Ellery's Essays

The Importance of Making Available What We Promise

I ordered a box of latex gloves from a 3^rd party seller on a popular e-commerce website. The seller confirmed my order by email and after 24 hours, the order status on the website was that the box of gloves was being prepared for shipment. One week later, the order status said it was at a “logistics facility.” Two weeks later, the order status was the item was out of stock, the seller will be unable to ship, and my order was cancelled.

I ordered a box of the very same brand of latex gloves from another seller and I received it within three (3) days. I was annoyed I wasted two weeks waiting for the first one that never came.

Shouldn’t sellers check first if they have stocks physically available on hand before they confirm a customer’s order? Is it not common sense not to sell something one doesn’t have on hand?

Sounds like yes but in the real world, no. Many enterprises sell items even if they don’t have them on stock. They count on their operations teams to either produce or procure the items and have them available as promised by the time customer wants them.

Available-to-promise (ATP) is an inherent element in supply chain management. It is how much of an item an enterprise will have on inventory for customers to buy, adding in what supply is arriving and deducting what’s already reserved for other customers.

ATP = On Hand + Arriving Supply – Reserved for Pending Orders

Enterprise owners count on the ATP to communicate to customers as to how much and when items would be on stock for selling.

For items that are make-to-stock, enterprises typically make sure they always have enough items on hand at any time for customers to buy. Supply chain managers would set safety stocks to buffer for unexpected demand.

If, however, enterprises are selling expensive stuff like precious metals, are in the business of shipping thousands of items like automotive parts, or are marketing products with short shelf lives, managers would not keep too much on hand to avoid tying up capital in inventory. Managers wouldn’t keep any safety stock and would rely on scheduled arrivals when committing ATP to customers.

Customers expect enterprises to deliver their items on-time and complete as promised. How well an enterprise keeps its promises is a criterion for success. ATP is therefore important. It’s one thing both the customer and enterprise care about. Delivering as promised ranks right up there with quality, cost, and service.

Supply chain executives should strive for the following when it comes to planning ATP:

Never Zero, At Least Not Often

No one likes to be told an item is out of stock. Mothers don’t like it when their favourite brand of diapers for their babies are not on the drugstore’s shelf. They would buy another brand if they come back in a week and there’s still no stock.

Short Lead Times

Customers will cancel their orders if a shop says the items they want won’t be ready for several days. We humans have thresholds when it comes to patience. We won’t wait too long. Enterprises who can quickly churn products for customers gain competitive advantage.

It Doesn’t Change at the Last Minute

Nothing is worse than breaking a promise. Few things are as frustrating as when a shop tells us that there will be a delay in the item that was supposed to be delivered today. It feels even more frustrating if we had already paid for the item. Frustrated customers won’t be comforted with apologies or refunds. Customer satisfaction comes when deliveries happen, not when they don’t.

One Person in Charge

There should only be one person in charge of ATP. Not the planner. Not the logistics officer. Nor the plant manager. Not anyone else but the supply chain executive, the one who oversees all the operations for the fulfilment of customer orders.

That means the delivery of items to the customers’ doorsteps, the making of the items, the marshalling of resources to make and deliver the items, and the shipping of the items. In short, the enterprise’s supply chain.

Enterprises, therefore, should have a chief supply chain officer who’d be in charge of making available what is promised.

Having two or more persons handle supply chain operations or delegating the accountability of ATP to middle managers are common mistakes that lead to items that won’t be there as committed. Having more than one person in charge of the fulfilment of customer demand just makes no sense.

It’s like a kitchen with two chefs: one is in charge of buying the ingredients, the other oversees the cooking. Both men would be fighting each other in no time. As the saying goes, “too many chefs spoil the soup.”

Keep It Simple

The more complicated an enterprise’s operations, the harder it is to keep promises.

Thousands of items, multiple steps, shared production lines, and conflicting policies & targets are examples in which management becomes muddled as items weave through supply chain operations to get to customers.

The advice is to keep it simple and use common sense. Schedule milestones operation by operation to know how much can be committed at the end of the supply chain. Deliver with smaller trucks or send single items through couriers. Keep few stocks but set automatic re-order points for items that don’t move as much (e.g. spare parts). Don’t keep stock of items that are make-to-order (e.g. tailored clothes).

Nothing Wrong with Being Conservative

There’s nothing wrong with applying an allowance to an ATP. If the schedule says an item will be ready in four (4) weeks, commit to five (5) when the customer asks. Adding an extra week would allow for unforeseen events such as if a supplier falls short in delivering needed materials.

No farmer can surely know how many fruits he will pick today. A fisherman wouldn’t know exactly how many fish he will catch tomorrow. But experience will allow either to provide safe estimates. The same is true for ATP. We never really know exactly how much items will be available but we’d be more confident with conservative numbers, just as long as it doesn’t lead to over-padding or over-commitment.

Enterprises and customers put a lot of weight in what is available to promise. Customers rely on enterprises keeping their word. Enterprises depend on their operations to have items ready when needed.

Enterprises should avoid promising nothing to make available and when they do, shouldn’t make last-minute changes. There should be only person in charge and he or she should be the one who oversees the operations in making ATPs realities. Planning ATPs should be as simple as possible and can be made with some conservatism. We should not over-commit or pad too much.

We make promises we can keep. People value us for how we act based on our words. It becomes not only a mark for success but also a way forward to mutually beneficial relationships.

About Overtimers Anonymous

Four (4) Suggestions for a Client-Convenient Website

The phone company needs a password whenever I want to look at my bill.

I enrolled into the phone company’s “paperless billing” system more than a year ago. Before, the “paper” bills were arriving late such that when I received them, they were already past the due date. With paperless billing, the phone company notifies me via email and SMS that the bills are ready for viewing (although the email arrives a few days after the bill date or when the bill had already been posted on the website).

