Problems are Doorways to Opportunities

Since the start of 2021, semiconductor chips, which are used in cars, trucks, computers, and smart-phones, have been in short supply.  Supply has been so short that automotive companies have shut down assembly lines and consumer electronics corporations have delayed roll-outs of new products. 

Bloomberg reported in its September 22, 2021 Supply Lines newsletter that the gap between “ordering a semiconductor chip and delivery is still growing.” 

But four years before in 2017 (see chart above), it was already taking at least 10 weeks to deliver a semiconductor chip from time of order.  So, while businesses in 2021 anxiously wait up to 20 weeks for their chips to arrive, why were industries tolerating long order-to-delivery times of up to 10 weeks in the first place?

The dictionary defines a problem as an “unsatisfactory situation.”  It is a “state of difficulty that needs to be resolved.” 

Many of us equate problems with crises and disruptions, that is, we see a problem only when it hurts us such that it becomes urgent to address it. 

Hence, we tend to avoid them or try to resolve them as quickly as possible.  The fewer problems we have, the better, we usually say. 

The dictionary, however, also says it is a “a question proposed for solution or discussion.” 

Problems can be doorways to opportunities, in which if we think of them that way, we should seek them out and solve them for the ideas that would benefit us. 

Enterprises and even governments are scrambling hard in 2021 to fix the semiconductor chip shortage that has crippled factories and caused supply shortfalls of many products, from cell-phones to computers.  Most saw the problem when order-to-delivery lead times extended from 10 to 20 weeks.

If enterprises in 2017, however, proposed the “question” of shortening the supply lead time of 10 weeks, and found a solution, would industries be undergoing a crisis in 2021?  Wasn’t there a way to bring the number of weeks of lead time down to 4 weeks or even less? 

It was obvious that since 2017, company executives had accepted the 10-week order-to-delivery cycle and adjusted their inventories and production schedules to cover for the waiting time.  Executives managed the 10-week lead time into their financial forecasts.  The 10-week lead time was not considered a problem. 

If one enterprise in 2017 had seen the 10-week lead time as a problem rather than as an acceptable fate, and in the process of “discussion” found a “solution,” one wonders how much of a competitive advantage that enterprise would have in 2021. 

It’s never really worthwhile to ask “what-if” questions especially after the fact of a crisis.  But in the process of problem solving, as a question becomes clearer, it would have been likely that a solution would have addressed future adverse situations. 

As companies see their businesses compromised by the semiconductor shortage of 2021, it becomes more sensible to seek out the problems and pose the questions for “discussion” and “solution.”

For the pain many had been experiencing in 2021, it would have been worth it if they had only sought and solve problems then. 

It’s never really good to dwell in the past unless we learn something from it. 

About Overtimers Anonymous

Solving the Supply Chain Mystery

I once met a regional sales manager of a large consumer good company at Davao City, the biggest city on the island of Mindanao, 978 kilometres (608 miles) south of Manila, Philippines. 

As I was introduced, the RSM looked at me for a moment and smiled broadly.

“You’re a supply chain consultant?”

Before I could say “yes.”  He says: “I’ve seen marketing consultants, sales consultants, and organisational development consultants, but this is the first time I’ve ever met a supply chain consultant!”

“Welcome, welcome!”  He shook my hand vigorously.  “I hope you can help us.” 

“You see,” he continues, “the supply chain is a mystery to me.” 

“Every time I submit a customer order, I never know what happens after,” the RSM said. 

“I don’t know when stocks would arrive.  I don’t know what and which products would arrive. And I don’t know how many would arrive,” the RSM said. 

He pointed to a few shipping container vans just outside the warehouse office where we were meeting and shared: “container vans like those would just show up and I wouldn’t know what are in them.” 

“I wouldn’t know if the containers have the products I ordered.  At the end of the month, five or more containers would arrive at the same time and I wouldn’t know which container would have the products I need the most.” 

“I’d spend much of my time calling the logistics office in Manila to tell me what’s coming and when but I never get a clear answer.  I spend a lot of time following up the deliveries of products I need when I should be using the time selling to customers.”

“As this is the first time I’m meeting a supply chain consultant, maybe things can change.  Maybe you can solve the supply chain mystery!”  The RSM said.

On the surface, the problem had a straightforward answer.  The consumer goods company’s logistics office just had to share shipping schedules with the RSM to tell him what’s coming and when.  That would right there solve the problem.

The problem, however, goes deeper. 

Why isn’t logistics sharing the information in the first place? 

