Category Archives: Problem Solving

85 Years Ago today, the smallest sovereign city-state in the world was established.

That’s right, eighty-five years ago today the Lateran Treaty was signed, bringing Vatican City into existence. With only 44 hectares, and 840 citizens and residents, it is the smallest independent state in the world by both area and population with an annual GDP in the magnitude of 20 Million and not Billions or Trillions.

It is more comparable to a mid-size company with 840 employees who live in residence year round and whose every need requires attention in addition to all of the maintenance associated with the business and resident properties, except this company has valued assets over 10 Billion dollars (as that is the estimated foreign investment by the Institute of Religious Works – the Vatican Bank – in the 1990s) and non-valued assets worth billions (upon billions) more on the open market, which include priceless buildings and works of art going back millennia.

The head of Procurement must have one of the most interesting jobs in the world. First of all, that individual would be procuring almost every commercial and consumer item at one point in time or another. Second, deliveries are limited to truck, train, and helicopter. (There is no airport, only one train line, and deliveries can be made to the gates.) Third, while that person would have every pressure to keep costs down for every day items and maintenance, that person would have an almost unlimited budget for works of art and historical artifacts of religious significance desired by the church. Fourth, security would be a concern with every purchase and delivery. And so on.

Relatively speaking, for an average mid-size company, Procurement is fairly straightforward. But how do you effectively management Procurement for the smallest independent city-state in the world?

If you have educated guesses, leave a comment or send the doctor an e-mail!

Cost Savings – It IS The Whole Package!

As per yesterday’s post and a recent article on Inbound Logistics, when Finding Cost Savings: It’s the Whole Package! Sometimes the only way you can save money is to first spend money.

The article, which says this is counter-intuitive (although it really isn’t), gives the example of an electronics manufacturing company that had a relatively low 2% damage rate, but needed to reduce shipping damage even further due to the high value of it’s products. They decided to work with their pallet provider to reduce the strength of, and add strength to, their pallets and boxes. The new packaging cost more to produce, but the smaller footprint reduced their LTL shipping costs and their reduced damage rate of a mere 0.1%, which was 20 times better than their previous damage rate, saved them considerably more than what they spent on improved packaging.

This goes back to yesterday’s post where true, sustainable, savings only come from the perfect order. If anything screws up, any cost savings you identified earlier in the process are more than negated by any screw-up that comes later. But even getting the order perfect from the supplier isn’t enough if you’re buying products for resale and then they get damaged when you ship the product from your facility to the customer’s location. The perfect order isn’t just from the supplier to you, it’s from the supplier to the end customer. The perfect order crosses the entire supply chain from the initial obtainment of the raw materials for the product three tiers down until the final product arrives in the hand of the end customer.

The other issue, as pointed out by the article, is sustainability. Your brand reputation might depend upon your commitment to sustainability and Corporate Social Responsibility – ignoring it to cut a few cost corners could result in a consumer backlash that will take significantly more off of your bottom line than the few pennies you save buying non-fair trade coffee or conflict diamonds.

Moreover, true sustainability always delivers cost reductions, especially where the consumption of natural resources is concerned. While there will be an upfront cost to install new technologies that reduce water and energy consumption, or to build new solar arrays and wind turbines to produce more sustainable power, which will be stored in a battery array for dark and calm times, this is a one-time up-front cost. Ongoing costs will be significantly reduce as the sun and the wind is free – unlike coal and oil which gets more expensive by the year. As the article says “any wasted money is wasted over and over again” and even if it takes three to five years to recover the investment made to prevent money being wasted, a company in it for the long haul will make it up four times over in the following twenty years.

So always look at the big picture – then true cost savings opportunities will emerge!

The (Board) Gamer’s Guide to Supply Management Part III: Star Trek Catan

Space, the final frontier. These are the voyages of the interstellar supply fleet. Their interstellar mission: to find new sources of raw materials, to build new outposts and new star-bases, to build new supply routes where no supply routes existed before!

