Skeptical Optimist

Just ran across a fantastic blog linked here. Spend time to read his 7 entries on Energy.

Great analysis that gets to the heart of the problem.

Experiment with Peer to Peer Lending

A couple of months ago I found a new web site that claims to be the eBay of lending.

Prosper is a intriguing startup by a founder of Paypal that allows you to lend money to others by bidding on loans. Loans are ranked by credit risk and there is even a 3rd party who ranks lenders with risk adjusted profiles. As you can see from the link I'm doing better then my mutual funds -- too bad this wasn't an offer in my 401k.

Updated: As an experiment - I've added a group function where I help people to get loans.
See the site I setup UpgradeYourCredit

Business Forecasting -- missing an opportunity

I'm amazed at the number of companies that miss a key way to serve their customers better and make more money. Better forecasting is a key "lever" in the process of improving business performance with both top line and bottom line impact. Top line revenue grows the better you match what you have to what the customer wants, and where they want it. A good forecasting process will do just that -- and it will give you an early warning when business starts to trend down. Bottom line also benefits by giving your manufacturing team a more stable plan and producing less waste.

Companies continue to treat this group as a "clerk" position and perhaps they throw some tools at the group. The best companies will seed the team with key business experts and people who understand the forecasting process from a mathematical perspective.

For companies that are "average" in tracking forecast error, the opportunity is large - about 2% of revenues - so a $100M USD company could drop $2M to their profits. I talked to one $1B+ company that didn't even track forecast error - a great opportunity for their new CIO to save the company a great deal of money.

Another data collection opportunity.

Technology Review had a great article on the Car Chip. I surfed over to the Davis site and discovered it allows you to monitor a number of engine performance indicators and the high end version allows you to have a GPS installed as well.

Neat technology - though still a bit pricey -- not sure if my kids would appreciate my tracking them every where they went but perhaps my insurance company would.

What we need now is a "HRP System" (Home Resource Planner) - that would link into the data via 802.11g and schedule tuneups and oilchanges on my Calendar system.

Opportunity in your existing data

Many companies miss a huge opportunity by ignoring their current enterprise data. Many times when preparing for a software implementation my clients and I find "artifacts" that management did not know about.

One client found that due to a number of acquisitions in their customer base, 90% of the orders came from 30% of the customers based on volume. When you consider ordering costs, returns, overhead, custom skus, and logistics they found that the other 70% of the clients were not adding value to the business! Looking at the same data from a Revenue viewpoint it was clear that they had to find a different way to serve those customers immediately.

The scary thing was that snr management did not know this was happening. They were fixated on making "better product" when their product was already very good.

This one discovery will help them push margins back where they should be.

Is there an opportunity for you to look at your business differently?

Shameless plug(s)

i2 has kicked off a new supply chain magazine -- here is the first issue

http://www.i2.com/supplychainleader/

Good article by my friend and excolleague at OAT - Marc Osofsky on page 30.

Enjoy - check out the interview with Panasonic -- a great example of Planning as a Service


Karl

(Yep - I own stock in OAT and a wee bit in i2)

JDA acquires MANU....

or what were they thinking....

The fastest way to kill sales is to demoralize your field team - for JDA to acquire MANU and then announce they were cutting jobs once the acquistion goes thru is probably not the best way to improve customer service or increase sales.

Management teams that don't understand the business will cut sales and consulting to "save money" -- but in my experience this is not a good idea unless you are shifting your business model to a channel partner model. I'm all for efficiency, having resources match demand and keeping costs low but that should be a regular management process. Thinking you can ignore that for months (years?) and then "catchup" in one swoop is poor management.

To be successful, you must constantly identify the market you are going after, keep overhead as low as possible and keep your employees engaged with customers.

Question to JDA management -- who is going to take care of your customers while your field team is demoralized?

Answer -- Don't worry - all the Oracle, SAP, IBM, ITWO, etc. field teams will happily pick up the slack

Inventory Management - Part II

In my previous post on this topic we talked about using POS data to align inventory with sales.

This project combined a few innovative techniques

1. POS data -- while available many companies don't use it for some reason (old concerns about data quality seem to be the biggest issue) -- they are missing a huge opportunity to shift their companies mindset from "sell-to" to "sell-thru" - it is only the purchases by the ultimate customer that matter, the rest of the PO is just a markdown or return waiting to happen.

2. VMI - Vendor managed inventory - again this has been around for awhile but not used much in the CE/CPG space with retailers. However VMI is a better method as it aligns incentives better for both the retailer and manufacturer. Topic for another post but if you examine the financials on both retailer and manufacturer and understand their problems, you will see that VMI will produce superior returns for both parties. It does however require a higher trust level.

