Monthly Archives: July 2012

The Supply Chain Paradox

The best supply chain is invisible, but an invisible supply chain gets no recognition in your average company.

This is the one lesson they don’t teach you in Supply Chain 101, probably because they don’t want to discourage you given the upward battle we still face in our chosen discipline of Supply Management.

The sad reality is that, outside of Disney, as expertly explained in this recent post by Christopher Sciacca over on Supply Chains Rock, your average company, or at least your average employee in your average company, has no knowledge of this paradox. Just like your average person is unaware of Bernoulli’s Paradox or even the Birthday Paradox.

At a Disney theme park, the supply chain function is invisible from visitors, who never see a delivery truck or van on the premises, or shelves being restocked by employees. Visitors get the feeling that all of the food and merchandise somehow magically shows up exactly when it’s needed. Disney accomplished this by building a one-square-mile-wide labyrinth below the park’s main streets, called the “Utilidor” that feeds goods to the park attractions surreptitiously and that is stocked with a three day supply of inventory at all times to ensure merchandise is there when needed.

In a smoothly flowing supply chain, raw materials and components show up almost just-in-time (JIT) at the plant that is producing your goods. Then the boxes are waiting at the other end to package them, and as soon as the boxes are filled, the palletizer is there to pallet them. As soon as the pallets are full, the pallet jacks are waiting to load them unto the truck that just pulled up to take them to your distribution centers. Etc. Etc. Engineers don’t have to worry about raw materials or components being late or in insufficient supply. Loading dock personnel don’t have to worry about needing extra temporary storage as the trucks are there when the order is complete. Etc. Etc. Not only do they not have to worry about supply chain functions beyond their jobs, but your job looks like it’s the easiest job in the world because, like magic, everything (and everyone) is there when they need it. As a result, the better your supply chain runs, the less respect you get in an average company for doing a “hard” job because you make it look so easy.

That’s the supply chain paradox, and one of the reasons we still don’t get No Respect.

I am the Twitter!

I am he as you are he as you are me and we are all together.
See how they run like fish from a whale, see the bird fly.
I’m crying.

Sitting on a hashtag, waiting for the tweet to come.
Corporation tee-shirt, stupid bloody tuesday.
Man, you been a naughty boy, you let your tweet grow long.
I am the poster, they are the posters.
I am the twitter, goo goo g’joob.

Mister celebrity ranting,
Pretty little celebrities in a row.
See the tweets fly like texts from a teen, see how they stream.
I’m crying, I’m crying.
I’m crying, I’m crying.

Random insane drivel, dripping from a newbie’s feed.
A desperate housewife, pornographic priestess,
Now you been a naughty girl you let your secrets out.
I am the poster, they are the posters.
I am the twitter, goo goo g’joob.

Standing in an airport Starbucks … waiting for the brew.
If the brew runs out, you get your fix
From candybars at the news stand.
I am the poster, they are the posters.
I am the twitter, goo goo g’joob.

Expert textpert channel blasters,
Don’t you think the joker laughs at you?
See how they smile like whales in the sky,
See how they snied.
I’m crying.

Internet Spinal Tap, cranking up the dial to eleven.
Gary William Brolsma syncing Numa Numa.
Man, you have to see them kicking that Mark Zuckerberg.
I am the poster, they are the posters.
I am the twitter, goo goo g’joob.
goo goo g’joob goo goo g’joob.
Goo goo g’joob goo

If you’re not following the doctor on Twitter, what aren’t you missing?

Finally, Someone Else Who Gets A Key Point of Working Capital Management!

Regular readers will know that SI has been ranting about all the hype-talk about Working Capital Management for years, including this post where the doctor got sick of all this working capital management talk. The simple fact of the matter is that most companies don’t understand what working capital management really is and mistake screwing suppliers (whether or not it is intentional) for lowering supply chain costs. The reality is that lowering your cost today is not good working capital management if it only raises your cost of acquisition tomorrow.

That’s why it was great to see this recent post over on Purchasing Insight on “Supply Chain Leakage – Stemming the Flow of Costs”. As per the article, when you calculate the scale of costs that leak from the supply chain, it reveals astonishing waste and it’s time that businesses — suppliers and their customers — took a closer look at collaborative techniques to take out these pointless costs.

As the article says, payment terms can be a double-edged sword. While it’s good to contribute to the reduced cost of working capital by extending payment terms, this doesn’t always support healthy supplier relationships and it can put an inordinate strain on the finances of the supplier, which is in the interests of neither party. If your cost of capital is 1%, and your supplier’s cost of capital is 10% or 20%, you’re just increasing your costs by 10% to 20% by paying late to save a paltry 1% or 2% cost on a short-term loan. The numbers just don’t add up.

True savings propagate through the supply chain. They are not limited to your organization.

This is What Tar and Feathering is For

I get disgusted when I see articles like this recent article in The Economist on how Bogus degrees from non-existent colleges cause headaches for employers.

