The People First Proposal

I would like to propose organisations put people first when it comes to their priorities. 

Organisations may say they already do but based on my observations, they aren’t. 

Two (2) banks asked me one day to update my business’s account information.  They gave me a pile of forms for my business accounts’ signatories to fill up.  On top of that they required board resolutions and corporate secretary certificates that formally authorise the signatories as representatives of the business. 

I told the two banks that I submitted forms with the same information when we first opened the accounts few years before.  I also said there were no changes in the board resolutions and corporate secretary certificates from ones we gave already.  I complained that filling up the numerous forms and having them signed by the account-holders would be a time-consuming inconvenience.

The staff from each of the two banks shrugged off my arguments and said it was bank policy; my complaints meant nothing.

Both banks had mission statements that placed high importance on their customers.  But after going through the tedious experience of filling up forms with information that didn’t need updating, it seems that the banks don’t really practice what they preach.  People aren’t first; policy is. 

It’s not only banks.  Government agencies and private enterprises seem to have relegated people to a lower category of importance. 

We don’t have to look far for examples. 

Employees of businesses complain they have to fall in line and wait for hours when they need to transact with government agencies.  Sometimes the agencies would turn away people who had already been waiting for half a day, citing excuses such as computer glitches or CoVID-19 limits. 

Staff of these agencies would tell complaining people that it’s government rules.  Rules, in other words, are more important than people who had invested time to wait only to be turned away. 

When I complained to an internet service provider (ISP) that my internet reception was spotty, the ISP sent a technician to check.  After inspecting my modem, the technician told me that the cause of the problem was a cable box outside of my residence but that another contractor would have to fix it as he wasn’t authorised to do so. 

When I followed up with the ISP, the agent replied that my “account and job order were escalated and already included/linked to plant isolation which [the agent] can’t commit any ETR (estimated time of restoration).”  Whatever that means. 

The agent continued saying he “will now close this conversation since your current concern has been noted, explained, and escalated to the pertinent group.”

I received no more news and the internet never got better.  Apparently, the ISP put their procedures first before people.  I plan to change to another ISP once the contract with the current one expires. 

I propose organisations put People First in their policies & procedures, and show it.     

Banks shouldn’t burden customers with unnecessary forms and requirements that in the first place don’t need to be filled up and submitted. 

Government agencies shouldn’t make people wait for hours only to turn them away. 

ISPs should fix problems and feed back to customers, not leave them hanging. 

It doesn’t need much in terms of resources or staff training to put People First.  Much can be done by making it part of common-sense management. 

First of all, it doesn’t take much for staff to be polite and to listen to their customers.  Listening does take effort but it isn’t rocket science.  One just has to take time to hear what the person is saying. 

Second, organisations should study the impact of their policies & procedures.  What are they putting first? 

Bank staff would cite periodic audits as the reason for clients having to fill up forms.  The staff fear audits because any detected deviation would be a bad mark on their performance.  The fear of negative audit reports has made it a priority for bank staff to follow policies & procedures and ignore the complaints of clients.  People don’t matter to bank staff because their attention is in their preserving their so-called good performance via compliance. 

Executives can re-orient their policies & procedures and put People First.  It starts with executives re-writing policies & procedures that consider clients’ needs and how performances of employees are measured and managed. 

Why not, for instance, banks consider waiving the updating a client’s account information if the client can simply sign a statement that there is no change? 

Why not include auditing the feedback of clients on how they feel about the bank on top of looking for errors or oversights in the execution of procedures?  Why not praise staff for very good positive feedback rather than punishment for performance no one can perfectly do? 

Why not ISPs set up a system to check the completion of jobs for clients?  And have a small team be accountable for the completion?  But consider every completion that receives positive client feedback as a basis of praise for the team? 

Why not government agency heads just have a front-liner who’d monitor the queues of people waiting to be served?  And communicate at the earliest about how long the wait would be rather than turning people away at the last minute?  The same front-liner can also feedback to agency heads how many people wait every day and find ways to reduce the queues.  And why not agency heads praise staff who succeed in reducing the queues? 

Such sample steps would go a long way in shifting attention for the sake of people than for the sake of procedures and rules. 

Putting People First is not just a slogan meant to be seen in a mission statement poster.  It is a principle meant to be ingrained in all who work in an organisation. 

About Overtimers Anonymous

Why We Need Engineers

I spent fifteen (15) minutes one morning pounding several pills into powder.  The powdered pills are medicinal supplements for my pet cat, to fight against liver ailments. 

One of my cats tested for high SGPT, an enzyme when found high in a blood test, indicates problems with the liver.  The vet prescribed the cat needed one tablet of liver supplement a day.  But since I found it impossible to force feed the cat with a tablet, the vet said it was okay to crush the tablet into powder and mix it with the cat’s food. 

The vet gave me the prescription and told me in what form I can give the pills to the cat.  She didn’t tell me how to do it.  That’s for me to figure out.  I used a kitchen hammer to crush the pills, put the powder in a bottle, and sprinkle close to the prescribed dosage on the cat’s food every morning.  I crush as many pills I can altogether to avoid having to use the hammer frequently and save time. 

The vet prescribed; I administered.  The vet tells me what’s needed and I do the work of planning and implementing.  And this essentially is a small-scale example of what spells the difference between scientists, doctors, & executives and engineers.  The former group formulates; the latter makes it work. 

Sometimes, however, the former group of scientists, doctors, and engineers believe engineers aren’t needed in some cases.  The former people try to work things out by themselves in the hope of saving time and money by not engaging the latter, the engineers.  Sometimes it works, sometimes it doesn’t. 