To view my bills, I have to log on with a user name and password and select the bills I want to see and save.

It was simple as all I had to do was click on the bills I want to download. But now, the phone company added a step in which I had to enter a 10-digit password for every bill.

It turns out that the password is the 10-digit account number of the phone number which is displayed on the website menu. So, what’s the logic of having to enter a password which is the same as the account number, in which anyone can see it?

I’m already securely logged on and I still have to type a password that’s already displayed on my bill. There’s no reason for it other than adding another layer of secrecy which doesn’t make sense. Is the phone company afraid that someone else will maliciously pay my bills? (I won’t mind).

Some corporations go overboard when it comes to cyber-security. They encourage people to enrol into their websites but at the same time make it hard to get in. It’s as if there were two people at the doors of company websites: one who merrily welcomes you and a grouchy gatekeeper who wants to throw you out.

I can understand the need for security given the number of high-profile hacks one sees in the news. But does the phone company want me to get my bill or not?

Corporations also try to save money when it comes to website access.

A large bank in the Philippines has a website which allows clients to pay taxes online to the government’s Bureau of Internal Revenue (BIR). The only problem: the bank’s BIR portal closes at 5pm and opens again the next morning, and it is only accessible Mondays to Fridays. I can’t pay my taxes at night or on weekends. The bank advertises that its site is open 24 hours a day, 7 days a week, 365 days a year; it just didn’t say that you can’t use it to pay one’s taxes after office hours.

The bank probably is trying to save money by turning off the portal’s server after daylight hours and on weekends. Clients just have to schedule their tax payments during working hours in sync with the bank’s. Meanwhile, its competitors don’t have such limits. One can pay anytime any day on other banks’ portals. One wonders if and when clients will migrate to other banks to pay their taxes. I already warn friends and peers from opening accounts with this bank because of this quirky online limitation.

One can understand the need to save money but should one do it at the expense of convenience of clients? Especially if clients will migrate to the competition to avail of better services?

I don’t believe it entails so much cost to make a website more convenient for clients. At the same time, I think websites can still be compliant to data privacy and security standards.

The following are some areas which I (a layman in information technology) propose companies focus on to make their Internet sites user-friendly and convenient:

User Interface

A mobile phone company has a website in which the log-in menu is located on a very small corner on the screen. If one has bad eyesight (like me), one won’t be able to see it. It took me eternity to find it the first time I was logging in. I eventually found it after scouring every pixel of my computer screen.

User interfaces are what are displayed on a website for users (you and I) to interact with. It’s supposed to provide ease of access, that is, easy to see, understand, and navigate. Making it hard for users to even see where to click defeats the purpose of a user-friendly interface.

Accessibility Anytime

It’s not only keeping a web portal open nights and weekends. It’s also avoiding the unscheduled and scheduled downtimes at the times when clients need them most. Some banks schedule “maintenance” of websites on weekends and holidays. As much as I understand the value of maintenance, I suspect some banks use the pretext of “maintenance” on holidays and weekends so they don’t have to pay people to be on duty to watch their systems. It’s convenient for them but inconvenient for some clients and goes against the intent of an online website: 24/7 availability, 365 days a year.

Availability on Any Platform

Many banks and companies offer access to their sites via personal computers, mobile phones, and tablets. They also make sure the sites can be accessed on any of the three (3) most popular operating systems, i.e., Apple’s iOS, Alphabet’s (Google) Android, and Microsoft’s Windows.

A few companies, however, spoil the convenience by designing their web portals for mobile phones the same way they do for desktop computers. For example, a mobile phone company (the same one that has a lousy user interface descried above) re-routes users to desktop-designed websites. If one is using a mobile phone, this can be a hassle as one has to go to a web browser made for a desktop computer and squint at the tiny words and letters not designed for a cell-phone.

A very large bank, on the other hand, customised online websites for mobile phones, tablets, and personal computers respectively. Displays and buttons are designed exclusively for whatever device and platform. I’ve moved more of my hard-earned money to this bank because of the convenience of access.

Security That Would Let Us In, Not Keep Us Out

Of course, security is important to us. Of course, we don’t want our data hacked and displayed for all the world to see. But can’t companies have websites where we don’t have to spend 80% of our time entering passwords in letters, numbers, & symbols, wait for an SMS confirmation which sometimes never comes, declare we’re not robots by encoding undecipherable curved letters, and having to enter new passwords to read our own bills? Can’t companies welcome clients without treating them as presumed-guilty-until-proven-innocent criminals?

We as customers or clients want to be served with convenience and with the assurance our transactions will be secure. But sometimes, enterprises do too much for security or try to save on cost by sacrificing convenience.

They forget that whom they try to protect or the costs they want to save can backfire on the clients, who are the people who’re providing their business in the first place.

I don’t believe it requires rocket science to tweak web pages to have friendly user-interfaces, wide availability, anytime access, and reasonable security. A little understanding for clients can go a long way in serving them even via a virtual online website.

About Overtimers Anonymous

Paying Attention versus Getting Attention

A columnist at a leading daily newspaper writes every week about ghosts, spirits, reincarnation, or in other words, supernatural stuff. He is obviously popular as he’s been writing for the newspaper for decades. He seems to be doing well as he’s consulted for some people and spoke at gatherings.

I laugh at how people can believe the silly stuff this columnist writes about until I remind myself that I also have advised clients and spoke at gatherings in which I try to get people to believe everything I say.

Am I really any different from the columnist who preaches unbelievable content? I offer insights but they can be hard to digest especially if they entail big changes in mindsets.

The columnist writes to get attention. Apparently, so do I. Many of us seek attention in our efforts to gain influence. We advertise. We preach. We SHOUT.

