Monthly Archive: April 2015

The Five Principles of Supply Chain Management

. . . an Innovative Approach to Managing Uncertainty.

supply chain mgmtInnovations in information technology have enabled companies to adopt supply chain management as a critical element of their corporate strategies. Despite these breakthroughs, many companies have not fully realized the benefits of constructing collaborative relationships with supply chain partners.

Professor Jack Muckstadt of Cornell University and his colleagues Drs. Murray, Rappold and Collins point out that, as companies focus on their core competencies, they have made significant strides to integrate their internal business processes and information flows and are leveraging this capability to compete as part of a larger supply chain. This compels corporate leadership to better understand their customers’ needs:

  • What do they want?
  • Where do they want it?
  • When do they want it?
  • How do they want to receive it?
  • What are they willing to pay for our products and services?

Constructing and operating a competitive supply chain is the primary objective of supply chain management. Several obstacles must be overcome to achieve this goal:

  1. Demand uncertainty is substantial and it can severely degrade anticipated performance in terms of unit cost, speed, quality, and responsiveness.
  2. Long and variable response times due to the supply chain’s inability to respond to environmental changes in a timely manner.
  3. Poor information infrastructures still lack the capabilities necessary to acquire, store, manipulate, and transmit data effectively and quickly.
  4. Business processes are often not designed properly. Internal and external processes are required to adapt to evolving business and supply chain conditions.
  5. Inadequately designed business metrics and decision support systems to contend with supply chain uncertainty.

Strategic and tactical modeling paradigms employed in supply chain decision support systems are insufficient. The manner in which uncertainty is treated in many operational environments is inadequate.

The Essential Foundation: Integrated Business Systems

It is essential to think of the supply chain in terms of five interconnected business systems: engineering systems, marketing systems, manufacturing systems, logistics systems, and management systems. Opportunities for supply chain efficiency tend to occur at the boundaries of these individual functions. The greatest competitive advantage comes to those companies that focus on both (1) integrating these five systems intra-organizationally, and (2) integrating these business functions as much as possible with their collaborating supply chain partners.

Supply Chain Operational Excellence: The Five Principles

A competitive advantage will exist only if several key attributes exist in a supply chain. Five guiding principles are necessary for effective supply chains. Applying all Five Principles of Supply Chain Management is necessary for the effective design and execution of supply chain systems:

  1. Know the customer.
  2. Adopt Lean philosophies.
  3. Create a supply chain information infrastructure.
  4. Integrate business processes.
  5. Unify decision support systems.

 

  1. Know the customer

Without a clear understanding and definition of customer requirements, a supply chain cannot be effectively constructed. One must construct an information infrastructure to capture customer transaction data, store the data, and analyze it from an operational perspective. The objective is to obtain a clear statement of the customer’s requirements. A supply chain’s requirements vary by customer, product, and location. These requirements must be thoroughly understood and form the foundation for constructing an efficient and effective supply chain.

  1. Adopt lean philosophies

For the past 25 years operationally excellent companies have focused on creating lean organizations. These companies have shortened internal lead times and made them more predictable and repeatable. They reduced work-in-process inventories from months of supply to days. Firms implemented just-in-time delivery strategies for their most costly component materials, and have worked to dramatically reduce setup times. These actions have substantially reduced indirect costs and improved use of physical space. More importantly, they have created cross-trained, empowered and more highly motivated workers. For maximum supply chain efficiency, all partners must engineer, align, and execute their processes so that the entire chain has the above attributes. Lean supply chains must also be designed as tightly-coupled systems that quickly and profitably respond to market demand fluctuations.  No combination of software systems can compensate for a poor physical operating environment.  Therefore, lean philosophies must be extended beyond a company’s internal operations to its trading partners across the entire supply chain.

  1. Create a supply chain information infrastructure

An effective information infrastructure, both intra- and inter-organizationally, is necessary for a supply chain to achieve competitive advantage. Today, internet enabled B2B collaboration makes it much easier for supply chain partners to share timely demand information, inventory status, daily capacity usage requirements, evolving marketing plans, product and process design changes, and logistics requirements — to mention just a few. However, true collaboration requires joint planning of inventory and production strategies and the reliable joint execution of operational plans on a continuing basis. How capacity is used daily must be considered from an overall system perspective, not just a local viewpoint. Simply passing data (even customer demand data) among partners does not realize the true economic potential of collaboration.

A traditional collaborative planning and forecasting initiative is merely a starting point; it barely scratches the surface of the financial rewards and competitive advantages that are possible through a true collaborative supply chain. Our recommendation is much more substantive and comprehensive.

