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We noticed a great closing article in this quarter’s issue of APICS Magazine, by Randall Schaefer, a CPIM and retired consultant, on how he once described his daily routine to his boss, and how it became an inspiration to others.  We’ll reprise his story here, from the Jan-Mar 2018 issue.

Schaefer’s career covered 50 years in supply chain beginning in the 1960s.  He recalls a time of no computers and resistance to procedures and discipline.  Then came computers, at least for accounting.  By the 80s he found managers finally embracing technology.  Then at a new organization, Schaefer endured his first performance review and found himself “on the wrong side of the company’s expectations.”

Apparently, he notes, the general consensus was that he didn’t do anything.  Subordinates and superiors all agreed, he notes.  Now in truth, Schaefer points out that he “trained my subordinates well and… brought our department’s metrics to all-time highs.”  But people noticed that he was not stressed out or always resolving some minor disaster.  They decided he wasn’t busy enough.

When his boss asked Schaefer to describe his daily routine, he told him he had none.  His style was to ensure that subordinates were following the disciplines and processes he’d put in place.  His only routine was to continually assess whether those processes and procedures were still valid.

His manager thought a manager ought to personally handle more tasks, rather than delegating.  But as he notes, his results were undeniable.  Thus, notes Schaefer, “he could only advise me to change my ways” and “I disregarded his advice.”

A year later, his metrics were even better.  His boss hated it.  He was changing the expectations.

Years later he applied for a job in the automotive industry.  In an interview with the president, Schaefer was asked to describe his management style.  He decided to play it straight he says, even if it might kill his chances.  “I don’t do anything,” he told him.  Then he says he smiled and added, “At least, that’s how it appears to others.  I learn every process, procedure and discipline in my areas of responsibility.  I teach each one to my subordinates and expect them to be followed routinely.”  They knew to come to him if something wasn’t right so he could fix those things.  In short, he noted “I have been very successful and would like to continue this success at your company.”

The president smiled and nodded, saying “I agree with you.  The busiest-looking managers rarely get the best results.”  And then he offered Schaefer the job.

On his first day, the president asked Schaefer to write down the description of his management style as he had shared it in his interview.  The president wanted, he said, to memorize it because an old boss of his had also once accused him of not doing anything.

And that may be the best definition of what a manager “does” that we have ever heard.

 

A recent article from ERP consulting firm Panorama Consulting which, like ourselves, has dealt with the ERP requirements of PE (Private Equity) firms after they’ve acquired another company, highlights a few key considerations they demand, and the lessons that can be drawn for private companies – whether ripe for their own PE acquisition or not.

 

First, no surprise, PE acquiring firms have a “low tolerance for implementation time and cost overruns.”  While that’s not news in itself, what it does is drive them to implementations that require fewer customizations (at least initially) and to avoid overly complicated software that can be hard for new users to adjust to.  They keep a watchful eye on timely project management, simpler functionality and anything else that might impact project risk or time.  They keep superfluous project activities and distractions to a minimum and focus time only on the tasks at hand – and as defined, ideally, in the project plan.

Secondly, Panorama notes that PE companies have a higher likelihood of opting out of the “big” ERP systems, mentioning SAP and Oracle Clould as two examples.  It’s all part of the prior point, where companies look to get “more bang for their buck” by implementing Tier II or industry-focused systems.  As they note: “One common school of thought is the new system may be a shorter-term (but credible) enhancement until they sell the company to an acquirer, so they don’t want to spend too much time or money on a larger or more complex system.”

Thirdly, PE companies express a preference for the ability to scale for aggressive growth.  We see this as being perhaps the number one factor in ERP upgrades these days: companies are growing fast — or they express the desire, and are planning to do so.  PE companies are fueled by strategic growth even more than most, notes Panorama.  They are willing and in need even of eliminating redundancy and inefficient processes.  They want to automate as much as they can and build processes and a technology backbone that support this.

Companies also note the need for improved, optimized reporting and being able to relate these to KPIs (key performance indicators) or other benchmarks.

And of course, when viewed holistically, it’s not just Private Equity firms who want — or need – the characteristics noted here.  Every company today needs much the same – and in turn, they can take a lesson from the sharp focus of the PE firms who have made the priorities outlined today into buying points for their ERP systems.

 

The Cloud Grows Ever Larger

According to The Wall Street Journal (1/17/18), Google is expanding its already large network of undersea cables to access new regions around the world not currently well served by its competitors, as well as to give itself some rerouting capabilities if a region fails or gets overloaded.  It’s all part of the now unstoppable growth of cloud computing services, as well as a play to keep up with its two greatest competitors, Amazon and Microsoft.

