About Dalip Raheja

Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.

Did you send that RFP to the Government? And why Santa may be late.

amaon boxIf you have ordered something from Amazon and it was delayed, you may have the political gridlock in Washington to blame.  So call your local member of congress and complain loudly.  The U.S. Postal Service (USPS) is part of Amazon’s supply chain ……and it cannot keep up with the demand.  This brings up a number of interesting points to consider in what may be a changing landscape.

Clearly, Amazon found that current delivery systems in the market (e.g. Fedex, UPS) were not enough to meet their Value Drivers(volume, delivery schedule, cost etc .etc.).  USPS has been suffering contraction and their relationship with Amazon  is a great strategy to re-invent themselves (which also now includes acting as a banking system). After all, USPS already has the infrastructure for the proverbial  ”last mile” into your home and most people like their mailman.  Which by the way means that Amazon will have significant influence on the physical “last mile” and they are already into the content development and delivery business in a big way and getting bigger.  This raises the obvious question of how big is too big as far as Amazon is concerned?  You may remember the drone delivery strategy from last year?

Clearly, Amazon and other retailers may have outpaced the capacity of the overall delivery system and is now including the Public Sector in its supply base.  Does that mean that the next time you send out a logistics related RFP, you should include the USPS in it?  Perhaps you do already and if so, does it present a different set of challenges and risks to consider?  Are your negotiation tactics totally different?  In this case, one of the obvious challenges would be the union who is actually quite supportive ” We are in favor of the Amazon delivery business and Sunday parcel delivery — it’s fabulous and we want it to continue”.  The challenge is that USPS is not staffed up to handle the volumes, their temporary workforce strategy is not working and their entire workforce is overworked according to the article.  Year over year volumes are up by 300% and the expectation is that this is a long term increase and not a short term phenomena.  And the long term investment in increasing the USPS infrastructure including the workforce is a political issue which means you must include that as part of your assessment when looking at the USPS. 

Does Amazon look to invest in the USPS like they might with another supplier and is there a model for that?  Should that be of concern? Does that lead to privatization where your mailperson has an Amazon hat on?  When the USPS has to decide between your card to grandma and the Amazon package, which one do they choose?  Already Amazon customers are complaining that they are not getting on time delivery.  How much influence does Amazon have over the USPS?  Wait till that call from grandma! By the way, this is the same discussion happening in the virtual “last mile” issue between the FCC and the industry (net neutrality) – who controls delivery of content into the house.  And content developers are bypassing cable (Netflix, HBO) but that’s for another blog.

amaon boxDealing with the Public Sector as a supplier clearly has its unique challenges and one where public policy and politics enter into the picture.  It may also be the emergence of a new model where public sector institutions who have been under pressure to outsource and privatize are now actually a service provider to the private sector – they have become the Outsource (a totally made up word).  It is also an interesting tipping point (thank you Gladwell) where one of the most dominant disruptors of the old economy (Amazon) is teaming up with one of the oldest institutions of that old economy (USPS) to make sure Santa is on time.  And if he/she is not, then call your congressman and give them &^##.

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Is your Organization Trapped in the Fear Zone?

fear zoneThomas Friedman in a recent op-ed discusses the still lingering aftermaths of 9/11.  Without getting into the politics of his piece, I think there are very strong corollaries in the business world.  The gist of his thesis is that the long term effects of the “age of fear” has warped our institutions and priorities.  He borrows the term from David Rothkopfs book.  According to Rothkopf, “not only did we overstate the threat, we reordered our thinking to make it the central organizing principle in shaping our foreign policy.”  Friedman then states that fear of being blamed by the fearful permeates our foreign policy and Rothkopf underscores this by saying that it has “killed creative thinking”.  Significant resources have been spent dealing with the “fear” and away from other critical priorities (education, infrastructure etc.).  According to Friedman, “many more Americans were killed in their cars by deer last year than by terrorists”.

There are many such examples from the business world.  We were working with a Fortune 15 client,  helping them re-engineer their Supply Chain processes which were dis-proportionately dominated by lowest price considerations and ignoring significant Value Drivers (including risk).  While we were in the midst of our work, they had a major disaster of epic proportions at one of their “manufacturing” sites….caused by a combination of their suppliers.  As was Predictable and Inevitable, the pendulum swung all the way to the other side.  We sat down with the leader and told him what was about to happen – suppliers that they had been doing business with for years would no longer be “qualified”, no one would sign off on any decisions unless everyone else had, their processes would come to a grinding halt, the risk department (a small sleepy unit of 3-4 people prior to the disaster) would gain prominence and accountability yet not have the competency to deliver etc. etc.  The leader was not able to take any action on any of these and sad to say, all of these came true.  This was 2-3 years ago and that supply chain organization is still trying to recover, after the predictable change in leadership.  The “Age of Fear” had set in.

