End of the Book Tour

Over the past couple of months, I have spoken at 13 locations to over 750 supply chain professionals. Tonight, I end the book tour in Raleigh with an event in the Research Triangle in North Carolina. It combines the educational, technology and user groups in this area.

It is always great to hear from readers. As I talk in the sessions, I ask the question, “What did you value in the book?”  The answers follow common patterns:

  • The most common answer is the sharing of the thirty-five case studies from the pioneers over the past three decades.  Common comments are, “The book is full of great stories.” Or, “I loved the quotes from the pioneers.” The readers love the stories.
  • The second most common response is on Chapter 6 and the insights shared on the Race for Supply Chain 2020.  Teams are looking for a definition of the future supply chain.  They recognize the gap between the current state of supply chain technologies and the changing business requirements. In strategy sessions, companies find the mapping of outside processes using new forms of data, and working with the concepts of emerging technologies, to be liberating.
  • The third is a reflection of accomplishments against the original goals of supply chain excellence.  Over the course of the tour, I have had great discussions on the definition of the term “supply chain” as a department (often focused on logistics) versus the original intent as driving improvements from the customers’ customer to the supplier’s supplier. Most supply chain professionals find the discussions engaging.  They take a deep breath when they learn that industry stagnation against the goals is a common problem.  Most do not realize that all industries (except high-tech) are stalled in making progress in powering improvements in profitability, inventory cycles, and managing complexity. Many are surprised to find the only thing that we have improved in the supply chain is employee productivity(revenue/employee).  They are surprised that we have not improved inventory levels, inventory turns, or Return on Assets (ROA). They take solace in the fact that it is a common problem and that they are not alone.
  • The discussions on talent are transformational for most audiences. I love seeing companies share stories of how their worlds have changed in the management of supply chain talent. It is great to see the book used as a dialogue starter.
  • And, last but not least, it is great to see the book used as a way to transform the supply chain discussion from a functional dialogue to a business discussion.  I am passionate that supply chain matters to the balance sheet. I believe supply chain saves the world. The groups around the world have loved the discussions on supply chain strategy and balance sheet performance.

The tour is over, but I hope that the discussions are not. It has been a great experience. I feel very fortunate to have had this opportunity to share this with you.  As always, we look forward to your feedback.

 

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The Myths and Realities of Demand Management…

While visiting several global manufacturing companies, I could not stop thinking about a blog posting written by my co-author of Bricks Matter (Lora Cecere, AKA the Supply Chain Shaman).  I realized that she has a really cool blog handle, and I need to get one, as well.  With all kidding aside the blog posting was entitled: “Let’s Admit Seven Demand Management Mistakes of the Last Decade”.  The reality is that those mistakes are still being made today.    

It is concerning that after three decades of supply chain pioneers those mistakes are still inherent in the demand management process at many companies. In fact, it doesn’t matter the size of the company, or the location.  I have sat across the table from several supply chain management teams over the past year at companies that span from less than $1B in annual sales to over $14B in annual sales.  Talk about stirring emotions with the words demand planning, or demand-driven demand management, not to mention being market-driven.  Although, the atmosphere in those rooms could be defined by despair, disillusionment, and most of all skepticism it was far from hopeless.  It seemed like Déjà vu when I worked for a large CPG company back the 1980’s–no analytics, no technology other than Excel, and 100% “gut feeling” judgment injected into the process by multiple departments including sales, marketing, finance, and operations planning all in an attempt to create a one number consensus forecast.  The story goes on with no real attention to accountability and little if no attention to the product mix as the focus is on a top down forecast.   The supply chain leaders didn’t just say we want to improve our demand management process, but said that they had no choice due to the fact they were sitting on anywhere from $100M to over $600M in finished goods inventory, WHIP, and raw materials.  Over $75M to $400M was in finished goods inventory, alone.  Talk about being supply centric in their approach to demand management…wow!   

As Lora mention in her blog that after two decades of process and technology refinement, excellence in demand management still eludes supply chain teams. This is an understatement. After two decades the demand forecasting and planning process is still the largest gap between satisfaction and performance.  Given our research in writing Bricks Matter demand forecasting and planning is the key focus area for most companies over the next two years.  For most it is the biggest challenge that they will face in the supply chain journey.  Companies want to improve demand forecasting and planning, but have focused mainly on the process with little or no attention to data quality and analytics.  As a result, their skepticism has become prevalent among their supply chain leaders that they can never be successful in improving demand forecasting.  As Lora indicating in her blog demand forecasting and planning is important to supply chain leaders, but also an area with the largest gap in user satisfaction.

