Personal Data Storage

This post is a departure from beaten track as we will discuss Redundant Arrays of Independent Disks; RAIDs. Having reliable data storage is essential to a personal data storage plan.  Many folks may chuckle at the thought of a personal data storage plan but there are good reasons for having one - especially if you have lost data in the past.  If you store large volumes of digital information such as tax records, medical records, vehicle documents, digital music, movies, photo collections, graphics, and libraries of source code or articles then a storage data plan is essential to reduce the risk of loss. Loss can occur due to disk drive failures, accidental deletions, or hardware controller failures that wipe drives.  Online services offer affordable subscription plans to back up your PC or store data in a cloud but you risk the loss of privacy when using these services. Having local, portable, and reliable data storage is the best approach and a personal data management plan is the centerpiece of the effort. 

Such a plan should be designed around two points. First, there should be a portable detachable and reliable independent disk drive system. Second, there should be a backup system. We will focus on the first point in this post. 

Figure 1: Completed RAID

After a lot of research, I settled on a barebones SANS Disk Raid TR4UT+(B) model, Figure 1. The device has a maximum capacity of 16 TBs and supports up to USB 3.0 and has an option to operate from a controller card improving data transfer raters over USB 3.0.  Fault tolerance methods of cloning, numerous RAID levels, and JBOD are supported as well.  Thus, the unit is well poised for a long term durable use.  

Since the device is barebones, I had to find drives that are compatible. Fortunately, the device was compatible with 11 different drives ranging from 500MB up to 4TBs across three vendors.  I had to figure out what characteristics mattered and determine which of the drives were optimal for my needs. The approach I used was a spreadsheet matrix, Figure 2. The illustrated matrix is a shortened form and did not consider the 4TB drive as it was cost prohibitive from the start as were several of the other drives. The 3 TB drive was used to breakout or create a spread for the other options. I computed the coefficient of performance, CP, then averaged them for the overall performance. In the end, I selected the Hitachi UltraStar 1TB in this example and purchased 4 of them. They are a high end server drive that are quiet and can sustain high data transfer rates for long periods of time. 

Figure 2: Decision Matrix for Drive Selection and Purchase

Figure 3: Installed Drives 

After selection, purchasing, and installation of the drives, Figure 3, RAID 5 was selected for the drive configuration. RAID 5 permitted hot swappable drives should one fail and provided more disk space than the other RAID modes. RAID 5 is a cost effective mode providing good performance and redundancy. Although, writes are a little slow. 

The final part of the process was to initialize and format the drives. File Allocation Tables, FAT and FAT32 are not viable options as they provide little recovery support.  New Technology File System, NTFS, improves reliability and security among other features. However, there is an emergent file system GUID Partition Table, GPT, which improves upon NTFS and breaks through older limitations. Current versions of Mac OS and MS Windows support this file system on a read and write level. Therefore, in a forward looking expectation of future movement towards this file system, the RAID was initialized then formatted with GPT. The formatting process was slow and took a long time. 

In the end, the RAID unit was accessible by both Windows and the MacBook Pro. All the data and personal information on disparate USB drives, memory sticks, and the local machines were consolidated to the RAID device. For the first time all my music, movies, professional files, and personal data were in one place with the strongest protection. The final cost was less than $650. The cost can be kept down if you shop around for the components: Amazon. It took about 8 hours of direct effort. Although the formatting and files transfers occurred as I did other things. 

While I will still use my memory sticks and a 1 TB portable USB drive with my notebooks, the RAID is the primary storage device. It can be moved relatively easily if I change locations and/or swap it between computers if necessary. The device can also be installed as a serverless network drive and hung off of a wireless router. I prefer not to use it in that manner as the risk of exposure or loss of privacy slightly increases.

Overall, the system is quiet and has a low power drain while in operation with heightened data protection. I encourage others to rethink how they are storing their data and invest in a solid reliable solution.  As the solid state drive come into increasing use, the traditional silver oxide platter drives will drop in price dramatically.  This will enable more folks to build drive arrays like mine at lower costs then convert them later to the solid state systems as those prices drop. 

Risk Management in Supply Chain

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. For example, my Masters program had several courses involving contracting and the Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Risk Management Strategy adding some additional support as well.

Risk Management in Supply Chain

The very nature of business is undertaking acceptable risk. Thus, all investments have risk including investing in a supply chain design. There are many dangers or risk events that lie in wait for business enterprises that usually result in disruptions and legal actions. Redundancies and contingency plans could go a long way towards stabilizing the operations and reducing potential risk.

PMI's approach to risk is very methodological involving categories, risk registers and risk impact matrices. Like PMI, APICs approaches risk  in a similar manner having its own terminology, categories, and tradeoffs.  Like PMI, APICs views risk as having either positive or negative outcomes.

APICS defines risk management as the process of identifying risk, analyzing exposures to risk, and how to best handle those exposures.  In supply chains, risk management is a complex end-to-end concern having risk resulting from increased dependence on critical resources, transport capability, globalization, and other considerations.

The Supply-Chain Council (SCC) defines supply chain risk management as the systematic identification, assessment, and quantification of potential supply chain disruptions with the objective to control exposure to risk or reduce its negative impact on supply chains performance.

Like PMI, the APICS risk management strategy seeks to mitigate, reduce, or eliminate risk. Risk managers must examine the chain to map the entire chain understanding interdependencies; identify failure points; create risk awareness in the chain; and devise contingency solutions for risk events.

Supply risk categories factors according to APICS include external, environmental, technical, and organizational as the same with PMI and the Global Association of Risk Professionals. The risk profile is influenced by the risk factors and the organizations tolerance for risk.

Risk Level = Probability of Occurrence x Magnitude of Loss

Technically, there is a tradeoff between risk and gain. In some cases, the risk is so low or unlikely that the organization accepts the risk. In other cases, the organization may value the risk and seek compensation in the event of positive risk.  Risk avoidance is often difficult but APICS defines it as eliminating risk or to protect objectives from risks impacts. Organizations tend to characterize themselves as either risk-tolerant (usually commoditized goods) or risk-adverse (usually goods that have a probability of lawsuits, death, or monetary loss).   The SCC points out the risk must have a term and a  perspective that defines scope. 

Risk prevention involves a risk response plan and planning. The plan is a document that is similar to the PMI's risk register. Planning is the process of developing the plan. Overall risk prevention involves assessing, balancing costs, contingency plans, and risk sharing.

