Monthly Archives: February 2010

If You Truly Want to Achieve Supply Chain Innovation …

Stop relying on spreadsheets!

I thoroughly enjoyed this recent article over on SupplyChainBrain on how Intel Takes The Top Spot in the Supply Chain Innovation Awards. The article pointed out that Intel enhanced product availability by scrapping its reliance on spreadsheets and embracing technology that creates a real time, available-to-promise (ATP) environment.

As a business management tool, Spreadsheets Suck, straight and simple. Considering that up to 90% of spreadsheets contain non-trivial errors and that they are barely adequate at the task they were designed for (which was day-to-day ledger-keeping, and nothing more), it should be pretty obvious that they are not an operations management tool. And while it used to be the case that you didn’t have any other option as a small or mid-sized business because the traditional, installed, behind-the-firewall enterprise software packages were ridiculously expensive and beyond your grasp, that’s no longer the case. In many areas of technology, you can now take your pick of multiple SaaS options that cost, at most, a few hundred per user per month. And that’s for the really good stuff. If you can get by on the more-than-good-enough 80% solution, you can probably find a solution for $20 to $50 per user per month.

After ditching their spreadsheets and implementing real tools, within three years Intel:

  • increased the percentage of change orders confirmed in one day from 21% to over 70%
  • increased Committed Dock Date from under 25% to over 96%
  • reduced manufacturing cycle times by 62%
  • decreased raw material, Work-In-Progress, and finished goods inventory by 33%
  • improved Weighted Mean Absolute Percent Error by over 20%

Isn’t it time you stopped relying on spreadsheets to drive your business?

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There’s No Such Thing as Good Spreadsheets

If you’re still using spreadsheets to run any aspect of your sourcing, procurement, or supply management operations, then you’re working at the edge of a steep cliff over a deep ocean waiting for the earthquake to come. I bring this up yet again because I recently stumbled upon an article over on the Harvard Business Review blogs on “why good spreadsheets make bad strategies”, which, by the way, they do.

 

It was a great blog post. We live in a world obsessed with science, preoccupied with predictability and control, and enraptured with quantitative analysis. Economic forecasters crank out precision predictions of economic growth with their massive econometric models. CEOs give to-the-penny guidance to capital markets on next quarter’s predicted earnings. We live by adages like: “Show me the numbers” and truisms such as “If you can’t measure it, it doesn’t count.”

 

What has this obsession gotten us? The economists have gotten it consistently wrong. And, moreover, the same economists who totally missed the recession turned back to the same quantitative, scientific models to predict how the economy would recover [after 2008], only to be mainly wrong again. CEOs keep on giving quarterly guidance based on their sophisticated financial planning systems and keep on being wrong — and then get slammed not for bad performance but for their failure to predict performance exactly as they promised mere months earlier. (Hence my distaste for Wall Street and my recent praise for private equity.)

Now, while CEOs and their CFOs would love to be able to extrapolate last month’s sales quantity and predict next quarter’s sales, but sometimes they find out that those sales weren’t as solid a base for growth as they might have thought — especially if some of the customer relationships underpinning them weren’t as strong as they might have imagined.

The fundamental shortcoming is that all of these scientific methods depended entirely on quantities to produce the answers they were meant to generate. They were all blissfully ignorant of qualities.

What people keep forgetting is that, in business, numbers are meaningless out of context. 1M in revenue this year means nothing if you don’t maintain whatever quality earned you that revenue this year. If you got the business because you had a better product, and you’re in an industry where products improve quarterly, and you don’t continue to invest in improvements, you can’t project 1M next year. Loyalty only accounts for so much in many categories, like technology and electronics.

So, as a forecasting tool, spreadsheets are even more useless than you tend to think they are. And they’re even worse as a business tracking tool if you’re engaged in global trade, because they don’t automatically update when the regulations and tax rates change. And paying the right amount can get you fined, and even jailed if it was determined that you did not make any efforts to insure proper payments and filings (if you’re an officer of the company).

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How The Mighty Have Fallen

The past decade has been rough on many companies, but technology companies appear to have bore the brunt of it. Check out Fortune’s biggest losers over the past decade over on CNNMoney.com. Eight are technology companies, and all make Ariba’s Market Cap Loss of 46 B [as chronicled in James Kwak’s The Myth of Ariba and discussed in my post on Will Private Equity Players Offer You Better Value Than Public Equity Players] look like pocket change!  (Ariba Peak: 47 B, Recent: 1 B, approx.)

Company Loss Peak Market Cap Recent Market Cap
Cisco Systems  425 B  557 B 132 B
General Electric  423 B  601 B 178 B
Intel  400 B  509 B 109 B
Microsoft  390 B  642 B 252 B
Nortel  283 B  283 B     0 B (bankrupt)
Lucent Technologies  274 B  285 B   11 B
America Online  219 B  222 B     3 B
WorldCom  186 B  186 B     0 B (bankrupt)

Lesson learned? Besides the fact that market valuation should never exceed a reasonable multiple of revenue (10X might be okay in extreme situations for true up-and-comers, but 100X is ridiculous), I’d have to say that this also teaches us that Software and Hardware is not worth more than the value you are able to extract from it.

Every blogger needs a cat!

They make great editors!

Every Blogger Needs to Have a Cat

To the tune of Everybody Wants to be a Cat from Disney’s The Aristocats.

Every blogger needs to have a cat,
because a cat’s the only cat
who knows where it’s at!

Everybody’s pickin’ up on that feline beat,
’cause everything else is obsolete.

Now a square on the keys,
can make your eyelids squeeze,
ever’time he writes;
and with a square in the act,
he can set writing back
to the caveman days.

I’ve heard some corny birds who tried to write,
but a cat’s the only cat
who can get it right.
Who wants to be fleeced
by a long-winded piece
or stuff like that?
When Every blogger needs to have a cat.

Now a square on the keys,
can make your eyelids squeeze,
ever’time he writes;
and with a square in the act,
he can set writing back
to the caveman days.

Every blogger needs to have a cat,
because a cat’s the only cat
who knows where it’s at.

While writin’ jazz you always has a Welcome mat,
’cause everybody digs editor cat.
Everybody digs editor cat.

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Twitter Will Make a Twit Out Of You!

As highlighted in this CNet video which asks “does Twitter make you stoopid” (at the 2:35/4:15 mark), “students [are] failing because of Twitter, texting” (Canoe.ca). The University of Waterloo in Ontario, which has world renowned programs in mathematics, computer science, and engineering (among other disciplines), requires all students they accept to pass an exam testing their English language skills. Almost a third are failing. “Thirty per cent of students who are admitted are not able to pass at a minimum level“, a failure rate that has increased five percentage points in the past few years. Poor grammar is the major reason students fail. “Emoticons, happy faces, sad faces, and cuz are some of the writing horrors being handed in”. “Punctuation errors are huge, and apostrophe errors”.

According to the news release, experts in the field are saying that “cellphone texting and social networking on Internet sites are degrading writing skills. And since Twitter is both, I think it’s finally safe to say that Twitter will make a twit out of you, and that’s not a good thing. After all, the proper definition of twit is an ignorant or bothersome person. Do you really want to be uninformed (dumb) and annoying? I don’t! (And while those of you who know me might say I already am, Twitter takes ignorance and annoyance to a whole new level. Let’s not go there. After all, now that it’s been demonstrated that when a twit speaks in the Twittersphere, no one hears, there’s just no point. )

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