So, it’s been a while and you’ve progressed to the point where you’re now Master of Catan. Always the first to build outposts, transform them into cities, build new supply routes connecting them, and amass the largest armies to protect those supply routes, you think you’re a master of supply as you deftly conquer the ports to secure the trade advantage, always outsmart the pirate, and never allow your rivals to secure a longer route. Maybe you are the Master of the lonely isle of Catan, but are you ready to supply the final frontier?

In Star Trek Catan, you’re settling the final frontier – space. You are a merchant selected by the Federation to build supply outposts to supply the different federation members. Instead of building roads, you are building starships; instead of building settlements, you are building outposts; and instead of building up those settlements into cities, you are building those outposts up into star-bases. Just like roads, settlements, and cities required resources that could only be collected from regions that neighboured your existing settlements and cities, starships, outposts, and star-bases require resources that can only be collected from nearby planets. (Wood and brick are replaced by dilithium and tritanium, and sheep, wheat, and ore are replaced by food, water, and oxygen.) You still have development cards, but instead of soldiers that build your army, there are star-fleet interventions that augment your security, and the progress and “victory point” cards have been appropriately updated as well. But the biggest difference is the introduction of support cards. In regular Catan, all you could do was build, trade, or play a development card. In Star Trek Catan, you always have one support card which gives you a unique advantage and the choice of when to play it (which is important as any given support card can only be used twice).

The support cards, which are, of course, modelled after original Star Trek characters, give you special abilities on your turn or in certain circumstances. Eight of the abilities can only be activated on your turn:

  • Uhura:Forced Trade You have the upper hand and can force up to two players to give you a resource type you desire in exchange for a resource type you do not.
  • Scott:Starship Building Miracle When building a starship, you may replace 1 dilithium or 1 tritanium with any resource of your choice.
  • Sulu:New Heading You may move any starship on the board at the end of one of your supply routes to the end of another one of your supply routes.
  • McCoy:Development Specialist When buying a development card, one resource of your choice can be replaced with another resource of your choice.
  • Chekov:Klingon Decoy Move the Klingons to the asteroid field and take 1 resource of the type produced by the planet the Klingons left.
  • Rand:Free Trading Outpost Receive one resource of your choice and perform one or more border trades with that resource type at the 2:1 trading outpost for that resource type.
  • Chapel:Liberate a Resource On your turn, after the production roll, take one resource of your choice from a rival with more victory points than you.
  • Sarek:Swords to Plowshares You may discard one Starfleet Intervenes card to build an outpost for the same cost as a starship.

The final two abilities are activated on production rolls:

  • Spock:Resource Compensation On any non-”7″ production roll where you receive no resources, you still get to take one resource of your choice.
  • Kirk:Protection from Klingons When a “7″ is rolled, if you have more than 7 resources, you may use this ability to prevent resource loss or, if you have 7 or less resources, to take a resource of your choice.

These abilities, which encapsulate some of the different skills deft supply managers may possess, can completely change the game dynamics. Think you’ve done a good job acquiring a monopoly on water or air? Think again. An opponent with the Spock or Uhura support card can still acquire those resources from you or the main supply. Or use Scott or McCoy to substitute another resource for that resource. And it changes the dynamic for you too! Once you’ve deftly placed those star-bases and are acquiring resources faster than you can build, if you can secure it, you can use Kirk’s special ability to keep those Klingons away and achieve victory even faster.

And if you play your cards right, you’ll always score two (of the needed 10) victory points for the Longest Supply Route.

Could there be a better game for a budding Supply Manager to cut his teeth on as he takes up the art of strategic board-gaming to refine his supply mastery skills? the doctor, who believes we should all be preparing for Extra-Planetary Supply Management, thinks not!

