Category Archives: Miscellaneous

Manage Uncertainty Like an Engineer

Like microchip fabrication and other complex engineering tasks, the supply chain is full of uncertainty. The best way to handle uncertainty is to deal with it up front, instead of trying to sweep it under the rug in the misguided hope that if the corners of the rug are stapled down, it won’t escape and manifest as a supply chain disruption. So how do you attack uncertainty head on? You approach it like an engineer.

A recent blog post on the HBR blogs on “how engineers manage uncertainty” had some great advice on how to handle uncertainty like an engineer.

  • Acknowledge the Uncertainty
    Ignoring it never works. Do your best to quantify the worst-case scenario, to mitigate as much of the uncertainty as you can, and to deal with the repercussions should it come to pass. For example, if you’re shipping a lot of product from China and the cargo ship sinks, and the holiday season is fast approaching (and it’s when you do 70% of your sales), if you have a dual sourcing strategy in place, you would quickly ramp up (overtime) production in the manufacturing facility where product can be manufactured and shipped to your warehouses in less time than it takes to ship them from China.
  • Have a Plan
    Working through a plan to deal with potential uncertainties helps to not only deal with repercussions when something happens, but to minimize the chances that something unexpected will happen in the first place. For example, if you realistically expect that 3% of products shipped to you will be faulty, you will order 103.1% of expected demand.
  • Break Down the Process
    This lets you analyze each step carefully and understand not only where the risks can arise, but how to mitigate the risks and prevent them from occurring in the first place. If the risk is transportation, because there is a high risk of a truck being hijacked for valuable components, you’d add security and possibly split the shipment in half to increase the odds that at least some product makes it to you quickly.
  • Teamwork
    If all team members on a cross-disciplinary team work together, not only is there a greater chance of identifying all uncertainty, but there is a greater chance of coming up with production plans that minimize uncertainty due to more creative power being available. For example, let’s say the product is fragile and the uncertainty lies in how many units will survive multiple shipments from factory to warehouse, warehouse to store, and store to consumer. More mind power increases the chance that a sturdier design will be found or that better packaging will be identified.

Share This on Linked In

How Do We Harness The Wisdom of Crowds In Supply Chain Forecasting?

As per a recent article in Strategy + Business on cleaning the crystal ball, which discussed the challenges associated with forecasting, we are reminded how the old game of estimating the number of jelly beans in a jar illustrates the innate wisdom of the crowd. In a class of 50 to 60 students, the average of the individual guesses will typically be better than all but one or two of the individual guesses. Furthermore, not only can you not identify the best guesser in advance, but that “expert” may not be the best individual for the next jar because the first result likely reflected a bit of random luck. Then there’s the fact that research by James Shanteau, professor of psychology at Kansas State, has shown that expert judgements often demonstrate logically inconsistent results. For example, medical pathologists presented with the same evidence twice would reach a different conclusion 50% of the time.

However, teams of forecasters often generate better results (and decisions) than individuals as long as the teams include a sufficient degree of diversity of information and perspectives. This is partially because a naive forecaster often frames the question a different way and thinks more deeply about the fundamental driver of the forecast than an expert who has developed an intuitive, but often overconfident, sense of what the future holds. But you can’t just throw a group of people together in a room and ask them to come up with a consensus because the most vocal or senior person might dominate the discussion and overly influence the consensus because most people put too much confidence in the most senior or highest-paid person.

So how do we harness the wisdom of the crowds and insure that no one voice dominates the forecast when the forecast is inherently risky and unpredictable? We look in the place that we are probably most familiar with — e-Sourcing. A blind RFX survey sent out to an interdisciplinary team of carefully chosen and randomly chosen individuals who, given a scenario description, past sales, and expected market trends (from third party analyst firms) are asked to provide their input to the short-, medium-, and long-term forecasts at the SKU and group level. Then, we simply average all of the responses, giving slightly higher, but individually equal, weighting to the carefully chosen respondents (who collectively complete an interdisciplinary team and do it as part of their jobs) and slightly lower, but individually equal, weighting to a section of random organizational individuals asked to weigh in with outside opinions. It won’t be perfect, but it will be substantially better than all but a few guesses — and since you won’t know what guesses will be good or bad in advance, it will substantially reduce your risk.

Thoughts? Comments? Criticisms?

Share This on Linked In

How Important are MiniTrends?

A recent book review of Minitrends: How Innovators & Entrepreneurs Discover & Profit from Business & Technology Trends over on the World Future Society site, which introduced the “minitrend” as any trend — technical, social, economic, demographic, legal, etc. — that is just beginning to emerge, although not yet acknowledged by the media or the marketplace, states that the early identification of emergent long-term trends poses such enormous marketplace value, it seems not improbable that traffic in minitrends will become a significant online phenomenon during the next two to five years.

As per the authors’ website, Minitrends go hand-in-hand with Megatrends. For example, within the Megatrend of an aging population are the Minitrends of people remaining active in the workforce for longer periods of time and increasing movement of elderly individuals to smaller nursing centers. And while some Minitrends will have little or no relationship to a Megatrend, they will have relevance to wider audiences.

If the minitrend is the leading indicator of an emerging megatrend, then it is probably quite important as it is signalling the state of things to come. If it’s a short-lived trend that’s here-today and gone-tomorrow, then any thought applied to the matter is a waste of time.

So what would a minitrend look like in supply chain? And how would you tell if it’s important? It could be a switch to a new technology platform, a switch to a new energy source, or a switch to a new form of payment. It would be important if the technology started to gain critical mass, if the energy source was cheaper and/or more sustainable, or the payment methodology preferred by your financial institutions.

So how do you detect a minitrend? Good question. According to the authors, you:

  • Follow the Money,
  • Follow the Leaders,
  • Take Note of Demographics,
  • Analyze Frustrations, and/or
  • Search for Convergences.

A good start, but I’m not sure it’s the secret sauce. But I’m not sure what is. Anyone have any ideas?

How Important is Local Language?

English is the language of business in most of the world, and in some countries, like India, at least 1 in 10 people speak it as a second or third language. So if you speak English, you can theoretically do business the world over. But is it enough?

A recent article over on the Harvard Business Review on “bridging the cultural divide” asked if learning Hindi is the key to creating business connections in India. According to one of the individuals being interviewed, you have thousands of entrepreneurs blooming in every region, in every city and in every town. It is no longer a few large industrial groups that control the Indian economy. Many of these young entrepreneurs feel comfortable [doing business] in Hindi. And this is true in many countries where English is fairly widely spoken for business (including China).

Plus, every language has words that are not easily translatable into English, just like many words (and phrases) in English are not easily translatable into some foreign languages. For example, the article mentions the translation of ‘chhatra latak, vaayu jhatak’ for ‘ceiling fan’, which means ‘that which hangs from the roof and sweeps the air’ and a recent article on Matador Abroad gave us 20 awesomely untranslatable words from around the world. So there are numerous advantages to knowing a local language.

Of course, if you’re not doing local business, and mainly outsourcing to the region, you probably don’t need to know the local language, but if you’re trying to sell into the region, there can be significant advantages.

Share This on Linked In