Category Archive: Supply Chain Management

Why Simulation-Based Instruction is the Best Way to Learn!

sitrain_teams_playing_wide_sts

The Chief Operating Officer (COO) asks the Chief Executive Officer (CEO): “What if we spend time and money training our employees and they leave the company?”

The CEO responds: “What if we don’t and they stay?”

Taking time and resources to train your personnel is often looked at as a necessary evil. Training employees takes them away from their day-to-day tasks and the cost will be reflected on the bottom line. Adding to the challenge of supporting training, is the uncertainty of the return-on-investment at both an individual and organizational productivity level.

As an executive who is considering training your team, the most important question you should ask is not: Should I train my team? but rather: What method of training should I use? Different training methods result in varying levels of content retention. Of course you want to ensure that your organization achieves the greatest value from training, so relevant content as well as deploying the use of experiential learning techniques should both be priorities.

learning-_pyramid

As the image to the left illustrates, participatory learning, especially using simulation for practice, provides the highest level of retention for training, second only to “teaching others.”

What is simulation-based learning? It is an instructor-guided, interactive learning environment that replicates an actual business, technical, or educational challenge. It permits the learners to practice resolving issues in a relatively worry-free atmosphere. Not only is it authentic and relevant to the learners’ work, but it provides a safe environment to learn; mistakes won’t result in costly repercussions. It’s ideal to spur on innovation, too, because it allows for creative problem solving.

Simulation-based learning is the most effective technique for developing every professionals’ knowledge, skills, and attitudes, whilst protecting the organization from unnecessary risks. It is useful in resolving practical dilemmas, and provides four real-time benefits.

  1. EXPERIENTIAL & REPETITIVE LEARNING. While in traditional lecture-based training, the desired outcome is merely explained; in simulation learning, individuals achieve an outcome from first-hand experience. Adults, like most people, learn better through experience. In the simulation, individuals have the opportunity for repetitive practice, which helps increases retention.
  2. KNOWLEDGE INTEGRATION. A key facet of any learning is that understanding is increased when it is linked to some already known piece of knowledge. Simulation-based learning, because of its participatory nature, has the added benefit of being able to psychologically link concepts and allow participants to link knowledge areas through their actions.
  3. RISK-FREE LEARNING ENVIRONMENT. Regardless of our attitude, learning research validates that we learn by making mistakes. In fact, they are invaluable to the participant. If executive decision makers can participate in relevant and realistic simulations, they can safely make mistakes, learn from them, and promptly apply their learned knowledge to their real work challenges, avoiding costly mistakes or unintended consequences.
  4. ABILITY TO ADJUST THE LEVEL OF DIFFICULTY. The technology provided in most simulation-based learning tools are designed to allow the difficulty level to increase as the competency of the individuals and teams improve. This provides additional flexibility and continual learning opportunities for a varied level of experienced personnel.

Simulation-based learning is the most effective learning technique for both your employees and your organization. Your training dollars are better invested with simulation training because of higher learning retention. Further, because your team will practice with relevant and practical scenarios, the potential for catastrophic mistakes is mitigated.

If you’re looking for a relevant, engaging interactive learning environment with simulation, call Merit and ask about our SimulTrain® project management training experience. Contact Jim Wynne at  jwynne@meritcd.com or call him at 610-225-0449.

Permanent link to this article: http://meritcd.com/blogs/why-simulation-based-instruction-is-the-best-way-to-learn/

Why Success is More Likely with Active Listening

Listening includes a lot more than just hearing words. Frequently, we need to interpret or infer a deeper or underlying message beyond the spoken word. We deploy many of our senses to detect non-verbal cues and assimilate our life experiences with the verbal message when we actively listen.

Usually, the objective of a conversation is to expand the listener’s knowledge, perspective or sensitivity to a topic that impacts behavior or beliefs. In the workplace, managing projects can implode due to poor communications. These can result in missing a critical deadline, budget overages, decreased sales, and in some cases, costly lawsuits.

