What’s on the minds of future business and supply chain executives?

Tuesday afternoon, I took a short road trip from Raleigh to Burlington for a keynote I was presenting at Elon University on Global Supply Chain issues. I’ve given speeches to executives around the world on just about any supply chain topic you can name, but I particularly look forward to interacting with young folks and finding out what’s on the minds of our future business and supply chain execs.

The students at Elon University didn’t fail to deliver! Questions ranged from fuel consumption, carbon footprints, implications of outsourcing, the U.S. losing manufacturing jobs, automotive industry viability, China being an open market for U.S. goods, China pushing manufacturing jobs to Vietnam, and more. These are all difficult and important questions that will certainly affect everyone’s future.

The most memorable exchange that took place with a student was in response to a statement I made on China being a capitalistic country, not a communist country. "What are the benefits of single party rule?" the student asked. And my response was that they get things done with little debate. This was followed by, "What if what they get done is not properly looking at human rights?" I responded by pointing out that I am a supply chain guy, not an ethics guy, so I am not sure that I’m the best person to ask about human rights.

I do know that human rights are a trade off. For example, a family lives in a house that blocks the expansion of a much needed highway and maybe even a spotted owl lives in the backyard of the family’s house. In the U.S., we do 7 years of study and even then probably do not build the highway. In China, they quickly build the highway. Being a supply chain guy, I like the highway as it provides for the improvement of life for many individuals and reduced transportation costs for many companies. Business is full of trade-offs, and our job is to weigh these trade-offs and make good decisions.

I have no doubt that this sharp group of students will be successful in their future career paths, since they are already on track with learning the prerequisites of what it takes for supply chains to be global in the 21st century.

For more information on my keynote, check out the Elon website:

http://www.elon.edu/e-net/Note.aspx?id=935471

Jim

As with many of the phrases we use in business and in our lives, I think that sometimes when the terms 'benchmarking' and 'best practices' are brought up, their meanings aren’t getting through.

That's why I chose these two terms for this recurring post feature I've got on my blog to examine jargon. Every once in a while, I'll be looking at the words and phrases we use in business and pointing out their real meanings. These are meanings that tend to get lost over time and from constant usage.

The phrases "Benchmarking" and "Best Practices" are in danger of becoming meaningless. But to the contrary, they are so very important! Why?

For the answer, let's consider Archimedes' bathtub. He's the mathematician from ancient Greece who exclaimed "Eureka!" after getting into a tub and noticing the water level rising – which made him realize that volume could be calculated in the same manner.

This story may only be a legend. But it helps to remember that these kinds of "ah-ha!" moments are really exciting when they happen. It's possible to improve operations by benchmarking and best practices, and when efficiency and cost savings are found along the way, it's really rewarding.

The really good part is that you don’t have to wait for the knowledge to come to you through random inspiration like Archimedes. By benchmarking your operations and applying best practices, you can control what’s measured and forge your own improvements.

Benchmarking and best practices require not only innovation, but also being a part of that innovation. When someone has a new best practice for some operation that upsets "the way we do things around here," it is definitely time to pay attention. New and better ways of doing things takes effort and special consideration, because it's easy to settle for the usual process. That's why it's important not to lose the meaning of these phrases. When we talk about best practices, we are talking about sharing the personal discoveries and progressions that innovate our work and our lives.

These are the Eureka moments that really make our careers interesting, and I think, satisfying and rewarding.

In the podcast I host, I did an installment that covers benchmarking and best practices and the reasons that companies should be incorporating them. I discuss a reaction that I got from an executive about benchmarking and best practices. Not everyone embraces the idea immediately, as I found, but eventually, he saw how useful they truly are. I also define these terms further and talk about the Supply Chain Consortium, the benchmarking and best practices forum that has a lot of great members like Target and Ingram Micro. You can listen to it or read the transcript here:

http://www.tompkinsinc.com/podcast/transcripts/10-21-08_podcast5_supply_chain_story.asp

Lastly, if you have had an "ah-ha" moment lately, I hope you will share your experience by commenting about it below. I also hope the next time you hear "benchmarking" or "Best Practices," you will think of it as the bottled lightning that it is instead of just another piece of meaningless business jargon.

My last post touched on the fact that the cruise that my wife and I are on was interrupted by the ship’s broken engine between Progreso and Cozumel, Mexico. That series of adventures presented a few insights into the responsibilities of the onboard leadership versus the corporate leadership of the cruise line.

Now I feel compelled to look at this event from a totally different viewpoint – the aftermarket supply chain perspective.

