Stadia emptied, vuvuzelas silenced, the Netherlands team has four years to contemplate what might have been in their resurgent prominence in the world of World Cup soccer. FIFA has a shorter time to assess the salutory effects of public hanging for sight-challenged and judgement-impaired referees. In the meantime, we'll don our colors and pull for Ajax, the pride of Amsterdam.
Back in the real world, the good news is that our universe of supply chain management is making headlines. That's also the bad news. USA Today's July 8 Money section carried a top-of-the-fold feature on shipping bottlenecks and their negative impacts on cost and timeliness. Our friend Rosalyn Wilson was cited (but CSCMP's production of her annual State of Logistics study was not mentioned - another rant for another day).
The problem was blamed on recession-driven capacity cutbacks in air cargo, ocean shipments, and truck transport. Adding container shortages to the mix makes marine transport the most severe manifestation of the problem, with shipping volumes increasing while Chinese container manufacturing has been seriously curtailed.
But, some of the damage was self-inflicted, and some continued difficulty is a matter of choice - an investment in short-term pain in exchange for a payoff in longer-term financial pleasure. Carriers (of all types) embraced sharp price cuts in order to keep operating - even at a loss - when times got tough. Many shippers took advantage of a perceived desperation, and turned the screws even tighter.
Now, the carriers want to get well - and fast. The USA Today feature reports a 150% increase in transportation costs (following the historic decline of 2009). Significant additional increases lie ahead, with re-activated capacity lagging demand. Some observers maintain that the ocean carriers' recent practice of "slow steaming" is a faux green maneuver to mask a cynical manipulation that reduces effective capacity - and creates unholy pressures for further upward price movement.
Despite the fine words and high concepts coming from many players in the global supply chain community, this scenario reflects a sobering reality about talking the talk versus walking the walk.
How often must we repeat these cycles of adversarial win/lose (and lose/lose) industry-wide confrontation? At some point, the strategists among us will learn to think, like Bobby Fischer, four or five moves ahead and build long-term business relationships. Real relationships will insulate genuine partners from the debilitating skirmishes that perpetuate the paradigm of creating immediate transactional focus, short-term one-sided gains, and long-term supply chain underperformance.
We know better; now we've got to do better. But, doing better requires that everybody - shippers, carriers, service providers - gets in the game. And plays to win-win.
Kathy: How do you think that your skills and ability in handling business relationships have evolved over your career?
Todd: I think that from where I started to where I am now I have a better appreciation and understanding of my customers’ business. And I think that by that evolution I’m able to talk more of their talk, obviously bring more value because I do understand their business. And by virtue of bringing that value, I believe that creates a better relationship. There is trust, there’s experience, there’s information flow, all those things.
In turn, again, I think that understanding your customers’ business builds a whole foundation for a relationship and things go along with that.
Kathy: So is it just your maturity or your experience of understanding the business?
Todd: Understanding through time, their business, and all the intricacies of their business and what they believe is value, what their issues are as they go about their day-to-day. Of course understanding what we do for them and put it together. These processes build relationships that are pretty much invaluable as you get to the end of the day.
I really believe when it comes to selling and the art of building relationships some of this is just inherent. I think you either have it or you don’t. I don’t think there is an in between.
So yes, you can get a better foundation, a better baseline, but when it comes down to it, to answer your question—I had somebody to show me the door, but when the door was open I inherently knew the things necessary to take those relationships and build on them.
Kathy: Do you look for that in hiring?
Todd: We sure try.
Kathy: It’s easier to teach them product than it is to teach them inherent skills.
Todd: It really is. And unfortunately we’ve hired people and we’ve had to let people go, not because they are not good people, but because when what we are trying to do in the market somebody can be very technically based and understand products.
But when the day is done if they can’t make a connection with somebody and build on that, then it’s not going to work. So unfortunately we’ve hired and let people go simply because they got to a certain point where they had all the technical skills in the world but that inherent piece, relating to a customer, couldn’t be met.
Kathy: Do you think it can be taught?
Todd: I don’t think it can, I really don’t. Some people are better than others in terms of how well they are able to get in there and connect.
