When Increasing Capacity Becomes a Priority

One Sunday morning, a homeless woman at a traffic intersection was approaching cars and begging for alms.  Some drivers give but most don’t.  But the woman persists anyway; she shows a sign saying she’s homeless and asks for money for food. 

I thought as I observed the homeless woman:  if the government could spend so much setting up facilities to quarantine patients infected with the CoVID-19 virus, couldn’t it also spend a little more to house the homeless who roam the streets?  At least the government could provide a place to sleep and some food and water to homeless people even for a brief time so they’d be able to find work or resolve whatever issue that brought them there in the first place? 

The frequent answer to such a suggestion is a lack of resources.  The government would say they don’t have the budget to provide such for homeless people. 

How then were they able to provide for CoVID-19 infected people?  That’s different, a government person may say.  It was a national emergency and the virus is dangerous and life-threatening. 

But isn’t being homeless and without food dangerous and life-threatening too? And at this point, the government would not pursue the argument.  With a wave of a hand, they’d just say there is no justification to provide the resources. 

Not only governments but also enterprises hesitate to provide resources even when the demand would be there.  Executives would cite limitations in budgets or capital.  They would prefer that the operations spearheading supply reach their points of maximum capacities before asking for any investment in additional capacities. 

And even if they are at that point of maximum utilisation, executives would require proof that operations are also at their highest efficiencies.  Executives by common practice, will want an organisation to exhaust all of its means before considering any investment in additional capacities. 

If executives can avoid investing in new capacities, they will.     

This is why factories run flat-out to supply products before companies realise they need to build new production lines.  This is why airlines wait until flights are overbooked or ticket counters turn away passengers before they add new planes to their fleets.  This is why some restaurants don’t expand their dining areas or hire new staff until they see patrons waiting for tables or walking away because they couldn’t get a waiter to serve them.    And this is why internet companies don’t install new equipment until they see slowdowns in downloading speed or backlogs of subscribers. 

It doesn’t occur to many enterprises that investments in additional resources should ideally happen before operating limits are reached. 

At the height of the CoVID-19 pandemic in New York City, USA, in late March of 2020, the US Navy dispatched the USNS hospital ship, Comfort, to assist the city’s medical services. 

New York was low on available beds and staff to treat a surge of CoVID-19 patients.  New York City welcomed the Comfort, with its 1,000 beds and trained medical staff.   

But instead of helping, the Comfort would only take non-CoVID-19 patients.  The US Navy thought that by taking in patients not infected by the virus, New York could free up space in their hospitals for the CoVID-19 patients.  The Comfort’s beds were also spaced closely side by side so in the first place, the ship could not enforce social distancing for CoVID-19 patients.

The Comfort ended up treating 20 patients at its first week as New York’s hospitals continued to struggle with crowded wards and weary staff.  After so many weeks of sitting idly by hardly utilised, the Comfort departed New York City. 

The story of the Comfort was a lesson for leaders, if not an eye-opener for executives.  One should not wait till an issue becomes extremely urgent before acting.  

But nobody did learn.  Nobody did realise.  Many executives of governments and enterprises have forgotten the story of the Comfort. It has been relegated as one more passing tale of the pandemic era.  Meanwhile, wave after wave of virus infections months after the story of the Comfort have led to overcrowded hospitals and more deaths due to patients unable to be admitted for treatment.   

We shouldn’t wait till the last minute before deciding we need more capacity.  It isn’t complicated to calculate how much more we need if we can see the rate of  growing demand and anticipate when our resources will no longer be enough. 

I gave money to the homeless woman that day but I saw more homeless people begging on the street corners the weeks afterward. 

We still haven’t learned. 

About Overtimers Anonymous

Lessons Learned from E-Commerce

December 28, 2020.  We ordered the food but couldn’t find the riders to deliver them. 