And when it doesn’t, it can be disastrous.

A beach house in Florida was seen the only one left standing and intact after a hurricane.  The owners foresaw the risk of storm surges and invested in a super-strong foundation and superior construction materials.  The owners wanted a strong house on soft ground on a beachfront.  They invested in engineering to make their house withstand the risks.  It paid off as seen from the picture. 

Unfortunately for the beach house neighbours, it didn’t turn out so well.  They obviously didn’t engage engineers when they built their houses.  They lost their homes as a result. 

Enterprises & organisations don’t need engineers for every problem.  We can agree with that.  Many problems can be solved by common sense.  Many problems aren’t engineering related.  Many are rooted in economic, legal, and personnel issues. 

There are problems, however, engineers are in the best position to solve. 

When the World Health Organisation (WHO) declared a pandemic stemming from the SARS-Cov-2, popularly known as CoVID-19, political leaders and executives instituted strict health protocols in their respective communities and enterprises.  Borders were shut; people were told to stay home; factories were closed; deliveries were delayed.

Shortages happened.  Hospitals ran out of supplies such as face masks and personal protective equipment (PPE).  Supermarket shelves emptied.  Undelivered perishable food was thrown away.  Factories didn’t get their materials or didn’t have enough workers to run production lines. 

And when vaccines became available.  No one figured out how to distribute them.  Executives made promises that they couldn’t keep especially when supply ran short.  Contracts were broken as national leaders of countries where the vaccines were manufactured decided to keep the limited supply for their own people. 

Leaders appointed czars and task forces.  But because they were mostly made up of doctors, scientists, politicians, and even soldiers, the appointees could only go as far as making manifestos and policies.  There was hardly anyone figuring out the planning and implementation of what these appointees wanted to do. 

Leaders and executives probably thought they just needed scientists and a few good managers.  They didn’t figure they needed the people who’d have the expertise to set up structures and systems to make their ideas realities. 

That’s what engineers do.  Make ideas into realities.  But many leaders don’t know that or haven’t accepted that. 

And that’s how managing the pandemic became one big tragic mess.  More than 300 million reported infections. More than 5 million people dead.  Billions of dollars and euros spent.  Millions of people out of work.  Thousands of enterprises closed, some forever.  And shortages and disruptions in supply chains continuing.

Scientists make formulae.  Executives develop policies.  Engineers build and help implement solutions. 

In many cases, many leaders deliberately forget the last sentence of the above paragraph.  And just like the beach house, the few who do remember are left standing while the others are swept away. 

About Overtimers Anonymous

Appreciating the Value of Veteran Employees

When I was a young industrial engineer at the food production division of a multinational company, the accounting department asked me to find out why there was a large reported loss of refined coconut oil.

They’re the ones we always look for when we need something. 

I went to the production manager and he told me to ask Mang Ben.

In the Philippines, calling someone “Mang” is an address of respect usually to an elder.  Mang Ben in my case was a fifty-plus year old veteran who had worked at the multinational’s foods processing department for more than 25 years.  Mang Ben had more experience than everyone else and he would know why there is a reported loss in the coconut oil.  (It turned out to be due to an unsubmitted form that failed to get to accounting). 

Mang Ben could tell how many weeks supply an oil storage tank has just by looking at a gauge and he knew how to “cook” the fats and oils that the multinational produced every day. He could unload a barge of coconut oil all by himself and even called shipping operators to schedule when the barges should arrive such that they’d be timed with the incoming tides.  

I’ve met many workers like Mang Ben in the enterprises I later engaged with.

  • There’s the veteran machine operator who worked for a printing press company.  He knew how to quickly troubleshoot critical equipment and was the one the owners went to if they wanted to know if deadlines could be met; 
  • There’s the storeroom clerk who knew where every spare part of every equipment of the enterprise.  Even if there would be hundreds of items, he’d know where they were kept.  He also had a box of index cards which he used to track the inventory of the items, from when and how many arrived from which vendors to when and how many were given out and to whom; 
  • There was the 30-year-old young lady who was the right-hand assistant of an owner of a trading enterprise which delivered to independent convenience stores.  She knew every inch of the warehouse she was in charge of and knew every step in the trader’s logistics operations, from order to delivery.  She would push people to deliver rush orders and knew the ins and outs of the trading enterprise’s accounting system;
  • There’s the purchasing clerk who was familiar with every vendor of the multinational company she worked for.  From the ones who delivered the expensive chemicals down to the office supplies, she knew who offered the best deals.  She was the go-to person when any of the enterprise’s managers needed something to be bought fast. 

Some executives in the past have cited operations managers’ dependency on people like Mang Ben as a sign of weakness in the system.  Relying on one person for so much may entail risk especially if that employee suddenly becomes absent or leaves the enterprise. 

On the other hand, having a very able veteran brings about opportunities.  Veteran employees like Mang Ben bring a wealth of experience that manuals or consultants can’t equal.  A manual does not quite teach how much to turn a valve in real life to get to just the right cooking temperature as well as how Mang Ben would show it in person.    

Veterans also are likely to know what improvements would be most helpful for an enterprise.  Many veteran labourers at warehouses had given me insights on how storage racks should be laid out and what kind of material handling equipment would help. I was surprised, for example, when the labourers at a toy importer said they’d settle for well-built ladders to climb than expensive forklifts to retrieve bulky boxes from the tallest rack shelves. 