My wife and I occupied the most forward suite on the 11th deck, immediately adjacent to the bridge. During daylight hours about 50% of the time as we go to/from our room, we see a crew member in a smart looking white uniform with bars on his or her epaulets going into or out from the bridge. I have asked several of these white uniformed folks (to include the Captain and Chief Engineer) a series of questions over a four-day period, and here is what I learned:

Question: What happened with our engine?

Answer: A turbocharger on one of our four engines went out and needed to be replaced.

Question: What kind of engines do we have?

Several Different Answers: Russian, Swedish, Norwegian, Italian and German. Twice I got a brand name, one sounded Polish and the other German. So who knows?

Question: What do we do about repair?

Answer: We will get it fixed in Key West, Florida.

Question: How long will it take to repair?

Answers: Anywhere from 3 hours to 2 days.

Question: Where did the repair turbocharger come from?

Three Answers: The United States, the manufacturer, but mostly "We have no idea."

Question: What is the procedure to order spare parts and what parts do you carry on the ship?

Again, Three Answers: Corporate decides, no parts on ship, but again, mostly, "We have no idea."

Question: What is the cost of mechanical failures to the cruise line and how often does the ship experience maintenance problems?

Two Answers: Either the politically correct, "Costs are very low and it almost never happens," or the more truthful, " We have no idea."

So, the conclusion I reach here is that the knowledge of the aftermarket supply chain on the cruise ship is very similar to the knowledge of the aftermarket supply chain for most technically oriented sophisticated equipment. Not much. This continues to surprise me in industry after industry.

Why does it surprise me? First of all, the costs are huge. According to the Aberdeen Group, aftermarket spare parts and service account for 8% of the annual GDP of the United States. This is over $700 billion/year in just the United States, and obviously this is a global challenge.

But back to our cruise ship for a moment. I cannot imagine the complexity of rerouting our ship, eliminating two ports and being off our original itinerary for five nights out of a 10-night cruise. In addition, the cruise line has given each guest a $150 onboard credit and a $500 future cruise credit. So, contrary to what my survey indicates, this was obviously a very expensive mechanical failure.

Secondly, the complexity of the aftermarket supply chain is great. In our aftermarket supply chain practice we include: service logistics, fulfillment services, end-of-life manufacturing, asset recovery management, refurbishment/screening, depot repair, warranty management, customer service, environmental issues, IT process management and recall management.

The issues of storage network, global transpiration, inventory planning, demand management, customs/duty, distribution center operations and global sourcing all come into play.

So, I’m really not sure what the white uniform crowd with the bars on their shoulders should know about the aftermarket supply chain, but I do know up close and personal that this topic is really important. And a nice sidenote – I even impressed my wife that I knew something useful about how to fix the boat. Next trip, I will pack a spare turbocharger.

Go!Go!Go!

Jim

STORY 1: My wife and I were just sailing on a cruise ship at 43 knots/hour between Progreso and Cozumel, Mexico. At around 11 PM, the ship significantly slowed. As we turned in after a long day of touring, I did not pay much attention. However, the next morning at 8 AM when we were supposed to be arriving into Cozumel, there was no land in sight.

We arrived at noon. At 1 PM the Captain announced we had an engine problem and we were going to stay overnight in Cozumel and we would have a revised itinerary for the whole cruise at 4 PM.

Later that evening, I spoke to the Captain and he was clear: He was fully in charge of driving the vessel, but he was in no way involved with the decision process on repairing the ship, with the revised itinerary or even with what was wrong with the ship (I will do another blog post on the ship’s aftermarket supply chain).

But the answer to the question, "Who is in charge here?" for story #1 was clearly not the Captain of the ship, but Corporate.

STORY 2: On February 11, my wife and I and 22 other folks took a 49-mile bus tour through Belize (used to be British Honduras) with our very smiley tour guide, Donna, to arrive at the New River boat terminal in Orange Walk.

At 10 AM, we boarded a 40-passenger river boat (twin 60 HP engines) for a 31-mile trip to the Lamanai Ruins. It was a great river trip full of wildlife and history.

At 11:30 AM, our boat had engine problems and we significantly slowed. Donna worked with Michael, our river boat , and we traveled at 50% of top speed to our destination.

While we ate, Donna got a replacement boat sent to us. The answer to the question "Who is in charge here?" for story #2 was clearly Donna.

STORY 3: Donna did a great job of the tour of the ruins – we saw three temples, a ball court, an amphitheatre and even wild monkeys. We boarded our replacement boat (twin 100 HP engines) to return to our bus. We went about 5 miles and the steering on the boat went out.