Risk Management best practices are approved by the SCC to mitigated cost and disruptions. Proactive efforts could offer a competitive edge and support the SCOR model.  There are four basic areas:

1. Formal risk management  
2. Visibility and quantification of risk
3. Coordinated risk management
4. Supply chain designed for risk 

Managing and mitigating risk in the supply chain is critical to the chains success which bear direct responsibility for supply chain success in a risk-laden global network. 

Reference:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.

Change, Futures, and Supply Chain Strategy

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. For example, my Masters program had several courses involving contracting and the Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Operations and Supply Chain  Strategy adding some additional support as well.

Change, Futures, and Supply Chain Strategy

Operations generally avoid following sales too closely which tends to throw the organization into volatile production swings. Classically, operations hangs just under the sales volatility and makes upward and downward adjustments based on long term trending.  With that said there are events that cause changes to strategy:

• Change in market conditions.
• Change in business direction.
• Anticipated changes in the market.

Market Condition Changes can emerge with stunning rapidity. Supply chains must adapt to a bursting bubble or long term trending with precision and accuracy. Failure to adequately identify and adjust can leave the supply chain with either massive overstock or austere shortages. Adapting may mean creating redundancy in manufacturing versus economies of scale or stronger command and control of the supply chain by external management to remove self-interest concerns in the chain. This was accomplished at the Heathrow Airport project as discussed in Project Complexity Perplexes Procurements. The project manager establish external control of the supply chain marginalizing the dominant supplier control. This increased collaboration and problem solving in the supply chain while reducing self interest and legal claims.  Supply Chain managers must avoid becoming too lean and balance customer service, flexibility, and cost.

Business Direction Changes result when companies approach the uncharted territory of new markets and products with little data or information available. Once in the new market or the product is out there the new information results in an overhaul of the supply chain or organization. A well designed supply chain can redirect goods and services to where the demand is emerging. Overstock and services in one area may be moved to areas where demand is higher preventing stock outs in one area and price reductions in another.  Whether the supply chain has centralized or decentralized management is a decision that must be considered. Nonetheless, flexibility and adaptability is at the heart of the supply chain design.

Anticipated Market Changes result when the market is volatile and advance forecasting efforts are undertaken. This is risky since all forecasts are wrong. The forecast error must be very narrow and the supply chain proactive. Innovation is the key to strategic flexibility and must occur in product, supply chain, and organizational designs.  Supply Chain qualities such as trust among partners and efficiencies can become liabilities. A lean and efficient supply chain can run until it starves itself for lack of a market.  Partners in the chain may place unwarranted trust in the nucleus firm and produce product until  the inventories are burgeoning or may follow the demand so tightly that the chain runs into the ground. 

If supply chains are to adjust to market changes in advance then they will need a different set of rules:

• Pursue efficiencies and improve chain velocities but not at the expense of flexibility.
• Develop multiple supply chains that are right for each product line.
• Monitor the consumer demand at the end of each chain in which the firm is participating.
• Monitor global trending
• Design for maximum supply chain flexibility

Competitive Priorities and Future Direction

Winning customers is a challenge and companies have different approaches.  The post on the Art of Profitability details the ways companies attempt to make money in markets. some of the profit models map to the APICS thought.  Some of the commonly used approaches according to APICS follow:

• Differentiate the product or service
• Niche design of product or service
• Low pricing of the product or service
• Responsiveness to demand

Differentiation begins with competitive analysis which is defined by APICs as an analysis of the competitors that includes strategies, capabilities, pricing, and costs. Once the analysis is completed differentiation may occur on quality, diversity, reliability, and features.  Typical supply chain strategy involves modular design and customization capabilities, marginal inventory to avoid obsolescence, design collaboration within the supply chain.

Niche marketing is the ability to service a closely held specialized segment of the market. The market is often a luxury, age or gender specific, or geographic segment of the market. The same product may be marketed differently to the different markets and the supply chains may vary or be identical.

Low price products or services are not compatible with niche or differentiated markets. This approach is used mostly with mass marketing and commoditized products and services. Supply chains under this approach seek to reduce cost throughout the entire chain. Under this model, suppliers may have to relocate, redesign the organization, change employment practices, and adopt lean practices. APICS asserts that low price strategy should not be confused with target cost which is designing a product to meet a specific cost objective. Target cost = the planned selling price - profit margins - (market + distribution costs) = the cost to manufacture.

Responsiveness is meeting delivery expectations of the consumer. Responsiveness applies to service and goods both. Fast food patrons will become impatient in line after a few minutes while fine dining patrons expect to waiting 30 minutes or longer. Supply chains handle responsiveness several ways. Safety stock is one method to avoid outages or wait times. Multiple warehouses that serve smaller regions reduce logistical times. Third party transportation services that stratified speed of delivery services.

Overall, supply chains serve many purposes in the business by balancing all the various elements in the chain, business, and operations.  More over the supply chain operates with a temporal quality of the moment with an eye on the future. Forecasting is a primary tool used in supply chains and the entire chain needs to focus on the downstream customer demand in order to avoid the bull whip effect.  Additionally, the products and services establish the approaches that affect the supply chain design supporting the product or service. Supply chain managers need to monitor everything all the time and act whenever necessary to keep the supply chain effective and moving. 

Reference:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.

Aligning Supply Chain and Corporate Strategies

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. For example, my Masters program had several courses involving contracting and the Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain and Corporate Strategy adding some additional support as well.

Aligning Supply Chain and Corporate Strategies

Regardless of the supply chain design success depends on the supply chain's alignment with the corporate strategy. The  supply chain is constructed with resources such as organizations, people, processes, and information that must be aligned to the strategies.  After alignment other essential factors of the chain become a focus such as infrastructure which gives the resources the power to act synergistically in order to achieve competitive objectives under the strategies.

Strategic Planning is the process by which customer value and financial value is achieve in the following areas:

• Organizational design
• Supply Chain processes
• Systems and Technology
• People
• Supply chain metrics

APICS has developed a decision making process that goes into aligning the corporate and supply chain strategies, Figure 1.

Figure 1: Aligning Corporate and Supply Chain Strategies. 
Source: APICS Supply Chain Fundamentals,  Module 1, p 1-78

Organizational design refers to the structural relationships in an organization between the elements. Design includes the nature and arrangement of elements to include communications, authority and responsibilities, financial management, and job descriptions.  An effective supply chain necessitates development of the organization through design in order to support the supply chain's alignment to corporate strategy. NOTE: In the leadership process post, I discuss organizational design as a function of the leadership process. 