Why is logistics not communicating with their sales counterparts? 

And aside from logistics, are other departments even communicating with each other?  Do the consumer goods company’s executives communicate with vendors, customers, 3rd party providers, and stakeholders?  Or are they too preoccupied with other problems they consider urgent?

Communication has always been a problem with companies, especially big companies.  Departments hardly talk to each other as they pursue pre-set goals or put out fires within their work boundaries.  If there would be any communication, it would be in the form of phone calls, memos, reports, or hours-long meetings.

Communication in the management sense, however, does not consist of meetings, memos, or phone calls.  Communication in the management sense is about rapport, i.e., active two-way connection between boss and subordinate, between peers, and between people from differing departments and separate enterprises. 

Communication enhances the flow of information in which individuals and groups constantly share pertinent important information with the purpose of meeting communal objectives for the mutual benefit of all concerned. 

So why aren’t companies doing that?  What’s the problem?  Why does a consumer goods regional sales manager have trouble getting in touch with people he sends orders to and waits for deliveries from? 

Communications within and between enterprises require support structures and systems.  Many companies, however, don’t have adequate structures and systems.  This is because these companies have been brought up on a culture of silos, in which managers and employees work in places that have goals and targets of their own. 

In the consumer goods company where the RSM works, there are performance measures and strategies assigned for every department: 

  • Finance seeks higher profits, more cash-flow, and higher rates of returns;
  • Marketing wants brand leadership, strong geographic distribution, and positive consumer acceptance;
  • Sales wants higher turnover, record-breaking selling volumes, and a high level of retail presence;
  • Manufacturing wants continuous uninterrupted production;
  • Logistics wants fewer pending orders and lower freight costs;
  • Purchasing prefers bulk purchases with large discounts on prices.

The consumer goods company’s organisational chart shows a hierarchy of managers and employees working in different functions with different scopes of work each with specific roles and goals.  The chart in itself lays out a plan of silos where individuals and groups work separately.

Separation means differences in priorities and interests.  What’s mine is mine, what’s yours is yours.  Each to our own.  I mind my business; you mind yours.  These become the thoughts of people within the company. 

What more for those who are not from the company.  We’re inside; they’re outside.  Enterprises might as well be islands in an ocean and many are just like that. 

Organisational development trainers and executives have recommended and implemented many ideas to bring people within and even between enterprises together.  They’ve introduced radical solutions such as “flat” org structures that eliminate many layers of authority and they have encouraged “campus” work ethics where individuals from different disciplines work together in open-plan shared work spaces. 

The consumer goods company the RSM worked for had “brand teams” which had marketing managers lead groups consisting of representatives from sales, manufacturing, finance, and R&D.  The brand team would “own” a particular brand of the company and be accountable for its success.  It was a way to break down barriers between functions. 

Unfortunately, these OD and brand team initiatives have only shown limited success.   At the end of the day, the functional employees and their managers go back to their familiar places of work and focus on the priorities of their departments.  The gates of their workplaces close once again as they resume pursuing their own urgent individual targets.   

Supply chains offer a way out of silos.  Supply chains are grounded on relationships.  Relationships, in order for them to prosper, require communication. 

In supply chains, operating functions work with each other to transform and move materials and merchandise from one point to another, one process to the next, one step at a time.  Connections and communications are what makes a supply chain tick.  And for a supply chain to work, it must tick with every part in clockwork synchronicity. 

When the RSM doesn’t know what’s coming and when, the communications and connections aren’t working.  The supply chain link from the transportation of the product to the receiving warehouse is broken.  The supply chain in this sense is not working. 

Hence, the first thing I urged for the consumer goods company is communication.  Fix the link, establish the connection, make active the communication not only between logistics and the regional sales manager, but also between logistics and other RSMs, logistics and transportation providers, manufacturing and logistics, the inventory planners and logistics, manufacturing and inventory planners and logistics, purchasing to planners to manufacturing, purchasing to vendors. 

There has to be rapport.  Not memos.  Not meetings. Not once-a-month reports.  Not emails or text messages.  But active two-way communication of shared information, shared planning, shared direction, and shared implementation. 

It doesn’t take a world-class detective to solve the supply chain mystery.  Just taking the initiative to communicate would provide much of an answer.

About Overtimers Anonymous

What is a Supply Chain, Really?

The first time I heard about supply chains was when I was working as a production planner at P&G Philippines in 1989.  P&G’s top management had just reorganised the multinational consumer goods corporation’s operations worldwide, integrating manufacturing, purchasing, and logistics under one group: the Product Supply Organisation or PSO, for short. 

