Asia Logistics Wrap

Bob Ferrari on Supply Chain's Grand Challenges: Part VII

Continuing with Bob Ferrari's series on the 'Seven Grand Challenges for Supply Chain Management', this post will consider the seventh, and final, challenge.

For convenience, I will preface each post in this series with the 6 architectures of high performance supply chains. I want to keep pounding these architectures because I think they are very useful, at a strategic level, in framing any supply chain challenge prior to devising a proper solution.

Physical--the actual movements and flows within and between firms, transportation, service mobilization, delivery movement, storage, and inventories.

Informational--the processes and electronic systems, data movement triggers, access to key information, capture and use of data, enabling processes, and market intelligence.

 

Financial--the flows of cash between organizations, incurrence of expenses, and use of investments for the entire chain/network, settlements, A/R and A/P processes and systems.

 

Relational--the appropriate linkage between a supplier, the organization and its customers for maximum benefit; includes internal supply matter relationships throughout the organization.

 

Innovational--the means by which a firm identifies, prioritizes, and brings new product/service innovation to market.

 

Human--the means by which human resources and talent are recruited, deployed, managed and developed across the supply chain for greater performance

Challenge #7: A Global Shortage of Talent and Skills in Supply Chain Management

Having received my MBA from Michigan State in SCM, I feel that supply chain management education has made significant advances at many levels in the United States, and likely in Europe as well. On the other hand, education in supply chain management across Asia has a long way to go. For example, here in Japan, the focus is more on separately teaching each functional component of supply chain. Undergraduate programs in SCM at the leading schools are essentially non-existent, and the programs at the graduate level are more academic in nature. At the same time, SCM training within Japanese businesses is also more functional in nature. As a result, the general talent pool in Japan may have decent functional skills but a solid understanding of SCM is lacking.

Also, despite the strong SCM knowledge leadership in the US, I would guess that the majority of this talent operates within US borders. With more and more supply chains going cross-border for sourcing and distribution of products, global SCM knowledge will naturally increase amongst this majority group over time. But the minority that actually has operational experience in SCM on the ground in foreign environments, and that can transcend the US-centric experience of the majority of SCM talent, will be in high demand. Let's move to some of Bob's comments:

"Under the initial sponsorship of the Supply Chain Operations Council (SCOR), an ongoing multi-company effort is underway to address an industry-wide concern regarding the need for recruiting and retaining of supply chain talent over the next five to ten years. As many in our profession are well aware, we have reached an era of the globally integrated value-chain, where supply and demand needs can come from every corner of the globe.  Of further concern is a potential lack of uniformity among various global-wide academic institutions in the teaching of broader curriculum and the preparation of local new talent."

One way to develop talent is via the corporate-academia partnership:

"The origins of this initiative began in 2005 when IBM initiated a partnership with a select group of universities focused within supply chain management, requesting help in building a globally accepted competency and management career framework.  Since that time, companies such as Boeing, Intel, Molson Coors, Procter & Gamble and Whirlpool have joined in broader sponsorship of this effort.  Thus far, this industry diverse committee has completed a survey where 300 plus companies among seven different industries have provided input on supply chain process and skill needs required within their organizational teams."

I saw this partnership firsthand since Michigan State is one of the selected universities. Bob then highlights the results of the survey mentioned above:

"One of the observations of this survey reinforced the stated need.  "There are concerns about (supply chain) resource stability and the value of employees understanding of country-level idiosyncrasies, which only be quelled by building sustainable, local talent.""

SCM now is respected by students in the US as a field for professionals. SCM is cool. But in Japan, for example, many students think of SCM primarily in terms of its components--trucks, dark warehouses, etc.--that are quite far from being cool. In fact, the relative few who end up with logistics companies may not even know what SCM refers to in concept. Thus in Japan, middle managers with talent in supply chain are in high demand.

In the end, global SCM talent will understand how to apply a consistent framework of supply chain knowledge across borders, but with the ability to tweak and modify this framework based on local or regional conditions. As a team, both localized and cross-border talent must collaborate and coordinate for supply chain success. This is one-point where I disagree with the survey response above that states only local talent can satisify the requirements for country-specific knowledge. Supply chain managers must be challenged to develop at least a strategic understanding of the countries where their supply chains are located, or traverse through, and the regional context.