Based on my personal experiences visiting companies, we find that demand forecasting and planning is the most misunderstood supply chain planning process with little if any knowledge of how to apply analytics to downstream data.  Also, well-intentioned consultants have given bad advice, particularly, that a one number forecast process is the key to success.  In my experience, the one number forecast does not work.  It only encourages well intended personal bias, and is used to set sales targets, financial plans, and other factors that are not directly related to an accurate demand response.  What drives excellence in demand forecasting and planning is the ability to incorporate sophisticated data driven analytics into the process using large scale enabling technology solutions to create the most accurate unconstrained demand response.  Once that unconstrained demand response is adjusted for sales, marketing, financial, and/or operational constraints it becomes a sales plan, marketing plan, financial plan, and/or a supply plan.  In this article, I share insights on the current state and give actionable advice that supply chain teams can take to make improvements.  

Why it Matters More than Ever to Embrace Demand-Driven Demand Management 

Demand Management concepts are now twenty to twenty-five years old. The first use of the term demand management in the commercial sector was lay claim to in the late eighties or early nineties.  Previously, the focus was on a more siloed approach to forecasting that was manual using very simple techniques like moving averaging and simple exponential smooth using Lotus Notes, and then, Excel, and a whole lot of “gut feeling” judgment.  Sound familiar.  In the mid-nineties demand planning and supply planning were lumped together, which gave birth to supply chain management concepts of demand planning and integrated supply chain planning. 

As we have found is that most supply chain professionals are quickly realizing that their supply chain planning solutions have not driven down costs, and have not improved inventories or speed to market.  What we have found companies globally across all industry verticals have actually moved backwards over the course of the last ten years when it comes to growth, operating margin and inventory turns.  In some cases they have improved days payable, but this has pushed costs and working capital responsibility backwards in the supply chain, moving the costs to the suppliers.

As we mention through the Bricks Matter book in order to move forward, companies need to admit their mistakes of the past. They must be willing to fail in order to move forward.  In their supply chain journey to sense demand signals and shape future demand the use of demand information will be critical in driving a more profitable demand response.  Leaders must confront a number of mistakes made in the design of their demand management processes over the course of the last decade. The mistakes are many, but all can be corrected with changes to the process, use of downstream data, and most all, the inclusion of analytics.  Let’s start with the biggest myth.    

1) One-number Forecast.  It is a Myth.  Well-intentioned academics and consultants tout the concept of one-number forecasting.  Enthusiastic supply chain executives have drunk the Kool-Aid, as they say.  But, the reality is it does not reduce latency and it is too simplistic.  The sole concept of a one number demand forecast is that “if everyone is focused on one number the probability of achieving the number is great”.  As a result, the concept adds unintentional and in many cases intentional bias, or forecast error to the demand forecast.  The reason is it is too simplistic, but the reality is that all the participants have different purposes, or intentions.  I ask supply chain managers, “what is the purpose of your forecasting process?’  They say, “To create a demand forecast”.  I respond, “What is the true purpose of their demand forecasting and planning process?” Is it to set sales targets, create a financial plan, or create a true unconstrained demand forecast?  They pause, and say all the above.  I ask, all the above are plans, not an unconstrained demand forecast.  There is only one unconstrained demand forecast, or as close as possible “unconstrained” with some inherent constraints whether self-inflicted or customer specific.  The people who push this concept really do not understand demand forecasting and planning.

A demand forecast is hierarchical around products, time, geographies, channels, and attributes. It is a complex set of role-based time-phased data.  As a result, a one-number thought process is naïve. An effective demand forecast has MANY numbers that are tied together in an effective data model for role-based planning and what-if analysis.  Even the eventual demand plan is sometimes not reflective of the original demand forecast due to capacity restraints, which results in demand shifting to accommodate supply constraints.  In fact, most companies who described demand shaping during our 75 interviews with supply chain managers were actually describing demand shifting, not demand shaping.  

A one-number plan is too constraining for the organization. A forecast is a series of time-phased plans carefully architected in a data model of products, calendars, channels and regions. The numbers within the plans have different purposes to different individuals within the organization.  So, instead of a one number forecast, the focus needs to be a common set of plans for marketing, sales, finance and operations planning with different plan views based on the agreement on market assumptions and one unconstrained demand response. This requires the use of an advanced forecasting technology solutions and the design of the system to visualize role-based views that can only be found in the more advanced demand forecasting and planning systems.