3. Planning as a Service "PaaS" -- Something software companies and their customers should start to consider. Similar to the more common Software as a Service (SaaS), PaaS removes the need to have Supply Chain (or even technical) experts in a CE/CPG product company. (SaaS removes the requirement to have technical experts supporting it, at least for that application)

Many companies are focused on making superior product rather than on building superior technical or supply chain expertise. These companies argue that technology or supply chain is not strategic and is a candidate for outsourcing to experts.

PaaS also aligns incentives better between the software tool vendor and the manufacturer. If the software vendors tools are so great (deliver so much value) then show me! PaaS allows the best software vendors to deliver just results every week -- then the client can decide
1. if they want just have the results or
2. bring the business process in house, and still have technolgy outsourced - a SaaS model
3. or everything in house - traditional software deployment.

Again like the VMI between the retailer and manufacturer this requires a high level of trust. So far for our clients that are using PaaS, it seems to work well.

15 minutes of fame

Vinnie invited me to blog over on deal architect. For those of you who haven't read his blog, you will find a real treat -- he always has something interesting to say. His blog and a few others remind me of the "good old days" of USENET with the level of conversation.

Hopefully I've kept up his usual standards...

http://dealarchitect.typepad.com/deal_architect/2006/04/the_real_deal_k.html

Seth's Blog

Seth's Blog


My wife's car (Toyota Sienna) actually has a realtime MPG dashboard - I find that glancing at it changes my driving behaviour enough to increase my average mileage by 5-7%. Sounds like market opp. for someone to come up with a $50 device that attachs to all cars....

Sadagopan's weblog on Emerging Technologies,Thoughts, Ideas,Trends and Cyberworld

Sadagopan's weblog on Emerging Technologies,Thoughts, Ideas,Trends and Cyberworld: "Innovation, Innovation Everywhere"

Sadagopan has nailed it again -- we are hearing these same thoughts around management innovation from our customers. The key to differentiating your company is to change how you deliver to your customers, regardless of the type of company. Brands, products and features are all becoming irrelevant when compared to how you are servicing your customers. You need to deliver value quickly and regularly and get better at it.

As the CEO of one large Korean Consumer Electronics company told us -- "Supply Chain Management is the only effective weapon to differentiate us from our competitors; we must shorten the time to market in a cost effective way". They are in a business where their goods depreciate in price 30% per year so speed is essential. Plus if they develop a new feature, it takes almost no time, < 1 product lifecyle, for another manufacturer in China to get a similar, cheaper priced good to market.

Supply Chain Management is again becoming a key area off differentiation for a few companies -- but I see far to many companies who are satisfied with poor customer service and inventory turns below the industry average. If your companies inventory turns are below average and the average is below 12 -- I think it you have an opportunity to get that promotion, increase that stock price, increase your customer service and make your CFO happy. Ok, so I made up the last bit about the CFO.....

Inventory Management: A Way to Give It a Grade - Knowledge@Wharton

Inventory Management: A Way to Give It a Grade - Knowledge@Wharton: "'The most sophisticated companies in supply chain management realize that responsiveness in inventory management is important.'"

Interesting article on Inventory management in today's Knowledge@Wharton -- the sentence above pretty much sums up the findings. The article's main focus in how an operational issue like inventory management impacts the stock price. However it suggests that because increasing inventory turns doesn't seem to impact stock price it is not important.

Actually my experience tells me something slightly different - you need both Responsiveness AND efficiency. Our company has helped clients increase customer service levels and increase inventory turns. We have done this enough times so that I believe most companies do not operate anywhere near their potential. That is they under-serve their customers carry too much inventory in the wrong places. For those of you with a financial background - they are not operating at the efficient frontier of their business.

For example
Examine the 2 graphics at the top of the column. We helped a manufacturer selling to a large well known retailer. The retailer did the forecasting at a category level and sent purchase orders to the manufacturer every week. In the first picture - you can see the misalignment between sales and inventory. In some places sales where very high but there was not enough inventory, in other place the opposite was true. In their standard process this happened EVERY week. The weeks of supply of inventory was anywhere between 17 and 80 weeks for this category.

In the second graphic shows the measurements AFTER our process was executed. The process includes examining the promotions, Point of Sale (POS) , competitive sales, current inventory positions and manufacturing process. We have been doing this weekly now for 20 weeks and have been able to keep the inventory to 3 weeks +/- 1 week - note this is been steady thru the holiday and more importantly post holiday.

Even the high end of this range - 4 weeks, we are turning inventory 13 times AND the retailers measurement of instock went from 60% to 90+ %! What if you took your highest revenue category and used this type of process - how much capital could you free up AND how much more revenue are you missing. (Our client found that with better instock postions their revenue and their retailers revenue went UP)

Next time I will tell you how we did it and no it was not with RFID