The aim of the PSO was to streamline the flow of materials and products from vendors to customers.  Executive leadership emphasised customer service, lower costs, and reductions in working capital, especially inventories. 

Top management at P&G Philippines pushed a comprehensive information technology project as the centrepiece to integrate the various functions, with focus on MRP 2, or Manufacturing Resource Planning, the precursor to Enterprise Resource Planning (ERP).

When P&G moved me to manage the shipping department at the company’s Tondo Plant in 1990, I arrived just in time for the implementation of the newly installed MRP-2 software.

It didn’t start well.

The software couldn’t keep up with the pace of orders coming in and the loading and dispatch of trucks.  The system would hang often or users from other departments weren’t updating inventories to allow us to pick items for shipping.  We ended up overriding the system which earned me the ire of the IT project leader.   Marketing brand managers and field sales came after my department as pending orders piled up and the General Manager even had me sat down in a whole day meeting to explain the snafus in the system.    

The shipping and IT department people worked nights, holidays, and weekends to get the system to work and ship orders.  We finally were able to deliver and the company saw its sales hit record highs. 

A lesson learned from the experience was this: 

Managing a supply chain doesn’t start with reorganisations or putting in a fancy computer system.  Managing a supply chain starts with establishing relationships between the people who’d be running it.  

The supply chain is a representation of operations and their relationships not only within the organisation of an enterprise but also with other organisations of other enterprises, especially the ones the enterprise does business with, such as customers, vendors, and 3rd party providers. 

A supply chain isn’t an organisation nor is it a system of operations.  It isn’t a flowing stream and it is not an ecosystem.  (Ecosystems are communities of biological organisms that eat each other). 

The supply chain is a model, a paradigm that shifts us from seeing work not as the jobs we do on our own at a work-station, cubicle, or vehicle, but as jobs that connect us with others in getting what we need, producing what are needed, moving to where they’re needed, and delivering to who needs them.    

A more-to-the-point definition for supply chains would be:  supply chains are operational relationships that make available products and services. 

Supply chain management is the management of those operational relationships

It’s not a system.  It’s not an organisation.  Supply chains are about relationships―relationships consisting of people working together to deliver products and services. 

About Overtimers Anonymous

Why Should We Care?

Silos

When we get a job in an enterprise, we generally assume it’s for work the company advertised and interviewed us for.   We would find it kind of funny if the company assigns us to do something we didn’t get hired for.   

But it happens.  We sometimes are given work that are not on our original job descriptions.   

Some organisations include “any additional jobs the company may assign” to the list of things to the position we are employed in, but we would push back if the “things” our bosses tell us to do are far from the kind of work we are supposed to be doing.  One does not assign advertising work to an accountant, for instance. 

But it happens.  Like a bookkeeper who the boss treats as a secretary.  Like a plumber who ends up repairing electrical circuits.  Or an engineer who doesn’t do any engineering work at all but becomes a supervisor of an assembly line. 

We also hesitate when an enterprise gives us work in another department or to a “sister company.”  In the Philippines, some firms set up “sister companies” or “subsidiaries” that are totally different legal entities but have almost identical ownership.  The owners would ask their best-performing personnel working in one enterprise to do jobs in another.  An accountant would end up bookkeeping for several different firms or a technician would find himself repairing machines at several different workplaces. Each would, however, be earning just one pay-check from just one company. 

And it does happen.  And often.  Especially in corporations that have diversified holdings in various enterprises. 

We of course want to do just the jobs we are hired and paid for.  “It’s not my job” and “I don’t care” have become favourite mantras in most workplaces.  But just as much as our peers avoid asking us to do things we’re not supposed to do, we find it difficult when our bosses tell us otherwise. 

Our bosses, however, also do get their share of extra work.  Their superiors as well as executives of other departments at times ask them to do things that’s not on the scope of the departments they run.  As much as they resent the additional assignments, many have a hard time saying no. 

And it happens again and again.  Despite what bosses have on their plates, superiors would pile on more.  And we employees get more work too as a result. 

So, we build walls.  What some so-called experts would call “silos.” 

Silos literally are those large towers we find mostly at farms.  They’re storehouses farmers typically put their bulk harvests in before sending them off to markets.  They are usually built with strong materials such as steel or cement.  Silos are designed to isolate stock they store from the outside world, to keep out pests, provide protection from the weather, and preserve freshness.    