Our family of cousins, uncles, and aunts couldn’t be together for New Year’s Eve.  Reunions and parties were not allowed in lieu of ongoing restrictions brought on by the CoVID-19 pandemic.  Instead, we ordered food from a food shop and was counting on available motorcycle riders to deliver them hot and fresh to our relatives on December 31, New Year’s Eve.

But starting December 23, we noticed available riders were getting fewer and fewer.  By the 30th of December, there were practically no riders available.  I ended up driving to the food shop to get the food packs and deliver them to my cousins’ residences on New Year’s Eve. 

We used to sit at a restaurant, order via a menu, wait as the restaurant’s kitchen prepared our meals, and enjoyed our food as waiters brought them to the table. 

No more.

Because of the pandemic, we had to opt via the e-commerce way, which was sit at home, order via mobile phone or tablet, wait for the food shop (a former caterer) to confirm that our meals were prepared, and then book a 3rd party rider service (motorcycle delivery courier) to bring our ordered food to our home. 

The success of e-commerce relied on a seamless process of order taking, preparation, and delivery.  Most of the time, there were no problems.  As long as the internet stayed fast and continuous, the food shops had the capacities, and there was an abundance of available delivery riders, we made our orders and had gotten them when we wanted them.

The December 2020 holidays, however, reminded us that e-commerce did have its limits. And the first place it manifested itself was in the riders.  We had no clue that riders will be rare a week before New Year’s Eve. 

We always assume there’s enough capacity throughout the e-commerce process. 

But we can never tell how many riders there’d be today or tomorrow.

Availability of riders is not only due to factors such as absenteeism and driver population but also very much in lockstep with the number of pending deliveries.

Since it was the holiday season, riders weren’t only tired and taking leave but pending deliveries were at their peak. 

As food shops were managing through the high demand and the Internet remained steady and speedy for customers who ordered, the bottleneck in the e-commerce supply chain was in the available riders to deliver the orders. 

There were several companies in the rider business, at least three (3) major ones in our city, Manila, to count on. 

If one couldn’t take the orders, we would resort to another. 

This worked most of the time but the holiday season of 2020 crimped the capacities of just about everyone.  

In the end, I (and probably a significant number of families) just had to pick up our orders ourselves.

I don’t know if this is going to be the new normal of the food e-commerce business in which I’d have to pick up my own orders when there are no riders available.  But there are lessons coming out that I’m learning.

Lesson #1:  E-commerce is Different.

E-commerce does not follow the same process as what we are familiar with order fulfilments.  For food shops, it’s click, prepare, and deliver.  It’s no more the sit-in-restaurant, order by menu, cook by kitchen, and meals placed on a table.  We pay online not in person.  It’s a total change from the traditional face-to-face transaction.

Lesson #2:  The Customer Experience Has Become Mutual

The e-commerce experience is a sea change from in-person interaction.  With e-commerce, it’s about ordering products by ourselves and getting our order in the right quality and quantity by ourselves.   The onus of ordering and the method for delivery has passed more to the customer from that of the enterprise.  The experience has become more dependent on a mutually beneficial collaboration between customer and enterprise. 

Lesson #3:  Customers Can Be Choosier but Can’t Get All of What They Want

Customers can be choosier as e-commerce opens the door to a multitude of enterprises into the market.  There are more food varieties, for instance, to choose from as restaurants, caterers, and want-to-be-chefs advertise themselves side-by-side on the worldwide web.   At the same time, customers can’t dictate how orders would be fulfilled or delivered as it’s what-you-see-is-what-you-get when it comes to transacting online. 