According to APICS, there is a four stage process to organizational design.  The first stage focuses on decisions and matters related to supply and distribution on an ad hoc basis. The second stage is centered on functional lines within the business acting as stove pipes or silos of self interest. The third stage expands to cross functional teams that measure and improve business wide processes usually emerging from second stage continuous improvement efforts within functional areas. The fourth stage begins integrative operations forming supply partnerships or customer alliances.

In short, organizational design integrates all the elements and progresses from a highly functional organization to a process orientation.

Supply Chain processes have transitioned away from functional operational processes like buying, planning, etc... towards business excellence or world class operations that involve complex information exchanges and a network of relationships. Effective supply chain management means mastery of the interconnected processes.  NOTE: Complex information exchanges in the information operations realm are known as Information Exchange Requirements, IERs. IERs can be either static or dynamic.  Static IERs usually relate to stable metadata needs that rarely change. Dynamic IERs occur when the metadata needs change regularly which is more common in emergent conditions and when uncertainty is high. The task of supply chain or business analyst and systems analyst is to know what metadata is available and how to source the information in short order.

In summary, key supply chain processes are emplaced and function at a competitive velocity.

Systems and Technologies points to the information systems and software technologies that makes complex supply chain operations possible. Technologies such as barcodes, RFID tags, GPS, and global networks track goods in motion and exchange information critical to corporate and supply chain strategies. However, the systems and technologies are not without challenges that stem from poor system designs, incompatible protocols and languages, and arcane technologies still in use. Even character sets can pose huge obstacles to overcome. Perhaps the greatest challenge are humans who erect barriers and reject new technologies or technology as a whole. Managing the human aspect requires patience and training. After all, processes are designed and managed by human beings. The purpose of systems and technologies is to facilitate the supply chain information exchanges at world class competitive velocities.

Supply chain excellence is reliant upon sage implementation of systems and technologies that not only promote world class operations but also strategic alignment. In reality, the network is very real. The supply chain's infrastructure is what is really virtual as a set of cooperating entities.  NOTE: Many companies tend to develop model financial performance statements, pro forma, then seek to force fit operations and systems to that financial model. While they have some level of success at this approach, the operations and systems seem to suffer often with processes out-of-control and/or a hodge-podge of systems. Under these conditions the organizational focus transitions to constant trimming, cutting, and reduction of costs to force fit the financial models. There is often a rush to market that also leaves the operations and systems in disarray. A tale-tale sign of this kind of activity is the presence of expeditors which are often labeled tiger teams, firefighters, and project managers. Not all tiger teams and project managers are expeditors. However, a vast majority of the expeditors, if not all, are seemingly project managers today. 

APICS alludes to this combination of operations and systems in their training. They discuss bringing processes under control and aligning systems in support of the strategies. This is putting strategy-to-task. With the right designs and tools, an organization can move and adapt swiftly to emergent conditions or adjust efficiently to new financial models; without major organizational redesigns or disruptions to processes and operations that are being forced fit into financial models; without expeditor-PMs pulling together the disparate mess of hodge-podge systems and poor processes. I have highlighted an approach in my posts on adaptive organizations that leverages systems and operations in favor of emergent conditions and adapts quickly reducing organizational latencies. Operations Management Series Posts.

In conclusion, technology is sufficiently advanced to tie all the processes together into a collaborative and transparent supply chain based on common information and data.

People are the ones who effect a supply chain despite the lack of a supply chain office or clear supply chain management structure.  Supply chain management requires training and education in supply chain thinking vice functional thinking.  Supply chain duties tend to be collateral duties rather than primary duties as it is an application of thought rather than supply chain tasks.  Supply chain means leadership through out the organization and chain by having the right people, in the right positions, throughout the chain. Supply Chain managers act as diplomats, go-betweens, and inspirational leaders keeping the supply chain together and effective. Supply chain managers must be holistically oriented.

One of the challenges in supply chain talent development, especially in large organizations, are misaligned human resources practices and policies. Supply chain management and responsibility must begin with executive leadership who champion the discipline.

A supply chain professional must:

• View the supply chain as a continuous linked process. 
• Manage relationships among team members and between teams to coordinate different temperaments and visions
• Understand the corporate business model and its alignment with the supply chain
• Manage cost skillfully throughout the entire chain
• Identify and buy or develop technologies that share information with the chain in real time.

The supply chain management is a flow that has supply chain professionals deployed having end-to-end visibility and has a velocity or tempo of operations.

Supply Chain Metrics are the ratios, generally speaking, that baseline then indicate out-of-limits performance of the objectives. There are many ways of measuring performance and since the supply chain is a flow and has a velocity many of the metrics are temporally based. ie  items per unit of time. A checklist can also provide performance information such as a T1 line is installed since a T1 transmits so many bytes per second verses a frame relay that transmits at a lower level of performance.

In short, measures are based on a relevant standard and strengths in order to assess performance then amend weaknesses.

Overall, the supply chain and corporate strategies all conform to ethics, regulations, taxes, and laws. As well as licensing and security policies.

Reference:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.

Building Supply Chain Collaboration

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world-class contracting. The Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain collaboration adding some additional support as well.

Building Supply Chain Collaboration

Part of designing a supply chain is developing the relationships up and down the chain.  There is little hope of strategic alignment without well-developed collaboration. Partnerships depend on:

• Auditable information and connectivity
• Formal agreements on proper behavior as a matter of self-interest ie contracts
• Incentive-based activity such as aligning organizational goals with collaborative objectives
• Process-based activities that build trust based on constant communications and feedback that open up to broader trust over time
• Leadership that has the authority to enforce/embrace relationships
• Each organization has a focus on the entire supply chain
• Network-wide visibility/transparency monitoring for the bullwhip effect and its impacts.
• Sharing of knowledge and not mere data.
• Transparency in sharing benefits and burdens of the relationships
• The amount of value-added and commitment type by each potential partner

The Illusion of Transparency is a particularly dangerous phenomenon in relationships which causes one, the other, or both parties to assume the other party has more information than they actually do. This creates a circumstance of distrust and can be exploited for wrongful gain in negotiations. The benefits of collaboration include but are not limited to:

• Lower costs
• Improved quality
• Better customer service
• Reduced inventories
• Rapid project results 
• Reduced cycle and lead times
• More effective relationships
• Enhanced commitment to one another

Actions govern intent in building relationships and share information. Actions send the signals the undergird trust, enforcement agreements, stabilize operations, and match collaborative goals.  Division managers must place the interests of the whole above the division by making major changes in how they operate.  Those major changes are guided by a few overarching tasks that management must undertake;

1. Designate relationship goals and assemble a plan of action to achieve them. 
2. Define the roles of every party avoiding redundancy.  Sequential interdependence should be avoided in favor of reciprocal interdependence. The exchange of information and efforts is mutual and bidirectional for each task resulting in greater rewards. 
3. Create policies or methods for resolving conflicts. Avoiding stiff contract negotiations is desirable for most companies who opt for relationship dialogue which is not too informal but has some guidelines. The guidelines must be sensitive to cultural differences. 
4. Managers must remain involved following the design of the relationships as without constant attention the design will part apart. 

