@ Supply Chain Management

Abcoautomation has a post up on How Supply Chain Optimization can help you beat your competition. Except that, the sort of optimization that is referred to there is not Optimization. I suppose that I have to start making a distinction between Big “O” optimization and small “o” optimization. However, that is a topic for another day. The topic for today however is two fold – Ernst Haeckel and the effect of Dr. Haeckel’s pithy summation on almost every and anything that we engage in. In very broad and general terms.

Ernst Haeckel, for those of us who are not likely to be avid readers, was a contemporary of Darwin (Yeah, that Darwin) championed a notion in evolutionary theory that can be summed up as, “Ontogeny recapitulates Phylogeny.” I assure you that you’re perfectly within your rights as a blog reader to switch to another page right now. It’s about to get a lot worse.

The following is the clarification of the terms: Ontogeny – the development of the form of the creature and Phylogeny – the location of the creature in the general scheme of evolutionary descent. Dr. Haeckel proposed (hypothetical creatures, drawings etc al), that Ontogeny recapitulates Phylogeny, which is to say that creatures in development exhibit developmental characteristics associated with creatures situated earlier in its evolutionary descent. This was quite an assertion which however in time turned out to be entirely wrong.

The surprising thing is that while “Ontogeny recapitulates Phylogeny” has little support in the natural world, something quite akin to it can be readily observed in the world of intellectual ideas and their application.

Here’s the content from the above story:

I heard a story one time about a Vice President of Distribution for a very well-known health and beauty aid manufacturer who gave this talk about when he took over as VP.  He asked what is the cash to cash cycle line for a particular brand of shampoo?

What is the time from the point where we spend money on boxes bottles or whatever you need for the shampoo and the manufacturing process to the time you get the money back from Wal-Mart (their end customer). Guess how long that process was?

Really, write it down and make a commitment you might be surprised at the answer. Well despite the fact that I’m not Vanna White, here is the answer. 47 weeks, 47 weeks of time. From the time that they bought bottles of goop, and paint and to the time they got their money back from Wal-Mart.

Now the next question he asked was this of those 47 weeks how much time do you really take to add the value process?

That is to make the product. Surprise again. 90 minutes. So out of the 47 weeks of time they only spent 90 minutes actually producing the product, and the final question how much of the corporate attention was on the 90 minutes?

The Supply Chain as an idea or the very recognition of the idea of a supply chain occurs quite later in the development of the capitalistic economy. So, quite akin to Dr. Haeckel’s formulation, this is a prime exhibit of later forms of organization and complexity recapitulating similar variances of thoughts and problems that were exhibited in earlier forms of organization. So while “Ontogeny recapitulates Phylogeny” was the mantra of an age past, I offer that “Novel forms of organization repeat the same problems exhibited in earlier developmental eras.” Or in other words, “Ontology recapitulates teleological gaps”.

Ontology has to do with the “that which is” and in this case would be the idea of the supply chain or manufacturing or putting things together. Teleology is about the purpose or end driven action that one undertakes day in and day out. So all that the statement above is referring to is the gaps in purpose that often exist in the recapitulation of newer ontologies.

This is precisely what prompted this long winding post – You see in the article above from abcoautomation, there is the suggestion that 47 weeks of lead time can be improved such that the non-value added proportion of this lead time can be reduced. However, that can only be done to a certain point i.e. as far as there is slack capacity to drive down the lead time. However, is there really slack capacity?

My simple point is this – these are problems that has been discovered and addressed in manufacturing – sometime well and sometimes not so well. The supply chain as a newer ontology (vis a vis Manufacturing) seems to recapitulate the same gaps in purpose.

Avoiding this recapitulation and the associated costs of this recapitulation is the only free lunch available – the question is whether you even realize the free lunch offer.

This is an interview with Pierre Haren, CEO of ILOG prior to its acquisition by IBM on what decision management is and how it came to be used in various situations. A look back (and forward) at 20 years of Decision Management.

This is also my particular field of expertise and Pierre alludes to the case of the product that I work with gaining acceptance in IBM’s wafer fabrication facility in East Fishkill, NY.

We had a great moment when we were able to successfully deploy a complex mix of ILOG and IBM tools at IBM Fishkill, in what was considered the most modern and fastest changing semi-conductor plant in the world. At that time, before our acquisition by IBM, IBM was a reluctant customer. I visited the head of the plant and promised that we would install the complete system for free. He would only pay if he kept the system in operation for more than a month.

Understandably, he was skeptical that a small decision management company could improve on the work of hundreds of excellent engineers who continuously tuned the $4B plant. We deployed a system which every five minutes re-computes the optimal plan for the whole plant for the next eight hours. It combines real-time data from the MES system to rules-based processes, an optimization-based scheduler, and advanced graphics to enable the plant operators to "see the current future" for the next eight hours.

The first day’s objective was low: do no harm. Within a month, all the operators where convinced and we were paid. More important, we changed forever the balance of what computers do and what operators do in that plant.