Lesson #4:  Management Has to Learn to Change

It’s not just enterprise executives have to change how they manage their operations but also that they have to learn to manage in an actively-changing environment.  No longer can enterprises expect a daily steady crowd of customers or expect to have the same capabilities in production and delivery.  E-commerce allows more competition and innovation as it expands the marketplace and connects more enterprises and customers.  Both enterprise owners and customers would need to be ready to adapt and change quickly as new products and services are introduced frequently

Lesson #5:  E-Commerce is Not IT; It’s Supply Chain Management

Last but not least, if we don’t already know, e-commerce is a supply chain thing.  It’s not an information technology (IT) thing.  A lot of entrepreneurs are spending a great deal of time on development and programming of applications but not much on engineering and managing operations.  E-commerce is one-side IT (clicking on an app and paying online) and one-side physical work (product preparation & delivery logistics).  It is therefore elementary that entrepreneurs learn how to optimally serve their products as much as to have  user-friendly efficient web applications. 

These are just some of the lessons.  There probably will be more as e-commerce gets off the ground. 

Meanwhile, I’ll just make sure my car is ready to pick up my family dinners in case no riders are available again. 

About Overtimers Anonymous

A Letter to the IE: More than Ever, We Need to Lead the World to Productivity

:

Dear Industrial Engineer*          

The year 2020 ended without a happy ending.  The SARS-CoV-2 virus had not gone away.  It continues to be a global threat going into 2021. 

Political and enterprise leaders have done all they can to defeat the virus. 

There was hope. 

Thanks to record-breaking world-class collaboration efforts, vaccines have become realities and are on their way to inoculate millions.  We are grateful to the scientists, engineers, health-care professionals, executives, and numerous support personnel who have done so much and continue to do so.

But there was frustration. 

The pandemic, however, had spread to every continent, including remote Antarctica.  It continues to infect and force governments to restrict movement and distance.

We have become more lonesome and insecure.  Some of us had pushed back but to no avail.  The virus retaliates without discrimination.  More had gone sick.  More tragically had passed away. 

Throughout the war against CoVID-19, we industrial engineers have been conspicuously left out.  We don’t really know if it’s because leaders are ignorant of what we can offer or if it’s because many executives think they have enough expertise.   Whatever the reason, we could have done more. 

Most of us industrial engineers are hard at work in different careers and jobs around the world.  Many of us have made big differences to the enterprises and organisations where we are employed or engaged. 

But for whatever we have done, whatever we continue to do, it hasn’t been enough. 

Long before the pandemic, productivity growth has been on a decline.  The gap in productivity year-to-year between advanced economies and developing nations has widened.  Disruptions ranging from natural disasters to socio-political upheavals had taken a toll on enterprises.  Growth has been curtailed.  Many enterprises, notably small businesses, have lost ground in competitiveness. 

The 2020 pandemic hit global productivity when it was already down.  It’s the culmination of its decline.  And we have felt the impact like a hammer driving down on the nail. 

We need to do better.  We need to make our world more productive.

Productivity is a misunderstood measure.  Unlike financials like profit, sales, costs, and cash-flow, it is not easy to describe productivity in one metric.  Economists try to do that by defining productivity as the output of a person; but doing so makes it incomplete and inaccurate. 

Productivity is delivery versus consumption; how much one delivers correctly to customers against how much resources and time are consumed in doing so.  Productivity requires direction.  What are we delivering, how many or how much, how close to what customers want, and when?  What are we going to use to make and deliver, how long it should take, how it will be conveyed, and with how much support?   It’s not efficiency which measures how fast we’re going; it’s more like velocity which measures how much nearer we are to our objectives given the resources we spent.

Productivity drives value.  It connects to the priorities of the enterprise.  It’s what gives us industrial engineers purpose because we’re in the best position to understand it and improve on it.  Productivity is our watchword. 

In an age where supply chains and operations are in the midst of crisis,

we find ourselves in an unprecedented position to make a significant difference. 

I don’t suggest a political campaign or a public relations drive.  We just need to demonstrate.  We don’t need to debate our proficiencies; we have the skills.  We know what we have and what we can contribute

How we can show what we got can be summarised in four approaches:

First, Point Out Problems and Volunteer to Fix Them

We shouldn’t wait to be assigned.  We should point about problems, make visible opportunities, and offer ideas and solutions.  In short, we should be proactive, i.e., act on our own without waiting for someone to tell us about problems.  We know more than a lot of people when there’s a problem. 