Barriers to Collaboration

The following constraints are predictable obstacles to achieving successful collaborations.

• Sub-optimization: This originates when supply chains are not interconnected and results in individual chains optimizing measures not common to the overall collaboration.
• Individual incentives that conflict with organizational goals: This is an outcome of incentives not aligned with the activities of the chain which can become counterproductive. For example, channel stuffing results from sales incentives that create too much demand which is the opposite of the bullwhip effect which creates unexpected inventory levels. 
• Working with competitors: Treat the competition warily and at an arm's length. Collaboration among competitors is often wrought with distrust and ulterior motives. 
• Bottlenecks caused by weak partners: Capability and capacity drive this factor.  The weakest or slowest link in the chain will limit performance. Managers must identify that link/partner and work to improve performance. This may mean wise investment in process and technology or seeking another partner who has the capability or capacity. 
• Technology Barriers: Incompatible systems decrease the sharing of data, knowledge, and communications.  Managers must identify the incompatibility seeking to improve performance. This may mean wise investment in process and technology or seeking another partner who has the capability or capacity. 
• Power-based relationships: Nucleus firms tend to leverage their power in a supply chain. This can result in inequitable profits/losses in the chain resulting in rebellion within the chain. This resistance can result is power shifts and retaliation throughout the chain. 
• Underestimated Benefits: Firms in the chain can incorrectly view the collaboration as a business process re-engineering missing or rejecting the overall value of collaboration.
• Culture Conflicts: Most often people and firms in the supply chain will view their way as the best way of rejecting out of hand the collaborative way. This is an outcome of a lack of information or information not in the supply chain. Managers must assure that alignment is being achieved through information sharing.  Many other cultural issues persist and may be difficult to overcome. 

Communication Levels and Intensity

Collaboration is almost wholly dependent on communications with various intensities of which there are four levels.

1. Transactional with Information sharing: Medium-term contracts with single sourcing of information.
2. Shared processes and partnerships: Longer-term contracts that share design knowledge across the network. 
3. Linked competitive visions and strategic alliance: This is a virtual entity that works out even the highest level of strategy collaboratively. Very long term relationships. 
4. Backward Integration (mergers and acquisitions):  This is the deepest level of trust but not without issues.  These mergers and acquisitions take a long time to meld cultures and processes. Often there is resistance and labor churn as an outcome. 

Once the level of communication is established, the collaborative intensity must be formed based on cost, quality, reliability, precision, and flexibility. These all must be balanced for each participant and are strongly influenced by four factors.

• Strategic importance: This is the primary sourcing consideration. There are two genres of these products or services; premium or commoditized. Premium goods are of high strategic importance, internalized or closely held, and cost more. Often there are multiple sources as a backup. Whereas, commoditized goods are widely available having low strategic importance.
• Complexity:  These are often large scale goods or services that are highly detailed requiring strategic alliances to ensure quality levels and timing of delivery. 
• Number of Suppliers: This affects the availability of goods and services. The fewer suppliers the greater the need for strategic alliances. 
• Uncertainty: Risk. The higher the risk the greater the need for building relationships to ensure delivery, quality, and pricing. In many markets, there is high volatility in pricing or availability. Environmental conditions can cause an entire crop to be lost or precision to be affected in the case of chip manufacturing. For example, an earthquake, flood, or volcano can bring all chip manufacturing to a halt.    

As the factors combine such as uncertainty and the number of suppliers, then the need to collaborate increases exponentially. Sometimes firms choose not to heed these factors and act at an arm's length to achieve their strategic goals and objectives. Firms make decisions about trade-offs. For example, quality checks may not yield the level of value they cost. Additionally, there may be some damage to reputation that is irrevocable and unmeasurable. As a result, companies take a swag at the issue and roll estimated cost into the pricing.

Overall, supply chain collaboration is more of an art than a science.  Supply chain managers must learn the art of balancing all the elements affecting the performance of the supply chain.  The challenge is founding the fact that the factors and elements are all dynamic and in constant flux.

Reference:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.

Supply Chain Strategy

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world-class contracting. The Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain Strategy adding some additional support as well.

Supply Chain Strategy

Adding strategy to anything suddenly increases the importance and sound grander than mere management. Strategic planning sounds considerably more sophisticated and powerful than mere planning. In the military, strategy alludes to the marshaling of resources in order to achieve an end state. One approach is effects-based operations to implementing strategy. If a corporate strategy is smartly conceived then implemented wisely, then strategy results in successful local, domestic, and global markets. 

Expeditionary warfare refers to autonomous organic units that operate globally and make use of supply chains to support operations. If the corporate strategy is similar to military strategy then the corporate supply chain becomes essential as a potent resource to success. Designing and implementing the supply chain correctly could be the edge to become more adaptive, flexible, agile, and deliver value against the competition. 

Strategy as an adjective is more exciting than a strategy as a noun. The strategic thinker stands ready to grab whatever circumstance emerges and exploit it for profit. Underperforming strategies will be dropped in a heartbeat for a higher-performing strategy. Strategic thinkers look into the future exploiting temporal elements of the market either seizing future opportunities or creating the opportunity. 

Corporate Strategy 

APICS defines strategy as the ‘How To...’ Strategy tells an organization how to function in its environment. Regardless of the strategy adopted, the supply chain must adapt and operate to further the strategic goals. Most supply chains include multiple independent companies with their own strategies and goals. This discussion is about the nucleus firm or master firm in the supply chain. All the strategies have to do two things: 

• Serve the customer. 
• Be Profitable for all participants in the supply chain. 

