Closed-mindedness

An engineer, a physician and an economist were sitting at an outdoor cafe. They noticed that two people entered a building across the street. A little while later they observed that three people came out. "Oh, no," the engineer said, "my measurements must have been wrong." "Obviously," the physician concluded, "they reproduced." "But now," countered the economist, "if another person walks into the building, it'll be empty."

Often we look at too narrow a range of data and interpret it solely from our own knowledge base. In business, we mistakenly compare week-to-week and month-to-month data points thinking that any variation is significant and must be explained. Just like the engineer, physician and economist.

Quite a few years ago in the 1990's, the US Congress tried to take credit for a reduction in inflation through their fiscal actions. However, a chart of inflation rates shows that the dip was hardly a blip in the overall variation.

Source: http://www.thedigeratilife.com/blog/index.php/2007/09/17/watch-prices-go-up-interesting-facts-about-inflation/

As you look at data in your business, make sure you've got a healthy perspective. Seek more than one opinion, especially beyond your own, or you might come to inane conclusions like the engineer, physician and economist.

Fire Your Supplier?

A recent article in USA Today suggested that suppliers be fired if they can't meet expectations. I agree with that, after you take one step:

Determine if almost everyone is failing and then look at your own ordering and scheduling processes to see if you're partially to blame.

In any company I've worked, I've suggested that a supplier report card focus on two groups that will make up 20% of all of your suppliers: one that's doing really well meeting expectations and reward them; the other that's not doing so well and figure out what needs to change. Chances are the majority (60-80%) are muddling through, mostly meeting your expectations. I've been involved in too many ordering systems to know that it's usually MRP or unreasonable customer expectations that create a 'crisis' for your supplier. At best, the process will create unreasonable expectations of your own that get passed onto the supplier.

Some suppliers will still excel--maybe because they carry a lot of inventory or have a lot of 'protective' capacity to provide service to their clients. (It's protective in the sense that it protects the company from missing deadlines when glitches or sudden demands occur.) These guys you want to recognize and perhaps reward with more business.

Some suppliers will severely lag behind everyone else because of their own internal issues. These need help or need to be replaced.

Most suppliers have pretty order fulfillment systems and have mostly accommodated your demands. Recognize that you're not their only customer. It's not a supply chain so much as a chain link fence. There's not going to be a lot you can change here. Unless you can change your system to be more robust given the variation in supplier performance, you need to figure out how to live with disappointment occasionally. If you do stock more, or increase your own protective capacity, or some other options to be more effective and efficient, your customers may thank you with more business.