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I have enjoyed engaging Bob's commentary on these challenges and look forward to covering equally stimulating topics into the future.

Site Changes

As can be seen, I have been making some changes to the site visuals--the old green was kind of wearing on me and getting stale. This new style provides a much cleaner, sharper look while splitting up the side panel content.

I am Joe the Plumber

No, I am not making a political statement...but I have new pipes! Yahoo Pipes! that is.

Over in the right-hand column of this blog, the very cool Yahoo Pipes! tool allows me to "pipe-in" specified content filtered with custom configuration. In this case, I am piping in content from several blogs related to business in Asia. The tool pulls 25 posts from the list of sites I have configured and provides varying content upon refresh of my site.

Currently, it seems Typepad restricts my blog to one pipe, but I look forward to playing with this new "plumbing" to see what it can do and provide in terms of content customization. I encourage everyone to check this out for their own sites!

Bob Ferrari on Supply Chain's Grand Challenges: Part VI

Continuing with Bob Ferrari's series on the 'Seven Grand Challenges for Supply Chain Management', this post will consider the sixth challenge.

For convenience, I will preface each post in this series with the 6 architectures of high performance supply chains. I want to keep pounding these architectures because I think they are very useful, at a strategic level, in framing any supply chain challenge prior to devising a proper solution.

Physical--the actual movements and flows within and between firms, transportation, service mobilization, delivery movement, storage, and inventories.

Informational--the processes and electronic systems, data movement triggers, access to key information, capture and use of data, enabling processes, and market intelligence.

 

Financial--the flows of cash between organizations, incurrence of expenses, and use of investments for the entire chain/network, settlements, A/R and A/P processes and systems.

 

Relational--the appropriate linkage between a supplier, the organization and its customers for maximum benefit; includes internal supply matter relationships throughout the organization.

 

Innovational--the means by which a firm identifies, prioritizes, and brings new product/service innovation to market.

 

Human--the means by which human resources and talent are recruited, deployed, managed and developed across the supply chain for greater performance

Challenge #6: Articulating the Value and Consequences of Supply Chain Directly to the C-Suite

One of the things I like about describing supply chain management in terms of the six architectures above is its communication value. This framework can be used to drill down into the details of supply chain and can be used in stepping back to assess overall strategy. Both uses have value for different supply chain players: the former for those who execute supply chain strategy and the latter for those who set supply chain strategy. In the end, wherever there is a disconnect between the two the potential for a supply chain failure increases dramatically. This is the sixth challenge Mr. Ferrari addresses (highlights mine):

"Challenge six is an individual challenge to all who reside in our community, whether in sourcing, planning, manufacturing and distribution operations, transportation, or any other related function...Supply chain professionals rightfully believe that there are critical tradeoffs among the objectives for driving down overall costs vs. needs to improve service levels to customers, establish relationships with key suppliers, insure security within the supply chain, or improve agility in a rapidly changing business environment."

Later, Bob goes on to conclude (highlights mine):

"This challenge to members of our community, as well as to senior executives, is to continue to take responsibility and sponsorship of initiatives that broaden both individual, organizational, and cross-enterprise team skills that focus on the ability for assessing, articulating, and managing the contribution of supply chain management to the business."

Supply chain wake-up calls like the melamine incidents reach the C-suite quickly, putting the supply chain in an awkward spotlight. A C-suite executive without a finger on the pulse of supply chain might first ask "How could this happen?" Bob touches on this:

"The effects of global sourcing decisions with limited information related to the effects of these decisions are now an education to senior management on the importance of having a common understanding of the potential implications or tradeoffs of these decisions, as well as having continuous mechanisms for better mitigating potential risks. An increasing trend toward more centralized supply chain structure has also reinforced the need for broader analysis and decision skills."

Obviously, supply chain professionals must be proactive in ensuring that risks are thoroughly assessed in advance and this is something I have already covered. But the real key is ensuring that supply chain is an essential aspect of developing corporate strategies. Supply chain has generally made a dramatic shift in most modern economies from being viewed as purely a cost of doing business to being a source of additional profit. However, the best companies are going beyond that, treating their supply chains as a source of strategic advantage--which can come from higher quality and service levels just as much as, or more than, lower costs, and none of which should be considered an "either-or" or "zero sum" game.

