Daily Archives: May 12, 2011

A Streamlined Supply Chain Is Integrated

I was pleased to see this recent piece on Making It Right over on Stores.org that quoted Brandon Arbiter, the Business Intelligence Manager for FreshDirect LLC, who said that we are operating three businesses simultaneously and that to execute each of these on a daily basis, every department needs to use the most up-to-date information and have that information at their fingertips.

Just like FreshDirect is simultaneously a grocer, an online merchant, and a transportation company, an average CPG supply chain is a manufacturer, a broker, a transportation company, and a bank that has massive amounts of data that needs to be managed in the physical, financial, and information flows. The business operations of manufacturing, brokering, transporatation, and finance cannot be conducted independently if the supply chain is to be successful. Otherwise, goods will be produced too fast or too slow, or they will get held up in customs somewhere, or they will sit in a warehouse for too long, or they won’t ever leave the factory because the last order wasn’t paid for on-time. That’s why a successful supply chain has to be integrated, and also why it’s the only way to arrive at a streamlined supply chain that has to simultaneously minimize the physical, financial, and information flows that need to be in lock-step for success.

Furthermore, not only are the operations and data flows integrated, but so are the metrics. Instead of metrics like shipped complete and on-time delivery, you have metrics like perfect order that say right product at the right time at the right price that integrate all of the operations. So take a lesson from FreshDirect and integrate your supply chain operations.

IP Good, Knowledge Better

I enjoyed this post over on the HBR Blogs that said you should stop obsessing over intellectual property rights because what inevitably happens when companies obsess over IP rights is patent frenzy, and that just results in patent pirates plundering. And if that isn’t bad enough, since the full text of your patent is only a click away on the USPTO site, your secret sauce can easily be copied by any set of eyes with interest, and if their country isn’t very protective of IP rights, and they don’t try to sell into your home country, they can profit off of your IP royalty free and you have no recourse.

That’s one reason I’m not a big fan of patents in general, and think that North America should follow the EU and ban software patents specifically. There’s not much value in patenting “processes” that have existed since the dawn of civilization (and we have records of “auctions” going back thousands of years) as the patent can be easily knocked down, and there’s no value patenting a technology “invention” that is based almost entirely on open source, as a simple substitution of a few pieces, a few changes to the integration strategy, and a few new steps makes it a different invention — which means that someone else can use your publicly available blueprint to create their own “invention” with very little effort. Plus, the process is very time consuming and expensive in terms of dollars (as patent lawyers aren’t cheap) and time (as the documentation and questions from the lawyers and USPTO will take up a lot of time). And you can’t defend them unless you’re cash-rich, making them weak defenses if you’re cash poor.

I’m not saying IP isn’t important, it is, and, fortunately, it is protected under copyright law and other laws if you keep it trade secret. I’m just saying that IP isn’t everything. As the post points out, it’s what you do with the IP that matters. And effective use requires effective knowledge management. As the post points out, pursuing IPR (IP Rights) entails structuring and documenting knowledge, and the irony is that this very structuring allows diffusion to other firms who get access to it and either work around the IPR or eventually imitate it — so if you don’t effectively manage your knowledge, you lose it, or at least the benefits of it.

However, since a powerful strategic opportunity lies in binding your tacit knowledge assets to your structured knowledge, proper knowledge management can lead to significant market advantages and revenues, and make you a thought leader, like it did for Adobe, McKinsey, and Bloomberg.

So how do you create a knowledge management strategy? The authors suggest that you start by mapping your knowledge assets against a codification/diffusion grid that separates them into core compentencies, patents & copyrights, industry wide principles, and industry conventional wisdom, using the process described in this post. Each type of asset requires a different strategy where protection and revenue generation are concerned.

In the end, legally owning your knowledge pays off only if you’re cash-rich enough to monitor and enforce the IPR. For most organizations, what ultimately drives performance is the organization’s possession of deep, tacit knowledge and its ability to identify, construct, and exploit knowledge networks using that knowledge to generate continual revenue streams.