Silos have become the best figures of speech for departments in an enterprise who don’t interact with other functions.  And they apply to individual enterprises as well. 

Many enterprises have a culture of looking more towards within than without.  The entrepreneurs that start them have a tendency focus a lot on the activities of their enterprises as they make the effort to boost sales and control costs.   Organisations are conditioned from day one to look inward.  How do we sustain cashflow?  How do we improve our products?  How many sales people do we need?  How much training is enough? 

They ask less about:  how did my customer do with my product?  Did he or she like it?  How has my vendor reacted to my purchase order?  Is she making the effort to ensure the best quality of the items we asked for? 

These latter questions don’t address the interests of our enterprises, so why ask?  Why should we care? 

We should care because the world is changing.  And supply chain management has become more applicable if not more essential in this changing world.    

It’s not only because of the pandemic.    

When the coronavirus (CoVID-19) pandemic hit in 2020, enterprises saw their supply lines fall apart.  Merchandise didn’t arrive or orders were cancelled.  Hospitals didn’t receive needed personal protective equipment (PPEs).  Ocean transport stalled, tying up containers at ports.  Factory production stopped; food deliveries were disrupted.  It was chaos. 

And it didn’t end there. 

Governments have lifted restrictions only to repeatedly put them back again as the virus returned in second, third, and even fourth waves.  Ocean-going vessels ran short of shipping containers for clients and the clients scrambled to build inventories as their customers rushed orders.  Factories stopped and started due to uneven deliveries of critical materials ranging from semiconductor chips, coffee beans, cotton, and chemicals. 

Some politicians trumpeted recovery but realities on the ground were that supply chains have buckled under the stress of whipped up demand and limited supply and capacities. 

Supply chains aren’t in a crisis because of the pandemic.  The pandemic just aggravated what has been holding back supply chains. 

Silos. 

Many businesses had built walls and had focused only on what’s happening within; they ended up at the mercy of outside forces.  They faltered from disruptions that became more frequent this past decade, culminating with the global coronavirus pandemic. 

The concept of the supply chain, since its introduction in the 1970’s, requires managers and executives to not only interact with each other’s functions but also relate with parties along the supply chains they link to.

A butcher must take into account the origin of the meat he procures. 

Chemical companies must assure the lasting efficacies of its products from deliveries to customer to succeeding tiers of trade to the final consumer. 

We cannot not care.  We need to realise we are participants in a supply chain that runs through enterprises, not just within enterprises.  The bottlenecks our vendors face whether it be in material shortages or traffic gridlocks are our business as well as theirs.  The effects of how our deliveries cascade down from buyers to consumers are for our best interests to know and even be involved.    

We should mind the business of others, as we no longer can mind our own alone. 

This is what supply chain management teaches us.  A supply chain’s greatest strength lies in its links, in the connections we make with others. 

It’s a hell of a change in mindset. 

The good news is that many if not most enterprises we compete with are still stuck in the mindset of silos. 

The bad news is that they’re getting the picture too and they will soon be change to become better themselves. 

About Overtimers Anonymous

The Path Towards Becoming a Supply Chain Expert Begins with Basic Competency

Sometimes identifying a problem is not in observing what’s going on; sometimes it’s noticing what’s not there.

In my blog, “Where are the Supply Chain Experts?”, written last March 2020, I wrote there were no supply chain experts seen working side by side with business and government leaders in solving supply issues at the height of the CoVID-19 pandemic. 

As media reported issues regarding shortages of medical supplies and consumer goods, we heard no real solutions to the problems.  And as government executives encountered obstacles deploying vaccines, there was no supply chain professional managing proper and efficient distribution. 

There may have been much talk about supply chain issues but there was little in the way of supply chain solutions coming from supply chain experts.

Not that there aren’t any supply chain experts.  There have been numerous podcasts, blogs, and testimonies on the subject but most if not all the supply chain professionals were really just broadcasting opinions.  There wasn’t much in the way of seeing them together with leaders or the leaders even mentioning any of them at all.* 

Simply put, despite the attention, nobody is putting weight in people with supply chain expertise.  Hardly any supply chain professional is in the limelight, even as the global CoVID-19 has brought on the most traumatic economic disruption in history.

There are several reasons which I believe why we don’t see supply chain experts taking the lead in solving major supply chain problems: 

Reason #1: Supply chain people are operations people and operations people are not expected to go out and interact with the outside world.   

The paradigm of operations people is to focus on what’s going within the workplace, that is, they focus inward.  Except to buy or deliver or hire a contractor, operations people don’t really interact with the outside world.

