Doctor's Note (March): Known “unknowns” and unknown “unknowns”

A respected political leader once tried to spell out the difference between known unknowns and unknown unknowns. Known unknowns are like the intensity of the next earthquake in Chile. We know that an earthquake will happen, but we don’t know the magnitude. Unknown unknowns are like the other natural disasters that might strike Chile. Not only do we have no idea of what might strike Chile, we do not even know if something will actually happen.

Doctor's Note (February): Integrating Finance and Operations

One sticking point in planning the supply chain is the disconnect between the operational forecast and the financial budget/forecast. All too often, the financial folks are not concerned about the complexities of manufacturing, and the manufacturing folks do not appreciate the larger financial picture. Best-in-class companies have managed to bridge this gap. In chemicals at least, the best-in-class manufacturers are running at an inventory to sales ratio of 8 percent or so, while their competitors struggle to maintain adequate service at an inventory to sales ratio of 12 percent or even higher.

Doctor's Note (January): Challenges for the Modern Supply Chain Executive

In 75 percent of companies, the senior supply chain executive also oversees traditional supply chain functions like distribution, logistics, manufacturing, demand and supply planning, or purchasing. The entire supply chain, however, rarely falls within the scope of any one of these functions and so the supply chain executive has to work across organizations to make major changes. This is changing. In leading companies, the senior supply chain executive reports to the CEO, the COO or the CFO. As supply chains become more extended and costs become more volatile, this trend will continue because the supply chain organization will be asked to respond faster to changes in the environment. What are these challenges that the modern supply chain executive will have to meet?

Doctor's Note (December): A Year Like No Other

For most organizations, 2009 was a challenging year. But challenges bring out the best in organizations with a mission and a purpose. As in other years, we saw many of our clients adapt to the current conditions and react to opportunities.

Doctor's Note (November): Are You Getting Your Money's Worth?

Based on a recent survey, the average company spends almost 50 person-days a month running its Sales and Operations Planning (S&OP) process. At a nominal employee cost of $800 per day, this is almost $40,000 per monthly S&OP cycle. The question that management needs to ask is; “what am I getting for this?” The answer is not simple. Well run S&OP processes avoid problems, but companies reward people for fixing problems and not for avoiding them. Given the pressures on performance and costs, employees tend to focus on solving the current crisis and avoid tasks that have no immediate and visible payoff.

Doctor's Note (October): Supply Chain Knowledge: Don't Reinvent the Wheel

If you ask the management in any company, the chances are that they will say that one of their most important assets is the knowledge of their employees. Yet most companies have no idea if their organizational knowledge went up or down last year. In fact few, if any, companies actually measure their organizational knowledge.

Doctor's Note (September): Positioning the Recovery

The worst is over. The latest Labor Department statistics show a 6 percent increase in productivity. Much of it is due to the decrease in real wages and benefits. This is normal at the bottom of a cycle when companies have completed the layoffs and furloughs and are operating with their belts tightened. Economists are no longer arguing about how deep the recession will be, but whether the growth will be consumer driven or investment driven.

Doctor's Note (August): Managing Outsourced Manufacturing Operations

Last month, Invista, one of the largest producers of polymers and fibers, announced that it was entering the engineering polymers business. While Invasta is well positioned to make the nylon 6.6 itself, it will use a number of toll manufacturers (contract manufacturers) to compound the products.

Doctor's Note (July): Inventory Woes - It is Time to Act Now!

US manufacturing inventory as compared to sales has been steadily declining over the past 20 years. Since 1991, the sales to inventory ratio (months) has come down from about 1.6 to below 1.3 in 2008. The recent slowdown has raised the ratio to above 1.4, but this is still only to the level it was in the 2001-2002 timeframe.

Doctor's Note (June): Unique Opportunities in a Downturn

We all assume higher productivity is better. So if a company is making a product for $100 and now starts producing it for $50, should the CEO get a bonus?