So you want to work in Operations and Supply Chain Management?

Well, it’s the start of a new academic year. A new cohort of Undergrads arriving at WBS and all must read OM as a core subject. Many, unfortunately, do not ‘get’ (or want to get) Ops, but some do. In conversations we have with alumni and through our work, the topic of talent in O&SCM often comes up as an area that firms struggle with. As O&SCM academics we always knew that it was a REALLY important area, it appears that the wider business community has woken up. So, what would we recommend to employers and potential employees as the key ingredients for a successful O&SC manager?

1. Deal with both hard and soft data

O&SCM is about two things. Understanding how to fulfil customers effectively and understanding what you should and should not do and how to do them. Some data are hard. Customer demand volumes, volatility, prices. Other data are soft, especially in SCM where relationships with suppliers can be critical. Other data are uncomfortably grey. You think you understand costs but all you have is price data not costs. That’s a bunch of different types of data that need to be dealt with and the best managers understand the different types, how they can be used and how much faith can be placed in them.

2. See the big picture

This is both vertical and horizontal. Vertically, good Ops Managers need to deal with the functions that ‘surround’ operations (typically sales and procurement) and reconcile the inevitable tensions to effectively fulfil customer demand. Horizontally, it is about understanding how what you do at the operational level affects the organisation. For example, how much inventory? Too much stymies cash flow, too little can expose your operation – and customer – to non-delivery. Decisions taken at the operational level impact the firm. Good managers understand why it does and what needs to be done.

3. Understand uncertainty and complexity

Operations and supply chains are inherently unstable and complex. How big is the supply base? What is the demand and supply volatility? Can this uncertainty ever be mitigated or does it have to accepted? Being able to understand this complexity and the interdependence will allow better decisions to be made. For example, if you have an unseasonably warm October (uncertainty!) and there are no summer fashions in store, how do you get your Eastern European supply base to change it’s schedule and deliver in a short time frame without affecting other deliveries (complexity!)? This leads me onto the next thing.

4. Prioritization

Ops and Supply Chains are dynamic. There is volatility at both a customer, supplier and resource level. Customers can increase or decrease orders on a whim, a supplier can go bankrupt or supplies don’t turn up (or are wrong when they get there), and resources, both human and equipment don’t always behave in the way you expect. All of this means that if you want to work in Ops and Supply Chain you need to be able to prioritise and reprioritise (and reprioritise again) to deal with the uncertainty and complexity.

5. Seek a ‘global’ rather than local solution

Too many times we see functions that place the emphasis on the function. This can lead to dysfunctional behaviours and dissatisfied customers. Occasionally the Ops and Supply Chain function(s) may need to keep a hit to keep customers happy (your 3PL will love you for all of those expedited orders). But this means that nearly everyone is happy(ish).

6. Cope with responsibility without power

More often than not, people within Ops and Supply Chains have lots of responsibility. Most firms spend over 75% of COGS on ‘supplies’ and Ops is what allows organisations to create ‘stuff’. So, important right? But, more often than not, this responsibility comes without power. Most firms have COO’s, many firm’s have CPO’s, but that’s a limited amount of power for all that responsibility. Especially given the impact that Ops and Supply Chain plays on the financial performance of an organisation and customer satisfaction. So accept it, and deal with it. Power comers with expertise, not role.

7. A deep understanding and passion about O&SCM

So few of our students want to work in Ops and Supply Chain. But lots of them want to go into Management Consulting. The majority want to go into Banking but Investment Banks from our understanding overwhelmingly hire highly numerate grads (Maths and Physics mainly). Part of this is that Ops is viewed – or possibly we teach it – as a very factory or process centric subject. Part of this is is that it doesn’t seem particularly cool. I would argue that if you want to go into Consulting, understanding about process design and objectives, standardisation and effectiveness, in addition to improving customer satisfaction are ALL critical. This is understanding that O&SCM is a vital area for all organisations. In addition, if you are going to be doing it, and living with it, you need to be passionate about it. You need to be fall in love with it again and again, even when you have a bad day.

