Ellery's Essays

Where are the Supply Chain Experts?

Supply chain managers are noticeably invisible amid the COVID-19 crisis.

There have been no supply chain executives standing beside national leaders as they made speeches and announcements.

There have been rarely any interviews with supply chain experts about how to deal with shortages of food and difficulties in transportation. If there were, much of whatever was said had been largely ignored.

A lot of people have viewed the coronavirus disease, COVID-19, as a medical problem requiring a medical solution, i.e., hospitalization, quarantine, finding a cure. As much as it is a medical issue, it is more of a problem that needs a social solution. Such a solution needs four (4) things:

convincing everyone to re-align their lifestyles to that of good hygiene, sanitation, avoidance of unnecessary travel & physical contact, and healthy living;
rapid segregation and isolation of suspected infected individuals;
boosting capacities of facilities and mobilization of medical personnel;
synchronising supply chains to stockpile and deliver inventories of essential items such as medical equipment, parts, supplies, food, water, fuel, and other essential goods.

Many countries did the first two, (a) & (b), many are scrambling with difficulty to do (c), and as for (d), it has been a nightmare of shortages and desperation.

Supply chains are overwhelmed amid the COVID-19 pandemic. Business firms and organisations are fending for themselves. There is no united front, no coalitions formed. There is no high-profile leadership to rally the logistics and manufacturing industries. Countries aren’t cooperating with each other; how could one therefore expect enterprises to do the same?

Despite the strides in bringing supply chain talent to corporate board rooms, many executives both in business and government have not engaged the supply chain professionals in the fight versus COVID-19. Instead, the supply chain experts are relegated to the side-lines, sweating away somewhere untying bottlenecks and moving merchandise as fast as they can to where they are needed the most.

Many enterprises only see supply chains as networks working within the boundaries of their respective businesses and not as continuous lines of flow of materials and merchandise that cross from one enterprise to another as they accumulate in value from one point to the next: from mines & farms, to factories & warehouses, to stores & e-commerce cross-docks, and finally to users & consumers.

As much as executives may justify confining supply chain management within imaginary boundaries as a means to foster their respective enterprises’ competitive advantages, there is great potential in designing supply chain systems and networks that synchronise the streams of products, information, and capital from the sources to customer’s shelves.

This is made more apparent with supply chains becoming more vulnerable to adversities such as COVID-19.

Adversities are those that disrupt the routines and flows of operations, particularly supply chains. Adversities come in different forms, degrees, shapes, and sizes. They are never the same from one to the next (similar, maybe, like with typhoons but different in that typhoons never follow the exact same path with the exact same intensity of wind & rain).

Because supply chains have stretched themselves to the four corners of the world, they have become more susceptible to varying adversities. Global supply chains are spread thin; their links ever more sensitive to disruption and change.

As supply chains have become global, supply chain management, however, has remained local. As mentioned, enterprise owners are reluctant to collaborate and link with vendors and customers for fear of compromising their competitive positions. Hence, there’s no overall organized effort to synchronize because there’s no strategy or structure for such in the first place.

The COVID-19 pandemic has shown that supply chains can’t function productively without synchronisation. And it has also shown that societies suffer when supply chains become adversely unproductive.

How do we synchronise supply chains to make them if not keep them productive?

The answer is not in management. It’s in engineering.

We Need a Playbook and It’s the Last Thing We Need

Many enterprises and countries around the world have playbooks to deal with pandemics such as COVID-19. These range from ISO standards and those based on the United States’ Occupational Safety & Health Administration (OSHA), Center of Disease Control & Prevention, and even the US Army Medical Research Institute of Infectious Diseases (USARMIID).

But as much as present-day playbooks may have protocols for pandemics, they don’t have any for supply chains. Enterprises and governments may have response plans such as quarantines and allocations of resources for medical facilities & personnel; there wouldn’t be any, however, for cross-border supply chains.

