THE ENTERPRISE--SO MANY UNCERTAINTIES WILL TEST EVERYONE--PERSONALLY & PROFESSIONALLY
IT’S NOW MID JANUARY, AND THE START OF THE NEW YEAR SEEMS TO HAVE ADDED, NOT REDUCED THE UNCERTAINTIES WE ALL FACE
COVID
The Worst First!
The most pervasive uncertainty is what happens next with Covid. Why? Because it disrupts all aspects of our life—personal, work, economic, family, etc.
So far mutations of the Covid virus continue to vary: that’s what viruses do. Like many living organisms, they try to stay alive by finding new hosts. Up through Delta, the vaccines—Pfizer & Moderna, et. al.—seemed to really help reduce suffering and deaths.
Many anti-vaxers resisted at their own risk and fell seriously ill (or died). Yet an unmentioned (and hard to confirm) aspect of the deaths were that 95% of the Covid related deaths were people who already had four or more co-morbidities. (Health problems that made them more vulnerable when the stress of the virus hit them.)
Facts please?
What was measurable is that during 2H 2021, a high percentage (about 70-90%+/-) of the hospitalizations were unvaccinated people. The prevalent Delta mutation attacked the lungs, a lief threatening place for a viral attack. The lack of vaccinations seemed to be ill-advised, with unnecessary suffering and deaths. However, in a free country like America, the citizens can opt to remain unvaccinated and take the risk of death.
Omicron has changed all that (it seems, but nothing is certain yet). Omicron was so infectious, it took over from Delta as the primary variant. Omicron seems to attack the bronchial system, more than the lungs; thus the death rate is lower and the suffering is different.
Still unknowns...
The huge recent unknown is how effective vaccines are against Omicron. Many vaccinated people are getting Covid (presumably Omicron). Both Moderna and Pfizer publicly admit that their annual shots no longer have much effect on the Covid Omicron variant, and the booster shots lose effectiveness faster. WHY?
Nobody knows—or at least they aren’t saying. This new Omicron variant will make you feel terrible, but usually doesn’t require hospitalization and is less often fatal. The best preventative measure seems to be masks—and not just single layer cloth masks—medical masks.
OTHER UNCERTAINTIES—SOME OF THEM FAMILIAR ONES.
Supply chain disruptions—due to shortages of products, labor, shipping containers, or all of the above. Nobody knows what will be delivered where, by when.
I had two good service experiences, one was at (YES!) the Summit Broadband Cable TV store. (Noted for poor service!)
The two young ladies, Valerie and Courtney were great, treated me like a customer, and ultimately got me what I needed (a DVR). Last week they were out of DVRs, so they told me when to come back, that one would be available. It was! (Pity the poor regular customers—no standard digital boxes were available.) They got me the equipment, told me how to set it up and gave me their email addresses to tell them I was ready to activate the DVR—and they did so—before they left at 5PM
The other was MacMobile, my computer consultant. My computer mysteriously refused to accept my latest (correct) passwords for email & web browsers, I called AppleCare—(They were no help except to scold me for using my computer for 5+ years and not keeping up with Apple's operating system updates.) When my help person called the morning after getting my “sos” messages, she solved my dilemma in minutes. (FYI: I let my computer get unplugged from the charger. The battery ran so low, it didn’t maintain the correct time and date. When powered up, it defaulted to a years ago date & time. We fixed that, and things improved fast.)
Futurist Alvin Toffler described this issue in a term for the predicted future: High Tech—High Touch. A medical provider of mine recently replaced voicemail with a person. They couldn’t keep up with listening to long voicemails. The person could handle patients needs via phone calls, faster and better.
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That said, here’s the age old dilemma of Supply Chains, described in a 27 year old IndustryWeek column.
Forecasts will always be wrong
Which means there are only two or three options for planners. ©John Mariotti 1995
“If only we could have accurate forecasts...." How often have managers or executives in most businesses heard--or used--those words as an excuse for excessive inventories or poor customer service? It is an almost-constant plea from production planners, materials and operations executives. Salespeople take a different view of this. It is they who must try to provide accurate forecasts. Of course, forecasts will never truly be accurate because they are predictions about the future. If we could accurately predict the future, all sorts of wealth would be at our fingertips.
