Yesterday, I met a friend for coffee. She started the discussion with a question, “How are you doing? So, what is it like to write a book? What have you learned?” I smiled. The question brought back so many flashbacks. My mind filled with emotion. It quickly short-circuited between the shear frustration of reading the seventh, and what I hope are the final round of edits on Chapter 5, and my rising excitement to soon hold a finished copy of the book that I have been working on for the past six months. While I have a co-author, Charlie Chase, it has been hard work.
The book is titled Bricks Matter and it is currently listed on Amazon to publish in January. My answer to her was that “Writing 96,000 words is easier said than done. And, it can best be summed up through sharing the story of a pig and an elephant.” We then discussed the story of the pig and the elephant.
The book is based on nine years of experience working with supply chain leaders. I thought that it would be easy. Prior to writing the book, I had penned over 700 articles, worked on over 80 quantitative studies and had the support of an administrative assistant and a researcher who helped me identify trends on financial balance sheets and annual reports. I love to write. However, it was not easy. It is easier to talk about the book that you are writing than to write one.
I was excited to start. I remember the discussions at the start of the process of writing this book like they were yesterday. I had written a book abstract and energetically shopped it around. I was naive. I thought acceptance would be easy. I was wrong. No one was interested in a book about supply chain from an unpublished author. I was unknown and the consensus was that a book about supply chain would be “boring.” I have taken it as a personal mission to prove them wrong. In the book, I have tried to make supply chain anything but boring. So, I smiled when my friend asked the question.
For many, writing a book is a rite of passage; but it is not always a labor of love. For me, it has been both. In the winter, I attended a Monitor Event (Access to Minds). It was a gathering with other thought leaders. We were speaking about book publishing. I was naive. I was surprised how many attendees were published authors, but had outsourced the writing of their book to a ghost writer. Not so for this old gal: I have pounded the keyboard on planes, in hotel rooms and at the end of my kitchen table for sixty hours/week for the past six months. To write the book, we analyzed twenty-five years of annual reports and seventy-five interviews. Each chapter took six weeks to write, and it has now been read by four editors. We have gotten approval on forty-one case studies/quotes and written and rewritten the book chapter by chapter.
I can now roll out of bed and not have “write chapter X” on my to-do list. It is gone from my desk and on its way to the publisher.
So, here I thought that I would share insights from the book based on a question that another friend asked me at a strategy day in New Jersey last week. His question was, “So after writing your book, what is your advice for supply chain leaders? What are the top points that you would highlight for them to consider?” That is the subject of this blog post.
I firmly believe that we do not have supply chain best practices. Instead, I think that we have emerging practices. In the interviews for the book, I spoke to seventy-five supply chain pioneers. It was good for me to reflect back, to think about the evolution, and hear the energy in the voices of the pioneers as they spoke of forging the processes that we know today. It gave me perspective.
In the building of today’s supply chain processes, I think that we “got sideways” in the evolution of applications. We confused requirements for systems of record with systems of commerce and decision support.
We implemented a lot of technology and continuous improvement programs without a long-term road map. Today, companies have a lot of systems that they just don’t use.
So, in short, my advice for a supply chain leader, in advance of getting a copy of my book, are ten points:
- Know Total Supply Chain Costs. This sounds simple, but it is not. I am amazed by how few companies really know their total supply chain costs. While they have had a myopic cost focus over the past two decades, it has been very focused on the vertical silos of manufacturing, distribution or procurement. They know the costs inside these silos very well. They do not know the trade-offs of the costs across the silos well. Very few (my estimate is 5%) know their total supply chain costs and can make decisions to effectively trade-off the costs of make, source and deliver. In the words of one pioneer, “My cylinders are firing hard, they just are not all firing together and in the same direction.” The key is alignment of the functions to the supply chain strategy with a clear focus on total costs. Supply chain leaders just cannot get there without a strong supply chain finance group.
- Rethink Metrics. Start at the Ends and Work Towards the Middle. The ends of the supply chain are fragile. One of the stumbling blocks is metrics. As long as we reward sales teams on volume and procurement organizations on purchased costs, progress on building the end-to-end supply chain will be fretful and slow. One of the companies that I admire gave me insights on this last week. They said, “When we changed our equivalent unit measurement from a volume-based to a profit-based unit, it became much easier to drive supply chain excellence.” This happened for them fifteen years ago and I think that it has been a cornerstone of their success.
- Redesign Outside-In. This sounds simple. It is not. While companies complain about their lack of flexibility, and the slowness of the supply chain response, they have been slow to question historic practices and to use new forms of data to sense market conditions. They have clung to traditional forms of transactional data like they were tablets handed down by Moses from Mount Sinai. New forms of data along with new capabilities in analytics give us the ability to decrease latency, improve demand sensing and decrease the bullwhip effect. Yet, too few are trying.
