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Overseas expansion by Chinese corporates with ambitions to become multinational enterprises is fueling a wave of overseas investment in joint ventures, equity investments and mergers and acquisitions. For example, China’s largest oil refiner, the Sinopec Group, is taking a 30% stake for $3.5 billion in the Brazilian unit of the Portuguese oil company Galp Energia SA. This is likely to be just the leading edge of the coming wave.

On the sovereign side of things, China is now pulling together a $300 billion dollar sovereign wealth fund. Apparently Beijing is less than enthusiastic about continuing large scale investments in European and US government bonds and figures that real assets in agriculture, energy and green technology are much better than broken promises from goverments around fiscal consolidation. Reuters news agency has reported that the People’s Bank of China plans to create a new vehicle with two funds, one for Europe and one for the United States. This will make China the largest sovereign wealth fund investor in the world.

Until next time…..

In effect it is a personalized supply chain news and information service. It offers the latest news and information for your interests from thousands of newspapers, magazines, and websites.

iChainnel is run by my good buddy Bill Huang of Global SCM in Shanghai. Hope you like it.

 Until next time…..

Everyone seems to have an opinion on how to enter and succeed in the vast China market. We’ve pooled our best practices and intellectual property to provide a global, pragmatic view of successful practices to efficiently and effectively establish a profitable presence.

China is now a 6 trillion dollar economy and has been growing at an average rate of 9% for the last thirty years. It is home to the second largest middle class on Earth after the US and the Chinese Post-’80s generating are expected to be the greatest spenders ever seen. Whether you import, export or do neither you cannot afford to ignore the impact that China is having on the world economy and by extension on your business.

The contributors to this position paper are:

• Michelle Randall, President, Enriching Leadership International, San Jose, CA, USA www.enrichingleadership.com
• Kelli Richards, President & CEO, The All Access Group, Cupertino, CA, USA www.allaccessgroup.com
• Tom Verghese, President, Cultural Synergies, Melbourne VIC, Australia www.culturalsynergies.com

Editing was by Alan Weiss, PhD, President of Summit Consulting Group, Inc. from Providence, RI, USA

You can download the position paper here China Business

 Until next time……

Richard Rumelt, who has been dubbed “Strategy’s Strategist” by the McKinsey Quarterly describes strategy as a process with three distinct but essential components – first there is a diagnosis of the business situation, followed by the development of a guiding policy which leads ultimately to cohesive action in pursuit of a specific outcome which, after all, is the real point of the whole exercise.

If we consider that the first stage – diagnosis – is an interpretation of the facts of the situation to allow us to make sense of that situation and devise focused action to improve our business, then it seems to me that this is a great time for all businesses to take a look at what is really happening in the wider world as the processes of globalization continue to unfold at pace.

Your interpretation of what these changes mean for your business will enable you to consider how your response can change your policies and actions so that your business can grow and thrive in 2012.

 First here are some of the facts:

• Most developed economies face several years of austerity and low growth meaning that home-driven growth, or growth from traditional export markets in other developed economies will be hard to come by in most sectors.
• China has been growing at over 9% per year for over 30 years. 400 million people in China have moved out of poverty in that time. Twenty of the fastest growing cities in the world are all in China.
• There are 1 million millionaire households in China.
• With the inability of the traditional western consumer engine to drive the world economy, China and other emerging economies will need to develop internal consumer markets to compensate for the loss in export growth. Consumption still accounts for only 36% of the Chinese economy as compared to 70% in US.
• The greatest generation of spenders ever known is expected to be the post-‘80s generation of Chinese now in their 20s and 30s.
• Almost 100% of global growth is now coming from emerging markets. This is not just the BRIC countries but also other rising stars such as Turkey which had 9% growth in 2010, Indonesia 6%, Argentina 9%, Colombia 4%, Chile 5%, Vietnam 7%, Philippines 7% and there are many others.
• More Indians have moved out of poverty in the last ten years than in the preceding 50 years. By 2050, India’s per capita income is projected to be 20 times the current level. The Indian middle class in now made up of 300 million people.
• Trade and capital flows between emerging economies in projected to grow tenfold in the next 40 years.  
• In 1990 the total value of global trade was $22 trillion – in 2010 it was $62 trillion.

No doubt, developing economies still have many challenges to overcome and it is imprudent to extrapolate current tends into an unpredictable future. Nonetheless, the processes that are currently at play have already changed things far beyond the model of the world that most business leaders are still operating to. This change, often lazily referred to as “Globalization”, is driven by technological change, demographic change and sociological change and is being accelerated by the debt crisis and the Great Recession. These are long term trends that are difficult to interrupt. This is happening now!

No matter what business you are in, whether you trade internationally or not, your business will be impacted by this reality. As a business owner or controller it is your job to interpret how your policies will adapt and what you plan to do in response.

Should you begin to source overseas or in new markets, should you begin to export or export to new markets, should you change product and service offerings for these markets, what supply chain solutions and capabilities will need to be put in place, what new skills will be required, what are the financial implications – there are many questions to be answered.  

Most business strategy is not strategy at all but rather a collection of wish lists, conflicting goals and uncoordinated action items many of which work at cross purposes with each other.  Focused, coordinated action in pursuit of well-formed business outcomes requires strong leadership and single-minded determination from business leaders.

What are you going to do in 2012 to ensure that your business thrives in the face of these globalizing trends?

Until next time……

Patrick Daly

Alba Consulting

Alan Weiss PhD, SGN founder explains, “We consider innovation to be “applied creativity.” That is, innovation is never for its own sake, but rather for the advancement of the organization’s competitive position and performance. This position paper is a global view of what that means.”

The contributors to this position paper were:

• Phil Symchych, President of Symcho & Co. from Regina, SK, Canada www.symchoandco.com
• Suart Cross, President of Morgan Cross Consulting, Newark, UK www.morgancross.co.uk
• Seth Kahan, President of Visionary Leadership, Bethesda, MD, USA www.visionaryleadership.com

Editing was by Alan Weiss, PhD, President of Summit Consulting Group, Inc. from Providence, RI, USA

You can download the position paper here Innovation

Warehousing is one of the key capabilities required to build logistics excellence in manufacturing and distribution alike.

It is often neglected or overlooked but when you think that the warehouse is the last place you have the chance to “get it right” before your internal or external customer receives your product or material.

When you look at it this way, you can see the value of translating your strategy to practical objectives and plans that people can actually work with and measuring these effectively to ensure that you are progressing in the desired direction.

In this podcast Patrick Daly discusses the relationship between business strategy and warehousing capability.  You can listen here Warehousing and Strategy

Strategy is a much abused term, so we thought we’d collect the best thinking of some of our global companies based on their clients’ experiences and successes.

The contributors to this position paper were:

• Phil Symchych, President of Symcho & Co. from Regina, SK, Canada www.symchoandco.com
• Patrick Daly, Managing Director of Alba Consulting from Dublin, Ireland www.albalogistics.com
• Jennifer Smokevitch, President of Roundtable Consulting from Sydney, NSW, Australia www.roundtableconsulting.com

Editing was by Alan Weiss, PhD, President of Summit Consulting Group, Inc. from Providence, RI, USA

You can download the position paper here Strategy

Here is the podcast description:

Patrick Daly, the international logistics consultant, provides insights, techniques and resources to accompany you on the road to supply chain excellence and accelerated growth. Patrick’s mission in producing this series is to help you focus in every moment on what you can do positively to achieve the business outcomes and results that you desire.