Logistics of the Greencard

While visiting tdaxp recently, I learned that Dan's wife had received her Greencard this past March based on the I-485 Adjustment of Status (AOS) application. Since then they have unfortunately been dealing with problems with the lawyer they chose to represent them while going through the application process with Homeland Security. (It seems Dan has removed his original posts commenting on the lawyer's performance).

Interestingly, my wife and I also went through the same process this year and she also successfully acquired the Greencard. We have something in common with Dan and his wife in that I am American and my wife is a Chinese national (from Shanghai). I am surprised I didn't realize all of Dan's posts on this subject at tdaxp--I would have definitely asked questions while my wife and I were patiently waiting the whole 8 months it took to complete the process.

Although my wife and I were confident we could put together the application ourselves, we nevertheless considered getting a lawyer as well. The reason being is that I have been working in Japan while my wife was studying her MBA in the US. Although I have maintained residence in the US, we weren't sure how this would appear to Homeland Security. In the end, however, we found a Chinese-American lawyer in New York was helpful in answering general questions about this specific scenario at no cost.

After submitting the application, we ended up having to resubmit a few documents later because I had applied using my Japan address rather than my US address. I did this primarily because my tax documents are filed from overseas using my Japan address, but once I resubmitted those documents with my US address, everything progressed smoothly through the final interview. We were asked the same questions as Dan and his wife received, except that my wife had never joined the Communist Party. So we never had to get into the details of immigration law like Dan describes. Our interviewer was very polite and friendly.

Although we plan to eventually move to the US, until we do my wife is required to return to the US at least every six months to maintain her Greencard. Since I visit the US to see family around twice per year anyway, this is no big deal in the short term. I would say our only disappointment in the entire application process was the lack of transparency in what is happening to an application at any given time. I would love to see something like FedEx package tracking for this process, but will likely never happen. It would simply show with greater clarity how inefficiently Homeland Security operates, and might force someone to actually do something about it! 

By the way, for those looking to embark on this process based on marriage or other family relationships, or already in-process, Visa Journey is a great site to reference.

Bob Ferrari on Supply Chain's Grand Challenges: Part V

Continuing with Bob Ferrari's series on the 'Seven Grand Challenges for Supply Chain Management', this post will consider the fifth challenge.

For convenience, I will preface each post in this series with the 6 architectures of high performance supply chains. I want to keep pounding these architectures because I think they are very useful, at a strategic level, in framing any supply chain challenge prior to devising a proper solution.

Physical--the actual movements and flows within and between firms, transportation, service mobilization, delivery movement, storage, and inventories.

Informational--the processes and electronic systems, data movement triggers, access to key information, capture and use of data, enabling processes, and market intelligence.

 

Financial--the flows of cash between organizations, incurrence of expenses, and use of investments for the entire chain/network, settlements, A/R and A/P processes and systems.

 

Relational--the appropriate linkage between a supplier, the organization and its customers for maximum benefit; includes internal supply matter relationships throughout the organization.

 

Innovational--the means by which a firm identifies, prioritizes, and brings new product/service innovation to market.

 

Human--the means by which human resources and talent are recruited, deployed, managed and developed across the supply chain for greater performance

 

Challenge #5: Who Assumes Ownership for the Extended Supply Chain?

 

This fifth challenge Bob Ferrari highlights I think is a very interesting one and great subject for discussion. Terms such as "extended enterprise," "extended supply chain," and "extended value chain" get bantered around often in the supply chain field. I believe the adjective "extended" has come into vogue due to the critical mass of supply chains changing as follows:

• Increase in supplier and vendor spin-offs as firms moved away from vertical integration
• Increase in sourcing from multiple-suppliers, including those suppliers that were once part of competitors’ vertically integrated supply chain
• Increase in sourcing across national borders, including single supply chains spanning multiple countries

By 'suppliers' I am referring to both goods firms and services firms. For example, in terms of services firms, numerous large companies have spun off their logistics business units, which now operate independently and serve other companies in the same industry.