Why is that? Because global supply chains have become prominent only in recent years. Governments and many enterprises still manage supply chains as if they exist only within their borders and factories.

Global supply chain relationships are mostly in the form of contracts with vendors and 3^rd party providers. Most of the links, from the sources, to the transportation, to the storage & deliveries are siloed, that is, they’re autonomous and overseen separately. Collaborations and interactions are mostly done between individual representatives such as between sales agents and purchasing personnel.

With no real connection, there is no protocol, and therefore no synchronisation that can overcome widespread disruptions from adversities such as what has happened from COVID-19. Every link on the supply chain is actually vulnerable to whatever form of adversity, more so a global pandemic.

If enterprises can synchronise (some people call it integrate) their supply chains, then there would be a united front versus any adversities. Enterprises would be able to adapt together. Goods would keep moving. People will get their products. Economies would remain stable.

Playbook protocols and procedures, however, are the last thing supply chains need. Synchronising supply chains requires several things first:

Management commitment;
Establishing comprehensive policies and strategies;
Setting objectives and performance measures;
Designing structures and systems to support the strategy;

Many enterprises have embraced (1), (2), and (3). Many have not been fully successful with (4). This is because many enterprises have trouble finding the talent to do (4).

Doing (4) is an engineering effort. It requires talent that will be sought for because before enterprises can sync their supply chains, they’ll need to engineer their networks to establish the links.

Only then can enterprises rewrite their playbooks and prepare for the next pandemic and whatever adversity that comes their way.

Why Weren’t We Ready for COVID-19 and How Should We Have Been?

The COVID-19 disease is the latest adversity to hit our world and it’s the worst yet. It also should be the last in how we deal with adversity because how we’ve been dealing with adversity has just been outright awful.

COVID-19 started late December 2019 in China and had spread around the world three (3) months later. People got sick, nations closed borders, supply chains stopped moving, and businesses slowed if not closed shut.

Many organisations had no playbook, protocol. or contingency plan, to deal with COVID-19. Many measures taken were akin to knee-jerk reactions. We just weren’t ready. And we should have been.

Adversities are part and parcel of enterprises and society. We encounter them all the time. From natural disasters to daily traffic, adversities come in all scales, shapes and sizes. And they always differ one day to the next.

Organisations develop risk management strategies to combat adversities. Risk management just has not been effective, however, as many organisations don’t treat risks as high-profile priorities, that is, risks are considered important only when they turn into threats or problems.

For instance, a company would invest in fire safety equipment and delegate a safety officer to monitor compliance to prevent fires. But executives would prioritize reports and presentations on issues such as sales, costs, and customer service. Managers wouldn’t ask about fire safety reports unless there was a fire.

Risk management also has traditionally been limited in scope such as to security, safety, and secrecy. It wouldn’t include adversities such as unexpected price increases in commodities, sudden imposition of tariffs, the surprise inability to collect from a customer, and diseases—these would be the responsibilities of respectively different departments and they wouldn’t even be called risks.

The COVID-19 pandemic offers us the lesson that what we’ve been doing in terms of adversity mitigation has simply just not been enough. We need to change how we anticipate and mitigate adversity. We should start by saying that it is not risk management but adversity management, that is, we treat adversity with wider ranging scope and priority.

It requires a change in mindset. Adversity is not risk. It’s a whole different category that encompasses risk. We need to realize we have become more vulnerable to it. How we’ve dealt with it in the past and with COVID-19 hasn’t been the right way; we need to formulate a new right way.

If we didn’t get sick from COVID-19, we should at least be sick and tired of how we responded to it and to all the adversities beforehand. We need a new approach, because not only can we will be able to save lives, we will be able to save our livelihoods.

Regular Customers Are Our Geese That Lay Our Golden Eggs

My tenant asked that I don’t increase his rent this year and at the same time requested a month’s delay in paying it. He’s been having problems with his business so if I would please consider.

At first, I didn’t like to agree. Finally, I did. My tenant had been a regular on-time payor and had agreed to rent escalations in the past. I decided to concede.

