No Such Thing as an Undignified Job

A well-dressed middle-aged Filipino man sat at the compartment of the train heading for Paris.  A passenger, an American woman, sitting across, asked what he did for a living.

Man: “I clean people’s houses.”

Woman: “You’re a maid?”

Man: “Yes.”

Woman: “Why are you on this train?”

Man: “I’m on vacation. I’m meeting my wife and children who are visiting from the Philippines.”

Woman: “How nice. I never would have thought a maid could earn so much money.” 

The man just smiled. 

There’s no such thing as an undignified profession.  So long as one earns well and is happy with the work, who cares what other people may say or think. 

About Ellery’s Essays

Demand Fulfilment Means Keeping One’s Promises

The airport lounge no longer granted access via my platinum credit card.  The credit card’s fine print did warn that perks may be withdrawn without notice. 

The bank dangled the lounge perk on top of other benefits.  I took it and the bank succeeded in selling me the card. 

But I’m unhappy because I no longer enjoy the perks the bank sold me for. 

Firms create demand by making promises.

Firms fulfil demand when they make good on their promises. 

About Ellery’s Essays

Knowing Your Inventory ABC’s

A business owner asked me:  how can I manage my company’s inventories more efficiently?

The business owner imported soap, luggage, and cell phones, in short: assorted merchandise.  He shipped in and kept hundreds of items in inventory, in which he had trouble keeping track.  Sometimes he had too many items in storage or had too few which quickly ran out of stock. 

I advised the businessman to try an ABC inventory system. 

An ABC inventory system classifies items under three (3) categories founded on Pareto’s Law.  (Pareto’s Law otherwise known as the 80-20 principle states that 80% of outcomes stem from 20% of inputs). 

In the ABC inventory system, I recommended to the businessman the following classification: 

Another way of putting it:

Sales is the product of price times quantity sold (P x Q) so items in a Group could either be selling at high volumes at low prices or at low volumes at high prices: 

An enterprise realises higher total sales as prices & quantities increase, and vice-versa if prices & quantities decrease. 

Operations managers would treat each group (A, B or C) differently. 

Group A inventories should be accurate and real-time.  Operations teams should count Group A items at least once a day and reconciled with book balances or with reports derived from the company’s database.  Procurement quantities & inbound logistics schedules should be based on what’s on stock, in-transit, and demand outlooks.  There should also be policies for safety stocks and customer orders management. 

Group B item inventories should also be accurate but need not be reviewed as often as that for Group A.  Managers may schedule counting & reconciling of items less frequently such as once a month.  Replenishment may be based entirely on reorder points.  Purchasing managers have more leeway to order bigger bulk quantities to avail of offered volume discounts. 

Group C items are items which require the least frequent inventory monitoring though this does not exempt storage facility staff to keep an eye on them.  Group C items include items which are at the sunsets of their product cycles and hence headed for discontinuance and eventually, the scrap heap. 

Group C items, however, may be significant in that they usually constitute half or a lion’s share of stock-keeping units (SKUs) and may take up significant, if not sometimes the most, storage space.  Operations managers should ideally buy Group C items only to match any confirmed customer orders and at the same time, keep stock levels low, if not wind down inventories. 

The business owner took my advice and tried the ABC system. 

After a few months, he reported that challenges remain but at least he was able to bring some formal control to his company’s inventories.  Staff had more clarity on which items to count more frequently (Group A) versus those which they didn’t have to as often (Groups B & C).  Staff also had a better idea which items needed more marketing (Group C).  And the owner had a better handle of planning how much to buy & stock such that he could control his working capital. 

Enterprise owners can vary the ABC to suit whatever needs they deem fit.  There can be more than three (3) categories [e.g., ABCD] or even just two [AB].  Managers may use other criteria such as turnover (inbound & outbound quantities), total delivered cost of goods, or value of purchases, rather than the standard value of sales.    

The point is to use what works best for one’s business. 

About Ellery’s Essays

Problems vs. Situations

Problems have solutions. Situations are simply things we need to live with, Seth Godin writes. 