More so when it comes to management and staff. Managers seeking attention talk a lot and remind their subordinates a lot. I know because I do it a lot as a manager and I’m still working on getting to do it less.

Sometimes and more often than not, it’s better to pay attention than get attention.

As treasurer for several commercial buildings, I monitor the spending of property management companies the associations of these buildings hire. In some cases, the property managers spend too much or they spend too little. This causes budget overruns leading to running out of cash or under-runs in which a building hoards too much money that otherwise should have been spent for better services and infrastructure.

When I sit down with a property manager to tell her how she should plan her spending, I’d often go into a long-winded speech about how she should have a vision for the building and how she should plan and present projects.

Naturally, after several minutes, she’d be silent with a glassy stare. And I know by then:

She’s no longer listening;
I’m talking too much.

When I, however, ask questions about the challenges of her job, she starts talking. As long as I keep asking, she keeps talking.

And as she talks and I listen to what she’s saying, I realise she’s coming from a wholly different point of view than mine. She’d start by saying that the property company she works demands numerous reports—reports that require considerable time to write and submit.

The building manager also mentions that her superiors have pushed a roll-out of ISO (international standards for quality & compliance) in all their client projects and that she has deadlines to meet those standards.

And so on and so forth the building manager would go about the training she has to go through, the meetings she has to attend at her company offices, the complaints of building tenants she has to address, etcetera, etcetera.

At a point, it would take an effort for me not look at my watch, not put on a glassy stare, and not to pretend to listen. Because from the effort to ask and the effort to listen, I get to learn what it’s like for the building manager. And from learning what it’s like, I get to understand the backgrounds and rationale for how the building is managed.

And as the building manager opens up, she opens up too to what I not only ask but also suggest. Eventually, we come to a point where we both agree to ideas on how to better manage the building.

By the way, this really happened. In that building where I did ask and develop a rapport with the manager, both cashflow and spending for critical maintenance projects doubled in one year. There were improvements in sewage, elevators, and air-conditioning equipment. Collections of dues gained in efficiency and the manager was still able to comply with her company’s directives.

Asking is a technique I’ve come to appreciate to have fruitful conversations and obtain tangible results. Asking is a key component of listening, of what many in the human resources field are promoting as empathy.

Taking away the buzzwords and hype, I’d just say asking works. When we ask questions and listen to the answers, it starts a conversation. As long as we don’t try cutting the other off, let the other talk, and digest what the other party is saying, we gain insights for ourselves which we can build on to suggest to the other side’s point of view. Because when we work from another person’s point of view, the person seems to understand better what we’re talking about; they would welcome it more than if we were communicating from our own.

We have a habit of trying to get attention to the things we want to say and preach. It’s what we see what people do every day in the media and in our everyday lives. We end up doing it too in our attempt to expand our turfs and gain influence.

I’ve learned, however, that paying attention works better. It’s done by asking, listening, and asking again, until rapport is built and ideas flow. And by experience, when ideas flow, doable solutions to problems follow. And I’ve seen the real-life benefits.

Ask, listen, repeat. It works.

About Overtimers Anonymous

Seen and Not Heard, Speak Only When Spoken To, Why It’s Good to Listen

In the old days (as late as the mid-20^th century), many parents told their kids that children were meant to be “seen not heard” and that children can only “speak when spoken to.”

This rule prevails among many families, never mind if it’s the 21^st century and some people say we should be more liberal with our kids.

Many enterprises apply this rule in their organizations too.

In one company I was consulting with, the executive vice president disliked getting interrupted or being asked questions by her subordinates. When they do, the EVP yells at them. The subordinates believed they didn’t have the privilege of speaking out; only their bosses have.

Whenever I sat in the top management meetings of large multinational corporations, I noticed only the executives seated around the conference table would be allowed to speak. Those middle managers and staff who sit at the periphery in less comfortable chairs would only talk when they’re addressed. Otherwise, they were expected to keep quiet. (They can laugh at the chief executive’s jokes though).

It seemed that such an old-fashioned rule stifles the sharing of information and the emergence of innovative ideas. And because of this, executives had become out of touch with their own people. Instead, the executives form their own opinions and solutions and when they address their staff, they expect immediate agreement.

New enterprises attribute their successes to the teamwork of their people. This gets forgotten as enterprises grow in size and complexity. But size and complexity shouldn’t be the reasons for not engaging with everyone in the organization.

Whether big or small, everyone in an organization has always something to share. Many of what they share may seem trivial but chances are there will be a gold nugget of an idea in the information they impart.

So, what should an organisation do to encourage information sharing? Meet with the people at their level is the first thing that comes to mind. Go listen to them at their workplaces. Note I said “listen” not “talk.” Listening is the real key here. It’s amazing how much an employee can open up when he or she realises there’s someone actually willing to listen.

It will take time of course. Some employees won’t open up at once especially when they’re face to face with the person who they believe holds the power of the organisation. There is effort involved. There always is when trying something not really done as much before.

But I think many have testified to the benefits of listening. It promotes trust for one. When the people of an organisation trust their executives more, when they see that executives are humans just like them, they tend to be more open to change. At least they would be more open to share information as well as receive feedback from the executives.

Some of us grew up in families where we were not allowed to speak unless spoken to. This unwritten rule somehow carried over to organisations which some of us work for today. It stifles information sharing and hampers innovation. Executives can break this rule by simply going down to the level of their employees and listening.

Listening builds trust and trust opens up communication which leads to information sharing and innovation. Innovation drives growth and competitive advantage. And it doesn’t cost a thing. Just some effort will do.

About Overtimers Anonymous

How to Save Money When Renewing the Dreaded City Business Permit

Every time we enter a new year, many of us reflect on the past and make resolutions for the future.

When the first working day arrives, however, we face reality.

One of those realities is the dreaded city business permit renewal.