That essentially had been my upbringing in most of my supply chain jobs.  I concentrated on my department, my workplace, the processes within that were assigned to me.  Emphasis was always on what was going on within operations, not without.

Any interactions with the outside world were initiated mostly be people who were not in operations.  Operations people did not initiate such things and I don’t think many do so up to today.

In other words, operations people, especially supply chain professionals, are proactive in what happens within the four (4) walls of factories, warehouses, and offices.  We were not asked to improve the connections enterprises had with vendors, customers, and 3rd party providers.  Executives emphasised performance measures, not relationships.

Reason #2: There aren’t many supply chain experts in the first place. 

Many entrepreneurs are not supply chain professionals and many executives aren’t either.

That’s one reason maybe why we don’t see many chief supply chain officers.  There aren’t that many experienced supply chain managers in the first place. 

It’s not that the leaders don’t recognise the importance of supply chain management even to the extent of having it as an equal in the echelons of top management.  It’s just that there are very few managers with supply chain experience. 

When I say experience, I don’t just mean experience in logistics or manufacturing.  I mean experience as in synchronising operational functions and interacting with customers, vendors, and 3rd parties in procuring, transforming, and moving merchandise from sources to customers.  How many people do we know have this kind of expertise?  Chances are not a lot. 

Reason #3:  Supply Chain education is relatively new and not widespread. 

Many people aren’t schooled in supply chain management.  We can’t blame them for that; supply chain education is relatively new, as in it’s a course that only has been around for only 30 years or so, unlike finance and marketing which have been around for more than a century (longer perhaps).  And supply chain management as a concept and application is still evolving.

Coupled with that are the ones who teach supply chain management.  There aren’t that many supply chain teachers, at least one would call qualified to teach, one who has experience in various supply chain activities.  

Many supply chain courses teach specific subjects that tie in general operations management topics such as inventory management, production planning, transportation management, and operations research.  The trouble is many of these courses don’t tie in the topics together to teach how the supply chain functions as a whole.  They don’t offer the connectivity that illustrates how supply chain operations work together from end to end.

At the same time, supply chain education isn’t really uniform from place to place.  Some schools link supply chains more to logistics while others stress transportation and purchasing.  Some don’t even teach manufacturing’s connection to the supply chain, treating it separately even as it shouldn’t be.  There’s really no formally standard course for supply chains as one would see for law, engineering, or business administration. 

The people graduating from any supply chain management course from the 1990’s to the 2020’s aren’t therefore fully educated in supply chains.  They’re just graduates taught with a hodgepodge of individual courses related to the subject, which in itself isn’t the same from one school to the next, from one teacher to another. 

These make the diplomas and certificates some supply chain schools issue open to doubt.  A certificate or diploma in supply chain management thus testifies to a school’s brand of teaching, not necessarily one that is generally applicable in any industry. 

When it comes to bringing supply chain management to the forefront and developing it as a prominent field that addresses present-day issues via the three (3) aforementioned reasons, what should be done? 

I believe education should be the starting point and the very first step should be to establish basic competency among candidates for the field. 

I define basic competency in supply chain management as where one is familiar with operations, can at least see how to tie them in altogether towards overall optimal performance, and where one has the ability to plan, organise, direct, and control supply chains both in the day-to-day and strategic perspective. 

Basic competency would be the foundation.  Experiences afterward would be the building blocks that would develop the manager’s proficiency. 

Both the education in basic competency and the experience one gains should not be inward looking but focused on the relationships and connections between parties and links within and outside the enterprise. 

It would be a wholly new approach to some entering into the study of supply chains.  But I believe it would be worth it.  Many of the challenges we see in supply chains are precisely occurring in relationships and connections between functions and parties inside and outside enterprises. 

Where can we find the teachers or just even the mentors?  Because there are not many of them, many aspiring students would be left on their own to look for and put together the bits and pieces experiences would bring. 

But even as they may be few, there are those who can at least help new managers attain that basic competency.   I’d like to think I can be one of those teachers given the knowledge and insights I gained from close to 40 years’ experience in the field. 

*[President Joseph Biden of the United States led a “summit on semiconductor and supply chain resilience” in April 2021 in which the President discussed  with chief executive officers (CEOs) how to tackle supply issues particularly in semiconductor chips.  No prominent supply chain expert was seen stepping up to address the issue].     

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

Just About Every Enterprise is a Supply Chain Enterprise

I and ten million people in Manila have the same problem every day.  Mobile phone reception—it’s lousy. 