Because of this overall increase in complexity, the underlying supply chain architectures have had to keep pace by becoming more sophisticated. Thus it is no surprise that companies today seek to acquire the supply chain talent that is able to manage such levels of sophistication and complexity. As Mr. Ferrari describes, this fifth challenge involves the balance companies must achieve between their functional specialists able to manage single supply chain architectures very well and cross-functional generalists able to understand how multiple supply chain architectures interact and impact each other based on different events and decisions. Bob leans towards the generalists as the most ideal for taking supply chain ownership:

"This manager should be adept in the broad understanding business processes, risk management, appropriate deployment of technology, and the scope of information required to make timely and informed decisions.  The skill level will, in my perspective, be broad, and encompass product, business, technology and functional scope of strategy and day-today execution.  This person will clearly grasp the big-picture, be able to manage overall change among cross-company organizations, and understand that functional lines in supply chain have all blurred.  No doubt, he or she will reside very close to the C-suite, and have enormous responsibilities and respect, as well appropriate leadership style."

As Bob continues, "Challenge five is an organizational challenge, one that will have to transcend personal lobbying and positioning, with a focus on bold leadership, coaching, and change management.  Having a thick skin and a sense of humor would also help."

Basically, this challenge must be addressed as a human architecture challenge because it deals with the talent deployed in order to manage your supply chain. For the most part, I agree with Bob on the type of personnel required to meet this challenge. It goes back to people who take what I labeled the "Level 3" approach to their profession:

Level 3 people are characterized by higher degrees of adaptability--they learn quicker and are comfortable working with many different subjects. Behind this is the ability to quickly identify patterns, relationships, and general commonalities across multiple fields and concepts. Because of this, they work well across borders, across cultures, across languages, etc.--they are cross-functional, horizontal thinkers that can dig deeper into a subject when required, and within a globalized context.

However, I would like to add that generalists can come on board with functional expertise but it is usually not as deep as specialists. For example, a specialist may have spent a straight 10-15 years implementing supply chain technology; whereas a generalist may have spent 4 years in manufacturing, 4 years in IT implementations, 4 years in warehousing and distribution and 2 years getting their MBA. In the end, the two types must be able to work hand-in-hand to make supply chains successful.

Back in Korea...

Posting has been light the past couple days as I have returned to Korea on business. Will be here a full month, but should not hamper blogging too much... Shawn Beilfuss Manhattan Associates-Tokyo -------------------------- Sent using BlackBerry

Supply Chain Technology Investments--Is now the time to hold back?

From talking with business friends and reading articles online, many companies are already starting to second-guess investment decisions on the table, or put these investments on hold completely, due to market uncertainty and economic forecasts that are becoming increasingly pessimistic by the day.

More specifically, technology investments that include supply chain technology will be impacted. Companies may postpone an anticipated upgrade, elect to execute temporary work-arounds, pull RFQs or RFPs from the market, or even cut-off existing projects until a later date. Of course, these are mostly short-term, reactionary measures designed to allow a wait-and-see approach during a time of extreme volatility. But these actions may be required if companies improperly calculated and assessed market risk while building up their businesses the past few years.

In July, Bob at Supply Chain Matters wrote a post titled, "Investing in Supply Chain Technology during Uncertain Times", and, while working off of a report from SC Digest, comments on three approaches companies should follow:

• Look for initiatives that can deliver a short-term ROI, and self-fund later stages of the project.   I have been long been counseling clients to do this very thing, regardless of the economic environment. A self-funding project is the easiest way to prove to senior management that the technology has value, and that mega-dollar spending is not the end result.
• Look beyond the immediate challenges into the big-picture, and ascertain how the pieces will really fit together to deliver total process capability.  In today’s vastly more complex world of supply chain complexity and risk, the big-picture for most companies should focus on highly refined sensing and response processes.  Manufacturers and retailers must be able to ascertain what exceptions are occurring in the supply chain at any given point in time, and couple tools with supply chain wide capabilities to rapidly respond and resolve unplanned events or exceptions.
• Don’t start with newer, more risky technology investments but rather look for proven technology that has stood the test of reliability, value, and scalability.  Amen to this recommendation! I would further add that this is not a blanket condemnation of a stand alone or best-of-breed application, since there are certain best-of-breed applications that have clearly proven themselves in reliability, scalability and value. The same could be stated for certain supply chain applications offered by the major ERP players.  The test is reliability and consistency of value.