Town and city governments in the Philippines require enterprises to register before they can conduct business in their areas of jurisdiction. Renewing a business permit is mandatory by every third week of January of every calendar year. It doesn’t matter if the business is big or small, profit or non-profit, every enterprise is required to register and renew their permits annually; there are very few exceptions.

The responsibility to register falls mainly on the enterprise. It’s one more task in an enterprise’s list of things-to-do to comply with the myriad of laws and regulations inherent in doing business in the Philippines.

The city/town business permit is also known as the mayor’s permit. To get one, whether new or renewed, the enterprise has to fulfil several prerequisites. These include:

Clearance from a barangay or village;
Securing a sanitary permit;
Getting an environmental permit;
Showing a fire department permit;
Clearance from the city’s zoning office;
Paying & getting a community tax certificate.

Each prerequisite in turn has its own requirements to meet. These include:

Proof of comprehensive general liability insurance coverage which is insurance to cover for anyone getting injured in an enterprise’s premises;

Physical medical examinations of the enterprise’ s employees including x-rays, blood tests, and doctors poking your people’s bodies;

A certificate from a licensed pest control exterminator certifying that there are no pests (insects not humans) in the enterprise’s premises;

A certificate from a national government agency that you’re complying with environmental laws. If the enterprise is exempted, it would need to get a certificate that the enterprise is exempted or a certificate that one that does not need a certificate (yes, it’s red tape at its worst);

The enterprise would need to pay fees for each clearance and permit it secures. The expenses can be hefty. A community tax certificate can cost up to PhP 10,000 ($USD 200) which is significant for many small businesses.

When an enterprise presents all the clearances and permits to the city/town business permit & licensing office, it will then have to pay the local tax which is based on the enterprise’s sales and spend for fees such as:

Garbage fee;
Signboard fee (even if you don’t have a signboard);
Electrical & mechanical inspection fees;
Personnel inspection fees (fees to pay for the medical, police, occupational tax, and seminars of the enterprise’s employees no matter what topics they cover);
EPO accreditation fee (EPO is the environmental protection officer of the enterprise and the fee pays for the city’s accreditation or certification of that person);
Environmental inspection fee;
Sanitary inspection fee;
Fire inspection fee – local;
Fire inspection fee – national (enterprises pay for the local and national fire departments);
Engineering inspection fees.

Sample of a city’s fees other than the tax

These fees seem to cover all the costs of city hall and then some so one wonders where the taxes enterprises pay go to.

Cities earn a lot of revenue from these business taxes and fees. Yet, they don’t make it easy for enterprises to renew their permits and pay for them.

It would take enterprises up to six (6) months if they are getting a business permit for the first time. And it would come at great cost and time. Cities and towns would require new businesses to undergo inspections (getting signatures from local agencies, engineers, and other authorities) and submit a lot of paperwork such as tax documents, business registration papers, as-built construction plans, and corporate licenses. Note that these are requirements for new businesses. The enterprise is applying for a permit to do business but has to first submit paperwork as if it has already been in operation for years.

Renewing the business permit every January of every subsequent calendar year isn’t as lengthy but it is a hassle. Renewing a permit is similar to getting a new one altogether. One has to submit documents, fill out application forms, and go to one local agency after another to get a city officer to sign the forms saying the enterprise fulfilled its requirements but still is subject to inspection.

Even if the city puts up what they call a “one-stop-shop” where all the agencies are located in one place, the enterprise’s representative still has to walk and stand in line at each agency’s desk. The total distance of walking within a “one-stop-shop” can run up to several kilometres, not including the walking after the desk officer tells you that you need to photocopy more of the documents you submitted and you’d have to run outside to the nearest photocopier several hundreds of metres away which also has a line of people waiting.

There is no value-added benefit in getting a business permit. At least to the enterprise. All the value goes to the city. The enterprise does most of the work preparing & submitting documents and paying for all the taxes and fees for services which mostly one will never really see.

It’s all part of compliance to laws and regulations that govern enterprises in the Republic of the Philippines. One has to follow the processes and pay for them for the sake of building the nation and uplifting the lives of citizens (as to which citizens we don’t seem to have any business to know). As the saying goes, “you can’t fight city hall.”

Enterprise executives delegate much of government compliance work to their employees, such as their bookkeepers, their in-house paralegals, and their administrative staff. More often than not, compliance is not on an executive’s strategy list. It is not a competitive priority.

If at all, executives rather not spend time thinking about compliance, even so for bothersome local business permits at the start of a new year. Executives would rather be busy on more so-called important things such as sales, operations, and investments.

But whether they like it or not, compliance is a priority that executives should not outright ignore. Because if and when they do, they can pay a high price.

Examples:

A city mayor shut down several businesses after inspection showed they were operating without permits;
A factory paid a heavy fine after it failed to prove it was complying with local environmental laws (it didn’t have a required bicycle rack and poster that showed the picture of the mayor saying there’s no smoking allowed in the premises);
A town billed a trucking company thousands of pesos for delivery vehicles that the latter did not disclose when it renewed its mayor’s permit;
A city zoning office refused to give clearance to an enterprise that was operating in a residential area where zoning laws didn’t allow business to be conducted.

We can avoid the unnecessary costs from business permit renewals not only by following procedures but also by looking out for some savings.

For instance, some cities and towns offer discounts if an enterprise pays one full year’s worth of tax instead of remitting every three (3) months. An enterprise saves not only from the discount but also from having to send staff to pay every quarter. (Some cities negate this benefit when their agencies require the enterprises to renew certifications such as environmental & sanitary permits every quarter).