8. Deliver from day one

Seems pretty logical right? Ops and Supply Chain Management is about effectively fulfilling customers (both internal and external), so if you are going to work in it you need to be able to deliver. And this needs to be from the start. I also suggest that this needs to be done consistently and pro-actively without starting any fires. Consistency is key…

9. Taking a long view

This is slightly paradoxical given that I have stressed how much of O&SCM is dynamic and complex. But, improvement takes time. More often than not many years. So, deal with the day-to-day but also never lose focus of how long real change takes. One of my favourite anecdotes is that it took Toyota decades to perfect and embed Lean. Why do we expect to be able to do it inside 12 months? By taking a long view you can deal with this.

10. Build relationships

This is the glue that holds everything together. And, these relationships need to be both internal and external. Relationships allow you to understand uncertainty within the customer and supply base, and allow you to create the global solution within a firm. Without them you have limited information, limited knowledge and no goodwill. People who want to work in O&SCM need good interpersonal skills in order to build lasting, strong relationships.

 

 

How NOT to design a service satisfaction survey

A follow on from my experience with the service network that fixed my MLC (remember that?). When I picked my car up I was asked to fill out a short survey on how my customer experience was. The questions – and my thoughts about them – went something like this:

1. How was your customer experience today? Today it was great. I got my car back, it worked, and I hadn’t had to pay any money. However, the total experience was less than great.

2. How was your service advisor today? As before. Marvellous. He had told me I could get the MLC back early, had checked out another possible fault and got a price on some new tyres for me. But remember… Services are delivered by more than one party. Let’s figure out how they ALL performed…

3. How would you rate us for value for money? It was free, gratis, I paid nothing. But why there was no option to say that this was warranty work on the form?

I also noticed that the scales were colour coded. Bright, solid green for very good, solid red for very bad. Surely human nature draws us to respond in the positive? The survey was also filled-in in front of the service advisor. Surely, off-line provides a better response? So, what can be done to improve the reliability of these surveys? Here’s a few suggestions:

1. Focus on the TOTAL experience, otherwise people will break it down into times and the full picture won’t be revealed.

2. Acknowledge that there’s a network, find out who the customer came into contact with, and how each of them rated. This was a dealer survey but surely Premium German Car Maker would be interested in how THEIR service network is performing?

3. Remove ambiguity. Let the customer say if it’s a warranty claim or their own hard earned cash that they have parted with. Surely whether someone pays or not will absolutely influence their perspective?

4. Minimise bias. Don’t colour code things and don’t get people to fill these things in live. It absolutely creates bias, but try to get the form filled-in in a way that creates opportunities for improvement. I am not precisely sure how to do this but it does not involve an opportunity to win an iPad…

I’m not anti-survey, I’m anti bad survey. They should be designed so that action can be taken where performance is sub-standard and without this design, an opportunity for improvement can be missed.

Service Networks and my Mid-Life Crisis…

Let’s get one thing clarified first. My Mid-Life Crisis (I’ll shorten this to MLC) is a thing and not an emotional or psychological condition. As I was turning 40 I decided to do the sensible thing and buy a bright red sports car. This is my MLC. The MLC was ‘pre-loved’ (academics aren’t that well paid) from a premium German manufacturer (I am protecting the names of the other parties here) and as I didn’t want to be landed with some unexpected, massive bill later on, I took out an extended warranty.

Last weekend the MLC began to emit a noise that sounded expensive and then another expensive looking light appeared on the dash as I drove home (they really should be flashing pound signs rather that icons that allegedly look like engines). I phoned the dealer and asked for it to be booked in to be looked at (and hopefully repaired under warranty). They booked me in for the following day but asked me to ring the roadside assistance number that came as part of the warranty as they did not want the car to be driven. That’s one hand off from the dealer to a third party…

I called the assistance number and they offer me a specific technician for the MLC but between 7-9AM the next day as they have no available technicians. I politely declined and decided to take it to the dealer at the allotted time the next day. The assistance company then called me to say they have found a specific technician who turned up at the allotted time (about 2 hours after calling), plugged the MLC into a computer, diagnosed the fault, said it’s safe to drive and that he cannot fix it and I should take it to the dealer. He also kindly notified his organisation that I might need a courtesy car.