2) Consensus Forecasting and Planning:  Can be a Reality, but in many companies it is a myth.  The entire basis for the concept of consensus forecasting and planning is based on the belief that each organization within the company can add insight (value) to improve the accuracy of the demand forecast.  In concept, if designed properly this is correct.  Like many concepts the reality is a result of the how it is implemented.  In this case, the implementation has been flawed. The challenge is that most companies did not hold the groups within the organization accountable for their bias and error.  Each group within the company has a natural bias (purpose), and corresponding error based on incentives.  The old adage, “be careful what you ask for because to may get it”.  Unless the process has structure regarding error reporting, the process of consensus forecasting and planning will distort the demand forecast adding error despite well-intended efforts to improve the forecasting and planning process.

We have worked with many companies that have redesigned their collaborative demand planning processes many times.   Each time it was to improve the user interface to make data collection easier by sales.  What I refer to as “automate what I do, but don’t change what I do”.  In each redesign not once did they ever question the value and appropriate uses of the sales input or apply structure around the input that was driving a 40%-60% forecast over/under bias.  We struggle with why more companies do not apply the principles of Lean to the consensus forecasting and planning process through Forecast-Value Add (FVA) Analysis. This is best described by Mike Gilliland in his bookThe Business Forecasting Deal: Exposing Myths, Eliminating Bad Practices, Providing Practical Solutions.  In its simplest form FVA measures the impact of each touch point in the consensus forecasting and planning process before and after the statistical baseline forecast is adjusted by one of the participating organizations (i.e., Sales, Marketing, Finance, and Operations Planning).  If that particular touch point isn’t adding value then you need to either eliminate it or weight the bias up/down.  This requires that all the forecasts be captured each cycle and compared to determine any bias. 

3) Forecast by Exception. It is a Reality. Given all the acquisitions and consolidation that has taken place of the past 20 years, SKU proliferation, as well as companies selling their products across geographic regions, markets, channels, and key accounts (customers) has made it difficult to touch every product every cycle.  It is not uncommon for a company to have anywhere from 2,000 to 18,000 products (SKU’s) thatspan across multiple channels (e.g., grocery, mass merchandisers, drug, gas and convenience, and others), across multiple regions and countries, not to mention customers and demand points.  This could lead to millions of forecasts each cycle.  It is virtually impossible to touch every product every cycle.  Companies forecast at some aggregate level in their product hierarchy with little attention to the lower levels (product mix).  Then, imagine doing this in an Excel spreadsheet.  Well that is reality.  The biggest attributor to forecast error is the product mix due to the sheer number of products and locations (SKU/Ship to location).  This requires a large scale automatic forecasting system that can do all the heavy lifting using analytics, and can filter on an exception basis those products and locations that need the most attention based on a set of business rules, and error statistics (e.g., MAPE, WAPE and others).  Excel is simply not scalable, nor does it have the depth and breadth of analytics.            

4) Fitting Demand to Supply versus Fitting Supply to Demand: This is Reality.  Traditionally, companies focused on forecasting what manufacturing should make, rather than what the market and channel were demanding.  This is a supply centric approach to demand forecasting and planning that compensates for the lack of a strong demand management process.   The process needs to focus on identifying market opportunities and leveraging internal sales and marketing programs to influence customers to purchase the company’s products and services, also known as shaping future demand.  This situation has changed the process focusing on modeling what is being sold in the channel to determine the best demand response.  This difference, while it may sound insignificant, is a major change.  It requires an additional step after demand sensing and shaping to translate demand into a more accurate demand response.  Forecasting channel demand reduces demand latency and gives the organization a more current demand signal. It also allows the augmentation of the forecast with demand insights (signals) to improve the quality of the forecast.  For most companies, this requires a re-implementation of demand planning methodologies and new enabling technologies. 

5) Lack of Statistical skills: This is Reality. Recently, while meeting with the supply chain management team of a large appliances manufacturer, I was asked to provide them with a detailed description of the skills required to hire demand planners.  This is not uncommon as most demand planners have minimal statistical skills.  Their primary role in the demand management process is focused on taking aggregate level forecasts and disaggregating them into ship to location by SKU forecasts.  This requires minimal statistical skills.  This is done using Excel spreadsheets, and then, manually entered into a legacy ERP system.  Those companies who invested in demand planners with advanced analytical skills combined with new demand forecasting and planning enabling technology based on demand sensing and shaping have significantly improved their forecasting processes. 

