Lean


Attracting (and keeping) the right customer – The software industry in Ireland

The major difference between a person with a lean mindset and one who has not, is that the lean head is always asking ‘Who is my customer?’, ‘What does my customer want?’ and ‘Do I know how well I am satisfying my customer?’ If we regard Ireland Inc. as a supplier of resources to potential overseas customers (i.e. the multinationals), there are many bodies corporate who ask those questions on our behalf, in order to attract and retain the right customer. The National Competitiveness Council, the IDA and our educational institutions, are just a few of the agencies who are active in ensuring that Ireland Inc. has the right mix of resources to attract the right customers.

These resources, or wealth enablers, come in a variety of forms and include political systems, tax incentives, regulatory and legal systems, availability of talent and geographic and climatic factors, to name the some of the most influential. They are not wealth generating in themselves, however they create the right environment to attract the right customer, and associated wealth, into the country.

If we take a look at the software sector as an example of ‘the right customer’, many companies have been attracted to set up in Ireland. As of 2018, Amazon, Cisco, EA Games, eBay, Facebook, Google, Groupon, Mastercard, Microsoft, SAP, SmartBox, TripAdvisor, and Yahoo have all established centres here. Outside of the United States, IBM Ireland’s Software Lab is one of its largest research & development labs focusing on cloud, analytics, mobile, social, and security. Ericsson’s operation is Ireland’s largest agile enterprise software development site, creating their next generation Network Management Systems, whilst Intel’s Quark family of processors was developed in Ireland. Even Aon established their Global Innovation Centre in Ireland.

The fastest rise in recent years has been the implementation of cloud and digital services bringing a new wave of software development and analytics. Millions of euros and dollars have been invested and thousands of jobs have and still are being created. (Please don’t anyone mention the disaster that was Apple’s proposed data centre in Athenry, Co. Galway).

But why Ireland? What have been the specific resources we supply to attract such customers and their investment? Well quite simply, Ireland was ranked 1st in the world for attracting and retaining talent in the 2017 IMD World Competitiveness Yearbook. Of course, having the highest education participation rate in Europe and the youngest population also helps the country become the fastest-growing tech population in Europe.

We all know of Ireland’s corporate tax rate of 12.5%. What is less well known is that Ireland also has a 25% Research & Development Tax Credit and a 6.25% preferential tax rate on income arising from intellectual property. Not alone that but there are also foreign direct investment benefits for Multinationals when engaging with organisations like IDA Ireland.

Okay so we have the talent, an educated young workforce, attractive tax rates and incentives – but just as importantly is our ease of doing business. Last year (2017) Forbes ranked Ireland as the 4th best country in the world to do business. This is where good lean management and building a strong track record helps businesses excel in the global market. Even the Irish government are planning to increase the number of people working in tech to 3,000 per year through the Tech Life Initiative.

So, although Brexit is bringing a certain amount of uncertainty, it is still a time of positivity as a lot has been achieved since the arrival of IBM in 1956, and if we manage it properly we can expect a lot more growth and development over the coming years.

Not bad for a little country with such a short independent history. With every upside of course comes a downside. Our model is easily copied and competitiveness ebbs and flows. As long as the corporate bodies in whom we trust to manage our competitiveness keep asking ‘Who is my customer?’, ‘What does my customer want?’ and ‘Do I know how well I am satisfying my customer?’ we will continue to thrive.

 

See IDA infographic here


Classroom vs. Online Learning – Which one is better?

As a child I well remember my father declining to tell us the meaning of words when we asked him. He would always say “Look it up in the dictionary”.  A true educator all his life, he knew that we would learn more and retain it better, if we did the research ourselves. In a broader sense, he understood the meaning of education (from the Latin educo ‘I lead out’) and delighted in finding various practical ways to satisfy our childish curiosity – all in the interest of enhancing our learning environment.

Learning is the process through which people acquire knowledge, skills and /or attitudes. New knowledge adds to what we know e.g. knowledge of statistics, knowledge of the six sigma DMAIC problem solving cycle. New skills change what someone can do e.g. computer skills, Minitab skills, or presentation skills. A new attitude means we change previously held beliefs, and typically change how we behave e.g. we gain confidence or we learn to accept a different approach to problem solving. Traditionally our journey to acquiring new knowledge, skills, and attitudes has taken place in the classroom or formal workshops.