And when it comes to big changes such as building a new warehouse or installing new technology, it also helps to have veterans participate.  Veterans know the products and services of an enterprise very well, if not more so than the owners themselves.  Whenever there is an introduction of something new like a new improved machine or new storage facilities, the veterans would likely have valuable input on what to watch out for especially on quality, efficiency, and service. 

Veterans would know how high a truck dock should be or where in a factory the floor would be strongest to place a new machine.  An architect or civil engineer may offer all the standards but a veteran would know via experience what and where would contribute best for something new. 

Many enterprises have veterans like Mang Ben, employees who have loyally stayed long with the business and know more about the operations than just about anyone else.  Veterans are not signs of weaknesses but people who offer opportunities for educating new employees and to consult with for improvements, whether minor or major. 

We should be grateful for the veterans in our workplace.  They contribute more than what we can appreciate them for. 

About Overtimers Anonymous

Why Redundant Systems are Out-of-the-Question Necessary

I live in Mandaluyong City, Manila, Philippines and on June 2, 2021, there were three (3) announcements:

  1. The Luzon electrical grid was on “red alert,” meaning power failures of up to two (2) hours were imminent due to shortfalls in supply from power plants;
  2. The water utility company, Manila Water, warned that there would be no water supply later in the evening, as the company was planning to fix a water main which could take up to ten (10) hours;
  3. The government’s weather bureau forecasted that a tropical storm was bearing down on Manila, which could bring heavy rains and strong winds.

None of the above happened. 

There was no power interruption.  Water slowed to only a trickle for up to at most a half hour in the middle of the night.  And the storm brought light rain but no strong winds. 

Though it was good news that none of the above happened, the three (3) announcements were disturbing for the following reasons:

  1. They all came as surprises.  The government was assuring ample electrical supply from April to June 2021.  Manila Water had just fixed the water main a few weeks before so we residents didn’t expect there’d be another job that would entail one more whole night of no water.  The weather bureau was predicting the tropical storm wouldn’t reach Luzon but we suddenly saw the new forecast on social media before the storm would hit;
  2. There was no sense of urgencyPoliticians bickered about the power shortages.  Agencies weren’t advising people about the risks in regard to the storm.  And no one was asking communities to prepare for the scheduled water interruption.
  3. These announcements wouldn’t have been necessary if the systems behind each of them were reliable in the first place

All of us rely on electricity and water for our basic needs.  It’s therefore a given that supply should be reliable, as in 100% reliable.  We don’t and shouldn’t accept anything marginally lower. 

If someone tells us we should be happy with 99% reliability in electricity and water, we would ask that person if he’d be happy having no water or power one day out of every 100 days.  We wouldn’t and no one else would. 

Hence, we expect the people who supply us the power and water to be utterly and perfectly dependable.  It’s what we pay for via the bills the utility companies send us and expect us to pay by deadlines with the threat of disconnection if we don’t. 

Electricity and water, like products, easily follow the supply chain model.  Power plants procure raw materials (e.g., coal, oil, gas, wind, solar, geothermal steam) and convert them to electricity which they deliver via transmission lines and distribution grids.  Water companies likewise procure raw water from reservoirs, treat it, and distribute it via their plumbing networks to household and commercial consumers. 

The procurement, transformation, and logistics that comprise every supply chain are present as well in electricity and water utilities.

What makes the power and water supply chains unique is that the products of both are instantly available.  We get power at the flick of a switch and water at the turn of a valve. 

We consumers expect three (3) things from utility companies that supply electricity and water: 

  1. Reliability all the time.  When we consumers need it, the supply should be there. 
  2. Reliability to all.  Supply should be available all the time to all in a utility company’s coverage area.  It is not acceptable if one community has water and power while another has none. 
  3. Reliability in quality.  Utility companies must supply electricity and water at the quality needed.  If our appliances need 220 Volts, it should be 220 Volts, not 250 or 190.  Water should be clean, not dirty. 

Some executives and politicians mistake capacity for reliability.  Some believe if there are more power plants, the more reliable power supply will be.  Likewise, for water, some believe the greater the reservoir capacities, the more reliable water supply would be. 

Capacity is about the capability of assets, such as machines that can produce more and such as storage facilities that can keep more.  But having the ability to make or store more doesn’t make a system more reliable. 

Manila relies on one large reservoir to supply the bulk of its water.  Some people urge that another should be built so that there would be more water available for a growing population.  It’s an issue of capacity, these people say. 

Manila, however, relies on treatment plants to clean and filter the water.  It also relies on a network of pipes to bring the water to consumers. 

What would happen if Manila had lots more water than needed via two (2) reservoirs but had only one treatment plant and one main pipe supplying several of its cities?  The system may have more than enough capacity but wouldn’t exactly be reliable especially if the treatment plant shuts down or a pipe springs a leak.

This is what exactly was the issue for that announcement of no water on June 2, 2021.  A main water pipe needed repair and it was the only one that supplied to a large swath of the city.  One pipe determined the reliable supply of water to hundreds of thousands of people. 

Similarly, it would be nice to have more power plants to have more generating capacity. But if there’s only a single transmission line from each power plant and single substations to process that power before reaching respective consumers, then the power supply may not be as reliable.

Luzon had a shortfall of power supply on June 2, 2021 not because there weren’t enough power plants.  It was because Luzon’s power plants weren’t being managed reliably.  A power plant for instance didn’t have a backup for its boiler facilities that ran its turbine.  Other power plants were down simultaneously for preventive maintenance, which reflected poor scheduling. 

Redundancy is key to dependable reliability in utility companies.  Redundancy is the operation of multiple identical assets for the same process.  Instead of one asset, there’d be two or more even if just one is enough to do on its own.  That means either there’d be at least one idle asset backing up other assets in an operation or several assets running at the same time but at lower capacities as they share serving the total demand. 

