Tag Archive: ROI

Supply chain strategy: Modernization tips from Lisa Anderson

March 27th, 2020

As Published in:  Ratelinx

For business leaders looking to modernize their supply chain, the technology investment is the easy part: Evaluate solutions, calculate the ROI, make your business case, and take delivery. Sure, it can be tricky to get sign off on these tech investments, but it’s a business problem with a logical solution.

The more challenging part is preparing your organization to take full advantage of that investment. That means getting people on board, ready for the change, and developing new processes that take full advantage of the new tech.

“High tech must be accompanied with high touch,” says Lisa Anderson, supply chain consultant and President of LMA Consulting Group, Inc. “The most successful supply chain leaders will remember that people are their number one asset.”

We asked Lisa for her perspective on the current state of supply chain, the key trends that are driving change, and how you can prepare your team for what comes next. Read on to learn what she had to say.

Modernizing Your Supply Chain Strategy

The right supply chain strategy includes technological investments, process refinements, and a change management plan for your team. It should be detailed enough to act upon, but flexible enough to account for changing trends. Here’s how to get started.

Key Trends Driving Supply Chain Modernization

For most businesses, there are two factors that make modernization essential. First, there’s sustainability: Consumers are looking to buy from sustainable companies. That means companies are under pressure to not only work with sustainable suppliers, but to prove they’re doing so.

The second factor is perhaps an even bigger driver for change: The demand for near-instantaneous, free shipping for ecommerce. “In the next five years, customers will be expecting Amazon-like service levels at affordable rates, regardless of the high levels of disruption,” Lisa says. “Reshoring, near-sourcing, and sourcing reevaluation will be major concerns.”

Lisa predicts high levels of adoption for new technologies to meet these demands. “The use of technology such as artificial intelligence, IoT, predictive analytics and other technologies will enable meeting these customer needs while maximizing profit and cash flow,” she says.

 

“In these early stages, it’s important to focus in on the
most relevant data to drive decision-making. ” 

Getting Started with a Modernization Strategy

The actual nuts-and-bolts process of building a strategy is the same as solving any problem in your organization. “Start with the outcomes you’d like to achieve,” Lisa says, “then perform an assessment and gap analysis of your people, processes and technology. Assess your change management capabilities to achieve your outcomes. Finally, design the solution and build an implementation team.”

The process may be familiar, but knowing where to start can be a challenge. The first step should be getting a clear picture of your current supply chain. “Start simply and create a dashboard or availability screen that shows your supply chain status; however, remember that if you don’t pay attention to process disciplines, garbage in will result in garbage out,” says Lisa.

In these early stages, it’s important to focus in on the most relevant data to drive decision-making. But don’t try to boil the ocean: “Data plays a vital role; however, do not get sidetracked and overwhelmed with data. Start with your No. 1 priority, find directionally correct data and enable visibility,” Lisa says. “Once your team and supply chain partners understand this data, move to the second largest priority.”

Once you have your supply chain mapped out, you can start to implement solutions that will pay off in the short term and in the long run. A.I. and IoT initiatives have the potential for a quick win. Lisa says in her consulting work, she’s seeing “Artificial Intelligence and IoT used in predictive analytics and forecasting as top priorities. Getting ahead of customer demand drives significant supply chain value.”

Train and Hire the Right Skill Set

For Lisa, the human element is an often-overlooked, but crucial, part of supply chain modernization. “I’ve found that a more dramatic ROI can occur by aligning the people, even more than the data and the process,” she says.

When bringing in new talent, Lisa recommends looking for data science fundamentals. “Data analytics, the ability to leverage ERP systems and think through down-the-line impacts as well as tying business process to systems design are all part of the equation,” she says. “But we should also look at soft skill requirements, such as the ability to collaborate.” Collaboration, big-picture strategizing, and lateral thinking are all essential characteristics of a modern supply chain expert.

The ROI Potential of Supply Chain Modernization

Remodeling your supply chain is not without risks, and it’s a process that takes time and resources to ensure success. But the rewards are worth the effort. “It depends on the situation, of course,” says Lisa, “but it isn’t uncommon to see a five or 10:1 return on investment from supply chain transformation improvements.”