The series is entitled “Daly Thoughts” and you can listen, download, and subscribe for free.

Here is the link  http://itunes.apple.com/ie/podcast/podcast-series-daly-thoughts/id481661960

Hope you like it.

Any combination of  two of these atttributes without the third will lead  to suboptimal organizational effectiveness.

• Competence and Leadership without Awareness = Poorly Defined and/or Communicated Strategy – unclear goals and objectives
• Awareness and Leadership without Competence = Skills Deficit – we don’t know how
• Awareness and Competence without Leadership = Leadership Deficit – no urgency/no ownership

It can be a very powerful and valuable exercise to take the A-C-L process visual above and ask yourself and your colleagues where am I/are we, my/our department, division or business situated on this A-C-L map and then write down and discuss some of the reasons for your answers.

I find that an awful lot can be learned from these conversations that then become very powerful catalysts and energizers for what ought to happen next in terms of priorities within the business.

How do we differentiate between processes that are strategically critical and those that are not? What if dealing with these critical processes means tackling difficult issues? What if we can only see part of the bigger picture? To listen to Patrick Daly explain how to move forward rapidly at the operational level in the face of these challenges, listen to the podcast here Doing the Right Thing and the Right Time

The role of an external consultant is not just to provide expertise in a particular area of specialisation, but rather to help the client to reframe, clarify and prioritize these challenges through incisive questions and provocative insights.

This helps both the client and the consultant to focus on those outcomes that are going to maximize the improvement in the client’s condition which is the whole point of the engagement.

Achieving a common view on how the client is going to be better off as a result of the consultant’s involvement energizes the process of prioritization and infuses the organization with a sense of urgency.

To listen to Patrick Daly explain how he works with his best clients to do just that , click here Prioritize to Thrive

One common theme in global supply chain management is the absolute requirement to drastically improve inter-organizational relationships.

The old arms-length adversarial relationships between supply chain partners cannot meet the challenges posed by international supply chain management. Let’s look at the three forms that these new relationships are taking today. One is straightforward collaboration. The second is the strategic partnership. The third is the risk-sharing relationship.

Straightforward collaboration is where we have organizations that come together on an ad hoc basis to achieve a specific goal that they could not achieve in isolation. We see good examples of this in the automotive, design, fashion, and filmmaking industries where groups of independent specialists work together to achieve a common outcome.

The next level up is strategic partnership and this is where one company possesses assets, knowledge, or capabilities of strategic importance to another company. They form a long-term cooperation sharing sensitive information and carrying out joint forward planning. Companies like Toyota have long-term stable relationships like this with their component suppliers.

The next level up is risk sharing and in this type of collaboration supply chain partners actually share financial risk. One good example of this is the Spanish company ITP which works in collaboration with Rolls-Royce engines and ITP take a 10% share of both the costs and the revenue stream of the sales of Rolls-Royce Trent engines which contains ITP’s low pressure compressor.

The move away from traditional inter-organizational relationships to these newer models is a real challenge. Some organizations combine these arrangements with different supply chain partners depending on the strategic value of the relationship. Those who can do this most effectively will be the winners in the global economy of the future.

The three biggest failures in supply chain strategy within organizations that I perceive are:

1. The failure to recognise supply chain management as a source of competitive advantage and the consequent absence of a coherent strategy.
2. The failure to translate supply chain strategy into actionable plans at the business unit, departmental and individual level.
3. The failure to coordinate, measure and communicate outcomes and results holistically during implementation and day-to-day operation.

This short podcast discusses these failings and challenges you to reflect on your own organization’s supply chain strategy.

Listen to podcast  The 3 Biggest failures in Supply Chain Strategy

“It seems to me that perfection of means and confusion of goals seems to characterize our age”

Ralph Emerson

Strong business capabilities bring consistency and enable a business to walk the talk of its customer service promise. They are the bedrock of reliability, credibility and reputation.

I find the greatest obstacle in my clients’ businesses to achieving top class capabilities is that the different functions, managers and associates involved often act at cross purposes with each other.

It is not that people wish for this to be the case but rather it is the way they are organizationally aligned and the way they are measured and evaluated that guarantees that they will act this way despite themselves.

At a tactical level, business functions left unchallenged will have conflicting goals and objectives by default. By way of example, think of the various functions that make up the logistics capability of a business and the different objectives of the stakeholders in transport, inventory, warehousing and supply management.

Wasted Efforts

“There is nothing sadder in the world than the waste of human potential”   

Diane Frolov

In a recent client assignment in manufacturing I encountered the following:

The on site warehouse holding the  inventories of raw materials reported through manufacturing, procurement which negotiated the supplier contracts reported through finance and inventory management reported through supply chain.

Procurement endeavoured to find low unit cost supplies with volume discounts, Inventory Management strived to increase turns and reduce lead times and the Warehouse Manager tried to achieve efficiency in the use of space, time and labour to provide service to production lines.

Improvement efforts initiated by one of the areas in isolation inevitably encountered resistance from the others. The result of this kind of thing, in the best case, is wasted effort, frustration and confusion and in the worst can be much more serious than that indeed.

Sound familiar?  

Ok, so how do we rise above this futile enterprise?

Rising Above the Confusion

“The significant problems we face cannot be solved at the same level of thinking we were at when we created them”

Albert Einstein

This is one of those situations where the solution, being common sense, is so obvious that it is frequently overlooked. We know this because the aforementioned situation is ubiquitous in organizations. Therefore, while what we are talking about IS common sense it certainly IS NOT common practice.

When you set goals or establish performance metrics at a tactical level within your department or function without reference to the wider goals and objectives of the business and your colleagues in other departments do the same thing the chances of your ending up at loggerheads are very high indeed.

This happens when the strategic goals haven’t been translated into practical, executable and measurable objectives at the tactical and individual level.

If you find yourself at cross purposes with your peers you will have to appeal to somebody who can actually do something about it, somebody with the authority to control reward and consequences, indeed somebody with the fiduciary responsibility to act.

If on the other hand you ARE the person with this fiduciary responsibility and your reports are at cross purposes with one another then you had better take a look in the mirror.

It’s the implementation Trap

“Firmness of purpose is one of the most necessary sinews of character, and one of the best instruments of success. Without it genius wastes its efforts in a maze of inconsistencies”  

Philip Dormer Stanhope

Alan Weiss the renowned strategy expert states in his book Process Consulting that strategies never fail in the formulation but rather in the execution. Weiss goes on to explain that this is because the strategy is not translated into operational objectives, individual objectives are not aligned, accountability is not thrust down to the front line and progress is not assessed against established metrics.

Why is this so?

In my experience, it is not about a lack of knowledge, expertise or experience, nor is it about applying the latest management fad, methodology, or technology but rather it is an issue of volition, resolve and true grit – that is, the simple determination to get things done and to hold self and others accountable no matter what.

This is the essence of the entrepreneurial spirit.  In our organizations this entrepreneurial spirit can so easily be swamped by agendas of internal politics, empire building and personal rivalries. The result is a lack of ownership, an absence of visible leadership and poor communication.

This is, without doubt, the most common organisational disease of our time. If your organization is not infected, I congratulate you. If it is, please ask yourself “what can I do today to begin to cure my organization?”