The most effective communication takes place when both parties are actively listening. So what is “active listening” and how do we do this?

Your active listening is apparent to the other party through your audible or visible signals. This can include something as subtle as raising our eyebrows, leaning towards the speaker, or using certain gestures (like a thumbs up, high five, etc.) Tilting our heads when we listen, on the same angle as the speaker, generally reflects a subconscious agreement  Uttering sounds like “uh huh” or “hmm” also tell the speaker that you’re paying attention. In America, making eye contact is considered a must in showing that you are listening, although this does vary in some cultures.

Of course asking good questions is one of the best ways to demonstrate that you are listening.
If you don’t have any questions (perhaps, because the message is crystal clear to you) then paraphrase the speaker’s message. You can preface your restated summary by saying something like: “Ok, now, if I understand what you’re telling me, you’d like to … (paraphrased summary of speaker’s objective).”

It is important to be authentic, too! In your effort to make it evident that you genuinely hear the speaker’s message, do not diminish your own persona or credibility. Be sure to phrase your introduction to your rephrased statement in a style that is consistent with the way you speak.

Why not find out if you’re as good a listener as you think you are? If you haven’t taken this insightful (and free) listening assessment yet, you can right now – or later when you have about 45 minutes and no distractions. When you’re ready, take the Active Listening Assessment here. Upon completion, you will receive an explanatory report along with tips and techniques that you can use to become a better active listener and communicator.

If you or your staff would benefit from mastering effective communications, improving active listening and learning “meaning-centered communication”, we can help. Please contact Jim Wynne at jwynne@meritcd.com or call him at 610-225-0449.

NOTE: PMPs: This assessment qualifies for one PDU and you will receive a certificate.

Permanent link to this article: http://meritcd.com/blogs/why-success-is-more-likely-with-active-listening/

The Pre-Mortem Technique

During my research on how to make better decisions I came across the pre-mortem in the writings of Nobel Prize winner Daniel Kahneman. He notes in his book, Thinking, Fast and Slow (2011), that the pre-mortem technique is valuable in the decision-making process because it has two main advantages. PreMortemFirst, it overcomes “groupthink” that affects many teams once a decision appears to be made. When groupthink is in effect, the wisdom of a plan or decision is gradually suppressed and eventually come to be treated as evidence of disloyalty. The collective suppression of doubt contributes to the group’s overconfidence, which is often a tragic flaw.

Second, it unleashes the imagination of knowledgeable individuals in a much needed direction—the opposite direction of the decision. The principal advantage of the pre-mortem technique is that it legitimizes doubts and encourages everyone, even supporters of the decision, to search for possible threats not considered in the decision-making process. I immediately recognized it as an excellent technique for decision-making, risk management and general leadership.

Because this has proven to be of great value, I would like to share this excellent technique with you. The pre-mortem is easy to implement once the team reaches a decision or finalizes a course of action. Here’s what you need to do:

Step back and state the following: “Imagine that we are one year into the future. We implemented (the decision and plan) exactly as decided here today. The outcome was a total complete disaster. Take 5 to 10 minutes to write a brief history of that disaster.” If someone asks: “What do you mean by a total disaster?” Reply: “In any and every way imaginable it was a total failure.”

Then, explore all the possible reasons that the decision or plan failed. By taking this opposite approach to brainstorming the ideas, your team will likely realize that there are more points that need to be thought through before the plan is implemented.

Merit Career Development incorporates this technique into our leadership, strategic decision-making, risk management and project management classes and it is very well received.  In one recent class the participants clutched the flip charts from the group discussion. I saw this and asked what were they going to do with them? I was told that they were going to present the findings to upper management; they had never participated in such a rewarding experience.

Merit can help guide your team through various tools and techniques to optimize your team’s knowledge, skills and ability with techniques and tools such as pre-mortem and many others. Please contact Jim Wynne at jwynne@meritcd.com or call him at 610-225-0449 to schedule training to learn this and other valuable decision-making techniques.