He goes on to say:

“Once we realize that a problem we have isn’t a problem at all, but actually a situation, it’s easier to do our best to move on and thrive. Focusing on a situation is usually a source of stress, not a way forward.”

I disagree.

There may be problems where there are no available solutions; it doesn’t mean there aren’t. 

A mediocre person says: “I’ll do my best.”

A great person says: “I don’t believe in no-win scenarios.” 

About Ellery’s Essays

Productivity: They Still Don’t Get It

McKinsey Global Institute: The power of one: How standout firms grow national productivity

Leading global consultancy McKinsey defines productivity as Gross Value Added (GVA) per work-person and reports that the world needs productivity growth on top of balance sheet profitability.

McKinsey still doesn’t get it.  The world doesn’t need labour productivity, it needs supply chain productivity, which is how fast and how much organisations sell merchandise and collect revenue vis-à-vis utilisation of resources & assets. 

Limiting productivity to labour alone is narrow-minded.  It propels bias towards reducing headcount and adding workloads to employees. 

Focus should be on performance of operations, not just people. 

About Ellery’s Essays

The Marimba Player

“Maybe you should try the marimba.”

It was a statement, not a question. 

My music teacher was exasperated with my piano lessons.  The teacher believed the piano was not for me. 

The marimba, which is unfairly labelled as an oversized xylophone, utilises only one scale versus the piano’s two, which made it easier to teach.

I got the hang of the mallets in no time, and my music improved. 

Like most students, I played in a recital before I graduated high school.  My music teacher gifted me a cheap plastic bust of Mozart, which I treasure to this day. 

I never saw my music teacher again. 

How I very much regret for not ever thanking her.

About Ellery’s Essays

The Good Problem

The repairman sighed.  No one called; there was nothing to do. 

The ad said it best:  we make dependable appliances. 

That meant that the repairmen, even though employed and salaried, had no jobs pending.  They were there just in case, nothing else. 

It was a lonely life, and the repairmen complained about the loneliness. 

For the company’s executives, having lonely repairmen was a good problem.  They would rather have that than the alternative, which wouldn’t be good. 

The brand, however, was long gone.  They don’t build them like they used to. 

About Ellery’s Essays

The Need to Change the Supply Chain

When a parcel arrives at my doorstep, I see myself at the end of a supply chain process—a process which involved multiple operations from procurement, manufacturing, to logistics.

But I could care less.  What mattered is I got my parcel and the items I ordered.

The individuals in the respective supply chain processes which enabled the delivery of my items could care less too.  What mattered to them was that they did their jobs, got paid for it, and were moving on to delivering their next order. 

Many a mission of supply chain managers is to deliver products & services at the right time, at the right quantity, at the right quality, and at the least cost.  Supply chain professionals deemed their jobs done as soon as they finish delivering the orders of their respective enterprises’ customers.   

Unfortunately, the adverse events of the 2020s taught me that this mission was flawed.  The mission was too limited in scope in that it did not consider the many processes which laid outside the boundaries of individual enterprises.   

A first reaction would be that supply chain managers should work with their partners, i.e., vendors, service providers, & customers.  It, however, went deeper than that.  Supply chain managers had look at not only those who were next door to them but also at those who were further before or after the vendors & customers of their enterprises.  Supply chain managers needed to work with partners to improve the productivities of all the connections of the supply chain from the sources to the end-users. 

That was a tall order to ask, as a lot of work would be required just to establish the relationships between all the members of the supply chain. 

But it was becoming necessary because of the adversities. 

Adversities are unfavourable situations which arrive in untimely fashion.  They not only disrupt the operations of enterprises but also entire supply chains as well.  They can be natural or man-made such as earthquakes, weather disturbances, epidemics, wars, trade barriers, or a groundbreaking app invented by an entrepreneur.  They can originate from outside or inside enterprises and the disruptions they cause could be far from predictable. 

Adversities had become fiercer as supply chains went global and became more complicated.  Selling to global markets and sourcing from locations halfway around the world came with compounded risks.  Enterprises had not adapted or anticipated these risks.  

