Building the foundation of a successful partnership starts with a good understanding of what you are doing, why you are doing it and the risks you can expect along the way.  Carving out an existing operation or sourcing to increase capacity are vastly different than sourcing a new product for a startup company with no hard assets.  Companies in the latter situation need to get outside help without question.  Companies that are outsourcing part of an operation or certain product lines have an understanding of the undertaking.  The challenge is finding those people, bringing them together and motivating them to make someone else successful doing what they (and their friends in the company) are doing today.   Not a task for the feint of heart.

If I had to pick one task or decision as the most critical determinant of success of the project it would be selection of the project leader.   Don’t make the mistake of assigning the one person who understands the product and process more than anyone else at the expense of all other skill dimensions.  It’s also more than just assigning it to a VP.  The right amount of technical knowledge is dependent on who you put around them on the team.  In outsourcing an existing operation, the project  leader needs to have strong interpersonal skills to manage the strong emotions surrounding the project.

Once the team is formed the next critical phase is defining the requirements and writing a preliminary statement of work.  The more detail here the better.  Anything important left unclear or unsaid will surely result in misunderstanding and sow the seeds of discontent.   As with anything involved here, don’t be an intellectual martyr.  Admit you aren’t sure and get second or third parties to challenge your idea of complete.  Meet with suppliers as part of the preliminary RFP/RFQ process to insure they have a solid understanding of what you are looking for.  Their questions will improve your documents.  Lead them to restate their understanding of your needs in their terms.  If they can’t do it well, they don’t.

Remember that the salesperson always wants your business.    Salespeople get paid to bring home business from new clients.  The best and smartest companies screen their prospects and will avoid considering projects that don’t fit their strengths.  Is your business really attractive to the prospect?  How do they measure their business and their customers?  Are you in a ‘focus segment’?    A question I love to ask is “Who are your top customers and if you win my business will I make that club and why?”   The answer to this question and the following discussion is very important to understanding your prospects for managing the relationship and the risks associated with it.  If you make it into the top customer club, you should get the regular attention of top management.  If you get the regular attention of top management, that usually means you get the ‘A team’ on your project – or at least B team players they project to develop quickly into A team players which can be even better because sometimes the A team is spread too thin.

Selecting an outsourcing partner has often been paralleled to a marriage.   I don’t know the statistics but even the worst Hollywood or Wall Street divorce can be cheaper than an outsourcing disengagement.  Just as the start and middle phase of the program must be clearly understood, so should the end.  Who owns what?  What are the ‘bridge’ responsibilities?  The more detail here the better because once disengagement is public all the other motivations go out the window and it all boils down to what is clearly on paper.

The bad thing that I always heard about consulting is that you are always selling yourself between jobs.  And how is that different from the real world?    Selling yourself is a fact of life these days.  No matter if you are currently employed or in-transition, you have to constantly be on the lookout to protect your turf or find a new range.  From CEO to entry level, there’s someone out there that would love to eat your lunch.

The most important thing for any employee to do, contract or not, is to demonstrate value add over time.  The more the value added over the shorter the amount of time the better.  A happy customer can turn into a full time employer and at worst help sell your next opportunity.  In the current economic and employment climate, more and more senior roles are temporary by nature if not by circumstance.   You have to sell your way in, but you also have to sell once you get in.

Once your inside you need to get to scoping out the real depth and breadth of the problem you are about to solve.     That’s going to require you to get behind the scenes and find out what is really going on.  The best way to do that is meet with the people directly involved or affected by the process you are working on.   The most important thing to get across is that you are here to help and you need their help to understand how you can do that.

Don’t expect to get the real answer on the first try.  You may hit the jackpot early, but until people trust you, it isn’t likely.   If you do well on your first couple of meetings, word will get around that you’re “OK” and people will open up to you.  It’s very important to read people and change your approach as you go.  If people are answering you with small word count sentences, keep it soft and easy and retreat for a deeper follow up on the next try.   If the flood gates open, don’t change the subject!

One of the natural circumstances of being a consultant is that you are a permanent outsider.  Most people do not welcome change in the first place so when it comes from an outsider, resistance finds friends very quickly.   You have to get used to the fact that the best you can do is make a strong case and hope common business sense takes over and people pick up on it.   Having the right executive champion can be the difference between success or failure.  They should help coach you when things get rough, but try to keep their help behind the scenes or whatever trust you’ve built will quickly vanish.