What’s important about this confluence of components i.e. Rules Management, Optimization using CPLEX and Visualization as it used in that fab (and since then in other fabs in the world) is how such a system can be used for execution. Not planning, Not strategy. But execution on a near real time basis – that means that actual tools on the fab floor act on the recommendations produced by the decision management system which in turn sees the action of the tools and then uses that as an input in further decisions. When operators and managers assert manual control in the operation of the tools or fab in general, the system accepts that and continues without issue. So the system takes into account the dynamic nature of the fab, recomputes and proceeds. I’ve blogged about this system : FabPowerOps in earlier blog postings – take a look.

Now I’m hoping to take this to the next level, deploying a federated system of such applications that not only interact with the fab floor as well as human operators, engineers and managers but with other apps taking their inputs and working on that.

Great stuff, I assure you!!

Happy New Year to all of you…

Start designing you life is an article by Tim Brown, CEO of IDEO which is an interesting way to start off the year. I’m a great believer and user of mind mapping tools

– As a way of brainstorming

– Documentation and sharing

The tools that I tend to use are also free and open source, Freemind and Freeplane (which is a fork of the former). There are a lot more cloud based mind mappers too these days.

Here’s my parting thought for 2012.

Here’s how I’ve been doing it for the last 6 years – yeah, it’s been six years on this blog. It’s been a lot of ups and downs but the less and less time that I’ve had this past year has made a big dent. So I want to shake things up a little. So here’s my pitch – Bring me your problems, your supply chain problems. Put them up here or if you’d like, email them to me (ajsirch@yahoo.com with “@scm” somewhere in the subject header )and with your prior approval, I’ll post them here (minus company/personal identification if you’d prefer that) and let’s get some ideas sprouting. Or if you have a better idea, put it in the comments section.

What do you think?

Have a  blessed remnant of the year and of course a rip roaring year ahead!!!

For the last four months, I’ve been part of a tough project – tough on multiple dimensions, beset by every sort of calamity that one can dream up (every day was an example of Murphy’s law in action). That’s a nice way of saying – don’t give me grief on a lack of updates for that reason. Well, not really -  blogging is therapeutic mostly.

But the point of this post is not to really go into the inanities of a project – it’s to place on the table the only free lunch in the world. So take from it what you will… Here’s what I learnt.

1. An unhappy client is not your fault, not the project’s fault.

Bang!! Front and center. Chances are that an unhappy client was unhappy long before you ever got there. In fact, unhappiness (both micro and macro) takes constant effort. It takes a whole lot of time and energy to be and remain unhappy. I’m not talking about the depressives or the manic-depressives but that class of people and organizations that are intent on getting there. An unhappy client is symptomatic of an unhappy culture or sub-culture of the firm and deeply unhappy ones are caught in a vortex – there is very little that one can do be it in through the project or as an individual to break the vortex. No measure of competency, delivery or solution can ever break the vortex – it has a life of its own. Like a demon. Such vortices don’t have technological solutions, project solutions or in some cases managerial solutions.

In nature, vortices dissipate because they encounter an environment capacitated to absorb the energy of the vortex. Vortices of sub-cultures ought to be dissipated by the larger culture of the firm. A vortex of culture within the firm cannot be dissipated inside the firm – these firms are dangerous to every thing around them and themselves. It is dissipated by the industry through the process of competition. And so on… Only competition, I believe, can break the vortex and this gets tricky at the team level but I see no other way to break the cycle. It’s something similar to what you might see on the Dog Whisperer where the energy of the pack is channeled into calming the dog that is freaking out.

2. Optimization is a mistake.

I love optimization. To me, it represents a curious blending of the platonic mathematical world and the real world – the world of the idea of the numeric colliding into the real where nothing of the sort exists. However, optimization (as is often sold to the business world) is first and foremost a terrible mistake. In a subset of these mistakes that businesses and firms make, it is the most important mistake that you need to make. Not in the sense that now that the firm has made it, walk away. No, once you’ve made the mistake of optimization, you’re ready to make the leap to the higher world of bigger mistakes. Such mistakes subside as you learn how to wield it properly.

However, most firms cannot deal with optimization. They (and by they I mean the people in the firm) are not able to deal with the intersection of the math and the real. They’re very content with their take on the real or other iterations on the real no matter how they’re being placed at a competitive disadvantage by those firms that not only invest in mastering optimization as a discipline but also as a way of approaching the business problem. Iterations on the real are reconceived processes, new technologies and the like. So most firms that take on the mistake of optimization treat it as a black box that keeps chugging away in the background telling them the “optimal” way to do things which passes through a gut-check filter and so it goes on… This is like buying a katana and using it for chopping vegetables.

Part of the issue with optimization is while there is an active movement to make supply chain a “C” level responsibility or at least have it on their radar – optimization (like statistics) is a nice to have. While the supply chain is an integrative activity of processes both inside and outside the firm, optimization is a quant backed way of executing the business (pun intended).