It would take several tries to call someone on my mobile phone and when I do, chances are the conversation would stop in the middle. 

Poor cellular reception is a norm in the Philippines.  It’s just so hard to get a decent signal to have a continuous conversation or get a text out. 

I’m sure telecom companies are doing all they could to improve their services.  I see it with their unrelenting investment in the set-up and maintenance of cell-phone towers as they continue to expand coverage and upgrade reception. 

If we think about it, the operations of telecom companies have similarities to those enterprises who manufacture and deliver finished products.  The good quality mobile phone reception we yearn for is not much unlike the supermarket products in how both are made available to consumers.  In short, both have supply chains. 

The supply chain is a model for enterprises that buy raw materials and produce & deliver merchandise for their customers.  Supply chain management has become a standard when it comes to managing the inventories and logistics of items, from chemicals to consumer goods.

Supply chains, however, aren’t limited to just physically tangible products.  They’re very much applicable to intangible items, such as electricity, health care, and business process outsourcing (BPO) services. 

Supply chains follow the flow of products from their start as raw materials to their conversion to merchandise and subsequent delivery to users.  Service and utility enterprises also follow a path of conversion and delivery not altogether different from product supply chains. 

In manufacturing industries, factories convert raw materials into products. 

In non-manufacturing industries, enterprises convert specific problems and issues into finished services.   Hospitals treat sick patients.  Call centres handle problems and questions.  Telecom companies provide mobile phone receptions resulting in uninterrupted conversations and successful sent messages.  Power utility companies make available electricity from energy sources. 

But It’s not just relating manufacturing and services.  It’s also the logistics behind both.  Whereas manufacturers rely on procurement of materials and logistics for transport and delivery, service enterprises depend on infrastructure and systems to ensure the flow of their operations.

A hospital needs not only ambulances but also the system of managing the dispatch of the ambulances for the assurance of fast turnaround for the benefit to patients needing immediate transport. 

One mistake I observe with service companies is that they limit supply chain management to stuff like spare parts and supplies. 

A large energy corporation for instance has a supply chain executive whose job is to buy equipment and components.  The energy corporation had no structure or strategy when it comes to power conversion and delivery.  The energy corporation, hence, had big issues in unreliable power delivery due to poor planning in energy generation and power plant capacities. 

The success of a supply chain model starts with its scope.  Does the supply chain manager of the enterprise handle the total flow from start (procurement/purchasing), to its conversion (production/service operation), and the logistics operations (transport/delivery/orders processing)?  If it misses on any of the aforementioned, chances are the enterprise’s business has a lot of room for improvement.

We consumers want good quality from the things we buy.  Not only the merchandise from the store but also from services such as mobile phone reception, electricity at the flick of a switch, and the best health care. 

The supply chain model is just as much applicable for intangible services as much as it is for tangible items.  Most if not all enterprises have supply chains for what they offer and deliver.  We just need to recognise that managing the operations with supply chains in mind can go a long way to bringing excellence and win-win results. 

If only the telecom companies can think like this, then maybe we’d get better service with our cell-phones. 

About Overtimers Anonymous

Supply Chains Must Have These Five (5) Traits

What’s all the fuss about supply chains?

An Evergreen container ship, the Ever Given, got stuck at the Suez Canal in late March 2021.  The solution was simple:  dig out the sand it’s grounded on and tow the ship to a nearby lake.  Unfortunately, because it’s a big heavy ship and the Suez Canal is a narrow shipping lane between Asia and Europe, a traffic jam of vessels ensued at both ends of the canal. 

The media jumped on the Ever Given’s predicament and soon enough, it became a global talk-of-the-town.  Supply chains became a hot topic as media analysts speculated on shortages of merchandise as container cargo ship arrivals were delayed due to the logjam. 

The Ever Given’s saga at the Suez Canal riveted the world.  It created so much buzz that weeks after the ship finally was freed, people were still talking about it and more so about supply chains. 

One stuck ship had created so much fuss.

Supply chains have been the focus of media attention since countries started locking down their cities and territories at the onset of the COVID-19 pandemic in early 2020. 

At first, media reported shortages in food, personal protective equipment (PPE), and supplies.  Then there were the reports about transportation bottlenecks in air and sea freight due to restrictions at borders and ports. 