Integrated information systems and business processes fig 1

Figure 1 – Integrated information systems and business processes

  1. Integrate business processes

Business processes must be established both intra- and inter-organizationally to support the supply chain’s strategic objectives, as illustrated in Figure 1, above. These processes, coupled with the information infrastructure, support the efficient flow of material through the supply chain. While much attention has been placed on understanding business processes within organizations, it is essential to build processes inter-organizationally to leverage and enhance partners’ capabilities. These inter-organizational processes must be designed to take advantage of the increased information that drives daily supply chain decisions.

  1. Unify decision support systems

Academics and software providers have designed and built Decision Support System (DSS) environments for individual companies and supply chains. These environments are based on different philosophical models. Also, they differ in how they forecast demand, and how they drive production and allocation decisions. Their goal is to generate plans that simultaneously consider all elements of the supply chain. No matter which approach is taken, these systems and their embedded rules drive many daily supply chain activities. Therefore, they have a substantial impact on the operating behavior, and consequently, on overall supply chain performance. How much they enhance this performance depends on both the accuracy of their input data and the modeling approaches employed. These decision support systems need to address uncertainty in an explicit manner—and most do not.

A New Decision Modeling Paradigm

Commercially available Advanced Planning and Scheduling (APS) systems have led to considerable improvements in supply chain efficiency in many companies. Success in implementing these systems depends on the extent to which the Five Principles of Supply Chain Management are followed. Strategic and tactical modeling paradigms employed in supply chain decision support systems are inadequate. Supply chain manufacturing and distribution systems are often not appropriately designed and operated.

Typical consequences of poor design are inventories concentrated in the wrong products at the wrong locations, and production metrics that do not match projections or meet management’s performance expectations. A fundamental cause of this failure is the environment’s uncertainty and the inability to construct accurate demand forecasts for most items. Given that creating accurate forecasts is difficult, entirely new paradigms like the No B/C Strategy must be used to ensure responsiveness. An integrated supply chain needs to be created that quickly and repeatedly moves the right quantities of materials to customers for those items that experience highly uncertain demand.

A New Operating Philosophy: The No B/C Strategy

When considering how much inventory to carry and in which products, it is essential that inventory be carried in those items for which it will be most useful. Inventory held centrally by manufacturing is nothing more than stored production capacity, or stored time. Most companies have significant inventory write-downs each year, and have to sell off inventory at less than cost. This occurs because it is virtually impossible to predict customer demand over a short lead-time.

So why are companies generating forecasts that are so prone to error? Inventory fundamentally exists in supply chain systems because customer order lead-times are shorter than manufacturing and delivery lead-times. If companies have long lead-times, then they must stock some inventory. This is where traditional planning systems fall short.

When considering the attributes of a new planning paradigm, the planning philosophies must include uncertain demand, customer lead-time requirements, finite production capacity, and inventory stocking decisions for different products and different customers. Not all products and customers behave identically. Not all customers for the same product behave identically, either.

The answer is a hybrid make-to-stock and make-to-order planning strategy that stores inventory in products while considering finite production capacity and highly uncertain demand. Called the No B/C Strategy, it categorizes products into ABC categories using a new method. Inventories exist only for products where there is a low risk of not selling them quickly.

Conclusion

Installing advanced information systems and streamlining business processes will not overcome a poorly designed physical operating environment, and vice versa. Business processes and rules must be tailored to the specific nature of the operating environments and to the supply chain’s objectives. Finally, decision support systems and business processes must be capable of explicitly dealing with uncertainty. One such approach is to employ the No B/C Strategy.

A client company applied all five of the Five Principles and realized a 60% decrease in finished goods inventory for its top 10 products. Concurrently, finished goods stock levels dropped 40% across the product family. Simultaneously, customer service levels (on-time delivery) increased to 95.2%. Most notably, the on-time delivery performance for make-to-order products increased from 37% to 60%, and is still increasing to this day.

Companies with sophisticated and complex supply chains that are willing to embrace change can gain a great competitive advantage. Looking at their supply chain operating paradigm in an innovative way can positively impact bottom line results. By adopting a new operating philosophy, the No B/C Strategy, and adhering to the Five Principles of Supply Chain Management, these companies will see new supply chain efficiencies that previously have not been possible.


This article was adapted, with permission, from Guidelines for Collaborative Supply Chain System Design and Operation; Muckstadt, Murray, Rappold and Collins; Technical Report No. 1286, School of Operations Research and Industrial Engineering, College of Engineering, Cornell University, 2001.

For more information about Supply Chain Leadership, or to attend one of Professor Jack Muckstadt’s courses, visit Excellence in Supply Chain Design + Operation or contact Jim Wynne, Merit Career Development, at jwynne@meritcd.com.


© 2015 Merit Career Development. All rights reserved.

Permanent link to this article: http://meritcd.com/blogs/the-five-principles-of-supply-chain-management/

6 Steps to Resolving Personality Conflicts

Personality conflicts on the teamMore often than we’d like, project managers have to manage conflict. Teams are human, after all, and arguments can arise for all sorts of reasons, from disagreements over workflow to competing priorities.

