Friday, March 15, 2013

My Views on Pilots! Dr. Tom DePaoli

Pilots Are For Doubters, Naysayers, and Obstructionists

New process or new initiative pilots are good for certain supply management ventures but don’t procrastinate or extend them out ad infinitum. It’s a good way for the resistance to kill you off. The burden of proof is 51 percent or reasonable. It’s not beyond a reasonable doubt or a 12-0 unanimous jury vote. If you use the later criteria you will never have a successful pilot. Make sure one person is accountable for the pilot beachhead and can understand the total picture. Folks love experiments, but remember that the first rule of experiments is to have controls!

If you get consensus in a kaizen, change the process, change it right away! Do not lose momentum.

http://amzn.to/RCvfPF link to my book

About Dr. Tom DePaoli

Dr. Tom DePaoli is the Principal at Apollo Solutions Publishing and Consulting with over twenty years of experience in all phases of purchasing, human resources, supply chain optimization, strategic sourcing, organizational re-design, e-commerce, SAP, lean six sigma and e-procurement software. He is a published author and story teller who believes stories have the power to teach more than what the textbook can offer. He is the author of Common Sense Supply Management and Common Sense Purchasing. Consulting and speaking inquires in the field of supply chain management, lean six sigma, publishing and purchasing are invited and most welcome. Visit the website, www.apollosolutions.us, send a personal email via LinkedIn to make your inquiries, or visit our social media profiles to learn more and to engage in conversation. He is the founder of 'Growing Up Memories' and Author of Growing Up Italian in the 50s. This is the first of a series of books about growing up. I invite you to share your 'growing up' stories for consideration in future publications. Whatever your background or nationality, maybe you grew up in your Dad's garage, or in a big family, if you have a story, please consider sharing it. Visit the website www.growingupmemories.com, send a personal email via LinkedIn, or visit our social media profiles to learn more and to engage in conversation.
Dr. Tom can be contacted at drtomd@gmail.com

Dr. Tom

contact me at
drtomd@gmail.com

Thursday, March 14, 2013

De-Mystifying Lean Six Sigma for Purchasing Professionals by Dr. Tom DePaoli

De-Mystifying Lean Six Sigma for Purchasing Professionals

By Tom DePaoli

February 17, 2013 at 1:23 PM

Many supply chain and purchasing professionals are intimidated by Lean Six Sigma (LSS) and its proponents. Relax. It is just a disciplined approach to problem solving. LSS uses many tools that have been around for years; in many cases the tools have just been cleverly repackaged by consultants.
Decisions are data-based, disciplined and plodding. Without top-down commitment, LSS is doomed to fail. Make sure you secure this executive commitment, and better yet make participation a strong criterion for individual performance reviews (raises). Projects should be selected by ROI (Return on Investment) and since much time and teams are required for a project, they must return or save at least $300,000 to qualify as a full blown LSS project.
Supply chain and purchasing professionals must be involved in sourcing the LSS consultant. Experience is critical and a proven track record of project success essential. Get references and insist on examples of work. Use a fixed hourly rate and make sure all developed training and projects remain your property. You can try to make the contract performance-based but many LSS firms will not agree to this. Make the goal to be self-sufficient internally within two years with all LSS training and projects.
Some LSS projects that have been done in purchasing and the supply chain are: Inventory cost, part obsolescence prevention, leadtime reduction, backlogs, unexpected orders, customer service internal and external, cost of schedule changes, transaction flows, cost of return product, and supply chain optimization. Many of these involve process mapping which is a type of flow chart that illustrates how things are done and identifies areas of strength or weakness.
LSS is not the only tool that can be used by supply management professionals for improvement. In my experience LSS should be used when the potential savings is great and you have some good data to analyze. If you do not have good data the LSS project will take even longer. If data is sparse, the Lean approach is much preferred which is highly visual, intuitive and does not require as much data.
Always Lean a process before you use LSS. By this I mean eliminate any redundant steps in the process that can be easily eliminated first. Reduce the number of variables in the process. Try to understand the voice of the customer (VOC) clearly before your start process improvement. Remember if the customer does not really care or value a process step; ask yourself, “Why are we doing it?”
Finally use kaizens for straightforward less complicated projects. The kaizen approach is usually done by the work team using the process and strives to eliminate waste in the process. The new kaizen improved process should then be quickly implemented. Supply chain and purchasing professionals must take the leadership role in LSS, Lean and kaizens. In my professional experience, the rewards of these approaches can be astounding. They do however require a measured and disciplined approach, and a commitment to not giving up!