One of the conversations I had, Kathy, you know this, is we had a regional meeting a few months ago. We were talking about our staffing and the people. We really tried to assess our competitors. We know what we are about. We know the things we are doing. But we really tried to put our shoe on the other foot of our competitors and figure out what they do better.
One of the things that came up from one of our formidable competitors is that they are just “guys guys,” as we put it. They put a team together that people want to be around. This is the stuff we are talking about—the inherent ability that they hire the people who have the innate ability to get in and make things happen, to build relationships.
We have better technical people, I’m convinced. But at the end of the day a lot of our customers want to be around people they want to be around. I don’t think you can teach that, I think you know it.
Kathy: All the inside sales people that I’ve listened to, the relationships that they have with their customers, is amazing. How do you measure it? How do you know if they are developing good business relationships?
Todd: How I gauge it today is far different than how I used to gauge it. Today, as I look at it is, are we able to use this relationship to make money? Because their—our customers’—job, and I don’t begrudge anybody, everybody is doing the job. But their job is to buy the best they possibly can. Our job is to sell the highest price we possibly can.
Relationships give you the opportunity to negotiate or give you an opportunity to do the work. I’m gauging the relationship today as, ‘Can you do all that and at the end of the day you are making money?’
We want better relationships. We don’t have a training program for that because, again, it is right back to what I said. We know inherently people either have it or don’t. We put them in the position. We want them to get to know people. We want them to do the things that they are doing.
But our managers now are really trying to use relationships. At the end of the day, are we able to use those relationships to make money?
It is not any more or any less just trying to be equitable with our customers. We are just trying to find that equitable approach where we are both winning in that situation.
Kathy: What advice would you give people, be it in sales or finance or operations, who really want to develop their business relationship skills?
Todd: Unfortunately you tend to live in the snapshot of where you are today. Things are changing so fast that you can’t assume anything anymore.
You can’t assume you have the relationship. You can’t assume you have the share. You can’t assume that you are doing great on service.
Make sure you understand what is in front of you because in some cases we are assuming a lot of things out there that just aren’t the case. Again, the economy has forced people to really do things they wouldn’t even consider doing a year or two years ago. That’s the assumption piece I was talking about. We just can’t assume much.
But I still believe on the relationship side of things, that at the end of the day it’s still what is keeping us in the game.
Price is big, but that same survey I mentioned, price was 3rd out of whatever category. It was still about trust and still about the product, the value and then of course price was there. It’s not the end all be all. But I think relationships are still giving us that opportunity to succeed to the best of our ability in the market today.
McNeil, the respected Johnson & Johnson unit, has faced a product recall of stunning proportion over the past few weeks, with a wide range of liguid analgesics, notably Tylenol, involved. This raises supply chain issues at a couple of levels.
One is how to handle products in the hands of consumers. These, it should be obvious, can't be physically returned in a reverse logistics application at any reasonable level of cost or effort. Accordingly, refunds are being issued, with instructions to get rid of any unused product, whether unopened or partially used. Another is getting earlier shipments out of retail customers' stores and warehouses, where larger quantities might require physical movement. I'm confident that J&J's supply chain partners value the speed and candor with which the situation has been handled, and would have expected nothing less.
There may be another level of interest, though, and I'm not quite sure how to approach it. In supply chain education, we are fond of - in examining the linked components of integrated supply chains - distinguishing between the "old days" of a logistics perspective and a 21st-century view of supply chain management. In the former, we were focused on what happened between the boxes in the diagram - physical movement and handling. In the latter, we say we are vitally interested in what happens inside the boxes - how we plan and execute procurement or conversion (manufacturing), for example.
But, are we really? Do we - can we - have visibility and oversight when the preceding link in the supply chain is J&J? Should we? If the source were not a provider of the same scope and scale, would we insist on having that visibility?
Should we rely on the processes, controls, and track record of any manufacturer to detect and correct problems, and keep the entire supply chain out of trouble? Or, do we not challenge behemoths, and hope for the best?
What are the ramifications of these questions on the quality of our business relationships? Are the risks real? Are they offset by longer-term benefits?