For electricity supply, that would mean multiple facilities, not only in the form of multiple power plants but also in multiple transmission grids and substations running parallel to each other. 

For water, that would mean not only multiple reservoirs but also multiple treatment plants and plumbing networks either running parallel or taking turns to be on standby. 

If a transmission line has a fault, the power company can switch to another grid to deliver the electricity.  If a pipe bursts, the water company can switch to an alternate pipeline. 

Some executives, however, see redundancy as a bad thing.  Since it requires extra investment and added operating costs, they would rather not have redundant systems and instead insist that their management teams simply make sure that the systems are always running all the time and perfectly.

Unfortunately, no system is perfect.  Eventually, there will be failure.  It is just not humanly possible to prevent a power line from snapping due to wear and tear or a water treatment plant from shutting down due to an unexpected clog in its filter systems.                                                                                  

Redundancy therefore not only becomes justifiable but also necessary especially when the consumers the utility companies serve, which is practically everyone, demand 100% reliable electricity and water.

Redundancy applies to other supply chains in other industries as well where customers are very sensitive to failure in the delivery of goods and services. 

Enterprises that sell finished products rely on multiple vendors for the same raw materials to avoid run-outs.  They also set contracts with multiple transport providers to ensure there’d be available trucks to deliver the goods. 

Again, some executives mistake capacity for reliability.  They ration procurements from vendors based on percentage of their manufacturing capacities and they ask only so much trucks per transport provider to total only what’s needed to ship in a day.  When a vendor fails to deliver or a trucker doesn’t show up, the enterprise ends up not making what’s needed or delivering to schedule. 

Redundancy means having assets that provide multiples of needed capacity, not just the capacity itself.  It means having multiple sources, multiple facilities, and multiple systems such that when one fails, another picks up the slack. 

And as much as it applies to electricity and water, it is very much applicable to other industries that have very demanding customers.

And it also applies to weather forecasting too.  Weather forecasters rely on multiple monitoring stations and multiple providers for satellite and analytical data.  The data and analyses are redundant but it allows weather forecasters to compare information and come up with more accurate and reliable forecasts.  Which makes it puzzling as to why the forecast was so much wrong before June 2, 2021. 

For critical services like electricity and water, we demand perfect reliability.  Redundancy in systems help assure that reliability.  We expect nothing less from those who provide what we feel we deserve. 

About Overtimers Anonymous

Four (4) Guidelines for Available Transportation

Many small business enterprises don’t put too much thought into deliveries.  For those who are into e-commerce and sell one or very few items via the Internet, the enterprise’s flow of work is typically receiving orders, preparing the items, and booking & delivering via a 3rd party service (e.g., Grab, Lalamove).

Many enterprises have seen their businesses grow thanks to e-commerce.  Some have seen their markets surge in terms of number of customers and deliveries.    

E-commerce has been a godsend to enterprises reeling from the coronavirus pandemic of 2020.  Some have not only survived but also made good money. 

As some enterprises grew, they expanded their product lines and gained more customers.  Some have seen demand for their products come with greater variability as they cater to customers with varying needs. 

Nevertheless, most e-commerce enterprises have done well despite the growing demand.  They have had no issue delivering versus demand (customer orders), thanks largely to sufficient capacity and availability of transport providers.     

But as businesses expand even more, they can begin to encounter issues. 

Transport availability and operating capacities show their limits when business multiplies.  Enterprises realise e-commerce becomes more of a supply chain issue, than just an adoption of an app. 

Some enterprises end up turning away customers when they lack the capability to deliver. 

Turning away customers means turning away opportunities.  When times are tough, enterprises can ill afford to turn away customers. 

Which is why it’s wise to study and pinpoint where one can invest in capacity and allow the business to grow. 

There are means to determine how to increase operating capacities.  It’s another story when it comes to transportation availability.  How does one procure more transportation?  Should the enterprise buy more trucks or source more 3rd party providers? 

The following are some suggested guidelines:

A. Own Vehicles for Demand Surges

Most enterprises experience demand surges.  Food shops sell more during the Yuletide season and not much afterward.  Gift & flower shops sell a lot before and on Valentine’s Day.  Convenience stores sell plenty of beverages and snack foods during long holiday weekends when most people stay home. 

An enterprise can assess its transportation needs for demand surges.  It might be a good idea for an enterprise to have its own transportation to pick up the slack when 3rd party providers may not be available, such as during holidays when many drivers and riders go on leave or are fully booked.

B. Have Back-Up Drivers

Nothing is more frustrating than to have a delivery ready to go but no one to drive the vehicle to transport it. 

Enterprises usually train several people to operate equipment such that if the operator is absent, another can take over. 

The same should apply for delivery vehicles.  Even if a shop relies almost 100% on 3rd party riders to deliver, it not only may be a good idea to have one’s own vehicle on standby but also to have more than one employee who knows how to drive it.  It’s not worth the risk of having no transport available to deliver all because there was no one to drive the vehicle that’s already there. 

C. Get to Know the Riders

They’re not your employees but it may be nice to get to know the riders who pick up your products and deliver them to your customers. 

Some riders come back again and again to deliver for an enterprise.  One reason is because some of them live nearby so they’re readily available every day.  It’s therefore nice to establish a professional rapport and even share contact information. Having a rider that you’d know and who’d you know will surely be there for your business every day adds a plus to ensured availability.