There is that famous Aesop’s fable about the Goose & the Golden Egg (http://read.gov/aesop/091.html). A man owned a goose that laid a golden egg every day. One day the man killed the goose and cut it open in the hope he’d get all the eggs. There was none. The man ended up with no more golden eggs.

Regular customers are like the geese that lay golden eggs. They buy regularly and pay regularly. The money we earn from them often makes up the majority of our revenues.

Our customers experience good and bad times, just like everyone else. There would be days they’d buy more and there would be days they’d buy less. We would be happy if they buy more and we would be concerned if they buy less.

Enterprises sometimes offer discounts, promotions, or product upgrades to get regular customers to buy more and contribute to sales growth.

But sometimes, when times may be not that good, for some adverse reason or another, regular customers just won’t be buying. And there’s not much enterprises can do about it.

Some enterprises seek new customers to make up for any revenue shortfall. They invest in new store branches at new locations or expand product lines to different markets. But if resources are limited because times are bad, some enterprises would resort to cost cutting.

Cutting costs, however, doesn’t mean cutting our regular customers off. Unfortunately, some enterprises inadvertently do when they cut costs. Some enterprises cut staff that communicate with regular customers or cut logistics budgets that result in poorer delivery services. Enterprises end up losing the regular customers who already have it hard and are getting it harder because the service has become worse.

When enterprises lose regular customers, they lose their geese that lay their golden eggs. It’s one thing to have fewer eggs; it’s another when there are no more eggs.

We may have the best of intentions to begin with but as the saying goes: the road to hell (in this case business failure) is paved with good intentions.

Dealing With Peer Pressure

A former high school classmate invited me to a Sunday get-together with other alumni. When I replied I may have other plans with my family, he begged me to cancel them. He urged I attend for the sake of our high school class. My family would understand.

This is peer pressure. It’s what happens when friends, acquaintances, co-workers, or who we call “peers” insist on one’s participation or agreement for a group event or activity.

Never mind what you feel. The peers seek simply your attendance and compliance. No is not an acceptable answer. Debate is out of the question. One just has to say yes, for the good of the peers.

Peer pressure disables individual proactivity or the person’s freedom to choose. It favours the peers’ priorities over your own. And in my case, it would stifle my Sunday plans.

How we respond to peer pressure reveals how strong we endear to our values. Sunday is a day I value with family. What I reply to my classmate would test that value.

Challenging peer pressure is challenging the peer, not the pressure. Clarify the peer’s purpose. Listen and empathize but don’t sympathize—peers pursue sympathy as a strategy. Insist to discuss even if the peer prefers not to and seek a win-win arrangement if possible.

Unfortunately, it often doesn’t get any further than clarifying. The peers would just assert. No flexibility. No negotiation. It leads to one making a decision. Yes or No. And if it’s a No, to sticking to it, despite the pressure. Despite even veiled threats or the warning of irreparable damage due to your intransigence.

I ended up saying No because I was sick.

How NOT to Manage a Crisis

https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.philstar.com%2Fnation%2F2020%2F02%2F03%2F1990083%2Fanonas-katipunan-and-santolan-lrt-2-stations-be-repaired-end-june-2020&psig=AOvVaw2TLf-WxdyNO0dgxbRbfR-9&ust=1583878713388000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCPjr2ce2jugCFQAAAAAdAAAAABAD

My manager apologized for coming in late for the meeting. She came from her home at Marikina but got stuck in traffic because she couldn’t use the LRT-2 commuter train. The LRT-2 station nearest to her home has been closed since October when two (2) rectifier transformers tripped and caused a fire. (https://www.linkedin.com/pulse/four-4-starting-points-getting-reliability-you-want-ellery-samuel-lim/)

The Light Rail Transit Authority (LRTA) proudly testified in a congressional hearing that the Marikina station and two others would reopen in June 2020, about a week ahead of schedule (https://newsinfo.inquirer.net/1233945/shuttered-lrt-2-stations-to-reopen-by-june). They assured the Philippine Congress that the bidding to purchase the replacement transformers has finished and they just needed to hire a full-time consultant specialist. The LRTA notified Congress, however, that trains may run below par at the onset.

