By Jim Tompkins, CEO, Tompkins Associates
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As I was preparing for this podcast, I was sitting in the Admiral's Club in the Heathrow airport. Fog had basically closed the airport and chaos reigned.
There were no available chairs. Business executives were sitting on the floor. There was a long line to get to the bar, and they ran out of clean glasses. I was supposed to get home the day before, but a computer went down in London airspace, and my flight was cancelled.
I had business meetings in six countries that week with my European partner - ROI - and my Asian partner - Technomic Asia. I had a to-do list that had forty items on it.
It was a Saturday, but nevertheless the club was overflowing with business travelers and a few families. I saw folks on their computers, on their cell phones, reading newspapers, reading books, watching TV, sleeping, eating, drinking, and a very few were talking.
It made me wonder in these crazy times how do people decide what to do with their Saturday afternoon? In fact, how did I decide? Of the items on my to-do list, how did I decide which task to do next? Was I working on the correct task? In fact, was there something more important for me to be doing that maybe was not even on my list?
What about you? Listening to the podcast right now, is that the right thing for you to be doing? How did you decide to do this task now?
As I reflected on my choice of what to do next, I found my present situation very much an illustration of an important business consideration that I would like to have you think about.
First, as I sat there, I was dealing with global opportunities of North America, Europe, and Asia. Second, my schedule had been significantly changed, and chaos was the order of the day. Third, I had way too much to do and not enough time to get it all done. Lastly, I had made a choice of what I should work on next, but it was not clear to me that I had made the correct choice.
How is this an illustration of an important business consideration? Think about it:
1. Global
2. Change was constant
3. Chaos was all around me
4. I did not have enough to time to get my work done
5. Identifying what was most important to work on was most important
Do you get it?
First, global: We fully covered the topic of globalization in Podcast #1 and the topic of the global supply chain in Podcast #2 in this series and it is very, very clear that the global supply chain is the make or break issue of this year and the next several years. Do the global supply chain right, and your company will prosper. Do it wrong, and you will be out of business.
Secondly, change is constant. Is this relevant today or what? I have never experienced the level of change we are going through today. Fanny, Freddie, Lehman Brothers, Bear Sterns, Merrill Lynch, AIG, valuation of the US dollar, fuel costs, slowing global economy, the whole credit market situation and more and more: an unprecedented rate of change that we all are living with.
Third, this level of change has resulted in chaos throughout the business world. A day does not go by where there is not another major chaotic event. We live in crazy, crazy times.
Fourth, our work loads. None of us can get done all we need to; at work, as well as at home. We all have twelve pounds of apples and a five pound sack. The pace of our life is so frantic, some days fly by so quickly that we never even get to the to-do list that we wrote the night before as we dropped into bed. This issue is so key I even wrote a book, Bold Leadership, in an effort to help people deal with all these apples.
And then lastly, with your limited available time, how do you decide what tasks you should be pursuing? I know we all should be working on the global supply chain, but on what aspect of your global supply chain?
I am 100 percent certain that if you have a great team that works on the wrong opportunities you will not get great results. You must have a great team work on the most important opportunities if you want to obtain great results.
Here's three general principles on identifying the correct opportunities, before I introduce my partner John Spain to give you some specific guidelines on identifying the correct global supply chain opportunities:
1. Be careful of people who want to continue to work on areas they have
always worked on.
As an example, I was at a company last week that really does a great job in their distribution center. The VP of distribution has been promoted to VP based on the great job he has done in the DC. Of course, there is always room for continuous improvement, but the remaining benefits are not significant and this VP needs to move outside of his comfort zone. Instead of working on projects inside the four walls, he needs to look outside of the four walls to really find significant benefits. So get outside of your comfort zone.
2. Pursuing opportunities because they are not performing according to budget is an inadequate reason to prioritize an opportunity. The budget may have not been set correctly, or the item over budget may highlight an area that is not the real opportunity, but rather a symptom of a totally different opportunity.
3. To assure the proper identification of the correct opportunities and therefore obtain the greatest benefits for the effort put forth, you need to pursue the methodical, holistic process that is tied to the global supply chain key performance indicators. These key performance indicators were identified in Podcast #2 of this series as:
a. Total Delivered Cost
b. Cash-to-Cash Cycle
c. Customer Satisfaction
d. Agility
e. Resilience
Okay, let me now introduce to the podcast audience my partner for more than 30 years and a veteran of several hundred supply chain assessments, John Spain.
John, welcome. John, I know you strongly believe in the buy-make-move-store-sell model of the global supply chain that I presented in the second podcast of this series. The process you have developed for supply chain assessments includes these topics, but also has several other components to help companies identify the correct global supply chain opportunities to pursue.
Tell us a little about the structure of your assessment process organization.
