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Take A Bit of Risk

July 20th, 2015

supply chain

I’m on a whirlwind trip with my brothers and nephew – 5 days, 3 states, 4 cities and lots of miles. One of the stops was Las Vegas so that Dylan could ride the Stratosphere roller coaster (and Brian could eat White Castle hamburgers……although I am not sure if he knew they were in Vegas before he saw the sign on the LOOOOONNNNNGGGG walk to the Stratosphere). Somehow riding even the calmest of roller coasters (which of course doesn’t exist) seems much different when you are 1000 feet + up in the air. The X Scream goes down so you seem like you are going to drop from 1000 feet up. See their picture below.

take risks

My nephew and brother about to take a 1,000-foot plunge on a roller coaster.

Once Dylan was on top of the Stratosphere, I think he wanted to change his mind; however, he stuck it out and survived. Greg said it was terrifying to be looking down 1000 feet from the roller coaster.

I’ve worked with people who are unwilling to assume the slightest bit of risk. They worry about what will happen if their manager doesn’t agree or if they are called out for taking the initiative. Innovation will not occur without some degree of risk. Actually, I don’t think any business can be successful long term without risk – do you? The key is choosing the smart amount of risk.

One tip to implement this week:

There is no reason to force yourself to ride X Scream; however, if Dylan can get on X Scream, perhaps you can think about a small, smart risk you’ve been thinking might help your company. What have you been thinking about trying but were concerned about unintended consequences? What risk have you been thinking about? Does it have a shot of success without causing significant damage?

Barring bedrock topics such as violating safety protocols, talk it over with your manager and take the shot. The worst that could happen is failure. As my consulting mentor says, if you haven’t failed, you aren’t trying hard enough (in essence you are not taking risk/pushing the envelope). If you fail, adjust and try again. Give a common sense, smart risk a go! You’ll be amazed by what you can accomplish.

Looking for more ideas to keep your supply chain connected? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”

 



Sarbanes Oxley

July 17th, 2015
sarbanes oxley

Meant to protect investors and increase transparency in corporate accounting, implementing the Sarbanes Oxley Act takes some organizational introspection.

The 2002 Sarbanes Oxley legislation (new, enhanced standards for all U.S. public companies) was established in response to high-profile financial scandals (Enron, etc.) in order to protect shareholders and the general public from accounting errors and fraudulent practices. However, implementing SOX in a meaningful way for an organization is far from a no-brainer. A few tips include:

1. Understand your business – what are your key business processes? Understand and document those processes, from the financial risk and control perspective. Do not worry about the rest.

2. Materiality – this is another way of saying, focus on the 80/20. Focus on those areas that have a large potential financial impact on your business.

3. Understand risks – there are endless financial risks in any business. The critical element is to understand which risks are important to your business. Key controls are required for those risks.

4. Understand controls – how does your business mitigate the key risks? What options/tradeoffs exist to mitigate the risks?

5. Think about what makes sense – it is quite possible to throw out strict, irrelevant rules and instead think about what makes sense for your business – what is logical (remember risks, controls and tradeoffs). Then, it is just a matter of putting it into an appropriate communication format for SOX.

6. Evidence – a key word for SOX. Regardless of whether you have the best processes, it might not matter – evidence is the key. In many cases, if you execute effectively in your organization, your processes will not need to be changed. However, it is likely you’ll have to add evidence so that you can prove it to your auditors.

7. Segregation of duties – although logical and part of other aspects of SOX, I’ve given this a separate bullet point because it is often one of the more challenging aspects for smaller, flexible organizations to achieve. Remember, logic works so long as it is backed by evidence!  

Did you like this article? Continue reading on how to be the Strongest Link in your organization:

Become the Strongest Link in Your Supply Chain

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Slashing Lead Times to Counter the ‘Amazon Effect’

July 14th, 2015
speed does not negate quality

Must you compromise quality for speed? Reducing lead time will increase customer satisfaction and avoid the Amazon Effect.

My recent research report on the Amazon effect says that 67% of manufacturers and distributors feel customer service gaps when compared to Amazon-like offerings. One of those key areas is lead time. When looking across my clients, which resemble a well-diversified portfolio of manufacturing and distribution companies, customers are demanding a 20% decrease in lead time at minimum with expectations up to 50% reduction on average.

Time is one thing no one has! A few of my most successful and rapidly growing clients pride themselves on a 24-48 hour turnaround and prioritize their people, processes, systems, inventory strategy and the like on this objective. It certainly seems worthwhile to take note!

Lead time reduction is not something that can be dictated. Even high inventory levels do not mean you’ll be able to successfully support short lead times on an ongoing basis. Instead, it means you need to have a process change somewhere in your supply chain to be sustainable. Have you taken time out of your manufacturing process? Perhaps you’ve implemented a few lean concepts. Or, it could mean that you have increased your collaboration with suppliers and customers to better support your supply chain needs. You could have used tools such as SIOP (sales, inventory and operations planning) to achieve this objective. Or, have you further leveraged or upgraded your ERP system and implemented functionality that allowed you to take out or minimize process steps? Or have you provided additional training and education for your planning team so that inventory, service and efficiencies can be optimized?