Donna got on her phone, and 45 minutes later up roared our second replacement boat (twin 200 HP engines). We flew back to Orange Walk. We quickly returned by bus to our still partially broken (3 out of 4 engines) cruise ship.

We arrived just 15 minutes before the ship’s departure! A great excursion. The answer to the question, "Who is in charge here?" for story #3 was clearly again, Donna.

So, in STORY 1, some Corporate Group in Florida made the decisions and we on board were kept in the dark, and in fact, still have a broken ship. In Stories 2 and 3, Donna (with short, quick communications while keeping us all fully up to date) got us back to the cruise ship safe and happy.

And what is the point? I find it amazing that a Captain of an 800-person cruise ship is not engaged in the decision process of "his" cruise ship, but a tour guide of a 25-person excursion is the alpha to the omega of the decision process.

Now, I am not comparing the complexity of running a cruise company with running an excursion, so this is not the point. The point is, "Who is in charge here?" where the here is everywhere.

Just think about it: Who is in charge of:

* That peanut factory in the news last week from Georgia? 

* Deciding how to structure the economic stimulus package?

* Pursuing the arrest of Michael Phelps for smoking marijuana?

* Deciding if your company should install its own ERP or utilize SaaS?

* Transforming your supply chain from regional to global?

* Deciding if Barry Bonds or A-Rod should play baseball this summer?

I really wonder about the roles and responsibilities and the organizational structure & design of the decision processes that surround us. What are the implications of these decision processes on how organizations function, or do not function? As we pass through our days, weeks, months and years, who is making the decisions that impact you, me and our loved ones. Who is in charge?

I think it is really important that we have the right people making the decisions. This impacts us all, and if not done well, it will result in bad decisions being made. So think about the things around you: When are you in charge? If you are not in charge, who is? If this is not right, what do you do to change it?

And what happened with the cruise ship and engines? Stay tuned.

My wife and I got on a plane last week and flew into Fort Lauderdale to board our ship for a 10-day vacation of the Western Caribbean.

At our first stop in Progreso, Mexico, we took an excursion that promised flamingo watching and tours of Mayan ruins, a Mayan Cemetery, a currently occupied Mayan Home, and the Dzemul Church. We entered the bus and our tour guide welcomes us and tells us his name is Josue Ayadel Manuel Camona Tapia, but that we should just call him "Joe." He introduced our driver as Raymundo Juan Pedro Antonio Eduardo Vega Toncha but we should just call him "Rocky."

The next thing that Joe told us was that the bus would be taking us on a 6-mile trip to the end of the pier and that the Progreso pier is the longest in Mexico. He then went on to explain that parked beyond our ship was first the container yard and next the salt loading facility, and then at the end of the pier sat the fuel export loading position. Joe then entered into a 20-minute presentation on the importance of exporting oil, salt, minerals and oranges and importing virtually everything else.

He went on to explain how the port functions and about the container traffic on the highway from the heart of Mexico to the Yucatan Peninsula. I thought – Wait a minute, I am on vacation and the most important thing Joe wants to tell me about is the global supply chain and how important it is to the people in this part of the world? Very cool!

Rocky does a great job driving, but unfortunately, we can't find any flamingos or anyone living at the Ruins. Joe had two explanations about where the Mayans went when they all disappeared:

1. Traders from Europe exchanged small pox for syphilis with the Mayans and the Mayans all died.

2. The Mayans were farmers who got tired of eating vegetables and moved to the sea to eat fish.

Funny, seems like Joe knew more about the supply chain than the Mayan culture.

I also learned something interesting about cube utilization at the Mayan Cemetery. Families reuse the burial vault for many family members. So dad dies, they push aside Grandpa’s and Grandma's bones and place Dad in the vault. Then when the next generation dies, they do the same thing again, and so on. It must get really crowded in the vaults.

But then we visited a Mayan home and I found out that in the 150-square-foot living room (daytime) and bedroom (nighttime), eight adults and two children live. The home had three out sheds – one for cooking, one for bathing, and then of course the necessary outhouse. In the main room they had electricity (a single light bulb) a refrigerator, a TV and a big boom box. Not sure if the Mayan house or the vault had more room per person.

Then at the Dzemul Church, they were so happy to see us that the children sang and danced. They even gave us lunch. It was a very good education for the children on capitalism, since I think my wife dropped $20 into the hat that this cute little Mexican girl was holding. On the bus trip back, Joe and Rocky sang. Sounded kinda like country songs to me. But they told us they were traditional Mayan songs about leaving the farm and going to the sea.

