Driving Complexity out of Your Supply Chain

Recent research from consultancy PRTM has found that there are major differences in the way companies manage supply chain complexity, which have significant impact on cost and profitability.

The Impact: “Simplifying” Supply Chains is one of the most frequently heard executive themes of the past few years. This research offers some practical ideas.

The Story: An article in the most recent issue of the Supply Chain Strategy newsletter from Harvard and MIT includes an article on “Driving Complexity out of Your Supply Chain,” by Rick Hoole from PRTM.

Based on preliminary research from a study PRTM conducted on supply chain complexity, Hoole notes what most SCM professionals know only too well: the supply chains of most companies, especially manufacturers of industrial and hard goods products with broad bills of materials, are increasingly complex.

The biggest driver: SKU proliferation, as the choices and configurations offered to buyers have exploded over the past decade. Shorter product lifecyles and rapid order-delivery cycles also play an important role in growing complexity.

“Complexity makes a supply chain inflexible and inefficient,” Hoole writes. “It also hampers on time delivery and creates problems for product quality.”

So what’s company to do?

Hoole offers three good suggestions:

Use the Right Metrics:

Most companies don’t really use metrics that track complexity, Hoole argues. Supply chain leaders focus more rigorously on product and component rationalization, he writes, and use metrics such as the number of configurations offered and the number of component parts more effectively than others.

Align the Supply Chain and Product Platforms

Centralization of the Supply Chain function is important in reducing complexity because of the leverage it provides to eliminate duplicate efforts and standardize components and processes. More importantly, it is critical that supply chain have strong representation on product development teams, looking for opportunities for parts standardization and to reduce complexity. A supply chain executive must be a member of the new product approval committee.

Focus on SKU rationalization

A supply chain executive needs to maintain a strong voice for continual pruning of weak, low volume and unprofitable SKUs.

Does reducing complexity impact the bottom line? PRTM’s preliminary research says definitively yes.

The top 20% of the study respondents in terms of adopting approaches such as rigorous product lifecycle management and frequent SKU rationalization has profit margins 3% higher than average, with significantly lower inventory levels versus their industry peers.

Summing it up, Hoole writes: Complexity is best addressed at the CEO level, because remedies such as product-portfolio reduction may be seen as putting revenue at risk. But a supply chain executive can have an important impact by understanding the problem and helping the company move forward on the issue.”

How do you think companies can best get their arms around supply chain complexity? Is reducing complexity really possible, or is the key to manage whatever level of complexity you have? What would you add to Hoole’s suggestions? Let us know your thoughts.

Article Research: Courtesy of the Supply Chain Digest Journal

Social Media: Are we Creating Business Value?

I am hooked now into FaceBook,LinkedIn, Ning, Second Life, our internal wikis, email, MSN instant messaging, my blog, my RIM - and I am starting to wonder if I am wasting time trying to stay connected using the latest Web 2.0 Social Media tools and gadgets.

One of the primary reasons I continue to forge ahead and use these social media tools is to research and understand the social phenomenon and impacts that these solutions are having on new business models and then translate this insight into valuable know-how or sense making for our clients at Helix Commerce (www.helixcommerce.com).

A primary reason that social media applications are top of mind is because of our current community research project focused on The Organization of the Future . This project is also in partnership with CATA, and ITinCanada.

As a result of this sense of overload - and I know I am not alone, we are starting to see another generation of simplification tools like AideRSS and FeedHub - just two examples of software tools trying to reduce the noise and improve our productivity.

The reality is that the information we had access to even just three years ago is 1000x greater now.

What is driving the Social Media and Web 2.0 connection frenzy?

Are we creating a generation of users that feel more lonely as they are more isolated on their computers? Is it because we have brought businesses and home life closer together with the home office concept, so when the kids are in bed, we go back to work? Is it the baby boomer generation's desire to stay hip and be able to communicate with their teenagers?