Most traditional demand planning organizations are positioned in the operations planning departments too far upstream to understand how to apply analytics to downstream channel data.  When meeting with supply chain managers, I ask “Who is responsible for demand generation?”  They always respond, “Sales and marketing”.  Then I ask, “Why then are the demand planner’s positioned in the operations planning organization?”  When in fact, they should be positioned in the marketing organization where the domain knowledge exists.  In other words, demand forecasting and planning requires analytics and domain knowledge.  The new demand management organization of the future needs to be positioned in marketing for two key factors; 1) to provide statistical support, and 2) gain domain knowledge.  As marketing products managers move every 2-3 years the demand planners will remain as the product domain knowledge experts, as well as the analytics expert over time.  As a result, the companies will begin to models sell through versus sell into the channels of distributions, as demand planners begin to analyze using statistics to measure the effects of those factors that influence customers to buy their products.  As a result, inventories will be managed more efficiently in the channels avoiding discounting, sales promotions, and other vehicles required to push products through the channels.  This will have a positive impact on profit margins resulting in higher revenues.    

6) Who should ultimately be Accountable for Demand Forecast Improvements?   Sales and marketing are responsible for demand generation, and ultimately for creating the most accurate demand response.  The primary role is to identify market opportunities, translate those opportunities into demand signals, measure the signals, and use them to shape (influence) future demand.  The consensus should be between sales and marketing with financing assessing the programs to determine if they are profitable.  If not, then it is finances role to push back on sales and marketing.  This is a truly a market-driven demand management process.  Operations planning should not provide another input into the consensus forecasting process other than to assess the implications from a supply perspective.  If there is a capacity issue it should be raised at the S&OP meeting to determine a strategy to resolve the constraints (i.e., add another manufacturing shift, OEM the capacity to a third party manufacturer, or shift demand by moving a marketing program to accommodate the capacity constraint).     

There is a large CPG manufacturer who does this best by following a structured demand management process that is supported by new demand-driven technology that allows them to measure sales promotions and marketing events mathematically calculating the lift, and then, assesses the lift to determine if it generates profit.  If not, the sales promotion is not implemented.  This combination of data, analytics, domain knowledge and financial assessment has significantly improve forecast accuracy as well as performance resulting in higher profit margins and lower finished goods inventory safety stock.  

Looking to the future? 

So while companies want to move forward, and the desire is to re-implement demand planning, in our opinion, they cannot be successful unless they admit to the myths and realities of the past.

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Bricks Matter Public Training Now Available

Last week, based on the content of the book Bricks Matter, Supply Chain Insights rolled out our first public training class. The class’ focus is to help supply chain professionals understand the evolution of supply chain excellence, and the building of outside-in processes. In the class, we benchmark the companies’ financial performance against peer groups and discuss the concepts of making trade-offs on the Supply Chain Effective Frontier. (For more on this concept, reference the Supply Chain Insights report, Conquering the Supply Chain Effective Frontier ) We try to help companies make these two concepts actionable through a series of experiential activities. At the end of the class, after the completion of the activities, we had some time to talk as a group. I was asked two very good questions that I thought I would answer here in this blog post.

We had just finished the training on supply chain talent (see the infographic below), when I was asked these questions:

  • Based on the research, what makes a great supply chain leader?
  • And, conversely, what characteristics should we look for in new demand or supply planner employees?

First, let’s start with the obvious. When it comes to supply chain excellence, there is no substitute for leadership. In fact, we find an inverse correlation between companies that have depended intensively on third-party process consulting assistance and peer group rankings on the Supply Chain Effective Frontier. The best results happen when there has been consistency in leadership that built supply chain potential and focused on improving flexibility and balance. So, as a group, we brainstormed the answer to these two questions.

What characteristics make a great supply chain leader?

  • Focus and discipline. Consistency of purpose. (This leader does not get swayed by fads.)
  • Ability to manage a broad scope of work. A great leader has the ability to think from the customer’s customer to the supplier’s supplier.
  • Builds supply chain talent. Works to set direction, share feedback and mentor employees.
  • Holistic thinker. Understands the trade-offs of the supply chain as a complex system and can help influence organizational leaders on how to orchestrate change.
  • Takes a long-term view. Understands that supply chain transformations take time. Builds potential and has patience.

What characteristics make a great planner?

Similarly, a great planner in the organization has similar skills. While the role in the organization may be more junior, they have complementary skill sets.

  • Systems thinker. The group agreed that there was no substitute for this type of thinking.
  • Ability to anticipate. Knows the business. Understands and anticipates cause and effect. If something happens, this individual understands the potential impacts and works to correct them before they become an issue.
  • Analytical. Quickly recognizes and interprets patterns in data. Sees market trends and translates them for the organization.
  • Influence skills. Has the ability to explain and share data to drive organizational alignment.

What do you think? Are we close? Do you agree that these are critical skills?

As talent issues increase, finding these skills will become more difficult. Let us know what you think of the latest infographic that we have built to help companies start to take this issue more seriously.

 

 Supply Chain Talent Infographic

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A Source of Talent for YOU?

“We are playing hosts to our world cousins. They are coming here to study.”