What do you think?
http://www.usatoday.com/news/washington/2010-04-12-tainted-meat_N.htm?csp=hf
The lack of specific governmental regulations on the contamination of beef is leading consumers to distrust the marketplace. Although the USDA’s Food Safety and Inspection Service tests meats for E. coli and salmonella, there is a growing issue with residue contamination in beef. Testing for these issues relies on assistance from the EPA and the FDA. Currently, there are no legal limits in terms of amount of pesticides or antibiotics. These risks directly will directly affect the public’s health.
It only takes a few stories about contaminated meat to deter end consumers from purchasing beef. Additionally, the screening agencies do not have the authority to stop the distribution of this contaminated meat due to the lack of regulation. The FSIS said in a written statement that the agency has agreed with the inspector general on "corrective actions" and will work with the FDA and EPA "to prevent residues or contaminants from entering into commerce." Will this be enough, or are the lobbyists correct in demanding specific laws and regulations?
UTZ Certified Good Inside is a program tried to creating open and transparent market place for agricultural products. Its vision is to achieve greater sustainable agricultural supply chains by farmers who are professionals implementing good practices that lead to better businesses. And by the food industry takes responsibility by demanding and rewarding sustainably grown products.
In the first quarter of 2010, 32042 metric tons of UTZ Certified Good Inside coffee was purchased by coffee roasters and brands. This is the highest volume in the history. UTZ Certified Good Inside coffee helps farmers manage their farms by trains farmers, facilitates farmers with common problems in the coffee farming and provide farmers knowledge agricultural practices and global coffee market. The UTZ Certified sustainability program helps farmers grow their coffee professionally and care for their local communities and the environment.
When roasters and brands buy UTZ Certified coffee, they know where if came from because UTZ Certified provides complete resources. Thus, UTZ Certified increasing demand for coffee production and willingness to invest in coffee market.
video: http://www.youtube.com/watch?v=fDmxw7oYe28&feature=related
North America is a weak spot in the global drinks business, largely because of the decline of carbonated soft drinks. With PepsiCo’s soda volume dropping 5 percent last year, according to Beverage Digest, the company had to figure out how to restructure its distribution network in order to fill customer needs more readily. Last year, PepsiCo agreed to purchase it’s two largest independent bottlers for $7.8 billion. This all comes at a time where the carbonated beverage market is losing share to healthier, non-carbonated products like juice and water. Ten years ago, soft drinks comprised 70% of PepsiCo’s beverage selection, where today they are responsible for only 45%. PepsiCo wanted to put an end to the days in which it argued with bottlers over profits and plans for new brands. When the company wanted to try new drinks or package sizes, the requests were sometimes hard for its big, independent bottlers to fulfill at the pace Pepsi wanted. That highlighted one of the central tensions: Bottlers thought Pepsi was too demanding, and Pepsi thought bottlers didn’t move fast enough. Big decisions between PepsiCo and its large bottlers too often became tug-of-wars over revenue, sales volume and profits. This shows just how willing partners must be to work with one another and just how important it is for businesses in partnerships to respond to the wants of the other. The new system put in place by PepsiCo now allows for a more integrated and seamless operation. This allows more flexibility to move with consumer’s changing tastes and compete with rivals like Coca-Cola in the short term. And in a time where big-box chains like Wal-Mart and CostCo continually demand lower prices, this acquisition allows PespiCo more negotiating leverage than its rival, leaving the boys at Coca-Cola to play catch-up. http://online.wsj.com/article/SB124939009522504571.html
http://www.orionmagazine.org/index.php/articles/article/5339/
“The Only Way To Have A Cow”
The article I read came from Orion Magazine. This article starts out with the author telling us how he does not and has not eaten meat in a fairly long time. He then goes on talking about how “vegetarians and vegans have upped their attack on the consumption of animal flesh” and also that consumption of meat has helped cause climate change. I do not believe that the consumption of meat has helped cause global climate change, mainly because I am in an atmospheric science class this semester and we have learned that all the little things people believe are causing climate change are not. It also states that “going vegan is 50 percent more effective in reducing greenhouse gas emissions than switching to a hybrid car.” The article goes on to tell us how cattle, today, are a big cause of climate change and greenhouse gas emissions. It also mentions how today’s cattle give off more greenhouse gases than bison from earlier decades because they are stationary or stay in pretty much the same area all day everyday until slaughtered, whereas bison moved around to keep away from predators. I, personally, do not agree with this article at all, but I was born and raised on a farm that taught me completely different views than what this author believes.