• August 22, 2011

  For Immediate Release
  Details:
  Alan Weiss, PhD
  401/884-2778
  alan@summitconsulting.com
  http://www.summitglobalnetwork.com

  New Global Consulting Group Provides Dramatic and Diverse Capabilities

  A new network of outstanding global consulting practices, Summit Global Network™ (SGN), is providing outstanding results to hundreds of clients in dozens of countries. Founder Alan Weiss, PhD notes, “We’ve formed a coalition of longstanding, highly respected consulting firms with offices in over a dozen countries to bring the best practices of the entire body to bear on the individual client needs of any one member.”

  Qualifications for membership include work with outstanding organizations willing to provide testimonials and endorsements; unique intellectual property and thought leadership; global applicability of approaches; and innovative, growth-oriented strategies. The average tenure of the 22 member firms is 18.5 years in business; over 90 books have been written by the principals and published; over 1,500 clients have been helped, including a range from Fortune 25 to small businesses, governmental agencies, and nonprofits.

  Members include:
  ACM Consulting, Inc. Canada
  Alba Consulting Ireland
  Ascendant Consulting US
  Aviv Consulting U S
  Beavis Consulting Group Australia
  Brighton Leadership Group US
  Cultural Synergies Australia
  Engage Selling Solutions Canada
  Enriching Leadership Int’l US, China, Germany
  Evidence Based Management UK
  Libby Wagner & Associates US
  M.B. Brandt Associates China
  Morgan Cross Consulting UK
  Opus Performance UK
  Purcell Enerprises Canada
  Roundtable Consulting Australia
  Sensei International US, UK, Bangladesh, Dubai, Singapore, Sri Lanka, Pakistan, Australia
  Symco & Co. Canada
  The All Access Group US
  The Chad Barr Group US
  Visionary Leadership US
  Wintrip Consulting Group US

  The group’s capabilities include strategy, leadership, communications, change management, ethics, safety, cultural change, performance improvement, sales, marketing, organizational development, restructuring, mergers and acquisitions, training, finance, technology, psychology and counseling, coaching, accounting, and international business expansion, among other skills.

  The network comprises scores of PhDs, MBAs, and university guest lecturers.

  Awards include:
  - Consulting Magazine Top 25 Consultants in the World
  - Excellence Magazine Top 30 Leadership Development Firms Globally
  - Young President’s Organization “All Star” (highest honor)
  - Lifetime Achievement Award, American Press Association
  - National Speakers Association Hall of Fame
  - Fellow of the Institute of Management Consultants
  - Best Book Award winner.
  - Board of Governors, Grammy Awards.
  - Mentor Hall of Fame.
  - Web Marketing Association Web Award.

  “We believe we’re the only global, growing network of its kind,” says Weiss, “representing the best of consulting expertise gathered from pragmatic work with some of the largest and best organizations in the world in all economies.”

  Links to all members and their specialties can be found at http://www.summitglobalnetwork.com

  End End End

NK: What are the real benefits of having a fleet management system in place for today’s logistics providers? Are there any disadvantages?

PD: The business outcomes that can be supported by means of an effectively implemented fleet management system include those of service enhancement, productivity improvement and compliance with official and industry regulations.

The outcomes related to service, responsiveness and reputation will result in improved top line performance while those related to control, cost, and productivity will impact the bottom line very positively. Therefore the correct fleet management system effectively implemented can be very powerful in enhancing business value on many levels.

In practice however some businesses may find that their fleet management system is more of a hindrance to their business that a benefit. This occurs in those situations where the system is not a good fit for the business due to poor selection and implementation processes.

Because there are many, many systems available with a wide range of functionalities, and with different strengths and weaknesses for various business sectors and applications, the assessment, selection and implementation of a fleet management system needs to be viewed as an important business project. This requires specialist knowledge in addition to adequate time and resources to execute effectively and efficiently.  

In effect, a fleet management system is just a tool and as such the selection and application of the right tool for the right job needs to be done very carefully indeed. In some cases in the ME region as well as other parts of the world, due to fault both on the purchaser and vendor or re-seller side, fleet management systems that are mismatched with the application have been implemented.     

NK: What are some of the problems associated with the current fleet management systems on offer in the Middle East?

PD: Product offerings are developing and improving all the time in line with advances in information and communications technology and in response to the operational and regulatory demands of the more demanding operators.

An extensive range of functionalities are available to manage fuel consumption, labour costs, proof of service, service levels, communications, security, route planning, administration and reporting.

One significant issue is that up until recently there has been such a wide range of offerings available from a plethora of small vendors within specific national markets and a smaller number of larger players with international market penetration in Europe, North America and South Africa. This has made it difficult for some operators to select the right match for their particular business applications both in terms of product and vendor.

However a trend that has been underway for some time now and which is set to continue is that of consolidation among these vendors through mergers and acquisitions. The major players at the current time include Masternaut, TomTom BS, Trimble and Digicore.

This consolidation is giving rise to more comprehensive offerings from a smaller number of more robust vendors who will be able to partner with their customers over the long haul.

Consequently, the major issues that I see for the future in the Middle East do not hinge so much around the features and capabilities of the product offerings of these main players but rather around the following:

• the ability of these vendors to be present, either directly or through approved partners to provide a credible, durable and consistent commercial presence in the region.
• the ability to provide the local skills, knowledge and capability to support and partner with their customers effectively both during the selection and implementation stages as well as for the long haul after sales period as business needs change.   
• the ability and competence of operators themselves to effectively specify, assess, select and implement fleet management tools that are truly in line with the requirements of their own businesses.

NK: What are logistics companies looking for from their fleet management system? How can such systems adapt to cater for the needs of today’s logistics sector?

PD: What a company is looking for will very much depend on what type of business it is in.

The requirements of a company operating a fleet of ships will be very different from those of a company specialised in intercity trunk transport by road which in turn will be very different from those of a company carrying out wholesale or retail distribution within a densely urbanized area.

The requirements in terms of visibility, control, security and compliance will be specific to each business and it is incumbent upon the operator to determine and specify clearly what his requirements are, what outcomes he expects and what business benefits he wishes to derive through those outcomes.

As with warehouse management systems (WMS), many fleet management systems have had their origins in specific sectors or specializations and although they will have developed and added features and functionality over time it is crucially important for operators to be able to discern how well a given system will support their own particular requirements.

If the the operator cannot do this effectively he may find himself involved in very costly and time consuming customization that delays roll out, disrupts business and delays or negates the expected business benefits. This is yet another reason why a well structured and resourced assessment and selection process is a must from the operator point of view.

 I would expect that the consolidation that is underway within the marketplace will enable the remaining players to provide a wider range of functionalities as standard features thus reducing the need for case by case customization and speeding up the roll out of solutions.  

NK: Do you think there is a trend towards outsourcing fleet management system or do many logistics companies want to develop their own system? What are the pros and cons of either method?

PD: There are two aspects to this. One is the question about whether to outsource the development of the fleet management system itself or develop it in house and the second is whether to outsource the operation of the fleet management system or operate it in house.

In relation to whether or not to outsource the development, a key consideration would be the level of control and security required. Even if these were very important considerations, the fact that there are a wide range of comprehensive offerings means that such a large investment in the time, skills and money required to develop a bespoke solution would only be justified in very special circumstances.

Outsourcing the operation of the management system is an option that many operators may be seriously considering. With regard to trends in outsourcing the management of services there is paradoxically both a trend towards this outsourcing and a trend away from it.

This is because there are both success stories as well as unfortunate instances in which the outsourcing arrangement did not deliver the benefits that the service provider and the client would have hoped for.