The students packed the room. At the Bricks Matter reception, in a classroom in Spain at the EAE business school, I met students from  Brazil, Ecuador, Egypt, Mexico, Sudan, and Panama. I was fascinated by the multicultural diversity of the talent in the room.

Today, the future supply chain leaders of the world are primarily coming from European and North American schools. The emerging economies of Brazil, Russia, India and China have not stepped up to the plate to build college programs to supply talent for the emerging markets.  As a result, the Spanish-speaking regions of the world are migrating to schools in Spain, and the English-speaking regions of the world are attending schools in London. The percentage of international students attending the book tour events in Europe was high.

Despite the rain, a public transit strike, and the fact that the event was offered only in English without translation, I spoke this week to a full house of over one hundred attendees in Barcelona and sixty in Madrid. (The events were co-chaired by the Spanish CSCMP roundtable and the EAE business school.) About 35% were students.

With an unemployment rate of over 20% in Spain, the discussions on the shortages in supply chain talent sparked interest, and much skepticism. Job shortages in the area of supply chain management were hard for the audience to conceive.

I could not help but contrast the grim mood in the room with the upbeat and jubilant mood of the graduating Penn State students at a recent conference that I attended in December.  While the Penn State graduates in the United States are being pelted with offers, and the talk was how to pick the best starting position, the attendees in the room in Spain were just hoping for a supply chain job anywhere.

I leave Spain believing that multinational investments in the European schools could pay big dividends. I think that it is an important source of untapped talent.

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Qs & As

“Croatia’s ascension into the European Union is a compelling event for Sales and Operations Planning.  We started planning a year ago. For those that have not begun planning, the pending events will overtake them.”

“Why are consumer products companies not more willing to collaborate with us in retail? We see the most progress with Coca-Cola and Nestlé, but we expected to see more from Procter & Gamble and Unilever. Is this unusual?”

Tidbits from Discussions in Croatia

“When I think about my supply chain journey, I want to be sure that my legs are not longer than the step.”  

“Whatever I chose to implement, I want to be sure that it does not take as long as the Duomo to build.” (The Duomo is a lovely cathedral in Milan that took 600 years to build.)

Tidbits from Discussions in Milan

London. Milan. Zagreb. Barcelona. Madrid. This week, I added stamps to my passport.

I am traveling Europe on a book tour to discuss and share insights from my writing of Bricks Matter.  As I travel, I find I am surrounded by beautiful brick buildings wherever I go. They are testimonials that bricks really do matter.

It has given me great pleasure to hold up my book and share insights with groups hosted by the Chartered Institute of Logistics and Transport (CILT) in London,  the Italian Association of Logistics and Supply Chain Management (AILOG) in Italy, Infoarena in Croatia, and CSCMP in Barcelona/Madrid. By the end of the tour, I will have met with approximately 450 supply chain leaders in Europe.  Tonight, I sit in Milan, fighting jet lag, reflecting on the events.

Many of the events have been attended by mid-market European manufacturing supply chain leaders (less than €500 million  in annual sales). Italian and Croatian audiences were filled with mid-market manufacturers. They are trying to figure it out.

The mood is reserved. Uncertainty reigns. They are feeling the economic impact of the world economy.  Here I share the answers to the most frequently asked questions on the book tour:

What are the differences between European and North American supply chain organizations? I find it interesting that this question is asked so frequently on my tour. The attendees are curious. Since most of my work is with global multinationals, I no longer feel the stark distinction between the continents that I felt five years ago, but it is top of mind for the audiences that enter the rooms on the book tour.

The first time the question was asked, it surprised me. I had to think about the answer, and pause and reflect on the dialogue leading to, and happening after, the meetings. Here is my answer, broken into three parts:

  • One of the first differences that I have encountered between the two continents is that the European supply chain leaders are not feeling the pinch of the talent crunch that is being felt in the United States.  The focus of most supply chain leaders that I meet here is logistics.  The continental schools are pumping out talent and the needs are being met.
  • In general, the planning processes, and the use of planning optimization in demand and supply planning, are not as advanced in Europe. Most supply chain leaders that I talk to are looking for simple, easy-to-use solutions.  There is less of an appetite for cloud-based planning applications or advanced analytics. There is more of a focus on  practical processes that work.  They are far  more pragmatic and there is push-back from the overhyped and expensive supply chain planning market of the last decade.
  • The groups are more functional than the teams in the United States.  They are not as far along when it comes to understanding horizontal processes.