Friedman goes on to cite Gautam Mukunda from Harvard who says because of this very real phenomena, we have been distracted from building resilience.  We are investing in low probability / high impact items (terrorist threats) and not investing in high probability /  high impact items (education, infrastructure) or in low probability /  high payoff innovations (internet).

Think about how corporations have handled situations like this – GM (ignition switch), McDonald’s (contaminated meat from suppliers), Takata (seat belts), Boeing (Dreamliner) and the list goes on and on.  How many of these organizations have moved into the Fear Zone, how long will they stay there and how will they get out?  Do they realize that they are multiplying the cost of the original disaster many times over by being in the Fear Zone?  Do they even know that they are in the Fear Zone?

Has your organization spent any time in the Fear Zone?  Over reaction to some minor audit points?  Do you know how to recognize the Fear Zone and how to deal with it?  Would you like to know more and discuss?

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How Good Are Your Collaboration Competencies?

collaborationIn a recent discussion with a client who is the Global VP of Services, the question of Collaboration came up from a unique perspective.  In his industry, they often partner with competitors and suppliers to respond to and deliver solutions to their customers.  And while they feel pretty good about their negotiating competencies, he was very concerned about the lack of collaboration competencies,  especially where you are faced with multi-faceted relationship structures (competitors and suppliers).  And when he layered on the fact that they were projecting a very healthy growth trajectory over the next 3-5 years, I had to point out that their ability to respond to that kind of demand  was totally dependent on their ability to develop those collaboration competencies as quickly as possible.  Now before you think that this may not apply to you, I would ask you to think about all those critical supplier relationships you have that for whatever reason you will never be able to break and therefore the only way to enhance the value of those relationships is through Collaboration? Or the amount of Collaboration you need internally to be successful in your role?

As our discussion continued, these points became quite apparent to him.  For his organization to meet those growth targets (and their order book over the next 2-3 years already supports those growth targets), they were at risk because the critical competency that was needed was Collaboration and as we all know, developing a competency has a lead time associated with it,especially one that typically doesn’t get a lot of attention.  The Collaboration competency requires a totally different way of thinking and traditional competencies around negotiations can get in the way.  For our client, this critical competency  was sorely needed within his organization when  dealing with those external relationship structures.

Developing these competencies can actually be a competitive edge for every organization.  Let’s take the example where you have a supplier who has a near monopoly.  Your ability to mine more value through Collaboration with that supplier gives you an edge or  your ability to create a new supplier (as a credible threat) might require collaborating with some of their other customers in the same predicament. Where there are long standing supplier relationships that your stakeholders will never let you change, you can still generate significant value with those suppliers through Collaboration.  Your sales organization may be contemplating entering a new market and the only way you can provide them with a Supply Chain to support that new market is through Collaboration.  How about when you might have to Collaborate with competitors to create a new Supply Base because it’s a regulatory requirement.

In our experience in dealing with this issue with clients, we have often found that the attitudes held by senior leaders around collaboration are the most challenging.  And unfortunately, those attitudes are allowed to permeate through their organizations.  Your organization may be totally different :-) ?  Organizations are designed with competing goals which add to the complexity.  Our basic attitudes have long been developed (as early as school) in a competitive environment, not a collaborative one.  I still remember the biggest challenge my kids had when they went to college was with team assignments that had  no active intervention from the professor.

We think that this will soon be recognized as one of the Next Practice competencies that create an explicit competitive advantage for organizations.  And if your goal is to stay ahead of the curve and Best Practices that others are pursuing, then Collaboration should be your clarion call for 2015.  

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Closing The Skills Gap By Borrowing From Germany!!

apprentice

While there are a number of reasons, the biggest seems to be that not going to college is considered a failure while the same is not true in Germany.  Called the TVET, Germany has had an apprenticeship program in place that encourages students to apply for 2-3 year training contract that allows the public and private sector to partner and provide both additional education and practical on the job training – Germany has the lowest unemployment rate amongst the young.