The closing of three (3) LRT train stations constituted a crisis for commuters. But after more than four (4) months, there is yet no purchase order for the transformers. Worse, the LRTA warned that trains may run at limited speed and schedule when the stations reopen.

This is a good example of how NOT to manage a crisis.

No sense of urgency. The LRTA proudly declares they’re done with the bidding after FOUR months. How long does it take to find the best vendor to buy the transformers from especially in a time of crisis? Maybe four (4) weeks, but not four (4) months!

No competent person to handle the technical ramifications. Saying that a full-time consultant specialist is needed for the installation of new transformers implies that the LRT-2 has no qualified technical people to begin with. How can a commuter railway system survive without technically competent people to oversee operations? How does one select a vendor without technically competent people evaluating the bids?

And how does one assure operational reliability for the long-term?

With no permanently assigned and qualified technical people and with a management approach that shows no rush to restore service, the LRT-2 commuter train is destined to be unreliable, unproductive, and expensive, all of which commuters and taxpayers would end up shouldering the burdens.

Making Better Decisions in an Opportune and Adverse World

Have you had those times when you felt you made the wrong decision for your enterprise?

For myself, countless times. If only I did this, if only I did that. I would have been richer. I would have had a better life. I’d have been happier. Etcetera, etcetera.

Making wrong decisions is a part of life but how does one know a decision is wrong in the first place? How does one make a right decision?

Decisions reflect our desired outcomes, our visions for the future. We base our decisions on objectives and overall strategies.

Decisions we make are manifest in the plans we implement and the policies we set. Decisions illustrate how we deal with so much or so little information. Decisions determine how effective we hurdle day-to-day obstacles and how we turn unexpected opportunities into beneficial realities.

We would always want to know if our decisions are on track with our goals. How do we do that? The following are my two-cents’ worth of tips:

It starts with a roadmap.

A ship navigates based on what it sees ahead and the maps it has. It’s the same with enterprises. We plan our routes based on our destinations. An enterprise needs a roadmap to know how it will reach a desired outcome.

Enterprise roadmaps come in the form of objectives and supporting action plans. Every action plan is a step towards a pre-determined objective. Action plans need to be specific, measurable, attainable, realistic, time-bound, and challenging (achieving an objective often is)[1]. Action plans must be relevant to the roadmap otherwise it is a useless exercise, a wasted diversion for the enterprise.

2. Establish visibility from all angles and observe.

Sea-going ships utilise technologies such as over-the-horizon radar and satellite weather imagery to see what’s ahead of them, behind them, beside them, and what’s coming. (Also, below them if you include sonar). Ship crews also monitor the insides of their vessels to know how well things are operating.

Ship crews, however, don’t just rely on data. They observe. Observe means to detect for the sake of response. Because when a ship is at sea, it needs to be responsive to whatever unexpected event may happen.

Enterprises in the same way need to know what’s happening from all sides, that is, the market, their vendors, and their operations. And they need to observe and respond.

State-of-the-art technologies such as artificial intelligence have brought on ideas for automated decision-making. There may come at a time when many day-to-day decisions will be left to high-tech machinery. Accountability, however, will still be on the shoulders of the enterprise’s ownership. So, whatever the future may bring, enterprises need to ensure they have the protocols to observe for the responses they would decide to do.

3. Organise the Observations.

Enterprises should organise what they observe to guide their owners in the decisions they make.

Organising observations means putting them in order for quick understanding and response. Key data need to be identified. Records kept. Summaries made. Reports presented. Charts and visual aids would be helpful. And all should be updated frequently.

An enterprise knows it is organising observations effectively when it sees its owners using them every day and basing plans on them. Enterprises should winnow (i.e. optimize not filter) data to their most useful state such that owners can make responsive decisions.