Why have we not made more progress on becoming demand driven? The next question also surprises me.  From an audience that is less mature in planning, the group will usually ask me why we haven’t made more progress on demand-driven concepts. I find that most don’t understand the principles of demand-driven value networks. As I explain the concepts of demand sensing, demand shaping and demand translation, most in the audience have not thought about the fact that the order does adequately reflect demand, and that all of our traditional supply chain systems are based on orders.  Walmart’s presence in Europe has had less of an impact.  RetailLink exists only in the United Kingdom, and the retail sharing policies of European grocers for point of sale data are not nearly as advanced as in the United States.

Most in the audience think about it as a consumer packaged goods/retail process, and have spent less thought on the impact of the Internet of Things and Machine-to-Machine (M2M) interaction. The Europeans’ use of mobile devices is much greater than in the US and with the population density in the cities, I think that they are primed to do great things in the area of demand-driven supply chains. However, I think that it will be less about point-of-sale sharing and more about the direct automation of machine-to-machine connectivity.  Just as the Europeans have automated taxi calls to be based on need, not based on a formal queue, I think that Europe will move forward on demand driven based on the convergence of mobility and M2M connectivity.  For example, while in London. I encountered a case study of Costa Coffee in London. The firm is competing with Starbucks.  To better service their stores, they have installed Barista machines that enable automated signaling on coffee usage. The data is hourly data received hourly. They are using this connectivity, and the Internet of Things, to drive replenishment. I love this story of a small company redesigning their supply chain from the outside-in. This is the promise of becoming demand driven.

Are market-driven concepts applicable to small and medium-sized companies? There is also a pervasive belief that the concepts of demand driven, and market driven, are only applicable to large companies.  When I hear this, I laugh. I think that they are a wonderful opportunity for the smaller company.  In fact, I think that a smaller company is more likely to be successful in market-driven concepts than a very large company that is hampered by politics and a large organization.

I liken it to the technology step change that happened with the telephone. You will never find people in emerging countries with a “landline.” The technology adoption curve skipped a step.  I think that market-driven value networks could be analogous.

I think the concepts of market-driven value networks are a wonderful opportunity for a mid-market European company.  With high commodity and demand volatility, I think that it makes it even more important to take this step to connect the planning and execution processes through synchronization and orchestration outside-in.

Market-driven concepts build on the concepts of demand-driven value networks. Companies should not undertake a demand-driven journey without ensuring supply chain process reliability.  In the design, there are five demand-shaping levers and  market-driven orchestration levers as shown above.  While demand-driven automates demand sensing, demand shaping and demand translation, the concepts of market driven takes it one step further to align the value network based on volume, mix, risk, uncertainty and price. This orchestration happens in near real-time through horizontal processes from market to market.

Wrap-Up

Standing in front of six excited European audiences of supply chain leaders talking about a book that I wrote, is the chance of a lifetime.  I am thankful and appreciate all of the people who organized the trip and to those that have submitted reviews (there are now twelve five-star reviews) on Amazon. THANKS!

To see the presentation given on the trip, check it out on slideshare or in the Supply Chain Insights Community.

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Let’s Hear It for the Supply Chain Pioneers!

In the research done to write the book, Bricks Matter, Charlie Chase and I interviewed 75 supply chain pioneers from four different generations.

The first generation of pioneers were mainly male and from engineering backgrounds. It was the world of clipboards and operations. The second generation was more diverse. They drove the global expansion of supply chains opening up new businesses in the emerging economies of Brazil, India, Russia and China. They also implemented the first generation of supply chain technologies. The third generation drove the innovations through the years of e-commerce and advanced analytics.  They were the first generation of supply chain professionals to graduate with a supply chain degree. They embraced social technologies and mobility faster than their managers and corporate cultures. The fourth generation is now entering the workforce from major universities.  As they do, the volume of data and the speed of communication is increasing. It is a world of mobility and private and public networks. They are entering the workforce in a period of tight talent. Increasingly, the pioneers are pushing advances in processes, technologies and organizations. On the bottom of figure 1, the progress on revenue/employee by peer group in Consumer Packaged Goods (CPG) and High-tech and Electronics is tracked.

In 1982, the term Supply Chain Management was first applied to commercial operations that crossed deliver, make and source processes. In 2012, Supply Chain Management celebrated a third decade.  2013 is the beginning of a the fourth decade. Listening to the stories of the four generations of supply chain pioneers formed the fabric of the book Bricks Matter.  Each generation had a different take on the challenges and accomplishments of their period.  It was fascinating and rewarding to hear their stories.

In the mining of the data on financial ratios for supply chain leaders, we find that we made great progress on employee productivity. As shown in figure 1, each of these periods of supply chain leaders saw progressive leaps forward.