The reasons for this are complex but often can be traced back to deficient specification, assessment and selection of the outsourcing partner and poor management of the relationship between the client and service provider on an ongoing business.

Whether or not to outsource is therefore not a decision that should be taken lightly. It is a strategic consideration and should be treated as such.

If the operator views fleet management as a strategic capability and an important value creating part of his business then the outsourcing of this capability is not advisable. If on the other hand, it is not a key value creating component of the business and is viewed as a commodity service that can be bought in then outsourcing will become a very interesting alternative.

The following table can be used as a useful frame for the strategic alternatives in this regard. 

FMS Strategic Framework

Once the strategic decision has been made to outsource, the assessment, selection, implementation and ongoing management of the relationship between the client and service provider will be the making or breaking of the agreement.

NK: In your opinion, will there be an increased or decreased regional demand for fleet management systems in the next 5-10 years? Please explain your answer. 

PD: Parts of the Middle East region have characteristics that in the short run tend to militate against the increased demand trend that is evident in other markets such as Europe and North America.

 In Europe in particular the high cost of fuel, high labour costs, environmental regulations and regulatory requirements are driving a strong trend towards the increased adoption of fleet management systems.

For example, in the United Kingdom, company directors may even face criminal charges resulting from accidents involving the vehicles belonging to their companies if it is found that all reasonable measures have not been taken to ensure the safe operation of fleets.

 Notwithstanding these current differences, I still anticipate that adoption rates in the Middle East region will increase over the medium and longer term due to faster rates of economic growth in the region as compared to western economies, the increasing complexity and sophistication in Middle Eastern markets and the fact that many of the regulatory and environmental factors impacting Europe and America are global in nature and will feed through to the Middle East in time.   

The 80:20 Rule, the Law of the Vital Few or the Principle of Factor Sparsity states that for many events 80% of the effects come from 20% of the causes.

When something is shared among a large number of participants there is always a more or less equal sharing out of the something among the participants.

In the case where 50% of the something is taken by 50% of the participants – this means that every participant has an equal share.

In the case where 99.99% of the something is taken by 1% of the participants – this means that very few participants take nearly all of the something

The 80:20 rule is a special case of this where 80% of the something is shared among just 20% of the participants. This is a situation skewed in favour of a relatively small group of participants.

Mathematically, there is nothing special about the 80:20 situation but it just so happens that many real world systems do appear to correspond to an unequal distribution similar to this.

Why is this so? Why is it important? What are the implications? Well let’s see.

A Little Bit of History

It was Vilfredo Pareto, an Italian engineer, sociologist, economist and philosopher who first observed and wrote about the phenomenon.

In 1906 he noticed that 80% of the land in Italy was owned by 20% of the population. For this reason, the 80:20 Rule is also known as Pareto’s Law or the Pareto Principle.

In 1989 the principle was still alive and well in world income distribution with the top 20% of individuals in the world enjoying 82.7% of the world’s income, the next 20% enjoying 11.8% and the remainder enjoying an exponentially decreasing amount thereafter.

Not fair, you might say. Maybe not, be that as it may Pareto concluded that what he had observed was a natural phenomenon and not just a result of human greed or malice.

Complex simulation models with rules defined only for the behaviour at the level of individuals have been developed in which the 80:20 rule has been observed as a naturally emergent property of the interaction of the individual agents. 

Applications

In less contentious fields of endeavour, the principle has been observed consistently in many natural systems. Applications are widespread in decision making and task prioritizations in fields as diverse as:

• Computer Science (fixing 20% of bugs will eliminate 80% of errors)
• Product Profile Optimization (20% of products generate 80% of turnover)
• Customer service (20% of customers cause 80% of customer service headaches)
• Health Care (20% of patients use 80% of the services)
• Criminology (20% of criminals commit 80% of the crimes)
• Project Risk Management (20% of project risks have 80% of impact)
• The Dating Game (80% of one sex want to date 20% of the other sex and vice versa)

Identifying the 20% in each case can have huge positive impacts on the efficiency in the use of resources and on the effectiveness of outcomes.

A Physical Logistics Application

In distribution warehouses, the typical activities that workers perform are as follows:

• receipt and checking of goods
• put away of goods to stock (normally into racks with fork lift trucks)
• replenishment of products to pick locations from the stock locations
• order picking, packing
• checking and dispatch

The most labour intensive of these activities is by far order picking. It can easily account for 60% to 70% of the entire labour requirements of the operation. In large distribution operations, this is a massive wage bill.

Order picking itself is comprised of the following tasks,

• fetch a truck or trolley, a pick note or bar code scanner
• travel to the pick location
• read the pick requirement from the note or scanner
• pick the product from the pallet or shelf to the trolley
• scan or tick off the list
• travel to the next location and repeat the process

Let’s face it the only parts of that process that actually add any value are the identification of the correct product and the picking of the product to the trolley.

However, in typical conventional warehousing operations the travel component of order picking can constitute anywhere from 60% to 80% of all the order picking time. This travelling adds no value whatsoever while swallowing up a huge amount of the available labour resource.

In our example we had 65% of all warehouse labour employed in order picking and 70% of order picking time was consumed in travelling from location to location. So a massive 45% of all warehouse labour resource was adding no value at all travelling from location to location.

Needless to say, the business owner was horrified at these statistics and wanted to know what we could do about it. The answer was “quite a lot actually”, and this is where the 80:20 Rule comes in.

Small Changes, Big Gains

Most business owners and managers have a pretty good idea of what their best sellers are. By that, they normally mean the 20% of products that generate 80% of the monetary sales value. What they often have no idea about is which 20% of products are generating 80% of the physical activity and consequentially, cost within the business. More often that not, these are not the same group of products.

When we analysed the data in this particular case, we found that of the almost 800 products about 150 of these were driving over 80% of the order picking activity and also that a large proportion of orders could be filled exclusively from this group.

By redesigning the positioning of products for picking in the warehouse and making the pick locations smaller so as to access more different products in a shorter travel distances we were able to reduce travel time by half overall.

Half of 45% is a 22.5% improvement in overall labour efficiency by simply changing where stock is located on the racking, the amount of stock held at the pick location and some cosmetic changes to the racking.

Simple tool – powerful results.

Good old signore Pareto! Grazie a Lei!

Warehouses that support manufacturing operations have a number of peculiarities that set them apart and present special challenges to the task of design, organization and management of these facilities.

In my view, to ensure maximum return on invested capital there are a number of key outcomes to be achieved as follows:

• Provide the right mix of storage equipment types to suit the current and future stock and the batch profile
• Provide for the projected capacity with high space utilization
• Provide effective and efficient processes and logical flow to through all the materials movement steps – receipt, put away, work order pick, pick face replenishment, staging, line-side replenishment, sales order pick, shipping and so on.
• Provide the right mix of materials handling equipment to support the processes
• Determine the labour requirements and ensure that they are deployed effectively and efficiently.
• Determine the skills required by operators and supervisors to work the solution.
• Ensure that the information system (WMS) can support the equipment/process design.

The Approach

I generally break the challenge down into two sub-solutions to be tackled separately and then to be integrated into one holistic solution as follows:

1. The Storage Solution or the Static Solution i.e. how can I hold everything I need to hold effectively and efficiency? 
2. The Activity Solution or the Dynamic Solution i.e. how can I access everything I need when I need it in the most efficient way possible?

