“Inventory: Endangered Species or Tempting Target?”

Richard Crandall and William “Rick” Crandall

Industrial Management

July/August 2007, pp. 20-25

This article addresses three different ways to reduce inventory:

• Direct reduction of physical inventory—Methods here include
• Lean Production to reduce work-in-progress
• Modular Product Design to reduce the number of components
• Mass Customization to reduce finished goods inventory
• Quick-Response Systems to reduce in-transit inventory
• Accurate Perpetual Records to reduce order errors
• Supply Chain Management to reduce inventory in all forms
• Reverse Logistics to reduce waste
• Quality Management to reduce defects and waste
• Indirect reduction of physical inventory—Methods here include
• Use more efficient equipment
• Improved motor vehicle performance
• Videoconferencing for less travel
• Scheduling optimal delivery routes
• Environmental control of facilities
• Secure shipping containers to reduce packaging materials
• E-commerce to reduce forms and paper
• Reverse logistics to reduce indirect materials
• Direct substitution to reduce a physical, three-dimensional product to an electronic format—Methods here include
• Cash to checks to credit and debit cards to electronic funds transfer
• Written calendars to PDF
• Print to digital books
• Letters to e-mail
• Patient files in folders to electronic files
• Product drawings to CAD files
• Film to electronic cameras
• Clay models to simulations
• Actual to simulated testing
• Training manuals to LCD display
• Office records to portable tag
• Photocopies to flash drives
• Retail store to website
• Physical audio-recordings to downloads
• Manual tax forms to e-tax returns

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“Are You the Weakest Link in Your Company’s Supply Chain?”

Reuben Stone, John Mentzer, and J. Paul Dittmann

Harvard Business Review

September 2007, pp. 116-127

This article divides the supply chain domain into seven key areas where a CEO can make either a positive or a negative influence:

• Picking the right supply chain leader—The authors argue that the company’s supply chain leader needs to have a formal educational or prior experience background in Supply Chain Management. General managerial competence but no background in the field is not sufficient to deal with the complicated set of activities involved
• Initiating benchmarking and devising metrics—A CEO “should push the organization to do supply chain benchmarking and best-practice analysis—and should review the results personally.” Regarding metrics, “True cost to serve, determined on an activity basis, should be part of the CEO’s metrics dashboard. Total assets employed, including both physical and working capital, should be measured and analyzed in relation to supply chain performance”
• Setting incentives for supportive behavior—“CEOs should also establish reward and incentive programs to encourage employees to behave in ways that benefit the overall firm, not just their own functions”
• Keeping up with supply chain technologies and trends—A CEO who understands new technologies can do a better job of assessing the case for expensive technology adoption. Understanding the challenges of deploying complex technologies can also help the company avoid missteps
• Eliminating cross-functional crossed wires—The authors recommend that the CEO be personally involved in developing a mature Sales & Operations Planning process. Also, “The operations and supply chain function should be held equally accountable with the sales and marketing function for customer service and inventory”
• Adding supply chain insight to business planning—The CEO should demand that business planning and negotiations “anticipate and explicitly address important supply chain ramifications”
• Resisting the tyranny of short-term thinking—CEOs should make sure that quarterly pressures do not result in unprofitable long-term supply chain trends

The article also includes an assessment instrument that can help a CEO examine his or her own level of supply chain leadership.

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“Bain’s Global 2007 Management Tools and Trends Survey”

Darrell Rigby and Barbara Bilodeau

Strategy & Leadership

2007, Vol, 35, Issue 5, pp. 9-16

Since 1993, Bain & Company has surveyed executives around the world about the management tools they use and how effectively those tools have performed. The survey focuses on 25 tools.
This year, the most commonly-used tools are Strategic Planning (used by 88% of companies), Customer Relationship Management (used by 84% of companies), Customer Segmentation (used by 82% of companies), Benchmarking (used by 81% of companies), Mission and Vision Statements (used by 79% of companies) and Core Competencies (used by 79% of companies).

For the rest of the 25 tools, the percentages were: Outsourcing (77%), Business Process Reengineering (69%), Scenario and Contingency Planning (69%), Knowledge Management (69%), Strategic Alliances (68%), Balanced Scorecard (66%), Supply Chain Management (66%), Growth Strategy Tools (65%), Total quality Management (64%), Shared Service Centers (55%), Lean Operations (54%), Collaborative Innovation (53%), Loyalty Management Tools (51%), Mergers and Acquisitions (50%), Six Sigma (40%), Offshoring (37%), Consumer Ethnography (35%), Corporate Blogs (30%), and RFID (radio frequency identification devices, 23%).

The top 10 tools in terms of satisfaction with the tool were: Strategic Planning, Customer Segmentation, Mergers and Acquisitions, Customer Relationship Management, Core Competencies, Benchmarking, Total Quality Management, Mission and Vision Statements, Strategic Alliances, and Business Process Reengineering. However, the differences between the “top” satisfaction tools and the others were not especially large. On a 5-point scale, the top 10 ranges from scores of 3.77 to 3.93. The rest ranged from 3.55 to 3.75

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“Happiness, Health, or Relationships? Managerial Practices and Employee Well-Being Tradeoffs”

Adam Grant, Marlys Christianson, and Richard Price

Academy of Management Perspectives

August 2007, pp. 51-63

The authors of this article state that employee well-being is a “hot topic” in organizational life. Employee well-being can be defined as “the overall quality of an employee’s experience and functioning at work.” There are three key dimensions of well-being:

• Psychological well-being or happiness—In the work setting, this has been looked at as “job satisfaction” by some researchers and as “fulfillment and the realization of human potential” by others.
• Physical well-being or health—In the work setting, this has been looked at as level of injury/disease, or Stress, or healthcare service benefits.
• Social well-being—In the work setting, researchers have looked at such factors as trust, social support, reciprocity, leader-member exchange, cooperation, coordination, and integration.

