, chapter 6, Kindle.