Google VP Ben Treynor professes that he “would prefer not to have to be in the cable-building consortium business” but found there weren’t a lot of other options.

Google parent Alphabet already owns a massive of network of fiber optic cables and data centers, already handling about 25% of the world’s internet traffic.  These facilities allow Google to control its data-intensive software without having to rely on the bit telecommunications providers.

After a decade of construction, Google will soon have 11 underwater cables around the world.  They’re used to “refresh research results, move video files and serve cloud computing customers” around the globe.

And at that, Google currently ranks third in cloud-computing revenue behind Amazon and Microsoft in the biggest tech race going on the planet now.  Billions of dollars of revenue annually are at stake, the Journal points out, as companies increasingly move various data operations to the cloud.

Currently, its longest cable stretches 6,200 miles from Los Angeles to Chile.  But Google has also teamed up with others, like Facebook, for its latest build-out.  They plan to share capacity on a 4,500 mile cable from the east coast of the U.S. to Denmark, with an additional terminal in Ireland, thus increasing its bandwidth across the Atlantic.

Another cable of 2,400 miles will be run from Hong Kong to Guam, hooking up with cable systems from Australis, East Asia and North America.

The internet build-out continues, as does the march to cloud dominance.  Only today, you’ve got to have a few billion dollars in your pockets to play.

 

As a recipient of multiple regional Company of the Year awards over the years from APICS (the American Production and Inventory Control Society, frequently known as the association for supply chain management) we are long-time boosters of their educational programs, in particular the series of five lengthy classes that leads to the CPIM (Certified in Production & Inventory Management) designation.  Over the years, many of our employees have taken their classes and earned the CPIM designation.

In the most recent of APICS Magazine, Mallinckrodt Pharmaceuticals is cited for its award-winning responsiveness enabled by improvements it made to its global supply chain.  And in several of the examples given, employees and managers there give proper credit to the CPIM training they utilized to accomplish their goals.

Mallinckrodt, a global specialty pharmaceuticals company that manufactures both generic and specialty drugs across a number of product lines, recently logged tremendous improvements in supply chain transformation through initiatives that were executed by staff with a deep understanding of what it takes to make a supply chain work – knowledge in large part gained through involvement with APICS and completion of their CPIM designation.

In Mallinckrodt’s case (since the full story is too lengthy for this brief post), those changes had a major effect on profitability and customer service.  Inventory turns rose by 52%.  Unit fill rate improved by 14%.  That led to a 92% reduction in backorders, and a 97% reduction in maximum single-day backorders, according to a review of their efforts published in the Jan-Mar 2018 issue of APICS Magazine.

Staff at Mallinckrodt repeatedly credited the training they got in the process of earning their CPIM, and the way it helped them understand the elements of supply chain, and then change the culture, gradually, within their own firm.  As one manager said, “This was an important step in my career because it gave me a foundational knowledge to build from.  The common language facilitated communication.”  This person was a recent college grad, didn’t know yet what he wanted to do, but then set his sights on leading the supply chain at his facility.

At Mallinckrodt, even IT staff have earned CPIM, which the parties say, enabled them to more easily translate IT requirements into a language the supply chain team could use.  “When communication improved, so did our results,” noted the Demand Manager.  “The answers to common questions became more powerful,” he adds.

In the end, the team not only “noticed the improvement in our internal metrics, but also received numerous accolades from customers through both supplier scorecards and formal awards received from our consistent delivery experience.”

And it was all because of CPIM and the desire to learn and grow into their supply chain responsibilities.  What better reason not to look into the APCIS CPIM designation at one’s own firm today?

 

A recent post by Brian Neufeld of Insight Works, a manufacturing and warehouse management supplier of software add-ins for Microsoft Dynamics points out a few of the key areas where companies lose money due to inaccurate inventory – points we think worth passing along today.

One key area of waste involves, of course, the tying up of working capital.  Inaccurate counts create situations where purchasers buy more inventory than they need, tying up precious capital.  How often is it the case that misplaced inventory, or double-locations, cause confusion and increased costs?  Having 100 of something when you only need 50 is simply wasteful – but unless you know just how many you have of an item, and its precise location, it’s a mistake that’s all too easy to make.

Multiplied across enough items, in the end you’re reducing the amount of capital available for more important uses, basically a lost opportunity cost.