Supply strategy centers on delivering the 4P’s; The Right Product to the Right Place at the Right Price and Right Promotion. A supply chain is not about fast and cheap despite being one of the models. Instead, supply chains are about timing and place for the customer. Many stakeholders are involved in the process to include market researchers, design engineers, logisticians, and many others. The challenges increase as there are multiple customers in the supply chains as well who are both internal and external to the chain. All the strategies of the supply chain require constant attention, leadership, and according to APICS a little magic. 

Sustainability in the supply chain requires widespread cooperation internal and external to the chain achieving the "triple bottom line" as no one is an island.

Forecast Driven Strategy 

A long-standing challenge in supply chains is identifying demand which is even difficult for even the most stable demand. Demand works its way back to the raw resources used in making the product. Traditionally, forecasting is the method of determining future demand and making to stock. This approach is a push strategy having three meanings: 

• Production: The production of goods based on a schedule planned in advance. 
• Material Control: The issuing of materials according to a schedule or job order. 
• Distribution: Centralized warehouse replenishment decision making at manufacturing or supply office site based on forecasts. 

Everything in the system is pushed downstream based on forecasts and the resulting schedules. As each participant in the chain makes their forecasts, errors in the forecast become amplified. This amplification of variability or demand uncertainty is called the bullwhip effect. Forecasts are deemed to be 100% incorrect being either too conservative or too liberal. The greatest risk in a push strategy is overstocking goods resulting in high inventory carrying costs or losses due to price reductions to move the excess inventory. 

Demand-Driven Strategy 

Demand-driven approaches are 'make to order' and considered a pull strategy having three meanings similar to the push strategy. 

• Production: The production of goods based on demand or to replenish stock levels following use. 
• Material Control: The issuing of materials according to or based on user demand or signaling. 
• Distribution: Centralized warehouse replenishment decision making local to the warehouse or supply point. 

In a strict demand-driven supply chain there is no production schedule. Goods are produced based on demand signals. Upstream forecasting remains necessary in a demand-driven chain. The primary challenge in switching from a push to a pull strategy is reducing inventory without impacting downstream performance. The greatest risk is a stock out which is often spun by marketing as overwhelming demand due to products appeals to the end customer. Demand-driven enterprises require some major considerations: 

• Access to demand data actuals in the entire chain. 
• Trust and collaboration among the supply chain partners 
• Agility

The Multiple Chain Strategy

An organization can have more than one supply chain. In fact, the supply chain can be a complex web or network of relationships. The more complex the Bill of Materials the more complex the network or supply chain.  Suppliers can range from small highly specialized service firms to giant material suppliers upstream or giant retailers downstream to individuals. Downstream goods may be sold through multiple channels; e-commerce, printed catalog, commercial wholesalers, and retailers. Regardless of the complexity and structure of the supply chain, there are two characters; Functional and Innovative products. 

Functional products have low contributions to the margin and change very little having very long life cycles with stable demand. Forecasts are generally simple and have less than 10 percent error.  These goods have long lead times and typically are made to order. These products are predictable and low cost having the performance indicators:

• High average utilization rate in manufacturing
• Minimal inventory with high inventory turns
• Short lead times
• Supplies selected for cost and quality
• Maximum performance at a minimal cost

Innovative products have unpredictable demand, short life cycles, and a high contribution to margins in excess of 20 percent. They also have high stockout rates in excess of 10 percent and out of season markdowns above 10 percent. Forecast errors exceed 40 percent. Lead times are often low to meet market responsiveness.  Innovative products have indicators that promote responsiveness over physical efficiencies:

• Excess or significant buffer capacities or safety stock of both stock and finished goods
• Aggressive reduction in leads times
• Suppliers selected for speed, flexibility, and quality
• Modular design that postpones differentiation as long as possible

A product can have both functional and innovative solutions but the variations would have different supply chains as one size does not fit all. Information technology makes it possible to have multiple or dynamic chains accommodating the different information flows and products.

Competition with Supply Chains

The point of having a strategy is to compete in the marketplace on the terms of the market share being sought.  Competing supply chains involve the following situations:

1. Groups of Companies allied as partners in supply networks competing against other networks that are also allied.

2. Competition that is carried out between or among individual companies on the basis of the supply chain. 

3. Competition that is dominated by a channel master whose policies dominate the entire channel. 

Supply Chain Strategy can be complex with multiple chains and competition factors that could change quickly. Therefore, the supply chain must be flexible and responsive in design.  Seeking win-win scenarios may be a challenge based on the tempo of the supply chain and change.  Therefore, it is possible that suppliers, wholesalers, distributors, and others in the supply chain may need to revolve.  A channel master may need to be outside the chain rather than a dominant member in the chain. This is to facilitate cooperation. If a member inside the supply chain controls the chain then flexibility and costs controls can be thwarted or non-perform for the chain.  For example, in complex projects typically performed by governments or major corporations, the project manager may need to become the channel master setting the expectations.  I discussed this in the post Project Complexity Perplexes Procurement.

Reference:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.

Joint Combat Assessment Team Readiness

Comment:  This is a article published following orders to China Lake Naval Air Systems Command training during 2003 and 2004.  It highlights the need to assess failures, faults, and deliberate actions to determine how to best improve systems.  Field work like this is exciting and finding ways maximizing the impact to America's adversaries while minimizing impacts to ourselves is a critical part of war fighting. This kind of thinking also extends to marketplace competition. While not belligerent, companies do seek marketplace dominance through similar efforts in quality, durability, and sustainability.  Another post of interest may be What does Military Experience Bring to the Table?

Training to Assess the Threat:

NAVAIRSYSCOM Det. 0474 Personnel Support

Joint Combat Assessment Team Readiness

 By 

Air Systems Program Public Affairs 

LT Mike Randazzo, NAVAIR Air Systems Program PAO

Mission planners rely on real-time combat data to establish immediately the threat environment and improve planning of ongoing operations. As an integral part of a joint service combat assessment team, Naval Air Systems Command (NAVAIR) Air Systems Program (ASP) personnel aggressively train to add value to this effort and contribute to current and future Naval aircraft combat readiness.

Sponsored by the Joint Technical Coordinating Group on Aircraft Survivability (JTCG/AS), the Joint Combat Assessment Team (JCAT) is comprised of Reservists from the Army, Navy, and Air Force. JCAT’s primary mission is to collect data on aircraft combat damage and losses.