More than a year later, by March 2021, the news shifted toward cargo congestions at North American ports, spiking consumer demand, shortfalls in semiconductor chips leading to automotive factory shutdowns, and the lack of available shipping containers as international trade picked up

And as vaccines became available, just about every so-called expert raised the spectre of not enough injections for everyone due to weaknesses in global supply chains.

But is all the fuss pointing to real problems in supply chains?  Or are they just exaggerations exacerbated by media and analysts seeking attention?

The COVID-19 pandemic disrupted just about every enterprise on Earth.

  • Many saw the emptied grocery shelves and many more waited in long lines to buy medicines and toiletries. 
  • Farmers threw away vegetables and poultry business owners cut production as inventories grew and demand fell.  There was plenty of food available in 2020 and then there were the shortages, particularly meat, in 2021; 
  • It wasn’t easy for some of us to find spare parts for fixing our cars, trucks, or motorcycles.  This was especially true as some car dealers and shops closed due to lockdown restrictions. 

We realised how fragile product supply chains can be in the era of the pandemic.  And as a result, we have seen the supply chain landscape changing before our very eyes.

So, yes, there are real problems in supply chains and no, the media weren’t exaggerating about those problems. 

The Ever Given wasn’t a wake-up call but the media attention is.  Supply chains need to be managed in a different light after all the disruptions enterprises have experienced. 

Where do we start? 

I recommend identifying what traits a supply chain should have:

  • They need to be proactive especially when it comes to demand.  Demand is a primary driver of supply chain flow and if it was already hard to predict what customers will buy, it was even more so during the pandemic and likely stay that way in the post-pandemic eras.  Supply chain professionals need to be at least one step ahead in anticipating, capturing, and cultivating demand in the planning and execution of customer fulfilment services. 
  • Many executives believe supply chains need to build in resilience.  Resilience is the ability to recover from difficulties—to spring back into shape after a shock.  I don’t fully agree.  Resilience implies that enterprises roll with the punches of disruptions, taking in hits and then healing afterward.  In my opinion, enterprise supply chains should learn to parry; they should build in resistance to whatever a bad disruption may bring.   Supply chains therefore should be versatile.  Enterprises shouldn’t just be ready to adapt or resist disruption; they should also be ready to initiate disruption.  And what does an enterprise need to manifest that?  Versatility
  • Supply chains must be productive.  Productive not as in efficient but as in performing effectively towards meeting and exceeding enterprise goals and strategies.  Supply chains are not generic.  Though they may share common standards such as service, cost, and quality, the extent of how each individual supply chain performs depends on the mission of the enterprise each works with. 
  • Supply chains need to be organised.  This is not just about having a structure that puts functions like purchasing, manufacturing, and logistics under one roof.  It’s also about having unified systems that connect and encourage vendors, enterprises, and customers to collaborate to a common cause.  
  • And last but not least, supply chains must be sustainable.  No, not the environment-friendly kind of sustainable but the type in which an enterprise can count on its supply chain for a perpetually reliable supply of resources, such as products, materials, components, energy, human resources, and/or working capital. 

Note that I didn’t mention digital as a needed trait.  As of now, I don’t see it is a needed trait despite what many may say.  Yes, it’s a whole new world and a whole new normal with e-commerce more dominant than ever and with technologies trending towards artificial intelligence, blockchains, and cryptocurrencies.  But as much as they will be hard to ignore in the near future, supply chains don’t need to be digital as a trait.  Supply chains would need to go digital as a means—a means towards being proactive with demand, versatile, productive, organised, and sustainable

About Overtimers Anonymous

The Importance of Making Available What We Promise

I ordered a box of latex gloves from a 3rd party seller on a popular e-commerce website.  The seller confirmed my order by email and after 24 hours, the order status on the website was that the box of gloves was being prepared for shipment.  One week later, the order status said it was at a “logistics facility.”  Two weeks later, the order status was the item was out of stock, the seller will be unable to ship, and my order was cancelled. 

I ordered a box of the very same brand of latex gloves from another seller and I received it within three (3) days.  I was annoyed I wasted two weeks waiting for the first one that never came.    

Shouldn’t sellers check first if they have stocks physically available on hand before they confirm a customer’s order?  Is it not common sense not to sell something one doesn’t have on hand?

Sounds like yes but in the real world, no.  Many enterprises sell items even if they don’t have them on stock.  They count on their operations teams to either produce or procure the items and have them available as promised by the time customer wants them. 

Available-to-promise (ATP) is an inherent element in supply chain management.  It is how much of an item an enterprise will have on inventory for customers to buy, adding in what supply is arriving and deducting what’s already reserved for other customers.