Tom DePaoli

Dr. Tom DePaoli is the Management Program Director at Marian University in Fond du Lac, Wisconsin, and the Principal (CEO) of Apollo Solutions (www.apollosolutions.us) which does general business consulting in the supply chain, Lean Six Sigma and human resources areas. Recently he retired from the Navy Reserve after over 30 years of service. In other civilian careers, he was a supply chain and human resources executive with corporate purchasing turnaround experience and Lean Six Sigma deployments. He is the author of: Common Sense Purchasing, Common Sense Supply Management and Growing up Italian in the 50s.

A New Way of Paying Procurement by Dr. Tom DePaoli

A New Way to Look at Paying Procurement

By Tom DePaoli

March 04, 2013 at 5:26 AM

Most supply chain professionals are familiar with the best practices of a supply chain organization and how to transform purchasing into a lead strategic partner in a company. These usually include a thorough spend analysis to focus on the major areas of materials and services. Another aspect includes the rationalization of suppliers and the formation of a few key partnerships with important suppliers. The institutionalization of a comprehensive sourcing methodology is also crucial. The area that is often overlooked or neglected is the investment in people!
Many purchasing professionals have been rewarded for bureaucratic and tactical behaviors for many years. The culture of risk aversion is prevalent and roles are particularly well-defined and limited. They focus on a particular material or service and become “experts” on these items. Often they work in silos and have no real connection with operations. It is usually not their choice but the expectations of the culture or of their organization.
The retraining of supply chain professionals begins with developing the capability to lead cross-functional teams not only in sourcing, but in process improvement activities such as Lean and Lean Six Sigma. Most need to reach the level of at least a green belt in a process improvement approach, and to reinvent themselves to be total product experts not just a particular material expert. You have to be a product expert to understand the Voice of the Customer (VOC) or what is really important to them. This requires striving to become an expert in an entire industry not just a narrow material. It also requires a dedication to understanding and working with operations. Performance reviews need to be tied into how well they do in predicting the market trends of their particular industry and meeting or exceeding the VOC.
All too often this training is piecemeal, unorganized and uncoordinated. Fortunately there is a comprehensive approach that has been around for 40 years that works in many industries particularly ones where employee knowledge is highly valued like the chemical, oil and process industries. The approach has been called pay-for-skill or pay-for-knowledge. Employees are paid more for each skill or knowledge area that they develop, and demonstrate their proficiency in by job performance. It does require a significant monetary investment by the organization in training employees and the organization evolves to a continuous learning campus. The word campus is critical because many organizations partner with local technical schools or universities to jointly provide the comprehensive training and courses.
Unfortunately many organizations have disinvested in training employees and would rather outsource for many skills or functions. This is deadly to the supply chain concept and process improvement, which must strive to constantly improve the entire supply chain from start to finish without breaks which may or may not be performed better by an outsourced entity.
The major objection to the pay-for-skill approach is the cost and the length of time for payback from the employees' improved knowledge. Once in place, however; the power of this employee intellectual capital, and the momentum of continuous improvement, establishes a supply chain centric organization that is nearly impossible to beat competitively.
People transform supply chains and organizations not technology or best practices.

Tom DePaoli

Buyers Meeting Point Book Review Common Sense Purchasing by Dr. Tom DePaoli

Book Review: Common Sense Purchasing

When I am reading the books that may end up on the Buyers Meeting Point Endorsed Publications list (in the Procurement Library), I often find that they are missing a certain… something? Now I know what it is – cartoon illustrations! All joking aside, I am now in a position to recommend a book that contains solid procurement advice and pictures. Read all the way to the end of this interview to see my favorite from the book.

Common Sense Purchasing is structured around 100 lessons, the kind of lessons that are easy to agree with, but not always so easy to consistently put into practice. My personal favorites are:

#3: Plan or Perish. Make sure you have a strategy first. Not technology first.
#12: Do your homework with suppliers and industries.
#21: Pick the right metrics [for procurement performance]. The right ones.

Following each lesson are examples and other ideas backing up why the lesson is important and how to execute its advice. If you need an additional reason to buy and read this book, it is the price. As of this interview, Common Sense Purchasing is available new for purchase on Amazon for $9.99. This is a significantly lower price than many of the more

academic

books out there. The price and the content are both accessible and down to earth.