In over 18 years spent facilitating formal workshops, I have become fascinated by the variety of learning styles that one can readily observe in the course of a day. Some like learning through debate and discussion, and will interject and ask questions and challenge (all good things) at frequent intervals; some like the interactive group exercises, and others are more comfortable reading through the text book and course notes. A blended learning workshop, customised to suit the client need and address the business problem in hand, is the most effective business learning environment that I know of. That, and the follow-on practical work that puts the theory to the test, and allows for learning on-the-job.

However, workshop-based learning is far from being the only option. Due to geographical distance, family commitments, budget constraints, or all combined, many people seek a more convenient alternative. One of the biggest changes happening in the education system is the steady transition to online tutorials. It was only a matter of time before the demand would grow for the convenience of online learning, especially if it is blended with written course work and occasional group sessions.

In Ireland, IT Sligo, who have over a third of their students now studying online, are at the forefront of this change regarding lean and six sigma learning. They offer a free six-week course in Lean Sigma Quality. Their MOOC (Massive Open Online Course) runs from October to December each year, so there’s still time to register now up until November the 1st.

The course has been running for the past six years and gives an introduction to Lean Sigma Quality, which has revolutionised the global manufacturing and services industries for over two decades. Nowadays, many employers now look for these skills in potential clients and it is a highly sought after practice of tools and techniques that ultimately creates customer satisfaction and a better workflow.

The course covers the following topics…

  • Introduction to Lean and ‘waste’ elimination
  • Lean Tools
  • Error Proofing (poka-yoke)
  • 5S and Visual Factory
  • Introduction to Six Sigma and variation reduction
  • Six Sigma DMAIC problem solving methodology
  • 7 Quality Tools
  • Descriptive Statistics
  • Lean & Six Sigma examples from Manufacturing, Service and Healthcare sectors

 

All online courses are different and if you have never done one before, it might sound a little daunting. Unlike sitting in a classroom where a facilitator can assess your interest from your body language and level of inquistiveness, this isn’t manageable with an online course so self-discipline is key. You need to put aside the time each week and keep encouraging yourself to move forward over the six-weeks. This course consists of a series of short recorded lectures with some extra learning resources available online. During the course, you will have access to discussion areas where you can ask questions and get support from your fellow classmates. This is something I would highly recommend. Doing an online course can often feel like a lonely experience and can lack the appreciation or encouragement from those we would usually get it from if going to a physical college building each week. But by getting involved in the discussion boards it gives you the opportunity to help others whilst also discovering suggestions and ideas you may not have thought of yourself. Also one successful motivational tool in such online courses are regular quizzes, which smartly are included in this course as your build up to submitting your final report.

On completion, if successful, you will automatically receive your certificate electronically which you can immediately email to your boss or a potential employer, before you pop open a bottle of bubbly and finally put your feet up for the evening.

 


Lean Restaurant Management

The Gallery Cafe in Gort takes us a long way from high volume manufacturing! Sarah Harty, owner of this Co. Galway restaurant, exemplifies lean practice in many ways e.g. sourcing from local suppliers, good teamwork, innovative use of space and giving back to the community. And the proof of the pudding – a customer review score of 4.5 on Trip Advisor.  Her story is an inspiration to anyone wishing to implement lean business.

Over fifteen years ago, a young woman, Sarah Harty from County Meath, fell in love with the small town of Gort in south Galway.  In 2005, Sarah opened The Gallery Cafe, a place she soon turned into a hub for her local community. Although she didn’t have any experience in running a business, especially one dealing with catering, it didn’t stop her from following her gut and seeing it through with passion. Her initial business idea was simple – paint pictures and serve customers.

One of the first important decisions Sarah took though was finding the right location, which would ultimately lead to a great lean management structure.

The original cafe in Gort was closed down after only a few years in business due to fire regulations, so she moved up further in the town. Although this new premise was great, she learned a lot about what she didn’t want in business. Sarah realised that a larger venue and bigger staff can bring unwanted stresses that her business model ultimately didn’t need.