The Data Requirement

For Part 1 the Storage or Static Solution, the data sets that are required are:

• SKU Master Data for all live item codes (Raw Materials, Packaging, WIP and Finished Goods)
• Supplier Receipts movements by line (this is for RM/Pck warehouse and is generally 12 months data to allow average batch sizes by SKU to be determined)
• Production Receipts movements by line (this is for FG/WIP warehouse and is generally 12 months data to allow average batch sizes to be determined)

For Part 2 the Activity or Dynamic Solution, the data sets required are as follows:

• SKU Master Data as above
• Production Issues movements data by line (this is for the access and activity solution within the RM and Pck warehouse and is generally 12 months data)
• Sales Order movements data by line (this is for the access and activity solution within the FG warehouse and is generally 12 months data)

The Solution Development

Various separate sets of analyses are carried out using these data.

The results of the analyses are then meshed together to yield a practical working solution to match the specific requirements of the stock profile and its static and dynamic characteristics.

These analyses can tell us what the profile of average batch sizes is by SKU and therefore which mix of storage equipment will be the most appropriate to make the best use of space.

The analyses will tell us what level of put away and picking activity there is and how many people will be required to do the work and which types of handling equipment will be needed.

The analyses will also reveal the nature of activity, whether it is constant or lumpy, full pallet or item pick, what the needs for staging areas and production kanbans will be and whether or not we will have high labour composite pallet picking on sales orders or low labour full pallet picking.

All of this output shapes the design of the processes and operating procedures to make it all work. This also enables us to specify the numbers of people, the skills levels required and the information systems functionality that will be required.

Following a structured approach such as this ensures that the solution is practical, holistic and effective and that it enhances the economic value of the business by providing a range of capabilities that simultaneously enhance the top line while containing the bottom line.

Worked Examples in Real Life Warehouse Design and Improvement

We are delighted to present this seminar on best practice warehouse design for manufacturing and distribution in conjunction with the Chartered Institute of Logistics and Transport (CILT) at the Crowne Plaza hotel in Dublin.

You will walk away from this seminar with practical ideas and tips to enhance your top line through service improvement and reduced cycle times as well as your bottom line through productivity improvement and inventory reduction.

Date and Venue:

Thursday 9th December 2010

18.30 to 21.00

Crowne Plaza Hotel, Northwood, Santry, Dublin 9

About this Seminar

The topics covered in this seminar are as follows:

1. Business Startegy and Warehousing Master Plan
2. Defining Goals, Scope and Objectives
3. Diagnosis and Data Gathering
4. Data Analysis and Solution Development
5. Options in Equipment, Systems and Technology
6. Implementation Planning and Execution
7. Performance Measurement and Continuous Improvement

Who should Attend this Seminar?

Professional managers and practitioners with responsibility for the formulation and implementation of warehousing strategy and operations in manufacturing, distribution and logistics service provision.

The seminar will be particularly relevant to:

• Logistics Managers
• Supply Chain Managers
• Operations Managers
• Warehouse Managers
• Materials Managers
• Manufacturing Managers
• Financial Managers
• General Managers
• Plant Managers

About the Presenter Patrick Daly

Patrick Daly, Managing Director and founder of Alba Logistics brings over 22 years of experience delivering value to manufacturing, distribution and logistics services businesses in Europe, Asia and North America.

Patrick has managed warehousing design and implementation projects in multiple sectors including pharmaceutical, electronics, media, fast moving consumer goods and raw materials. He has consulted with top Fortune 500 companies such as PepsiCo, GlaxoSmithKline, Johnson & Johnson, Braun, Heinz and many more.

Patrick is an experienced presenter and has delivered courses and seminars with the National Institute of Transport and Logistics (NITL) , the Chartered Institute of Logistics and Transport (CILT), the Abu Dhabi National Oil Company (ADNOC), the Supply Chain and Logistics Group (SCLG) in Dubai and Global SCM in Shanghai, China.

Patrick brings a direct, down-to-earth approach to his workshops and seminars that is both entertaining and challenging to delegates. 

Bookings

To book your place on this seminar please contact Michael Lynham at the Chartered Institute of Logistics and Transport (CILT) in Ireland on 01 676 3188 or info@cilt.ie 

Closing date for bookings 15th November 2010

Decisions are required to be made in business regarding capital investments, reorganizations, changing ways of working, promotions, training and so on. Understandably, in the light of the recent past and the current uncertainty we may tend to be overcautious, inclined to favour inaction over action, over-analysis in preference to decisiveness.

Bear in mind however that all the great achievers have always known instinctively that the time to move ahead is actually before they feel completely ready. So if the time has come for you, the options have been considered, the risks and rewards have been weighted up and it is time to move forward – take action now!

You can always course-correct while moving forward if necessary rather than waiting for everything to be just right before moving ahead and missing your opportunity.

© Patrick Daly 2010

“There are costs and risks to a program of action, but they are far less than the long range risks and costs of comfortable inaction” – John Fitzgerald Kennedy

“Any Leader that does not set out the context for change sufficiently and involve the workforce extensively at every level will simply not succeed.“  Liam Cassidy, President, LCL Ltd.

Liam Cassidy

Managing Change

In a career spanning over three decades working with major multinationals, change for me was never ending. Multinationals are marvelously constructed organizations where regardless of the economic environment, pressure for results is never ending, and relentless. If you are expanding, the bar simply goes up, if you are reducing, you align your resources to match that, which means shedding resources and trimming costs. In either situation, change has to be managed and although there are challenges with both situations, they are more difficult with the latter where difficult decisions must be made, communicated and executed.

For the last 15 of those years I have been implementing a formula that has been highly successful and provided great results. I have turned ailing and poor performing factories around, creating what is known within the manufacturing world as Benchmark sites. That is, they become a model for the rest of the organization to imitate.

This article is therefore written from the perspective of a Factory Manager. It is not an article with academic references. Rather, it is based on my own experiences witnessing and being part of both failure and success, and gradually evolving to a formula that has provided outstanding results even in situations when others said it would not be possible. I have learned much during that time, but one thing is clear: “nice” managers are not successful. Neither are they respected. By “nice” I mean those that sidestep sensitive and difficult issues. They give similar Performance Appraisal ratings to high and poor performers alike. Sensitive issues involving people are ignored. They conform and will not challenge or “rock the boat”. Managers that confront difficult issues, that challenge the status quo, which will not ignore people related issues, will be successful.

I have successfully managed factories in Ireland, USA, India and China. What I will describe here is what I do when I go to a site, how I engage with the workforce, how I deal with people who are going to slow down what needs to be done and the tools and techniques applied that has consistently provided spectacular results. Space does not allow me to go too deeply into detail, but I hope readers will get a good idea of what guarantees success, and what will ensure failure.

The Threat is Real – Communicate That!

In every case where I managed factories competition was fierce. Within multinationals each manufacturing source is constantly being compared. You fight to hold what you have, and try everything at your disposal to attract new investment. It is essential that this message is imparted to the workforce and repeated at every opportunity. Sometimes the threat is very direct, like when I was sent to a factory in the USA to prepare it for closure within two years, or in Ireland immediately after my then organization, Gillette, was acquired by Proctor and Gamble, and they had tentative plans to close our plant and move the business to their own legacy site in Germany and to a new one in Eastern Europe. In such circumstances it is easier to communicate as the threat is clearer. In other circumstances the threat is more indirect. I have seen many factories enjoy good years, get complacent, and lose their business to other sites that have become more competitive. Those stories are shared. Examples of factories that either no longer exist, or are losing business and therefore also losing jobs are shown. They are made aware of the ongoing pricing comparisons that are always taking place, so that a constant awareness of the competitive environment is being created.