And then there’s inventory shrink.  According to the National Retail Federation, 1.44% of all sales are lost to inventory shrink.   Shrink does not only refer to theft and damage, but can also be a byproduct of bad counts and other tracking inaccuracies.

And then there are labor costs.  A lot of time gets lost chasing down items that aren’t there… or aren’t where a system says they are.  That lost time is compounded when others have to join the search.  And it doesn’t have to happen all the time to add up to a fair amount of lost labor efficiency chasing product.

Then there’s the cost of lost customers due to the inability to fulfill customer orders or meet their time demands, often caused by out-of-stock situations.

All these issues and more can be turned around by embracing the benefits of warehouse and inventory automation.  Paper-based systems are error-prone, labor-intensive and time-consuming.  Today’s digital solutions, consisting of software integrated with the company’s inventory, production and sales orders, and coupled with commonly available handheld bar code scanners, can make these mistakes and costly issues a thing of the past.

 

 

A recent article in APICS Magazine notes that organizations sometimes fail to leverage the power of their supply chain, despite the fact that effective supply chain management has been shown to improve overall organizational efficiency, heighten effectiveness, reduce costs, streamline material and information flows, boost margins and ROI and improve competitive advantage.

Why?  They suggest maybe it’s because too many believe it to be a “back office function” that is merely a cost center and a necessary evil, thus rendering the results invisible.  But this couldn’t be further from the truth notes Gary Smith, VP of Logistics for New York City Transit, and an APICS certified CFPIM.  Indeed, he notes, the very visible benefits are plainly apparent when you look at a company like Amazon, which you can bet thinks very deeply about its supply chain – so it’s customers don’t have to.

The article goes on to note three barriers that often prevent supply chain management from being seen as valuable:

  • Employees who procure, manage, warehouse and transport materials don’t see themselves as supply chain professionals.
  • Supply chains are far from being optimized tactically, and there continues to be a lack of aware of the value they can bring to organizations.
  • Supply chain management is not considered strategic. In fact, delivery and procurement ought to be a part of every organization’s strategic planning process.  It’s a strategic investment.

The necessary decision support tools including warehouse management, forecasting, advanced planning and scheduling and procurement optimization can actually help automate – and improve —  many of the routine decisions otherwise made (with great fallibility) by humans.

These automation tools in turn enable teams to make choices faster, with better results, so that people can “focus on the issues that can halt operations and add tremendously to costs,” notes Smith.

It’s an investment – in tools, staff, training and the application of best practices.  But it’s an investment with a return that will keep on giving as you automate what can be automated and leave your most important asset – your people – free to work on harvesting the remaining, truly value-laden (and oftentimes, higher-hanging) fruit.

 

Manufacturers are increasingly pursuing direct online sales to end users these days, and with that comes the challenge of more, but smaller, shipments.  When you’re built for pallets and cases and you’re shipping onesies, you face new challenges.  The rise of e-commerce has made the integration of logistics and distribution a integral part of operational competency.

Moving from a manufacturing and wholesale environment to a direct sales model for e-commerce may require more employees, fixtures or space.  Instead of loading pallets into trucks, you may be staging small shipments in boxes.  Documentation and labels multiply, and new types of equipment may be needed along with everything from tape and packing materials to racks and printers.

Is it worth it?  Dave Turbide, a New Hampshire based consultant and APICS certified CPIM makes the point in a recent article in APICS Magazine that, in fact, you may not have much of a choice.  E-commerce is growing so quickly that some manufacturers have found they have no choice but to direct-ship to customers.  The question becomes one of whether to do it yourself, or engage a third party.

Turbide suggests a few questions, taken from APICS’s CPIM body of knowledge, to ask if you’re facing that question yourself:

  • Is the activity strategically important?
  • Does the company have specialized knowledge?
  • Is the company’s operations performance superior?
  • Is significant operations performance likely?

If you answer yes to one or more of these questions, Turbide suggests careful exploration and to consider the cost-service trade-offs involved either way.  If you can answer no to most or all, then outsourcing may be the way to go.  Just remember that e-commerce is not going away, and only likely to grow.  It can become a vital link in your customer relationship experiences.  You may want to “cultivate positive workings relationships with package delivery services” like UPS, FedEx and others.

It’s worth noting the following survey statistics recently produced by PwC.  When asked “Which of the following channels are companies using to generate sales,” respondents indicated:

  • 79% – Store
  • 73% – Website
  • 25% – Mobile app
  • 24% – Catalogue
  • 21% – Third party provider

As to the reasons people say they shop online:

  • 38% – Convenience
  • 25% – Bargains
  • 18%- Speed