As luck would have it, within a few years Sarah was able to buy the original location for a great price and refurbished the entire building. This is where it gets interesting. Her basement floor is now made up of a kitchen, bathroom, and an 18-foot well which attracts many a tourist. The ground floor is where her cafe, restaurant, and art galley is located which also acts as a monthly music venue for local artists. The first floor of the building hosts yoga classes and kids meditation with Life Drawing Workshops taking place there in the winter months, and on the top floor is where Sarah now lives.

Sarah’s food is simple and seasonal. She sources everything locally from her butcher next door to her Uncle who provides berries. Even the crockery they use is sourced locally with a team bonding exercise every year with the staff making their own plates and cups together with local ceramics maker Michael Kennedy.

Instead of creating something for her community, she did her research to see what the locals wanted and then met their needs. For Sarah, a successful business is built on great staff and a happy kitchen. Gort has a significant Brazilian community. So instead of filling a kitchen with stressed chefs throwing pots and pans, stamping their feet and ponding their fists, she filled her kitchen with a bunch of happy local Brazilian ladies who bring a great energy to the place.

Although, Sarah’s initial plan was to paint pictures and serve customers, she soon realised that this wasn’t going to be a reality and that it was more beneficial for all to use the gallery as a hub to showcase 22 artists from the area every year. This again, made the community the focal point of her business.

Sarah now employs 12 full-time staff and through hard work, proper planning and practical decisions – her business is now thriving. As she simply puts it “If you support your local community, they will support you.”

See the video here https://www.youtube.com/watch?v=tXxmQeqDxF0&t=20s


Supply Chain Risk Management – Fail to prepare, prepare to fail

At regular intervals, a local crisis occurs in some country around the world, and the ramifications on global trade are felt for months afterwards. We can all probably name political coups, ash clouds, earthquakes, and tsunamis that have had a devastating effect on many sectors for months after their occurrence. Here in Ireland the recent collapse of UK construction company, Carillion, has left subcontractors and regulatory bodies scrambling to recover the situation and keep the planned school building programme on track.

Benjamin Franklin famously said “Fail to prepare, prepare to fail”. This phrase couldn’t be more apt when it comes to dealing with anticipated and unanticipated risks in the supply chain. Supply chain risk can be defined as the probability of an event occurring that will influence (usually negatively) the ability of a business to serve its customers. Effective identification and management of risk will enable an organisation to guarantee continuous cash flow and profitability. In this blog I will concentrate on identifying and mitigating risk in the supply base.

There are all types of operational risks which need to be considered, ranging from suppliers who create goods and services used in a company’s own operations, to third party providers who distribute the company’s products or services to the customers. By using the following 5 techniques when planning and agreeing to third-party involvement in your business, you will reduce the risk of damaging situations and implement an effective risk management policy. The key factor is to do your research on the suppliers and carefully plan and prepare for all possible supply interruption situations.

 

  1. MAP THE HIGH-LEVEL SUPPLY STREAM

For each key product and service, identify and map nodes (the inventory holding points) and activities (the inventory movement between nodes). This visual map on paper is typically completed by the procurement/purchasing teams.

 

  1. PERFORM A HIGH-LEVEL RISK LISTING ON THE SUPPLY STREAM

Brainstorm along the stream, all the worst-case scenarios from global issues, plant shutdown, loss of goods, restricted transport links, strikes, to internal breaches. Typical high-level categories are

  • Quality risk (the primary concern of most organisations)
  • Political (including government stability, legal and regulatory requirements, tariffs etc.);
  • Socio-Economic (including religious observance, holiday periods, counterfeiting, bribery);
  • Supplier organisation stability (ownership, management ethos, financial standing, safety & quality record, insurance)
  • Geographic (including distance, transportation mode, number of ports of call, time)
  • Climatic (including heat, cold, climatic turbulence, earthquakes);
  • Monopoly/supplier dominance (single source supplier, unique technology, patent restrictions, supplier very large by comparison with organisation), and
  • Pricing and future currency fluctuation (commodity price increase/decrease).

This step is similar to the first step in a traditional failure modes and effects analysis (FMEA) exercise.

