The Center for Creative Leadership recently had a very inspiring piece in their newsletter. It talks about how effective leaders really need to have “vision” to provide guidance during an economic slowdown. This piece dovetails nicely with the ideas in my Bold Leadership book, for those of you who’ve read it. 

It’s a “no brainer” that inspiring a shared vision is a fundamental practice of inspirational leadership – since inspiration has to be at the heart of it all. To act on this practice, imagine a better future for your company. Think big and think positively. The sky is the limit. Once you have done that, you can’t keep it a secret. You need to communicate the future enthusiastically and passionately with your constituents until they share not only your vision for the future, but also your enthusiasm and passion. So, make these two commitments: 

Envision an uplifting and enabling future.

Enlist others in a common vision by appealing to their values, interests, hopes, and dreams. 

I absolutely agree with CCL’s list of tactics for leaders to share their visions. You must be genuine and demonstrate knowledge and commitment beyond just a few words to lead through difficult times. Folks do not want to follow someone who doesn’t believe in themselves and what they are trying to accomplish!

They want someone who is:

Honest – You’re being measured by what you say as well as what you do. So, “practice what you preach.” 

Competent – Be capable and effective, ask good questions, note your achievements, create a winning track record, and develop your leadership skills.  

Forward looking – Be the “magnetic north” and let folks know what they are getting into.  

Inspiring – Be passionate, enthusiastic, energetic, and positive. Be a cheerleader and let your confidence shine. 

When you are all the things listed above, you are also considered credible. Having high credibility, means that those following your lead will be proud to be part of the organization. They will have a sense of ownership and a strong team spirit. More than ever, we need these credible, inspirational leaders in today’s marketplace. Check out the post on the Center for Creative Leadership’s site. 

With so many potential changes coming our way in the transportation industry, I asked one of our best practices experts, Chris Ferrell, Associate Director of the Supply Chain Consortium, to share with us more information on a hot topic that has recently come to my attention: a proposal from the American Trucking Association that, if passed, will change the size and the amount that truckers can carry in one haul.

I welcome Chris as my first guest blogger, and here’s what he had to say.

Go!Go!Go!

Jim

____________________________

So far, 2009 has been shaping up to be a significant year for the trucking industry. Although there is a lot less freight available due to the economic downturn, fuel prices have dropped precipitously and the recent stimulus bill pumped $100 billion into shovel-ready projects designated for national infrastructure. Beyond those projects, the National Highway Bill – the primary piece of legislation that determines where and how money collected from the federal fuel tax is spent – is up for renewal.

However, the estimated cost of this highway bill is expected to be about twice the $286 billion cost of the most recent bill from 2005. So, how are we as a nation going to pay for all this? And how will all this affect businesses and their supply chains?

Oddly enough, a group you might expect to be holding out their hand, is in fact holding their hand up. The American Trucking Association would like to see some adjustments made to the laws that govern the maximum weights and lengths of commercial vehicles. I don’t want to bore you with the actual details of the proposed bill (see more in this PDF), but if even a few of the seven proposed measures are implemented, there are tremendous efficiencies to be gained. And trucking companies are more than prepared to share some of the productivity to help pay for everything. To see the seven measures, go to this article Tompkins Associates published in the Supply Chain Edge newsletter with more details.

Preliminary results from a truckload shippers’ survey that the Supply Chain Consortium is currently conducting suggest that the average savings the seven proposals would generate for total transportation budgets is about 7%. That’s huge!

Even if you’re not a shipper who has ever weighed or cubed out a truck, you should consider supporting the initiative. You see, the ATA’s weights and lengths proposals have the ability to help solve a number of problems on Main Street as well as Wall Street.

Allowing shippers to load trucks to a higher weight limit means fewer trucks on the road. Who’s in favor of a shorter and less congested rush hour? Concerned about U.S. dependence on foreign oil? How about CO₂ emissions? Shipping the same amount of product on fewer trucks would reduce all of these.