Is there an ROI on a Forecasting System?

September 12th, 2019

A Client Question
Since forecasting can deliver significant benefits with increased levels of service, inventory turnover and margin improvement, the question that inevitably arises is whether it makes sense to purchase a forecasting or demand planning system. Of course, the answer is: “It depends”.

In one client situation, goods were manufactured in Mexico and purchased from Asia. Key customers were large retail outlets. Demand seemed to change daily.  Yet, lead times were in the months if the ‘right’ stock wasn’t in the ‘right’ place at the ‘right’ time. Of course, they could cover some small changes by adding freight costs but that isn’t a recipe for profit. Improving the forecast would improve their success. So, the question turned to whether a system would have a ROI.

The Answer
In their case, they could achieve a rapid return on investment by using a forecasting system. However, let me say upfront that more often than not, I do not recommend a system. It completely depends on whether it will drive the appropriate level of improvement and associated results or not. In this case, we could easily drive dramatic forecast accuracy improvement since we started out at such a low level of accuracy due to the business environment, industry and key customers. The people understood the importance of the providing forecast feedback and although the key customers didn’t have “good” forecasts to provide, they could provide data we could analyze. In these types of situations, we are able to reduce inventory by a minimum of 20%.  It should be noted, though, that results can be far greater.

Food For Thought
Although forecasting systems can be a great idea to drive service, inventory and margin improvement, they do not always provide a return. Take a step back to understand your industry from a forecasting point-of-view:

  • Is demand constantly changing?
  • Are you supporting small numbers of customer/location points with less than 25 items or is it 100 fold?
  • Are you able to gain key customer input and/or point-of-sale data?
  • Do you have anyone familiar with demand planning and forecasting to be able to make sense of what a system is telling you?
  • And, last but definitely not least, have you found the appropriate scale for your forecasting system?

Trying to kill a fly with an assault rifle is overkill. If you are interested in running your situation by us, contact us.

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Who Are Your Stars?

July 21st, 2019

In our 14 years of consulting experience and almost 30 years of working experience, we have found that 80% of executives spend the majority of their time with the 20% of employees who do not achieve results. Unfortunately, this means they don’t have time to spend with the stars who achieve 80% of the results. Do you fall into this trap as well? As executives commented in our 2019 predictions document, talent is a hot topic in today’s tight labor market. If you aren’t paying attention to your stars, they will jump ship to someone who does pay attention.

People don’t leave companies. They leave bosses!
As an executive, stop to think about what questions you are asking. Do you ask your direct reports about their stars? Could you identify the future stars of your organization? Or are you just addressing issues as they arise? Key customer issues. Board questions. Performance problems. Etc. If so, undoubtedly, you are receiving information from stars or they could be working behind the scenes, invisible to you. We find that these stars can be easily overlooked because they might not like the spotlight or they are likely to be the person to bring up unpopular topics. Does your culture support these stars or encourage them to stay hidden?

Here are ways to find your stars:

  1. Pay attention to who your leaders go to in order to get information. There is always a star behind the scenes who has the information when you need it. It is likely this person could be several layers below you and so you’ll need to pay attention.
  2. Have you asked old-timers for information or ideas lately? Ask employees who have been around a while. If they feel overlooked, they aren’t going to offer ideas and information until asked. However, when valued, you just might be surprised with some amazing results. We have had countless numbers of clients with this sort of hidden gem! Typically there is at least one person like this in every organization.
  3. Look for someone who might be unpopular in meetings because they’ll bring up issues. Frequently, there is someone who is willing to speak up about issues who becomes unpopular because the rest of the team doesn’t understand or think the issue will occur. This person is also seen as delaying the process. Sometimes, these folks are just problem employees but often they can be your stars. Stars are willing to speak up about issues, and if you listen to them, they will save you from all sorts of problems. Of course, if it was only that easy! Typically these folks might not be the best communicators, so they aren’t seen as stars by their managers. You’ll have to look hard.
  4. Look for the influencers. Although not typically in a position of power, the masses will follow them because they trust their judgment. This isn’t obvious because leaders aren’t involved. Look for who employees go to with questions or look for who they will go to if issues occur.
  5. Ask each employee about his/her ideas and/or create small group discussions. Once you gain trust, you’ll rapidly identify your stars.