Buyers Meeting Point interviewed the author, Dr. Tom, about Common Sense Purchasing.

BMP: In the introduction of the book you say that you have made “just about every darn mistake one can make in purchasing”. We are glad that we are not alone in that. Which mistake was your ‘favorite; which taught you the most important lesson?
Dr. T: One of my favorite mistakes is when we went through a disciplined and arduous supplier selection process. The selection process was done by a cross functional team. All the numbers were favorable and the supplier had good references and was eager to get started. The total cost of ownership savings were well over $1,000,000. We did all our homework and were very confident of our decision. The new supplier promised to provide a supplier representative on site for 20-30 hours per week. We even had a celebration. The supplier representative started and I thought that things were going well. Unfortunately our maintenance personnel just could not get along with the representative and conflicts arose. It was more a personality issue rather than competence. Luckily the supplier had another representative available who replaced the initial representative and was well liked by our internal customers. The lesson learned was that once again, relationships are not only critical, but "king" in supply management. We added to our supplier selection process an interview (performance based) of any on-site representatives by our internal customers, like maintenance, and a reference check and discussion with other customers about the on-site representative. Also don't celebrate prematurely. Lesson #1: It’s about relationships first and foremost.
BMP: How does the rising role of social media/networking relate to the need to emphasize the value of relationships?
Dr. T: Social media/networking improves or enhances the value of relationships. They are an excellent tool(s) not only for developing deeper relationships but getting to know people in the supply chain on a personal basis. This is an asset and people appreciate attempts to build better personal relationships. It is the Internet version of playing golf with someone. You get to know a lot about an individual when you play eighteen holes of golf with them. Obviously social media is not that intense but it does help build relationships. Bottom line it helps build trust, especially internally which is a key for managing change. Some argue that we should not build these type if personal relationships with a supplier or internal customers but I disagree. More often than not, this type of relationship will help especially in a crisis. Besides what is the alternative? Being constantly adversarial adds no value. The watch out is that you cannot let personal relationships sway your judgment when major decisions have to be made. Being honest with a supplier, when they are deselected or disqualified, is always the best option. Most experienced purchasing professionals can remain objective and not let personal relationships derail their judgment. They can usually avoid what I call Supplier Stockholm Syndrome. Lesson #6: Ruthlessly rationalize suppliers first and then don’t back off.
BMP: As the need to manage risk increases in organizations, many companies are moving away from supplier rationalization – or rather away from single sourcing. Does your recognition of risk as one of the “bottleneck materials strategies” (lesson #19, bullet 4) fully address that or do you think supplier rationalization as a strategy should be reconsidered altogether?
Dr. T: There is no standard answer for this. You need to have a different supplier strategy based on the particular service or material that you need and the risk of supply interruption. The more critical or strategic the material, the more that you have to make a sourcing decision based on risk. This may include multiple suppliers, alternate materials, or backup suppliers. Sole sourcing decisions can have significant dollar savings but an interruption of the supply chain can carry great risk and cost. The purchasing professional must have multiple sourcing strategies to

deal

with risk. This is especially relevant today where many companies have international suppliers who can deliver at much lower costs. However, many of these countries are at risk not only from a political or stability aspect, but natural disasters. Lesson #12: Do your homework with suppliers and industries. BMP: I love the fact that you advocate not being intimidated by bullying stakeholders/internal customers, “Purchasing is not an unctuous service organization at the beck and whim of internal customers” (p. 11). What advice would you give for managing or minimizing the inevitable fall out?
Dr. T: My advice here is to always lead with the facts and stay professional. Make sure you have a good supplier evaluation process in place with great metrics. Bullying stakeholders often focus on one incident and over dramatize the single event and impact. Maintenance people often focus on one incident of late delivery of a part. This is a standard bullying exaggeration procedure. When shown that the supplier evaluation data reveals a 99% plus on time delivery of thousands of parts, the drama is often defused. My other advice here is to publish supplier performance metrics (visibility) so that everyone can see how they are doing.
BMP: You use terms such as procurement, purchasing, buying, sourcing, etc. in your book. Do each of the terms used have specific meaning to you or do you use them interchangeably? I ask because of the growing association between purchasing and tactical buying v. procurement and more strategic activity (for instance).
Dr. T: I use them interchangeably in the book. I categorize these terms as skill sets that all purchasing professionals must have. Purchasing professionals need to switch gears in their approach based on the customer needs. They may have to quickly be tactical, strategic or bureaucratic based on what the customer wants. What every purchasing professional should ask themselves at the end of their day is "What did I do today to help move the business ahead?"
BMP: Nearly 10 years after your book was originally published, if you were to write lesson #101, what would it be?
Dr. T: Do not give up on relationship building. It does take time, effort and stamina. But the rewards are huge. The first test of a relationship is very important, so make sure you do your very best to maintain and improve the trust.
BMP: In the interview posted on your site, you mentioned plans for another book on the role of managing relationships. Is that still in your future?
Dr. T: Yes this book is still in the future and an outline is currently being developed.
BMP: Several times in your book you mention Dr. Deming (W. Edwards Deming, I presume). How did his work come to play a role in your purchasing philosophy? Is there a book by (or about) him that you would recommend?
Dr. T: Dr. Deming was actually more of a people person not a statistics or quality person. He trusted people. He often noted that over 90% of defects were not caused by people or the