JCAT Team with live-fire testing F-14: As an integral part of a joint service combat assessment team, Naval Air Systems Command (NAVAIR) Air Systems Program (ASP) personnel from NAVAIRSYSCOM Det. 0474 aggressively train to contribute to current and future Naval aircraft combat readiness. (LCDR James Bogden is second from left on top, and LT Mike Neaves is third from left on top.)

During recent conflicts, the lack of a permanent combat damage reporting system resulted in the loss of valuable combat damage data. In 1999, JCAT was established as a Reserve unit ready to deploy rapidly and collect combat data anywhere in the world. LCDR James Bogden and LT Mike Neaves joined JCAT from NAVAIRSYSCOM Det. 0474, which supports NAVAIR’s Naval Aviation Depot at Naval Air Station Jacksonville, FL. Det. 0474 is aligned with NAVAIR’s Industrial Capabilities unit which delivers the people, skills, knowledge, facilities, and equipment required to perform depot-level maintenance and repair of aircraft, engines, components, and other aeronautical equipment, and performs manufacturing and prototyping operations.

The JCAT unit, also, provides threat training to aviators and battle damage repair personnel. “An important part of this mission is to ensure that we continually train for the mission to ensure that we are ready to be deployed whenever and whereever we are needed,” LCDR Bogden said. Bogden and Neaves recently participated in a two-phase training session geared toward raising awareness of threat assessment and combat data collection.

The first phase of the training was the 2003 Threat Warheads and Effects Seminar at Hurlburt and Eglin Air Force Bases, Ft. Walton Beach, FL. The annual threat seminar covers the entire spectrum of threat weapons, including grenades (RPGs), manned portable air defense systems, and the latest Russian surfaceto- air missile systems. Threat exploitation hardware displays and live-fire demonstrations of small arms, RPGs, and a Stinger missile serve to reinforce the classroom material.

The second phase of JCAT training consisted of hands-on combat data collection training hosted by the NAVAIR Weapons Survivability Laboratory at China Lake, CA.

“We received valuable training on the effects of hydrodynamic ram from armor piercing and high explosive AAA, conventional metal versus composite structural damage, and warhead fragment and pattern identification. The combat data collection training provided us with the techniques and abilities needed to collect damage information in the fluid combat environment while minimizing the impact on the maintenance personnel trying to get the aircraft back into action,”  Neaves said of his recent training experience.

Participants observed an F-14 live-fire demonstration and collected damage data on a variety of aircraft, including an F/A-18 Super Hornet, V-22 Osprey, Harrier, and C-130. Each complete training assessment consisted of data collection (measurements, photographs, interviews, etc.), preparing a presentation, briefing the findings, and an instructor critique of student performance. Emphasis was placed on proper damage documentation for future reference and briefing operational commands.

“Projecting ASP technology and operations support at the depot level, even in a joint operating environment such as JCAT, is key to the ASP strategic planning process: to create a more ready and responsive Naval Air Systems Reserve Force,” said Rear Admiral Mark Hazara, Director, Naval Reserve Air Systems Program.

“Harvesting combat data to improve survivability and provide a database of lessons learned for future aircraft designers supports our effort to provide NAVAIR with readily deployable assets to provide optimum current and future material readiness,” Hazara added.

The Air Systems Program (ASP) provides qualified and diverse civilian and military experience in operational support of Naval Air Systems Command (NAVAIR) research and development, engineering, program management, logistics, and industrial capability activities. The 600 Naval Reserve officers and enlisted men and women of the ASP train constantly to respond to evolving NAVAIR missions enabling the organization to harvest tangible cost savings for fleet recapitalization. The ASP is comprised of 32 commands that are headquartered in 14 states.

References:

Randazzo, M. (2004). Naval reserve association news: training to assess the threat.  (Vol 51. No 2.).  VA. 

Community Leadership

The United States is undergoing a variety of transformations leaving many American citizens feeling helpless as a veil of uncertainty shrouds the future. The United States has been different than the other 200  or so countries around the world. The concept of American Exceptionalism is the belief that the United States does not conform to the rest of the world because the United States is of a fundamentally different character. Exceptionalism is built principally upon the freedom to exercise democratic processes. In practicing Exceptionalism there is a venue for the citizens to participate in planning their future other than reliance on ineffective or disinterested leadership that are classically of tyranny and aristocracies. This venue any citizen can take up and affect change is community leadership.

Community Leadership

One of the challenges with mainstream media, churches, and even  the United States government is an overwhelming volume of demagoguery and ineffective efforts. Everyone seems to be pointing out one side or the other of an argument. While often there are calls to action, no one is taking action or solving the problem.  The most probable reason is because many people lack the will, training, or skills necessary for mobilizing the cause into action. Community leadership enables the average citizen to take action, address grievances, effect outcomes, and impact the community and lives.  Any one or group can undertake any cause by getting organized the right way. 

A community leader is a person who works with others to develop and sustain the health of the community resting on several key points:

• Leadership is not the end in itself, but the mechanism to something else.
• Community leadership occurs whenever anyone works to develop and sustain a healthy community.
• Community leaders are identified by their works not their position or traits.
• Community members are a sufficient resource pool of leaders.

A healthy community is a place where the citizens economic, social, physical, cultural, and spiritual needs work for the common good and creation of a cooperative future.

In this posting two books will lend support to the notion of community leadership.  A framework is laid out in the Community Leadership Handbook for establishing and leading action. Managing Policy Reform offers the Democratic Reform Process, DRP, model that is reflected in the Leadership Process post. Together these two resources are the basis for a lay person, a citizen, to pull together an action committee, small group, advisory counsel, or community planning team. The purpose is for citizens take action in their community.  It does take work and it does work. 

Who can take action? Anyone can perform this action and have. However, if the effort is governmental, citizens or registered voters should have greater credibility rather than non-voting citizens, illegal aliens, green card holders, felons, and others in the system. Although, some political stakeholders in government accept all folks regardless of their affiliation.

The Core Competencies

In order to lead a cause, there are several competencies required; the ability to frame ideas, build social capital, and mobilize resources.   These undergo a process that result in a deliverable. 