I asked my fifteen year old son yesterday what he loved most about the social media giant Facebook - he said he loves his Fun Wall where his friends post things like yellow stickies and they make him laugh or smile. What he does not like is the constant sharing of gadgets that his friends email him and he has to decide if he wants them or not. Huge time waster he says, as everyone is just mailing everyone vs being selective.Send to all friends with a quick click is a common stroke that also creates ineffective communication habits.

I would love to hear your thoughts on what is driving the social media tool usage frenzy and your thoughts on their effectiveness and business value? I am most interested in business value vs personal value reasons.

The obvious answers to dealing with social media information overload are: Know what you need and manage your information sources. Using RSS and Yahoo Piples can really help you prioritize where you need to focus your attention. Netvibes is a good RSS reader that helps to organize information into relevant tags and streams.

I suspect the simple truth is knowing what problem you need to solve and using the tools that best meet your needs. In time, many of these toolkits will fade and we will have universal aggregators that simplify our life even further as networks of networks will have the "collective intelligence" to source the most optimal path to meet our needs. The promise of the semantic Web is in line of sight as these social media tools are rapidly evolving our intelligence and know-how as we explore their value and create interaction opportunities that create new innovations and hence discover new meaning.

Just tonight, I was catching up on new social media innovations and I discovered Twine.

Twine enables one click social networking and auto discovery, plus provides a KM and collaboration tool for personal and business use. It is like a superset of today's best social bookmarking sites, it has a better contact management syustem than Facebook, and fills a void between Match.com and eHarmony and today is free. Twine founder is Nova Spivack who was behind founding Radar Networks. So tonight after this entry, I will be visiting Tech Crunch on Web 2.0Innovation updates.

As I learn more now I am faced with my curiousity to use Twine....where will I find the time...love your thoughts - Web 2.0 Social Media users - where is this business trend all going to lead us in terms of business productivity and business growth and value creation?

I would love to hear your thoughts on this blog entry, as we are actively researching The Organization of the Future project with ITin Canada, and CATA and one of the research streams is on the impact of Web 2.0 and social media on future organizational business models.

Evolution of Portals for Business

When Dr. Jose Claudio Terra and I wrote Realizing the Promise of Enterprise Portals in 2003, recognized by Harvard as a must read and a Best Seller on Amazon, we knew that portals would revolutionize business as we know it providing web based access to business to consumer portals, business to business portals, business to employee portals, and now today, portals to portals anywhere. We have worked with Groove, Sharepoint, wikis, and most recently Google Aps - internally and deployed solutions for our clients.

What we are currently experiencing is that portals are more dynamic and tools are rapidly developing for business users to create portal experiences, web pages, and dynamic conversations on the fly.

Some of the portal tools that are pervasive and popular is Sharepoint, from Microsoft. Designed to run on an internal computer, Sharepoint requires an organization to buy its own server, and purchase the software licence to take advantage of a collaboration, and document management environment. There are now a number of hosting solution providers that also allow Sharepoint access for a subscription monthly fee model.

We are now starting to experience another generation of online portal services that are enabling organizations to build real-time their websites and host them online for free. Google Sites, from Google offers users a point and click set of tools to build easily websites without knowing how to program them.

What is very attractive to Sharepoint Office Server 2007 is it has an integrated enterprise search tool that easily allows users to filter and sort through both structured and unstructured data. It also integrates with Office which is the standard desk top communication suite for the majority of businesses today (Word, Excel, Powerpoint etc). Integration with calendar, task lists and instant messaging with Sharepoint and Office is a very logical platform for businesses to deploy.

At the same time, Google is extremely aggressive in its office tools development. With Google Calendar, Google Talk, Google Docs, Google Spreadsheets, and the attractive free pricing solution, Google offers small businesses and university students a compelling solution. Althought, the functionality of Google is signficantly below that of Microsoft's rich Sharepoint and workflow solutions, we predict that this lead advantage will diminish in time between Google and Microsoft.