Be careful how you introduce and carry yourself.  People are much more likely to chip in and get behind you if they trust you are here to make them all look better and it’s not about you.  In this way good leadership strategies make the same sense for the consultant as they do for line management.  There is no ‘I’ in team, etc.  When you are asked to make observations and recommendations about the current state of a process or operation take care at how you present things.  Keep it impersonal and objective.   Soften every criticism with a positive point.  Choose your words very carefully.  Point out better ways to do things instead of finding fault with how a particular function or person does it today.

Do I need to mention that your “A” players need to lead this from the pre-selection phase through installation and post mortem?   The “A Team”  must delegate or offload enough work to others in order to devote the time needed to get this done.  You can’t develop an “A” process with your “B” team.    This team does not and should not be all upper management.   This needs to be driven as much from the people ‘on the lines’ as from management.  It also needs  a diversity in perspective.  Great ideas come from less experienced but high potential newer people.

Don’t  forget  to ‘Keep it Simple’.  Who buys a Ferrari when a Taurus would do?  The answer is people who have either won the lottery or have otherwise become financially independent.   If you are running a business like that, please give me a call.  The fancy ‘bells and whistles’ aren’t free.  The most obvious price is up front and or monthly service fees.   The more insidious component and what is often not realized until late in the project are the ongoing maintenance required to keep it operating in peak operating condition – just like the Ferrari.   It’s very important to balance the value of the fancy ‘bells and whistles’ against the realities what is needed to do the job and the capabilities throughout the chain.   Avoid creating additional systems with additional maintenance requirements when integrating the data into current systems will do just fine.

Block diagramming or mapping your process from a current and future state perspective is an important exercise BEFORE engaging software vendors.  That way you are defining what software can do for you instead of fitting your process to the software.  You’d be surprised how many companies put this off until afterward and pay the price of a delayed on failed implementation, a swoon in performance and customer service.    Mapping needs to happen to prior to develop the training plan and materials and should be largely independent of the system you choose.  I don’t remember who said “The road to hell is paved with good intentions”, but if you throw software at a bad process you just get to a bad place faster.   If this system is really going to transform your business you need a new blueprint and plan to go along with it.  Don’t miss the chance to lay the right foundation for the future.

Real –time data is critical in tracking material, inventory levels in the chain, ready to build and in performing ‘what if’ scenarios.   Inventory data needs to be very accurate and if you’ve picked the right partners it very well should be.  Lead-time data can be a different issue.   Data can be sent back and forth very efficiently over the internet, but if it’s been weeks since the data was updated, be careful about  the assumptions you make from it.   Do you really need that screen at your fingertips with a real-time update on every part or will a daily or weekly report that is nightly batched and stored on a local server do just fine?

Before you sign the final documents, Test drive the system with data from your own business.   Most of solution providers will gladly accommodate this step.   The limiting issue here is translation and mapping of your data to the target system.   It’s not trivial, but it’s not rocket science either and it’s something better understood before you jump in anyway.  If your IT staff is more comfortable with infrastructure (networks, servers and wires) than application work (the systems and resulting data carried in and around the network) then find a good contractor that will stick with you through the selection and implementation.

The first step on the road to corporate sustainability is to develop a thorough awareness within the enterprise of the issues involved and how they impact the company.  How aware are you on the subject of sustainability?  What is the environmental impact of the technologies and processes in your industry?  Many people are aware there is an issue, but few understand the specifics nor the urgency in a sufficient level of detail nor from a business perspective in meeting the risks and opportunities that sustainability brings with it.

Before you can decide where you need to go, you need to know where you are.  The second step on the road toward sustainability comes from understanding the current situation.  How much energy is being consumed at the various locations and steps within the company processes?  Where is the company in relation to compliance with current regulations and what risks are on the horizon with potential new regulations?   Are there any resource saving projects underway and are there any new projects being considered or suggested?  What key metrics need to be added to the corporate dashboard?   How does the company compare with competitors?  How are they meeting the challenge?

Once an understanding of the current situation has been developed, work can begin on a reduction strategy taking the top resource cost impacts and risks and working down the list.  Are there key technologies ready for adoption that just haven’t made it to the top of the project stack Are you properly recognizing the expected (and increasing) costs of resources in evaluating your projects?   Are you aware of subsidies that could help put your programs over the top?  There is a lot of money out there just waiting for resource saving projects.

It’s important at this stage to identify easy to implement and high impact ‘Low hanging fruit’ projects that can lead to early success and build momentum throughout the enterprise.  Your employees and customers will get the message that you are serious about leading the charge, and properly handled, it won’t be lost on the supply base.   Focused work group projects and Kaizen events are excellent tools to use to get the message out and for developing ideas for new resource and waste saving projects.