Communicate the Vision

I begin by laying out the challenges, threats and also the opportunities if we implement necessary change. A vision is created of where we can go to. Usually this says something like: “We will be among the best in the world in which we compete” (In reality I mean “The Best”, but to declare so will create too much resentment from sister factories and the senior people associated with them). I tell them that I have a toolkit, which I can apply with their support, but before completing the formula I need their input. So I ask them 4 key questions: what is working, what is not working, what we should retain, and what we need to do to become a great plant. External facilitators are used to conduct this exercise with the entire workforce in groups no larger than 20, so that involvement and confidentiality is assured. The outcome of the consultation process is printed in booklet form and every employee gets a copy. This a wonderful tool to show everyone that their opinions matter, and provides the moral high ground when rolling out the change programs.

 ”The best leaders are those most interested in surrounding themselves with assistants and associates smarter than they are. They are frank in admitting that and are willing to pay for such talents.”  Amos Parrish 

Call to Action: iIentify the People Barriers to Change

Meantime, managers at all levels are being appraised, identifying who is going to embrace what needs to be done, and who will get in the way of the necessary changes. It is my experience that at least one third of senior, middle and front line managers need to be separated. Usually, I take on board a small team of consultants I know and trust to help me quickly identify those,  and to educate and train people in the various programs. It is absolutely essential that the people, particularly those at senior level who are not going to make it, are quickly removed. Otherwise, momentum will be slowed down and undermined by their presence. It must be emphasized that this is critical. The factory manager must be absolutely ruthless in driving this, because the greater good, perhaps the very survival of your plant, will be jeopardized.

Lean Toolkit – Making it Happen

In parallel with this, we set about putting our Lean tool kit in place. There is no more effective way to obtain better results than through the “Lean journey.” I like to have multiple programs working in parallel. So purchasing begins to work with key suppliers to get new working agreements in place. We establish Kanbans to our warehouse and then to our factory floor, and for the internal movement of work in process.  We train people in the art of Process Mapping and get people working throughout the plant on generating improvements. We start to get people thinking about Value Streams, (factories within factories) and usually within 3 months have an exemplar value steam emerging, with others identified to work on later. Meantime, all of our plant reports are being redesigned so that every work center has data that they can make sense of, enabling them to track their own performance. All data collected is analyzed, if it is not adding value and being used to inform and improve it is eliminated. We also get our entire staff, including office and factory personnel, involved in redesigning their work areas through the 5S Process. This is an outstanding tool for maximum involvement of people and when implemented will transform how the factory looks.

Visible Results

With all of these programs in play, credibility for the new programs becomes well established. What has been promised is being delivered upon. The challenges facing the plant have been laid out backing it up with clear evidence. The workforce has been asked to answer the 4 key questions I referred to earlier, therefore taking their views on board. Those not delivering are being separated (workforces always know who those are and this further increases credibility). The factory is looking much better through the 5 S programs, and painting and refurbishment. Data that was not being used has been discontinued, new reports from every department have been redesigned and now both inform and add real value. Communications processes are in place, and as much as possible this is done through Visual Management, with results and key messages posted throughout the plant. Space has been freed up in the warehouse and shop floor through the introduction of Kanban and implementation of 5S. Value Streams are being created to drive out waste with allocated people being decentralized so that they sit and work together.

 Usually after 3 months great excitement has been generated, with many programs already in place. Improved results are already visible. After 6 months a very substantial change is visible in both the atmosphere of the plant and its appearance, and of course its results. After 1 year it is truly spectacular, and then just keeps getting better as people become more familiar with the new way of working and with the various tools and techniques.

This is what works for me. I have achieved spectacular results by using this formula. The plant I was sent to close in the USA was declared a Benchmark site by Gillette within 2 years. The Ireland plant survived and still thrives as a Benchmark site. They continue to see off threats from Eastern Europe and Asia. In fact, they have just recently leased an adjoining factory.  In my last assignment in Shanghai, I also left a Benchmark site behind. With this formula, applied without compromise, there is no failure, only spectacular success!

 ”The only definition of a leader is someone who has followers”  Drucker

Operating Principles – Without Compromise

Twelve years ago, in frustration with the lack of urgency and engagement of the management team and workforce at the plant I was then assigned to, I wrote what I called; 10 Operating Principles – Without Compromise©, that I have used then and since to summarize and help communicate my thinking, and to focus the workforce on what it needs to concentrate on. The language used is deliberately clear, direct and unambiguous. They are posted all over the plant, everyone is educated on what they really mean, and regular surveys are arranged so that we remain on track. They have worked wonderfully well for me.

1. Create an open honest environment where good communication is treated as an essential part of the process and in which everyone has a genuine voice.
2. Maintain high awareness of the competitive environment and a constant focus on cost reduction and continuous improvement.
3. Build urgency and speed of response into all processes through the empowerment of people and elimination of bureaucracy.
4. Acknowledge people as our greatest asset and invest in their education and development on a continuing basis.
5. Clearly communicate goals and objectives to employees at every level and hold each person accountable.
6. Nurture an organization that is in constant touch with developments in technology, the markets, the wider organization and that anticipates and prepares for change, rather than reacting to it.
7. Design transparent financial reports so that managers and people at all levels have key cost measures as tools and can be held accountable for effectively managing their areas.
8. Develop an effective Performance Appraisal system so that every employee is given an assessment of their performance, strengths and opportunities, with follow up plans to address and monitor their needs.
9. Take swift action to deal with employees, regardless of level, who obstruct or do not sufficiently contribute to change that is necessary for the ongoing development of the business.
10. Empower people, by creating a team based matrix organization that allows for fast decision making and where occasional mistakes are treated as opportunities for learning.

 Why do so Many Attempts at Change Management Fail?

If what has been written so far is about how change works, what about failure? For me it is clear. If success is down to Leadership, then we are also responsible for failure. Any Leader that does not set out the context for change sufficiently and involve the workforce extensively at every level will simply not succeed. They must establish a communications process that is 2 way with comments and questions listened and responded to. They have to provide the necessary education and resources to ensure successful implementation of the various programs. Managers and employees that slow down or block the changes must be removed. It is within these critical areas that too many leaders compromise, and subsequently fail.

Recently, the Massachusetts Institute of Technology (MIT) has confirmed that over 60% of attempts at change fail. Personally, I think the figure is on the low side. From what I have seen over 3 decades it is much higher than that. I would have put it at around 80%. However, organizations are understandably reluctant to admit to failure, with very good reason. So I suspect that always getting the real data is not so easy. Acknowledging failure means shattered careers, lost bonuses, and perhaps even a share slump. Divisions and departments close ranks and partial success or even downright failure is often celebrated as success, or the program quietly dumped soon to be superseded by the next new flavor of the month. (Those readers working in large organizations will understand exactly what I mean!)

Over my career, I have been able to tap in to people’s natural instinct for survival, and natural desire for meaningful work.  Workforces have the same needs all over the world, regardless of where they reside. They want to be respected, and to be acknowledged by having a voice that is listened and responded to. They want opportunity for education and development, and to be fairly remunerated so that they can provide security for themselves and family. The wonder is why so many organizations struggle to see that, or to implement programs putting them in place!

Finally, I conclude with one of my favorite descriptions of the organization that I believe provides an essential basis for success!