It’s sometimes worth it for an enterprise to examine what it pays for in a business permit. For example, a commercial building for years has been paying a private company a monthly fee to take away the trash. The building’s board of trustees realised later that it was paying thousands of pesos in garbage fees to the city. When the board brought it up to the city sanitation office, the latter instructed the city’s trash hauler to pick up the trash. The board then cancelled the contract with the private company and stopped spending for something already paid for with the city.

Enterprise executives always like to enter any new year with confidence and initiative to grow their businesses. Growth, however, entails meeting obligations such as renewing city permits at the start of every year. It’s a hassle and it costs a lot but enterprises need to do it else they will pay more in fines or risk being closed down.

Compliance is a must when it comes to laws and regulations but enterprises can avoid spending too much by examining what they’re charged for and availing of discounts when offered.

Compliance comes with a cost but we don’t have to spend more than we should.

About Overtimers Anonymous

Four (4) Guidelines for Available Transportation

Many small business enterprises don’t put too much thought into deliveries. For those who are into e-commerce and sell one or very few items via the Internet, the enterprise’s flow of work is typically receiving orders, preparing the items, and booking & delivering via a 3^rd party service (e.g., Grab, Lalamove).

Many enterprises have seen their businesses grow thanks to e-commerce. Some have seen their markets surge in terms of number of customers and deliveries.

E-commerce has been a godsend to enterprises reeling from the coronavirus pandemic of 2020. Some have not only survived but also made good money.

As some enterprises grew, they expanded their product lines and gained more customers. Some have seen demand for their products come with greater variability as they cater to customers with varying needs.

Nevertheless, most e-commerce enterprises have done well despite the growing demand. They have had no issue delivering versus demand (customer orders), thanks largely to sufficient capacity and availability of transport providers.

But as businesses expand even more, they can begin to encounter issues.

Transport availability and operating capacities show their limits when business multiplies. Enterprises realise e-commerce becomes more of a supply chain issue, than just an adoption of an app.

Some enterprises end up turning away customers when they lack the capability to deliver.

Turning away customers means turning away opportunities. When times are tough, enterprises can ill afford to turn away customers.

Which is why it’s wise to study and pinpoint where one can invest in capacity and allow the business to grow.

There are means to determine how to increase operating capacities. It’s another story when it comes to transportation availability. How does one procure more transportation? Should the enterprise buy more trucks or source more 3^rd party providers?

The following are some suggested guidelines:

A. Own Vehicles for Demand Surges

Most enterprises experience demand surges. Food shops sell more during the Yuletide season and not much afterward. Gift & flower shops sell a lot before and on Valentine’s Day. Convenience stores sell plenty of beverages and snack foods during long holiday weekends when most people stay home.

An enterprise can assess its transportation needs for demand surges. It might be a good idea for an enterprise to have its own transportation to pick up the slack when 3^rd party providers may not be available, such as during holidays when many drivers and riders go on leave or are fully booked.

B. Have Back-Up Drivers

Nothing is more frustrating than to have a delivery ready to go but no one to drive the vehicle to transport it.

Enterprises usually train several people to operate equipment such that if the operator is absent, another can take over.

The same should apply for delivery vehicles. Even if a shop relies almost 100% on 3^rd party riders to deliver, it not only may be a good idea to have one’s own vehicle on standby but also to have more than one employee who knows how to drive it. It’s not worth the risk of having no transport available to deliver all because there was no one to drive the vehicle that’s already there.

C. Get to Know the Riders

They’re not your employees but it may be nice to get to know the riders who pick up your products and deliver them to your customers.

Some riders come back again and again to deliver for an enterprise. One reason is because some of them live nearby so they’re readily available every day. It’s therefore nice to establish a professional rapport and even share contact information. Having a rider that you’d know and who’d you know will surely be there for your business every day adds a plus to ensured availability.

D. Take Advantage of 3^rd Party Promotions & Programs

Some 3^rd party services offer programs wherein client enterprises can not only avail discounts but also provide greater priority for package pick-ups and deliveries. The enterprise can estimate the packages it will ship daily and see how a 3^rd party’s offered program fits in terms of price and available transport.

Pandemic or no pandemic, enterprises are growing through e-commerce. They are seeing exponential growth and so far, many are coping well and making profits.

Growth at a point, however, reveals the limits of enterprises. When it comes to e-commerce, it usually shows not only in operations but especially in transportation.

It may be good for enterprises, therefore, to invest in one’s own transport especially for demand surges, have enough back-up drivers, and establish relationships with 3^rd party providers, like with the riders and/or availing programs & promotions 3^rd party services may offer.

Better to be ready to deliver than to be unable to.

About Overtimers Anonymous

Lessons Learned from E-Commerce

December 28, 2020. We ordered the food but couldn’t find the riders to deliver them.

Our family of cousins, uncles, and aunts couldn’t be together for New Year’s Eve. Reunions and parties were not allowed in lieu of ongoing restrictions brought on by the CoVID-19 pandemic. Instead, we ordered food from a food shop and was counting on available motorcycle riders to deliver them hot and fresh to our relatives on December 31, New Year’s Eve.

But starting December 23, we noticed available riders were getting fewer and fewer. By the 30^th of December, there were practically no riders available. I ended up driving to the food shop to get the food packs and deliver them to my cousins’ residences on New Year’s Eve.

We used to sit at a restaurant, order via a menu, wait as the restaurant’s kitchen prepared our meals, and enjoyed our food as waiters brought them to the table.

No more.

Because of the pandemic, we had to opt via the e-commerce way, which was sit at home, order via mobile phone or tablet, wait for the food shop (a former caterer) to confirm that our meals were prepared, and then book a 3^rd party rider service (motorcycle delivery courier) to bring our ordered food to our home.

The success of e-commerce relied on a seamless process of order taking, preparation, and delivery. Most of the time, there were no problems. As long as the internet stayed fast and continuous, the food shops had the capacities, and there was an abundance of available delivery riders, we made our orders and had gotten them when we wanted them.