D. Take Advantage of 3rd Party Promotions & Programs

Some 3rd party services offer programs wherein client enterprises can not only avail discounts but also provide greater priority for package pick-ups and deliveries.  The enterprise can estimate the packages it will ship daily and see how a 3rd party’s offered program fits in terms of price and available transport. 

Pandemic or no pandemic, enterprises are growing through e-commerce.  They are seeing exponential growth and so far, many are coping well and making profits. 

Growth at a point, however, reveals the limits of enterprises.  When it comes to e-commerce, it usually shows not only in operations but especially in transportation. 

It may be good for enterprises, therefore, to invest in one’s own transport especially for demand surges, have enough back-up drivers, and establish relationships with 3rd party providers, like with the riders and/or availing programs & promotions 3rd party services may offer.

Better to be ready to deliver than to be unable to. 

About Overtimers Anonymous

Behold The PSI: A Basic Tool for Supply Chain Planning

The PSI or Production-Sales-Inventory is a basic spreadsheet template for supply chain planners. 

It looks like this:

The PSI has three sections:  production, sales, and inventories. 

Production represents the in-flow of an item or what’s going into inventory.  A basic example is finished goods input coming from a manufacturing operation’s output.  We can also call it supply. 

Sales is the out-flow of an item or what’s going out from inventory.  An example is a shipment to a customer.  We can also call it demand. 

Inventory is the stock of an item on-hand in storage, such as how much of an item is in a warehouse. 

The PSI makes visible production, shipments, and inventories over a range of time periods or what we can call time-buckets.  It’s an outlook for planning.  It’s up to the planner if he or she wants to use weeks, months, or even days for the time buckets.  It’s also up to the planner how many time buckets to plan for.  It doesn’t have to be just three as in the figure below.  It can be any number.  Some enterprises use six (6) buckets for a 6-month outlook; others go up to 12.  It is the planner and his superiors that decide what periods to cover (e.g., weeks, months) and how many. 

The PSI’s horizontal rows list the items or products.  Each row shows the production, shipments, and inventory outlook for each item via the quantities in the respective columns or time buckets. 

An item can be a product, material, or a supply or spare part. It is recommended to select an enterprise’s most important items to the PSI.  By very important, that would mean those that executives often keep an eye on. 

Working the PSI starts with a beginning inventory at the zero (ø) column of the inventory section. 

The planner’s basic aim is to track the inventories from one time-bucket to the next.  In the figure below, the planner notes that inventories at the end of week 1 becomes fewer as a result of sales in the same week. 

When the planner, however, inputs the production and sales of week 2, the inventories end with zero (ø) on week 2. 

To put what I just said in a formula:

and to put it to represent every time bucket:

where x is the time-bucket number.

The aim of the supply chain planner is to ensure there will always be available inventory for sales.  Hence, supply chain planners typically prefer there’d be extra stock at every time bucket.  

Supply chain planners typically set inventory targets for every time-bucket in line with their superiors’ policies and strategies.  Sales for each time-bucket usually are based on forecasts and customer orders. From the inventory targets, the planner computes the production or sales needed and still have enough left to meet inventory targets.

Planners focus on either how much to sell or how much to produce to meet inventory targets. 

If it’s production, planners would adapt the ending-inventory formula and make it look like this:

For a desired ending inventory of five (5) units of items A and B, the planner would set production numbers that would match sales but leave at least five units at every ensuing time-bucket. 

When the enterprise wants to plan how much of an item to sell given inventory targets and ongoing production, the supply chain planners would adopt the following formula: 

Which in the PSI would look like this:

…which looks just like the PSI for production.  😀

The PSI in the above diagrams show the same numbers but illustrates a different approach.  The planner either figures out how much to produce or calculates how much to sell for the ultimate purpose of having enough inventories at every time-bucket. 

An enterprise can tailor a PSI for its particular business. 

For an enterprise that buys finished goods and directly sells to customers, for instance, a planner can adapt a PSI from a production-sales-inventory template to one that is purchases-deliveries-inventory:

An enterprise that imports items and converts them to finished goods, a PSI may look like the one below. 

I found this especially useful in a metals manufacturer that was importing metal coils that then were then cut up and converted into steel sheets, plates, tubes and pipes.  As steel coils were the key components of the manufacturer with its weight in metric tons as the standard of measure, the PSI enabled the manufacturer’s managers to plan the quantities and timing of importing and converting expensive metals without having too much on floor for too long. 

When enterprises use a common measure from key materials to finished product, the supply chain planner could expand the PSI to a 4-column spreadsheet consisting of purchases-production-sales-inventories:

A 4-column PSI would be particularly effective for enterprises with few but predominantly high-volume products such as those in commodities.  And it opens up participation of practically the four (4) core disciplines of the supply chain:  purchasing, production, logistics, and planning. 

The PSI doesn’t require sophisticated software or hardware.  One can use an ordinary spreadsheet program (e.g. Excel) or even do it by hand with or without a calculator (or abacus). 

The PSI gives visibility to an enterprise’s supply and demand picture from present to future for key items, whether finished goods, materials, or parts. 

The PSI’s limit is that the more items an enterprise has, the more tedious it becomes to plan and track.  ERP systems coupled with up-and-coming artificial intelligence (AI) software can make up for that.  Many enterprises, however, rely on planners to plan the items they carry.   

Even with its simplicity and features, it’s hard to find an enterprise that actually uses a PSI.  Many planners tend to devise their own templates, using spreadsheets mainly, despite the availability of integrated planning tools provided by expensive software. 