It’s bad enough when a job candidate, who is actually a con-person, lies about a degree — either by leaving off the field or specialization of the degree in the hopes that you’ll believe an accounting degree was actually a computer science degree (as a certain high-tech CEO did) or by claiming to have a degree from a college / private institution that is no longer in business or, better yet, just had a fire and lost all the records.

But when someone sells a fake degree from a fake institution, as the nine people who stood trial in China in April did, that calls for a public tar and feathering. It’s disgusting. A degree is not only something that should be earned (which is why I also get upset when a celebrity who went to a certain institution gets a degree in something they don’t really know anything about, or the catch all Doctor of Letters degree, just because they are famous*), but something that should be certified as granting the holder a certain degree of knowledge and capability. You should be able to go to a registered, and reasonably respected, body and ascertain that the institution or individual in question had the authority to grant the degree, which conveys that whomever awarded the degree had a reasonable understanding of the knowledge required to verify that the recipient met the minimum requirements for the degree and was worthy.

And if I wasn’t livid enough after reading this point, you can bet I was ranting like a madman after reading that, in China, the really shrewd conmen have gone beyond simply selling fake degrees from fake universities, to pretending to offer real degrees from real, accredited, institutions. In one situation, a group of 68 students had been paying to attend class at what they thought was a programme affiliated with the Shangdong Institute of Light Industry (SILI). After four years they found out that everything about the programme had been a scam, and that the man behind the scheme had vanished. If you buy a degree, and get ripped off, that’s your problem. But in this case, a very enterprising conman leased a building, found some equipment, hired an instructor (who was probably qualified enough to teach the classes), and, as far as I can tell, literally offered the SILI degree program. Yes, the fake institute was not affiliated with SILI, but if the students came out of the four-year fake program with the same skills and knowledge as the students who went through the real-program, they have earned the degree as much as their peers — but because they didn’t get accepted into, and pay, the real institute, they’re screwed. In this situation, they should be allowed equivalency examinations, and get the degree if they pass, but you know this is not going to happen unless they pay the full degree cost — all over again. In this case, we not only need tar and feathering, but the walk of shame through the capital — end to end. Then comes the jail time and mandatory repayments, with damages.

Short story — don’t ever, EVER, EVER offer a fake degree or certification, because if the doctor finds out, he will make sure that the entire world knows and report you to every certification body, law enforcement authority, and regulatory body he can find the phone number or e-mail for and make sure you, or your institution, is publicly humiliated. This goes double if you offer fake degrees or certifications in Supply Management, or make false claims about what a certified or degreed individual will be able to do after obtaining your certification or degree. You have been warned!


* My readers who, like the doctor, earned their Ph.D. (and paid for it in blood, sweat, hair, and mental health) will understand!

Supply Chain Difficulties in Latin America

Inbound Logistics recently ran a great article on Beating the Odds in Latin America that did a good job of summarizing the changing situation in Latin America and the challenges associated with your Latin American Supply Chain. Given that it might be true that Latin America “is all about growth”, it’s a market you want to understand.

The first challenge that the article pointed out is that of logistics costs that are high compared to other regions of the world-about 15 percent of the cost of goods sold. Ouch! Like parts of India and Northern China, transportation options are few, roads are not great, rail is (almost) non-existent in many places, and ports are congested. As more investment flows into the region, the situation will improve as it did in China and India. The situation in Brazil in particular is going to improve rapidly with the 2014 World Cup and 2016 Olympic Games on the radar. And this isn’t the only transportation issue. The transportation industry is fragmented in Latin America, with a lot of small players and this makes it more difficult to manage, especially when handling volume spikes.

The second challenge is that of lagging productivity. Average productivity in the region has increased only 1.4% per year for the past 20 years, which is much less than in Asian economies. This is partly due to restrictive labour rules and sector specific regulations but also due to taxes and lack of investment.

The third challenge is that of supply chain expertise — there is a relative lack thereof in Latin America. Universities aren’t even offering logistics degrees yet, yet alone supply chain management degrees. Without even basic Operations Research programs, people entering the logistics field have to learn everything from how to manage a distribution centre to how to interact with customers.

The fourth challenge is that of systems. Technology systems infrastructure generally lack sophistication, and in some cases, even availability. Plus, for an average logistics carrier in the region, a TMS (Transportation Management System) is too expensive for a single company to justify. As a result, many companies end up doing a lot of manual work that is time and cost intensive.

The fifth, and final challenge, that was noted is that of security. Crime is pervasive throughout Latin America, and takes a heavy toll. The homicide rate in some Latin American cities is extremely high. For example, the crime rate in Rio de Janeiro has eight (8) times as many homicides as New York on an annual basis and eleven (11) times as many as Toronto. Plus, surface transportation is the most difficult security risk area of the supply chain in Latin America. Sincethere usually aren’t multiple routes to destinations within a country. In many cases, criminals simply block the highway and start checking trucks to see what products they like and they get away with it because the police are understaffed so they cannot patrol every road.

It’s not an easy situation, but it does appear to be a navigable one for those willing to roll up their sleeves and get their hands dirty.