The biggest conflict currently escalating amongst the seed industry is between farmers and the big corporate giant, Monsanto. Over the past decade, these two entities have been fighting over legal issues concerning Monsanto’s patented genetically modified crops. Since farmers reuse their crop as seed for the next planting season, Monsanto has been suing hundreds of them each year for patent infringement. Most farmers give in, and settle out of court, because of the high legal fees. Monsanto knows these farmers will continue to purchase their seed, because of its high quality and yield producing traits. Is it fair for Monsanto, who makes billions of dollars in profits each year, to form lawsuits against famers, who may make less than $50,000 each year? How can a consulting company help mitigate the problem between Monsanto and the farmers, and ultimately resolve this issue? It will be interesting to see how this problem pans out in the future between David and Goliath. What are your thoughts on this issue?
http://www.keepmainefree.org/suesuesue.html
Wal-Mart entered India with the idea of global expansion, but it has been faced with opposition that it usually does not face. What did Wal-Mart do? It adapted to the market conditions and made it work. Instead of focusing its attention down the chain on customers, which Wal-Mart cannot do because of restrictions, it is focusing its attention upstream on the producers – the farmers. This relationship is mutually beneficial because it gives Wal-Mart a valuable partnership within the country, which is important when entering new markets, and the farmers receive higher prices for their products as well as information and technology that are available through Wal-Mart and its affiliates. Perhaps the higher productivity and incomes will alleviate some of the poverty problems and Wal-Mart will succeed in India. This example is a good indication that adaptation and cooperation are the keys to successful entrance into a new market.
http://www.ndtv.com/news/india/how-wal-marts-wooing-indian-farmers-19777.php
Kraft's marriage with Cadbury Article http://www.businessweek.com/managing/content/feb2010/ca2010028_928488_page_2.htm Kraft’s acquisition of Cadbury has been part of every conversation in the agbusiness industry. Both companies are prestigious brands with solid global markets, this merger of Kraft and Cadbury will control 15% of the world’s confectionary market making it the largest. In respect to business relationships, this merger in terms of annual cost savings, is predicted to save Kraft about $625 million in procurement, marketing and R&D. Kraft will take advantage of these cost reductions by using Cadbury to tap into the luxury segment of many emerging markets like India and Latin America. So far this all sounds good for Kraft, but what benefits does Cadbury receive? Cadbury benefits from Kraft’s huge amount of financial resources and assets to make products like Chocolate bunnies and Dentyne Ice at cheaper costs. The merger in the long run is expected to increase sales 5% annually. This relationship will work in the long-run.
Cargill, the world's largest trader of agricultural commodities, is threatening to halt business with one of its suppliers based on information that points toward the company's deforestation activites. Sinar Mas, a major Indonesian palm oil supplier, has been accused of illegal land-clearing activities to create plantation ground for its palm oil production. Sinar Mas assures that once further investigation is completed, its business with Cargill will remain. However, other buyers, like Nestle who is switching suppliers and Unilever who scrapped a $33 million contract with Sinar Mas, are way past threatening. Their business relationship with Sinar Mas is no more, because these multinationals didn't want to harm their companies' global perception because of their supplier's actions.
Companies stop business relationships all the time; so, why is this particular situation significant from a food marketer's standpoint? None of these buyers had any real issues with what they were buying. The issues that terminated the supplier/buyer relationship had nothing to do with the quality or physical ascpect of the product that was being transacted.
Here, we see the extension of a generic commodity to what Theodore Levitt would call a product bundle + intangibles. In business relationships, there are intangibles that are added into a product bundle with the commodity/product that are remarkably influential. It was an "intangible" part of the "product bundle" that Sinar Mas created that was unwanted by its buyer. Nestle, Unilever and now Cargill can't do business anymore with Sinar Mas. But did this have anything to do with the product? Nothing. The problem was entirely in the risk of tarnishing the perception of the buyer, and how that was affected by WHO they bought palm oil from, and HOW it was being produced, but not WHAT it was.