For many companies, most of the impact is defined outside their direct control.  Most manufacturing companies cost base is in the supply chain and naturally the highest resource consumption is upstream.  Supply Management must add sustainability prominently to the already complex mix of issues involved in developing and maintaining a strong and competitive supply network.  The good news is that most of the strong companies are leading the charge here and making the job easy.   The bad news is that marginal and weaker companies are at risk of falling further behind or worse.

Do your suppliers know where their impacts are?  Early discussions with key partners when you are in evaluating your current situation are a good idea at this stage.  Their impact may be greater than yours and they may already have a good strategy in place.  Have they completed or do they plan to do Life Cycle Analyses (LCA)?  Those ‘low hanging fruits’ are most often hanging in one of your supplier ‘trees’.  Collaboration projects with major suppliers on new designs and new technologies is a very smart way to lead to major breakthroughs.

One way to look at sustainability is as another evolutionary step along the road of  ‘quality’ that has taken us through the Toyota Production System (TPS), to Lean Enterprise and now to Sustainability.    Each of these steps has taken our focus further beyound the virtual ‘four walls’ of the enterpise.  Lean made us look at the entire supply chain.  Sustainability turns our focus beyond the global supply chain, to the impact the chain has on the environment and the people in and around it.

Doing the ‘wrong’ thing comes from weakness which leads directly to the temptation to take shortcuts not just to make more profit, but just to survive.  Companies can’t drive sustainability, the ‘right’ thing to do, unless they’re efficient and effective and doing the right things operationally.   The ability to do the right thing comes from strength, from depth of purpose and strong cultural foundation.  That sounds like Lean to me.    If you are looking for companies that truly support sustainability, look past the website PR and focus on what really enables them to do ‘walk the talk’.

One of the observers in our group got up and said he didn’t like the way the supervisor in our play asked unrelated questions at the start of the meeting ‘how are you?’, etc.  He said the off topic questions were off topic and seemed underhanded.   My hand shot up so fast I almost dislocated my shoulder.   The instructor picked me and I related a story about why this lead in was a concious strategy.

I had a manager of a supplier that I dealt with on a day to day basis.    As with many manufacturing facilities, each day presents its unique ‘pile’ of challenges.  Some larger and deeper than others.    If he was having a good day, I could take a direct method and we could get right to the problem.  If he was having a bad day, throwing another one at him in a direct method would only insure it hit the side of the stack and bounced off.    I explained that is why such questions are vital.   It didn’t matter I was dealing with a subordinate.

Listening first  always gets peoples attention.   Listening leads to understanding and the foundation of every good connection and relationship.   The person in my group who commented was headed to be a poor salesperson.   I hope they found some help along the way.  Not from our instructor.   The look on his face as I was explaining it was like deer looking into you know what.    Big school research, statistics and all that and too far removed from real interpersonal skill development.

Who hasn’t met that person who has the answer to all your problems, but they never let you talk enough to tell them your problem?  They are talking up a blue streak down one path when you are trying to go another.  Its the foundation of almost every misunderstanding I can remember.  Somebody talked too much.   Thought too much about where they were and wanted to go an not enough about where the person or people they were talking to were and wanted to go.  It’s how you make deals, win negotions, followers and almost anything else you want.  You learn by listening, not by talking.

My father in law has a great saying that sums it up “You can sit there and look the fool, or speak and remove all doubt”.    Another favorite is “God gave us two ears an one mouth in an intentional symbolic relationship of  how much they should be used”.  Listen first.  Talk second.  Good advice.

I’m not one that puts a lot of  thought or effort into new year resolutions.  Tomorrow is promised to no one much less another year.   I reflect on the last day and the one coming up.   The last week and the one coming up.  It’s what you do if you are type A like me.   If I need to make a change, I don’t wait for the new year to start, I just get on with it.    The passing of one year into the next is still a good time to reflect on what has past.  To give thanks for our blessings.  To review recent life lessons and use those to help us  face whatever the future has in store for us.   Life teaches us lessons every day.  Some we learn easily and move on.  Others we either miss completely.  Some come back to us for a reminder.