I think all of the above are valid points. What isn't mentioned is that all of these suggestions have positive implications for long-term as well as short-term strategy and it is that balance that companies should be striving for so that they are prepared to take advantage of the next significant growth period in the economy.

Continuing with this theme, the TEC Blog asks "Should you cut back or freeze IT spending in a recession?" While they state the obvious in that the answer depends on each comany's own situation, they provide some good points as to why continuing to invest during a recession is an advantage:

• By investing in software solutions like business intelligence (BI), and business performance management (BPM), that allow you to make better, faster business decisions and squeeze more profit from your existing operations, you can get a leg up on your competitors at a time when they’re cutting back on their own IT development.
• By deploying collaboration and remote meeting solutions, you can reduce travel costs without having to sacrifice creativity and team synergy.
• By opting for hosted solutions and cloud computing with their vastly lower capital investment requirements, you can capitalize on cost-effective ways of helping your business become more efficient, while positioning it to emerge stronger and more profitable when the good economic times return.
• You can cut a better deal with software vendors in a recession, a time when they’re especially hungry for your business.
• With many companies—some undoubtedly your competitors—letting go of IT staff, there’s an opportunity to scoop up some excellent talent that simply wouldn’t be available if the economy was good. And probably at a discount, at that.

But what can happen if you cut or freeze key technology investments? The TEC Blog cites CIO with this:

"Just this past spring cio.com published their five reasons not to cut back on IT spending in a recession. The bottom line was pretty clear: under-investing in IT can lead to poor customer service, lost business, and a lack of productivity—all things you would never want to see happen to your business (but, I imagine, you wouldn’t mind seeing happen to your competitors, so who you would you rather see cut back on IT spending, you or them?)."

Notice how a lot of what is said above relates to your company's positioning in the marketplace relative to competitors. As I have discussed previously, this is the external business intelligence challenge facing supply chain management--not just know what is happening in your supply chain but also knowing what your competitors are doing about their supply chains.

Of course, we aren't just speculating that companies will be making decisions to drop or hold IT investments--the performance of supply chain technology vendors is already indicating that the market is softening. In the article "Logistics software firms hit by world economic woes", America Shipper Online writes:

"The downward spiral of the world economic situation is slowing the purchase of logistics software leading to disappointing performances and sluggish forecasts for several leading software manufacturers.

"Silicon Valley’s Oracle saw a major slide in its stock earlier this week, following warnings from analysts to expect a global downturn in software and hardware sales.

"Officials from Germany-based software giant SAP cited the evolving world financial crises as the reason for lower than anticipated preliminary third quarter results. "The market developments of the past several weeks have been dramatic and worrying to many businesses. These concerns triggered a very sudden and unexpected drop in business activity at the end of the quarter," said Henning Kagermann, SAP co-chief executive officer."

The measures SAP is now taking are probably first-line-of-action type moves that most companies will do or at least consider as immediately achievable:

"SAP told employees Thursday that it was implementing cost-cutting programs, including a hiring freeze, according to an internal e-mail obtained by German newspaper Rhein-Neckar-Zeitung. Additional steps, including cuts in travel expenses, will also be implemented. The e-mail indicated the moves were precautionary, in light of the worsening world financial situation."

The impact will be sector-wide:

"The SAP news follows closely on reports of weaker than expected financial results from U.S. software firm Manhattan Associates and U.K.-based Kewill Systems. Atlanta-based Manhattan Associates said the firm’s second quarter consolidated revenue increased 1 percent to $90.5 million, compared to the same period last year. While services revenue grew by 12 percent to $62.3 million, the firm’s license revenue dropped 17 percent to $19.4 million. Kewill, in announcing its 2007-2008 fiscal year results, said the firm would see "a substantially weaker financial performance in the Americas than in Europe." Kewill's overall revenue increased to $88.1 million, or 22 percent, compared with 2006-2007. While European revenue grew 32 percent to $51.7 million, the firm’s Americas revenue saw a smaller 6 percent increase to $32.5 million."

In this environment competition for open contracts will increase and so, as I have discussed previously, knowing your customer and your customer's competitive landscape better than the competition while executing creative and savvy sales techniques will likely win the day. At the end of the day, internal cost-cutting won't improve your pipeline.