Framing ideas determines what, why, and how action is taken. The process of framing involves analysis, values, motivations, vision, strategy,  and focus.  When developing a compelling vision and setting priorities that frame the action and ideas several practices are involved:

• Identifying community assets
• Analyzing community problems
• Accessing community data
• Doing appreciative inquiry
• Visioning
• Translating vision into actions

Building social capital is a leadership skill of developing and maintaining relationships marked by trust, reciprocity, and durability.  Much of the human capital operates in social networks in which bonding and bridging occur.  The leader can only draw on the social and human capital if a deposit was made. Wise leaders do not take their investments lightly. The tools often employed are:

• Effective communication
• Managing interpersonal conflicts
• Building social capital across cultural boundaries
• Mapping social capital; link analysis

Mobilizing resources is creating critical mass in order to take action and achieve an outcome. This requires strategic thinking and workable plans. This involves moving others to speak and support on behalf of the effort, engaging gatekeepers to networks, drawing large numbers of community support, and sage employment of the change adopters. Some of the practices include:

• Maintaining stakeholder registers
• Building Coalitions
• Building effective community teams
• Recruiting and sustaining volunteers. 

The Leadership Process 

The Leadership Process model is the general structure for community leaders. The leaders begin by identifying the problem, setting goals, and then managing the reform or change.  Perhaps the most critical aspect of the leadership process is framing the ideas and building support. Without these two skills the rest of the process is useless.  One tool of value is the workshop. 

The Workshop

This tool goes by many names such as neighborhood and district advisory counsels (NACs and DACs), town hall meetings, community planning group, think tanks, work teams, etc... The function remains the same. Workshops are an effective means to illicit participation from the constituency or supporters. 

Leaders must prepare the workshop prior to meeting. This requires a set of activities that loosely structure the sessions and permit dialogue. Each meeting should possess the following traits: 

1. Have objectives or goals set. 
2. Know what seeds to plant that build stakeholders’ ownership. 
3. Identify and invite strategic participants; people with access to funding, social networks, and influence. 
4. Realistic meeting durations or time limits. People have other lives and the leader must respect their time. 
5. Set the location. Have a stable and reliable place to meet. Ensure that others can lead if you are not able to attend. 
6. Design the agenda for simplicity, flexibility, and make it actionable.

During the meeting, leaders must keep the tempo and focus. They achieve through a specific framework for the conduct of the workshop. 

1. The agenda is a roadmap and a destination too. Allow for the discussion to naturally flow and keep it on the roadmap. 
2. Emphasize participation. Treat all participants as adults. 
3. Foster combinatory play with operational relevance in order to learn.
4. Use facilitators who are generally stakeholders and supporters who have a unique focus and can manage the areas of expertise. 

Work shops can involve large numbers of people and multiple or tiered workshops can address numerous special interest. In the leadership paradigm there are three tiers of leaders that map acutely to tiered workshops.

• Leaders with followers. This maps to tactical operations and effecting outcomes.
• Leaders of leaders. This maps to operational level activities expanding influence beyond one community. 
• Leaders of leaders of leaders. This maps to strategic level activities expanding the influence regionally, nationally, or even internationally. 

The workshop is an essential tool for a community leader who can expand the influence of the vision across communities and even internationally. 

Getting Started

If you are fed up with the way things are and you know what needs to be done then it makes sense for you to get the ball rolling. Make sure your idea is framed well and you've identified potential sponsors and stakeholders. Begin by writing letters to them as emails get filtered and unknown people and unsolicited emails tend to get deleted. Letters tend to get read or at least scanned. Follow up the letters with a call and seek to schedule a meeting during which you frame your idea in their terms gaining their  support.

Once you have built a base of sponsors and stakeholders. Organize workshops and begin to plan then mobilize resources keeping the sponsors and stakeholders informed.  Refer to the process model and step through each stage. Track progress and make adjustments as necessary until you have achieved the objectives. 

Community leadership is a means for the common citizen to get involved beyond the vote and making real impacts to lives and their communities.  It does not have to be a 1960's student demonstration or an act of civil disobedience. In fact, the need to be on TV or gain attention in those ways is actually rare as most actions can be achieved by meeting with the right people and gaining support. Incremental change adds up over time making a whole new way of living. As a strategy the leader should assess the various changes necessary for a vision then devise a skillful plan to achieve them.  

Other posts of interest:

The Democratic Reform Process Model - General

The Democratic Reform Process Model - In Practice

References:

Brinkerhoff, D.; Crosby, B. (2001). Managing policy reforms: concepts and tools for decision-makers in developing and transitioning countries. Kumarian press: NY

Supply Chain: Impact of Globalization

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. The Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain Globalization Impact adding some additional support as well.  I made an update to this post 12Oct13. 

Supply Chain:  The Globalization Impact

APICS defines globalization as the interdependence of economics globally that results from the growing volume and variety of international transactions in goods, services, and capital, and capital, and also from the spread of new technology.  Supply chains and globalization will continue to influence each other throughout the 21st century. A global strategy focuses on improving global performance through the sell and marketing of goods and services with minimal variation by country. This is not to be confused with multi-country strategy which has variation by country utilizing local capabilities.

The interdependence of economies around the globe creates a number of opportunities for supply chain managers:

• New markets for goods and services
• New Resources and suppliers
• New pools of labor

Trade between nations has been around for a long time but has increased in recent years due to enablers such as transportation and information technologies. Nations and companies alike are focusing on these core competencies in order to participate more profitably in the global trade.  A combination of the competencies makes globalization possible at a competitive price. 

Globalization creates challenges just as it has created opportunities. Cultural differences between nations come into sharper focus creating potentials for terrorist attacks, piracy, and illicit trafficking of goods and services. Other challenges are the introduction of disruptive technologies that create a competitive advantage for one supply chain become a must for the others which then moves towards commoditization. 

The 10 Keys to Global Logistics and Trade Management:

• Focus on total delivered cost management
• Further automate global logistic processes
• achieve end-to-end visibility
• Leverage supplier portals and achieve advanced ship notice compliance
• Commit to total identification and regulatory compliance
• Maintain transportation flexibility
• Embrace variability management
• Build integrated international and domestic workflows
• Adopt and integrate planning and execution platforms
• Focus on financial supply chain management

Companies and nations must become involved globally in order to remain competitive. Additionally, the advent of complex economies opens markets for local resources while introducing new products and service not locally available. Overall, global supply chains must be adaptable and responsive to the global system while cooperating on a local level. National markets must be chosen wisely in order to limit variation.

Regionalization vs Globalization

While business is globalizing the world is regionalizing.  Globalization of industry and business means that companies are becoming either multi-national or multi-cultural organizations. Multi-national companies retain a unique identity across nations and cultures. Whereas multi-cultural companies assume the culture and identity of their hosts. Management is dramatically different between the two types of companies.  However, another challenge is thrown into the mix - regionalization. Regionalization blurs cultural and national boundaries generally into larger regional economic centers of influence. I discuss this movement in the post Reflecting on the Character of Business and the Economy. 