Second, Drive the PDCA Cycle

We should drive the Plan-Do-Check-Act (PDCA) cycle, the basic process of carrying out solutions.  What many people don’t realise is that it’s a cycle, not a model for a one-time project.  We don’t stop after implementing a solution; we seek opportunity for something even better.  It’s why we also call it continuous improvement.  PDCA is a wheel that we keep spinning to keep productivity moving and growing. 

Third, Stand Up and Be Heard on Strategy

Keeping the PDCA cycle spinning requires leadership.  We are those leaders.  Our superiors are our audience.  Feedback, justification, and assertion are therefore essential.  We should have a say on strategy because productivity depends on direction.  It doesn’t just ensure the PDCA cycle keeps spinning but  that we spin the right cycles; we address the problems that are most important. 

Fourth, Promote Productivity

As industrial engineers, we promote productivity.  No one else will.  Not the economists, not the post-graduate business administration executive, not other engineers.   It’s us because our education and experience have us focused on productivity more than anyone else. 

Productivity has become a forgotten term in the decade of 2010 to 2020.  Its growth has fallen by the wayside.  It is on us to remind everyone about it, show how important it is to the viabilities of enterprises and competitiveness of organisations, and reveal its potential in the fight against disruptions, especially versus seemingly insurmountable ones like the pandemic. 

The anchor of our IE vocation is productivity.  It’s our unwavering principle we base our accomplishments on.  It is the flag we wave amid disruptions and difficulties. 

Let’s get going. 

About Overtimers Anonymous

*I had suggested we change our titles to supply chain engineers.  😊

Acknowledgment:

Alistair Dieppe. 2020. Global Productivity: Trends, Drivers,
and Policies. Advance Edition. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO.

We Need Better Monitoring Systems

Most executives like performance measures.  Otherwise known as metrics, key performance indicators (KPI’s), analytics, or scorecards, enterprises embrace performance measures as a means to assess how their businesses are doing.

The point of a performance measure is to check how an individual or team is doing against a target that is set by superiors.  (No matter what people may say, it’s always the superior who sets the targets).  Targets are set in line with strategic goals.  Individuals and teams strive to perform such that resulting measures would meet targets to attain the goals. 

But after more than twenty (20) long years since they’ve become popular, performance measures are no longer good enough, especially for supply chains. 

Supply chains are product and service streams.  Materials, merchandise, and information (printed and digital) flow through networks within and between enterprises.  From one operational step to the next, products and services transcend in value as they make their way to their final destinations: the end users.

Supply chains are sensitive to disruption.  When a disruption hits one process, every part of the supply chain feels it.  A delay in the loading of a truck, for instance, may entail a change in production schedules at a manufacturing facility it is supposed to deliver to, which in turn may cause a shortage of a product the facility is supposed to make. 

Performance measures are popular as many people could relate to them.  They are simple and easy to appreciate.  They show how a person’s work is doing versus a target that fits to that person’s tasks.  The performance target would be linked to higher levels of performance measures that would finally connect to a strategic goal. 

Unfortunately, performance measures do not work very well when there are disruptions.  Whereas they are designed such that different levels of an organisation can be made accountable for them, performance measures are not flexible to changing circumstances.  

For example, a production line supervisor is accountable for how many overtime hours his crew works in a week.  His target is that each crew member does not work more than 4 out of 40 hours of overtime per week.  He controls the overtime by rotating his crew members’ leaves such that not many of them have days off at the same time.  But if the supervisor receives a surprise rush order such that he has to make double his weekly volume, he would be forced to ask his crew to go on overtime to meet that order.  His boss, however, would ask him later to explain why he exceeded his weekly overtime target. 