What is also going to be an interesting dynamic is that as the university kids using Google for school and small businesses grow up to be mid sized companies - they may have a locked in loyalty to Google putting pressure on enterprise organizations in time to switch to Google. This tension is already underway in New York in the larger investment houses which are piloting Google Aps in consideration of adding it as an approved standard to integrate with Microsoft Office, due to pressures from grads not wanting to stop used their beloved Google Aps software.

Over time, pressures to switch will evolve, due to the economic comparisons, which will cause Microsoft to offer alternative pricing models to maintain market share. We see the office software market as a commodity market as value will derive from unique value in customized processes for competitive advantage that cannot be easily replicated.

In addition, when large global organizations can save over $15-30 Million in software costs, Microsoft licensing terms will come under increased scrutiny as large enterprises become more aware of its alternatives.

The good news is end users are benefiting in the war for portal presence as costs are being lowered, functionality is increasing, and customer service to retain customers is searching for new ways to increase customer value.

New Language New Times New Innovations

Have you ever looked over your son or daughter's shoulder to see what they are writing or recording or saying on their Facebook Funwalls, MSN instant messenger, Blogs, Wikis, You Tube, Skype, social bookmarking, virtual world games, RSS feeds, and now Mashups....etc?

New words create new language in new times -- and with new sources of energy, toolkits, and ways of thinking - new innovations are seeded. Who would have ever thought that FaceBook would one day be potentially worth $30-40B - only Google or Microsoft can afford to purchase this ten pound gorilla.

Just think of the new language, new tools, new ways of socially interacting to communicate. Most of these new words are creating new language to reflect the Enterprise of the Future, and reinforce we are in fact living in a new time.

Humans are evolving in their forms of communication and increasingly becoming more dependent on the web for all forms of personal and business interaction.

However, we are also in a generational gap that is widening, as most late baby boomers are not as familiar with Web 2.0 social mediated approaches to working; or if they are, they are rapidly scrambling to catch up.

The implications are significant. In the war for talent, we need to attract the best and the brightest. However, they want to work in cool places with cool toys and work in cultures that are fun, collaborative, and transparent. My dear friend David Ticoll likes to say The Naked Organization, the title of his most recent book, written with technology futurist, Don Tapscott.

Many organizations are simply unprepared for this evolution in the meaning of work. Far too seldom do I find senior executives rapidly embracing and leading by using Web 2.0 approaches to either share business strategies in wikis to encourage open and transparent iterative engagement, or blogging daily and letting employees know real time about the good wins of the day and the big worries that you need them to be attentive to.

One CEO I coached on this approach was Gary Wood, the prior CEO of Grand & Toy Canada, he not only listened - he executed his blog and did an audio blog recording and uploaded on a weekly basis, sometimes 2-3 times per week. He was not longer not visible to his employees - as they knew if he was in the office, or at a customer site, or in a board meeting. This open communication helped to position his leadership style more transparently, and demonstrate new ways of leading in his goals to transform the organization. Gary is a leader that we will have to watch what he does next, as for sure he will strive to be innovative in his communication practices with his employees.

Fluid, open and utterly transparent or naked dialogue is not a skill most boards or C level executives are used to or comfortable with. So many of the business schools have trained a generation of leaders in control theory, business contingency, risk management, and compliance rigor that these new perspectives on Enterprise 2.0 are to many unsettling and uncomfortable.

We are, however, starting to see enterprise businesses look closely at how these new social mediated approaches called Web 2.0 can improve their collaboration capabilities for information sharing and to extend the enterprise's reach. Hence, the new term floating around - called Enterprise 2.0 is in, simple terms, recognizing how to apply web based commmunication approaches to achieve more rapid, agile, and collaborative organizational capabilities.

In a recent Enterprise 2.0 study conducted by the American Industry Information Management (AIIM), with sponsorship support from leading content providers like: Core Media, Day, EMC, OpenText, Social Text,and Spring - in their Enterprise 2.0 - Agile, Emergent and Integrated Report, a number of key questions were asked regarding market adoption of Enterprise 2.0 approaches. I have highlighted some of the more salient findings in our continued journey to understand new language, new times and new innovations.

