Saturday, April 19, 2014

Thank you MMAM! (Math, Metrics, Analytics & Money) Part 1 (Math & Metrics)

The past few weeks have been very busy for me between teaching several Supply Chain/CSCP classes, taking a class myself, speaking to three classes at UIC, co-chairing the CSCMP Chicago Roundtable Spring Seminar, and attending the SCOPE Conference (and yes, work!)  A few concepts jumped out at me at these events and I want to share them.  I believe these are particularly important for emerging supply chain leaders.

The first concept is Math.  Supply Chain Managers (and Leaders) need to be comfortable with not just arithmetic but also more advanced mathematical functions.  Below is the Logistic function which is interpreted as the probability of the dependent variable being a 'success':

Supply Chain practicioners are often making decisions that don't involve binary outcomes (0/1, yes/no) but rather involve probabilities (possibly/possibly not).  We need to be comfortable with measures of risk and probability even if the calculations are done in 'black boxes' within Advanced Planning & Optimization engines or special software packages (and many would argue that we need to be even more so when 'black boxes' are involved!)  As a Supply Chain practicioner you need to be comfortable dealing with more than just 'business math'.

I've been working to become more adept in my own analysis and I am taking an EDx MOOC (Massively Open Online Course) through MITx entitled The Analytics Edge:

This course is an introduction to Analytics and machine learning techniques.  At work I frequently deal with large datasets (but not Big Data) and lead a small team that does some very good analysis - this often involves discussing different approaches to analysis or techniques to arrive at business results that can drive better decisions in the future.  However, it's been a long, long time since I've had to exercise my 'math' muscle.  I'm not saying that anything is coming back to me from freshman year Honors Calculus course at Northwestern but I am having to do some math that involves 'thinking' and it's been a lot of fun to learn some new Analytics tools.

Metrics is the second concept that jumped out at me numerous times over the past week.  At the CSCMP Spring Seminar Lora Cecere, the Founder and CEO of Supply Chain Insights presented her ideas on "Metrics That Matter".  Lora has a fantastic background in Manufacturing, Software, Supply Chain research and has held leadership roles at several large CPG companies; that has given her a unique perspective on supply chain and financial Metrics and how they are linked.  What I like most about Lora is that there are no sacred cows - she calls it like she sees it (or rather, what the data tells her) and her opinion is that most supply chains are failing at their mission.  Presentation at CSCMP Chicago Roundtable event on April 8, 2014 from Lora Cecere Supply Chain Insights:

Unfortunately many organizations presently have Metrics that incent behavior that we don't want.  As Lora mentions in her presentation, "A Supply Chain with Complex Processes with Increasing Complexity", it is increasingly complex to establish Metrics (natch!) that incent supply-chain appropriate behaviors.  Leaders within the organization must de-optimize operations within their silos and start partnering with other functional areas in the organization to optimize the overall system.  Without Metrics that drive that cross-functional behavior the organization will have suboptimal results.

Six days later at the SCOPE Conference attendees heard Daniel Myers, Executive VP of Global Integrated Supply Chain at Mondelez International speak about the transformation of the Supply Chain team at his organization.  Metrics that cascade through each level of the business from leadership through individual contributors are a key measurement of their success (or rather will be as they are still on the journey).

More to come on Analytics and Money in my next post!  Please share your comments regarding Math & Metrics below.

Sunday, March 30, 2014

Inventory, Beer and Tests

Last week I spent a morning playing The Beer Game with a group of senior Supply Chain and Continuous Improvement leaders.  Before we started the game our host, an SVP of Supply Chain, related that he once played this same game with the CEO of an organization and the CEO became very frustrated at playing a 'game they couldn't win'.

Supply Chain and Continuous Improvement practicioners know it's not about 'Winning' but rather about the march of continuous improvement towards True North.

Well, our group of experienced leaders did not do so well.  Although we weren't supposed to collaborate it was difficult not to overhear what orders the distributor sitting next to you was going to place.  In spite of the factory trying to maintain some semblance of level production, inventories downstream (bull)whipped in all directions, stockouts occurred, and a certain amount of chaos ensued.  Your basic supply chain challenges.  The supply chain participants were surprised to learn at the end of the game that the customer simply ordered one amount for the first several periods and then doubled their demand for the following periods. 

Fortunately we were moving producing and distributing red 'chits' and not real inventories subject to expiration or trying to service customers that could turn to our competition.  Although this game seems simplistic it is a great way to drive home the value of Supply Chain collaboration. 

A few weeks earlier I attended a plant tour of Revolution Brewing Company sponsored by the APICS Chicago Chapter.  (Yes, I know it's a difficult job touring breweries but someone has to do it).  Chris Bird, the Director of Operations at Revolution told us that it's not unusual for them to have trucks waiting while cases of beer come off their packaging line and go straight onto a pallet and into the truck.  It's not their packaging line that is the constraint - they only run it 3 days a week; it's the size of their fermentation tanks that are the system constraint.  All of the beer they brew is routed through this set of tanks and they are rather traditional in the aging periods used for their beers (or rather they don't 'rush' it out the door).  They didn't seem particularly compelled to expand capacity (and it's interesting to note that since this tour another local craft brewery, Half Acre, announced an expansion of the capacity).  

Late this week I sat for the APICS CSCP exam again (I already have my CSCP certification but APICS instructors are encouraged to retake these exams).  In a recent SCM World report the CSCP and CPIM certifications were  recognized by business leaders as the leading Supply Chain certifications in the world (beating the next competitor by a substantial margin) and after taking the exam it is clear why. Supply chain challenges run the gamut - one Supply Chain may be challenged with inventory chaos while another may be facing demand that can't be met.  The understanding of the concepts tested on the CSCP exam give a Supply Chain practicioner a wide variety of tools to face these challenges.