Disruptions are nothing new for supply chains.  They can be big or small.  They are the results of both adversities and opportunities  And they can come periodically or frequently.  They are never identical in cause and they sometimes come in the most mundane manner, like a surprise doubling of a production order such as in the example mentioned above

Performance measures work when supply chains run routinely, much like in a game of sports.  Sports games operate under fixed sets of rules and conditions.  Players score and meet goals to win. But if it rains, the game stops.  In similar fashion, supply chain professionals perform to achieve objectives set by schedules under favourable and predictable working conditions.  But if someone changes the schedule or everyone has to go home because of a disruption like a virus-causing government-mandated lock-down, the performance measures become useless. 

Disruptions are normal.  They aren’t exceptions.  Disruptions occur often as a result of frequent adversities and opportunities that ripple through the fast-paced interconnected world we live in.

What supply chains need are monitoring systems that tell us not only what is going on but also notify us when there is a need to respond.  We need monitoring systems that will tell us about upcoming disruptions and give us time to take action.             

Two things comprise a monitoring system:   visibility and guidance.  Visibility in the form of real-time information and guidance in the form of alerts to events that merit a response. 

An example is a fuel gauge in a car.  The gauge provides visibility on how much fuel is there in a tank.  It also gives guidance via a flashing light that alerts the driver that the fuel tank is almost empty. 

Monitoring systems are not new to supply chains.  Manufacturing managers harness instruments and gauges to monitor production lines and facilitate process control.  A number of enterprises have adopted technologies such as radio-frequency identification (RFID) tags, block-chains, and artificially intelligent command-and-control systems to oversee supply chains even from long distances.   

Many enterprises, however, have had little success in mitigating disruption in their supply chains despite the growth of high-tech monitoring systems.  This is because many monitoring systems aren’t focused towards disruption.  Instead, they are geared towards performance for the sake of measuring results versus strategic goals, which as aforementioned don’t really contribute very much in a frequently disruptive environment. 

We, therefore, need to re-orient supply chains towards monitoring for disruption, not performance.  By watching out for disruption and responding to it, supply chains would be able to muster resources to mitigate it, even perhaps take advantage of it. 

One doesn’t have to start with an intricate, complicated or expensive system.  One can begin with simple reports from various operations along the chain.  For instance, vendors, brokerages firms, and shipping companies can email the status of orders for imported materials. 

Import status report

A status report such as the one above can tell stakeholders about impending issues such as a shipment that’s about to be considered abandoned and subject to penalties.

Supply chain engineers can make improvements step-by-step by tailoring feedback systems to fit different processes.  SMS texts summarising daily customer orders, entered orders in the database, communicated factory orders, MRP II real-time plans are examples.     

      

A supply chain monitoring system can also be like a tsunami warning system: 

Or it can be manifested like a dashboard for supply chain professionals to see:

Whatever the design, the purpose of the monitoring system is to allow stakeholders to watch out for disruption and respond when needed. 

Performance measures have not proven to be helpful in our disruptive-driven world.  We need monitoring systems that provide visibility and guidance especially for supply chains.  They don’t have to be complicated; they just have to be adequate enough to bring attention to disruptions.

Disruptions are a result of both adversity and opportunity.  In either case, it’s always best to be one step ahead whether it be to mitigate or to take advantage of whatever’s out there.  

Why We Need to Build Supply Chains

Enterprises are planning to rebuild their supply chains in the wake of the pandemic of 2020. 

Well, no, not really. 

Many enterprises are planning to resume production and boost inventories in the aftermath of the COVID19 pandemic.1 Some firms will narrow their product lines to those that are in high demand (e.g. toilet paper).  Others will stock up on raw materials and seek vendors that are nearer to their production sites as alternatives to risky international sources.

Not many firms, however, plan to build or rebuild supply chains.  I don’t blame them. 

Building a supply chain is not an attractive option, at least at first glance.  Most enterprises work within existing supply chains and would not outright see a good reason to build one that overlaps with other organisations. 

