Hurricane Irene: understanding risk management and supply chains for the uninterested

Even if you are professionally  uninterested in supply chains or risk management you should have heard of Hurricane Irene hitting the US East Coast including New York. The very unusual prospect of New York tunnels being flooded (with animation being shown  on several  TV stations ) has cancelled trains,airplanes and closed colleges  and there is now news that the Merritt Parkway highway might be closed in Connecticut. A state of emergency has been declared at both the State level by the Governor and by the President for Federal aid. If you live in the track of the storm you must be getting calls and messages from friends worldwide – so intense has been the communication. A local dinner invitation with friends  has been pushed up to early lunch on Saturday although the storm is scheduled to arrive on Sunday at 2 am. Our hosts do not want to put their guests at risk !

Once a risk is identified for an organization – the key lesson from the Hurricane Irene preparation is communicating that risk. It is this latter piece where organizations including Governments seem to fail but the current communication of "hope for the best but prepare for the worst" is rather effective for the Hurricane Irene.

And if you live in the path of the storm you will see that grocery stores have run out of bread,water and batteries because of the repeated warnings that power might be gone for several days and weeks in some areas. When you look at nearby shelves that are full of ice-cream, beer or soda and empty shelves of water you get the idea of supply chains by item or SKU. Also, how consumer demand ultimately drives supply chains and distribution channels. The re-order time for water at grocery stores is obviously longer than the weather notice and the time it took for the Irene risk to sink in with consumers.

An update to follow on this post after the hurricane.

Update Monday, August 29, 2011 Hurricane Irene did less damage than expected. So there is now talk  whether the risk was over-hyped by the media and civic authorities. And that's the thing with risk management. When things are better than expected folks tend to get into the "crying wolf" mode – but hey the purpose of management is to minimize risk and from this blog's point of view the hype was worth it.

StratoServe nominated for CBS Connecticut’s Most Valuable Blogger Awards 2011

 StratoServe   has been nominated for CBS Connecticut's  Most Valuable Blogger Awards 2011. The MVB_badge_connecticut nomination reads:

StratoServe helps organizations "Get Innovation from your B2B and Supply Chain" for economic renewal in Connecticut and USA.

Please vote  with just one click ( till  September 9 , 2011 ) at the CBS Connecticut website here or on the Nominee Badge ———————————————————————————>>

You can vote once everyday!

 

Are you caught up in a commodity business like HP ? Try branding and digital distribution

Every business is feeling like a commodity business, all the buyer seems to care about is price and this was brought to sharp focus with HP exiting the hardware business. The HP brand was great but what margin can you really make at final retail prices of $500 for laptops. So branding does not work as IBM realized years ago. Digital distribution must not work entirely because why would Dell start distributing computers in retail stores? Don't be surprised if in a few years you see computers at the dollar store just like calculators today!

So what do you do if you if you manufacture products and as your industry matures with experience costs keep declining with off-shored production and optimized manufacturing methods and just squeezes out your brand margin? If you are in the car business you try and upgrade your brand from Toyota to Lexus. The latter has better margins but a smaller customer base that is relatively price inelastic.

But if along with your brand you change your distribution policy and are able to capture the benefits of digital distribution like Amazon – then you can actually thrive as a brand even when everyone else is getting commoditized and extinct.Amazon stayed true to its policy of digital distribution and spent enormous effort in improving its supply chain network  and today digital text sales are higher than paper book sales. A clear re-defining of its business helped Amazon ( viz. we are in on-line distribution/order fulfillment and not just an on-line book-seller) while the computer industry and lots of appliance makers  just seem to be going along with the shifting sands of lower global production costs.

Feedback is really important in the ICT Model of input-process-output

ICT Feedback-StratoServe

Given the interest of blog readers on the ICT model based on a past post, it’s important to emphasize the value of feedback to the  inputs and process part of the ICT model. To recall the ICT (or Information Communication Technology) model is depicted as input—> process—> output with a feedback  loop to input from the quality of the output as depicted in the ICT diagram above. The feedback is really  important.

To understand the importance of the quality of inputs think of the old saying “garbage in – garbage out” with respect to data and computers. It is quite amazing how applicable the concept is to what organizations do. Organizations exist as processors when you put your ICT glasses on. Now if you are a food processing factory then you can immediately understand the importance of well defined minimum quality of ingredients.The measurement of quality parameters is pretty precise and forms the “feedback” at this point.  And this same well defined “quality” of inputs applies to all kinds of services including qualifications and training of personnel- delivering the service. In the world of services marketing the organizations structured ways of delivering a uniform”service” experience to the customer involves very structured training programs for employees. For example, the McDonald store employee- worldwide illustrates the success of getting human inputs to a predictable quality level. The word predictable is important because the intent is not to be “the best” or “the fastest” but merely to assure that the customer gets the exact same experience-wherever. And if you ask HR managers trying to get this done – you’ll know how challenging this is.You really don’t want negative customer feedback so the feedback and remedial action must happen during training.