I finished the year by playing golf.  Twice in the last two days in fact.   I’m an above average golfer.  My index hovers around 10.   I can break 80, or I can blow through 90 like I did yesterday.    With five holes to go, I needed to shoot par to shoot 90 even.  I shot one under (and then noted I added wrong).    The lesson came on the last approach shot.  I had hooked my drive left, luckily not in a nearby trap, but behind a tree that would impede a direct path to the hole and the green.    I needed to carve a hook shot with a utility club around that tree (from an uphill lie I might add) to get anywhere near that green about 200 yards away.  Now I’ve been to the range once in the last two months.  I haven’t played twice in the same week since summer and most of my golf since fall has been par 3 where I take nothing higher than my seven iron.  I had no earthy reason to expect anything near success in executing a shot like that.  I did it! I wound up 10 yards beyond the hole and off the green, but it was right behind the flag and I chipped to inside a foot for a gimmie par.

All I remember is standing over that approach there was nothing in my mind other than a picture of the shot I needed to hit.  Nothing else.   One shot illustrates what I love about golf.  Nothing compares to watching a well struck shot soar through the air to its intended target.  More importantly, in my humble opinion, no other game, no other pastime, no other activity teaches you the importance of focus more than golf.   As you walk or ride between shots there is ample quiet time and the choice of how you use it is the foundation of the outcome.  You can wallow in doubt.  You can think about the improbability of what you are trying to accomplish.  The micro faults in fraction of degrees that can lead to disaster.  The blades of grass or spike marks that can cause the ball to veer away.  Alternatively you can picture your intention clearly with absolute focus and resolve.   The lesson isn’t that focus is guarantee of success, but that doubt is an absolute predictor of failure.

Now that doesn’t mean than someone who has never hit a golf ball can picture it in their mind and make it come about.  The ability has to be in there somewhere.    It isn’t that much different with life.  Picturing myself in the leading role for a box office smash hit movie is not a realistic goal.  Something between here and there is more like it.  What you picture in your mind, if its right for you, you will bring about.  Your mind doesn’t know if you are seeing is what you fear or what you want.  If a picture of doubt crosses your  mind – step away and collect yourself.  Focusing on the negative only hastens its arrival.   Focus on the positive outcome.

I finished last year with that lesson.  One I’ve been shown many times and probably will again.   I offer it to you with the best wishes for a new year and decade that brings peace and prosperity for us all.

 Much of what I see published on this topic pushes software services and systems that enable more ‘real time’ collaboration with customers and suppliers, aligning supply with demand, statistical analysis of customer performance, and the list goes on.  These systems can be very useful tools and potentially the missing link in achieving superior supply chain performance.  There are also many things that go into the successful conception, design and deployment of these kind of systems, I will not restate those here (Maybe in a later post).

Understanding your customer is the key concept that is so often misunderstood or neglected in the pursuit of better forecasting.  Almost every customer will send a bad forecast once in awhile. Most of the time the customer will catch them. It’s the ones where the customer doesn’t understand how far off they really are that can do damage.  You need to understand the difference between what they say they can do and what they really will do.  Don’t make the mistake of booking good news that can never happen.

The lean concept of ‘Takt time’ is very important here.  Most all systems have built in constraints that on one hand frustrate our ability to do more or go faster, but are very useful if we watch for it and use it to our advantage.  How many of you understand your customer’s constraints?  How much can they feasibly use in an hour, day or week? What is their theoretical maximum capacity?  Are they even measuring it?  How closely have they come to achieving this maximum capacity and for how long a time?  Running at 50% of theoretical is not uncommon.  How many days in a row have they been able to do 80% of their maximum?

Let me make an example.  A customer buys one type of widget from you and they forecast usage of 1,000 per week, but over the last year, they averaged 500 per week and have used 800 or more only twice.  A great deal of your material lead time is 12 weeks or more.  Your customer gives you a forecast for 1,000 units per week for the next three months.  If you booked this order and unless the constraint has been broken, they will use half of this amount and you will be sitting on a greater and greater pile of excess inventory.  Assuming no downstream intervention, the excess could grow on average by 500 units per week to a maximum of 6,000 units – equal to the average quarter consumption.  I’m not sure how you track inventory turns and performance, but this isn’t good by any measure.

The example above is obviously a worst case scenario.  Lead-time is the real enemy in this situation, but if you had a near zero lead-time supply chains, you wouldn’t be reading this. How this would work out in the real world would depend on what kind of material commitment horizon arrangements exist between the various customers and suppliers along the chain.  I know it is very dangerous to load numbers different that what your customer gives you, but you better speak up if you think they are sending out instructions that don’t make sense.  Knowing the system better than they do is how you increase your value to them which is always a good thing.  If the customer doesn’t listen – and some don’t, well, find ones that do.