The December 2020 holidays, however, reminded us that e-commerce did have its limits. And the first place it manifested itself was in the riders. We had no clue that riders will be rare a week before New Year’s Eve.

We always assume there’s enough capacity throughout the e-commerce process.

But we can never tell how many riders there’d be today or tomorrow.

Availability of riders is not only due to factors such as absenteeism and driver population but also very much in lockstep with the number of pending deliveries.

Since it was the holiday season, riders weren’t only tired and taking leave but pending deliveries were at their peak.

As food shops were managing through the high demand and the Internet remained steady and speedy for customers who ordered, the bottleneck in the e-commerce supply chain was in the available riders to deliver the orders.

There were several companies in the rider business, at least three (3) major ones in our city, Manila, to count on.

If one couldn’t take the orders, we would resort to another.

This worked most of the time but the holiday season of 2020 crimped the capacities of just about everyone.

In the end, I (and probably a significant number of families) just had to pick up our orders ourselves.

I don’t know if this is going to be the new normal of the food e-commerce business in which I’d have to pick up my own orders when there are no riders available. But there are lessons coming out that I’m learning.

Lesson #1: E-commerce is Different.

E-commerce does not follow the same process as what we are familiar with order fulfilments. For food shops, it’s click, prepare, and deliver. It’s no more the sit-in-restaurant, order by menu, cook by kitchen, and meals placed on a table. We pay online not in person. It’s a total change from the traditional face-to-face transaction.

Lesson #2: The Customer Experience Has Become Mutual

The e-commerce experience is a sea change from in-person interaction. With e-commerce, it’s about ordering products by ourselves and getting our order in the right quality and quantity by ourselves. The onus of ordering and the method for delivery has passed more to the customer from that of the enterprise. The experience has become more dependent on a mutually beneficial collaboration between customer and enterprise.

Lesson #3: Customers Can Be Choosier but Can’t Get All of What They Want

Customers can be choosier as e-commerce opens the door to a multitude of enterprises into the market. There are more food varieties, for instance, to choose from as restaurants, caterers, and want-to-be-chefs advertise themselves side-by-side on the worldwide web. At the same time, customers can’t dictate how orders would be fulfilled or delivered as it’s what-you-see-is-what-you-get when it comes to transacting online.

Lesson #4: Management Has to Learn to Change

It’s not just enterprise executives have to change how they manage their operations but also that they have to learn to manage in an actively-changing environment. No longer can enterprises expect a daily steady crowd of customers or expect to have the same capabilities in production and delivery. E-commerce allows more competition and innovation as it expands the marketplace and connects more enterprises and customers. Both enterprise owners and customers would need to be ready to adapt and change quickly as new products and services are introduced frequently.

Lesson #5: E-Commerce is Not IT; It’s Supply Chain Management

Last but not least, if we don’t already know, e-commerce is a supply chain thing. It’s not an information technology (IT) thing. A lot of entrepreneurs are spending a great deal of time on development and programming of applications but not much on engineering and managing operations. E-commerce is one-side IT (clicking on an app and paying online) and one-side physical work (product preparation & delivery logistics). It is therefore elementary that entrepreneurs learn how to optimally serve their products as much as to have user-friendly efficient web applications.

These are just some of the lessons. There probably will be more as e-commerce gets off the ground.

Meanwhile, I’ll just make sure my car is ready to pick up my family dinners in case no riders are available again.

About Overtimers Anonymous

Behold The PSI: A Basic Tool for Supply Chain Planning

The PSI or Production-Sales-Inventory is a basic spreadsheet template for supply chain planners.

It looks like this:

The PSI typically has three sections: production, sales, and inventories.

Production represents the in-flow of an item or what’s going into inventory. A basic example is finished goods input coming from a manufacturing operation’s output. We can also call it supply.

Sales is the out-flow of an item or what’s going out from inventory. An example is a shipment to a customer. We can also call it demand.

Inventory is the stock of an item on-hand in storage, such as how much of an item is in a warehouse.

The PSI makes visible production, shipments, and inventories over a range of time periods or what we can call time-buckets. It’s an outlook for planning. It’s up to the planner if he or she wants to use weeks, months, or even days for the time buckets. It’s also up to the planner how many time buckets to plan for. It doesn’t have to be just three as in the figure below. It can be any number. Some enterprises use six (6) buckets for a 6-month outlook; others go up to 12. It is the planner and his superiors that decide what periods to cover (e.g., weeks, months) and how many.

The PSI’s horizontal rows list the items or products. Each row shows the production, shipments, and inventory outlook for each item via the quantities in the respective columns or time buckets.

An item can be a product, material, or a supply or spare part. It is recommended to select an enterprise’s most important items to the PSI. By very important, that would mean those that executives often keep an eye on.

Working the PSI starts with a beginning inventory at the zero (ø) column of the inventory section.

The planner’s basic aim is to track the inventories from one time-bucket to the next. In the figure below, the planner notes that inventories at the end of week 1 becomes fewer as a result of sales in the same week.

When the planner, however, inputs the production and sales of week 2, the inventories end with zero (ø) on week 2.

To put what I just said in a formula:

and to put it to represent every time bucket:

where x is the time-bucket number.

The aim of the supply chain planner is to ensure there will always be available inventory for sales. Hence, supply chain planners typically prefer there’d be extra stock at every time bucket.

Supply chain planners typically set inventory targets for every time-bucket in line with their superiors’ policies and strategies. Sales for each time-bucket usually are based on forecasts and customer orders. From the inventory targets, the planner computes the production or sales needed and still have enough left to meet inventory targets.

Planners focus on either how much to sell or how much to produce to meet inventory targets.