Most of the planning spreadsheets I’ve seen are hard to understand or are very specialised.  When I present the PSI template to planners, however, I’ve gotten very positive feedback with executives welcoming its application. 

A PSI is a basic manifestation of what a supply chain planner does, which is to plan production or estimate the demand needed with a minimum amount of stock at every time period.  It is a basic tool for supply chain planners.  It’s simple to set up and provides a comprehensive canvas of what an enterprise’s supply and demand would look like in the present and future.  It has its limitations in the complexity of an enterprise’s items and operations. But at the very least, it provides a foundation for planners to manage inventories and optimise supply chain productivity. 

About Overtimers Anonymous

How Important Productivity is to the Value Chain

The fast-food restaurant drive-thru I go to every Sunday morning hasn’t been serving the liquid creamers that accompany the coffee I order with my meals.     

At first, they said the creamers were out of stock.  A week later, they said they can only serve one (1) creamer instead of the two (2) that should come with every coffee order.  Finally, they substituted the coffee creamer with a non-dairy powder cream in a sachet. 

The fast-food company saved money in all three (3) instances.  They saved when they served coffee without any creamer or with just one instead of the usual two.   They also saved when they started serving the powdered creamer in sachets as the liquid creamer is more expensive.   

The fast-food company can claim savings but did it deliver value? 

In his seminal book, Competitive Advantage,[1] Michael Porter introduced the value chain, a representation of a firm’s “collection of activities that are performed to design, produce, market, deliver, and support [the firm’s] product.”

Value is the “amount buyers are willing to pay for what a firm provides them.”  The typical strategy of the firm is to create value that “exceeds the cost of doing so.”  According to Porter, value is the key to competitive positioning.

The fast-food company normally served two (2) 10-ml cups of imported liquid creamer with every coffee order.  It was something I look forwarded to and expected whenever I went to the fast-food company’s drive-thru.  When the fast-food drive-thru stopped serving the creamer, I was not happy.  I felt I was no longer getting my money’s worth from my coffee order.

Bundling two (2) 10-ml creamers and two (2) packets of sugar was standard for every coffee order, according to the drive-thru attendant.  Unfortunately, the fast-food drive-thru no longer had the stock and substituted the creamer with a cheaper sachet of locally produced non-dairy powder. 

The fast-food company apparently thought substituting the imported creamer with a cheaper local product would be no big deal.  The management of the fast-food company probably didn’t believe its customers would buy less of its coffee, even with the downgrade. 

The cost of all the activities in the value chain must be less than the price of the product.  The difference between the price and the cost is the margin.    Enterprise executives tend to cut costs or differentiate their products to maximise margins. 

The problem arises when customers like me perceive a lower worth of the product as a result of the enterprise’s cost-cutting.  Perceived lower worth leads customers turning away from the enterprise and opting for alternatives from the competition, resulting in lower demand for the enterprise’s product.    

Many enterprises see-saw between cutting costs and differentiating their products as they struggle to maintain their products’ profit margins.  When they see costs going up, some enterprises buy cheaper materials and services.    When they see demand slowing, they spend more for product development and advertisement of their product’s features.  In either case, the enterprise ends up losing customers or spending more than it should.    

All functions in an enterprise make up its value chain.  Whether it be purchasing, marketing, logistics, sales, manufacturing, finance, accounting, human resources, information technology (IT) services, legal, public relations, research & development, etcetera–every department and individual play a part in delivering value for the enterprise.  Every one in an enterprise contributes.  There is no exemption.  If the value chain is to be competitive, everyone has to work and to work together toward the common cause of maximising the margins of the enterprise’s products. 

Every part of the value chain must be productive.  Productivity drives value. 

Productivity is output over input.  In the value chain, productivity is the output as delivered and accepted by customers versus how much was inputted in doing so. 

That means whatever function we work in, we must deliver output that would benefit the enterprise’s product margins.  Our performance, no matter how seemingly small or irrelevant, contributes to the value chain. 

Some of us equate value chains with supply chains.  This is wrong thinking and it is detrimental to an enterprise’s productivity.  Whereas the supply chain’s basic functions like purchasing, manufacturing, and logistics directly add value to a product, roles such as legal, human resources, marketing, sales, engineering, information technology, and research & development (R&D) are just as equally important. 

Human resources professionals hire talented people to staff the enterprise’s organisation.  In-house legal counsels ensure products are compliant to local laws and regulations and defend the enterprise’s products’ intellectual properties.  Finance executives ensure the capital needs for products.  Marketing cultivates ideas for R&D to develop into reality.   

A condiment such as a coffee creamer may seem trivial.  For value chains, nothing is trivial.  Every detail and process have a bearing on how a product’s value chain will bring worth to customers. 

The fast-food company may dismiss my disappointment if it turns out I’m alone in complaining about a downgraded coffee creamer.  If a vast majority of its customers continue to consume the fast-food company’s coffee, then well and good, the enterprise would have saved money without any dent to its coffee’s perceived value. 

But if my sentiments are shared with many coffee drinkers who decide to turn away and find alternatives, then the enterprise would no doubt be strongly encouraged to improve the productivity of its value chain.  Perhaps it will study how better to source its imported creamer to ensure it will always be bundled with the coffee it sells. 

In the meantime, I decided to get my Sunday morning coffee from the fast-food company’s competitor. 

About Overtimers Anonymous


[1] Michael E. Porter, Competitive Advantage,  (New York, N.Y. : The Free Press, 1985), pp. 36-38

Ten (10) Examples Towards Building Better Supply Chains

For years, experts have cited the urgent need for supply chains to adapt and get better.  In 2005, Paul Michelman via the Harvard Business Review wrote:

“Threats to your supply chain, and therefore to your company, abound—natural disasters, accidents, and intentional disruptions—their likelihood and consequences heightened by long, global supply chains, ever-shrinking product lifecycles, and volatile and unpredictable markets.”