Depending on your perspective, longer or heavier vehicles could even make the roads safer. This is a touchy subject that is a bit counter-intuitive, so let me explain:

While the laws of physics very clearly demonstrate that it takes longer to stop a heavier object when comparing it on a one-to-one basis with a lighter object, the trucking industry would tell you that the most accurate predictors for accidents over time has been miles traveled and driver experience. So the fewer miles a truck (or trucking company) is logging, and the more experienced the driver (or driver base) is, the lower the frequency of accidents becomes.

But let’s be honest, big trucks can be intimidating, especially when you’re right next to one on a windy day. And the politicians who aspire to long careers in Washington D.C. are terrified of an accident involving the proverbial school bus full of children and one of these longer, heavier vehicles.

Even some shippers who would stand to benefit financially from the "Weights and Lengths" proposals are concerned about this. A friend of mine from college who runs the private fleet for a large national retailer told me that while his company favors the bill, they won’t lobby for it directly lest one of their tractor-trailers with their logo on it is involved in an accident. I don’t know what the answer is, but it seems like the benefits of the proposals are significant enough that we should not dismiss them based on hypotheticals.

Personally, I think the safety concerns of longer, heavier trucks, while real, will more than be offset by higher quality drivers and fewer trucks. And the fact that it could simultaneously increase corporate productivity, raise taxes to pay for much-needed infrastructure investments, and reduce congestion, fuel consumption, and CO₂ emissions makes it a slam dunk. But that’s my opinion. What do you think?

Once in a while in this blog, I like to point out jargon we use so frequently that we sometimes forget its real meaning. Brace yourself, because today I'm going to be looking at the word "optimism."

But wait ... is that word even a part of our vocabulary any more? 

For a lot of us right now, the glass is looking half empty. It may even seem like it has a hole in the bottom and there's nothing in there at all. The unending layoffs, the recession-related news, the unending problems in the credit markets and the global economic performance are creating very challenging times as businesses scramble to respond. Many of us can't see the half-full part in that glass anymore, but it is there though. Really!

An economist from right down the road from me at the University of North Carolina-Charlotte recently went on the record with MSNBC with his diagnosis that the recession's worst part is over.  In fact, we at Tompkins are also seeing positive signs that we have hit bottom and the upside is coming soon.

Understanding how to win after the recession needs to be something business leaders are envisioning right now. Think of it this way: "In the face of an economic meltdown, you can retrench, pull in your horns, protect your balance sheet, and preserve cash. Or you can realize that this is about humanity screaming for change." This is a quote from Sam Palmisano, CEO of IBM, from a December 2008 interview with Fortune magazine. Changes are coming along with the recovery, and leaders need to know how those changes will affect a business's vision and strategy.

Get back on the track toward optimism: Do something today that makes you stronger for the future. An end to the recession is coming to the global marketplace, along with all the changes that humanity keeps screaming about. Your competitive edge depends on responding to these factors in the near future and understanding how the world is not only flat, but also curved and unpredictable. I will be covering more on how to deal with the recovery in upcoming blogs.

How do you think companies need to respond once the recession is over or has ended? What about your organization?

Go!Go!Go!

The China Law Blog recently put up this post about why you need to tour the plant in China before you place an order. This brought to mind something that happens in the new book I wrote, Caught Between the Tiger and the Dragon, that is due out in April.

In the book, the main character, Rich (CEO of a lingerie manufacturer) attempts to do his best to plan where to produce and buy products in China. But the people running the show at the private equity firm that his company's involved with won't even pay to let him travel there.

In fact, a lot of problems that Rich encounters relate back to this sight-unseen ordering from half a world away in a place that he has never even been. The private equity firm wants to save money by not sending Rich to China, but it ends up costing them a great deal more money in the long run. Speaking of cost reduction, I recently did a new podcast with Steve Ganster of Technomic Asia on smart and strategic Asian sourcing cost reduction, and you can hear it or read the transcript at http://www.tompkinsinc.com/podcast/transcripts/03-03-09-podcast14_asian_sourcing.asp  

Not being able to see the operation at work is a major problem that CEOs in real life face. In this post from the China Law Blog, they cover nine reasons why you need to see the plant for yourself. At the end the question is asked, "Can you think of a 10th reason?" I would like to add a 10th one: To find out how the people running things at the plant communicate within the manufacturing facility and with their customers.