When you think of the next link of the ICT chain i.e. process- things are much more reliable in manufacturing situations. Because production equipment comes with manufacturers helping the factory get started. So if inputs are deficient these suppliers can be hugely helpful in getting things started and stabilized. As with inputs, processes need records and the ability to track back and investigate a fault that is seen in the output.Because the output is being measured for quality on a random basis in manufacturing environments and forms the fairly unambiguous feedback.

Things are more complicated in service settings. The customer experience is difficult to capture in real time. That is one reason you find that restaurant waiters/managers tend to come by tables and ask if everything is OK. Unless there is a real problem most customers don’t speak up and measures such as taking a survey on the Internet about the experience is what some restaurant chains are doing today.

The feedback is thus the critical piece and feedback that goes back from output to process or inputs or from process to input is a great way to improve the whole input—>process—->output chain. So do look for feedback on all parts of your process and then try to have a genuine vigorous process to action the feedback.

About StratoServe.

Google Motorola and the Android partners : should you acquire an upstream customer?

Since Google offers the Android operating system free to cell phone makers like Samsung and LG there is much debate on whether cell phone makers who use Android will start feeling sidelined. Apparently the cell phone makers using Android were given a heads up on the acquisition of Motorola and everyone congratulated Google and at least politely asserted that this shows  Google's seriousness for the mobile market. But this brings up a fundamental question of : should you acquire an upstream customer?

An upstream customer is one who brings you one step closer to the final consumer who uses  your product (e.g. Android ). An upstream customer could also mean acquiring an independent distributor. Think of all the Quick Service Restaurants (QSR) where some restaurants are company owned and others are franchised. If Google goes by that logic there is nothing to fear by other upstream customers like LG and Samsung. Surely a food franchiser would keep all elements of the customer facing pieces ( the menu, the bread and the salad) uniform.  In fact, Android might get better when its tested and refined at company owned devices (Android at Motorola)  and at franchised type operations (Android at LG and Samsung).

One question remains and that is why should Android go free to Motorola competitors? And if you have used Android you know when you try to update a new contact it asks you :

  1. Would you like to store the contact on the Cellphone instrument?
  2. On the SIM card ? ( if it is a GSM phone) 
  3. Or in your Gmail account?

When you are given the option – you don't want to be tethered to a device (what if you lost your cell phone?) . You want to "go cloud"  and the payback is that you have to see all those ads when you use the free Gmail. So there is a revenue model and that sort of makes things easier to understand.

Google Patent Search helps acquisitions and defend IP- as in Motorola

If you use Google  Patents (Beta) , you can search patents and that allows you to find patents around a technology and who else is citing a patent. So let us say Apple cites a Motorola patent and Google acquires all of Motorola's patents its hard for Apple to prove that Google Android or Motorola devices  infringed their intellectual property (IP). "Hey – you took our IP  because you refer to the Motorola patent in the first place…"  is the sort of neat answer that Google can give.

While analysts  maintain that Google wants to get into the cell phone hardware business- I think the patent defense idea is probably the bigger reason for the Motorala acquisition. Google's credo is "do no evil"  but with Apple ,Microsoft,Oracle constantly alleging infringement – a rather evil motive, the Motorola patent buy is like getting nuclear arms by a country  – serves as a real deterrent to attacks.

And the fun part is that Google Patents  allows anyone to search patents instantly and Apple and Microsoft could have come  to the same conclusion – viz . buy Motorola's patents. You can be sure that many industries like green energy,pharmaceuticals,electronics  will be trying the  same route of acquiring a whole bunch of patents to serve as a deterrent to competitors infringement allegations.

Organizations get global but Governments struggle local : French downgrade and London riots

Americans secretly admire French style and wine but publicly deride French fries – so its particularly unsettling that a French credit downgrade  is affecting Wall Street and millions of Americans' retirement savings. And then you have the London riots where Prime Minbister Cameron is talking about learning how the leadership in Boston (USA) and Belfast (Ireland) fixed their problems. If you think about it organizations of all kinds are becoming global and "boundaryless" but Governments are about geography,boundaries and sovereignty.

Governments are supposed to ensure law and order including defense, help economic growth and promote employment and take care of education and health of their people.  Each one of these  have  a physical component or "bricks" component that cannot be globalized . For example you do need elementary schools that are buildings,have teachers that local students can attend.

