Oct 18, 2009 | Demand chains, Management, OE
We can learn a lot about supply chain management from successful retailers.
To be successful, generally they have identified their logistics chains as a key source of competitive advantage and they work on it.
Their business model depends on having the stock on shelf when a consumer wants it, but with a minimum in reserve stock, and none “left over” that requires discounting or dumping to clear.
Li & Fung, the extraordinary Chinese supply chain manager who have had a key role in the boom in Asian sources fashion wear, Woolworths, the dominant Australian supermarket chain, and Spanish retailer Zara have all based their success on supply chain innovation supporting their service offer to customers.
A usual metaphor when explaining the Japanese Kanban system of managing “flow” through a process is of a supermarket shelf, a consumer takes one off, a replacement is delivered to the hole from a JIT flow from the supply chain. The appearance of a hole on a supermarket shelf is a physical representation of “pull” or demand, the basic building block of a chain that maximises demand chain efficiency, and builds a competitive advantage
Oct 7, 2009 | Leadership, Management, OE
Organisation charts almost always depict organisations as an equalateral triangle. It is a simple change in perspective, to see it with a third dimension, like the Egyptian pyramid. Suddenly, it is clear that the guts of the organization are largely hidden from view.
It also becomes clear that enterprises can really only work when there is engagement across the third dimension, with all the complication that engagement implies.
This simple act, of thinking about the organisation and how it works including the third dimension is an easy way to recognise the complications inherent in the management processes and decision-making necessary to make the thing effective. Cross functional co-operation then becomes an obvious necessity, not something mandated by someone with a good idea.
Sep 29, 2009 | Management, OE
One of my clients is currently undergoing a risk management exercise, pretty ordinary, albeit important stuff. List all the conceivable risks, rate their probability of occurrence, consider the impact if they occurred, and the consider the costs of mitigation. From that matrix, some sort of priority list for investment can be developed and implemented.
However, when we started considering the IT risk, we found ourselves confronted by an expanding list of considerations that seemed to grow the more we considered it. The pervasive nature of IT as it has evolved over the last 10 years has changed its risk profile in a profound way.
The boundaries between management functions have been blurred, as have the processes that drive manufacturing, procurement, customer management, and everything else where we routinely now use IT.
Even a simple IT failure is no longer isolated to the immediate functional area impacted by the loss of data, it impacts through the supply chain, and across functional areas in ways we had great difficulty predicting.
The message is simply that IT is sometimes easy to ignore, to treat as an expense, because it us so much part of the environment, but ignoring it is the worst possible outcome, instead, it should be at the front of discussions about investment (financial & human) productivity, process improvement, risk management and competitive advantage.
Aug 17, 2009 | Governance, Management, OE, Strategy
Return on Asset calculations as a realistic basis of performance measurement for many firms is rapidly going out the window.
On one hand we do the financial calculations, based on the accounting notion of tangible assets in the business, whilst on the other, saying that the primary assets of the business walk out the gate every night and go home.
This paradox should radically change the ways we measure the return on assets, it creates the need to find ways to consistently measure Intellectual Capital, not an easy challenge, but one that Directors and management need to start grappling with.
Consider, physical assets depreciate with use, but intellectual assets appreciate with use, so perhaps there is a measurement matrix in there somewhere, but probably fashioned by psychologists and anthropologists, rather than accountants.
Aug 2, 2009 | Demand chains, Innovation, OE, Operations
Standard project management tools are designed to manage a sequential series of activities typified by a building project. They do this very well, as the work flows are dependent on the completion of previous work that is done to well understood, almost generic specifications.
They are far less useful when they are set up to manage processes that rely on the production of information for their success, where iteration between different activities are required, such as those in a product development project or a value chain development and improvement process.
This leads to the conclusion that when developing such a project that requires the production of information to be successful, spend a bit more time in the planning stage to map the flows of information, particularly where there are known dependencies, as well as the work flows. This added investment of time in the planning stages typically yields huge returns during the implementation.
A simple question, asked over and over, can help:
“What do I need to know from other tasks before I can complete this one?”
Jul 27, 2009 | Management, OE, Operations
Operational management is becoming harder pressed to find reductions in the working capital required to keep the operations running, with the constant option of outsourcing, “off-shoring”, consolidation, and so on as the price of not running hard enough. Working capital numbers over time are a good measure of the cost awareness of your operation, but do not really address how productive the working capital is, for that you need a denominator in the equation.
Working capital is: Accounts recievable + inventories – accounts payable. If you add a denominator, you can get a measure of the productivity of your investment in working capital:
Working Capital Productivity= Working Capital/net sales. How much better to measure the productivity of the investment rather than just the amount of the investment.
