Anyone who has been in business for any length of time has been wrong at least once in their career. Learning from our mistakes is how we grow, right? One of my personal growth opportunities was a senior manager in strategic procurement for a Fortune 100 company. Outside consultants had sold management on their leading us in an accelerated commodity strategy process combined with a ‘free markets’-style Internet auction.
I wasn’t happy about it and I wasn’t alone. I’m a “do-it-myself” kind of guy and I don’t need other people taking care of my business. We had a lot of good people. We knew our commodities. We were taking cost out at a competitive rate based on the commodities, but I couldn’t argue that our business was in trouble from a profitability standpoint and needed help. No one was getting a vote on this and it was up to all of us to get on board and move forward.
To make a long story short, it was a very successful undertaking. We saved more money and we found more new suppliers than we would have doing business the same old way. The outside consulting group helped us in a lot of ways. They added people to the mix that allowed us to do things faster than we could have on our own. Yes, those outside people needed to be brought up to speed, but that could be said about anyone we would have put into a special task force initiative like this. The consultants value add was process knowledge. They had been through this drill before. On different commodities and in a different line of businesses, but it was successful all the same because the process really doesn’t change all that much. We knew the process, but had run it less aggressively and at a more relaxed pace with team leaders and members that were taking time out from the day to day tactical side to drive this strategic initiative. We learned how to do it better and faster than we had before.
One very important factor in my mind, was that by bringing in someone from the outside with strong top management support and visibility, it sent a very strong signal inside and outside the company that the game was being changed and pushed people outside of their comfort zones. Current suppliers responded more competitively than they had in the past. The aggressively competitive bids of outside suppliers could not be ignored and forced us to add suppliers we may not have considered as strongly in the ‘business-as-usual’ process. The next time your business needs a strategic kick start, don’t be shy to engage outside talent. I know I won’t.
I joined a discussion a couple weeks ago and generated a bit of a firestorm. Someone posted a question about how forecasting helps you become lean. It’s one of my hot buttons, so I couldn’t help myself. The best characterization I’ve heard for forecasting is that it’s either ‘lucky’ or ‘lousy’. I don’t remember where I first heard it, so I must apologize for not being able to properly throw credit for this gem. In all the lean training and literature I’ve been through, I can’t recollect a mention of ‘Forecasting’ being on the critical yet never ending path to ‘The Goal’.
Forecasting is nothing more than an educated guess. Until the day that lead-times all go to zero and the supply chain response is infinite, forecasting is a necessary evil. Obviously, the more resources that have to be committed prior to receiving an offsetting commitment from a customer, the higher the exposure and forecasting becomes increasingly important. As lead times decline and responsiveness increases, the forecast becomes less important, but the necessity for it will never completely go away.
The goal should be to be able to effectively satisfy customer demands despite greater and greater deviations between foretasted and actual demand levels. The only way to do this is to reduce the lead time between customer ‘stimulus’ (pull) to supply chain ‘response’. The companies that are on the real road to lean understand this and the ones are trying to take the back alley short cuts do not.
Are you taking lead-time as a given? Do your suppliers embrace lean and tools like SMED, small lot production etc? Are you buying mostly on price and not total cost? Are you buying in volume and taking the discounts when smaller quantities may be better for both you and the supplier – so they can serve you and their other customers? I’ve seen all too often when a volume discount was based more on the incentives for the salesman than on the physics and logistics of the transformation.
If I can draw a correlation between the discussion activity centered on forecasting vs. lead-time reduction, collectively we’re not spending enough on the latter. Effort spent on forecasting today must be re-spent on it tomorrow. A lead-time reduction improves your ability to serve the customer for time eternal moving forward. Spending a bit more time here will pay huge dividends down the road.
I must say it’s taken me some time to finally get here. For those of you contemplating their own blog, I must say it is much easier than I made it out to be. GoDaddy made it very easy and very inexpesive. Most of my time was spent fretting about what I wanted to write about, what the domain name should be, on and on. I finally just decided to get ‘myname.com’ and just get going. If we always strive for perfection, what we have at any given moment is most often much more than others expect.