On the other hand  companies are responsible to their shareholders and move production and find markets wherever there is an opportunity. The stock market with computer controlled automatic trading probably leads company actions at a furious and volatile pace. Similarly non-profits – though spared the vagaries of the stock market are able to take advantage of globalization by raising money and donations globally ( eg. NGO's) or setting up global campuses (eg. universities).

Governments and their leaders- find themselves geographically nailed by rioting social media using  mobs – like Prime Minister Cameron. At best they can seek inspiration from other governments while having to deal with the issues that are very much local. In other words while all other organizations can make their organizations,supply chains and markets go global – Governments really cannot. They must deliver locally whether it is law and order ( in London) or jobs (in the USA) and that is more challenging when every other organization can be much more mobile.

The “stability predictability” challenge : why the Fed’s action might help jobs

The stunning decline of the stock market on Monday after the S&P downgrade left one wondering as did the waiting with bated breath of the stock market to the Fed announcement. Coming out and saying that interest rates will not change till 2013 does a lot to help both the market and organizations feel  less  uncertain about hiring. And it has all to do with stability and predictability in the environment that organizations (including Governments ) can help with.

There is something about organizations that cause them to add drama and uncertainty where none is needed- just so that some individuals  feel safer by keeping options open. And in doing so, the organization's mission gets out of focus because now it is dealing with the associated fallout of a self inflicted "uncertain" posture on personnel motivation. In fact, you'll see that better organizations try to minimize peripheral turbulence (do not randomly change some process or rule capriciously) so that the organization stays focused on mission and more importantly folks are motivated. Remember the inability of spirit is the problem in the US recovery- nothing else.

The Fed action is a welcome relief, take a cue  in your organizations think before acting on two questions:

  1. Will this action motivate my people? Or pull them down?
  2. That mission ( getting jobs for the US Govt. for e.g.) achievement follows from motivated folks which includes all stakeholders.

US credit downgrade : dealing with the no-college degree unemployed

This blog is not particularly worried about Standard and Poor's dire prognosis of  AA+ for the US Government although it is a temporary set back  for the  stock market.

However, I am concerned about the underlying message of of the S&P downgrade  -which is  not so much about the US Government's solvency but more about the eagerness of both parties to score points over each other rather than focusing on the key US problem- jobs for those without a college degree.

For, the real problem is not with the college educated unemployed. The overall college grad unemployment rate in the US is getting closer to 4% and was the max  of 5%  when you see the last row of the Table A-4 of the Bureau of Labor Statistics . The no college US workforce has suddenly run out of opportunities  because all the low-skilled manufacturing jobs have been shipped to China and the low-skilled service jobs have been shipped to  India,Philipines etc.

So, if you do not have a college degree and/or skills you are really an unemployable person in the US. Unless you add a skill that allows you to do a "hands on work, " in today's high tech workplace. Let's say you know how to run a traditional lathe – getting  trained on a computer controlled precision machining equipment would help.  There is such a shortage – that someone will take you on. And you'll have a new career……

The point is that we need to segment the employment problem population more precisely and drive programs that help these segments directly. To do so, leaders of all parties need to come together which is the point of the S&P downgrade in the first place. The debt problem will be more manageable once we are able to fix the unemployment problem….

A town level SEC for investing in local small business

With globalization it is easier and easier to buy stocks in a variety of growth markets or in large US companies who are under pressure to turn a profit and therefore outsource jobs for lower costs. Meanwhile the most stellar small businesses have a hard time in finding small money to finance a website upgrade, do some e-commerce and try to market globally. You know businesses in your neighborhood who you would buy shares in if only you could. Is a town level SEC the solution?

The "Locavesting" article   points at  the interesting possibility because only then can you direct confidence,money ,growth and jobs to neighborhoods. And a transparent local SEC type of mechanism might help.

Now think of the real estate market. Unless you plan to go to a location frequently you prefer to invest in something local so that you can go and fix the faucet if the tenant has a problem and save some money on the plumber, which is what your rental agent would do.. This works well till you have a real estate bubble where locals remain silent about overvalued properties and unverified incomes and you have the mortgage mess.

So now the Government needs to come in and regulate the real estate market as they do the shares of foreign companies who must file with the SEC to protect  US investors.

The question is that when the town governments work so well, by and large, through public oversight why can't the SEC type of role be given to local citizens?  A business with local friends of 40 years is very unlikely to disappear with a local investor's money particularly if there are a couple of local directors on the small business board. And with the on line trading being so active and streamlined – it should not be difficult for the business to list and trade at least locally.

The logistics of the listing,trading on line is not that difficult given that the Internet allows you to do geo-targeting for advertising and should allow folks to invest locally based on the IP addresses.

Local people can  put some of their money in local businesses  and watch them closely thereby helping local jobs. Just a thought.