ATP = On Hand + Arriving Supply – Reserved for Pending Orders

Enterprise owners count on the ATP to communicate to customers as to how much and when items would be on stock for selling.  

For items that are make-to-stock, enterprises typically make sure they always have enough items on hand at any time for customers to buy.  Supply chain managers would set safety stocks to buffer for unexpected demand.

If, however, enterprises are selling expensive stuff like precious metals, are in the business of shipping thousands of items like automotive parts, or are marketing products with short shelf lives, managers would not keep too much on hand to avoid tying up capital in inventory.  Managers wouldn’t keep any safety stock and would rely on scheduled arrivals when committing ATP to customers. 

Customers expect enterprises to deliver their items on-time and complete as promised.  How well an enterprise keeps its promises is a criterion for success.     ATP is therefore important. It’s one thing both the customer and enterprise care about.  Delivering as promised ranks right up there with quality, cost, and service. 

Supply chain executives should strive for the following when it comes to planning ATP:

Never Zero, At Least Not Often

No one likes to be told an item is out of stock.  Mothers don’t like it when their favourite brand of diapers for their babies are not on the drugstore’s shelf.  They would buy another brand if they come back in a week and there’s still no stock. 

Short Lead Times

Customers will cancel their orders if a shop says the items they want won’t be ready for several days.  We humans have thresholds when it comes to patience.  We won’t wait too long.  Enterprises who can quickly churn products for customers gain competitive advantage. 

It Doesn’t Change at the Last Minute

Nothing is worse than breaking a promise.  Few things are as frustrating as when a shop tells us that there will be a delay in the item that was supposed to be delivered today.  It feels even more frustrating if we had already paid for the item.  Frustrated customers won’t be comforted with apologies or refunds.   Customer satisfaction comes when deliveries happen, not when they don’t. 

One Person in Charge

There should only be one person in charge of ATP.  Not the planner.  Not the logistics officer.  Nor the plant manager.  Not anyone else but the supply chain executive, the one who oversees all the operations for the fulfilment of customer orders. 

That means the delivery of items to the customers’ doorsteps, the making of the items, the marshalling of resources to make and deliver the items, and the shipping of the items.  In short, the enterprise’s supply chain. 

Enterprises, therefore, should have a chief supply chain officer who’d be in charge of making available what is promised.  

Having two or more persons handle supply chain operations or delegating the accountability of ATP to middle managers are common mistakes that lead to items that won’t be there as committed.  Having more than one person in charge of the fulfilment of customer demand just makes no sense. 

It’s like a kitchen with two chefs:  one is in charge of buying the ingredients, the other oversees the cooking.   Both men would be fighting each other in no time.  As the saying goes, “too many chefs spoil the soup.”

Keep It Simple

The more complicated an enterprise’s operations, the harder it is to keep promises. 

Thousands of items, multiple steps, shared production lines, and conflicting policies & targets are examples in which management becomes muddled as items weave through supply chain operations to get to customers. 

The advice is to keep it simple and use common sense.  Schedule milestones operation by operation to know how much can be committed at the end of the supply chain.  Deliver with smaller trucks or send single items through couriers.  Keep few stocks but set automatic re-order points for items that don’t move as much (e.g. spare parts).  Don’t keep stock of items that are make-to-order (e.g. tailored clothes). 

Nothing Wrong with Being Conservative

There’s nothing wrong with applying an allowance to an ATP.  If the schedule says an item will be ready in four (4) weeks, commit to five (5) when the customer asks.  Adding an extra week would allow for unforeseen events such as if a supplier falls short in delivering needed materials. 

No farmer can surely know how many fruits he will pick today. A fisherman wouldn’t know exactly how many fish he will catch tomorrow.  But experience will allow either to provide safe estimates.  The same is true for ATP.  We never really know exactly how much items will be available but we’d be more confident with conservative numbers, just as long as it doesn’t lead to over-padding or over-commitment. 

Enterprises and customers put a lot of weight in what is available to promise.  Customers rely on enterprises keeping their word.  Enterprises depend on their operations to have items ready when needed.

Enterprises should avoid promising nothing to make available and when they do, shouldn’t make last-minute changes.  There should be only person in charge and he or she should be the one who oversees the operations in making ATPs realities.  Planning ATPs should be as simple as possible and can be made with some conservatism.  We should not over-commit or pad too much. 

We make promises we can keep.  People value us for how we act based on our words.  It becomes not only a mark for success but also a way forward to mutually beneficial relationships.  

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