Jul 6, 2009 | Demand chains, Management, Strategy
Newton is one of the real genius’s of history, he promulgated a series of laws that form a key part of the foundation of following scientific success.
However, he did not get it all right.
“To every action, there is an equal and opposite reaction” he said. Any experienced negotiator will tell you this is nonsense in the context of a negotiation, where the reactions to a proposition are rarely opposite or equal to the proposition suggested.
A negotiation is a complex series of interactions that depend on the creation of perceived value, and the reflection of that value in some way, often in monetary terms, but not always.
My sister (in Trinidad) has just swapped a beautiful, highly equipped, 32 foot sloop with some finishing work to do, for a 45 foot steel hulled sloop with little gear, apart from a full suit of sails, but which can cross the Atlantic at will. No money changed hands, but value was created for both parties, because the other had what they each needed at the time, so a deal was done, and it had nothing to do with money. It was however, a complex negotiation about relative value, with the emphasis on what each could bring to the other, and still win.
Isaac did not consider the complications of game theory in his deliberations, but if he had, he may have put some caveats on his laws.
Jul 2, 2009 | Demand chains, Management, Operations
Supply or Value chains are essentially sequential, one activity logically follows the completion of the one prior, and in streamlining the timing and handover parts of a process, you can build great efficiency.
However, great leaps in performance will not come from incremental improvement in a sequential process, but from finding ways to complete activities in parallel, but this will require a whole different set of collaboration tools, to ensure that each parallel activity is working towards the same end point, using information that is consistent and complementary.
The exchange of information through the chain becomes absolutely essential as you move to reduce the cycle time and costs of activity sets in a chain by re-engineering the chain to progressively adopt parallel activities. Without essential information being far more freely available that is necessary in a sequential chain situation the whole exercise will be a disaster.
Simple first steps taken to “parallel process” can offer great improvement, but more importantly, they can be an indicator of what is possible, and a precursor of the sorts of information sharing capabilities that will be necessary to capture the promised performance improvements.
Jun 25, 2009 | Demand chains, Management, Strategy
Three things constitute the basis of decision making in most enterprises, Risk, Cost and Reward. Boiled down, this is what it is all about.
In a supply chain, each participant does its own assessment and comes to a conclusion about the balance between RC&R in their situation, and acts accordingly.
For a chain to work with maximum productivity, each of the participants needs to come to a bunch of conclusions that complement all the others in the chain, and rarely will this happen on its own.
In some manner, control needs to be exercised through the chain, and as most managers know, managing the things over which we have so called control is usually hard enough, without setting out to manage things over which we have no control.
The control cannot be applied, it must be accepted as consequence of being a part of the larger entity, the chain, which is a part of maximising the RC&R matrix for the business.
Jun 24, 2009 | Demand chains, Strategy
One of the hidden challenges in most transformations of a supply chain to a demand chain, is the alignment of the incentives through the chain.
For a demand chain to be successful, each point in the chain must see its own best interests best served by serving the best interests of the entire chain.
In a normal supply chain, each point sets out to maximise its own position, with little regard to those “upstream or downstream” of them, leading to gaming, which almost always produces sub-optimal outcomes.
Aligning incentives provides the opportunity to maximise the productivity of the resources tied up in the chain for all concerned.
Jun 17, 2009 | Demand chains, Management, Strategy
Nice thought.
Contracts are the usual form of defining an agreement, they are an enforceable substitute for trust that each party will keep his end of the bargain.
However, the web has made information so freely available, that the potential is for a substitute form to evolve, a form that calls for, and publishes performance data for all to see.
The ambient threat that non performance to an agreement will become public knowledge is going to become as powerful as a contract, as it will inform others that your business is not to be trusted. Similarly, the converse is true.
Will facebook replace a contact, perhaps not, but it may mitigate the current monopoly lawyers and the courts have on the process of agreement enforcement, becoming entirely more democratic and affordable in the process.
Jun 16, 2009 | Demand chains, Management, Marketing, Strategy
There is a theme in the demand chain category of this blog. Wherever I go, I see the power of information transparency to improve performance, not just in commercial situations.
There is an ongoing battle in Australian education for school scorecards, anyone who seriously thinks about performance improvement of Australia’s education system comes to the conclusion that information on current performance is a pre-requisite for improvement, but the bureaucracy, and the teachers union together, but for their own reasons are making it difficult, all in the name of our childrens education.
Bullshit. It is in the name of retaining the very comfortable status quo.
Similarly, a scorecard of hospital performance has been shown in parts of the US to have a dramatic effect on surgical outcomes. Won’t happen here, even with the seeming catalysts for change that are evident in several hospitals, Bundaberg in QLD and Campelltown in NSW amongst others.
In the event we ever get real transparency, where results can be seen, and lessons learnt, the productivity of public dollars spent on health care would improve dramatically.
Businesses and value chains that have used transparency as a management tool routinely see productivity double over time, and there is no reason the results in Healthcare and Education would not repeat that performance.