- Define the CSR Program for Value. The first Fortune 100 manufacturer to publish a Corporate Social Responsibility (CSR) program was Dow Chemical in 1996. Procter and Gamble followed suit in 1999. Since then, all Fortune 100 manufacturers have some form of a CSR program. However, most are disjointed. Most focus on cost control not on the greater proposition of using the CSR program to redefine value. Some of my favorite stories for the book were Toms Shoes and IBM Global Asset Recovery (GARS). With every pair of new shoes sold, Toms Shoes distributes a pair of shoes to a needy child. As of 2012, they have distributed over 1 million pairs of shoes in 25 countries. It is part of their brand promise. In a similar vein of making corporate social responsibility part of the brand promise, in 2002, the IBM GARS group pioneered a reverse logistics process to refurbish equipment and prepare it for resale. Products are recycled through demanufacturing and manufacturing processes over and over again. In 2011, the GARS group processed 33,038 metric tons, or 73.4 million pounds, of high-tech and electronics products. Less than 1% of the electronic materials are scrapped in landfills.
- Align and Coalesce Value Networks. When companies say the term ‘network,’ they think of ‘supply networks.’ However, I see leaders working on demand, supply and design networks in separate and distinct programs. I believe that the evolution of Market-driven Value Networks will see these coalesce to drive more value. While supply networks are a natural extension of supplier development efforts, design and demand networks are newer. In the book, I share insights on how leaders build demand networks to improve the transparency of demand data with channel partners. Taiwan Semiconductor Manufacturing Company (TSMC) is a good example of a company that has transformed its business model through the use of design networks.
- Define your Terms and Build a Supply Chain Strategy. Use Them to Build a Guiding Coalition. While all companies want to drive supply chain excellence, they are not clear what this means to them. The problem is that most companies that I work with do not have a clear supply chain strategy and they unknowingly ask for teams to work on supply chain excellence using vague terms that are not actionable. I get to read many supply chain strategy documents; in 99% of supply chain strategy documents that I read, I see over and over again that companies want to have an efficient, agile and responsive supply chain. However, when I ask them to define what this means, they look at me with a blank stare. There are no industry specific definitions for the terms “efficient,” “responsive,” and “agile.” They need to be defined.
- Initiate Continuous Improvement Programs in Demand Planning and Focus on Forecast Value-Added Analysis. My advice for all is to stop trying to get perfect on imperfect numbers. Instead, measure bias and error and try to reduce it, but design supply chain network and inventory systems to use the “probability of demand” not the “absolute number.” I am a big fan of Forecast Value-added Analysis. It is explained well in Mike Gilliland’s book, the Business Forecasting Deal.
- Understand Your Supply Chain DNA and Build Supply Chain Potential. Each supply chain has its own supply chain potential. Leadership in the supply chain needs to drive the right mix of strength, agility and balance while managing the trade-offs of customer service, forecast accuracy, inventory management, costs, corporate social responsibility, and asset utilization. This is easier said than done. Supply chains are complex. The trade-offs are not intuitive. To meet this challenge, I recommend that companies invest in network and inventory modeling technologies. One company’s work that I am impressed with in this area is General Mills. They are using Llamasoft’s new Supply Chain Sherpa (application on tablet) to help teams better understand supply chain trade-offs in decision making. For more on the work that they are doing check out this YouTube video.
- Go Horizontal. By now this theme may be like beating a dead horse for the reader, because I know that I hit it hard and often. However, it is worth noting that the processes of the last decade were vertical supporting the strong silos of make, source and deliver. To build the end-to-end supply chain from the customer’s customer to the supplier’s supplier these strong vertical silos need to be connected by horizontal processes. The most common are revenue management, sales and operations planning, supplier development and Corporate Social Responsibility. Without strong horizontal processes, you cannot achieve balance or drive agility.
- Processes Are Evolving. We Do Not Have Best Practices. Instead, We Have Evolving Practices. I started my career as an industry analyst believing that we have “best practices.” After studying the evolution of practices for the last ten years, I now know that the practices are evolving. It is like riding a moving sidewalk. They evolve right underneath our feet. I hope that the book gives you and your teams some perspective for the journey.
As for the pig and the elephant, my lips are sealed. Their stories lie deep within the book. They are light-hearted stories that I hope that you can use to better understand how to drive supply chain excellence. They enrich the story of Bricks Matter. To learn more, you will just have to read it for yourself.
On a side note, I am now building training modules that will launch with the book. Each chapter will have interactive training and will come complete with experiential exercises. The training is designed for teams that want to learn more about what drives supply chain excellence. You can follow the development of the training modules through the Supply Chain Insights Community that launches on September 5th, 2012. Let me know if you would like to try it out with your team.
This week, I have a week at home to write reports. Look for three new reports to go up on our website this month. We publish reports openly on SlideShare. Let us know your thoughts. We would love to hear from you.