Beware: Experience May Be A Liability!

by Dave Garwood

While in college, I mastered FORTRAN (an obsolete language used in engineering schools) and became pretty proficient, if I do say so myself. How far will this experience carry me if I go to work at Microsoft? AOL? eBay?

While this may sound like a ridiculous scenario, a similar situation is taking place in industry today. The "experience" many companies are depending upon to improve their supply chain management may just be as outdated as my FORTRAN experience!

Who would think of depending on DOS "experience" to effectively use Windows NT? Who would depend AOL 2.0 to get online today? No one! Yet an analogous situation is evolving when it comes to new software investments.

Many companies are spending big bucks to install new tools such as ERP packages to squash the dreaded Y2K bug. Most of them are also expecting to also see dramatic operating performance improvements -- inventories cut in half, costs slashed, customer service improved, etc. But the emphasis has been on software selection and installation. I predict most of these companies are in for some very big disappointments. In fact, this has already started! They are depending on version 3.0 supply chain management experience to use the new tools and improve company performance.

Old Practices Only Yield Old Results!

Much of the leadership in most companies have "experience" -- version 3.0 experience! Here are a few examples. They typically:

• Take annual physical inventories to correct inventory records that have been saturated with errors all year.
• Second-guess sales forecasts.
• Stage material to find shortages.
• Circulate Hot Lists and expedite, ignoring shop order and purchase order due dates in the formal system.
• Make and buy large lot sizes to reduce costs.
• Use clout and leverage to get better supplier performance.
• Allow past due, front-end overloaded master schedules to perpetuate and "keep the pressure on."
• Make as much as they can to maximize utilization and get favorable overhead absorption to artificially increase profits.
• Use standard lead times to make customer delivery date promises.
• Maintain engineering and manufacturing bills of material.

And the veterans that survived got very good with version 3.0 thinking. If they use new Y2K-compliant tools and 3.0 experience with the new software, what results will they get? Answer: Same as they got with the old tools! They will just spend more money doing it and challenge the "experienced" people to learn how to run the business the old way with new tools. Not a pretty picture! If any of these 3.0 tactics sound familiar, beware!

The Alternative? Version 6.0 Thinking

Fortunately, many other companies have taken the time to update to v6.0 thinking for running their business. They invested in education to upgrade the "experienced" people into a new way to do their jobs and run the business. Here are a few examples of v6.0 thinking. They typically:

• Use the proven 5-Step SOP process to integrate sales, manufacturing, new product launches and financial plans into a single plan.
• Use demand management and deploy total quality principles and techniques to focus on reducing demand variability.
• Measure demonstrated capacity and use it to validate the credibility of schedules.
• Insure due dates always equal need dates and meet schedules 100% on time.
• Deploy a cycle reconciling process to find root causes of inventory inaccuracies, implement corrective action, maintain accurate records and eliminate non-value added physical inventories.
• Use Available-to-Promise (ATP) to make realistic delivery promises to customers and deliver 100% on time.
• Quickly and accurately create bills of material for customized products using configurators.
• Improve supplier performance with Win/Win partnerships.
• Tap the enormous knowledge of every employee to simplify all business processes, reducing costs without demoralizing "downsizing" actions.
• Reduce lot sizes to "as required" by overcoming obstacles such as lengthy set up times.

--- and there are many more!

If you have upgraded your systems by investing in new ERP software, do yourself a favor. Make sure the people running the business (at all levels in the organization) are also upgraded to Version 6.0 thinking. It is cheap insurance to guarantee your investment pays off. If you aren't implementing new software, upgrade to Version 6.0 anyway!

If you'd like a printer-ready electronic copy of our ERP Readiness Test, email us and we'll email it to you right away. Use the Readiness Test to evaluate whether or not your organization is ready to launch new software!