I took my MLC to the dealer on the following morning where I was greeted by a happy chap who directed me to take a seat and I then see ‘my’ service advisor (a further hand-over). The advisor was very polite and informed me that it should be covered under the warranty (great!), but I could not have a courtesy car for two weeks as they normally have 15 of them but 5 have been crashed (not so great). He also informed me that if the repair is over £500 then he needed approval from the warranty firm for the repairs (not good, more waiting). The car should be fixed by noon of the following day and after signing a bit of paper and handing over the keys I headed to work.

Some time later, ensconced in the Ivory Towers of WBS, I received a call from the manufacturer’s courtesy vehicles provider to make me aware that I could have a car and to let them know if and when I wanted it (yet another handover). The interesting fact about this is that his call was prompted not by the dealer, but by the repairman logging it on the previous night. I then received a sequence of calls from ‘my’ service advisor keeping me updated (they identified two faults but there was really only one and they had to seek approval from the warranty provider to carry out the repair), and my MLC was now fit to drive again. So, all’s well that ends well right? Not quite…

Let’s consider the number of party’s I interacted with. 1) The nice lady at the dealer, 2) The nice lady at the automotive assistance place, 3) The repairman, 4) My service advisor, 5) The courtesy vehicle provider, and 6) (indirectly) the warranty provider. That’s a whole sequence of potential break points in the service. Also, if I had needed a car (but remember I was told I could not have one for two weeks?) to get around and couldn’t do it that would have seriously affected my view of the premium German brand. So what can we take away from this?

Organisations must consider that services are delivered in networks. Networks have break points and that failure of ANY of these points leads to me – or you, or your customers – having a negative view of said firms products or services. This could lead me to take my business else where. So, how can organisations get round this? First, make sure that using the service appears simple. As a customer I had clear visibility of a major part of the service network. I didn’t need (or want) this and it probably increased my frustration. Second, take ownership of the network. This does not mean in-sourcing it, but it does mean maintaining a consistent experience throughout. After all, if it does go wrong, people can go elsewhere…

 

Why can’t we all just get along? Creating the conditions for (non) collaboration

I went to lunch this week with a former CPO from a large industrial firm and a purchasing director from an automotive firm. Over lunch I was asked the question: “why do we find collaboration so difficult in supply chains?” My response was that there are a number of reasons behind this and nearly all of them can be addressed. I believe the reasons that apply to collaboration between firms also apply to collaboration within the firm, so, in no particular order:

1) Mutuality. Collaboration is mutual and has common goals. I have often heard a firm use the term ‘strategic partner’ then fail to apply strategic thinking (“we’ll put you on the approved supplier list”) or partnership behaviour (“can we see your accounts”). Collaboration has to be about both sides putting something in, to both get something out. It requires common, agreed upon (i.e. mutual) goals. After all, you both have to have skin in the game.

2) Intent. You must have intent to do it. Collaboration is about adaptation between partners, it’s about joint working. While there can be lots of intentions towards doing it, one party has to move first otherwise we end up with this:

Soldiers

3) Social bonds. Good collaboration needs lots of rich information sharing and deep social bonds. This can be achieved by putting people into cross-functional teams, co-locating staff in a supplier or customer, or structuring working spaces to encourage social connections. One European car manufacturer structures its design offices in a ‘hub and spoke’ where the design teams work in the spokes and the hub contained shared services (photocopiers, coffee, water etc.). People mingle in the hub, informal information flows, collaboration occurs and (hopefully) better design occurs. If it’s not possible to create these interactions structurally, for example your customer or supplier is eight time zones away, then social bonds must be created differently. Frequent visits is one way to do this but the relationship needs to be kept ‘live’ in between visits so pick the phone up and ask them how they are, share information and knowledge to demonstrate your goodwill and intent.

4) Incentivisation. In a previous post I discussed the need for metrics and incentives to be aligned to what the organization wished to achieve. Well, the same thing holds here. If collaboration is to be nurtured, then incentive mechanisms need to be established that foster a win-win environment. They need to be jointly agreed and adhered to. It’s no good looking for “price down”, when the resources of your collaborator are complementary and are tricky to substitute. After all. Collaboration is about leveraging synergies between organisations, not maximizing gains within companies.