4. Run weekly planning sessions but if things get boring, run simulations.

Some of us hate to exercise. But most of us do it anyway because we know it’s good for us.

Enterprises should also exercise. Armed force militaries do it to prepare for battles, so shouldn’t enterprises do it too?

Many enterprises already exercise via weekly crisis executive planning sessions. I say crisis, because if an enterprise’s executives are meeting once a week, there probably is at least one crisis after another that’s happening. (Some enterprises conduct once-a-quarter planning sessions even if there are pressing problems; it is in these enterprises that executives are constantly in stress).

Planning sessions, however stressful they may be, hone the skills of executive managers. Something like when a blacksmith heats iron bars and immediately quenches them with cold water. The up and down stresses of the sessions condition managers for future challenges.

But as enterprises grow and managers get more skilful, the sessions get boring and fewer. It is at this point that executives should consider simulations in the place of infrequent real-life crises.

Simulations are like mini-workshops for enterprise executives to develop their decision-making skills. The traditional option would be to attend seminars and workshops. But doing workshops and seminars would like be jogging a few days a year. One should exercise regularly to make a difference.

Simulations bring forth what-if cases of opportunity and adversity for executives and managers to work through. The best types of simulations are those that would entail issues that executives would least expect (like a global health virus from China). Simulations should target executives’ responsiveness towards opportunities and adversities.

5. Record the experiences, not only yours or mine but everyone’s.

One must record everything from minutes to notes to action plans to performance metrics. Doesn’t hurt to have archives especially when people change within organisations. A datum is like a book in a library—an enterprise may never need one that often but when the need does arise, it’s nice if one is there ready to be referred to. It’s important of course to organise the records (see #3 above).

It has come to a point where we need to assure ourselves that we are making the right decisions in a world where things change quickly, either adversely or opportunely.

Making the right decisions starts with a roadmap that’s made up of deliberate action plans. We’d need to establish visibility for what’s ahead and organise our information into content that matters. And we’d need to sharpen our skills through multi-functional teamwork in crises or via simulated exercises. We’d need to record all of what we do because it would be helpful to have something to refer to for future challenges.

Being decisive includes being secure in deciding correctly. Opportunity knocks, adversity strikes. It pays to be prepared.

[1]https://overtimersanonymous.home.blog/2020/02/03/what-are-action-plans-how-can-they-help-and-what-are-we-supposed-to-do-to-make-them-work/

Why Enterprises Lose Customers to Piracy and The Simple Strategy to Stop It

Just the other day, I tried to download a free episode of a new science fiction television series that streaming services were offering on their websites. Instead, I was greeted with a message:

“Isn’t Available In The Country or Region You’re Currently In.”

It turned out that the free episode is only available in selected countries. It wasn’t available where I lived so I couldn’t download. There is no way for me to watch the free episode of the new series, unless I get it from a vendor selling pirated videos.

Pirated videos are illegal. Downloading movies, TV shows, and computer applications without permission from their owners are against the law and penalties await those who illicitly sell or possess such stuff or what is otherwise called intellectual properties.

Intellectual property piracy, however, thrives because:

They are readily available especially when the original stuff isn’t;
They are much cheaper, as in a downloaded movie can cost less than a US dollar.

Countries have cracked down on piracy to the extent that courts have penalized culprits and confiscated their assets. Legitimate online streaming services offer themselves as alternatives for pirated media by providing access to original content at reasonable subscription prices. Spotify and Netflix, for instance, have become very popular platforms for offering a wide expanse of music and video content at quite attractive subscription rates.

Yet, the underground economy of intellectual property piracy flourishes. The piracy business operates openly in shopping centres and in the internet. People looking for newly released movies, new television episodes, and the latest software applications can find them easily from vendors, either in-person or virtual.