As we approached the pier, Joe told us more about cargo ships and also about how Rocky wanted to drive an 18-wheeler. I guess this global supply chain stuff is here to stay because even on vacation, you can’t get away from it.

Fun in the sun!

Buena suerte and adios (for now),

Jim

I just saw that Supply Chain Digest's editor has put out a list of predictions about the supply chain for 2009. They did this last year too, and it's an interesting feature. You can check it out here: http://www.scdigest.com/assets/FirstThoughts/09-02-12.php  

As I was preparing to leave for my "vacation," (more details on this adventure later), I was thinking about a business trip I took a few months back. It was less than pleasant. I was stuck in London at the airport. My flight was canceled, and I had 40 things on my to-do list.

One of them was to prepare a podcast, which I did right there in the airport. At the time I was thinking about how I was going to get everything done, which made me ponder how executives of global supply chains prioritize.

That's what the podcast is about, and here is where you can listen to it and read the transcript.

"Identify the Correct Supply Chain Opportunities" at:
 http://www.tompkinsinc.com/podcast/transcripts/10-07-08_podcast4_supply_chain_opportunity.asp

In this podcast, I ask the question: "Was there something even more important I should have been doing that wasn't even on my list of 40 items?" I hope you take a minute to look at your to-do list (I'm sure you have one, right?) and ask yourself this same question.

It is easy to overlook the strategic goals and core competencies that are the real reasons your career, your company or your industry exists. What are some of the essential things you could be doing instead of sinking your time into the little details? Things like:

- Become a mentor to others.

- Take a look at the vision statement of your company and see if it should be evaluated again (or create one if it's not there).

- Look at each item on your to-do list and ask yourself what tangible goals each task is accomplishing. See if you are truly on your way to those goals, or if you're just going through the motions.

I hope to hear from you about your "big picture" goals in the comments. Hope you enjoy the podcast, and as I promised, more on my mystery "vacation" coming up soon!

Jim

It’s unfortunate and maddening that we are in a global recession that will almost certainly deepen before it improves. Government stimulus legislation and intervention into financial institutions, at whatever level it ends up being in the end, will likely affect the economic downturn’s momentum in various ways but not completely cure it.

So where does that leave us? Folks are definitely hurting. But with the right attitude, I hope that it will eventually leave the world with a greater understanding of what happens when we let ourselves become complacent with old ways and refuse to realize that there must be some sharp, treacherous rocks hidden beneath that pretty river (as well as some trash and a few old tires and shoes!)

And, coming at this from a purely philosophical note, I hope that the business world realizes that when the river is low, that it is the best time to jump in and establish your own rocks in the river.

Oftentimes, it takes a crisis to reveal the bumps and warts that are hidden underneath what previously appeared to be a successful organization. The Bernie Madoffs of the world need to go away so that the honest, well-managed organizations are allowed float to the top.

This also reminds me of the big tree that fell in my backyard recently after a bout of heavy rains. It was old and blocking out sunlight and nourishment that the younger trees needed to thrive and grow. Therefore, I could not really feel badly about the tree because its death represented new life, and so it is the same in today’s business world.

So instead of feeling bad about the Madoff mess or the tree that has fallen, we should celebrate the renewal that comes from casting out the old and bringing in the new. Think of that popular movie "The Lion King" and the circle of life – it’s the same principle.

Now is an excellent time to celebrate the demise of old schools of thought and ways of doing business and usher in smart strategies and processes. What do you think, and what are you doing to "put new rocks in the river and plant new trees?"

Go!Go!Go!

Jim

Here I go again. Someone mentions globalization, and I find myself on my soapbox, adamantly trying to get folks to realize the positives of a global economy.

But this time it's a little different because a lot of others (most of them smarter than me) are now realizing how interconnected global economies are and understand the need to make joint decisions.

The dismal economic situation has not only impacted large, powerful nations, but it streams all the way to poverty-stricken countries as well. It is a global problem, and we need to come together as a global community to create global solutions. In doing so, we can create a brighter future not only for business and commerce, but also for our children and our children's children.

Although there has been much talk about globalization -- a fair share of which has come from me, as we know -- it seems that the concept of globalization was not and has not been clearly defined throughout the world.

The U.S. is a strong country, built on capitalism, but neither we nor other powerful nations can solely provide the solutions to this economic problem. We need to come together to determine and weigh the risks and benefits of potential solutions.

We've made great strides already, with unprecedented cooperation among nations. And it's up to all of us to pull ourselves up by our bootstraps and build a secure future so that we do not find ourselves in this situation again.