5) Trustworthiness NOT trust. This old chestnut, but with a twist. Too many times have I heard that ‘trust’ is key, but the reality is, trust is a pretty difficult thing to grab hold off and influence. That’s why I always say that trustworthiness is more critical (so, are you a person of your word?). It’s then up to the other person to determine whether they trust you (and are they therefore trustworthy?). So, in the end, it’s just about doing what you said you would (and having a person that understands that on the other side)…

So, there we have it. Possibly simplistic, possibly naïve, some simple prescriptions for getting along.

 

 

 

 

 

Get your house in order. Why effective Supply Chain Management starts inside…

Good SCM is about effectively configuring and coordinating supply to meet customer demand. Sounds pretty simple, but why do organisations find it so difficult? I believe much of this has to do to with their structures, methods for incentivisation, differing functional goals and radically different views as to who the customer actually is.

Let’s look at the simple example of the procurement and sales functions. Procurement’s goal as a function is typically focussed on negotiating the best price (let’s leave the thorny debate on whether the cost is actually clear to another time) and they might be looking for surety of supply. They will be incentivised to achieve these. Who’s their customer? That’s probably operations who have different goals. If we then turn to the sales function, what’s their goal? Typically to sell ‘stuff’ to the customer. Their customer is the customer. The sales function will be incentivised to sell ‘stuff’ I would suggest that this creates something of a paradox. Procurement focused on cost, Sales on sales and Ops doing their own thing in between. So, what are the chances of matching supply and demand inside a single organization, let alone the numerous organizations that make up today’s supply chains?

Some organisations I have worked with attempt to create a supply chain function. They attempt to address the structural challenges of effective SCM. All of those I have seen forget to include some functions – typically sales (making the SC function wholly upstream focussed), or operations (meaning a critical component of the supply chain is not integrated). So trying to address this through structural means looks difficult. An alternative option is to consider more integrated goals and incentivisation mechanisms that guide functions towards considering that while they all have different internal customers, together they have one end customer. Once this is in place, intra-functional integration becomes easier and working together becomes part of the day-to-day. Only after learning how to do it can organisations begin to drive real value from their supply chains. So, first get your own house in order.

So what’s Operations Management (and why is it important)?

Operations are all around us, everything we consume, by way of product or service, is the result of Operations; without them nothing would get done. The aim of Operations Management is to ensure that what is done, is done to the greatest benefits of the operation’s stakeholders.

Operations Management (OM for short) considers how organisations configure, control and coordinate resources and processes to deliver value through products and services to the network of stakeholders. We recognise that few operations exist in isolation and so some resources and processes that are important to us are not in our control, they exist in the wider network (supply chain) and these can only be co-ordinated, so we extend our concept of Operations Management to be the configuration, control and co-ordination of resources and processes to deliver value to the stakeholder network. Why is this important?

In order to illustrate one facet of why it is important, let’s considering examples such as some recent product recalls (Toyota, horse meat etc.) and disasters (the collapse of Rana Plaza). In cases such as these the whole Operation was configured in such a way that the focal (or OEM) organisation had lost control of key parts of their Operation, thus posing risk – reputational or otherwise – to themselves and other stakeholders. So OM is partly about managing risk, but why else is it important?

I would argue that in addition to risk, good OM drives efficiency and effectiveness, profit (surplus in the public sector) and liquidity – but probably not all at the same time. Much of the focus of OM is about how we do more with less – how we become efficient. Efficiency and profit link back to Porter’s view of Strategy being about Cost Leadership and Differentiation (greater service levels lead to greater profit). So, good – or bad – OM impacts a firm strategically but we still need to discuss how OM can impact liquidity. If a firm can minimise it’s cash-to-cash cycle then it is more liquid. Less reputable organizations might do this by asking for money from customers more quickly (reducing debtor days) and paying suppliers over a greater time period (increasing creditor days). In the words of a colleague, this is “bully boy accountancy”, and can upset customers and lead to an unsustainable supply base as you would be impacting suppliers cash flow. Is it not better to get Operations to free up cash by minimising the need for inventory and reducing the amount of work-in-process? I think so.

So, without OM we wouldn’t produce stuff – products or services – and that ‘stuff’ would be less efficiently produced and so less competitive in the market.

Operations are clearly important. There is still so much more to OM. There is innovation, performance management, agility, supply chain and so on. These will be the subject of future blog posts. Watch this space.