The article provides several examples of how specific efforts to promote well-being on one of the above three key dimensions may create a trade-off with diminished satisfaction with one of the other dimensions.
In order to achieve positive well-being synergies, the authors suggest that organizations have two options:

• Influencing managerial attention by encouraging managers to notice the impact of their actions on employee well-being
• Influencing managerial motivations by encouraging managers to value the impact of their actions on employee well-being

Ways to increase managerial attention include:

• Think broadly about who is affected and how
• Think about long-term impact
• Collect more information on employees’ attitudes about current practices

Ways to increase managerial motivation include:

• Broaden the range of outcomes important in the organization
• Be willing to reconsider practices

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“Deployment: 7 Stumbling Blocks to Overcome”

William “Mike” Kelly

ASQ Six Sigma Forum

August 2007, pp. 16-22

This article discuss seven common stumbling blocks that can impact the deployment and maintenance of a lean Six Sigma program, especially in service industries:

• Waning support, whining management—Even companies that start with senior leaders fully onboard, the right people assigned, and significant goals can lose support quickly. Other pressing issues grab the senior leaders’ attention. Middle managers complain about the amount of time and resources needed. Projects end up being put on the back burner.
• Fitting square pegs into round holes—Make sure the current measurement system is an appropriate fit for the projects undertaken.
• Projects, projects everywhere—When there has been some success with deployment of a lean Six Sigma project, many other people may want to start their own projects. The same limited resources may be stretched too thin to accomplish much of anything on any of the projects.
• Meetings, meetings, and more meetings—“Having a meeting” may be considered synonymous for “communication.” Meetings need to be focused and time-limited. If many meetings are really needed, then the other duties of the attendees may need to be reduced.
• The ever-moving voice of the customer—Customer information must be collected systematically and comprehensively. The squeaky wheels and the most recent comments should not be over-weighted.
• The black and blue repercussions of quick hits—Change activities need to be well thought-through and implemented. Changing everything all the time creates variation and confusion.
• Not-so-standard operating procedures—Individuals may follow their own standard procedures, but those procedures may not be consistent with those of other individuals.

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Stumble-Proofing Six Sigma

Patrick O’Hearn, GP
 

When implementing successful Six Sigma programs with our clients, GP Operational Excellence follows these approaches...

Waning support, whining management—We insist on a top down and bottom-up approach to any project. We gain active commitment and drive action at the operational level (front-line employees, team leaders, supervisors) and have active commitment and ongoing project reviews by top management. The moment operational employees realize that the project is not on their boss’s plate, the project leaps off their own plate. Driving action and results at the operational level, communication of the results to top management, and top management acknowledgement of project results all keep our projects on the right track

Fitting square pegs into round holes—The measure phase of a DMAIC or DMADV is critical but often short-changed. We avoid being in the position of solving a problem only to find out that measures were subject to way too much measurement error. The two questions answered by the measure phase are “do you have data?” and “how do you know your data is any good?” The use of a gage R&R or formal MSA is not appropriate in many LSS projects, but a data collection plan is often the key tool for the measure phase. A data collection plan helps operationally define the process input and output data and determines how much confidence to place in each piece of data.

Projects, projects everywhere—People’s time is by far the most difficult resource to obtain for a project especially in an environment where there are many concurrent projects. Securing resources is the key role of the project sponsor who is often otherwise underutilized by the project leads. At the first hint of people resource issues on a project, the black-belt needs to make a beeline for the project sponsor to get immediate action to correct the issue. Workloads can often be shifted to accommodate project needs.

Meetings, meetings, and more meetings—When starting an improvement program, we create a meeting matrix to determine when important human resources are scheduled for routine meetings. The full use of Microsoft Outlook and similar programs for time management should be encouraged because these programs provide visibility for meeting scheduling. Every meeting should have an agenda and a known meeting duration. A meeting effectiveness checklist can be used to trim the fat from poorly conducted meetings and free up time for performance improvement.

The ever-moving voice of the customer—The use of quality function deployment (QFD) should be encouraged for collecting and utilizing the voice of the customer information. Ideally customers should be encouraged to attend team meetings and provide direct input to the improvement process. In the event that customers cannot readily attend team meetings QFD information can be shared electronically to ensure that you have the customers’ interests in mind as you drive process improvement.

The black and blue repercussion of quick hits—Nothing gets front line employee attention like a quick win, but this type of program can be a double-edged sword. We guard against raising employee expectations too high because we realize that what rises to the top of the quick win programs are often the bad ideas of the past that have high employee emotional involvement. Each idea that is generated from this type of program needs to be evaluated critically and responded to. Project teams need to have the horsepower to both drive excellent improvement ideas to realization and to kill ideas that are not practical in a non-threatening way.

No-so-standard operating procedures—Standard Operational Procedures (SOP) are just that; the standard way to perform a task. They are not to be deviated from, but they can be improved in a systematic way through a defined procedure improvement process. Desktop procedures can be used as guidelines and are more suggestive than prescriptive. We reserve SOP’s for setting procedures in concrete and use desktop procedures to draw lines in the sand.

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