The original Board Gamer’s Guide series:
Part    I: Ticket to Ride
Part   II: The Settlers of Catan
Part  III: Munchkin
Part  IV: Castle Panic
Part   V: Small World
Part  VI: Zombie Dice, Tsuro, and Get Bit!

… and the new Board Gamer’s Guide series:
Part  VII: Upon a Salty Ocean
Part VIII: Agricola
Part    IX: Small World Part 2
Part     X: All Creatures Big and Small
Part    XI: Agricola Part II-A
Part   XII: Agricola Part II-B

Thirty-Five Years Ago Today, Trans-Atlantic Balloon Shipments Became a Reality!

Not necessarily a safe or cost-effective reality, but a reality when the Double Eagle II, piloted by Ben Abruzzo, Maxie Anderson, and Larry Anderson, became the first balloon to cross the Atlantic Ocean when it landed in Miserey, France (after leaving Presque Isle, Maine).

Where transportation is concerned, this was quite a feat!

Some Takeaways from the E2Open sponsored SCM World Collaborative Execution Study

SCM World recently released a study on Collaborative Execution (defined as two or more parties working together to improve supply chain performance by continuously solving real problems with better information), focussed on Speed, Innovation and Profitability, overseen by Kevin O’Marah, and sponsored by E2Open that had some rather interesting, and in a few cases, surprising results. First off:

For suppliers, collaboration is primarily a means by which their customers share demand information, with 73% strongly agreeing this is a key aspect of collaboration.

For buyers, an overwhelming 83% believe collaboration revolves around the supplier sharing availability information (e.g. capacity, lead times, etc.).

In other words, both sides agree that collaboration centres on information sharing and, furthermore, the study also found that,
both sides need visibility and want a dedicated problem solver

This means that the primary barrier to collaboration between most supply chain partners is the fact that companies struggle to share information effectively, with 54% seeing lack of data visibility across trading partners as a perennial problem. Furthermore, the next biggest barrier was speed of issue resolution, with almost 50% agreeing that this was a barrier to effective collaboration. (In addition, 92% agree that quick problem resolution is part of good collaboration.)

But the most surprising result of the survey was that trust, governance, and benefit sharing were not the biggest barriers to collaboration, as commonly suggested, but the ability to connect trading partner information flow, insure quality of information, and synchronize that information for quick problem solving. (For example, almost one half of respondents felt granularity of data was a problem, speaking to the quality issue, and almost one half of respondents saw timeliness of information as a problem.) This says that, for the most part, it is not lack of desire, trust, or willingness to collaborate that is the problem, but a lack of technology to enable collaboration. (And this is a shame, considering that such technology has existed in more than adequate form for at least five years now for even the largest of multi-nationals with the most complex supply networks. It may take some effort to get used to some of the technology, which is only now maturing on the usability front in some cases, but how much of a barrier is it really to spend a few days learning a technology that is going to cut your issue resolution time in half and decrease your risk substantially?)

Given that:

  • collaborative relationships were more cost effective,
    55% of respondents agree
  • good collaboration minimizes risk, and
    75% of respondents agree
  • learning is faster in a collaborative environment
    70% of respondents conclude that the rate of leaning increases by at least one-and-a-half times

Acquiring the technology that your organization needs to take collaboration with your trading partners to the next level should be a no-brainer. (Especially since the last finding means that any operational metric targeted such as inventory days, total landed cost, cash to cash cycle time can be expected to improve one and a half times as quickly as would be the case without collaborative execution. Thus, any appropriate technology acquisition is going to give you a very quick ROI.)

The only other point of interest was the not-so-surprising result that management by exception it seems is still not part of a “truly collaborative” trading partner relationship for a substantial number of companies. This would indicate that collaboration, even among market leaders, is still not very mature. In a mature relationship, each party trusts the other to do what they do best and only gets involved when a deviation is detected or an idea is devised to improve the process or product. But still, it’s nice to know that both buyers and sellers do not see trust as a barrier to collaborating for mutual gain.