Unprecedented adversities, thus, buffeted supply chains at the onset of the 2020s.  Executives found themselves at a loss as they had no influence or upper hand over the adversities.  They did not know what to do as disruptions made demand & supply more uncertain.   

Executives complained to government leaders which was futile since many politicians were just as much as the reason for many adversities in the first place.    

Executives preached resilience but what did that even mean, other than hunkering down and weathering through storms? 

Some hoped that benefits of new breakthrough technologies like Artificial Intelligence (AI) would outweigh the impacts of adversities setback.  But then again, many executives could not comprehend what AI was or how it could be applied.  AI wasn’t a know-it-all computerised oracle which could solve any problem. 

Supply chain managers resorted to traditional playbooks to seek ways out of adversities. 

They looked for alternative suppliers, preferably nearer to their manufacturing & logistics locales, and thereby closer to customers. 

They attempted to re-negotiate contracts with existing vendors & service providers, especially those their enterprises could not quickly switch away from.

They asked for help.  They argued with legal teams to lobby for government relief (like Apple asking the American administration to defer tariffs on smartphones & other computer equipment).  They requested chief finance officers (CFOs) to allocate more working capital to build inventories.  They worked with human resource managers & labour union leaders in seeking concessions to optimise head counts & payroll expenses. 

But the playbooks could go only so far (if they didn’t fail outright). 

Supply chain managers had to face reality.  The traditional playbooks were no longer useful in overcoming adversities especially those which affected entire supply chains.   Managers needed new methods to solve problems pertaining to the overall supply chain than to operations within the walls of their respective enterprises.   They needed to change the systems & structures that underlie the supply chain. 

Supply chain managers had to first embrace productivity as their aim.  It was no longer about respective enterprises delivering the goods at the right quantities, right qualities, right times, at lowest cost to the next direct link on the supply chain.  It was more about adding value to the merchandise & services which flowed through the supply chain.   Productivity was the aspiration to bringing about more value or worth to every linked enterprise in the supply chain.      

Supply chain management by itself won’t be enough in bringing about productivity improvement.  Supply chain managers needed supply chain engineers.  

Engineers build systems & structures that enable supply chain operations.  Managers oversee operations.  Engineers build or change them. 

Managers plan, organise, direct, & control resources & people.  Engineers design, experiment, test, and commission systems, structures, & equipment. 

If enterprises were to work together to boost the productivities of the supply chain they belong in, they’d had to adopt engineering principles and methodologies. 

Industries had become global in the 2020s and in the territories where enterprises set up shop, adversities became more severe.  So much so that enterprise executives were dumbfounded on how to mitigate the risks and tackle the disruptions.  Supply chains needed to change and supply chain management wasn’t the means to do so.  Organisations needed supply chain engineering.     

The good news is that supply chain engineering (SCE) stems from industrial engineering (IE), a field that has been around since the end of the 19th century, right before the height of the Industrial Revolution. 

The bad news is that many executives and engineers themselves are not familiar with SCE and some have very little recognition of IE itself. 

Nevertheless, executives are slowly recognising the need to communicate & collaborate with their partners & linked enterprises along the supply chain.  Many businesspeople had experienced the disruptions of entire supply chains but don’t know what to do afterward. 

The answer is to boost productivity and to do this via supply chain engineering. 

About Ellery’s Essays

Four (4) Starting Points to Getting the Reliability You Want

https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcRSx5anbe1AJZFzSWL-ELawl2bwy8urO9HJcA&s

MANILA, Philippines, October 3, 2019. An electrical transformer (rectifier) at the Light Rail Transit Line 2’s (LRT-2) commuter railway tripped and caught fire. The fire knocked out train service from downtown Manila to the eastern suburbs of Marikina and Cainta. Thousands of commuters from workers to students were forced to find alternative transportation.