Many factors, be it technology, globalization, or media influence, make any business relationship extremely fragile nowadays, in that absolutely EVERYTHING that is offered to the other company matters. Every aspect of what you sell/buy and how you go about it in a business relationship can be influential, even if it is "intangible."
The intangibles that are included in the product bundle are significant. So significant, in fact, that it cost Sinar Mas a relationship with some of the most recognizable food companies in the world.
http://www.ft.com/cms/s/0/79510d4c-37af-11df-88c6-00144feabdc0.html
Theodore Levitt: http://cte.jhu.edu/courses/pii/marketing%20success%20through%20differentiation.pdf
Dr. Tachi Yamada is President of the Bill & Melinda Gates Foundation's Global Health Program. In a recent interview with Adam Bryant of the New York Times, Dr. Yamada recounted a few lessons he has learned along the way, including the importance of making the person with whom you are talking feel like they are significant, or that what they have to say matters most in the current moment.
Dr. Yamada designates time to read and respond to email and to take and return phone calls, but he does so by focusing on one task at a time. He does not carry a Blackberry!
His approach is interesting and encouraging. It seems to me that the current business landscape involves multi-tasking each and every last thing that can possibly be multi-tasked. I like the sincerity of his living-in-the-moment practice.
Says Dr. Yamada,
"What I've learned is that when you actually are with somebody, you've got to make that person feel like nobody else in the world matters. I think that's critical. So for example, I don't have a mobile phone turned on because I'm talking to you. I don't want the outside world to impinge on the conversation we're having."
(Quote published in New York Times on Feb 27, 2010)
Bill Drayton and Valeria Budinich at the HBS blog wrote the following paragraph in a blog entry earlier this week-- it really resonates with me.
"To be effective in this new world, you will need to master the skills of empathy and teamwork, as well as leadership and driving change. You will need to know how to function in a world that is not a hierarchy but a kaleidoscopic global team of teams, with no boundaries between sectors and change that happens at an escalating pace."
I am so glad that empathy and teamwork are acknowledged as keys to success!
They are important characteristics that I see in many successful business leaders and are critical for strong business relationships.
Click to read to blog entry, Get Ready To Be a Changemaker.
(Excerpt is from Get Ready To Be a Changemaker, 2 Feb 2010)
As we move to more global environments, teleconferencing, or phone conferencing is becoming a norm. Here at Franklin University, we have opened new campuses in Poland, Macedonia, and will be opening in other countries in 2010. While the course delivery will be face-to-face, the collaboration necessary prior to the beginning of courses is essential. And, while face-to-face collaboration is preferable, it is not always possible so phone conferencing, or teleconferencing, has become the mode of collaboration.
Here is a laundry list of points you might consider before and during your conferences from a distance:
Prior to the conference:
1. Ensure that all participants have a copy of the agenda. Define any necessary vocabulary, or jargon that the participants from a distance might not understand. If you have a point person at a distance, you might want to have them review/add to the agenda items.
2. Do a set up of technical tools prior to the meeting. Make sure that everything is working without difficulty.
During the Conference:
1. Do introductions and specifically introduce anyone who might be new to the group.
2. Ask each person to identify themselves when they speak, especially if it is a large group.
3. It may be difficult for non-native speakers, or speakers with a different accept in English to understand a person, especially if the conference is by phone. It will be important that you remember to speak clearing and slowly (not too slow though) so that others understand. It is also important that you refrain from using slang expressions that may not be understood by speakers of other languages.
4. Provide for pauses in the discussions and ask if participants have questions.
5. Engage as much as possible, the audience at a distance.
6. If there is lag time between locations, slow down the conversation. Also, if you are using translators, provide for translation time. Plan for additional time (about 1/3 more) if a translator will be used.
7. If possible, use easily-seen graphics, drawings, or other illustrations to accompany presentations.
8. Keep a record of action items that need to be completed by all concerned in the conference. Review these items at the end of the meeting.
9. In a timely way, follow up the conference with a summary of the action items and other points.
It might be difficult, the first time through, to get one's head around the notion that business relationships are assets. I believe that they are, and, when done right, are built on investments of time, money, and reputation. This is especially true in the host of relationships that makeup a functioning supply chain.
