| Leadership | Supply Chain | Lean Processes | Negotiations |
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Fall/Winter Newsletter 2003By Michael J. Cote Quote of the month: "The leader who understands how process unfolds uses as little force aspossible and runs the group with pressuring people." The Tao of Leadership, John Heide
Welcome to all our new subscribers. I have enjoyed speaking with many of you personally over the past few months. If not, friends probably referred you, so welcome too. Good NewsI am excited and pleased to report that I have recently accepted a full time faculty position at Northeastern University teaching undergraduate business courses in the evening division. It has always been one of my goals to teach college and I am fortunate to have this opportunity at such a wonderful and leading edge school. Northeastern has a five-year program that allows students to have internships to work in the field to gain first hand knowledge of the career. I am teaching Strategy and International Business courses, one of my main areas of interest. This schedule still allows me to continue my consulting practice and lecturing schedule during the day. Please email me privately if you would like to know which classes and which campus I will be teaching at during the upcoming semester. Supply News RecapsHighlights of leading business magazines- for those who don't have time read everything. Employment: Unclear… ISM’s employment index remained below 50% for the 37th consecutive month, although business analysts claim the situation should improve early next year. EconomyGood News!! ISM’s production and business activity indices (64% - the highest level in three years) continue to trend upward. The semiconductor industry recovery is on track being driven by cellular phone applications, PC sales picking and overall electric equipment production PricesMostly Stable: Down - None Up - Mining, construction, retail SupplyDeliveries are just slight slower (down 2%) even though inventories are up 2%. This indicates that supply is stable except in specific industries. These include wholesale trade, communications and business services Supply Management Best Practices Tips
ArticlesThis summer I had the extreme pleasure of teaching a graduate course entitled "Global Supply Chain Management" at Northeastern University. For the class I wrote two case studies illustrating issues in global supply chain management of which I had first hand experience…I was the purchasing manager at both companies. The Eltech case demonstrates the tremendous benefits of managing cost drivers beyond the first tier supplier in the supply chain and that supply managers should consider "value-add" as the real measure of whether a supplier is truly low cost. The other case involves GenRad (now Teradyne) establishing and designing a supply chain for a new diagnostics system slated for the Ford Motor Co. This case is an example of how a supply chain manager must consider the holistic effectiveness of the entire supply chain. Both these cases show that just because each portion of the supply chain is optimized it doesn't necessarily mean that the whole chain is optimized. These cases can be viewed on the website under the news and articles section. They are interesting reading and may contain some ideas you could adapt for your own company.A special thank you to Mike Chester, President of International Manufacturing Consultants, for being a guest speaker at the Northeastern class. The students really enjoyed hearing about the culture, how companies operate and some of the unexpected difficulties in doing business with China. Mike spent several years in China and runs a consulting business helping people to locate sources and start manufacturing in China. Lean Manufacturing Practices tips to reduce Supplier's Costs1.Eliminate "non-value" add process- the number one way of reducing cost is to have suppliers STOP all the non-value add steps in their process! You pay for it all. For example, do you want to pay for all the inspection steps a supplier takes to ensure quality…or would you rather just pay for the quality? A supplier can often eliminate many inspection steps if their process is in statistical control. This means that their process will usually yield a product that is within acceptable tolerances of their processes. An alternative is that their process allows a percentage of the products manufactured to be outside specification limits…then they have no choice but to inspect. Inspection is almost always more expensive. And guess who pays for it? Other non value add steps might include reworking product, unbalanced production schedule which means wasted production time, product features that are not needed, specifications that are far tighter than what you need or extra packaging and shipping costs. A few years ago I read where an airline eliminated the piece of lettuce under the pear half and saved a half of million dollars. Just a small change can add up to big savings over the year. Look with a new set of eyes at all areas. 2. Minimize inventory-carrying costs: Some inventory is always needed to level our volatile demand. Lean practices show how suppliers can minimize the inventory. In general, the buffer inventory required between processes is cycle time x quality consumed. So, reducing cycle time inevitable reduces the amount of buffer inventory required independent of consumption. 3. Use industry best practices to maintain competitive costs: The supplier using the best practices for their industry will usually have lower prices. Why? By definition, best practices are the most effective and efficient practices in the industry. For example, one best practice is for suppliers to in source core competencies and outsource all other functions. This leads to lower costs because your supplier focuses and invests in what they do best; and what they don't do as well is given to another supplier who is more competent in these areas. 