workers

, but by defective materials purchased for the process or the poor design of the process. People cannot make a bad process design much better, and over 90% of quality is imbedded in the initial process design. Purchasing can play a tremendous role in assuring that the incoming materials are of high quality (world class suppliers) and that the process is designed correctly (cross-functional teams with engineering). The role of purchasing on quality is critical. I will not recommend a single book Dr. Deming but here is a good website to review many books and articles on him. http://www.deming.edu/BA/BATheMan.html

A New Way to Look at Paying Procurement Dr. Tom DePaoli

A New Way to Look at Paying Procurement

By Tom DePaoli

March 04, 2013 at 5:26 AM

universities

to jointly provide the comprehensive training and

courses

. Unfortunately many organizations have disinvested in training employees and would rather outsource for many skills or functions. This is deadly to the supply chain concept and process improvement, which must strive to constantly improve the entire supply chain from start to finish without breaks which may or may not be performed better by an outsourced entity.
The major objection to the pay-for-skill approach is the cost and the length of time for payback from the employees' improved knowledge. Once in place, however; the power of this employee intellectual capital, and the momentum of continuous improvement, establishes a supply chain centric organization that is nearly impossible to beat competitively.
People transform supply chains and organizations not technology or best practices.

Tom DePaoli

careers

, he was a supply chain and human resources executive with corporate purchasing turnaround experience and Lean Six Sigma deployments. He is the author of: Common Sense Purchasing, Common Sense Supply Management and Growing up Italian in the 50s.

Friday, August 10, 2012

Common Sense Supply Management

COMING SOON

In his new guide to supply management, author Thomas DePaoli offers no-nonsense strategies learned from his diverse career in many organizations. Told in part via a story format, Common Sense Supply Management uses real life examples to discuss what goes right, and often wrong, in the supply chain management trenches.

The stories are told factually without any embellishing notes to distract the reader. By carefully following this book’s accounts, supply management professionals can learn a career’s worth of what to do and what not to do. DePaoli provides practical lessons launched from real-life cases and tested in the unforgiving supply chain management reality.

Like many good business leaders, the author places business relationships first and foremost in his guide. “Supply management covers more breadth and depth than any other discipline in an organization,” says DePaoli. “It is the art of building multiple relationships.”

His book advances to tackle best practices, Lean Six Sigma, and information-based negotiations. He includes an extensive chapter on planning and strategy that prepares the reader for his multi-dimensional approach to suppliers, offering proven tactics for testing and sourcing suppliers, and he is candid about the possible pitfalls of using international sourcing.

A stickler for robust, data-driven decisions, he shows the sorts of metrics supply managers should be tracking. He discusses a range of computer-based tools that allow professionals to conduct their business. He warns managers about adopting slick-looking technologies that remain incompatible with an organization’s culture.

He remains convinced that his story-telling strategy will allow readers to learn more than what any textbook offers. “Some of the stories are good management lessons,” says DePaoli. “Others were the result of having great people work for me and teamwork, while others were the result of just hard work and massive amounts of tough homework.”

Supply chain management continues to form the backbone of most companies. Knowing how to orchestrate its complexity can give an organization a strong competitive edge. The supply managers who are willing to take the journey and possess the indomitable spirit necessary to succeed will greatly benefit from this unorthodox but powerful guide.