John Spain:
Thank you, Jim. It's good to be here today to talk about the supply chain and how to improve it. We do get a lot of clients asking the questions:
What should I be doing with my supply chain?
What are the most important things to do?
How should I get started?
And what should I do first?There is a real need to answer the question: "Where is the best place to spend our time and energy on the supply chain?"
From my experience, the best way to answer these questions is to start with a comprehensive assessment of your supply chain to find out exactly where you are. Then, by benchmarking your supply chain against others, you can find the gaps in performance and identify where you need improvement.
As you know, at Tompkins, we have developed a comprehensive methodology to do just that - assess supply chain operations, identify opportunities and map out a path forward. We call this methodology "Global Supply Chain Assessment Tompkins" or G-SCAT for short.
With G-SCAT, we capture key supply chain metrics, benchmarks, processes and best practices, as well as overall issues, such as strategy, organization, and technologies.
Then, by comparing the information from the assessment to recognized industry benchmarks and best practices, we can identify improvement initiatives that help us focus the supply chain transformation efforts in the best areas. So we begin many of our client engagements with a "Global Supply Chain Assessment."
Jim, as you said, G-SCAT does cover the supply chain model of buy-make-move-store-sell. But it also covers overall topics of strategy, planning, information technology, threat and security. If we look at how G-SCAT is organized:
Buy --
Sourcing and supplier management
Trade management -- trade agreements and customs
Product development and product life cycleMake --
Production/operations - manufacturingMove --
Transportation -- international and domestic and inside sourcing countryStore --
Distribution operations
Inventory managementSell --
Customer serviceWe also cover overall supply chain topics:
- Supply strategy/planning
- Supply chain organization -- often these focus on functions, processes and metrics, and overlook the people aspect; organization may need to change too
- Planning and forecasting
- Information technology -- infrastructure and planning and execution systems
- Threat, security and risk management
- Performance management -- metrics and performance reporting
- Cash to cash cycle
For each of these areas, we have organized the assessment into process, people, technology and metrics. We are mapping performance with metrics and benchmarks, but we are also mapping processes against best practices.
Jim:
Once you collect all the information, how do you decide which opportunities are the right ones to pursue?
John Spain:
Once we gather the data, we compare it to industry best practices and benchmarks to identify the gaps that need to be closed. These gaps are the opportunities for improvement.
For each of these opportunities, we identify the potential savings, resources required to implement (capital, systems, and people), ease of implementation and the readiness of the company.
Based on this information, we prioritize the opportunities and develop a plan of attack that will maximize the contributions to the bottom line. Obviously, we want to focus on what provides the biggest bang for our buck. So we start with initiatives that are relatively easy and quick to implement, but have a significant positive impact on the bottom line. Those that are more difficult to implement and that don't have a significant return are left for later, if at all.
Jim:
How often are the opportunities identified for pursuit the same ones management thought were the correct opportunities to pursue?
John Spain:
Typically, management has already identified problems that do need to be addressed; however, we find that well over half the time when we do an assessment, there are a lot more opportunities for improvement than has been identified to date. And very frequently the problems they are working on are not the best ones to tackle first. What is really needed is a comprehensive plan of attack to go after total supply chain transformation. That is what the supply chain assessment will do. It not only tells you where you are but it also lays out a road map to get to where you want to be and how to get there in the most effective manner.
Jim:
How many people are typically involved with a global supply chain assessment, and how long does it take?
John Spain:
It depends on the firm and the complexity of their supply chain, but it is typically not a long process to assess a supply chain. For a simple supply chain, in a small-to-medium sized company, it can be done in two to four weeks by three to four people. For a large, complex supply chain, it could take three to five months and involve five to ten people. Not all of these people would be involved for the whole time, because a lot of them are subject matter experts that will concentrate on only one area or aspect of the supply chain.
Jim:
What would be your advice to someone who is just getting started on defining the correct global supply chain opportunities to pursue?
John Spain:
There are three things that I would tell someone getting started:
First, don't skip the assessment or cut it short. If you do, you could be working very efficiently, but not effectively, because you could be working on issues that are not the most critical ones. You really need to focus on what is most important. Without an assessment, you may not be doing that.
Secondly, benchmark what you are doing against others. This will give you a frame of reference and help you understand what others find important and help you to decide what is important to your supply chain.
Third, learn and listen as much as you can. Listen to your own people, as they often have very good ideas; and listen to other companies to learn what is going on in the supply chain world. The more we know, the better prepared we are to lead the supply chain transformation.
Jim:
Thank you very much, John. A great start for folks beginning to pursue global supply chain opportunity prioritization.
This concludes podcast #4 in this globalization series. In two weeks, we will release podcast #5, where I interview an expert on the other portion of doing supply chain assessments: benchmarking and best practices.
Glad you were with John and I today, we look forward to speaking with you again real soon.
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