4. Less liability for custom material: Liability is a thorny issue if you outsource product manufacturing. Any time you ask a supplier to manufacture a part that is customized for you, there is some liability. Inventory and cycle time are minimized when the supplier uses lean methods reducing your liability and allow you to phase in new or lower cost products more quickly. Recent Events and UpdatesI was honored to speak on “RFQ – Strategic and Tactical Sourcing ” at the National Education Buyers Conference in Falmouth, Ma on October 24th. One of the conference leaders was James Boyd, former president of PMAB. The buyers seem to appreciate the complexity of the process and my tips on how to do it better. They were especially interested in Question Based Negotiation. I offer seminars in this negotiation technique developed over the course my 25 years in supply management. I presented a forum on "Global Supply Chain Management” at the September meeting of the Boston chapter of the Institute for Supply Management. I explained how supply chain management differed from supply management and the attendees seemed to enjoy my concept of “always late” instead of “just in time”. Consider all the benefits of “always late,” including perfect on-time delivery, higher quality and happier suppliers. Wouldn’t life for purchasing people be so much easier? Surprisingly I received the most comments about a brief off the cuff comment I made during the talk about my goal of trying to keep manufacturing in the United States by making manufacturing competitive with international manufacturers using lean techniques, automation and supply chain management. I believe, that as a nation, we need to decide on a set of “core manufacturing competencies,” and maintain a commitment to investing in and developing these. In my recent travels, I have seen many examples where manufacturing in the U.S. is better, cheaper and more flexible than any abroad. By the way, the Keynote speaker was Jack E. Rossin, author of “The Pawnshop Chronicles” and a member of the Society of Professional Consultants of which I am also a member. They have a wonderful website with a list of members. If you ever need a consultant for anything, not just manufacturing, or lecturer I recommend checking there first. I was a noted guest speaker at the grand opening of the Mount Wachusett Devans Training Center on September 9. I will be presenting various seminars in supply management and lean manufacturing. Call Tom Black at 800-441-5813 for a schedule. I was asked to be a guest lecturer at Professor Rick Hilliard's Entrepreneur class from Nichols College. I had taken this exact class while earning my MBA so it was an honor to be on the other side of the desk so to speak. I enjoyed hearing about some of the varied ideas for starting a business from the students. I hope I gave them some humorous insight and inspiration. I would recommend this class to anyone who is thinking of starting a business one day or currently running a small business on a shoestring. Professor Hilliard continues to teach the most effective, informative and best-structured MBA courses on entrepreneurship and leadership at Nichols College. The web seminar entitled "Outsourced Manufacturing: Maintaining Visibility and Control" was very well received. There were lots of good questions and solid feedback. If you missed this one, visit Supplyworks website to find out when the next web seminar will be and the topic. AME recently sponsored a "Lean Manufacturing" best practices walk through at ITT Rule in Gloucester that I attended. This company manufactures marine pumps, compasses and other maritime equipment. ITT Rule recently implemented an impressive supplier pull replenishment system. This, I believe, represents the new generation of KANBAN. Their system was simple, visual and soon to be self-adjusting. It also automatically identifies supplier performance problems. One of the biggest problems with KANBAN is "how to adjust the KANBAN quantities as demand changes. ITT Rule has solved this problem bin a simple and least intrusive way- quantities are changed when customer consumption requires it! I also taught a class on Websites for Small and micro businesses through the Assabet Learning Center. I covered how to optimize website marketing value for small business owners, how much you should pay to have it done, and how to decide whether to use it as a brochure or to sell on the internet. This is not a class that tells you how to make a website for yourself, but instead focuses on using the internet to augment your marketing plans. I will be teaching the same class again on March 9, it’s just a one-night class. If you are interested email me or contact Assabet. Upcoming I am currently writing an article on new product introduction. I would like to thank to Brian Chisholm and Angelo Tortolo for allowing me to interview them. Mr. Tortolo is a very interesting gentleman who I met a NEPCON. His business, Venture Technologies, helps launch new products. I plan to include his story in the article so I will let you know when it is published. Next IssueWhat to do when supply market prices rise. Tips on how to compress your supply chain and reduce total costs. I am considering starting an online chat group. I am thinking it would be in digest form that you would receive once a week and hosted by yahoo groups or another similar host. I get many emails each day and speak with many people often with the same questions. I am always happy to answer and think it would be helpful to share the information with others. I haven't decided the best way to do this and would like suggestions. It would only work if subscribers would be willing to give their input. I would be the moderator. I could post news items, announcements before the event happens, current articles, any information I think you would find helpful, etc. as they arise and not wait until I have the time to write a long newsletter like this one. I would need a minimum of 50 people to sign up before I would consider launching it. I would very much appreciate your thoughts on this matter. It will require a time commitment from me that I would gladly do but I need your support. It would replace this newsletter not in addition to. Please call or email with your comments and let me know if you think this idea will work. Thanks again. As always, may the Source be with you.
Michael J. Cote, C.P.M. |