The day after, October 4, the Light Rail Transit Authority (LRTA), which manages the LRT-2, said there was a need to import a new transformer to replace the one that burned. Because it would take almost nine (9) months to import a new transformer and because the transformer is a key component of the electrical system that provides the power for the eastern end of the railway, three (3) commuter stations at the railway’s eastern extreme would have to close and remain shut until the new transformer arrives and the power system is fixed.

Workers and students, who would be inconvenienced by the long shutdown of the three (3) stations, complained about the prospectively longer commute. Even as the LRT-2 resumed operations at the stations unaffected by the burnt transformer, commuters grumbled on social media over statements from the LRTA and the government that either pleaded for patience or told people to accept the situation and adjust their schedules accordingly. With roads already clogged and a major highway partly closed due to ongoing construction, commuters from neighbouring cities, Marikina & Cainta, found themselves resigned to cramming into overcrowded public buses and jeepneys and enduring Manila’s traffic gridlock.

The solution to the problem is simple. Replace the transformer. How come it would take so long? Because the LRT-2 management didn’t keep a spare. Management apparently didn’t want to keep a spare because it was expensive. Price tag of a brand-new heavy-duty transformer would cost the LRTA up to two (2) million pesos [$USD 35,000]), not including the additional expenses for storage and security.

It’s a norm of not only the Philippine government but also many businesses not to keep spares, especially those that are not locally available and had to be imported from abroad. Owners hesitate to spend for spares not only because of the high cost but also because they fear the spares may become obsolete or deteriorate over time.

For the case of the LRT-2, not keeping spares saved the LRTA from tying up cash but brought the risk of breakdowns and disastrously long shutdowns.

If the LRT-2 had a spare, downtime of the railway would have been at most only a few days. The LRT-2’s customers would not need to experience such utter inconvenience for so long.

In January 2024, the LRTA announced that the LRT-2 was fully rehabilitated and back to fully normal service, almost five (5) years since the fire that hit the commuter train’s substations.

The LRTA, however, did not say whether they would change policy and keep spares.  It’s likely they wouldn’t.  The LRTA leadership would still be reluctant to spend for expensive spares even if having some would maintain the reliability of Manila’s railways and prevent long inconvenient shutdowns. 

Many executives trade off reliability in favour of continued financial health, i.e., sustained positive cashflow instead of sunk capital in fixed assets.   They also probably will push operations and maintenance subordinates to work harder to ensure reliability with the limited resources and capital available. 

Attaining reliability in one’s system isn’t complicated and it doesn’t have to be costly. Done properly, a reliable system would reduce costs and increase revenues. 

Reliability is the probability that a system will perform to expected standards in a scheduled period.  We measure reliability from its performance (e.g., output) versus expectations or standards (e.g., schedule, capacity).

The reliability of a system, such as a railway, depends on the combined reliabilities of its components, especially when they are in series or inter-connected. The combined reliabilities of the components in a system can go only as far as the reliability of each individual component.

For example, if five (5) components of a system are in a series and each has a reliability of 99%, the reliability of the system would come out as:

99% x 99% x 99% x 99% x 99% = 95%

[0.99 x 0.99 x 0.99 x 0.99 x 0.99 = 0.95]

The resulting total reliability would be 95%, or the system would likely run 95% of the time, or there’s a 5% chance it would fail. To put it another way, there’s a good chance that system failure would occur in as any of five (5) days within a 100-day period.

For a larger system with more components, such as up to a hundred (100) components in series, the reliability of the system will come out as:

(99%)100  = 37%

That is, the system would be reliable only 37% of the time. 63% of the time the system would likely fail. Despite having components with 99% reliability, the total system would be plainly unreliable.

The LRT-2 system in our example was bound to fail given that it incorporates hundreds of components, from its cables, wiring connections, and transformers. Even if each component may have a 99+% reliability, the total system would have a cumulatively high likelihood of failure.

But as much as failure seems certain, one can still improve the reliability of a system and this can be done via four (4) basic starting points:

1.  Map the layout of the system and assess the reliability of each component;

a.  What is the component’s function?

b.  Is a component a stand-alone item or is it a set of parallel items that

back up each other? (e.g. is there grounding wire to avoid short-circuits?)

