Oct 14, 2009 | Demand chains, Management, Operations
If you want a prediction, go to the lady in the tent at the local fair.
If you want a forecast, talk to those who have an intimate knowledge of the drivers of the outcomes you are seeking to forecast.
Good forecasting is an iterative process, the more you do, the better you get, so long as you understand why the forecast is (almost) never right on each occasion it is done. Continuous improvement techniques are the core functions of good forecasting, and good forecasting is essential to smooth operations.
Aug 16, 2009 | Innovation, Management, Operations
Over the last 10 years in the farming operations that make up a substantial portion of my client base, the foundations of the decisions being made have been radically altered by the rapidly increasing cost of water.
Water productivity is a now common term, coined to describe the relativity of the return per unit of water used to grow differing crops.
Water is now a capital item, traded independently of the farming operations to which it was originally attached.
Is it too long a stretch to consider other productive inputs in a similar light?.
Electricity is produced by coal burning power stations, and is used in a variety of ways from domestic lighting to powering industrial manufacturing. What would happen if we started to make decisions about the power usage in the same manner we make decisions about weather we grow rice or stone fruit, by the value of the output for a unit of productivity of the base input, power, or water.
Decisions would then be made about the relative value of lighting an office block at night, and making another container load of widgets. Simplistic, but you get the point.
It may be a dumb notion, to be considering the relative value of the output per unit of electrical power used, but 25 years ago, so was considering which crop to plant based on the relative value of the output per unit of water.
The current debate about the fmanagement of greenhouse gas production, the balance between its total environmental and economic costs of production and the value of its use, and how that is to be integrated into a sensible economic framework has a long way to go despite politically motivated noises of certainty emerging from Canberra. As with most unknowns, it should evolve with experiment, and we should be hoping that the rules put in place now to satisfy expediency do not have an adverse impact on that evolution.
However, water is still a political and economic mess, so expecting the carbon debate to be any better will be a very big ask indeed.
Aug 4, 2009 | Demand chains, Innovation, Operations
The impact of current behavior of all who are engaged in an alliance on the perceptions and expectations that will drive the evolution of the alliance into the future is pervasive.
Success breeds expectations of more success, and failure breeds blame and retribution. Any alliance has its setbacks, so the latter influence often brings alliance development to a shuddering halt. Those engaged in addressing the challenges of alliance evolution for the first time often do so from the perspective of the types of assumptions made by economists and accountants, that of rational behavior.
Anyone who has spent any time dealing with a number of alliances has seen evidence that much of what goes on cannot be explained by using assumptions of rational behavior, it is far more influenced by what may be seen as irrational behavior, until a social psychologist becomes involved, then many actions become predictable as the vagaries of behavior are factored in.
I have previously noted the impact of an apparently irrational need for revenge demonstrated by Ernst Fehr an economist at the University of Zurich, in a game widely known as the “trust game with revenge” in which an apparently irrational need for what can be termed revenge, is demonstrated to be a hard-wired behavior.
This apparently irrational drive for revenge, in this context of alliance development is often just a minor bit of “pay-back,” for perceived slights and misbehavior, but it has brought many nacent alliances to an end.
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.
Jul 26, 2009 | Demand chains, OE, Operations
I recently wrote about the productivity of working capital, and my view that the productivity of the capital was a revised calculation that all businesses should consider.
Clearly, the best way to increase the productivity of the capital required to run the business, is to reduce the cycle time of processes in the business. Use inventory quicker, collect debts quicker, increase the throughput productivity of operational assets, reduce those activities that do not add to the customers experience.
All of those factors are internal to the business, and mostly we are pretty aware of them.
The emerging opportunity increasingly recognised by successful enterprises is the necessity to increase the collaboration between the sequential value adding points in a demand chain, by reducing the transaction costs that occur between firms in the chain. In effect, “Lean” for the supply chain, by reflecting the customers demand patterns back through the chain.
This is the core of the success of Toyota over 40 years, and as the world recession recedes, the enterprises tht emerge from the chaos will be different to those that went in, and there will be a far greater focus on transaction costs through the chain.