If it’s production, planners would adapt the ending-inventory formula and make it look like this:

For a desired ending inventory of five (5) units of items A and B, the planner would set production numbers that would match sales but leave at least five units at every ensuing time-bucket.

When the enterprise wants to plan how much of an item to sell given inventory targets and ongoing production, the supply chain planners would adopt the following formula:

Which in the PSI would look like this:

…which looks just like the PSI for production. 😀

The PSI in the above diagrams shows the same numbers but illustrates a different approach. The planner either figures out how much to produce or calculates how much to sell for the ultimate purpose of having enough inventories at every time-bucket.

The insight here is you can tailor a PSI for your particular business.

For an enterprise that buys finished goods and directly sells to customers, for instance, a planner can adapt a PSI from a production-sales-inventory template to one that is purchases-deliveries-inventory:

An enterprise that imports items and converts them to finished goods, a PSI may look like the one below.

I found this especially useful in a metals manufacturer that was importing stainless steel coils that then were being cut up and converted into steel sheets, plates, tubes and pipes. As the stainless steel coils were the key components of the manufacturer with their weights in metric tons as the standard of measure, the PSI enabled the manufacturer’s managers to plan the quantities and timing of importing and converting expensive metals without having too much on floor for too long.

When enterprises use a common measure from key materials to finished product, the supply chain planner could expand the PSI to a 4-column spreadsheet consisting of purchases-production-sales-inventories:

A 4-column PSI would be particularly effective for enterprises with few but predominantly high-volume products such as those in commodities. And it opens up participation of practically the four (4) core disciplines of the supply chain: purchasing, production, logistics, and planning.

The PSI doesn’t require sophisticated software or hardware. One can use an ordinary spreadsheet program (e.g. Excel) or even do it by hand with or without a calculator (or abacus).

The PSI gives visibility to an enterprise’s supply and demand picture from present to future for key items, whether finished goods, materials, or parts.

The PSI’s limit is that the more items an enterprise has, the more tedious it becomes to plan and track. ERP systems coupled with up-and-coming artificial intelligence (AI) software can make up for that. Many enterprises, however, stick to simple spreadsheets to plan the items they carry.

Even with its simplicity and features, it’s hard to find an enterprise that actually uses a PSI. Many planners tend to devise their own templates, using spreadsheets mostly, despite the availability of integrated planning tools provided by expensive software.

Most of the planning spreadsheets I’ve seen are hard to understand or are very specialised. When I present the PSI template to planners, however, I’ve gotten very positive feedback with executives welcoming its application and visibility.

A PSI is a basic manifestation of what a supply chain planner does, which is to plan production or estimate the demand needed with a minimum amount of stock at every time period. It is a basic tool for supply chain planners. It’s simple to set up and provides a comprehensive canvas of what an enterprise’s supply and demand would look like in the present and future. It has its limitations in the complexity of an enterprise’s items and operations. But at the very least, it provides a foundation for planners to manage inventories and optimise supply chain productivity.

Find Ellery

Why Shifting from the Month-End Surge to Delivery by Demand is Common Sense

“We just have to live with it,” the General Manager replied.

The GM was responding to my comment that month-end surges in sales orders were causing inefficiencies in the company’s logistics operations.

I was presenting an operations assessment report to a company that distributed name-brand computer printers and accessories. One of the key observations from my report was that the majority of sales orders (more than 50% of monthly sales) came at the end of every month. Staff from sales, accounting, to logistics rushed deliveries to fulfil the orders and meet revenue targets. Sales personnel counted on the deliveries to achieve if not beat their quotas and benefit from incentives. Not attaining the targets and quotas was simply not acceptable.

The company is an exclusive distributor for a large name-brand supplier of printers. The supplier dictated the monthly sales targets. The supplier expected the company to meet those targets from month to month, no questions asked. Hence, the company’s General Manager said that month-end surges were something they could do nothing about. It was something they had to live with.

Many executives do not want to shift from the practice of month-end selling and delivery. “It’s not for discussion,” a consumer goods wholesale executive once told me when I said the monthly surge in deliveries was causing her firm’s transportation expenses to rise. The executive did not want to change a practice which has become so ingrained in the company’s culture.

Executives don’t dispute that month-end surges bring about inefficiencies and high costs throughout the supply chain. Surges cause stock run-outs as inventories deplete quicker than suppliers or manufacturing lines can replenish. The surges also drive up inventories of customers which result in increased product returns especially for products with limited shelf lives.

Logistics expenses increase as month-end surges strain storage and transport capacities. Some firms rent additional storage to stockpile products in anticipation of sales surges. Transport providers tend to sub-contract additional trucks to ensure there are enough vehicles to meet the demand. Both the additional storage and transport capacities result in higher delivered costs for products.

Month-end surges are sometimes coupled with periodic sales promotions and price changes which fuel more spikes in orders and delivery volumes. Surges thus cause a “bullwhip” effect in which the up-and-down delivery volumes and resulting peaks and valleys in inventories amplify speculations throughout the supply chain.

Executives are reluctant to move away from month-end surges because they fear lower sales will result. They are afraid shifting from month-end sales would cause a decrease in revenue which they can ill afford in organizations that especially measure performance by monthly targets.

Moving from month-end sales to just deliveries driven by demand is common-sense logical. It’s just not accepted given the anxiety it would cause among executives. In a demand-driven supply chain, one delivers only what and when it is needed. The fear is the demand and the subsequent sales might not be up to par with immediate targets.

A downturn in sales would indeed be expected as customers would exhaust overstocked inventories from any previous surge. In succeeding months, demand would pick up and sales would average closer to what would have been with month-end surges. But executives would have to have faith that that will happen and executives don’t like to count on faith.