Intellectual property pirates download illegal content via under-the-radar websites with the help of boosted internet connectivity. Despite the low prices, the income from selling to a large market of buyers comes out profitably for pirates. Downloading is fast such that interested buyers can get the newest content in real-time. If someone wants a video, a song, or a software app that’s not available from legitimate sellers at his or her location, he or she can get it, fast and cheap from pirates.

A similar scenario applies for popular brands of products. Newly released name-brand cosmetics for example are bought from their home countries and then sold by independent sellers in places where licensed or exclusive dealers have yet to set up shop.

Independent but unauthorized sellers bring in new models of laptop computers, tablets, and cell-phones while licensed dealers lose revenue opportunities as they wait for their allocations of new models to arrive from the original manufacturers.

When there’s demand for new products, it would be common sense for the creators to distribute them as fast as possible to waiting consumers. Unfortunately, they do not. They invest in only so much capacity that doesn’t immediately cover all locations. They brush off waiting buyers and threaten pirates with legal action if their creations are copied illegally.

But many buyers are willing to take the risk to buy illegally pirated products. Sprightly sellers would ignore the possibility of prosecution. They’d ship in what they can from source countries where new products are available and sell them to where buyers would be eager and able to pay.

Independent sellers would sell at higher prices if demand is strong but many would resort to razor thin margins that would make them comparable to the original prices of the creators. For example, sellers have been found selling Apple products at margins almost unnoticeable in comparison to those from authorized dealers.

Legitimate streaming services have almost no additional cost to distribute their content world-wide at a moment’s notice. It is curious that they would still withhold distribution to countries with sure buyers that would opt for originals versus having to buy from pirates.

The way to beat intellectual property piracy is to simply and swiftly distribute to where the demand is. The price of not doing so is the loss of market share to underground competitors who will pick up the slack and profit in their absence. People will buy from pirates if the content is available and they want it now.

Consumers will not care about how much creators invest in their content and the ramifications of illegally procuring pirated products. They also won’t wait for creators to sell original content if the pirated products are on hand and almost equivalent in quality.

Piracy is an option when original products aren’t available and the demand is there. The easy way to beat piracy is for enterprises to sell their wares everywhere where there would be certain demand. Warnings about criminal prosecution for piracy can instil fear but it won’t be scary enough for impatient customers to opt for illegally channelled products.

The technology is there. The networks are there. The available capabilities are there. Enterprises just have to plan and direct their products to their markets, make their money, and beat the pirates in their own game.

How to Avoid the Aggravation of Un-Available Items

If there’s one thing that ruins the productivity of your day, it’s when a needed item isn’t available.

A wonderfully designed business may have skilled workers, state-of-the-art machinery, and a talented management team. But the business yields nothing if the needed items to run it aren’t there.

Managers deal with challenges such as absent workers, power failures, and machine breakdowns. In most cases, they find ways to overcome these challenges and thereby avert costly problems.

But when it comes to the unavailability of an item, there are hardly any outright remedies. Once one finds out that an item, whether it be a raw material, a packaging box, a spare part, or even a light bulb that’s critical to a business operation, isn’t there, it will inevitably lead to downtime.

No one likes downtime. When downtime occurs, the impact is irreversible. Output is lost; productivity suffers; costs go up; deadlines are not met; customers don’t get their orders; the bosses complain.

The best way to deal with downtime is to avoid it. Make sure it doesn’t happen. And the first best starting point is to ensure that one has all the items, components, and materials it needs and when it needs them.

So, how do we do that?

Establish a policy; a realistic and doable policy

It’s one thing to have a policy to guide managers in buying and stocking items. It’s another to have a policy that’s realistic and doable. Many enterprises routinely plan materials, components, and parts based on unrealistic policies. These enterprises end up experiencing expensive downtimes.

For example, a buying clerk orders 1,000 litres of fuel because there’s 500 litres in inventory and the policy is to stock no more than 1,500 litres. The business operation, however, require 2,000 litres of fuel a week. Because there’s only a maximum of 1,500 litres on stock at any one time, the enterprise runs the risk of running out of fuel and shutting down.