Our friend Wayne Bourne, in a recent Sage Advice column (www.logisticsmgmt.com), Rounding Third And Heading Toward Home, pointed out the stress that a difficult economy can put on working relationships. He suggested that supply chain partners who have learned how to weather the storm together will be strong partners when economic recovery is a reality. Wayne was dealing immediately with shipper/carrier linkages, but the core issues transcend specific supply chain roles. What he didn't say is what happens to partners who haven't kept their bonds strong during the tough times. Or to those who have abandoned underlying principles and values in order to take advantage of a partner's economic vulnerability.
He didn't have to. We can all probably figure out what happens to relationships that have become toxic. The only real questions are "When?" and "How hard?"
There are few options in dealing with toxic assets (relationships, in this case). Underperforming at best, and risk-the-business at worst, one could turn a blind eye to them, and let the bad apples poison the rest of the barrel. Or, the losers might be cut loose, resuming business as usual with the "A-Team" relationship partners.
My own inclination would be to perform a form of triage, focusing on, and investing in, rescue and recovery of those relationship assets that can deliver a reasonable "bang for the buck," and have promise for the long term. That might leave awkward questions of a degree of risk in allowing some relationships to recover - or not - on their own, and of figuring out how to proactively jettison those that might be beyond hope.
Realistically, it's easier to contemplate making those who have to go walk the plank when seas aren't quite so rough. At the moment, it's unlikely that many will cut precious revenue from the top line. So, we're back to "When?" and "How hard?"
What do you think? Are you ready to treat key supply chain relationships as assets? Can some assets become so toxic that dramatic action is the practical approach? What has worked - or not worked - for you?
I've been railing, raging like Lear against the storm, for some time about the inevitability of a turnabout in the stampede to Asian off-shoring - and the creation of long-distance, difficult-to-manage, and arm's-length busineess relationships in extended supply chains. The pressures of escalating transport costs, rising local wage structures, increased inventory holdings, up-front cash requirements, and delivery uncertainties - among other factors - simply had to tip the economic equation sooner or later. Maybe it's finally happening.
The New Calculus of Offshoring from the October 2009 issue of CFO magazine (also available at www.cfo.com) hits the issues head-on, and reflects a recognition in the financial community that bodes well for a coming-together of traditional antagonists, accountants and supply chain practitioners. It's more than ironic that the same executives who argued for distant off-shoring a scant few years ago are now touting the competitive advantages of closing down many such operations.
The article cites a cornucopia of challenges in the old off-shoring model, including unsustainable cost savings, weak project management, poor communications, differing work ethics, error rates, costly travel for oversight, overseas wage inflation, inflexibility, and low speed, among others. It goes on to outline a number of options in sourcing and "shoring" (some a bit tongue-in-cheek).
But, shifting service and manufacturing functions creates mission-critical challenges in business relationships. Few of the moves are to in-sourced internal operations. Instead, they require the creation of new relationships with new supply chain partners, with all the risk and uncertainty implied in commitments to less-well-known entities. Further, sorting out the right (often blended) solution among the options is, in itself, a test of an organization's acuity in the front-end processes of deciding what kinds of relationships with which partners are the right value-adding combinations.
My opinion? These moves are no longer isolated events; they constitute an emerging trend. But, they're not yet mega-trends. This is the time for supply chain leaders (and those who want to be) to get the relationship act together. Prowess in this arena will be tested over the next couple of years.
At the end of the day, you'll not want to be Lear, lamenting, "The weight of this sad time we must obey . . ."
I regularly visit a website called The Social Organization and today I read a compelling piece about why some people, particularly in the business world, are resisting social media.
I find this online community, businessrelationships.com, very valuable because it's a place for businesspeople to discuss news and issues, ideas or anything related to business-- to be involved in the online conversation. The rest of the world is participating in digital discussion, but some fields, especially those in business and law, are lagging. They are resistant.
Rachel at The Social Organization has written a blog entry, part of which I have re-posted below, that addresses this. She calls it the "Social Media Fear Factor."
Read the full post on her website.