 ”The old rules of traditional hierarchical, high external control, top down management are being dismantled; they are simply not working any more. This has changed the role of manager from one who drives results and motivation from the outside into one who is servant leader, one who seeks to draw out, inspire and develop the best and highest within people from the inside out.” Stephen Covey 

 Liam Cassidy can be contacted at email: liam@consultlcl.com.cn or: cassidyliam8@gmail.com  visit: www.consultlcl.com

If you are going to invest time and money in improving things in your supply chain, how do you know which things you should be improving?

How do you know which things will make a real difference to the business?

It’s not enough to know which processes and practices could be better. You must understand which processes and practices actually matter.

• Attempting to optimize the wrong processes and practices will lead to no measurable improvement in desired business results.
• Attempting to optimize all processes and practices is simply dysfunctional and is not achievable.

Both approaches are a waste of time, effort and resource.

To really know where to focus your effort, you need a two-pronged approach as follows:

• A clear understanding of the practical capabilities that will really deliver the results of the declared strategy of your business.
• An objective benchmark of the current state of the processes and practices that underpin these strategic capabilities.

Once you are clear on both of these points, then you are in a position to commit your time, money and resources to improvements that will achieve the desired results - not before.

Here are the business benefits of this approach:

• The current state of every process and practice that matters is benchmarked on a scale vis-à-vis industry best practice.
• Specific measures and metrics can be developed to track and manage improvements in these attributes.
• Improvements can be prioritized and targeted where they will deliver maximum business benefit quickly.
• The investment in every improvement initiative can be evaluated explicitly against the value that it will provide in real business outcomes such as quality, profitability, compliance, capacity and capability.

If you want to get started now, contact Patrick Daly on +353 86 811 6030 and pdaly@albalogistics.com

This allows you to decide, based on your particular business strategy, which elements of your supply chain you will target for improvement.

It is important to remember that it is dysfunctional to try to optimize all elements – the business strategy must be the guiding light on this.

There is a comprehensive set of supply chain diagnostic and benchmarking tools available through WERC and CSCMP that can provide you with a great starting point. These have been produced by Kate Vitasek and her team at Supply Chain Visions.

The ones I recommend are:

1. The Supply Chain Management Process Standards available from CSCMP – there are 6 of these covering the Plan, Source, Make, Deliver, Enable and Return aspects of the supply chain.
2. Warehousing and Fulfilment Process Benchmark and Best Practices Guide available from WERC
3. Warehouse Manager’s Guide to Benchmarking available from WERC.

They can all be purchased online through WERC and CSCMP. Here are the links www.werc.org and www.cscmp.org.

Here is a small selection of some minimum standards under the headings of Rules and Structures, Measurement and Performance Management, Continuous Improvement, and Facilities Maintenance. 

Rules and Structures

• On receiving and despatch docks there should be a structured work plan with scheduled receipts and desptaches so that shifts can be planned to match resources with demand.
• Zero tolerance of bottlenecks and interrupted processes in receipts and despatch areas with structured work plan and designated areas for specific activities.
• Standard ways of working defined and implemented for major warehouse processes such as receipt and checking, put away, picking, replenishment, returns, cycle counting, and shipping.
• Where different racking types and depths of storage are in use, clear definition and adherence to put away rules for supplier receipts and production receipts in order to maximize the utilization of the storage equipment.
• No part pallet storage or picking in high density racking systems such as push-back racks and gravity flow racks.
• Structured and selective cycle counting regime, preferably systems driven.
• Take advantage of round-trip opportunities to complete tasks on the dead leg. For example, if dropping a pallet of packaging to a line side, take advantage of return to warehouse to take back a pallet of finished product. 

Measurement and Performance Management

• Daily and weekly targets and goals for all operatives, supervisors and managers.
• Vision boards for daily performance tracking of actual work versus planned work.
• Definition and measurement of key productivity indicators such as dock-to-stock time, pallets put away, lines picked, pallets despatched, stock accuracy, space utilization and so on.

Continuous Improvement

• Regular and scheduled offline supervisor time to focus on process improvement, training, certification and compliance.
• Cross-training of personnel across the critical tasks and activities of the warehouse operation.
• Structured and formalized mentoring program for new hires.
• Regular offline workshops involving operatives, supervisors and management to improve standard ways of working, solve problems and create new ways of doing things.

Maintenance and Facilities

• Scheduled time and clear responsibility for warehouse housekeeping activities both indoors and outdorrs.
• Periodical warehouse storage equipment damage review and repair or replacement.
• Regular and scheduled materials handling servicing, maintenance and repair.
• Clear signage and floor markings for designated areas and activities.
• Regular facilities servicing and maintenance including docks, doors, floors, yards, lighting, air conditioning, fences, gates and so on.

Whatever the input from an external consultant, whether it be engineering knowledge, executive mentoring, data analysis, running surveys or leading events, it is in both yours and the consultant’s best interest to be clear at the start on the results and the benefits that you will get from the consultant’s involvement in your projects.

You need to be asking yourself the following;

• What is the killer gap to fill?
• What is it that I will point to at the end of a project and say “this was a resounding success”?
• How will I know that things are better – how will it look and feel?

The value of these benefits has to be really significant and compelling relative to what you pay in order to justify the consultant’s involvement and any self-respecting consultant wouldn’t have it any other way.

For you, as the person committing budget, getting to a common understanding with the consultant on this value is the single greatest catalyst to providing you with the confidence in the return that you will achieve on the investment. It can take some time to get to this but it is very worthwhile.

The typical consultant is interested in rates and how many days they are going to spend – in my view this is unethical because it incentivizes time wasting and non-value add activity. I, as a value-oriented consultant, am interested in adding value fast in exchange for fees that are a good deal for both parties.

This a different way of doing business and is dependent on the quality of the relationship and a certain level of trust, but without this understanding, the consultant’s input becomes just another cost to be minimized as much as possible and the real opportunity of the partnership is missed altogether.

In every case and for every person buying consultancy services, the value that they see is different – some aspects of value are tangible and some are intangible and that is normal and valid.

Here are some of the typical outcomes that are valued in most cases: 

• Creating the capability to do certain things.
• Transferring of knowledge and skills.
• Achieving target levels of efficiency, productivity, compliance, quality and so on.
• Reducing Risk.
• Enhancing reputation and prestige.
• Providing confidence and peace of mind.

All of these are focused on what comes out at the end and not what goes in at the beginning such as days, methods, events, equipment, training and so on. All of these are just means to the end and represent no value themselves.

Achieving valuable business outcomes and getting there fast is the real value of external consultancy.

Explicit agreement on the value of those business outcomes between the person committing the budget and the consultant must always be the start point of the partnership– anything else is a road to disappointment.