Then in the future, for example, you will know to pick up the phone to clarify an order instead of relying on e-mail. I have heard horror stories from VPs and others in the business world who encountered avoidable problems simply because of miscommunication with China business partners. For example, a VP who just assumed that their suppliers used e-mail eventually found out the hard way that the suppliers hardly ever glanced at it, and the miscommunication really showed in the botched orders they eventually received. Add more reasons to the list in the comments below or see the post from the China Law Blog at: http://www.chinalawblog.com/2009/03/china_plant_tours_nine_reasons.html

It was a wild and enlightening five days in Europe – from the shop floor to the board room. I was there visiting our office in Germany, and we focused on 16 organizations in all, digging in and exploring their opportunities and challenges.

LSPs, manufacturers and distribution companies: It encompassed a wide cross section of companies from cosmetics, to washing machines, diesel engines to automobiles. I see the major challenges in Central Europe now to be the global economy and slow sales (of course), reducing working capital, supplier relations, cost reduction, supply chain optimization, merger and acquisition integration, etc. Amazingly, with only four exceptions, the meetings across Central Europe were identical to the meetings I have in North America.

However, I found four interesting exceptions that reflect basic differences in our view of business and the fact that we have something to learn from these differences:

1) Benchmarking and Best Practices

I noticed a European lack of sophistication on Benchmarking and Best Practices (B&BP) thinking. Very little participation in B&BP was found, and what was found was driven by financial benchmarks as opposed to operational B&BP. Also surprising was the lack of connection of using benchmarking as a guide to identify appropriate best practices to be implemented. Central Europe has a clear focus on continuous improvement, but a very cloudy focus on breakthrough transformations.

2) Change Management

The second variation that I noted between North America and Central Europe was the topic of change management. Overall, the European view of change management is much more evolutionary then revolutionary. The European view is to evolve from a very good operation to one that is even better – not through a stepwise transformation but rather through the evolution of continuous improvement.

3) Quality

The third difference relates to the enhanced importance in Central Europe on quality. Manufacturing quality vs. low cost country (LCCs) sourcing was a very active topic of discussion. In North America, this discussion is much less frequent since sourcing from LCCs is a given as opposed to the quality debate continuing. Two big observations here: first, North America has a more developed process for manufacturing outsourcing; second, Central Europe really does a great job on high quality manufacturing. So, Europe fully accepts LCC sourcing for underwear and athletic shoes, but for precision tools and equipment, they prefer the quality of "Made in Germany."

4) Real-time Control

Lastly, a difference that I expected to find and did was the prevalence of worldwide ERP systems, but I did not fully expect the inappropriate use of these ERP systems to drive real-time process control in manufacturing and distribution. Without a real-time process layer of middleware between the ERP and the equipment controllers, I saw several systems that had too much equipment and not enough immediate control and flexibility. In North America, we prefer to have more thought and less steel. And certainly, this provides us with flexibility not available in Central Europe with their harder automation.

It’s also interesting to categorize these four differences into two groups. The first group combines differences 1 and 2 and says that North America needs to enhance their thinking on continuous improvement and Central Europe should do the same on breakthrough transformations. The second group combines differences 3 and 4 and says that North America needs to return to an enhanced focus on quality, whereas Central Europe needs to enhance their middleware capabilities.

So, I had a great week of sharing various ways of thinking on supply chain and manufacturing. It is clear that with 90% of the issues being identical, the marketplace is global. Although there are some small differences, for the most part business in Central Europe is very much like business in North America. It will be interesting to see how both evolve in the next decade.

I’ve always heard that "slow and steady wins the race," but when you’re facing tough economic times, sometimes the rules change. Slow and steady are still part of the plan, but sometimes you need to act swiftly, like removing a Band-Aid.