1.) How critical is Enterprise 2.0 (use of social mediated tools) to your organization's overall business goals and successes?
10% indicated - Imperative
34% indicated - Significant
27% indicated - Average
18% indicated - Minimal
11% indicated - Not at All

2.) How well is Enterprise 2.0 understood in your organization?
41% indicated there is no clear understanding
33% indicated they are vaguely familiar
14% indicated they are not sure how this is different from Web 2.0
13% indicated they are well aware and are expressly addressing it

***

When we wrote our book in 2006 on Collaboration Commerce, , we were researching how blogs, wikis, podcasting would start to revolutionize business process and human interactions and ultimately customer interactions.

Unfortunately, most companies do not have a clear understanding of how to integrate Enterprise 2.0 approaches into their business strategies and business operations.

I am seeing daily in our client work, or speaking engagements, the same perplexed faces that I remember seeing in the 1980's when personal computers were in their early adoption lifecycle phase. Who can imagine doing business today without their personal computer, or their blackberry (more like crack berry), given the addictive nature that the RIM has on active users.

What is perhaps the most rewarding finding from this recent report is that the number one benefit that organizations see for Enterprise 2.0 is to increase collaboration.

Over 69% of the surveyed respondents indicated the number one benefit was to increase collaboration in their organization. This was not a surprise to me as we saw this in our earlier research but the affirmation feels good as our early hypothesis as to the core of Enterprise 2.0 is based on trust, reciprocity which enables collaboration and hence commerce (exchange of value).

The second major benefit was to increase knowledge - or increase awareness of what we know (56%).

Then the usual benefits one would logically expect followed in order of importance increasing agility and responsiveness (56%), Faster communication (55%), Increase Innovation (39%), Reduction of IT Costs (36%), and Accelerate Brokering of People (21%).

In terms of where organizations are in their implementation of Enterprise 2.0 approaches; it remains clear that we are still in the early adoptor phase. You only have to go to a dinner party and ask how many of you have a personal blog or a business blog at work and some will say they have a personal blog, but seldom do you find professionals blogging daily at work, uploading information on YouTube to share with employees for learning purposes, etc.

The majority of organizations are in the mostly adhoc usage phase (35%),over 21% are in the strategy formulation phase, and 28% are in the balanced approach phase -- which really is as vague as you can get - something is happening, a little official perhaps, but some evidence of progress.

Measurement of value in these tools is primitive, with the majority of Web 2.0 approaches not having an effective measurement approach. Over 77% of the organizations surveyed did not have an ROI approach to implementing these solutions or have demonstrated an acceptable level of return.

The biggest barriers to implementing Enterprise 2.0 approaches consistently, like in every other change transformation program, reinforced: lack of knowledge understanding, corporate culture, lack of a business cae, immaturity of technology, cost, lack of interest, and resistence from senior management and IT as the most frequently reported challenges or impediments to implementing these approaches.

Summary

There is no question new language is rapidly evolving. We are entering another generation of the web as we integrate elements of the experience economy with rich media, gaming, and 3D virtual worlds which collectively are altering our customer and employee experiences.

Few organizations are embracing virtual worlds at the speed they need to. At 2bevirtual , a company I founded last year, we have been conducting global research on virutal world experiences with CMP Media out of NY which will be issued in a new book later this year. When I thought the language might take a pause - there is even more new language to understand in virtual world experiences as teleporting takes on a new meaning, inventory of all my personal artifacts, virtual real estate etc.... New innovations in every industry can now be found with Web 2.0 and new approaches to collaboration in the Enterprise.

If you have any stories or questions on Web 2.0 and Enterprise 2.0 (The Organization of the Future), please do drop us a comment back, we welcome your perspectives, insights, questions. What is important to understand as we have much learning to do together.

We are always much smarter as WE!.

Clearly a new world order is unfolding, with new language, a new time, and more importantly, new business innovations are being seeded ...all in the shifting currents of time.