"For social media enthusiasts, it is sometimes hard to understand the trepidation and anxiety that social media engenders in others, particularly in the business world. The truth is - and this is coming from someone who is pretty immersed in it - social media does a lot of exposing. There are not only a lot of potential critics out there, there are also a lot of prospects and competitors out there. If you are not on your best behavior, they may see you at a moment of weakness and they may not stick around to see if that is who you really are or not.
thesocialorganization.com, The Social Organization, Sep 2009
The Economist, which steadfastly continues to call itself a newspaper rather than a magazine, recently ran a provocative - in the sense of provoking - column. The October 1st Schumpeter opinion page (www.economist.com/businessfinance/displayStory.cfm?story_id=14540023) discussed elements of thriving on adversity. It cited several cases of companies that havelearnt how to prosper in difficult times, and have even started up with transformational busniess concepts during recessions.
The column cited some positives from leaders that distinguish them from industry laggards, including ground-breaking product innovation, customer/product re-focus, and prior good management that husbanded resources - including cash - against a rainy day. It regrettably went on to include using "muscle" to "squeeze" costs, a tactic that is short-sighted on a good day and destructive to effective high-trust business relationships in the end.
Curiously, several of the titans mentioned are among the global leaders in supply chain management (and supply chain relationships), e.g., Cisco, P&G, Coca-Cola, Nokia, IBM, PepsiCo, and the like. Leveraging the creativity and power of intimate relationships with supply chain partners was not mentioned.
I am generally mad with admiration for The Economist for the quality of its writing, for the substance of its content, and because it is one of the few "newspapers" that really understands about supply chain management - and assumes that its readers also do. Schumpeter, with some excellent content and research, went only halfway on this topic, then missed the boat on what might be the most important element for success in tough times, the quality and caliber of business relationships in the supply chain.
What's your take?
Actually, there are many roads out of Chaos. The one that leads to Conformance is called Collaboration. It is full of twists, turns, and surprises, and takes longer than one might imagine to reach its destination. Two cases from the world of logistics and supply chain managment come to mind.
One is the 'umble wood pallet, a staple in any distribution center and indispensable for moving products on a more-than-one-at-a-time basis. Fifty years ago there were no particular universal standards for pallet size and construction. A food company pioneered the development of a "standard" pallet, which later became known as the GMA pallet. 48"x40", it is today the dominant pallet size in North America, and correlates closely with the 1.2mx1m European pallet. (There are still other sizes surviving, notably the 42" pallet used in telecommunication industry.)
The struggle to achieve this relative uniformity across a spectrum of companies and supply chains was tough, and initial resistance to the notion delayed serious collaborative development for several years.
More recently, the marine cargo container ("shipping container"), which has made efficient global supply chain execution possible, and piles of which crowd freight yards and intermodal terminals across the country, has undergone a remarkable journey to get from Chaos to Conformance. The painful birth and development of the "standard" shipping container is detailed in the soporific, but vitally important book, The Box, by Marc Levinson.
The basic concept originated in 1953, with the first container shipment going from Newark to Houston in 1956. But, the multiplicity of container sizes (and backers) threatened to shut down the emerging trend by the late '50s. It took until 1970 for ISO to publish the first complete draft of its standards. Although considerable progress was being made while standards were still in development, there were still holdouts involving two major shipping lines in the late '60s.
The lesson here is that the relationships required to successfully navigate from Chaos to Conformance can be incredibly more complex, sensitive, and fragile than those involving supply chain partners, or even an end-to-end set of supply chain collaborators. They tend to be transient, but intense. They necessarily include governments and labor unions, and they often have international ramifications - and participation.
Many of the participants in the debate and resolution play roles that transcend the usual picture of supply chain relationships, such as seaports, railroads, air cargo carriers, and airports. Further, the operating entities involved may be bitter competitors in all other aspects of supply chain execution, suspicious of one another, as well as skeptical about new thinking.
In summary, the Collaboration Road from Chaos to Conformance may be a bit like Maui's Road to Hana. Difficult, and on some days seemingly impossible, full of pitfalls and opportunities to crash, but in the end, the only way to drive there.
What do you think? Do you have other examples?