 

  1. CROSS REFERENCE THE SUPPLIERS TO THE RISK LISTING

Using your vendor database, identify all approved and non-approved suppliers. Create a matrix that identifies which risks apply to which suppliers. Prioritise the list in the areas of greatest risk.

The above sample table uses a scale of 1 to 3, where 3 is the highest-level risk. The results of this exercise, typically performed by the procurement/purchasing team, are used to devise a proposed risk mitigation strategy for each supplier. For each of the risks identified, the mitigation plan must include a cost of implementation and quantification of the reduction in the risk. Aim for a 50% reduction, or greater in the risk. The proposals are then presented to the management team for amendment and approval.

 

  1. IMPLEMENT THE MITIGATION PLAN

In order to flesh out the mitigation plans, owners need to be found who will be responsible for taking action. This typically involves several months’ worth of work that needs to be planned, resourced and tracked through to completion. Here is where most risk mitigation plans fall down. Often senior management is prepared to live with the risk (‘It won’t happen to us!’) than invest in a mitigation plan.

Some useful risk mitigation strategies include:

  1. Vendor-owned consignment hubs close to your organisation (infinitely preferable to organisation-owned safety stock)
  2. Safety stock
  3. Second and third sourced vendors
  4. Alternative transport (e.g. air freight vs. sea freight)
  5. Alternative routes
  6. Late delivery penalties
  7. Contract cancellation option
  8. Sue the supplier for breach of contract.

The above options range from the collaborative (most desirable) to the punitive (least desirable).

  1. STANDARDISE THE PROCUREMENT APPROACH

The process of sourcing new suppliers involves asking where in the world should your organisation purchase raw materials, components, services? Once the supplier is identified, due diligence on intellectual property, capability, quality, pricing, flexibility and confidentiality etc. are all part of a standard contract negotiation process. Your organisation now has a template and guidelines to incorporate risk analysis and fail safes into future procurement processes e.g.

  1. Pre-plan the supplier identification and negotiation process, using the risk analysis template developed in 2 and 3 above.
  2. Standardise and simplify the contract template.
  3. Address the limitation of liability, indemnification, and supplier insurance that covers the potential risks identified. Ensure your organisation is covered in the event of being sued by the supplier or any 3rd party in the event of failure to supply products or services. Incorporate the requirement to keep certificates of insurance up to date.
  4. Include opt-out terms in the event on non-fulfilment of terms.
  5. Use credit rating agencies to assess the financial stability of the company. Regarding an Irish business, you can obtain financial reports from www.solocheck.ie.

Points c and d above are a different way of looking at the traditional catch-all force majeure contract clause. It’s can be a fine line. You don’t want to be overly-restrictive in the procurement of third-parties which ultimately leads to reducing your options of encouraging new suppliers and innovators to step-forward or tender. There will always be risks, but it’s about a willingness to take intelligent risks in order to generate profits for the bottom line.

In summary every organisation should strive to establish a collaborative relationship that will benefit both your organisation and the supplier. There is no zero-sum game (I win, you lose) in successful supplier-customer relationships. That being said, disasters can and will happen, out of the blue. I hope the above 5 step approach will help you to prevent or avoid them, or at the very least to significantly reduce their effects on your ability to supply your customers.

So, as you ponder what intelligent steps you need to take to mitigate risk, remember one more quote from Mr. Franklin “Never leave that till tomorrow which you can do today.

Bernie Rushe is a former lecturer on the undergraduate and post graduate programmes in Supply Chain Management at the University of Limerick.

 


“The future is not what it used to be!”

The future is not what it used to be!

So said Gerard O’Neill at the recent IRDG annual Design Thinking conference at Kilmainham Hospital Dublin on 2nd June 2016. Gerard was one of a panel of many world class, informative and entertaining, speakers on the day. We learnt of the application of  design thinking in many disciplines – from information systems design to movie making. Jeanne Liedtka from the Darden Business School at the University of Virginia, advised us that in a world of increasingly complex stakeholder relationships, a deep understanding of one customer (i.e. n=1) is more important than relatively superficial relationships with many customers. Highly compatible with lean product/process design and agile information systems design, I attended as part of my own continuing professional development. The day was well worth the investment. For more information on future innovation events, and practical workshops, the IRDG website is worth a visit.