When Ludicrous becomes Scandalous.

When Ludicrous becomes Scandalous.

I like to have fun with the words ludicrous and scandalous.  By personal definitions are as follows:

Ludicrous; We’ve all been there…  Billy always has the crazy ideas.  Often, they're actually worth looking into and determining if they have any substance.  However, with any good brainstorming there are the occasional ludicrous ideas.  There is absolutely nothing wrong with the occasional ludicrous idea, just don’t spend resources on it.  

Scandalous; Is spending time and money on that ludicrous idea…!

 Five things to avoid living in a scandalous environment:

  1. Do team members have the authority to question and challenge others ideas?  Encourage healthy debate and critical examination of all ideas.  Even the CEO or Boards recommendations.

  2. Establish cross functional teams.  Establish diversity.  This eliminates bias thinking.

  3. As leaders often, our thoughts can be taken as directives.  During, meetings and brainstorming session keep opinions to yourself and let the team work through the thought process before offering any suggestions.

  4. At all brainstorming session, identify one person to be the devil’s advocate. Their role is to challenge 100% of the ideas and force the team look at the suggestions from the opposite direction.

  5. When possible socialize the top two or three idea contenders with outside influencers to check for reasonableness.

 

Don’t be Scandalous!

Ludicrous and Scandalous

Entropy Busters® Series - The Rule of 1% = 50%

Article after article has been written about the advantages of complexity reduction and what should be done. However, too often there is little focus on the root cause of entropy creeping into the enterprise. A recent Forbes article outlines the seven steps to reduce complexity. Each step mentioned addresses the symptoms of the illness and not the disease. We are not doing a good enough job of asking, "Do we really need so many exceptions?" or "That's a really stupid rule". Rather, we need to be asking, "What's driving and creating such complexity?"

The Elegance of Simplicity

Why are there stupid rules, why do we need a multimillion dollar ERP, CRM, MRP...?

Looking at Southwest Airlines; They have 706 aircraft; 98.2% of those are two Boeing models, the 737-300 and 737-800. Both aircraft only use one engine type, the CFM56. They have open seating, which does not require a complex ticketing systems. We can all agree Southwest has addressed complexity head-on.

What if I were to tell you that every business I've completed the following analysis for had this outcome?

Class % Demand % Part Numbers

"A" 80% 5-15%

"B" 15% 10-20%

"C" 4% 10-25%

"D" 1% 40-55%

MYTH, "If you focus on the 80%: the results will come". In the short-term you can make the argument that this is correct. However, in the long-term the results are not sustainable, because the last 1% is draining the teams resources. We must shift the paradigm and focus on eliminating the drivers for the last 1% or 50% of the complexity.

We allow entropy to creep into our organizations. en · tro · py /ˈentrəpē/ noun. Lack of order or predictability; gradual decline into disorder.

What would your business look like if complexity was cut in half? Would you need a complex ERP, CRM, and MRP? My premise is that the reason we need such complex processes and operations that require exception after exception and tribal knowledge is the sheer scope of our product offerings and parts required to support.

Over the past 20-30 years much has been written and accomplished in all areas of business satisfying customer expectations. We keep adding more and more offerings, functionality and larger sizes, in many cases without the processes to support such variety. Let's take a hard look at ourselves and agree there is a tipping point and exceptions to this line of thought. Again, look at Southwest Airlines and Apple. One firm is a discount air carrier and the other is high-end consumer electronics manufacturer. Both are excellent examples of operating complex equipment with a simple business design, model and product offering. Surely your business can be designed without the last 1% of demand or 50% of complexity?

Stop thinking of a process, a committee or new initiative for complexity reduction. Tell the team and customer you're eliminating the last 1% of demand.

Blow up the current model.

The latest business buzz-word is "Disruptive".

Be disruptive!

Be an Entropy Busters®!

What would this mean to your business design, organization, supply and customer base?

Rule of 1% = 50%

Art Koch's Profit Chain™ - Cheap is Cheap - Buyer Beware!

A couple weeks ago I posted about Cheap is Cheap - Buyer Beware!