I’ve had lots to say about approaching cost reduction aggressively and intelligently. And that should be your #1 priority. However, to reach your more near-term supply chain goals, there are certain "cost buckets" that present significant cost reduction opportunities. So, I say, "You need to take advantage of the benefits of the tortoise as well the hare to win the race." And before I forget it, I’d like to thank my good friend and colleague Gene Tyndall for identifying these buckets.

Here are five of these cost buckets that companies need to pay close attention to today in order to improve bottom-line results in the near-term.

1) Inventories: Talk about "decisions, decisions," something I usually say comically when choosing between simple items like strawberry or chocolate ice cream, or which shirt to wear. However this is a little more serious.

Although you have forecasts to make decisions about the amount of inventory to purchase or have on hand, these forecasts are always subject to error. Always! With the right knowledge and tools, this number can be more exact, saving you money and headaches.

2) Total Delivered Cost: This measurement captures all the costs that go into the product to reach its purchase point at the end consumer. While many of you may be measuring total landed costs, which is based on costs of freight, duties, taxes, and logistics from the source to the company destination, the key measure for determining pricing and margins is total delivered cost.

3) The Supply Chain Network: Check out your locations of production and logistics facilities. Fixed capital, operations, taxes, leasing expense, selling general and administrative expense (SG&A), and others are driven by the network. By rationalizing your global network, you may find savings in the operations at each facility, the routing of product flows between facilities, and in the ownership and operational management of the facilities through outsourcing or contract manufacturing alternatives.

4) Logistics Outsourcing: If done effectively, logistics outsourcing can reduce costs dramatically and remove assets (as well as liabilities) from the balance sheet. You may also see continuous cost improvements, especially with service level agreements, which create close relationships between clients and service providers and are geared toward efficiency and productivity gains.

5) Supply Chain Technologies: Although it can be frustrating at times, technology is a wonderful thing. Companies usually find near-term savings in rapid implementations, better use of existing technologies, and greater alignment of the technology enablers to operations. I can’t tell you how many times I have seen existing technologies not being fully utilized. I don’t like to see companies throwing their money out the window like this. If you don’t know the advantages, find someone who can help.

When the economy is down, I don’t want to have to pick between being the tortoise or the hare. I’ll take both, and I hope you do too. It takes a long-term strategic plan and a short-term tactical plan. And it’s really about crossing the finish line and coming out on the other side – not about who wins the race.

Go!Go!Go! But make sure your set your pace with near-term goals to have mini-successes along the way.

Every year or two, I like to write a book related to supply chains, business, or leadership. This past year, I have been working on a fun business novel that mirrors some of my own experiences. It is titled Caught Between the Tiger and the Dragon and will be out in April.

In my book, Rich Morrison, the main character who is appointed CEO of an American lingerie manufacturing company, is given very short notice that he has to outsource some of the company’s functions to China, as a cost savings measure . . . Sound familiar at all?

Rich overcomes many challenges along the way and discovers the importance of relationships and communication when partnering with companies in China, as well as in his personal life. This situation is played out across the U.S. daily, as companies learn to deal with cultural differences as their businesses go global.

I’ve seen first hand the ups and downs of conducting business in Asia, and the processes and ways of thinking that have yet to be perfected. So, I am sure that now is the perfect time for this book!

Since Asia and other low-cost countries are such a hot topic for businesses and folks are beginning to realize how truly global our economy is, I felt it was time to write a novel to help U.S. companies understand why some business fail and some succeed when moving manufacturing to China. And for many business leaders and decision makers, it will let them know that they are not alone in the problems they are facing.

I enjoyed using humor and suspense to tell such an important story and am looking forward to the book’s release. And I am finding that the business novel format is a really cool way to talk about the challenges that companies face today.

I’ll be blogging more about it later and providing some sample chapters. Meanwhile, do you have stories about outsourcing to China that you would like to share? I’d love to know what challenges you are facing in this area and how you are dealing with them.

Go!Go!Go!

Jim