Permanent link to this article: http://meritcd.com/blogs/the-pre-mortem-technique/

Emotional Intelligence (EQ): The Essential Secret to Great Performance

The concept of emotional intelligence, EQ, has been studied for over 30 years. Research shows that high EQ predicts success beyond an individual’s knowledge, skills and abilities. Emotionally intelligent leaders have significantly greater annual profit growth, increased customer satisfaction, and higher personnel retention. In management, the more senior the leader, the more the EQ matters. In sales and customer service capacities, the higher EQs correlate directly to success.

RedheadStudies show that lack of EQ may limit a person’s ability to achieve results. Lower EQ scores correlate with lower merit pay increases, lower job satisfaction and more burnout. Managers’ and supervisors’ EQ scores correlate with their performance ratings.

The definition of emotional intelligence has been the subject of ongoing debates; however, researchers all agree that it consists of two principal components. The first component; intrapersonal skills or self-awareness, is the ability to recognize one’s emotions as they occur, helping one gain self-control in potentially emotionally charged situations.

The second component, interpersonal skills or social awareness, is the ability to recognize others’ emotions. The ability to express empathy enables one to have more positive relationships and minimize unproductive conflict. EQ helps put people at ease, build and mend relationships, confront problem employees, and manage change.

It is important to note that emotional intelligence can be learned. Understanding and incorporating specific EQ skills, techniques, and behaviors can help improve both the intrapersonal and interpersonal skill sets. An intra-personal skill, self-monitoring, can help one can limit or minimize emotional hijacking. Let‘s look at this closer…

Emotional IntelligenceWe all have specific words or phrases that are steeped in emotion. During the 1960s and 70s, the term “nuclear power” raised a great deal of emotion—both positive and negative. Similarly today we have emotionally charged words or phrases such as “gun control”, terrorism, and consumer privacy. It is important to recognize one’s own emotionally charged phrases and stop the emotional hijacking that is about to take place.

By recognizing our emotional responses when we hear a cue by self-monitoring, we can prevent emotional hijacking before it takes place. Stopping to recognize the emotional trigger is an important first step. Taking a deep breath, and/or silently counting to 10 can help us regain composure and react in a rational manner.

As for interpersonal skills, empathy helps us develop more positive relationships with others at work. Increasing our display of empathy enables us to connect with another person on an emotional level, thus allowing us to develop a meaningful, trusting relationship.

The question remains, however, how much emotional intelligence do you have—what is your baseline? Do you have an EQ deficiency, or are you well above average? There is only one way to know your EQ baseline and that is to take an assessment. Many exist on the Internet, some free others fee-based, however they may not stand up to statistical reliability and validity standards.

We invite you to take our free online self-assessment http://www.meritcd.com/assessments/eq/ and see how you compare to others; it takes less than 15 minutes. You will receive a report comparing you to the general population and you will know your starting point. With your baseline in hand you can select appropriate techniques and build your self-awareness and social awareness skill sets, and improve your emotional intelligence.

Would you like some guidance to improve your staff’s EQ? Merit offers half-day and full day workshops that help participants understand, identify their baseline, and strengthen their emotional intelligence. With exercises and interactive assessment tools, this workshop is engaging and life changing. For more information, please contact Jim Wynne at jwynne@meritcd.com or call him at 610-225-0449.

Permanent link to this article: http://meritcd.com/blogs/emotional-intelligence-eq-the-essential-secret-to-great-performance/

What your peers are planning for 2016

The results are in!

On behalf of all of us at Merit Career Development, we’d like to thank everyone who participated in our 2nd annual 3-Question Training Planning Survey last month. As promised, we are reporting on the results – which have, interestingly, shifted even from a year ago.