Enterprises would likely focus internally in their own operations if there’s any supply chain building that needs to be done.  And even then, enterprise executives would hesitate to do any major change if they perceive it would entail too much work and cost that wouldn’t reap much beneficial return.

Some companies in the past did try to rebuild their supply chains.  They called it “re-engineering” and it was popular in the 1990’s.  The idea was to redesign business operations from scratch and then apply sweeping changes to existing operations. 

It didn’t last long.2 Many companies ended up downsizing instead of changing.  A lot of people lost their jobs and companies didn’t realize much of any reward.  Re-engineering quickly lost its luster as fast as it was introduced. 

Some consultants, academics, and information technology (IT) vendors still push for re-engineering though they avoid the term.  Some pitch IT platforms such as Enterprise Resource Planning (ERP) to drive operations improvements.3 Alas, ERP and other similar platforms have not been as successful as hoped.   Many projects have fallen to the wayside

Many enterprises took to managing supply chains than into re-engineering them.  They sought talented people who’d know how to regulate inventories, negotiate with vendors, process orders, and make sure operations would comply with the latest environmental sustainability rules and occupational safety & health guidelines.  Executives also placed hopes that supply chain managers can lead in implementing new technologies such as artificial intelligence.  Supply chain management had become the norm.  Re-engineering was forgotten. 

Then the pandemic came. 

Enterprise executives know that supply chains need to change in the aftermath of COVID19.  And it isn’t just because of COVID19.  Before that, it was the tariff war between the United States and China that turned global trade upside down, not to mention similar disputes such as the British exit (Brexit) from the European Union.  There were also the supply and price fluctuations in commodities from metals, rare earths, to crude oil.  There were also the natural disasters. There were also the cyber-security data breaches.  And there were also the numerous upstart entrepreneurs who were introducing technologies such as drones, ride-sharing, video-streaming, and ecommerce mobile apps that threatened traditional businesses. 

Enterprises had to accept: supply chains, especially the global ones, were vulnerable.  They don’t work well in a disruptive environment.  The pandemic proved it.  All one had to see were the idle factories, closed warehouses, shut stores, and empty shelves.  The present supply chain set-up no longer applies. 

Building supply chains isn’t really that hard and expensive.  Sure, it requires investment but just like supply chain management, the key is talent.  One just has to employ the right people with the right talent.  The good news is that the talent is there in front of us, ready to work and available.  They are the industrial engineers; they have the tools and the skills and whom I’d rather call supply chain engineers.   

It’s not management but engineering that would drive the building of supply chains.  Engineers build things.  That’s their role.  Managers don’t do building; that’s not their role. 

The process of building supply chains is not too far off from constructing a factory or warehouse.  One has to have a plan, a timeline, and a full list of resources and costs.  And one has to have a engineer with the expertise and leadership to design and oversee. 

The difference lies in the nature and scope.  Whereas a facility such as an office and warehouse lies within the bounds of an enterprise, a supply chain encompasses the stream of products and services that crosses organisations and borders. 

A supply chain is like a river.  Build a dam and that’s a facility at a point in the river, with the purpose of harnessing the river’s water.   Building the supply chain involves setting up systems and facilities along the river to ensure the continuous and sustainable flow of water from start to finish. 

The supply chain engineer works not only with stakeholders within the enterprise but with stakeholders from other enterprises, such as but not limited to vendors and customers.  The engineer identifies and designs what needs to be built along the supply chain river. 

Most of what would be built first would likely be the networks and systems that link along the supply chain stream*.  The engineer would seek the optimal design that would synchronise and sustain flow that would uphold competitive standards of reliability, quality, and versatility. 

The 2020 pandemic is the latest in the series of 21st century disruptions to supply chains. It was the worst and it won’t be the last.  Enterprises who realize that their supply chains are vulnerable and need to be built with engineering talent would be on the right track to reviving their competitive edge.  

*Note:  I wrote a similar blog in LinkedIn in July 2019 in which I stressed structures in supply chain building.