When conflicts arise, it’s the PM’s job to keep everyone moving forward, putting them together to thrash out technical differences or reach a compromise on resources. Even in the case of a heated debate, an effective project manager can lead the team toward a decision that’s workable for everyone.

Sometimes, however, team members seem to talk past each other, arguing about peripheral issues or focusing more on each other’s personalities than anything else. These are signs that, for whatever the reason, the people involved simply don’t get along. Their disagreement, substantive though it might be, is surrounded by a discontent that permeates all of their interactions, to the point where cooperation stops.

It’s a thorny problem to confront, and resolving it involves more than listening to both sides and steering them toward a solution based on merit. How, then, do you forge a truce?

  1. Actively listen. It’s critical that PMs pay close attention to their team’s dynamics at all times. Personality clashes aren’t the kind of thing most people like to talk about, so you can’t depend on others to clue you in when issues start to smolder. Even as you’re putting your team together, pay attention to personalities and consider how well individuals will mesh. While it’s reasonable to expect everyone to act professionally, sometimes people take such opposite approaches that avoiding conflict may be impossible.
  2. Deal with it promptly. If you spot trouble, be ready to act. As uncomfortable as they are to deal with, personnel issues rarely take care of themselves. Indeed, leaving people to work out conflicts on their own may only intensify the problem. When you see arguments becoming personal, inject yourself into the situation.
  3. Listen to both sides. Whatever the issue, it involves multiple people. So before creating a plan of attack, be sure to speak to all parties. Make sure your conversations are more than venting sessions. You need to understand the specifics of the conflict, so don’t allow one person to simply attack the other behind their back. Make them support their complaints with specifics. Be sure to encourage each person for possible solutions.
  4. Remain impartial. Your role here is to be a mediator, not a judge. That means you should understand the issues from both perspectives, with an eye toward finding some sort of middle ground. When talking to one person, try to educate them about the other’s point of view, without taking sides.
  5. Seek a compromise. Seek recommendations from both parties on what kind of approach might ease the tension. Maybe it’s more frequent communication, or some kind of tradeoff in scheduling. Maybe it’s an agreement to exchange notes before documentation is widely distributed. Whatever it is, encourage the parties to find pragmatic, manageable ways to work together.
  6. Document it. Follow up your conversations with emails to make sure everybody’s clear on what was discussed and agreed to. Obviously, you’ll have to approach such correspondence tactfully. Rather than focus on the complaints you’ve heard, detail the agreed-upon plans for moving forward.

Of course, situations vary. While you’ll have to tailor your strategy to the personalities and issues involved, your intent should always be to focus everyone on the work they’re responsible for, and the goals they have to meet. You probably won’t turn your clashing team members into close colleagues, but you can provide them with an avenue to manage their conflict and concentrate on getting their work done so that the project moves forward unimpeded.

For more information about how Merit Career Development can hone your leadership and management skills – including managing conflict on your team – please contact Jim Wynne at jwynne@meritcd.com.


© 2015 Merit Career Development. All rights reserved.

Permanent link to this article: http://meritcd.com/blogs/6-steps-to-resolving-personality-conflicts/

Serve Up the Training Your Staff Needs—and Wants

Group of business people in a modern officeAre you giving your staff the training they need to best serve your clients? Sure, you’ll pay for the tax courses, but are you giving them the people skills—like problem solving, customer service and supervisory skills—that they need to make your firm the best it can be?

You may be surprised to learn that your accounting staff hungers for more training. Consider some findings from a recent CPA Trendlines Career Outlook survey:

  • Less than a quarter of respondents agree that their firm always pays for the courses they want, not just what they need.
  • Fewer than 20 percent of respondents say their firms pay for soft skills learning. Offering your staff an expanded menu of training that includes soft skills and other education can improve client relationships and staff retention, as well as develop future leaders.

“Solid communication and interpersonal abilities are becoming just as important to accounting professionals in addressing client needs” as traditional training, writes Paul McDonald, senior executive director with Robert Half in a recent CPA Practice Advisor article. “Your team members also need business acumen that extends beyond accounting to understanding clients’ bigger-picture business goals and concerns.” McDonald identifies desirable soft skills: diplomacy, customer service, problem solving, adaptability, and communication.

These important skills are also the ones that staff wants to learn. For instance, problem solving gives accounting and finance professionals the most career satisfaction, according to recent a Robert Half survey. In fact, problem solving outranked number crunching in the results, which is pretty amazing given the importance of numbers for accountants!

Soft skills learning can help accountants at any stage of their careers, says Kathy Ryan, CEO, CFO and co-founder of RoseRyan, a CPA firm serving the San Francisco Bay area, in an Accounting Today article. “I challenge anyone who feels they are being held back in their career but is not sure why, to get a reality check on their soft-skill set and do some fine tuning. I also encourage those in leadership positions to consider ways they can cultivate the ‘softer’ side of their teams’ abilities (and their own).” It isn’t a surprise to learn that Ryan’s firm regularly teaches soft skills.