There are countless ways to design your supply chain to slash lead times. Join me in Las Vegas for my presentation “Priming for Supply Chain for the Amazon Effect” at the APICS 2015 International Conference to learn more about how to prepare for success with topics including lead time reduction. The key is which is most effective for your particular situation and objectives. After all, there is no reason to run further and work harder than your competition to get to the same end goal!  

Did you like this article? Continue reading on how to be the Strongest Link in your organization:

The Amazon Effect: Why We Must Pay Attention to Our Customers

The $1 Million Dollar Planner

 



The Power of Customer Service

July 10th, 2015

supply chainI’ve seen a few examples of the power of customer service this week, and it propelled me to write on what a huge impact it can have. For example, I participated in 3 full days of ERP demonstrations in order to provide expertise on which software would be the best fit for achieving business results. There was a person (Brian) assigned to stock the room with drinks and bring in food for breakfast and lunch each day as demos can be long days. He happened to notice on the first morning that I didn’t drink the coffee and hadn’t seen the cooler with water, and so I took out a can of Zevia (a diet coke without the bad sugars) from my briefcase. He asked about it, where they sell it, etc. The next morning there were several cans of Zevia in the cooler already chilled. How impressive!

I never would have asked him to do that but he went over and beyond with customer service. I asked about him later on and found out that he was in marketing and had told my colleague the story of how he was hired. He had always admired my client and so when he was between jobs, he stopped by to see about a job. The owner happened to see him in the lobby with a bunch of materials he had put together on them, and so he stopped to talk with him. The owner was impressed with what he had put together and hired him, even though there was no job posted at the time. I thought this was a great story as it is a perfect example of how it “begins and ends with leadership” and the impacts you have can extend in never-expected directions. Imagine if Brian goes over and beyond for my drink what he must do for their customers!

One tip to implement this week:

Think about what you can do like what Brian did. What simple thing can you do for your customer, your supplier, your colleague, your manager and the like. Pay attention to what would make a difference. In my case, I never would have thought to ask yet I was very appreciative and felt like a special customer/partner because of his gesture. Zevias are not expensive yet it was powerful. No matter your budget or position, there will be several ideas like this you could implement each day if you are looking for them. Do you think I am even more favorable about working with this client and more inclined to go the extra mile for them? Of course!

Looking for more ideas to keep your supply chain connected? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”

 



Remember to Keep an Eye on Costs with Growth

July 9th, 2015
cost with growth

Navigating growth gets tricky if you lose perspective on spending. Keep costs under control by identifying the spot where people, process and technology work best.

Understanding and controlling costs has always been a critical success factor for the majority of businesses; however, during times of growth, it is especially important to make sure to remain vigilant while also investing as needed.  Growth is exciting but it also can be harder than downsizing to navigate. Thus, keeping an eye on costs can be valuable to ensuring success.

So, how does one go about defining cost? It is as simple as defining the intersection and sweet spot of your organization’s people, process and technology assets. It doesn’t require complex solutions or significant capital investment; instead, it requires a focus on these three key variables – people, process and technology.

First, it all begins with people. As my HR mentor used to say, the right people are your #1 asset. And, I’ve never seen an example where this didn’t turn out to be valid. From the perspective of defining and controlling costs, there are a few keys to success related to the people component:

  1. Explain the big picture– Since defining and controlling costs involves hard work, a strict process discipline and doesn’t typically involve a new and exciting technology or the latest fad or program, it is not likely to win popularity contests. In my experience, most people want to be working on something considered interesting or leading edge; therefore, it is essential that leadership not only present the big picture vision behind this initiative including the why’s to the company goals but they also must emphasize the importance and priority. The talent will be far more focused on delivering results if they understand how they are contributing to the company’s success – and they know that their efforts are valued. When I was VP of Operations, I found it amazing how many times I received feedback about how this seemingly small communication step was not only appreciated but also a key reason for people feeling a part of something important.
  2. An accountability culture– Since controlling costs requires a rigorous process discipline combined with metric tracking, a culture of accountability is essential. This sounds far easier to achieve than it is in practice, yet, in my experience, it is the 80/20 of delivering results. So, it is worth it to invest the efforts upfront to achieve a significant return on investment. The keys steps involved in creating a culture of accountability include: jointly establishing performance goals, providing/seeking continual feedback and improvement, tracking progress to goals, revising based on changing business priorities, following up with an audit and acknowledgement of completion/success. I found that people resist at first as a culture of accountability is uncommon and uncomfortable (after all, being busy feels good and is easier to control than being accountable for results); however, when consistently applied, 80% of the people step up to the plate, the low performers leave (which further energizes the high achievers) and, in the end, the majority of people find more meaning in this culture and can no longer imagine going back.
  3. Value your people– As obvious as it sounds, people are cornerstone to achieving a successful end result. People are not only the thinking power of the organization but they also drive the bottom line results. With the clarity of goals and framework, people will rise to the occasion and contribute to success through involvement and participation. The key is for leadership to get out of the way of success; instead, if they provide support and tools, ask questions and encourage continual progress, you will accelerate your timeline to success.
  4. Cross-functional team– 80% of the time, a cross-functional team will not only accelerate the results but will also improve the quality of the results. For example, in one project, our goal was to define material usage and find a way to reduce back to standard levels. There were at least 10 possible scenarios of why material usage was higher than standard, ranging from high scrap levels to adding extra material during the process in order to speed up the run rate on the machine (which produced 5-10% additional parts) to receiving materials that weighed on the high side of tolerance. By including team members from Engineering, Operations, Maintenance, Quality, and Finance in the process, we were able to reduce the time required to identify and solve the problem.