As I said before, there are a lot of good software tools that will help you manage your supply chain.  Unless you understand what is behind the numbers going in and the limitations of what comes out, you can make just as many mistakes and even more quickly than before. Know what you can really do and expect to do.  What your customer can do and what your suppliers can do. If you know this, you are well on your way to putting more advanced supply chain software to use.  If you don’t, you won’t get your return on your system investment.

By the way, this concept is even more important in the reverse situation. Change the word ‘customer’ with ‘supplier’. Do you know your suppliers constraints?  Do they know? Have you buffered your production peaks if they can exceed your suppliers?

Any strong and viable business must adhere to lean principles, whether they know it or not.  Lean is a merging of quality, operations managment, financial management and even marketing discipline that when properly applied will not just improve results but have the potential to lead to market dominance.  Lean principles are the path to delivery of  higher value goods and services, more quickly, cheaply and more profitably.    Lean is what good leaders adopt and adhere to and poor ones either don’t  recognize or have trouble implementing.

People are what make a lean enterprise go or not, by following where they are led.   One of the cynical acronyms of lean is ‘Less Employees Are Needed’.    It is the first open manhole cover that must be navigated around to avoid progress derailment.   People trust good leaders to take them from ‘muda’ work and move them to new jobs needed by  new customers and even grow into new products and new markets.  Leaders are not strangers to those in the plant and on the line.  Leaders have built a feel for the operation that extends beyond the scorecards and reports by often rolling their sleves up and working shoulder to shoulder on the floor and in the conference rooms.   This kind of involvement is fundamental to developing the current and future value maps and streams and identifying the first Kaizen.   Good leaders don’t leave that job to consultants and delegates. 

Are your sleeves up or down?

Most operations have some level of excess inventory due to forecast and mix, engineering changes or quality issues.  The low hanging inventory reduction ‘fruit’ is to identify and segregate these buckets until the relieving actions can be completed.   Once this is in control, the key is to keep it from happening again.   Unless processes were way out of control to begin with, the inventory reductions from these areas  will not usually pay for increases in buffer stocks for active customer programs – and until the causes for the excess are eradicated through sound management control, they are likely to return anyway.

The biggest opportunity for reducing inventory is having supply and demand match.    Demand forecasts are never perfect.  Forecasts are either ‘lucky’ or ‘lousy’ or somewhere in between.  We can always work scrub harder, ask more questions to try to get a better forecast, but we can always count on falling something short of perfect.   The only perfect solution to reducing inventory while maintaining (and almost surely improving) customer satisfaction is to reduce lead-time and batch sizes throughout the chain, with zero and one being the respective goals.

Buying in quantity to get the price discount usually costs more in other areas.   In many cases, its of benefit only to the salesperson’s quota and incentives and often has little to do with the economics of manufacture.  In a lean environment, the opposite is most surely the case.  Suppliers manufacturing in lower batch sizes with shorter cycle times often have higher quality and lower costs.   Yield in many cases swamps allocated cost loadings and let’s not even start talking about those on a lean blog.

Making adjustments to the flow and operation of your floor is on the critical path for full improvement but starting that complex and long journey is the subject of another blog entry or two.   In paralell with those efforts, a lot of good can be had by working closely with key suppliers.  Start separating ‘cycle’ time and ‘lead’ time in your discussions.  We often only talk about lead time.  They are very different things and often will help you understand how different suppliers operate, or what lengths they are willing to go for you.   Both of these things are good to know.  

Lead times apply to the normal promise for a new order that was not anticipated.   Cycle time is the amount of time between release of an order to the floor until it is ready to ship.  If you provide a regular and decent forecast, and you have earned trust as a valued customer, you should expect responses closer to cycle time than full lead time – but not always – be careful. 

By decent forecast I mean you can explain dramatic changes from one period to the next.  That way you show you put thought into it and you will be distinguishing yourself amongst the few.  You’d be surprised at the number of companies with fancy computer systems that don’t understand what they put into them.  If the forecast is the music, its no wonder no one recognizes the songs that the plants are trying to play.  

Even for parts with spotty or seasonal usage, suppliers will usually make arrangements to buy materials and have them ready to produce if you agree to take the product within a reasonable time – that is if you have built the trust with them that you will deal fairly with them and not leave them holding the ‘bag’ of parts when the plan changes.   Be careful there.  If you string them along, don’t blame them if that extra material isnt’ there when you need it.