Recognizing the inevitability of forecast errors, managers and executives have long sought some magic solution to enable them to respond to the pressure for excellent service in the face of ever-declining lead times. There is no "magic" solution. True, timely information about actual marketplace demand can minimize the problems created by faulty forecasts. But even with the best of information, only two real production options exist: holding more inventories or developing more flexible/shorter-cycle production systems. (A third option might be a "make-to-order" business, where the order lead-time is long enough for production to respond.)
Manufacturing businesses are not alone in this dilemma. Service businesses face similar uncertainty--but the limiting factors are people (staffing levels) or resources (like telephone lines or computers) instead of materials. So how can a manager or executive cope with inaccurate forecasts in the face of pressure for faster and faster response?
One answer is to consider the links in the supply chain that can be forecast with some precision. By communication with suppliers, their available future capacity can be accurately determined. So can the lead-time to respond to volatile demand swings. And the suppliers' response times can also be determined.
Some demographic trends can be forecast reasonably well. Barring plagues, mass migrations, or wars, the age-group of populations (except for birth rates) can be pinpointed fairly accurately for most developed countries. And when a customer has committed to buy an item, that fact can be factored into production plans, as can the timing of an upcoming sales promotion or a new product launch. But is this enough for the poor production planner? Unfortunately, it's not.
Here is where flexible inventory and production strategies come into the picture. Guessing at how much finished-goods inventory to hold is no picnic. The risk of error is high; but can be reduced by inviting customers to participate in forecasting. New systems like Efficient Customer Response (ECR)—using information technology to bridge multiple levels in the supply chain—are helpful. ECR systems are being used increasingly in fast-turn retail environments like grocery stores to link supply and demand more closely—in the expectation of better in-stock positions without corresponding increases in inventories.
After all, it is data at the level closest to end-user demand that can best help quantify expected future demand. If the product or service lends itself to such an approach, keeping inventory in a semi-finished state allows flexibility in meeting different customers' demands. Temporary personnel agencies and outsourcing can be a big help in handling demand surges, too.
The Japanese taught us the wonder of SMED (Single Minute Exchange of Dies) and rapid setup/changeover technology. This increases flexibility. But too few companies engage their suppliers in discussions about how they can jointly speed production changes and increase flexibility. Often it is as simple as sharing more information, more often. Field sales forces equipped with modern communications tools can feed back changes in customer plans faster than ever–-if only they will.
With all of this, will forecasts be accurate enough? No! But even so, parts of the traditional forecasting process can be improved, more than we often realize. New PC-based forecasting software--such as "Focused Forecasting" and "Demand Solutions"--can help analyze trends and historical demand patterns. Using better information and insight, forecasts can be improved. But they will always be wrong. The manager or executive who understands this will search out the best strategy for deploying assets (either in inventory--finished vs. unfinished--or flexible production capacity).
Doing nothing but the same old things and wishing only for a better forecast is no solution at all!
@BIO: John Mariotti, a former manufacturing company CEO, is president of The Enterprise Group. He lives in Knoxville and is affiliated with the University of Tennessee’s College of Business Administration. His 1995 e-mail address was: [email protected].
Update PS: Beware of basing forecasts on prior year’s data without careful analysis. This can cause “errors of repetition”—because if you ran out of an item the prior year, and if you base forecasts on that, you might make the exact same error and run out again this year!
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SHORTAGES IMPACT THE SUPPLY CHAIN & OFTEN TURN INTO EXCESSES AFTER THE CAUSES HAVE BEEN FIXED
There’s a classic teaching tool in the Logistics field called “The Beer Case.” It illustrates how spikes in demand that cannot be serviced, leads to overreaction, and overcompensation (over stocks) in the Supply Chain. A purchase for one big party, when passed through the suppliers in the supply chain triggers a surge in buying, increased inventory and even new production capacity—all of which becomes unnecessary—once the one-time event is recognized—too late.
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THAT IS A SEGUE TO MY NEXT TOPIC—LEARNING VS. UNLEARNING, & CAUSATION VS. CORRELATION—FROM A 1999 COLUMN—AN EXCERPT
Change requires learning--and unlearning—both!
Relapses are common, and can negate prior progress. ©John Mariotti 1999
The pace of change is accelerating, driven by rapid and widespread advances in information technology. When combined with advances in transportation and logistics, this radically increases the rate of globalization. The implications for business organizations are profound.
For manufacturers, one of the most important implications has to do with the importance of building empowered learning teams. Only "top-to-bottom" learning organizations can survive and succeed in such an environment.