I discussed how buying cheap lets entropy into your organizations. We are seeing this play out in real time with the Boeing 737-MAX, DO NOT let this happen to your organization! It looks as though Boeing went with a low price contractor. Here are five things that can help you to avoid this type of error.

Do you have a buyers in a purchasing department or commodity specialist in a procurement departments?

Ask these five questions.

  1. What percent of the team are professionals with education and certification supply chain or procurement management.

  2. Who does procurement report into? If it’s finance, I can guarantee they are focused on the incorrect metrics.

  3. What percent of the time do you reward contact to the lowest price bid?

  4. Do you have a supplier score card and are the rankings credible?

  5. What percent of suppliers are jointly working with procurement, supplier quality engineering and design engineering to reduce total cost?

Lastly:

  • Staff a department with unskilled workers, you create a cost center.

  • Staff a department with skilled professionals, you create a profit center.

Below is my original post from July 8, 2019.

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A quick way of adding Entropy into your organization is via purchasing.

If you’re always buying from the lowest price vendor, you’re running a purchasing department.

If you’re working to understand the TOTAL cost of ownership and rewarding suppliers that support; excellent customer service, flexibility delivery, outstanding quality and jointly deliver ongoing cost reductions, you have a world class procurement function that builds supplier partnerships.

The best way of becoming an Entropy Busters™ zealot. Never open the door and let it in…

Ask yourself and the team these three questions.

  1. What percent do we reward contact to the lowest price bid?

  2. Do we have a supplier score card and are the rankings credible?

  3. What percent of suppliers are jointly working with procurement, supplier quality engineering and design engineering?

If you don’t readily have the answers to these questions, you’re letting entropy into the process

Cheap is Cheap - Buyer Beware!

Supply Chain Management is alive and well!!!

Supply Chain Management is alive and well!!!

I recently read the June 2018 HBR article “The Death of Supply Chain Management

Shocking….to say the least.

I liken this article to the mid 1980’s and the push for “Lights Out” manufacturing.  Are they shouting from the same roof top?  Have not educators and professionals alike learned that lights out manufacturing has an extremely limited application.  And here they are sounding the same horn.  I can hear it now, “The Light’s Out Supply Chain” or “The Autonomous Supply Chain”.

If the authors’ objective was to get our attention, they did. However, they missed significant historical lessons. Nothing can replace human tactile/touch of making the pieces fit together.  Just ask Elon how his autonomous factory is working.  How many truly believe there will be 100% autonomous networks of vehicles roaming our roadways. Not many…we like driving and conditions change too often.

They’ve missed a critical point: SCM has been a 2nd class citizen within organizations for years and never let loose to show its true potential.  And NOW with big data, AI, and better analytics we have moved to the front of the bus. 

It’s time for SCM leaders to invest in themselves, organizations to invest in SCM as professionals. SCM is a profession just like CPAs and engineers.  As we move to the front of the bus, we as leaders in SCM must demand more professionalism within our profession.

The authors are correct, in there are significant benefits to AI and linking; sales, demand planning, inventory optimization and replenishment planning.  However, there must always be a strategy, vision and professionalism to “right the ship”.

SCM welcome to 1st Class!!!  Let’s act like we belong and let’s not blow the opportunity to show the world what integrated SCM can achieve.  It’s a great time to be part of this transformation.

 

Art Koch

Advisory Services and Founder 

+1-336-260-9441

art@arthurkochmgt.com

Thinking Big!

Just finished Alan Weiss’s one day session on Thinking Big! WOW…! Alan is the author of more that 60 books and the person behind the Million Dollar Consulting® franchise. This is my third class/session he has lead, all have been transformational for me as an expert resource and advisor for Operations and Supply Chain.

Key learnings;

  1. Don’t let our norms consume our creativity.

  2. Focus on what you desire in life to have break out Thinking Big opportunities.

  3. Build your brand; Entropy Busters!™, Inventory Is Evil!, The 1%=50% Rule, and Found Genius.

  4. Over communicate

  5. Stand out in the crowd / become an object of interest.

Alan Weiss and  Art Koch

Alan Weiss and Art Koch

Our class.  19 people from 4 counties.

Our class. 19 people from 4 counties.