Monday, October 6, 2008

Business transformation and be counted

Business transformation and be counted

There may not be that many differences between September 2008 and September 1998 afterall.

In 1998, I was at the state of Pennsylvania USA, communicating with Dr. Alvin Gunneson about the Agility Methodology and how it could be applied to corporations based in Asia. Unfortunately at the end of the business trip, there was the dawn of the Asian financial crisis that caught many nations by surprise. Many nations collapsed and were later bailed out by the IMF.

In 2008, I was greeted in Liverpool with the bad news of Lehman Brothers and the collapse of the British XL Leisure leaving many of the travelers stranded in various parts of the world. When I moved over to Kansas City USA for the APICS International Conference, there was the big shocking news of financial trouble at AIG and other financial institution. The financial crisis has hit USA and Europe, and will this spill over to Asia?

Global economy getting turbulent

With the crude oil shot up to US$180 or so, the world was reacting frantically to knee jerks in the drastic increase in the price of petrol, food and other products and services.

Most people begin to change the lifestyle and managed to reduce the spending on petrol and others. The crude oil was forced to go below US$100 due the significant decrease in demand. The turbulence may have lasted one to two quarters, but the damages have been created in one way or the other.

Financial industry in US and Europe in crisis

The US government will have the bail out bill to prevent the collapse of the financial industry. This is going to be US$800 billion in the first round and then probably another US$800 billion some time later. With trillions of dollars needed to mitigate the potential damages, it will be critical that the US economy can withstand the test of time.

The EU government probably will take a different approach by not initiating the bail out but instead allow for other mechanisms to come into play so as to reduce the potential damages.

Recalling Dr. Jack Welch’s infamous “Cost Down or Close Down” directive

When Dr. Jack Welch was tasked with the transformation of GE, he did not hesitate to introduce drastic measures and directives, to ensure that the senior management of all the subsidiaries got the loud and clear message of “Cost Down or Close Down”.

The people might not have stomached the directives well, but then GE was transformed permanently. However, that was not enough for GE to be globally competitive, so the next directive was to be “number one or two, or out you go”. The rest is history.

Dr. Jack Welch was voted the most successful and famous transformist of the 20th century.

The destiny of some of the British great corporations

During my studies at the University of Liverpool, I had the opportunity to work with Pilkington Brothers and BICC Group of Companies. Pilkington was the world’s largest floating glass manufacturer but lost the competitiveness and was taken over by other manufacturing group. BICC lost the world’s number one position in cables manufacturing, and could not regain the former glory. Globalisation and internationalization have created new global giants and affected the conservative ones into sunset or takeover target.

Now that Range Rover and Jaguar have been taken over by the Indian Tata Group, we may see many more international takeovers and mergers.

The Internationalisation of the University of Liverpool

The rather conservative red bricks university has been going places. The on-line MBA has been a great success globally. The Suzhou campus is growing from 1,000 students to 2,000 students in a short period of time through a joint venture.

There will be a Graduate School being set up in India, and plans to have more of this in other strategic locations.

APICS’s New Product Introduction (NPI)

APICS has woke up from the over dependence of the decades old Certified in Production & Inventory Management (CPIM), and begin to develop new products. Certified Supply Chain Professional (CSCP) was launched in 2006. Lean Enterprise and Global Sourcing courses are launched in 2008.

This drastic transformation is the reflection of the need to ensure that professional certifications have to be customer-focus and demand-driven. This is in line with lean enterprise and supply chain management.

The Way Ahead

Business transformation seems to be the way ahead for every organization or enterprise in order to survive the impact of globalisation and internationalization.

Thursday, October 2, 2008

Lean Supply Chain Management

Lean Supply Chain Management

The global economy is subject to cyclical ups and downs, enterprises have to transform to cope with internationalisation and globalisation. The collapse of some of the banking giants may be just the tip of the icebergs of the challenges ahead. The US$700 billion bail-out of the American financial industry is absolutely necessary to avoid the repercussions and chain reaction as well as possible massive loss of employment. What will happen to the rest of the world is yet to be seen, and some nations may not be able to survive the financial "tsunami". The potential damages may surface some time in the future.

In a turbulent marketplace, it can be traumatic for the traditional supply chain management that is centred around the decades-old time-tested re-order point technique coupled with the easy to operate MIN:MAX inventory control. More so if the enterprises assume that the future will repeat the past performance without the ability to accommodate possible variation due to intrinsic and extrinsic factors.

The fact that Dell Computer have decided to sell off the manufacturing plants to the would-be contract manufacturers within the next 18 months can be a very good corporate strategy. This is probably in line with the Agility Methodology and the Agile Virtual Enterprise Conceptual Framework, whereby corporations transform to capitalise on the core competencies and leverage with others to remain globally competitive. Apple Computers and HP have been adopting the agility business model for some time now. It is little surprising that Foxconn becomes the world's leading Original Design Manufacturer (ODM) for some of the greatest global brands. The Foxconn Taiwanese owner started off the company in Taiwan as Hon Hai (Red Sea) and venture into China with Foxconn to create a blue ocean with an annual sales of US$70 billion. A success story that has not be well publicised but Mr. Guo is the richest man in Taiwan.

Toyota sale revenue is around US$0.25 trillion per annum and is now the second largest car maker in the world. The famed Toyota Production System (TPS) as been incorporated into the Lean Manufacturing process framework, and have become popular for manufacturers and enterprises wanting to achieve good customer service, high quality product, low cost production, good management, respect for people, short manufacturing lead time, short cycle manufacturing, continuous improvement and all the best practices for planning and execution.

While many enterprises are busy trying to figure out how to implement lean enterprise, Toyota continue to achieve significant success and brand power through the very fundamental philosophy of simplification and standardisation. While Toyota continuously perfect the leadership, management and people development, many enteprises may be too caught up with trying to fit TPS into a rather complex manufacturing environment. The outcomes are often fairly predictable due to the less effective approach of trying to live with the existing habits, norms, performance, systems, traditional management, incompatible metrics, and culture.

Lean does not happen overnight. It requires a subtle cultural change, extensive education & training, value stream process mapping and simplification, a paradigm shift, continuous improvement & innovation, and effective people development and management.

It is time to go lean to survive the global competition.