A well-known business tale features a sales manager, an operations leader and their boss who are walking to lunch when they find an antique oil lamp. They rub it and a Genie comes out and says, “I will give each of you just one wish.”
“Me first! Me first!” says the sales manager. “I want to be in the Caribbean, in a sailboat, without a care in the world.”
Poof! He’s gone.
“Me next! Me next!” says the operations guy. “I want to be in Hawaii, relaxing on the beach with my favorite Lean book.”
Poof! He’s gone, too.
“OK, you are up,” the Genie says to the boss.
The boss thinks for an instant and says, “I want those two back in the office after lunch.”
Hard-earned lesson: Let the boss speak first!
While this is usually a wise policy, deferring to hierarchical experience when it comes to operational strategy could make an organization go “Poof!” with no chance of coming back. In the age before Big Data, market decisions were made locally and big picture impacts were difficult to see or even be aware of. But now data is available in spades and those who harness it rule the day.
Take a glance at the present-day heavy weights below:
- Apple Phones
What do these well-known companies have in common? None of these were “first movers” in any sense (recall forbearers Kmart, Yahoo!, all the brick and mortar booksellers, and Blackberry), but in short order they ended up absolutely crushing their competition. How?
Cases can and should be made for leadership, vision, core competencies, etc. but one common denominator that doesn’t get enough attention is this: their ability to make daily complex decisions faster and more accurately than their competition.
These companies and others rely heavily on data to make systematic decisions that are transparent with high degrees of accountability. Companies with dynamic operations where pennies saved per transaction amount to millions in a year can ill afford to lean on the traditional judgment levers of conventional wisdom, hunches and headcount reduction to stay competitive. The Fortune 100 companies that have stayed in the Fortune 100 have paved the road for fact-based decision making that favors rigorous analysis occurring not once a year but thousands of times. Per day. This is where the golden eggs are.
Would your business see value from a review in supply chain strategy? Take this test (1= does not apply; 5= this is exactly us)
- Improving operations is a key tenet to your long term strategic plan
- You have at least one area where it takes an experienced subject matter expert to handle complex decisions on a daily basis. If that person left, there would be trouble.
- Operating margins are below those of your biggest competitors
- Your operation’s footprint is geographically spread out with multiple supply points and supply sources
- Decisions are made on a frequent basis (daily, hourly) on how you should best use these critical assets
- It’s not always apparent when the wrong decision has been made
- There exists wide variability in the ways your money-making assets are used/deployed
- There is high potential value in achieving incremental improvement between actual and theoretical
- Asset and logistics decisions are highly repetitive and are made in pockets without a view to the bigger network picture
- The supply chain is under constant duress from customer requirements, suppliers and regulations
A score of 35 or more suggests you sit in an industry where the decision making process lends itself to mathematical modeling in order to find optimal avenues for underutilized assets, debottleneck key operational constraints or improve forecasting. Tools commonly used in these scenarios include linear programs, Monte Carlo simulations or specialized optimization software. A score of less than 35 suggests there may be more opportunities in channel strategy than in improving your competitive position through modeling.
Whichever it may be, strategic or tactical decisions involving critical assets should never be made in a ‘black box’, where the thinking that went into choice is unclear. The best decisions are made with the support of a visible, systematic process in which the decision criteria are understood, the range of alternatives to be considered are agreed upon, and the performance of each alternative is systematically assessed against the criteria before a recommendation is proposed. In complex, interconnected business environments this is even more true. For those industries that are particularly sensitive to asset utilization and opportunity costs, having the right operational strategy means speed, reliability, scalability and efficiency.
In this era of optimization, it’s too late to put the genie back in the bottle.