In addition to prioritizing people, it is imperative to focus on process and technology. In the case of defining and controlling costs, the keys to success are interrelated and largely interdependent for process and technology. They include the following:

  1. Simplicity– I thought we’d start with this key to success because it is fundamental and often the lack of simplicity is a root cause of poor results. There is an intense pressure throughout organizations to add complexity – it is quite enticing, and most companies think it is essential to success so they create a never-ending web of complexity to supposedly provide them with “the latest and greatest” analytic tools (which few, if anyone, truly understands) and ways of tracking cost. For example, in multiple projects, I’ve worked with teams who thought that tracking material issued to the line, specific piece by specific piece or specific unit by specific unit was absolutely critical to understanding scrap per line crew, per supplier, etc. In each of these cases, there was some benefit to tracking this data; however, it was the 20% of the 80/20 rule. There was a cost associated with the extra level of detail tracked. And the data was only as good as the data going into the process (garbage in, garbage out). Therefore, aside from an industry or manufacturing processes that requires this level of complexity, you’ll achieve exponentially better results with simplicity, just as we did in our projects. Actually, in one case, we invested extra resources and time in order to reverse the complexity and simplify the process, yielding an improved bottom line result. In another example, instead of investing in the latest and greatest software, we invested significantly less to develop reporting that separated the purchase price variance from the usage/volume variance. This report unscrambled the complexity. We then leveraged this information and focused exclusively on the controllable factors that could be modified or managed in order to have a direct impact on results. Why waste time with anything else? I’ve found repeatedly that the simplest, straight-forward, typically ‘boring’ solution yields the best results for less cost.
  2. Data integrity– Data integrity is one of the “simple” solutions which typically provides the most significant return on your investment in these types of projects. I equate a focus on data integrity to ensuring that your house’s foundation is stable. Although widely popular, why do you want to spend significant resources, time and funds to implement complex systems (similar to installing just the right home theatre surround sound system) when you have a huge crack in the foundation of your house? It sounds ridiculous but it is common – my guess is that it is more exciting and interesting to talk with your friends and neighbors about your new surround sound system with the latest features instead of dealing with the builder to fix the boring yet structural problem in the foundation.
  3. Analysis, prioritization, and follow-up– in essence, process discipline. I consider this blocking and tackling – hard work yet essential to success. Typically there are endless opportunities to define and control costs. This is exactly why timely analysis and prioritization are key components in every successful cost initiative – no company can afford to staff every potential opportunity; instead, staff and prioritize those with the most potential impact to the bottom line or those affecting the critical product lines or key customers. Don’t get stuck in analysis paralysis; instead take your best shot at prioritizing and then focus your efforts solely on execution. During execution, it is critical to track progress, identify root causes, resolve problems, test, re-test, follow-up – and repeat the process. On one project team, for every 1% reduction in line scrap, we would save one million dollars. We didn’t find the “million dollar solution”. Instead, we saved a few million dollars by identifying a series of anomalies, analyzing root causes and developing solutions with the cross-functional team. No fancy systems, no complexity, no significant capital investment. Instead the cross-functional team developed simple reports/metrics, analyzed, brainstormed, and instilled a rigorous process discipline – essentially worked hard and found a way to deliver more than a million dollars to the bottom line.
  4. Continuous improvement– Defining and controlling costs is not an event or project; instead, it is a process (a way of doing business). There are never-ending tweaks to the people, process and technology to optimize operational processes – thereby reducing cost. In the best organizations, optimizing the tradeoffs of line efficiency, line scrap and staffing levels is built into the daily routine. For example, in an operational turnaround project which resulted in a 20% gain in efficiencies, the key to success was focus. Each morning in the operations meeting, a cross-functional team met to review the prior day’s key performance indicators (such as efficiencies, downtime, scrap levels, etc.), set today’s priorities and develop simple action plans with associated resources to address. In a manufacturing environment, there is always an opportunity for improvement. Resolving the “low hanging fruit” opportunities alone doesn’t propel an operation forward; it is the day-to-day discipline of tackling problems and identifying opportunities that achieves the result. In essence, a rigorous process discipline focused on continuous improvement was the key to delivering a successful operational turnaround.

Defining and controlling costs is not about the people, the process or the technology; instead, it is about leveraging the right combination of people, process and technology to catapult your organization to the next level. 

Continue reading on how to strengthen your Eagle Eye:

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