Regionalization has the effect of reducing nationalistic opportunities for industry to a few regional opportunities for industry to leverage.  As part of regionalization, freedom of movement within the region is increased and trade barriers are decreased. Trade between regions has yet to be determined but  on the surface appears to become more standardized. Currently, there are only five major regionalization efforts with more developing. Some regionalization efforts will be very tumultuous and even belligerent as the case with the Middle East.  Other regionalization efforts will just happen overnight.

With the increased freedom of movement and reduced trade barriers, supply chains will dramatically change. In some cases, components in the chain will move to new regions and other component will move into areas previously not possible. Overall, the supply chain challenge will increase as the world order regionalizes.

References:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.

Supply Chain: Creating Value

This is a series on Supply Chain Basics looking at the discipline from the Society of Operations Management perspective. Supply chain is also essential to project management as PMs are typically trained in world class contracting. The Defense Acquisition Workforce Improvement Act, DAWIA, certification highlights the combination of project management and supply chain. In this post, we will explore Supply Chain value adding some additional support as well.

Supply Chain: Creating Value

Supply chain management aims to create value that is the worth of an item, good, or service. A related concept is 'value added' to goods and services. This is the responsibility of all entities in the supply chain. The relevant definition of 'value added' is the actual increase in utility from the viewpoint of the customer. The idea is to remove all non-value added activities. However, customers may view value wider than simply utility when considering price, availability, and attractiveness.

APICS views the business as a capitalist notion of profit margin or the difference between revenue and the cost of goods sold. The greater the margin the greater the financial success. Net profit is the result of deducting all expenses not only the costs of goods sold from revenues. APICS ponders the questions is financial success, money, a sufficient measure; are other traits involved; and are there limitations to ways of creating money? APICS emphatically asserts, "YES".

Not all profits are justified. Revenue can be generated that may be unethical or socially forbidden.  Governments tend to have influence in these areas and in Global operations what is permissible in one region may not be permissible elsewhere.

Value is measured by one stakeholder group at a time. Global supply chains have many stakeholders and what is beneficial to one stakeholder may be harmful to another. Therefore, identifying all the stakeholders and determining the impact the activity will have on each other is important.  Downstream impacts are just as important. Ultimately, the end customer is a significant stakeholder. There is a balance between value and profits. Each partner in the supply chain must optimize value in the supply chain as a whole. many questions need to be answered;

• Should profits be passed through to customers as discounts?
• Should profits be distributed as investor dividends?
• Should profits be reinvested in equipment and plant upgrades?

External stakeholders are also a challenge and consideration. These include governments, communities, lenders, etc...

Balancing the stakeholders value in the supply chain is a challenge as increasing the value for one decreases the value for another. Everyone has to be satisfied in order to participate.

Sustainable Supply Chains

This is when environmental paradigms are infused into the supply chain utilizing the cradle-to-the-grave notion of product management.  Sustainability and green are often used interchangeably despite sustainability being a broader topic including social and economic concerns. Both terms tend to refer to the limitations of economic activity imposed by natural resources. Companies should seek renewable resources rather than those that are depleting with slow or no replenishment.  Protection of the environment is also a major consideration.  ISO14000 provides an international standard for supply chain operation. However, in many countries ISO14000 reporting requirements can create legal issues for companies given local or national laws regarding these standards. Therefore, many companies are reluctant to adopt these standards.  Sustainability overall is significant in supply chain management;

• Government and regulatory pressures
• Good environmental management and sustainability
• Public opinion and the power of consumer choice
• Potential for competitive advantage

Sustainability makes good sense because it drives growth, reduces costs, and increases profits. Green supply chain management is here to stay and adds stakeholder value.

Financial Value

Reducing costs in one way to creating financial value and must be performed carefully in one of three ways:

1. Tradeoffs may be self-defeating. Rebalancing the spending increasing money in one area while reducing spending in another area can have negative impacts or a net loss. For example, shifting inventory from one member in the chain to another who has less capability or leverage could cost the relationship and supply chain performance.
2. It takes money to make money. Reducing costs through layoffs may free capital for supply chain projects but inevitably results in lower performance and ultimately failure. Most supply chain improvements require capital up front to realize greater revenues, profits, or both in time. There has to be a net gain.  Typical measures have been ROI and ROA. 
3. Gains must be equitably distributed. An error often made is not redistributing gains based on the needs of the stakeholders. Teamwork across the chain must be justly rewarded.  

Customer Value

In a capital economy, making money means responding to the customer meaning market driven.  The goal of market driven supply chain is to deliver products and services to that customer who will make the purchase.  Supply chain may be managed with an eye to delivering one or more of the following:

• Product or Service Quality: The supply chain must coordinate the right design, right materials,  and right production in order to achieve the right level of quality.
• Affordability:  This is a misleading notion in most cases. Affordability is not discounts, bargains, and just items of modest value but instead the appropriate price level for a market. A supply chain invests in the appropriate level of processes, people, technology etc... in order to achieve the right price. Keeping goods and service at the right price means supply chain efficiencies. 
• Availability: Some products and services require timeliness.  This affects not only inventories but the mode of delivery. 
• Services:  There is an indistinct division between products and services.  Often services are value added to a product sale. A reverse supply chain has grown in importance in recent years often called the Service Chain to handle returns, repairs, and warranty issues. 
• Sustainability:  Consumers are often the driving force behind environmental and social supply chain innovation.  Customer opinion for or against a companies policies and practices can impact sales. 

The amount of emphasis on one value or another will depend upon the nucleus firm's market strategy. No one will deliver low quality on an unpredictable schedule at high prices. In the end, the creation of customer value is the primary factor in supply chain strategy.

Social Value

A supply chain's contribution to society comes from three factors.

• Creating a positive good through delivering socially desired and useful products or services
• Avoiding or reducing negative environmental side effects of activities such as extraction, processing, and construction
• Integrating sustainability into the supply chain using the SCOR model.
• Plan, source, make, deliver, and return

There is no one size fits all approach to building and sustaining a supply chain.  Different practices and the sequencing in which they are adopted will vary and be driven by organizational and supply chain objectives.

References:

(2011). APICS Certified Supply Chain Professional Learning System. (2011 ed.). Version 2.2.