Snip_1_Table_1Hot Topics

Although project management professionals represented more than 60% of our invitation mailing, the topics in greatest demand for 2016 are Leadership, Team-Building, Communications, and Critical Thinking and Decision-Making. These ranged from 38% to 29%, while the overall category of Project Management (PM) dropped to 13% this year (from 45% last year.) In the PM arena, both years, “Identifying and Managing Project Risks” were in the top third ranking at 29%. See the Q1 chart above for details:

 

Delivery Methods

Snip_1_Table_2The preferred delivery methods have changed, as well. For the past few years, there was a growing interest in
web-based learning and self-paced, DIY courses. This year, on-site, full day courses have re-gained their
popularity, with 54.4% of respondents choosing this as their preferred delivery method. In 2014 on-site, full day courses were only requested by 34.2% of respondents. For more details, see the Q2 chart:

 

Snip_1_Table_3Choosing Course and Provider

The basis for choosing a course and provider were measured differently last year, but in both instances, the primary driver is the course topic and/or area that most needs development, followed by convenience of timing, and location. The program cost was lower in priority. See Q3 chart on the left for details.

 

 

 

If you are seeking to reduce your organization’s gaps in skills, improve cooperation and productivity through better communications and decision-making knowledge, or provide some morale-improving, team-building workshops, let’s talk. With a wide variety of courses, delivery techniques and a highly skilled training team, we will help you achieve your training goals for 2016 and beyond.

Contact Jim Wynne at 610-225-0449 or at jwynne@meritcd.com.

Permanent link to this article: http://meritcd.com/blogs/what-your-peers-are-planning-for-2016/

Crossfit Training; Your Body and Your Mind

The start of a new year brings with it many changes, professionally as well as personally. Many of us choose to start the New Year by making goals and resolutions, whether resolving to stick to a budget, or picking up a new hobby. Mine? I’m in the majority of the population: lose weight. To help me achieve my resolution I’ve started an exercise program called CrossFit training.

What is CrossFit training? The CrossFit training program, as explained by its founder Greg Glassman, is a system of performing functional movements that are constantly varied at high intensity. CrossFit is a strength and conditioning program that optimizes physical competence in each of ten recognized fitness domains: Cardiovascular and Respiratory Endurance, Stamina, Strength, Flexibility, Power, Speed, Coordination, Agility, Balance, and Accuracy.

Glowing_ManThe CrossFit program was developed to enhance an individual’s competency at all physical tasks. Athletes are trained to perform at multiple, diverse, and randomized physical challenges. This type of fitness is demanded of military and police personnel, firefighters, and many sports requiring overall physical prowess.

CrossFit training benefits the body by training your individual muscles over time to work together to provide an overall greater level of personal fitness than can be achieved by only conditioning one set of muscles at a time. This got me thinking: are there other areas in my life where I can use this approach? How can I “crossfit” my skills to become better at my job? How can I crossfit new learning opportunities to become a more valuable employee?

How can CrossFit training the body carry over to crossfit training your mind? If we consider our skills, hobbies, and responsibilities in our careers as muscles, we can make the analogy that those skills are muscles needing exercise. Some muscles are used more than others; some are barely used at all. All too often in our jobs, there is a set way of doing things that is like performing a repetitive workout. However, the brain is a muscle that like all muscles must be exercised to be kept in peak condition.

Modern cognitive psychology has demonstrated that the brain is not a static entity. Rather, the brain is continually and constantly developing and pruning pathways across skillsets, linking new knowledge to existing knowledge, or destroying old pathways which aren’t utilized to make room for new synaptic links. You can take advantage of this process by crossfit training your brain with a new skill or area of knowledge, which is seemingly unrelated to your existing career or job responsibilities.

people teaching each otherHow can crossfit training your mind benefit you in your workplace? Cross-functional training has many benefits for organizations as well as employees. At an organizational level, cross training skillsets help safeguard the organization against widening skills gaps. Organizations that cross-train employees across a range of functions put themselves in a good position to prevent sudden shortfalls and manage surges in specific areas when there is a spike in demand. On an individual level, cross training enables employees to explore and assess alternative interests and abilities. It also enables managers to identify and nurture employees who show exceptional talent in a particular function. Cross-training yourself to learn new skills, can increase your employability and enable you to stay relevant.