Fifteen (15) years later, amid a pandemic that has wreaked economic havoc, executives are hearing the need even louder.  Supply chains must become resilient and robust in a new normal of constant disruption.  Supply chains must change

Experts have urged enterprises to map their supply chains, identify risks, review their networks, and innovate via technologies such as robotics and automation.  But what does an enterprise do when it’s got the maps, identified the risks, and has the network review results? How does an enterprise innovate via technologies? 

We cannot just manage supply chains to make them better.  We need to build them. 

It’s like a house.  When we manage our houses, we do things like fix a leaky roof, replace lightbulbs, and unclog drain pipes.  But we can only do things ourselves up to a certain extent. 

When the job gets too big to handle, we seek experts.  Civil engineers help us replace the roofs and retrofit the foundations.  Electrical engineers help re-wire our electrical circuits. 

The analogy applies for supply chains as well.  We can manage supply chains only so much.  When we need to make significant improvements, when we can no longer just manage them, when we need to rebuild them, we’d seek engineering help.  The most qualified to do so are Industrial Engineers (IEs), or more specifically, Supply Chain Engineers (SCEs). 

How can SCEs help rebuild our supply chains? 

The following are examples:

  • Developing the Digital Supply Chain.   

With the advent of Industry 4.0, enterprises, more than ever, are investing in new technologies that marry data and process productivity.  SCE’s can help enterprises implement state-of-the-art technologies into their supply chains which will provide the means towards real-time operations visibility and automated process improvement. 

  • Setting Up Flexible Manufacturing Systems (FMS)

SCE’s can help integrate flexible manufacturing systems (FMS) into supply chains.  FMS is an alternative to traditional production systems in that it focuses on short-run small-lot-size manufacturing versus long continuous mass production.  SCE’s can build in flexible systems into supply chains via integration with logistics, production planning, and procurement. 

  • Improving Inbound & Outbound Logistics

Supply chain engineers can streamline the flow of goods coming into and out of storage facilities.  They can identify and ubblock bottlenecks, and recommend how manpower and facilities should be laid out such that merchandise can flow continuously and smoothly.  SCE’s can also study the economics of procurement and delivery practices that underlie their impacts on logistics flow. 

  • Simplifying Storage & Handling

Storage and handling are very high on the list of many supply chain managers’ preoccupations.  Enterprise executives don’t like them because they connote cost and they’re seen as not adding value.  But with the SCE’s help, enterprises can turn them into the assets they really are. 

  • Tuning Up Transportation’s Last-Mile Productivity

SCE’s can offer options that would boost the productivity of last-mile freight deliveries and services.  These include recommending changes in transportation structure, improving route planning & scheduling, and balancing loads maximisation with delivery turnarounds.

  • Perfecting Order Fulfilment

SCE’s can come up with order fulfilment systems that seamlessly connect anticipated customer demand with available-to-promise (ATP) inventories.  The goal is perfect orders: deliveries that meet 100% of customers’ service requirements 100% of the time.  

  • Factoring the Worker in the Workplace

Enterprises want efficiency but need to be mindful of the welfare of their workers.  Popularly known as ergonomics, SCE’s apply human factors engineering to improve labour productivity by adopting the workplace to the person, rather than adopting the person to the workplace. 

  • Re-Implementing Total Quality

It’s an old buzzword from a bygone era, but Total Quality still serves as an applicable approach to ensuring supply chains deliver what they’re supposed to.  SCE’s provide the in-depth tools and means to make sure processes work right the first time. 

  • Re-Defining Cost Engineering

To many enterprises, it’s a glorified clerical function that estimates job expenses and checks the billings from vendors and contractors.  But it’s more than that and SCE’s can show how cost engineering can not only tame the expenses but also provide competitive value for supply chains.

  • Pruning the Value Stream

Value-Stream Mapping (VSM) is the basic tool of Lean, and it tells us where the non-value added and value-added activities are.  SCE’s show how to optimise the value stream after we know the results of VSM. 

Enterprise executives have heard the need to reform their supply chains.  But they can do only so much managing them.  Enterprises would need the assistance of Supply Chain Engineers to build in better structures and systems. 

The ten (10) examples described above illustrate how SCE’s can help enterprises change their supply chains for the better.  And given the ever increasing clamour for change in these challenging times, we could use all the help we can get. 

About Overtimers Anonymous

Hoarding and How to Discourage It

When people buy a little more than what they usually need, we call it speculation.  When they buy much, much more, we call it hoarding.

What happens when people hoard?  Do the enterprises that supply the goods gain in sales and profits?  Do hoarders make money?

Hoarding happens when people perceive they might not be able to buy the items they essentially will need in the very near future.   They end up buying a lot, to the extent consumers empty grocery shelves or businessmen use up all of their storage and look for more. 

Hoarding is not the same as building up buffer stocks or safety stocks.  Buffer and safety stocks take into account estimated variations in demand and supply.  These would be based on statistical formulae, as in like standard deviations if one recalls his or her education in statistics. 

Hoarding doesn’t have any statistical basis.  It is pure over-speculation borne by exaggerated perceptions of a current reality.  It often is a reaction to an adverse situation. 

A typhoon threatens to hit town.  Residents panic and buy based on what they believe they would need when the storm hits and afterwards.  How much they buy is based on fear and perceptions.  Perceptions are based more on emotion than it is speculation.  Hence, people buy as an emotional response and they tend to buy a lot more than they really need. 