2.  Identify the weakest components or the ones likely to fail the soonest;

a.   Seek the oldest components, especially those that have exceeded their designed life expectancies.

b.  Identify the components that show signs of wear or abnormalities (e.g. hot bus-bars, rusty bolts, loose breakers).

3.  Replace the components that are old, expired, worn, or showing abnormal indications, even if these items still seem to be performing up to par.

4.  Install parallel back-ups or invest in spares for components that require long lead times for replacement, such as transformers.

From these starting points, management can incorporate a preventive maintenance protocol that regularly monitors the system’s components, especially those identified as weakest or critical.

Preventive maintenance, by the way, doesn’t just mean continuous monitoring and diagnoses of components. It also includes changing parts or upgrading components when they reach the scheduled end of their expected lives even if they are still working well. 

As much as organizations such as the LRTA may have to invest somewhat in spares or back-ups, reliability can be attained via some common sense and via the four (4) starting points mentioned.

Reliability doesn’t mean fewer breakdowns. Components will still break down as the above reliability equations show. But the total system will not, because back-ups and spares at the weakest points coupled with a protocol that continuously replaces or upgrades critical components shall keep the system running like new day-in and day-out.  A system that doesn’t shut down is a system that runs continuously which means a continuing positive experience for customers.  The system becomes more productive which translates to optimally lower operating costs. 

Many organizations and enterprises are reluctant to keep spares because it costs money. Despite the risks, many organizations would rather ‘save’ than maintain reliability. But reliability isn’t just about keeping a spare. Reliability is about making sure the system is performing, that is, identifying the weakest points and beefing up its components’ reliabilities either by having back-ups, spares, and/or them having parts replaced not when needed but when scheduled.

It’s not complicated to do and an organization that does so would benefit in lower costs and higher revenues because a reliable system not only ensures things keep running at minimal risk of disruption but also because it leads to positive outcomes resulting into higher productivity.

About Ellery’s Essays

Elements of Productivity

Our objectives stem from our business priorities, which usually consist of:

  1. Accumulation of Wealth
  2. Attaining Competitive Advantage
  3. Establishing Esteem or Reputation
  4. Growth in Influence

How managers perform against objectives relative to meeting their business organisations’ priorities define their productivity. 

The mistake managers make is classifying productivity as a mere performance measure.  As much as it does make visible how well the enterprise performs, productivity is more an attribute than a measure. 

Some managers limit productivity to labour performance or to how many tasks teams finish in a fixed time. This is a misleading view of productivity.   Productivity looks at how much value a supply chain generates for its stakeholders vis-à-vis their strategic goals. 

It’s no secret that one very hard part in managing supply chains is getting stakeholders, not only between the ones within enterprises but also between partners, i.e., vendors, customers, & service providers, to agree on common objectives.  No progress in productivity will happen until every enterprise on the supply chain can agree to an end in mind. 

It may not be that tough, however, to lay down common objectives.  As much as supply chain operations can be complex, many business owners have similar expectations about them:

  1. Supply chains must be reliable
  2. They must be efficient
  3. They must be versatile

I have surmised, therefore, that three elements* dictate supply chain productivity:

  1. Reliability
  2. Efficiency
  3. Versatility

Reliability is “the ability of an item to perform a required function under stated conditions for a specified period of time.”

Versatility denotes our supply chain’s readiness to transform itself as the need arises.

Efficiency measures how fast we produce [deliver] versus how much resources we use.  (I see efficiency as one that addresses stakeholders’ clamour for cost control or reduction). 

Common sense seems to say that productivity and its elements of reliability, versatility, & efficiency are what we look for in our supply chains and are the answers indeed to the challenges supply chain professionals & executives face. 

So, why aren’t executives & stakeholders focusing on these? 

Is it maybe because many owners simply don’t yet get it? 

*I formerly identified five (5) traits supply chains must have.  This essay reflects my updated thinking that productivity is the one ultimate attribute supply chains must pursue in which reliability, efficiency, & versatility are its elements.

About Ellery’s Essays