A few examples …learning the components of Strategic Leadership as a Project Manager (PM) can help reduce the probability of failure by sharpening leadership skills that enable the PM to better understand, motivate and build consensus with other members of a project team.  Or, learning to identify the role emotions and subconscious biases play in the decision making process can enable an individual to make more effective decisions. Learning Risk Management skills can enable a Human Resources manager to better anticipate potential problems and know how to create effective solutions before a problem arises.

In 2016, give consideration to learning things outside the scope of your role or responsibilities. Even if learning new skills may not seem directly related to your current work position, you will be increasing your value. Soon, you’ll wonder how you ever got along without these new skills.

If you are seeking to reduce your organization’s gaps in skills, improve cooperation and productivity through better communications and decision-making knowledge, or provide some morale-improving, team-building workshops, let’s talk. With a wide variety of courses, delivery techniques and a highly skilled training team, we will help you achieve your training goals for 2016 and beyond.

Contact Jim Wynne at 610-225-0449 or at jwynne@meritcd.com.

 

Permanent link to this article: http://meritcd.com/blogs/crossfit-training-your-body-and-your-mind/

Do You Know Your WHY?

Most people know what they do. Some understand how they do it. Few people take the time to understand why they do what they do. (And no, the answer is not to make money!) As an organization committed to inspiring others to enrich their career, the team at Merit Career Development conducted a “Why” exercise at our annual planning session.

 

In order to better understand “why” we, the Merit team, we began by reviewing the TedTalk of Simon Sinek, on “Start With Why.” We then tasked each member of our team to consider three important questions:

 

  1. Why do we do what we do?
  2. How do we do what we do?
  3. What do we do?

 

The results were simultaneously surprising and unsurprising because we were all quite precise and remarkably similar in our expressed thoughts. We agreed…

Why we do our work at Merit:

  • Education changes the world.
  • Education empowers people to take control of their lives.
  • We are improving people’s lives through education.
  • We can and do make a difference in people’s lives through education.

How we do our work:

…by designing and delivering engaging and interactive courses that center around techniques that increase retention.  Using proven research grounded in adult education theory, our courses are designed for people to experience the learning in a hands-on, practical, and engaging medium so they can immediately put the knowledge they learn into practice.

What we do:

With a very talented, highly educated team, we design and deliver relevant professional education and training using engaging and memorable techniques.

 

Merit Career Development hopes to have the opportunity to work with your organization in 2016. We believe that we can make a difference in your life and in your organization.

 

Contact Us

 

Enjoy the Simon Sinek TedTalk by clicking here: http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action

Permanent link to this article: http://meritcd.com/blogs/do-you-know-your-why/

Supply Chain Talent Crisis Looms

Breaking chainsSupply chain executives are worried about a weak talent pipeline.

More than half of executives at US-based global companies say they are not confident their supply chain organizations have the competencies they need today, according to the 2015 Supply Chain Survey from Deloitte.

As a profession, supply chain management finds itself in something of a crisis. Just as the discipline is gaining stature within enterprises, many organizations are confronting critical shortfalls of talent. Some observers believe the demand for supply chain professionals might exceed supply by a ratio of six to one.

Years of headcount reduction, training budget cuts, and the retirement of highly skilled individuals have all contributed to the shortage of supply chain talent. At the same time, a combination of accelerating technology development and widespread experimentation with new operating models are expanding the scope of supply chain operations, creating a demand for new types of supply chain employees—a trend that is only expected to accelerate in the future.

“Margins are so thin in many industries that any technology or operational change that can provide a competitive advantage—whether its 3D printing or advanced analytics—is critical. And those capabilities are inherently dependent on talent,” explains Kelly Marchese, a principal and supply chain leader with Deloitte Consulting LLP.

It’s not a matter of sheer numbers, rather, it’s a matter of shifting needs as rapid changes in supply chain activities, tools, and goals call for new skills in management and leadership.