A major obstacle to embracing rapid change is that change requires people to unlearn old behaviors if they are to fully benefit from new learning. Old habits become the de facto barriers to change until they are unlearned--thus allowing the newly learned behaviors to become firmly implanted in their place.
Much has been written about the benefits to businesses that evolve into learning organizations. From the work of Douglas McGregor and Chris Argyris at MIT decades ago to the more recent work of Peter Senge (The Fifth Discipline, Doubleday-Currency, 1990) and Jim Barber ("From the Working Class to the Learning Class," National Productivity Review, Fall 1994), learning organizations have been recognized as the most effective avenue to sustainable competitive advantage. With the pace of change accelerating, the pace of learning must also accelerate.
To clear the way for rapid new learning, the rate of "unlearning"—letting go of the old ways--must also accelerate. It is here that resistance is often the greatest. Another challenge may be even more daunting: simultaneously becoming both a learning and an unlearning organization.
Unlearning sounds easy: Just forget the old way and use the new one. Abandon old beliefs and habits, and practice the new ones. If resistance to change were not so great, unlearning would be simple. However, change is difficult to bring about—and frequently more difficult to sustain. Because change creates discomfort, change initiatives fail far more often than they succeed. When they fail, the inescapable conclusion is that the learning/unlearning process has not been effective.
In many cases, corporate change processes fail because unlearning does not occur. Some don't fail outright, but due to inadequate unlearning, they regress or experience periodic relapses…..
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WILL YOU LEARN/UNLEARN, AND DISCERN THE DIFFERENCE BETWEEN CAUSATION (CAUSE) AND CORRELATION (EFFECTS)
George Santayana is popularly known for aphorisms, such as "Those who cannot remember the past are condemned to repeat it.” Replace the words “remember" with "learn from" and substitute repeat (its errors). Some say we learn from experience. Maybe so—maybe no. In many cases the outcome that could have caused the learning from experience is too far separated in time and context to learn from it. Fail to maintain your car for a long time and it will likely fail in some way. Will you connect that failure to your negligence? Maybe so—maybe no.
Many of us watch TV shows in which detectives must separate correlation from causation (or probable cause, as they call it). The fact that a victim and a suspected criminal both live in a high crime area may satisfy correlation—the data supports that. But Only the evidence can confirm the causation. We all encounter this difference constantly. A person is not performing well in their job. Which is it (data-based) correlation or (evidence-based) causation?
My favorite way to describe the difference is this: If I snap my fingers or clap my hands five times every day, I have no problem with elephants trampling my landscaping. The correlation is very high—100%. But why? There’s no causation. No elephants live anywhere near me (except the Columbus Zoo & The Wilds). So, unless there is an escaped elephant around, the causation is absent.
If your company is losing business in a nearby market, why is that happening? Could it be that the sales team is at fault. Data will support correlation, but not causation. A new competitor (or a new buyer) may have entered the picture and is taking away business for any of several reasons. A relationship may have changed, or the mix of product may have also shifted.
Are your deliveries always late around the holidays? Data on correlation might reveal which deliveries and to whom. Causation might reveal that your have not adjusted lead times or delivery methods for the seasonal peak volume. Do you learn? And do you also unlearn old ways, and that you must replace old with new learning, before it becomes entrenched in your behaviors? The rapid advance of technology dictates that a lot of learning/unlearning is critical to stay competitive in today's fast moving global business world. Doing nothing (in the face of rapid change) is a decision too; usually a bad one.
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WHEN FACING UNCERTAINTY, THE BEST APPROACH IS TO REDUCE AS MANY VARIABLES AS POSSIBLE, EVALUATE THE OUTCOME, THEN LEARN FROM THE EXPERIENCE AND ADAPT.
Covid is another story. Pay attention to what qualified Doctors say, not journalists of politicians. Let’s hope that Omicron is going to fade soon.
Best,
John
PS: News just out: US Inflation hit 7% on its way higher. Those responsible (the ones in control of our government’s runaway spending) seem to avoid the blame entirely. Why? They shift the blame to everything and everyone else. Actually Covid (thanks to the Chinese) deserves a lot of the blame. However, the flagrant spending (Biden, Congress & the Fed) with no underlying value is a big cause (including Trump’s excessive spending near the end of his term). Thanks to Joe Manchin and Krystem Sinema, it hasn’t gone completely bonkers. A big blame on reduced purchasing power in the paychecks of working Americans is Bidenomics and his ridiculous Build Back Better boondoggle.
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