Since your stars are responsible for 80% of the results and are the go-to people for any project worth doing, there is a dramatic ROI in finding your stars and embracing them. It certainly seems worth the effort of checking in on a few employees each time you walk through the office. Don’t stop and talk with your favorites or those with which you have common interests. Instead, stop at the first desk that wouldn’t part be part of your routine. Be interested and listen. We’ll bet you learn compelling ideas rapidly. Let us know how it goes and what strategies you find the most successful in finding your stars! We are always interested in this vital topic.

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The Right Combination of Technical & Communication Skills ROCKS!

February 20th, 2017

I am the Chair of the APICS West Coast student case competition, and we just wrapped up our 2017 event. We had 104 students from around the world fly into San Diego to compete. It was a really impressive group of students!

technical and communication skills

The competition is judged 50% on the technical score (the return on investment achieved after several rounds running a business simulation game) and 50% on the presentation to the Boards of Directors of the company. I have to say….some of the best presentations were those who didn’t perform as well on the ROI because they learned from it, took the positive attitude and used a creative mindset to show how they would improve in the future. With that said, just as is true in real life, you MUST have both the technical side (no empty suits can be successful long-term) AND the communications to back it up.

The team that won not only 1st place in the undergraduate division but ALSO was the top scoring team of undergraduates and graduates and so will represent us at APICS 2017 was Harvey Mudd College. Although I’m the chair of the competition and excited about how amazing EVERY team performed at the event, I am especially thrilled because Harvey Mudd is an APICS Inland Empire Chapter student team. CONGRATS Alexa LeJoe SinopoliShaan Gareeb and Katherine (Yoo Jeong) Shim! (And Kash Gokli, your academic advisor).

Harvey Mudd College

One tip to implement this week:

Take what these students did to heart and think about how you can continually improve your technical skills AND your communication/presentation skills. I find that my clients often think about investing in technical skills but rarely think about communication and presentation skills yet one without the other doesn’t work.

Deliberately sketch out a plan. Select 1 technical skill and 1 communication skill you’d like to improve. Even if you have a long list (we all do!), just select one in each category that you think will be especially beneficial to your career in the next year. My clients find that if they select intelligently and FOCUS in execution, they succeed. Let me know how it goes.

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…”

 



Why Looking at Return on Investment (ROI) is So Much Better than Cost

June 3rd, 2015

supply chainHow many times have you heard about managing cost (or saving money) in the past week? I bet quite a few, as almost all companies focus significant efforts on cost. In all functions, and certainly if you are in or responsible for Operations, a large portion of your responsibility is to reduce cost. Similar to real estate where it is “location, location, location”, I often hear about “cost, cost, and cost”. Certainly managing cost is vital to success; however, being solely focused on cost will drive you to failure!

Instead, I advocate thinking about return on investment. For example, if you spend $1000 instead of $100,000, yet the benefit is $1100 vs. $400,000 over the same time frame, which is better? Of course, when you spend $100,000, you quadruple your investment whereas you only gain 10% with the smaller investment. With that said, of course, it makes sense to minimize the $100,000 to $90,000 if it’s feasible so you don’t have to throw the baby out with the bathwater.

Although these numbers can be compelling, it isn’t the only reason to focus on ROI. If you are thinking only of cost, you will MISS opportunities to grow your business and innovate. Think of the “cost” in this case as an investment. Are you willing to invest in your success?

One tip to implement this week:

The great news is that no matter your position, you can start thinking about ROI. For every decision you make, consider the likely benefits and costs. Costs are not only financial; there could be hefty risks as well (with small or large investments). Most executives think this way for large capital investments; however, why don’t we think this way for the smaller decisions? We should!

It doesn’t have to be lengthy and time consuming. Just think about the benefits; ask a few questions (if you don’t know, you should find out anyway) and you’ll be much more confident that you’ll end up with a better result in the end. Those businesses that think about longer-term impacts (even if the return occurs within a quarter or year; it can seem longer-term at times) will thrive.

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…”