The Deloitte survey evaluated technical capabilities ranging from real-time shipment tracking to artificial intelligence. Optimization tools and demand forecasting are the most widespread tools currently in use, but that is predicted to change in the near future. The biggest gap between current strengths and anticipated need is competency in technical analytics. This is seen as the most important technical competency in the near future; only 46 percent of supply chain organizations in the study consider their skills in analytics to be “very good” or “excellent.”

Figure 1: Use of Supply Chain Capabilities; Deloitte 2015

A Cutthroat Technical Skills Market

It’s no wonder supply chain leaders are concerned about recruiting and retaining related technical skills. They’re competing not only with other supply chain organizations for that talent, but also with other functions in their own organizations—chiefly IT. “If you look at supply chain and technology, they’re two of the most strained areas of talent in the whole corporate ecosystem,” says Benjamin Dollar, a principal with Deloitte Consulting. “You need to have strong technology skills in supply chain, and CIOs increasingly need to enable sophisticated problem-solving within the supply chain. And neither one can do it with the people they have now.”

Supply chain managers are looking to science, technology, engineering, and math (STEM) graduates to fill new supply chain roles—but it’s a tough sell. “Most supply chain leaders would love to hire engineering grads from top schools, but a job in the supply chain at a manufacturer is pretty low on their list,” Dollar says. “There’s not enough sex appeal.”

Looking for Leaders

While a large majority of survey respondents (73 percent) said it was extremely or very important to hire employees with the required technical competencies in order for their company to meet strategic objectives, even more (79 percent) said leadership and professional competencies (such as problem-solving, change management, and talent development) were extremely or very important. Strategic thinking and problem-solving were deemed most critical in the future with 74 percent of respondents saying it would be rising in importance. But just 43 percent say they are very good to excellent at it today.

That may be an even bigger challenge for supply chain executives than locating technically skilled professionals. “You can at least take a class in analytics,” says Marchese. “Leadership characteristics take more time to develop.”

leadership and performance competencies
CIOs and COOs: A Talent-Sharing Opportunity

“A lot of what’s driving the supply chain talent problem is the need to implement new technologies, and that’s an issue for both the COO and the CIO,” says Marchese.

But to be successful in the future, IT and supply chain must be closely aligned. “You have to create an operating model in which the supply chain can make it clear what its requirements are and IT can show the supply chain the art of the possible,” says Dollar. “To do that successfully, you need a mix of strong supply chain talent combined with advanced technical skills.”

Build Internal Skills Augmented by External Expertise

Advanced supply chain management concepts must be matched by advances in talent management capabilities. The survey also found recruiting new talent is seen as a greater challenge than retaining existing talent, especially at higher levels, suggesting that building skills internally is becoming increasingly important.

The largest difference between the expectations of supply chain leaders and followers is something of a concession to reality. Leaders are more likely to believe their supply chain organizations will make increased use of specialized external expertise and staffing over the next five years. Supply chain talent may flourish best when it lives outside the walls of organizations supporting personnel inside companies where supply chain excellence is “the business of the business.”

Source: Supply Chain Talent of the Future: Results of Deloitte’s 3rd annual Supply Chain Survey. © 2015 Deloitte Development LLC. Member of Deloitte Touche Tohmatsu Limited.

Supply Chain Crisis Looms WSJ CIO Journal Copyright © 2015 Deloitte Development LLC.


Does your staff need stronger supply chain management skills? 

Merit’s Excellence in Supply Chain Design and Operation workshop engages participants through computer simulations, game play, team exercises and case studies that reveal the critical factors one must consider when designing and operating a responsive, high performance, world-class supply chain.

This fast-paced, interactive course, led by Professors Jack Muckstadt and Peter Jackson of Cornell University, provides an understanding of the “Laws of Supply Chain Physics” and the basic principles of flexible, efficient supply chain design and operation. Learn more here.

Contact Merit Career Development’s Walt Beadling at 610-841-1618 or email at wbeadling@meritcd.com.


© 2015 Merit Career Development. All rights reserved.

Permanent link to this article: http://meritcd.com/blogs/supply-chain-skills-shortage-threatens-us-competitiveness/

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.


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