Obviously, the policy of having only at most 1,500 litres of fuel is unrealistic. The policy should perhaps consider a minimum purchase quantity of 2,000 litres and perhaps a buffer stock of at least 500 litres, to cover for possible delivery delays.

A viable policy should be in tune with the needs of the enterprise and doable in terms of capabilities from the source (i.e. vendor). It sounds like common sense (and it is) but many enterprises, believe it or not, follow outdated policies that are based on past practices that don’t consider current needs and capabilities. These enterprises experience expensive downtimes, as a result.

“Plan for Every Part”

There should be a policy for every item, part, component, and material involved in the operation. The policies established should be realistically and respectively applicable for every item. One may have a sweeping policy that covers many items although experience has shown that doing that results in inefficiencies and undesirable outcomes (i.e. downtimes). This is simply because a sweeping policy seldom covers for each item’s uniqueness.

The best approach would be to “plan for every part” which Chris Harris best describes in his essay (https://www.lean.org/Downloads/The_Plan_for_Every_Part.doc). Mr. Harris argues that operations management should catalogue every item’s identity and background information. This not only includes its specifications but its supply information as well, that is, its sources (vendors), purchase information (e.g. vendor’s terms & conditions), shelf life, storage requirements (e.g. requires refrigeration), and handling (e.g. fragility).

What an item’s characteristics are, how the vendor supplies it, and how it should be stored and handled, would guide managers in the buying and stocking of every item of the operation.

Get Consensus

Managers are accountable for the delivery of products and services. Purchasers are accountable for the cost of items and the reliabilities of vendors in delivering items to the quantities and qualities specified. Finance is accountable for the management of an enterprise’s wealth. The accountabilities of all three overlap when it comes to inventories.

Purchasing managers would prefer to buy items in bulk at discounted prices, especially if these items are imported from other countries.

Finance managers would prefer that inventories be kept to a minimum to avoid tied up cash in working capital.

Operations managers would want to have enough inventories to avoid run-outs that would result in downtimes.

All three (3) disciplines need to reconcile their preferences to arrive at a consensus of policies for the items needed for an enterprise’s operations. Balancing the preferences to arrive at a consensus is key as an enterprise would no less want a business that saves on cost, have lower working capital, and provide competitive customer service.

If one can’t collaborate, at least communicate

Many enterprises don’t want to collaborate with their suppliers. They’d rather have an arms-length relationship that doesn’t require having to share to much information or end up at a negotiating disadvantage. Enterprise executives simply don’t want to put too much trust in vendors (or in anyone for that matter).

Some enterprises collaborate closely with suppliers so much so that the latter have exclusive contracts. But that’s not a popular thing in industries as enterprises prefer to have multiple suppliers for the items they buy such that there’s always the option to sourcing from someone else.

Not opting for collaboration does not mean enterprises shouldn’t communicate with their vendors especially when it comes to the day-to-day supply of key materials, components, or parts.

When enterprises order from vendors, they order based on projections of output. And more often than not, these projections change from time to time.

On the other hand, external factors such as commodity price increases, foreign exchange fluctuations, and events in global trade are constantly influencing the supply of any item. Talking about these things with suppliers may help in anticipating upcoming challenges.

There is no downside in dialogue. It’s always to everyone’s benefit to have two-way communication on issues that would affect each party’s business. And it always helps if each party empathizes with the interests of the other. There is no harm in talking. Information sharing is never a waste of time. Customers and vendors can still be careful when it comes to disclosing confidential data. One doesn’t need to share too much to have a constructive relationship.

No enterprise executive favours a business shutdown because something wasn’t available. Downtime is never an option when there are deadlines and targets to be met. Managers should check the policies of all items and plan for every one if there isn’t one already. Operations, purchasing, and finance managers should strive for consensus in policies to avoid conflict with the overall enterprise’s strategy. Enterprises should also have open lines of communication with suppliers to anticipate issues.