S&OP has been getting a lot of attention lately indicating a growing interest and a market for improvement initiatives in this area. However, like all business initiatives, success comes from focus on the essential business outcomes. Therefore it is important to be crystal clear on what these are and how linking together the demand side and the supply side of the enterprise can contribute to managing the global supply chain effectively. Bill DuBois takes a humorous perspective on the subject here http://tinyurl.com/3ao8hxz

Global Supply Chain Strategy Summit

Dubai’s Supply Chain and Logistics Group (SCLG) will be holding its 3^rd Global Logistics and Supply Chain Management Summit on 12^th May 2010 at the Madinat Jumeirah complex in the Gulf city. Over 200 speakers and panelists from around the globe will gather under one roof to discuss the current and future global scenarios of Logistics and Supply Chain Management. More here www.sclgme.org

Economic Recovery Underway

Warren Buffett’s Berkshire Hathaway Group is showing significant improvement in its industrial units. Berkshire Hathaway owns interests in a diverse range of quoted companies and this provides Mr. Buffett with unique insight into the performance of the wider economy. According to Mr. Buffett “American business is improving from everything I see now”. Buffett expects to see a decline in unemployment feeding through soon as companies begin to rehire. More here http://tinyurl.com/2wt6dhd

World Trade Expansion

Lawrence Webb at the Wall Street Journal writes that exporters and importers are increasingly bullish about prospects for world trade in the next six months. While world GDP is expected to come in at +3.1% this year, world exports are set to rise by a whopping 9.2%. The rise in emerging markets and the growing middles classes in China, India and Brazil are the main drivers. While the overall panorama is positive, some clouds on the horizon to look out for are volatility in currency exchange rates and protectionism. More here http://tinyurl.com/2wq6n9e

Supply Chain Risk

James A. Cooke writing in DC Velocity magazine focuses on how the recent Icelandic volcano eruption interrupted air freight movements to and from Europe and disrupted global supply chains. This natural phenomenon illustrates how unforeseen events can dramatically impact today’s integrated and globalised supply networks. Explicit risk analysis leading to the preparation of rapidly implementable contingency plans is a must now for those responsible for operating global supply chains. More here http://tinyurl.com/39cpy2s

Kardex Group, the manufacturers and integrators of automated storage and retrieval technologies have appointed Allied Ireland as their strategic partner with sole distributorship rights for both the Republic of Ireland and Northern Ireland.

Kardex provide integrated solutions for warehouse and materials handling applications such as order fulfilment, order consolidation, kitting, sorting and picking.

Allied Ireland supply and install storage systems for commercial and industrial applications. The range includes racking, shelving, conveyors, partitions, cabinets and  office furniture.

For more information www.allied.ie

China – The People’s Currency

The peg that has been maintained between the Chinese currency, known as the Renmenbi (RMB) or “People’s Currency”, and the US Dollar has been the source of tension between the two countries in recent months. However, in latest developments, two new appointees to the People’s Bank of China monetary committee have hinted that China may relinquish the peg on its own initiative in the near future. This is expected to have the effect of allowing the RMB to appreciate gradually. This could be another indicator that China is adjusting its future strategy towards internal consumption and the efficient allocation of capital to balance the over-dependence of the economy on high volume, low margin exports. More at www.statfor.com  

USA – Supply Chain Intelligence

Today’s complex supply networks require continuous collaboration with upstream and downstream supply partners. A new report by the Aberdeen Group highlights the importance in best-in-class performance of integrated Business Intelligence (BI) capability embedded in supply chain processes that can provide immediate intelligence to process owners and managers. The capabilities provided by best-of-breed BI systems include internal and external scorecards, analytics and reports, supply chain modelling, data management services and role-based exception alerts. See the report here www.aberdeen.com   

USA – Tylenol Recall

McNeill Healthcare, a division of Johnson & Johnson has undertaken an extended recall of Tylenol, Motrin, Rolaids and other brands due to reports of a musty odour and consumer illness associated with some products. The problem has been put down to small traces of a chemical known as 2,4,6-tribromoanisole which is believed to have originated in chemicals used to treat wooden pallets sourced in the Dominican Republic and used to store packaging materials at the firms plant in Puerto Rico. This has led to a move away from chemically treated pallets to heat treated pallets for the transport and storage of both ingredients and packaging. The wood pallet industry in the US is sceptical however that the wood pallet is indeed the root cause of the contamination.  More here http://tinyurl.com/yecppz8

Persian Gulf – Layoffs at Agility

The Kuwait headquartered Agility is the Gulf Region’s largest logistics company and provides integrated logistics and supply chain services primarily in the Middle East, Africa and South Asia. The firm is undergoing a major staff restructuring programme which has seen 500 to 600 staff laid off according to the Arabic Al Qaba daily. A slowdown in large new contracts is cited as the cause. In latest developments the firm has had trading in its shares suspended on the Kuwait Stock Exchange for failing to report quarterly financial results in time according to Bloomberg’s Fiona MacDonald. More here http://tinyurl.com/y9bmlgn

USA – Stolen Medicines

US law enforcement officials say that criminal gangs who used to steal laptops and fragrances are now turning their attention to low-bulk, high-value prescription medicines such as painkillers, drugs for erectile dysfunction, anti-depressants and other medications. The trend has been signalled by the recent high-profile $75 million robbery of anti-depressants and other medications at an Eli Lilly & Co. warehouse in Connecticut believed to have been the biggest of its kind so far. $184 million in prescription drugs were stolen in the US in 2009. More here http://tinyurl.com/ydqf3pk

 Costa Rica – Sustainable Coffee

In the conflict between the interests of farmers and those of the ecosystems, supply chains and markets that support their livelihoods, examples of profitable and sustainable solutions are emerging according to a BBC report. Coffee is one of the top five traded global commodities and over 100 million people depend on it for their living. A number of projects in Costa Rica are developing new sustainable techniques to enhance farmers’ output while at the same time mitigating the effects of intensive agriculture. http://tinyurl.com/yajmsbc

 USA – “Inventory – it’s the Enemy” Jim Cramer

The host of CNBC’s Mad Money Jim Cramer has identified the enemy of economic recovery and its name is Inventory. Inventory needs to be financed and carrying excess inventory, particularly in an environment in which credit is scarce, tends to delay economic recovery. Consequently, working off excess inventory is a necessary step in bottoming out the decline and starting on the road to recovery. Jim Cramer explains in this entertaining clip http://tinyurl.com/yat83z2

Here are a few items of interest that caught my eye this week.

Google Spat

Google’s spat with the Chinese government continues unabated. Google has begun rerouting visitors to its google.cn site in mainland China through to its uncensored Chinese language site hosted in Hong Kong. For more on this story http://www.kxk.me//l/ae7

High Tech Order Picking

Ocado Limited of Hatfield UK is unconventionally bringing high tech to the web based grocery business. Ocado can service 65% of British post codes from one warehouse located on a 27 acre site on a former airfield in Hatfield.  The in-house developed high-tech solution comprising complex order routing algorithms, conveyors and high productivity picking churns out 90,000 orders a week and is a central plank of the company’s IPO pitch rumoured to be worth £1.1billion. However, while sales and earnings are up, the business which is now 10 years old has yet to turn a profit. More here  http://www.kxk.me//l/aeF

Designer Salt

PepsiCo have developed a new designer salt for their Lay’s potato chips which reduces the consumer’s intake of sodium by 25% while leaving the taste and flavour of the product unaltered. It’s all part of Chairman Indra Nooyi’s commitment to provide healthier products to customers. For more on this story http://www.kxk.me//l/ae8

Green Supply Chain

The green supply chain is a reality it seems but only where the results of green initiatives deliver real business benefits in terms of efficiency, cost reduction and improved corporate image. Check out the Global Supply Chain Council’s Green China Supply Chain survey here http://www.kxk.me//l/ae9

Energy Security

Unconventional gas sources located in shale and coal beds could lead to a geo-political game change with Europe and North America potentially self-sufficient for up to a century. While America is ahead of Europe in exploiting this resource, the future looks promising for both and holds out the prospect of reducing dependence on existing suppliers such as Russia, Venezuela, Iran and Libya. More here  http://www.kxk.me//l/aeD