Asking staff about the courses they would like is now a trend at accounting firms, the AICPA says in its white paper, The Evolution of CPA Firm Learning:

  • Staff can learn better when they have a say in their learning plans. The white paper cites an American Society for Training & Development article, “The Amazing Era of Self-Service Learning,” that suggests your firm may see as much as a 500 percent increase in learning benefits when staff manage their own training.
  • Real knowledge rather than “getting training hours in” is becoming the focus. More experience-related, simulation, and “mock” programs build real-life skills.
  • Succession needs require staff to learn more than technical topics. Firms are including more leadership, management and other personal development courses, and they’re introducing them earlier in their staff members’ careers.

Staff who are hungry to learn about running the firm, interacting more efficiently with clients, managing support staff, and the other ingredients of a successful CPA firm should be consuming the appropriate soft-skills training. Serve staff what they want, and your firm will have a banquet of talented professionals to build your firm.

Soft skills training is critical for both your staff accountants and your firm. Merit Career Development offers leadership and communication courses specifically designed for accountants plus the opportunity to earn CPEs. For more information, please contact Jim Wynne at jwynne@meritcd.com.


© 2015 Merit Career Development. All rights reserved.

Permanent link to this article: http://meritcd.com/blogs/serve-up-the-training-your-staff-needs-and-wants/

Can Everyone Be a Leader?

Collective LeadershipIn recent years, a growing number of organizations have changed the way they are structured. The old top-down way of doing business, in which management wields all the power, is increasingly giving way to a collective leadership style, in which all employees are involved in setting and reaching company goals.

Some of the most successful companies—like Google, Apple, and Zappos, for example—are comprised of employees who are passionate about their company’s business strategy and working toward its goals. They are also engaged in actively promoting their company’s policies

Collective leadership is one way to increase employee growth and productivity. Blurring the lines between boss and worker, it empowers the latter—and leads to creativity, team building and openness, allowing employees more ownership of their work, while maintaining a level of discipline that ensures the job gets done.

Leaders who practice this type of collaboration believe that their power doesn’t come from their title or position, but rather that the group is stronger when everyone shares information and each individual is encouraged to offer ideas and suggestions.

The challenge for the leader is to create an environment where diverse individuals can work together effectively toward those shared goals. To do so, keep these points in mind:

  • The manager must trust the employees and their judgment, and make sure the employees know it.
  • Employees need to be capable of achieving the stated goals.
  • Employees must believe in what they are doing and know they are members of the team.
  • The manager needs to recognize that employees from different generations may have different work styles and know how to blend those differences for team productivity.

A manager who practices collective leadership is easy to spot. First and foremost, she doesn’t dictate to her team, rather, she brainstorms with them, and they arrive at solutions together. This leader knows how to allocate time and resources to foster this collaboration, allowing team members to hold various roles in which their responsibilities evolve.

She doesn’t run around “putting out fires,” instead, she gets to the root of an issue, offering immediate and ongoing feedback. She coaches all year round, not just at performance review time. And she ensures her team members are cross-trained, trusting them and allowing them to be accountable for themselves.

Of course, it’s not simple or easy, but there are some guidelines for creating a collective leadership style in your workplace, according to Marion Chamberlain in the Huffington Post.

  • Rotate leadership responsibilities, giving everyone the chance to understand what it means to “lead.”
  • Educate everyone equally, giving them access to the same information.
  • Don’t promote just to promote. Let individuals learn new tasks and move forward in those they are best at.
  • Offer good salaries, benefits, and additional perks, so employees will want to keep advancing their skill set.
  • Allow employees to make their own decisions and hold themselves accountable, based on clearly stated guidelines.

The collective leadership approach has grown with the increase in international competition and the shrinking of the global marketplace. Employees want to have more responsibility and autonomy in their work, as they actively engage and work as a team to create and set goals, and to achieve them.

This is especially true of the generation born between 1981 and 2000, the Millennials, who, in general, like to interact and collaborate with their colleagues, using a high degree of creativity to accomplish goals. This is a major divergence from the Baby Boomers who thrive on direct orders and chain of command, closed doors and annual reviews.

A truly collaborative environment is creative and innovative, and must tap into the best qualities of all the diverse individuals of all ages in its workforce. Putting at least some of these techniques in place can be a smart business decision that pays dividends over the long haul.

For more information about how Merit Career Development can hone your leadership and management skills, please contact Jim Wynne at jwynne@meritcd.com.


© 2015 Merit Career Development. All rights reserved.

Permanent link to this article: http://meritcd.com/blogs/can-everyone-be-a-leader/