However, when we look at the progress of supply chain leadership on the Effective Frontier where companies have balanced growth, costs, complexity and cycles, we find a very different story.  High-tech companies continue to make progress after three decades of work, but the majority of the industries are stalled or going backwards.  Consumer Packaged Goods (CPG), food & beverage companies and chemical companies are stuck and pharmaceutical and industrial companies are moving backwards. For a complete look at this analysis, check out the new report by Supply Chain Insights on What Drives Supply Chain Excellence: A Look Back and a Look Forward.

As companies take stock and begin to run the race for Supply Chain 2020, that is outlined in Chapter 6 of the book, there are differing points of view of what maters. More and more, companies are realizing that they are stuck on the Supply Chain Plateau of the Effective Frontier and things need to change.  Join us at Supply Chain Insights as two leaders, Fran O’Sullivan, Global Manager of Integrated Supply Chain IBM Manufacturing, and Michael Corbo, Vice President of Global Supply Chain of Colgate-Palmolive, discuss their journeys for supply chain excellence in their race for Supply Chain 2020 on our upcoming webinar.

 

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Sold Out! Second Printing

The first printing of the book, Bricks Matter, is sold out. We are working on a second printing. If shipment time is delayed from Amazon, please bear with us.

We are busy coordinating the book tour.  The first stop is in Bentonville next week. We will kick-off with a session at the University of Arkansas followed by a public event in Bentonville. We hope to see you there.

In February, we have a session planned for the APICS chapter in Danbury, CT on February 6th and with the WERC council in Raleigh, NC on February 27th.  This will be followed by a European tour that will include London, Milan, Barcelona and Madrid. The book will also be sold at an event in Croatia on March 13th-14th.

It is fabulous to see the reviews on Amazon. The book now has two five-star ratings. We would love to hear from you! Let us know if you need more information on how to arrange hosting your own book signing event or to take advantage of the Bricks Matter training materials that complement the book.

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Published!

There are 14 to a box. We opened, signed and shipped 140 of the books this weekend. It was exciting to hold the book, ready for release, that I had co-authored with Charlie Chase. It was eighteen months in the making. Holding it was emotional.

It comes 290 pages cover-to-cover and smells like INK!  The book, Bricks Matter, is now shipping from Amazon. The digital version is also available for download.

We would love your comments on the book. After you’ve read it, it would be helpful to add your comments to the ratings and reviews section at Amazon or the Bricks Matter Book Club on LinkedIn. We also encourage you to attend the “Meet the Pioneers” webcast on January 10th to hear first-hand the thoughts of supply chain pioneers interviewed for the book.

Please share with friends and let us know what you think.

 

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Bricks Matter by the Numbers

My soul craves a holiday. Like many of you, I’ve sat in one too many airline seats, hustled for one too many cabs and slept in too many hotel beds. I need to unwind. I want dust to gather on my suitcase as I bake my special holiday treats. I crave time to step off the treadmill of life to think. It is time for reflection and celebration.

The book Bricks Matter is currently at press. In my mind, I imagine a factory of printing presses whirring with the words that I have written; the smell of ink hangs heavy in the air; the printing line is busy stacking cut sheets on skids, assembling the book onto pallets; forklifts are putting the cases onto trucks. I think that it is only fitting that a book about supply chain is born this way into the real world.

It is 290 pages, 1 inch thick with 36 case studies. I anxiously await to open my first box. Holding the first book in my hands will be emotional. It represents 18 months of hard work and 75 interviews with supply chain pioneers. The presses are rolling. The hard copies of the book will ship from the Amazon warehouses on January 4th and the digital versions will be available the week of December 22nd. Emotions are swirling in my head. I am anxious. What will people think? Will I have the courage to read the ratings and reviews? I feel a bit naked.

This is the third anniversary of the Supply Chain Shaman’s blog. I have posted 147 entries. I purchased the domain when I announced that I was leaving AMR Research. It was a cold day in Boston three years ago. The sting on my face from a nor’easter was one that only a Boston resident could know. I held my coat tight as the tears froze on my cheeks. I was scared. I could not go forward as an analyst after Gartner Group’s purchase of AMR Research, but embarking on my own journey was frightening. I did not want to do it, but I needed to.  As the book publishes, I wonder what others will think?  I am crossing my fingers. Happy holidays.

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Five Things I Learned about Supply Chain Management from Writing Bricks Matter

In September 2011, I began the journey. It took me sixteen months.

I started writing on a rainy, cold fall afternoon. I remember it well. As rain streaked the window panes, I wondered how hard writing a book would be. I was soon to learn.

There were three distinct phases: the research, the writing, and the reviews/edits. Each was hard work. It was much tougher than I thought. At each stage of book development, I asked myself, “Why did you want to do this?” The answer was always the same. 2012 marked the third decade of supply chain management. The story needed to be told.

The first phase was research. Over the period of September through December of 2011, I listened to a litany of interviews from 75 first generation of supply chain pioneers. Many of the stories were similar, but I wondered at the absence of data. In each interview, there was a belief that supply chain leadership made a difference, but the people interviewed did not know the balance sheet impact of their efforts.

These early pioneers drove progress, shouldered the burden of new process thinking and built the supply chain organization within their company. However, most of the effort was driven by “projects” or “technologies.” They had worked in isolation on a piece of the supply chain. There were no stories of an end-to-end supply chain transformation. They had pushed from the bottom of the organization often going across the grain. No one thought that the work was done.

When the interviews were done, I plunged into the second phase. The writing began. I thought that this would be fun. For those of you who don’t know me well, I love to write. For me, few things are better than getting up early in the morning and experiencing the flow of words from my fingers. I find the process intoxicating. So, I thought, “How hard would it be to write 98,000 words?” The answer soon became clear. To use a sports analogy, I found that I was a sprinter not a marathon runner. I was used to writing short pieces. I did not have the discipline to pound the keyboard to structure a larger piece. As a result, each chapter became a love/hate relationship. I would start a chapter with a flourish, and soon hit a slump. It would usually happen as I neared the 3,500 word mark. For weeks, I would massage the same 3,500 words looking for an angle, trying to punch out a story and make it coherent. I would toss and turn in bed and tote manuscripts on and off planes. Then suddenly, I would get it! The story would become clear. It was magical. As a result, the words would come freely and the story could progress.

I was a first generation pioneer. I had donned my hard hat and safety shoes in the late 70s. I was picked by my boss to attend early classes taught by Eli Goldratt on The Goal. I spent 15 years building supply chain teams, ten years building software and ten years as an analyst. So, as I sat down to write, I thought it would be easy. I thought I knew my stuff. I thought that the book would be primarily reporting. I was wrong. I learned a lot. In this blog, I share the five things I learned about supply chain management in the process of writing the book, Bricks Matter.

  1. We Seek Clarity. Our Journey is Far from Done. As I wrote the book, it became clear that we have emerging practices not best practices. Our work is not done. After three decades of supply chain process evolution, companies are still not clear on what defines supply chain excellence. As a group of professionals, we have not held ourselves accountable to balance sheet results, and aligned practices and policies to the delivery of greater value. As I realized this, I sent the book to the printers with a heavy heart. As an analyst, I had been guilty of looking at narrow one-year snapshots and broad generalizations. The book made me realize that a discussion of supply chain leadership needs to be a comparison of at least three years of sustained performance against a relevant peer group at the intersection of profitability, growth, cycle and complexity ratios.
  2. Leadership will Happen at the Ends of the Supply Chain. Today’s supply chain is stronger in the middle than at the ends. Leaders will drive differentiation by designing processes from the outside-in for both buy- and sell-side markets. As they navigate this transition, they will find that relationships matter; and while we have talked about collaboration, it has only been talk. Instead, companies have successfully moved cost and waste backwards in the supply chain to trading partners that are less able to shoulder the burden. This was a strong factor in the decline of the American automotive industry; and if companies are not careful, it will be a strong factor in preventing a material event. One of the things that we can clearly see in the analysis of supply chain leaders is that companies that lengthened Days-of-Payables Outstanding (DPO) decreased resilience.
  3. The Role of the Supply Chain Organization. Today’s supply chain organization is both an enabler and a barrier. It is an enabler to manage costs and improve reliability; but sadly, it is a barrier to redefining the next decade of supply chain leadership. In most organizations, the team is defined too narrowly. There is no one on the team that is chartered with building the end-to-end process. Teams confuse the scope of the supply chain organization (which is often limited to distribution) with the need to drive differentiation through end-to-end supply chain leadership. This is worse in Europe than the Americas; but it is a problem for all.
  4. Change. We have to Learn, to Unlearn to Relearn. Due to challenges in front of us, and the growing opportunities with technologies, we must learn the practices of the past, to unlearn and discard them to relearn the practices of the future.  Companies that think that we have “best practices” to move forward will be at a disadvantage.
  5. Outside in. The differentiated supply chain of tomorrow will be built based on a clear understanding of supply chain strategy. It will be built in a step-wise progression from the outside-in.  As companies map these processes, they will find that many of their investments in first generation supply chain technology are legacy. This will be a revolution not an evolution.

The greatest change happened through failure. While we would like to make it glamorous, we mostly stumbled forward trying to avoid other’s mistakes. As I wrote, I gained clarity. I hope that you do as well.

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