The Snowy Big Data Supply Chain Event of January 2016

Prolog:

Did you see it coming? Sometime during the droning sound of The Weather Channel announcers describing Winter Storm Jonas I realized, “Holy cow! There is a gigantic big data event going on.” Not just gigantically big, but galaxy-like big.

How much snow was going to fall? What will the distribution of snow depth be? What is our projected absolute error range? How many plows do we need? Where? What is their capacity? Do we have enough fuel in all of the stations in the target range? Where will the snow all go? Can we calculate which roadways should be cleared first in the city so that assets can be deployed early and be ready (the grid of Manhattan has to be very easy to optimize)? And so on. We just need all of the data.

While the people in the target story zone were fretting over bread and milk, the folks in Buffalo, Syracuse, and Rochester were saying “Let’s get some brie, baguettes, smoked meat, and winter lager and watch those folks out East deal with this event!” While many of us remain skeptical about weather forecasts, communities, cities, and governments cannot afford to under-estimate the potential impact. Readiness is paramount.

The amount of “things” required to prepare for and respond to storms or major events is enormous. Some of the things already are part of the data network needed to manage the response. Many elements are not in place yet (for example, distributed sensors informing the agencies about the current state) and should be part of future planning. The more “things” that can provide data, the better agility we’ll have. We all know, the Internet of Things (Iot) is the next Big Thing! Some say it’s bigger than any other next biggest thing. Ever.

Well, we have our history about weather. We have great models that modern-day media love to show off – despite historical accuracy issues (I wish I got paid to be wrong!). We have supply and capacity in place – but how much can we handle?

 

Winter Storm Jonas

The storm that is now in the record books provided a tremendous vehicle to assess the full breadth and depth of what’s capable for IoT experiences that can generate unprecedented volumes of real-time data that are rich with the informational nutrients of how to prepare and respond that are truly transformational to society.

This information is essential to the supply chain part of the discussion. Supply chains thrive on timely, accurate data and information to remain both agile and focused. The supply chain elements are the “things” in the Internet of Things aspect of this big data opportunity.

There are big data lakes everywhere along the infrastructure waiting for deeper analysis: transportation, food & beverage, energy distribution, emergency services, consumption trends, and more. These all need to be mined for the requisite information to determine readiness (historical analysis vs. current capacity) and deploy the assets (snow trucks, salt, sand, water, emergency services) when needed – even days ahead! Supply planning starts with historical data about consumption rates and performance and the impending storm event.

“Data is the new science. Big Data holds the answers. Are you asking the right questions?” Patrick P. Gelsinger, Senior High Technology Executive

At one point on TV, one official said “We cannot handle snow above 3 inches per hour!” That’s the capacity of the current system. Is there additional flexible capacity nearby that could have been deployed much earlier? How much more is actually needed? If we moved all of the cars out of the roadways earlier, would our plowing efficiency go up and increase effective capacity? If public officials were given the tools to ensure well-ahead of time that the sufficient supply and capacity was available, the impact of the storms could be measurably less.

If you look at the map above, one can see that areas of the region usually well-prepared and equipped for large snowfalls went un-touched (Great Lakes snow belt, northern New England). Was a formal assessment done to determine if those assets (plows, snow, and emergency crews) were available and mobile enough to help out the storm area? If not, this is an opportunity that the right analytics tools can determine.

Snow in Minnesota

With the right system in place to model and determine what is required, the new demand (projected storm size) is loaded into the supply network and artificial intelligence (AI) tools manipulate the data to suggest likely outcomes. The AI engine(s) recommends a full deployment map of all essential infrastructure (capacity) and consumable assets (supply) based on confidence models from the weather predictions. If there are gaps, the model can reach out to other assets close to the region at risk. Ready. Set. Go!

The models that do the weather predicting (demand generation) will eventually feed the emergency system directly and scenarios played out will look at redistribution of supply (assets) within range (cycle time) in advance of the storm. Back to the things part of this, adaptive sensors throughout the affected area will keep pace with storm accumulation and clearance rates to adjust both capacity and supply – an agile supply chain with real-time data. True, there might be occasional errors of over-commission that leaves assets under-utilized, but we know this is a less risky and costly situation than not having assets in place due to under-forecasting.

With the correct supply, projected demand, and historical consumption data available from the aforementioned things, cities will also be able to know in advance where all transportation assets (planes, trains, and automobiles) are sitting and which ones need to go get out of Dodge; which ones to stop from coming in; which ones to store; and which ones are needed. Traffic flows can be adjusted to streamline exit paths and security assets (police and/or National Guard) can be sent out to monitor and guide. They will be redeployed later in the day as the snow begins to accumulate and eventually fades into the sunset. Once it is all said and done, everybody goes home, safe and sound.

Why should anyone ever be stranded on a highway again? The entire system in the affected area can be prepared for the event and take preventive action much earlier. While the chances exist that we over-forecast, the alternative is much worse – which we’ve seen many times in the past.

“Get the milk! Get the bread! Get the toilet paper! It’s gonna snow a ton!”

Once the storm and clean-up are over, there will be a brand new set of data available about the entire event, from the original warning to the last bit of snow moved. These data go into the existing pools of data and help set up the supply/capacity response for the next storm. Of course, record storms reset all of the averages and distribution of potential impacts – future events will benefit from the learning achieved. Simulation models will have new parameters to use during the next event’s planning.

Our ability to respond to widespread severe weather events must be proportional to the degree of recovery needed. This may mean that readiness spreads out geographically. With some capabilities (electricity, for example) the risk is higher that a storm can affect millions of people. Do we have the data and information necessary to help assess and plan for the impact of outages? With information such as this, government and private services can be deployed at the right levels and at the right cost.

Until the next biggest weather-driven supply chain event!

The discussion can really go on longer.

What do you think about this?

Well, time to check out The Weather Channel once more before going down for a long winter’s nap. I’m rooting for NYC to beat its all-time record and watch people stranded helplessly on TV. That’s winning, right?

“Let it snow, let it snow, let it snow!” Sammy Cahn (writer)

 

Epilog

After flying successfully from Seattle to New York City’s LaGuardia Airport, the reality of the problem became very evident. Hundreds of people were landing in the NYC airports once the flights were released. Unfortunately, the roads were not quite as ready. Accidents, slow moving traffic, and atypical congestion clogged up the LaGuardia airport late Monday afternoon through the night. Clearly, the incoming traffic exceeded a reasonable level given the overall situation. Busses, shuttles, limos, and taxis could not get through. Rental cars were quite depleted and emergency crews were dealing with the mess. 1 hour and a few dollars later, the driver from Avis accepted my “offer he couldn’t refuse” and took us to the Hertz terminal. Clearly, this is yet another opportunity for minimizing the disruption in this type of event with better data, information, analysis, and integration with the services in the region.

 

Michael Massetti is an Executive Partner with Gartner who really does enjoy being a supply chain professional! Seriously. All opinions are my own.

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Dealing with Big Data: From Quants to Smarts

For those tracking the world of Big Data and Analytics, you’ve probably heard of “Quants.” Just to be sure, a quant is the epithet of a person who is an expert in analytics and “quant”-itative analysis – thus the moniker “quant.” Quants are the people who businesses rely upon to illuminate the gnarliest analytical, mathematical, and numerical problems.

Quants play a crucial role in many industries and functional areas from health care and manufacturing to banking and retail supporting supply chain, finance, marketing, and more. As long as there are streams of data to understand, quants are here to stay. As the streams of flow into larger data lakes, especially with the Internet of Things (IoT) promising to generate gazillions of bytes more of data, quants have unparalleled job security. My former CEO at AMD, Rory Read, used to say that management’s role is to “torture data until the truth surfaces.” This role is relegated to data savants, a.k.a. The Quants!

“Torture data until the truth surfaces!”  Rory Read

One important area of focus for a company’s Business Intelligence (BI) activity is to identify the areas where more quantitative data analysis is needed. Many companies find themselves using high-performing employees mired in the laborious and unproductive practice of aggregating, rationalizing, cleaning, and reporting on data. BI and analytics programs drive to reduce the time needed to get information while allowing additional time for employees to dig deeper for fundamental, root-cause analysis capability, develop data models, simulate scenarios, and provide decision support.

Once the business achieves data cleanliness and stability, the focus changes from reporting and informing about past performance to anticipating and predicting future potential outcomes. Driving the business by looking exclusively through the rear-view mirror does not allow companies to avoid dangers lurking ahead. Once the ability to anticipate is in place, business discussions move from “what happened” to “what may happen” – scenario planning and modeling.

The migration to a forward-looking analytics model compels organizations to ask, “Are we ready for the ramifications that these BI development programs have on individual skills, management expectations, organization structure, and communications across the enterprise?” As the company evolves toward more anticipation-oriented and proactive decision-making based on data, the skills and disciplines required on the teams change. The questions management should be asking change, too. How will this actually work?

Teams must frame the decision scope and ensure clarity of the business problem(s) or opportunity(ies) being addressed. The quantitative analysis that follows will include reviewing historical data, establishing a hypothesis, gathering data, and performing the analysis. At the back-end of the process, decision makers must evaluate the results from the story that the data analysis conveys.

Trust is vitally important in both the data and the individual/teams doing the quantitative work. Verification never ceases. Critical statistical validation and thorough inquiry should always be the norm. Transparency of the analytical approach and assumptions is central to successful decision-making. If the models are used by upper management to guide and inform decisions, the underlying assumptions and algorithms used to provide the core information must be visible and understood by all involved.

“In the end, the science of analysis must be married with the art of intuition and experience to make BI programs bring the anticipated results.”

Thomas H. Davenport highlighted a number of key questions that everyone involved in the process should be asking in a Harvard Business Review article from the July-August, 2013 edition “Keep Up with Your Quants.” These questions included:

  • What was/were the source(s) of the data?
  • How well does the sample represent the population?
  • Were there outliers and did they affect the results?
  • What assumptions are in your analysis and models? Do any conditions render this invalid?
  • Why did you choose the specific analytical approach? What options did you consider?
  • How are you certain of causality vs. coincidental correlation of the outcomes with the variables used?

This type of inquiry has not been common or pervasive until recently. Management must understand the fundamentals and assumptions used to establish institutional confidence in the information and guidance that comes out of the analytics and decision support models.

In the end, the science of analysis must be married with the art of intuition and experience to make BI programs bring the anticipated results. Artificial Intelligence (AI) will play a more significant role in the future. In the meantime, the behaviors identified above are fundamental to the success of any analytics and BI program. It is necessary to keep strong and open relationships between the quants and the decision makers.

Do you want to be a quant? There are myriad opportunities across all industries and functional areas for individuals to delve into the world of quantitative analysis. As the data streams continue to grow exponentially with IoT to become tsunamis, the need will increase further. Quants will no longer be a luxury for business success, they will be necessary. The future will bring more AI into play – people working on data and models now are likely to grow and evolve to develop new AI algorithms.  Their role will expand to not only help evaluate data with known models, but also to create and maintain models that are intelligent and adaptive to update themselves. It’s an exciting future in Big Data, BI, Analytics, and AI!

Who’s your quant?

 

“I never guess. It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.” Sir Arthur Conan Doyle (Sherlock Holmes author)

 

Michael Massetti is an Executive Partner with Gartner who really does enjoy being a supply chain professional! Seriously.

All opinions are my own.

Relationships Do Affect Sourcing Decisions

Regardless of who is involved in the process of selecting a supplier, an impartial and fair process is what matters most.

The creation of robust relationships is an intrinsic element of conducting business in the supplier management field. To build strong alliances there must be a foundation of trust and respect. Preservation of supplier confidence and trust is strengthened through a sound sourcing process.

All potential suppliers must believe that they have a bona fide opportunity to win the bid, even if the incumbent has already established relationships inside the company. Complications can occur when procurement personnel have existing friendships with the suppliers involved in the sourcing event.

One of procurement’s primary roles is to establish decision criteria that achieve an equitable supplier selection process. A balanced decision process should determine which supplier relationship will have the best impact on the business.

Most companies have established conduct policies involving the ethical standards of supplier interaction that clearly delineate conflicts of interest. ISM’s first principle of supply management states that one must “avoid the intent and appearance of unethical or compromising practice in relationships, activities, and communications.” Even if you are the only person who knows of the potential for conflict, but you must take precautionary actions to avoid it.

Situations may arise in which a close friend of an employee works for a supplier participating in the bid. Several specific steps can help you remain impartial if your friend works for a supplier.

If you are a part of the sourcing event, it is essential to recuse yourself from the selection process. Additionally, the person leading the event needs to know about the relationship with your friend. Finally, if your friend asks you specifics about the bid, you need to state clearly how important it is to remain outside of the process entirely.

If your friend’s job is at stake, remaining unbiased can be extremely complicated. You may feel pressured to sustain your relationship by providing information about pricing or a chance for your friend’s company to re-bid. By trying to help your friend, you may actually jeopardize your own credibility, compromise your company’s ethical standards, and put your own position at risk. No matter how strong the temptation, the requirements of the business take precedence.

Because most companies run sourcing events regularly, managing an impartial process is essential to maintaining credibility with all of the prospective suppliers. Sourcing events involve several companies and individuals. The supplier selection process must transcend any single individual’s role. As Mr. Spock told Captain Kirk in Star Trek 2, “The needs of the many outweigh the needs of the few.”

ciao…mam

Michael A Massetti is a high technology supply chain executive who has managed procurement, quality, supply chain planning, customer operations, distribution/logistics, operations engineering, and more.

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Show Me The Money! Get What You Deserve – Contract or Not

Supplier Remuneration – Sometimes You Just Have to Ask: Recouping Losses Due to Supplier Error Without Strong Contractual Protection

Warranty Handshake

This is a true story about a supplier issue that led to a massive field return issue – but actually improved the relationship. “Why is this an issue?” you might ask. Well, not all supplier relationships are governed by strong, broad-based agreements. Sometimes, without appropriate coverage or protection, especially in a sole-sourced situation, you just have to ask for a remedy and hope for the best.

How did we get to this point? 

The relationship between the supplier and us was solid. The companies worked together long before I arrived. For the most part, things were going well. However, the contract was not up to date and we were not properly protected from mishaps of the supplier.

We bought a specialized system from them to run part of our software. We installed these systems worldwide for our customers as a critical element of our overall solution. As with any purchasing environment, we tracked cost, quality, delivery, technology capability, and response to issues to judge performance. They performed very well.

Then, we discovered the issue.

 

The impact

It was not the type of problem that surfaced during the normal testing and evaluation. In fact, it was serendipitous that we found the issue at all. Once we discovered it, there was no turning back. Due to the nature of the problem, it was inevitable that at some point our customers would experience an unacceptable problem.

The cause of the problem was not the usual bad device or faulty manufacturing process or the rest of the list of hardware hiccups. The supplier had made a change in their manufacturing control system (MRP). During the translation from the old to the new system, the bill-of-material (BOM) got truncated and a number of components in the design never made it into the hardware. Despite that, all of the functional tests passed their processes and ours.

By the time we realized it, we were hundreds of systems, and a few million dollars, into shipments and field installations. Houston, we’ve got a problem.

We had to recall, replace, and repair the systems immediately – it was an “epidemic” situation. The challenge was that replacement had to occur first. We worked through those logistics to ship, replace, return, repair, and then re-ship. Fortunately, the systems were all very new and we could send repaired systems back out as new.

Please

We began the dance to get the supplier to cover the recall and replacement costs. Back and forth between the procurement manager and the account executive at the supplier.

Of course, our CFO was breathing down my neck. “We never get compensated for anything from suppliers. How come we always bear the burden?” Mind you, the contractual situation was inherited.

Regardless, time to negotiate more intensely. I went back and forth with the account executive.

“Look, we did not cause this. In fact, we did nothing wrong. You shipped us bad stuff.”

“Yes, I know. But why should we pay for the overall recovery? We are not obligated. There’s no way our financial executives will allow me to commit anything. We will fix our mistake, but that is it.”

Time to escalate.

Money Handoff

In the end we got our compensation

The escalation call was scheduled. The account exec told me not to expect a miracle or anything different from the financial executive.

The Cliffs Notes version went as follows.

“We have a major recall and repair problem. We are thankful that you are fixing the problems quickly and expediting new material to accelerate the entire process. However, we are spending a couple hundred thousand dollars to execute the entire process. Our customers cannot wait, so we must move fast. The personnel and shipment costs are not cheap.

“Please accommodate us by paying at least half. Thank you.”

Within 15 minutes of the call, the account executive called me back.

“You won’t believe this! Your request was so compelling, honest, and candid that the financial person agreed to compensate you. Congratulations. I never thought this was possible.”

It was even more fun walking down the hall to tell our CFO that we got half of the money back. He was equally ecstatic.

The negotiations and escalation could have gotten heated and hurt the relationship. We could have threatened legal action or changing suppliers. Both of these courses would incur a lot of opportunity cost and wasted effort.

Instead, we just asked and they said “yes.”

ciao…mam

  

Michael A Massetti is a supply chain executive who has managed procurement, quality, supply chain planning, operations engineering, and more. He’s also “gotten the money” when suppliers go awry.

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Don’t Be Afraid to Say “No!” to a Bad Contract

The Grass is NOT Always Greener on the Other Side of the Fence!

Grass-isnt-always-greener

With the new operations and procurement organization in place, it was time to focus on improving the performance of the supply chain. Since we were a relatively small manufacturer, we maintained our contract manufacturing with one partner. The performance of this segment of the supply chain was not meeting expectations. At the surface, the answer appeared straight-forward – change suppliers. The new CEO and new Sr. VP of Operations were experienced with a larger partner from their past. For the procurement team, it was time to evaluate the options – supplier improvement and/or a new supplier.

We began the new supplier evaluation process. Candidate companies were researched, visits to their facilities were completed, and we reviewed initial RFI (Request for Information) responses to prepare for the next step. We selected two companies to execute a formal bid with in addition to our current partner. With the courting process now in full motion, a few months later we made the choice to select a new supplier and begin the negotiations dance. So far, all of the amazing attributes and features of their business models were in full bloom, just like the male peacock’s glorious tail.

Dancers

Meanwhile, there was business to run, market share to attack, and profit to be achieved. Procurement was under-staffed, especially the resources dedicated to the largest and most critical supplier. After adding a very experienced out-sourced manufacturing ace to the team, it was time to drive measurable performance improvements. The four areas requiring focus were cost, inventory visibility, cost of poor quality (CoPQ), and delivery performance. The team set out to establish systematic improvement plans in each area – that’s what procurement does. With all of the warts and blemishes in full purview, we had to assess if we could dress our current dance partner up to the hilt.

With the prospective partner identified, we prepared to negotiate the contract. We had already negotiated myriad contracts during our professional life. We understood the ins and outs of negotiating, outlining critical goals for each partner, giving and taking on the hot clauses, and sending countless red-lined versions back and forth. It always seems to go this way: we tear through many of the clauses rapidly but get bogged down on the most intricate ones that have the largest financial risk.

Stalemate

Six months had passed since the contract negotiations commenced and we had not reached closure. It was looking dismal. There were a few very critical clauses that we could not even come close to agreement on – we put negotiations on hold twice during the process to ensure both companies were thinking things through thoroughly. We had come to a critical juncture in the potential relationship, not just the approval of the agreement. Despite many attempts to massage the wording to accommodate both parties’ concerns, we had reached a stalemate.

It was a difficult call to make, but it was time to go to the senior vice president and tell him we had to abandon the negotiations – we could not accept the financial risk that was being put on us compared to our current situation. During the six month period of the negotiations, our existing partner’s performance had transformed markedly. The quality team had reduced the cost of quality excursions by 50%. Delivery performance climbed over our 95% objective. Inventory issues had virtually disappeared. And, cost reductions were reaching all-time levels. Was there really a dire need to change suppliers anymore? In contrast to the courting phase when we observed all of the beauty of the new supplier and the warts of the existing one, we had a more complete view of both parties now.

Cancel Contract

In the end, we said “No!” and continued a successful and productive relationship with our existing partner. We sat down and hammered out a new agreement with them in less than two months. Business was progressing well. While it was a difficult decision to make, in the end, it was clear that the grass was not greener on the other side of the contract fence.

ciao…mam

Michael Massetti is a high-tech supply chain executive who really does enjoy being a supply chain professional! Seriously.

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So, you really enjoy being a supply chain professional? Part 4

Resolve to Reduce Your Risk with Resilience, Really!

 Risk Dice

Let’s face it, managing a global supply chain is a fascinating and pressure-filled profession. We learned a long time ago that chains are only as strong as their weakest link. If it weren’t for the myriad ways that your supply lines could be disrupted without a moment’s notice, we’d all sleep a lot better! Don’t you wonder sometimes how and why you got into this field?

This fourth article will look at the challenge that is managing risk – from systematic solutions to the unintentional roll of the dice we often take.

Weakest-Link

Chains are only as strong as their “weakest link.” Telecommunications has it right. Fault-tolerant networks rarely fail. Do you have a supply chain or supply network?

True, chains are only as strong as their weakest link. Why do we even call what we have a supply “chain?” Do we ever settle for a supply “chain” without understanding the risks to our business without some level of protection of a “network?”

Fault-tolerance is a concept that has been used in telecommunications, airplanes, and space missions for many years. Even the simple spare tire in your automobile is some degree of risk management and fault tolerance.

Procurement professionals ponder the merits of multiple source strategies from both a pricing and supply risk perspective. But there are times when a sole-source is the only practical path. In many electronic devices, there are sole-sourced parts that are critical to the function of that device – just consider “Intel Inside” of the PC market for years, with few viable options, if any. Can your supply chain tolerate that risk?

With a multiple source strategy, there are fewer individual disruptions that, when they occur, can affect your company’s supply. This is one degree of redundancy that provides some fault tolerance. Supply chain professionals need to look up and down their entire “chain” from raw material inputs to their suppliers, through all levels of manufacturing, warehousing, and global distribution to ensure the right level of end-to-end risk avoidance is in place.

As a long-time cyclist, I always carry at least two spare tubes, a patch kit, and plenty of CO2 cartridges to repair any possible flats during the ride!

 

Supply disruptions will always occur at the worst possible time to your most important customer on your least flexible product when you least expect it. Think Boy Scouts “Be Prepared!

Supply Network

The 18-month stretch from mid-2010 through the end of 2011 was “one for the ages” when it came to uncontrollable and “unknowable” global supply chain risks.

It began (not so) innocently with the eruption of the Eyjafjallajökull volcano in Iceland in 2010. So, what impact can a silly volcano in Iceland have on the global supply chain?

Well, quite a lot. Most European air shipment channels were shut down for a week or more. It was rough sledding for my company during that stretch as our sole-sourced critical supply node was in Germany. It took a few days, but we got trucks to head southeast and eventually get shipments. Thankfully, we had buffer inventory in place.

Not to be undone, the massively devastating earthquake followed by the deadly tsunami in Japan hit in early 2011. The damage to the automobile industry just before the summer selling season was significant for several months.

Later on, after supply resumed, who had actually thought about and prepared for the fallout from radiation due to the damage at the nuclear power plant and the need to have materials inspected for radioactivity?

Last, but not least, in late summer, the monsoon rains in Thailand created floods that eclipsed the 100-year benchmarks that most flood plains are based upon. This disrupted nearly 40% of the global hard disk drive market for months as many of the supply nodes were under water, literally.

One very interesting juxtaposition of supply chain efficiency, just-in-time inventory policies, and overall supply chain risk played out during the latter two events.

A concentration of suppliers for the two industries developed over time – automobile components in the northern part of Japan and hard disk drives in central Thailand. This looks great from a supply chain efficiency angle as transit times between steps in the process are reduced, inventories can be kept leaner, and a pool of talent is developed (no pun intended).

However, the impact of the uncontrollable and unknowable was dramatic. An efficient supply chain on one day and a dramatic impact to global supply on the next. Both industries have done some major upgrades in their overall practices to reduce the potential impact in the future.

How lean is too lean when it comes to supply chain risk reduction and overall resilience? Are you prepared?

Don’t be an ostrich. Just because you can’t see it doesn’t mean it won’t affect you!

ostrich-head-In-Sand

Visibility is an essential element in risk planning and avoidance. Even events or risks that can be considered “unknowable” (like the exact timing of a devastating natural disaster) can be modeled and that intelligence deployed to your supply chain’s risk resilience assessment.

Sometimes, even internal practices that are very visible, when left alone, can open the door for a catastrophic impact due to an untimely event.

I’ve experienced some very skewed end-of-quarter delivery profiles in my career – very high risk when it comes to disruption susceptibility.

More than once we were faced with major typhoons running around Southeast Asia during the last week of our quarter. Timing-wise, we had to have all shipments out of the region by the end of the day on Friday in the US to have any real chance of revenue attainment for the quarter, which ended on Saturday at noon in the US (midnight in eastern continental Asia).

While I have no disastrous results to share, it did wake us up and probably had more of an impact to affecting the linearity in our quarterly shipments than any whining our supply chain and logistics group could muster. Even the CEO brought the topic up during the next end-of-quarter review.

 

Inflection points are only visible in the rear view mirror.

You don’t know until you know and then you know. Especially when it comes to a change in the curve – an inflection point in the trends.

InflectionPointEven with all the big data stories and the tremendous growth of analytics in supply chain, sometimes things change and you don’t know it until you know it.

The resilience of the supply chain depends considerably on the ability to detect and respond (react) to an inflection point. The strategies put in place to protect business are called into action when the need arises. The better prepared and more agile your supply chain is, the less the damage.

Written off as a fad in 2010 when Apple introduced the first iPad, two years later, the entire PC industry was reeling from the damage. The lack of serious attention given to that inflection in the personal device or computing market hit PC manufacturers and the rest of their supply chain very hard.

Further, the entire software model was disrupted. While “apps” had debuted with the iPhone (even the iPod Touch) a few years earlier, the entire software industry was impacted. Did anyone prepare for the impact of Angry Birds?

In the end, it’s all about preparation and detailed analysis of your entire supply network risk to determine whether or not you can weather the storm.

As the Boy Scouts of America have said for years, “Be Prepared!”

 

ciao…mam

Michael Massetti is an executive who really does enjoy being a supply chain professional! Lucent Technologies once took a risk on Michael and he’s been in supply chain ever since. Thanks to my former colleagues and partners in supply chain crime Joe Carson and Chris Armbruster for their ideas.

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So, you really enjoy being a supply chain professional? Part 3

Supplier Management – Isn’t It Fun to Manage Suppliers?

Let’s face it supply chain is a fascinating and pressure-filled field. As we discussed in part 2, without demand there is no need for supply. Similarly, without supply, there’s no need for suppliers. If it weren’t for all the trials and tribulations of working with suppliers, procurement professionals would lead such a boring life. Don’t you wonder sometimes how and why you got into this field?

This third article will look at the fun that is managing and working with suppliers – from the transactional vendors all the way up through strategic partners. Future story lines will include inventory, supply chain risk, logistics, and managing numbers.

Suppliers who insist on telling you how strategic they are, aren’t.

Supplier Management Pyramid

As buying evolved to purchasing, which then evolved to procurement which further evolved to sourcing, the organizational concept expanded accordingly. The tactics of buying grew into the discipline of managing supply and suppliers.

The development of supplier relationship management accompanied the stratification of the supply base into a number of different hierarchal models. The most tactical suppliers are fundamentally transactional and have the lowest level of relationship management. This highest are the most strategic with the largest and most critical spend allocation and the deepest relationships. There are way more suppliers at the base than at the top.

Then why does it seem that the suppliers who are lower in your spending hierarchy insist on declaring themselves strategic to the procurement team? Based on non-scientific surveys of suppliers who evaluate themselves as “strategic” the triangle above would be inverted with hardly any in the lowest tier!

The question really is “who’s strategic to whom?”

A cornerstone of any supplier management program is transparency between both sides of the relationship. If your suppliers are not intimately aware of their status, the program might need some work.

Regardless, this does not guarantee that the supplier will not continue to view the relationship as strategic to them … it just may not be strategic to you.

 

If you or your suppliers consistently refer to “the contract… the relationship definitely needs some work.

Contract Icon

Anyone who has ever negotiated a long or difficult contract has experienced the absolute relief and joy when the agreement is signed and filed. Have you had this thought before? “I just hope that my tenure with this supplier expires before the agreement!”

Regardless, contracts are necessary (evils). Many companies require formal purchasing or supply agreements for specific spending thresholds. They are the foundation for managing the relationship, executing business, and dealing with exceptions – especially the unforeseen.

Nonetheless, the most hair-raising and deflating words that a purchasing professional can hear during the normal course of business is, “But, that’s not what the agreement says …” It gets even worse when similar comments permeate the daily conversations. Been there. It’s not fun.

Believe me, agreements are one facet of the total relationship. However, if you hear about the contract repeatedly, the relationship is dysfunctional. Fix it!

“If you had told me it was a competitive bid, I’d have come in with a lower price.

Dilbert Bid Lie

I’m sure we’ve all heard the cliché: the three most important things in purchasing are price, price, and price. A lower price, for sure.

RFI. RFP. RFQ. Auctions. E-Procurement. D&B. Altman Z-score.

There are myriad methods available to sourcing pros to evaluate and eventually select suppliers. Of course, the criteria include price, capability, capacity, relationship, number of sources, and more. No matter what, it’s always difficult to avoid price … or should we say PRICE?!

And, there’s nothing more upsetting during a bid process to have suppliers try to game you. Isn’t it frustrating to have to go back to a supplier, especially one you are already working with, and they tell you that they didn’t realize that price was important? Down right maddening!

Really? You didn’t know that your best bid was required? Makes you wonder. Cross that one off the list.

 

ciao…mam

Michael Massetti is a high-tech supply chain executive who really does enjoy being a supply chain professional! Seriously. Thanks to my former colleague and partner in supply chain crime Alex Brown for his ideas.

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