It sounds like hard work to make sure one has every item available when needed. It is hard work; nothing is ever that easy. But it’s better than the stress and aggravation one gets when there’s no stock of that one essential part, component, or material one needs for the business.

Quality: It’s About Meeting Customer Standards, Not Yours

For the nth time, one of the elevators broke down. The three (3) elevators at the office building had just been rehabilitated. But a few weeks after the elevator contractor’s technicians packed up their tools and left, the elevators had begun to show problems.

The elevator contractor who did the rehab arrived every time to fix the elevators. He did so again for this latest one. But something had to be done. The breakdowns were too frequent. Worse, a passenger got trapped in this latest incident. The lady had to wait more than an hour to be rescued. This was getting out of hand.

A day before, the building administrator reported that the contractor pointed to worn out parts in the elevators which were causing the breakdowns. Wait a minute, I said, the elevators were just rehabilitated. Weren’t all parts replaced?

It turns out, no, not all were replaced. The elevator contractor replaced only parts that they assessed were in need to be changed. They didn’t change all of them. Why, I asked, didn’t they change all the parts? Was that not the point of the rehabilitation? The Board of Trustees of the office building, I said, had resolved to have the elevators overhauled such that they would come out like brand new. The Board, I added, also resolved to support the rehabilitation with a hefty budget. Quality would trump cost. We wanted elevators that would be good as new.

The administrator replied that the elevator contractor felt that some of the parts were still in good condition such that they didn’t need replacement. The parts that had been breaking down in the recent days were some of those un-replaced parts.

The elevator contractor, despite the mandate of his customer to rehabilitate the elevators to be like brand new, had his own strategy—one which was based on his standards, and not of his customer’s.

To add insult to injury, the elevator contractor notified the building administrator that he would bill the replacement of the parts since they were not covered by the warranty of the rehabilitation. Unbelievable!

This is a classic example of how we misunderstand quality.

Many of us would say we know what quality is and we would say it’s about:

Meeting customer specifications and service requirements;
Exceeding expectations;
Selling a product that doesn’t have defects;
Receiving no complaints from customers;
Marketing products that are superior versus the competition;
Selling products and services that work and are affordable;
Making products that comply with stringent international standards and qualify for certificates of excellence.

In short, we’d say quality is about having a very good product that stands out.

But where do we base the standards of quality on?

Do we base it on our own standards or on the standards of our customers?

I have seen executives argue with customers about the quality of products and services. A car buyer would argue with an automobile dealer that the car the former bought isn’t of good quality. The dealer would stand by the quality of the car he sold and dismiss the customer. More often than not, the dealer would say the car buyer doesn’t know what he or she’s talking about. If the buyer already bought the car, the dealer would just dismiss the buyer as an ingrate.

And this is exactly what was happening with the elevators at the office building. The contractor stood by the quality of his work in rehabilitating the elevators of the office building. Never mind that his rehab strategy left out a few hundred parts that he felt didn’t need replacement.

Quality is about meeting the standards of customers, not of the ones providing the products and services.

Enterprises sometimes trade off customer expectations with their own. They then develop strategies and policies that would cater to their perspectives instead of the ones who buy the products and services.

There are enterprises who dominate markets and have not much in the way of competition. Customers would patronize the products and services of these domineering enterprises especially if there are not many other competing choices.

Such situations would only last so long if the products and services don’t meet customer expectations. Customers would be ready to switch once a competitor shows up that does a better job. It also won’t stop customers from grumbling and complaining about the enterprise’s substandard products and services.

Enterprises may ignore complaints if there is no effect on the business. But things have a tendency to catch up with enterprises sooner or later.

And when that time comes, customers would abandon these enterprises. Customers do not remain loyal to enterprises who don’t meet their expectations

For the elevator contractor, the office building’s board will have no sympathy, much less any loyalty. The board will pay him for his services but not without a fight. Too bad. I thought he did a very good job. Turned out it wasn’t.