Stakeholders in many companies measure executives via short-term targets. Stakeholders want to see continuous growth in their company’s finances especially if they expect dividends and bonuses every year. Creditors, such as banks who provide loans, also want to see continuous short-term gains to assure themselves that they will be paid the interest and principal of what they lent.

The month-end surge is a manifestation of short-term thinking. Shifting from the month-end surge requires changing one’s mindset from short-term to long-term management.

When delivering only what is needed and when it is needed, all functions of the organization have to work closely together. Sales needs to forecast future demand from the grass-roots level or from the end-user, whether that be the customer or the customer’s customers. Marketing would support sales where it sees demand is lacking or where there is potential. The supply chain from logistics, manufacturing, and procurement would have to build in a capable system and structure to anticipate the demand. Sales, Marketing, and the Supply Chain, most of all, would need to communicate and come out with a consensus of action every time they review actual and forecasted demand.

Attaining higher sales is not a product of individual sales persons or a result of incentives for just one group. It is the product of teamwork. Any challenge in fulfilling demand and achieving targets can be met if the organization works as a team.

And isn’t that what organizations are supposed to be doing in the first place?

About Overtimers Anonymous

Originally published in LinkedIn May 06, 2019

A Letter to the IE: More than Ever, We Need to Lead the World to Productivity

Dear Industrial Engineer*

The year 2020 ended without a happy ending. The SARS-CoV-2 virus had not gone away. It continues to be a global threat going into 2021.

Political and enterprise leaders have done all they can to defeat the virus.

There was hope.

Thanks to record-breaking world-class collaboration efforts, vaccines have become realities and are on their way to inoculate millions. We are grateful to the scientists, engineers, health-care professionals, executives, and numerous support personnel who have done so much and continue to do so.

But there was frustration.

The pandemic, however, had spread to every continent, including remote Antarctica. It continues to infect and force governments to restrict movement and distance.

We have become more lonesome and insecure. Some of us had pushed back but to no avail. The virus retaliates without discrimination. More had gone sick. More tragically had passed away.

Throughout the war against CoVID-19, we industrial engineers have been conspicuously left out. We don’t really know if it’s because leaders are ignorant of what we can offer or if it’s because many executives think they have enough expertise. Whatever the reason, we could have done more.

Most of us industrial engineers are hard at work in different careers and jobs around the world. Many of us have made big differences to the enterprises and organisations where we are employed or engaged.

But for whatever we have done, whatever we continue to do, it hasn’t been enough.

Long before the pandemic, productivity growth has been on a decline. The gap in productivity year-to-year between advanced economies and developing nations has widened. Disruptions ranging from natural disasters to socio-political upheavals had taken a toll on enterprises. Growth has been curtailed. Many enterprises, notably small businesses, have lost ground in competitiveness.

The 2020 pandemic hit global productivity when it was already down. It’s the culmination of its decline. And we have felt the impact like a hammer driving down on the nail.

We need to do better. We need to make our world more productive.

Productivity is a misunderstood measure. Unlike financials like profit, sales, costs, and cash-flow, it is not easy to describe productivity in one metric. Economists try to do that by defining productivity as the output of a person; but doing so makes it incomplete and inaccurate.

Productivity is delivery versus consumption; how much one delivers correctly to customers against how much resources and time are consumed in doing so. Productivity requires direction. What are we delivering, how many or how much, how close to what customers want, and when? What are we going to use to make and deliver, how long it should take, how it will be conveyed, and with how much support? It’s not efficiency which measures how fast we’re going; it’s more like velocity which measures how much nearer we are to our objectives given the resources we spent.

Productivity drives value. It connects to the priorities of the enterprise. It’s what gives us industrial engineers purpose because we’re in the best position to understand it and improve on it. Productivity is our watchword.

In an age where supply chains and operations are in the midst of crisis,

we find ourselves in an unprecedented position to make a significant difference.

I don’t suggest a political campaign or a public relations drive. We just need to demonstrate. We don’t need to debate our proficiencies; we have the skills. We know what we have and what we can contribute.

How we can show what we got can be summarised in four approaches:

First, Point Out Problems and Volunteer to Fix Them

We shouldn’t wait to be assigned. We should point about problems, make visible opportunities, and offer ideas and solutions. In short, we should be proactive, i.e., act on our own without waiting for someone to tell us about problems. We know more than a lot of people when there’s a problem.

Second, Drive the PDCA Cycle

We should drive the Plan-Do-Check-Act (PDCA) cycle, the basic process of carrying out solutions. What many people don’t realise is that it’s a cycle, not a model for a one-time project. We don’t stop after implementing a solution; we seek opportunity for something even better. It’s why we also call it continuous improvement. PDCA is a wheel that we keep spinning to keep productivity moving and growing.

Third, Stand Up and Be Heard on Strategy

Keeping the PDCA cycle spinning requires leadership. We are those leaders. Our superiors are our audience. Feedback, justification, and assertion are therefore essential. We should have a say on strategy because productivity depends on direction. It doesn’t just ensure the PDCA cycle keeps spinning but that we spin the right cycles; we address the problems that are most important.

Fourth, Promote Productivity

As industrial engineers, we promote productivity. No one else will. Not the economists, not the post-graduate business administration executive, not other engineers. It’s us because our education and experience have us focused on productivity more than anyone else.

Productivity has become a forgotten term in the decade of 2010 to 2020. Its growth has fallen by the wayside. It is on us to remind everyone about it, show how important it is to the viabilities of enterprises and competitiveness of organisations, and reveal its potential in the fight against disruptions, especially versus seemingly insurmountable ones like the pandemic.

The anchor of our IE vocation is productivity. It’s our unwavering principle we base our accomplishments on. It is the flag we wave amid disruptions and difficulties.

Let’s get going.

About Overtimers Anonymous

*I had suggested we change our titles to supply chain engineers. 😊

Acknowledgment: