The Opinion Page
News and comments about the issues facing today's SCM and Inventory Management professionals.
I remember some years ago visiting a large warehouse and distribution centre on the Eastern Seaboard that belonged to one of my corporate affiliates. Sadly, my associates in this operation were losing money by the bucketload, while (happily) my operation was turning in a tidy profit. I do not revel in the misery of others, but there were reasons why I was making money while they were not. If I could get them to make money, it would be a win-win solution for all.
My associates were terrific people, well-intentioned, brilliant, and skilled. But they were baffled by their lack of success vis-a-vis profitability. As one of the first orders of business, I was taken on a tour of their distribution operations. They had recently purchased a WMS system from a third party provider, and I was generally impressed with its capabilities. Their market was huge - perhaps ten times larger than mine. Opportunities to exploit economies of scale were there.
As I walked around the warehouse, however, I felt like I was driving down a freeway where the view of gorgeous parkland was completely impaired by billboards. There were more slogans, motivational sayings, targets, goals, and miscellaneous signs than you could shake a stick at. If I were looking for a sign to point me to a fire extinguisher (and I did), it was more likely than not that it would have been obscured by a banner which said something corny like "There's no "I" in "TEAM." Holey mackerel! I honestly had no idea what colour the walls were painted, or if they were painted at all.
Superficially, the banners became eye pollution. The messages were entirely washed out. There was no focus, no impact. No worker seriously paid attention to them. But the signs and banners were only a symptom of deeper ills.
As I started to peel back the layers of the onion, I discovered that enormous resource (financial and administrative) being devoted to setting targets, monitoring targets, measuring employee efficiency, and capturing attitude. Targets frequently conflicted with each other. Connection with the customers became obscured. There was little value-add. With hundreds of goals, there was no focus. Inordinate attention was paid to picayune errors. Hours, days and weeks were spent in meetings reviewing and measuring results, setting new goals. All relevant trend lines pointed down. I didn't have to ask about employee morale. It stunk. Like Tiger Woods, there eyes were collectively taken completely off the ball. It was MBO on steroids. "That which gets measured gets done" run amok.
As Mary Walton pointed out in her book "The Deming Management Method", slogans never helped anybody do a good job. Dr. Deming said "they generate frustration and resentment." There is an inference in sloganeering that if employees simply tried harder, they would do better. This offends the worker - it does not inspire her.
"You can beat horses,' Dr. Deming said, "they run faster for a while. Goals are like hay somebody ties in front of a horses snout. The horse is smart enough to discover no matter whether he canters or gallops, trots or walks or stands still, he can't catch up with the hay. Might as well stand still. Why argue about it? It will not happen except by change of the system. That's management's job, not the people's."
I remember clearly, on more than one occasion, being suckered in by my employers by offers of bonuses for supporting and achieving sales goals. They then proceeded to set the sales goals so high, that no one could ever achieve them. No bonuses were paid. Oh, let me correct that....bonuses were paid to company executives for their incompetence, and for leading the company directly into oblivion and bankruptcy. Bonuses for firing people. Bonuses for destroying families and communities. Sinful.
Management needs to get into the process, and make it easy for workers to do a good job. But many in senior management have grounding in the Dark Art of marketing, and as such are masters of smoke and mirrors.
I have recently been engaged in a conversation with colleagues in APICS about Lean. Some terrific thoughts have been presented by many people. I came across two brilliant quotes provided by Chris R. Deans CPA CPIM CIRM of LeanTech International Consulting based in Shanghai and Nanjing.
On the subject of "Humility" Mark Twain is credited to have said that " it is the one characteristic that as soon as you think you have it, you don't."
Taking that notion into the field of Lean, Chris Deans says, " Lean is not a destination but a journey and the minute you believe your enterprise has arrived is actually the instant you have lost it".
Thanks, Chris. I couldn't have said it better myself!
My professional background is predominantly in retailing. I cannot begin to relate the number of times great ideas have met with failure due to the inability of different areas to communicate and work together as a team.
Promotions are critical to the sales performance in many retailers. My son delivers newspapers to our neighbours that are routinely packed with flyers from various retailers in the neighbourhood - the things weigh a ton! Sears Days! Bay Days! Warehouse Sale! Customer Appreciation Days! BOGO! But many retailers fail in the execution because of their simple inability to communicate the promotional plan to key stakeholders up and down the supply chain, assess potential constraints, and respect demonstrated lead times.
How often has the Marketing Manager walked down that hall to the Inventory Manager's office to ask, "How are things going for the big promotion that we are running next week?" Only to hear the Inventory Manager respond, "What promotion?". Oops! A quick root cause assessment finds that the promotional idea was only approved last week, with a pompous "Pull out all the stops! Let's make this happen!" comment from the VP, in the face of lead times of 4 to 6 weeks. The result? Lost sales, unnecessary expenses, disappointed customers, unfulfilled demand, poor sales, and the inevitable witch hunt for a culprit (or scapegoat).
All of this could be avoided by setting in place a well-articulated and precise promotional plan, discussed and endorsed with all relevant stakeholders, which respects time fences. Effective communication is key, and an inbox cluttered with 200 emails per day is not an example of effective communication - it's just noise.
Such a plan is not possible without a holistic approach to managing the business. While people within any given department might work superbly, this effort can quickly go to waste if the work is not done while respecting the needs and objectives of other departments. Marketing needs to appreciate that it takes time to transport goods across the country to various distribution points, and that expediting shipments involves excess cost. The Inventory Manager needs to understand that he or she has a responsibility to understand the promotional plan (upstream) and that the warehouse has finite capacity (downstream). Finance needs to understand that playing fast and loose with payment terms (e.g. extending actual supplier payments beyond agreed terms) might improve cash flow, but it ruins supplier partnerships. It's not "all about Me"....it's about the welfare of the entity as a whole.
JIT, for example, will not work in an environment punctuated by functional silos and turf wars. Teamwork is a prerequisite. It is not an easy task to introduce JIT philosophies into a business that has built such barriers. Dr. Deming had an interesting observation with respect to JIT:
"Many American manufacturers are trying to start with just-in-time, unaware that this process is years off. Just-in-time is focused downstream. It's a natural occurence. It is the end result of getting things right in the first place."
John Skelton is the Principal Consultant and founder of Strategic Inventory Management.