Looking at the long term from a global perspective presents a paradigm shift for many. It's an intricate picture with more complexities, but this is what we need to move forward and create a promising, successful, global future.

What got me up on my globalization soap box was that just this past week, the world's business and government leaders came together at the World Economic Annual Forum in Davos, Switzerland to discuss solutions to the global economic crisis and other key issues of worldwide importance. The meeting closed with a call for a "new brand of collaborative and innovative leadership."

Amen! I'm glad to see our world leaders moving in the right direction and creating a path for everyone to follow. I am now eager to see business leaders accept this challenge and adopt a new brand of collaborative and innovative leadership within their global supply chains.

We are the world and globalization is here to stay. Let's use this new awareness to our benefit.

Go!Go!Go!

Long-distance relationships are always tough. Even in these days of instant messages, Blackberry addictions and computer conferencing, big things can and often do get lost in translation with your suppliers.

The fact is, the more distant the supplier, the more important the relationship becomes, but in practice, the more distant the supplier, the weaker the relationship.

Since China has become North America's preferred overseas destination for low-cost sourcing, it seems like the perfect strategy, right? The North American company and consumers get what they need at lower costs, and the Chinese manufacturer/distributor gets the business it needs. Everyone is happy, right?

But there are clear signs in the business world that this honeymoon is over. Why? Because the most significant part of Supplier Relationship Management (SRM) -- the actual Relationship -- has either not been fully developed or has been insufficiently nourished in order to thrive. SRM goes to the heart of successful Supply Chain Partnerships, and in China, Guanxi is at the heart of any business, government or personal relationship.

If you don't understand Guanxi, then you have no business doing business in China. Click here for a great post about the term, "Guanxi for foreigners," in the China Business Blog and Podcast. Loosely translated as "relationship," it really goes way beyond that meaning. With suppliers, Guanxi is a general and deep type of understanding between two entities in which both are aware of the other's needs and always take them into account. It's an ongoing process and often flows on a more personal level than Westerners would consider a typical business relationship.

To source well today, it takes communication on the Guanxi level. It also takes forging a strong supplier relationship while focusing on building a solid global supply chain. Consider these two recent situations, which I learned about first-hand from executives who do major sourcing from China.

Example #1:

The head of global sourcing was nervous. Her company had only one source for a key component that was coming in from China.

 

Supplier A had done a good job, but from time to time had trouble meeting schedule. The head of global sourcing contacted her agent in China and requested that alternative sources be identified, so as to minimize her risk with Supplier A.

 

After a long negotiation and qualification process, two alternative suppliers (Suppliers B and C) were identified. Each was given about 25% of the volume. This increased costs but gave the head of global sourcing a sense of security.

 

When volumes increased, the company hired a China-based consulting firm to do an assessment of the three suppliers. After some digging, the consultant found that A, B and C were all owned by the same firm.

 

Now, I ask you, how do we expect to source well if we do not have a relationship with the firm with whom we are sourcing?

Example #2:

Out of frustration, a vice president of supply chain for a firm headquartered in North America worked through the entire weekend on a detailed schedule of the exact SKUs and quantities he needed for the next 12 shipments from the company's distributor in China.

 

Shipments up until then had been way off the mark, but the vice president believed his exact instructions would solve the problem. On Monday morning, he emailed these detailed shipping instructions to his contact in China.

 

Sixteen weeks later, in came the first of the 12 containers. The VP went to the warehouse as the container was being unloaded and was shocked to see little resemblance between his email instructions and the shipment. The second and third containers were also not to his specifications.

 

Perplexed and aggravated that all of his work had been for naught, the vice president called the distributor in China. He asked the supplier why his detailed directions were not being followed, and was surprised to learn that the distributor doesn't bother with email, and probably never saw the detailed instructions.

 

Quality communications are not defined by what you say or write -- but by what the person you are communicating with hears or reads. An effective global supply chain requires quality communications, and the definition of "quality communications" varies from culture to culture.

 

So what is the solution here? In the North American business arena, SRM is often perceived as the application of SRM software to enhance Supplier Management. But when crossing the ocean, that is not the case, SRM is not about Supplier Management, but the Relationship. Of course, there is SRM technology that is useful for facilitating communication between suppliers and companies, but true SRM with China is a one-to-one process.

SRM in today's global marketplace is simply not about a company lining up all their suppliers and forcing them through the implementation of software. It's about a tailored approach to SRM – emphasizing the Relationship – and understanding your supplier partner's ways of doing business.

I'd like to hear what you think about global sourcing. What problems have you encountered, and how are you solving them? Are your suppliers in China, and if so, how's the Guanxi?

Jim