3. Plan – Do – Check – Act (PDCA)

While PDCA is quite important as far as continuous improvement goes and this simple concept underlies most of the continuous improvement methodologies out there, it has some relevance to the world of project delivery. For me, there has always been a question of which task do you start with: Is it Plan? Is it Check? or Does it even matter where you start? I now think that the right step to start with as far as project delivery / consulting projects go is to start with Check. The simple reason for that is that when you’re an external consultant, you’re essentially going by what you’re told. Often times, I find that there is a delta between what the client knows and what is actually present. The Check step is best visualized and not tabulated/reported. And its better to make it real-time in some way. Some people refer to this as analytics and that in my opinion is where any such project ought to start because it gives visibility of the changes that are going to happen or happening in execution. This has the added benefit of putting the client in the driver’s seat as you work on the engine while in motion.

Ladies and Gentlemen, I give you evidence #1 that it is well nigh impossible to eat your free lunch. Now, I’m of the opinion that there is only 1 free lunch in the world : “Learning from the mistakes of others.” But just because there is such a free lunch, please don’t assume that you can even eat it.

Why did we outsource/offshore everything to China? Labor cost? Heck, the chinese think that the true cost of labor is still too expensive. By true cost, I mean not just the hourly pay. From the article: Robots lift China’s factories to new heights,

From car plants to microchip foundries, China’s industrial sector increasingly runs by machine.

According to Nomura, 28 percent of factory machines in China use numerical controls – one measure of automation. That may be far lower than Japan’s 83 percent, but China is growing far faster than Japan did at a comparable stage of development, says Ge Wenjie, a machinery analyst with Nomura.

The supposed reason is quite stunning as well,

"You don’t have to be an expert see the (quality) gap between Chinese cars and those made by companies like Audi and Volkswagen," said Li Shaohui, who oversees automatic control engineering for the company. "To beat those competitors we have no choice but to use a higher level of equipment and technology."

But you do sir, you do have to be an expert to know that the quality gap is not just the lack of high tech robots.

However, the whole game of international trade is coming full circle now – stunning in the sense that it took only about 15 odd years to rapidly industrialize (the benefit of the free lunch) to start feeling the need for advanced machinery and consultants from developed nations.

However, the lingering question is going to be whether they will just buy the robot because of its supposed supra-human like qualities or pause to chew on the mistakes of their forebears when they went the route of the robotic revolution.

Process, People, Process – Robots should go to management and join the other robots there…

Continuing from my first post: Predictions from Supply Chain Gurus – Part 1, I want to take a look at two predictions for 2012 by two noted Supply Chain gurus namely Bob Ferrari and Steve Gold.

First up, Bob Ferrari’s prediction

"The concept for “supply chain control tower’ coupled with more leveraged use of predictive analytics will come to the forefront, but in 2012 there will be a need for vendors and consultants to focus on market education and early adoption support," Ferrari says.

Read all of Bob Ferrari’s predictions here: 2012 Supply Chain Predictions : Is the End of the World nigh?

Second, Steve Gold’s prediction

Gold predicts continued inflation in raw materials and other input costs in 2012 (not all agree with him there, given slowing global growth), but regardless, more interesting is what he says companies must do about it.

Gold says hedging and demand aggregation strategies should be part of the approach that companies take, but that they must also to look at reducing those costs not by focusing on the price or rates they pay, but instead or additionally by "Trying to find a way of redesigning products or working with suppliers collaboratively to consume less" – which he says requires a new way of thinking and acting.

About the above predictions, they’re rather safe predictions – what I’d like to call, trend based predictions. We all know about Big Data and the impact that it’s going to have on every business. However, not all is so clear cut with this predictive analysis stuff – nothing new other than access (and the consequent ability) to a whole lot more information is happening right now. It’s like the old optimist child joke – when she saw a pile of horse manure, instantly jumped in saying that there must be a pony in here somewhere.

Gold’s predictions is also predicated on the widespread feeling that inflation (even hyper inflation) is about to break loose. However, the US Central Bank is operating under the assumption and expectation that inflation is muted. Compare that to my empirical observation from my grocery shopping that inflation is ~ 9-10% on the grocery budget. Of course, if you added say Hard Disk drives to that basket, it might average out things a bit but I’m not in the habit of eating bits and bytes for breakfast.

While commodity prices have been increasing in the past – let’s hypothesize that this is because of easy credit, the spectre of another recession has put the brakes on expected demand and this has consequently led to a fall in prices in the current. If the central banks of the world coordinate another round of easy credit, then we’d switch back to the former situation of increasing commodity prices. This is not looking like inflation or hyperinflation but stagflation. Furthermore, it suggests that stagflation is nothing more than ignorance-flation in the sense that no one really knows what to do and nothing seems to be working out.

More to come…