In the midst of the summer season, I thought it would be fun to offer some random thoughts on a variety of supply chain topics.
Relative to my piece a few weeks ago on Customer Sacrifice is Different than Customer Satisfaction, we received several humorous responses from readers who noted they regularly used the irons in hotel rooms. The point Jim Gilmore was trying to make, of course, was not that no one used the irons in hotel rooms (I threw out the figure of 1 in a hundred or less). Obviously, some people do. The point was that whatever the percentage is, it’s certainly well less than 100%, but hotels chains go to the expense of outfitting each room with the equipment nonetheless. This whole concept of understanding customer sacrifice is still very interesting to me. Take a look at the piece if you haven’t read it and share your perspective.
You think GM has it bad? I saw a recent piece that said that the new CEO of Volkswagon is lobbying hard to get the work week for factory employees raised from 27 hours per week to 32. Makes union/UAW issues in the U.S. seem almost trivial by comparison. Still, while the German automaker isn’t knocking the ball out of the yard, it is making money, while GM bleeds red ink.
There are so many supply chain and logistics related academics, spending so much time on research – why is 90+ percent of what is produced is unreadable and of little or no use to practitioners? It seems such a shame. I regularly peruse CSCMP’s Journal of Business Logistics looking for something worthwhile for SCDigest readers, for example, and it’s a rare find. I understand that many of the journals are written largely for other academics, and the drive for tenure and all that, but it just seems like we have this engine for better understanding of supply chain management that just goes to waste. There are some exceptions, for sure, but not many.
One really interesting question for RFID is this: When will it go main stream, and be just another data collection technology? It’s interesting because when that happens, many of the RFID specific publications, events, and company positions will quickly evaporate, just as they did with bar code. I knew a fellow who for a long while had the position at GM of something like “Director of Auto ID,” and was mainly focused on the use of bar coding. Can’t imagine that job exists today, at least in the structure it was. I’ve been told that at one point recently, Procter & Gamble had over 30 people looking at various aspects of RFID, and that was before the Gillette acquisition with its large RFID team (I know there has been some rationalization of the two teams). So, is that mainstreaming 2 years away, or 5 or 10? At one level, many people, including SCDigest, benefit from this RFID think dragging out for many years.
Just to show you how things change, early in my career I was involved in several projects where large companies (the old AT&T comes to mind) that literally procured bar code printers from at least a half dozens vendors and ran each of them for weeks printing labels to determine which was the right brand to standardize on corporately. The expense of the label and ribbon materials alone was huge. This was in the early 1990s. In just a few years, printers became largely commodities.
So, “Lean Six Sigma” is quite the rage. I think we should add Theory of Constraints to the mix. So, “Lean Six Sigma, powered by TOC” or something. Actually, in our interview with TOC inventor Eli Goldratt, he suggested Lean and Six Sigma were tools often used to execute TOC-based strategies. More on all this soon.
I’ve recently spoken with a number of supply chain executives at publicly traded companies who say it is amazing the number of questions from the financial analysts each quarter about company inventory levels. I really think this all traces back in large part to the Cisco inventory debacle of 2001, in which a charge of $2 billion was taken related to excess inventory. The inventory concern really isn’t related to the operating cost of the inventory, and the ability of lower inventory to improve free cash flow and other benefits; it’s all about two things: as an indicator of sales momentum and as a future risk factor of a big inventory write-off that will severely reduce profits.
Most companies are barely scratching the surface on their use of analytic application in supply chain. Yes, we have an increasing number of reports, but these true analytic applications (from traditional supply chain software vendors as well as a few specialist firms) can drive a lot of value in root cause analysis, operational improvement by getting a quicker handle on negative trends, and other benefits. I’ll write more on this topic later, but do you agree we have a long way to go better leverage all the operating data supply chains throw off?
I’d love your comments on any of the above as well.