On the other hand, you have companies that are severely constrained in their growth in the US because they cannot find people.  Here is one frustrated CEO:I wish that we could go to the school system and be able to hire machinists, tool and die makers…these 12 people that we’re trying to hire are keeping us from growing”.  At the same time, “Most companies (American) don’t see technical and vocational training as one of its key responsibilities” according to Andreas Koening.

South Carolina has taken a totally different approach and launched a very aggressive apprenticeship program (thanks to the influence of a number of German companies there) and gone from 800 to 11,000 in a short time.  This has helped them close critical skills shortages in manufacturing.  In addition to the German influence, they also have public sector support in terms of tax credits. They have also gone beyond the traditional building trades and included nursing, pharmacy, IT etc., to expand the scope and interest.  Brandon started during high school and is now working and going to college-“I get paid for my hours at work…and I get paid when I’m in class”.  While not for everyone, this is clearly a path to middle class that has been missing for quite a few years.

Many other economies are starting to take notice and Germany is helping launch many localized versions of their TVET.  Manufacturing work is much more sophisticated today than it ever was and the skills gap will continue unless companies figure out more creative ways of acquiring those skills (build them) instead of posting want ads and waiting and waiting and waiting.  As Tom Perez (Labor Secretary) says, apprenticeships can be a sleeping giant for the US economy – if we can just convert the parents who keep thinking that a college degree is the only way for their kids.  And they can always get a degree and have their employer pay for it – while they work.  And we don’t need to restrict this approach only for manufacturing?                   

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Ebola, Halloween and Supply Chain Risks

chococalteWhile there is no comparison to the human suffering and tragedy, the Ebola crisis does have some lessons to be learned from a Supply Chain Risk Management perspective.  We discussed some of them as they relate to the “Ebola response” Supply Chain here and here but there is also the risk associated with Supply Chains that are supported in West Africa – a prime example being Cocoa.

 If you have not noticed, your favorite chocolate bar is already more expensive and cocoa contracts are at a three year high.  According to Jack Scoville, the spike is largely related to Ebola fears.  While cocoa is largely grown in the Ivory Coast and Ghana and the Ebola epidemic is in the neighboring countries of Liberia and Guinea, the fear is  that it will spread to the cocoa fields. Even just the perception that it might, had that perception taken hold, would have been enough to start driving farmers away from their crops.  The way that risk was mitigated was by closing the borders to human traffic.

 The resulting risk created though was that the entire migrant labor for cocoa harvesting comes from Liberia and Guinea.  The impact of this is totally un-predictable as the harvesting season is currently underway.  While the hope is that labor will be available from other sources, the potential impact of this will be significant on the cocoa crop and therefore chocolate prices.  Which is probably why the futures contracts on cocoa are baking that risk into their pricing.  And  by the way, the agronomists and economists, who would be visiting the cocoa fields to project this year’s crop, yield, quality etc. to price out cocoa futures cannot do so as they have not been willing to travel because of Ebola fears.  The level of uncertainty surrounding cocoa is probably unprecedented.

Now place yourself in the shoes of your peers who are in the Chocolate industry or just substitute cocoa with your critical commodities, and Ebola with any significant major disruption (another Ebola like event, terrorist event, natural disaster, etc.) for your suppliers or their suppliers.  Does your Supply Chain Risk Management process incorporate such events and know what to do when they occur?  Or, does it ignore the existence of such risks?  Have you checked with your key suppliers and asked them to share their risk process with you so you know how much “pass through” risk you have.  What if 75% of your key suppliers are dependent on a small region in China or India – is that too much portfolio risk for you to assume? And this risk is prevalent whether we are discussing products or services.  What if the risk (Ebola) was able to contaminate your supply chain and cross borders as an intrinsic part of your supply chain?

For living proof of this, all you have to do is to look at McDonald’s (and KFC, Burger King etc.) and the impact it has had on them – and they are a vaunted Supply Chain organization.  Tainted meat from a Chinese supplier has had a significant impact on their sales, market share, brand, earnings, stock price etc. and  they all are still a long way from recovering from.

Halloween is coming and while no one is predicting any impact on demand because of any connections between Ebola and chocolate, high prices will definitely mean a lot less chocolate for the kids in their bags.  And that also means a lot less chocolate for me to steal from those bags the next morning.

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