Convergence of Downturn-Oriented Supply Chain Solutions and Risk Management

The past few days I have discussed both the need for investment in supply chain solutions during downturns as well as the need for an internal strategy dedicated to supply chain risk management. In the process, I highlighted how Toyota has committed itself to investing in its human architecture and innovational architecture while executing the risk management strategy of maintaining production capacity--physical architecture--close to market in the United States. It is also making adjustments to its financial architecture via a new marketing campaign for 0% financing.

Expectedly, Honda is making similar moves. Via the Detroit News, the article 'Honda to start making Accords at Alabama plant' covers Honda's response to the current economic downturn. There are basically two pieces to Honda's actions: 1) Utilizing the flexibility of manufacturing platforms to shift the overall ratio of model production at existing sites and 2) Investing in idle full-time employees via voluntary training programs.

First, below is a description of the changes in model production and shifting between manufacturing sites (highlights mine):

"Honda Motor Co. said Monday it will start making V-6 Honda Accords on one of the two assembly lines at its factory in Alabama by the middle of next year. The plant in Lincoln now makes the Odyssey minivan and Pilot sport utility vehicle. Company spokesman Ed Miller said Honda will cut 8,000 vehicles from production at the Lincoln plant in November because sales have softened.

"The conversion to Accords in Alabama frees more space for Honda's plant in Marysville, Ohio, to build more fuel-efficient four-cylinder Accords. The company also said it will increase production of four-cylinder engines at its factory in Anna, Ohio, and cut some six-cylinder engine production. Honda already had announced that it will move production of the Ridgeline pickup from Canada to Alabama early next year.

"As a result of the moves, Honda will make more four-cylinder Accords, the most popular model, in Ohio, and import fewer of them from its Saitama factory in Japan, Honda said in a statement. Through September, more than 80 percent of Accords sold in the U.S. were made in America, Honda said.

"Honda also plans to cut Odyssey and Pilot production by a total of 14,000 in February and March as the Alabama plant is being converted to Accords, Miller said. So far this year, Accord sales are up 5 percent, while Odyssey sales are down 14 percent and Pilot sales are down 17 percent from the first nine months of 2007, according to Autodata Corp."

The above changes cannot be done without careful, long-term planning and investment. This flexibility was built-in as Honda expanded facilities and production in the US and illustrates their ability to manage supply chain risk.

In terms of its workforce:

"Honda will trim production at the Alabama plant by giving workers Monday through Wednesday off during the week of Thanksgiving, Miller said. It also will stop production on Nov. 7, 14 and 21, he said.

"The Alabama factory complex has about 4,500 workers, Miller said. They will be paid for the shutdown days if they come to work to attend training sessions, he said."

The fact that Honda's workforce training program is similar to Toyota's is not coincidence as this is a common practice across many Japanese automotive companies (including key suppliers) and across industries in Japan. It truly is a best practice if managed as part of an overall HR strategy within the supply chain.

Supply Chain Risk Management in Action: Exxel Outdoors Inc.

Hot off my discussion below on supply chain risk management, the Asia Business Intelligence blog highlights the example of an Alabama company making supply chain adjustments, and guaranteeing increased assessments of extended supply chain risks. The original article from Bloomberg mentions the following:

"With costs in Alabama running 3 percent below those in China, Exxel is cutting production at a joint venture in Shanghai while hiring workers, adding machines and increasing output at the 250,000 square-foot plant. This year, for the first time, the company will make more bags in the U.S. than abroad.

""We'd been losing the battle to China but had a feeling things were going to change,'' founder and chief executive officer Harry Kazazian said. "Call it a calculated gamble or hindsight, it's working for us.''

"Kazazian's strategy is a result of the dollar's 17 percent drop against the yuan since 2005, rising wages in China and a jump in freight rates. He projects his company's revenue will rise as much as 20 percent this year to $42 million from $35 million in 2007, helped by the Wal-Mart order last December for Disney-themed kids' sleeping bags."

I actually forgot to mention exchange rate risk in my previous post, but it obviously can strengthen a cost advantage or, as in the above case, exacerbate an already dissipating cost advantage.