Hoarding doesn’t benefit anyone.  Having too much of anything either eventually results in wastage or in having cash tied up for too long in the stuff bought.  Hoarders believe they would profit a great deal from selling the excess stuff that would become scarce but even then, the money earned is just a one-time bonus and the windfall doesn’t necessarily come at once.  Hoarders pay for the additional cost of storing the stuff and the opportunity cost for the cash they expended would be sunk into the goods they probably would be keeping for some time. 

Hoarding regularly also isn’t really a good idea.  On top of the added cost of storage and lost cash liquidity, having a lot of inventory drives up expenses.  Costs for security and upkeep creep in and eat away profits. 

Successful wholesalers especially of consumer goods and food items should not be classed as hoarders.  One wholesaler I know stocks up on canned goods and liquor starting July of every year.  He stocks up enough quantities that would meet likely demand for the year-end holiday season.  He bases his projected sales on the demand histories of the products he stocks.  And he’s often right.  The goods he bought and stocked up end up practically sold out before Christmas. 

Hoarders on the other hand don’t base their purchases on demand forecasts.  More often than not they end up with inventories that last for months and even years.  Hoarders buy based on irrational reasoning.  Wholesalers buy based on rational estimates. 

Hoarders likely won’t listen to advice to not stock too much.  Some enterprises, therefore, control how much inventory they make available to their customers, especially if the products they sell are fast-selling essential commodities.  Suppliers will ration and allocate to discourage hoarding.  Or they’ll ask for cash up front as hoarders, just like everyone else, would have limits in their financial capacities to pay. 

Hoarders can be very persistent in procuring the stuff they want to keep for themselves and satisfy their irrational urges.  Enterprises should distinguish who their customers are from the hoarders that put away products and refuse to share with others who may need them just as much, if not more.    

Customers may be always right.  Hoarders never are. 

Why and How Banks Should Improve their Services

In the late 1990’s, Asiatrust Development Bank, a relatively newcomer to the Philippine banking industry, expanded its banking hours from 8:30am to 6:00pm.  It was a break from the traditional 10:00am to 3:00pm schedule that was the mainstay of other Philippine banks.   Many small businesses and individuals particularly those who worked until evenings, flocked and opened accounts with Asiatrust. 

Asiatrust also offered pick-ups of deposits from customers and post-dated check warehousing, in which post-dated checks can be safe with banks until their deposit dates.  These added conveniences helped the bank snare more clients, notably small & medium-sized businesses

Some banks took notice of Asiatrust’s meteoric capture of market share and also expanded their hours and services.  Asia United Bank (AUB) absorbed Asiatrust in 2012 but its legacy of services for small businesses and entrepreneurs lived on in the Philippine banking industry.

Almost thirty (30) years later, amid the pandemic of 2020, Philippine banks have reversed these services.  Citing the risks to public health, banks have shortened hours; some have even closed branches.  Banks have reduced staff, resulting in long queues of clients at branches and long waits when calling customer service hotlines. Bank internet services have slowed thanks to surges in online transactions. 

Banks serve an important function in ensuring enterprises and their supply chains keep running well.  Cash-flow transactions between vendors and customers transpire mostly via banks.  Foreign exchange dealings, such as letters of credit (LC’s) and wire transfers, happen in most cases through banks.  Philippine bank executives repeatedly extol their commitment to customer service but they balance that priority with that of managing present-day risks in order to maintain the health of their finances. 

When banks downgrade services, enterprises’ supply chain activities may suffer. When a bank is closed or the waiting line leading into it is too long, for instance, clients may find themselves unable to consistently do routine financial transactions.  This can result in delays in payments to vendors and depositing collections from customers.  Receipts of materials and deliveries of merchandise would be negatively affected. 

Cutting back services, especially those dealing with foreign exchange transactions, can hamper the timelines of enterprises to import materials or export products.  

Banks have a golden opportunity to grow if they would just focus on service. 

In the Philippines, more than 65% of adult Filipino households don’t have bank accounts.  That’s 65% in potential market growth for banks.  Many Filipinos don’t deal with banks because either it’s a hassle for them (branches are inconveniently far from their homes or places of work) or because it’s simply discouraging to open accounts (e.g. too many forms to fill, minimum deposits, low interest rates, restrictions on loans). 

Small businesses make up 99% of commerce in the Philippines.  Which means they also likely make up 99% of supply chain transactions in the Philippines.  Even if the remaining 1% of enterprises that comprise big businesses may hold a large share of the commerce, the revenue and investment potential of small enterprises cannot be discounted. 

Banks aren’t just important to supply chains, they are much like them and can even be managed as such.

Banks purchase and deliver cash to and from branches and require the logistics of armoured cars.  They not only tap the talent of managers and staff to serve clients but also have work systems that can be optimised (e.g. tellers and customer services). 

The science of determining how many branches to have and where to locate them are not much different from that for storage depots for manufacturing firms.  And finding out how much capacity a branch should have (number of staff and how many operating hours) isn’t far from the capacity computations for assembly lines and logistics operations. 

The risk management for banking operations which encompass safety and occupational health aren’t really unlike that for the standards and practices for supply chain operations. 

Organisations with supply chains have been continually adapting to risk and improving customer service, pre-pandemic and amid the pandemic.  If they can do it, banks can too. 

The science of supply chain management and engineering can work for banks as much as it has in many industries.  It just perhaps needs the insight to get it started.  

About Overtimers Anonymous