Category Archives: Inventory Management

COMMUNICATIONS: YOUR NUMBER ONE FORECASTING TOOL

communicationsWhat would you say is one of the most important skills that any forecaster can have and yet still be one of the most under-rated skills in almost any position?  That’s right, communications skills.  That is because Forecasting is universally considered a “technical position” which requires technical skills, not a soft skill like communications expertise.  The problem with this assumption is that it is absolutely wrong.  Forecasters spend most of their time interacting with other people to gather, confirm, or disseminate information.  If you stop and think about it, there are very few groups within an organization that the forecasters do not interact with.  And the more involved a company becomes in external Supply Chains the more complicated this information web becomes.  Forecast accuracy is an issue in most companies and how much worse will the apparent inaccuracies be if information is being mis-communicated or misunderstood at any point in the process?  Just to be clear on this point, the technical skills are important but the results are dependent on the information gathered (GIGO) and the knowledge distributed out from the forecasting process.  In the end, it’s not just about the tools, it’s about the people.  However, it is important to understand that an effective communicator does not need to be a great speaker.  For one thing communications is a two way process and when you are speaking you just have to be able to speak in a way that people can understand – Clearly, simply and effectively.

One of the most important points about communicating (listening or speaking) is to clearly understand the WHY of the communications.  If all parties clearly understand the why of the interaction they are more likely to end up at a useful understanding.  For example, if the forecaster wants to meet with the sales group about historical data in order to understand the reasons for demand variability and the sales group think the reason for the meeting is to criticize them about that same variability, are they likely to come to a successful conclusion?  Not likely.  But why would the two groups understanding be at such odds with each other?  After all, the request for the meeting clearly stated that the reason for the meeting was “to discuss variability of historical demand”.  Surely everyone would understand that to mean the forecast group is trying to achieve a better understanding in order to improve forecast accuracy.  In this example, the communications was clear and simple, just not effective or understood.  It is important for the communicator to understand who they are interacting with, what their “world view” or “language” is, and how they are likely to understand any communications.  This is where tools such as Myers-Briggs Type Indicator can be extremely useful.  These types of profiles can give you a hint on how people will interact with you.  The emphasis here is on HINT as it certainly will not be 100 percent accurate, but as forecast professionals we are comfortable with non perfect accuracy.  As an example, and remembering that this is a really “broad brush” scenario, extraverts tend to process verbally which means that in a meeting they will tend to keep talking until they reach a decision at which point they start repeating themselves.  Introverts tend to process internally which means they tend not to say much until they come to a decision at which point they will say it, once, quietly.  If you are facilitating that meeting it is part of your task to control the extraverts and to catch the introverts so everyone recognizes the actual important decision points.

In addition to the verbal part of communications you need to be aware of the non verbal component of communications which according to Prof Albert Mehrabian (University of California) can contain up to 55% of the message.  This is particularly important when the verbal and non verbal components of the message conflict (you have my complete attention, please ignore the fact that I am looking everywhere except at you).  What about eye contact, hand movement, changes in volume or tone?  What about personal space?  Different cultures have very different comfort zones when it comes to personal space which, if ignored can distract people strongly from the discussion at hand.  Generational differences can also have a very direct effect on communications.  Boomers and Millennials have very different communications methodologies that can lead to mis-understandings if not accounted for.  Boomers tend to be much happier with direct person to person contact while Millennials tend to be more comfortable with indirect communications such as social networking and message texting.  When you combine this preference for indirect communications with the various issues around body language this can easily lead to communications issues.  If, as mentioned earlier, up to 55% of the message can be by body language then texting or email is missing many of the nuances available in face to face meetings.  Perhaps this is one of the drivers of the increasing usage of emoticons and acronyms (OMG).   Even the world view of Boomers and Millennials are quite different.  Boomers tend to be very concerned about Work / Life Balance while Millennials think about Work / Life Integration.  A subtle difference but very important to how and when each group works.

One other point about non verbal communications; Many large companies are stressing the use of electronic tools such as teleconferencing rather than traveling to meetings.  While undeniably cheaper it also cuts out all the body language aspect of the communications as well as making it easier to multi task (no one can see you checking your email) which takes your attention away from the communications process thereby making it less effective.  Even video conferences are not as effective as having everyone actually in the same room and that is without even considering technical issues such as poor sound quality.  Sometimes it IS cost effective to get on the plane and go see someone.

Again, effective communications requires two way communications which means participants need to listens as well as talk.  Listening is NOT something that most people do well as they would rather listen to themselves then anyone else.  This makes tools like Active Listening into critical communications tools.  As the famous quote by Robert McCloskey goes: “I know that you believe you understand what you think I said, but I’m not sure you realize that what you heard is not what I meant.”  Active listening is more than just making sure you hear what is being said.  It is also about focusing on the other person, not interrupting them or thinking ahead to what your reply will be.  It is about repeating back what you heard in your own words to confirm a mutual understanding (reflective listening).

So how can you improve your communications skills?  There are groups such as Dale Carnegie or Toast Masters that you can join to learn some of these skills.  You can take some Sales and Marketing courses.  This will not only help your communication skills, it will help you to understand their world better.  Take Trainer the Trainer type courses (APICS has a wonderful one).  But most importantly, learn to walk a mile in the other person’s shoes.  It’s only when you understand someone else’s needs, wants and desires that you can truly communicate with them with minimal misunderstandings.

If you would like to discuss more about Communications and how to improve it in your organization, I would be more than happy to meet with you and to explore this in more detail.  Please feel free to contact me at edwhite@jadetrilliumconsulting.com.

If you would like to read more about this and other topics check out my other posting on my website – http://jadetrilliumconsulting.com

ARE YOU AN INVENTORY HOARDER?

clutterI was skimming through the shows on TV the other night when I saw a show about hoarders – people that, for whatever reason, cannot get rid of anything.  Inevitably this leads to a home full to the rafters with “stuff”.  This left me thinking about some of the warehouses I have dealt with over the years with the same problem.  Again, for whatever reason, management just cannot authorize the disposal of dead, obsolete or slow moving stock.  Inevitably this leads to very full warehouses and inefficiencies in material handling.  I knew one company that had material still in their warehouse that had been there for over 30 years and another company that, while moving material from a wall discovered a door into a room everyone had forgotten about.  The room had some inventory in it and parts for machines that had been decommissioned decades earlier.  These may be extreme examples but they do exist.

In talks with various management groups the usual justification is that they had already written off the value therefore it was not costing them anything to keep the material.  While it is quite true that there would be no cost on the books, there ARE a number of indirect costs that are incurred by keeping unnecessary stock around.  First and foremost, it is CLUTTER and it has been well established (particularly by lean proponents) that clutter leads to lost material, excess movement, longer lead times, and decreasing customer service levels.  All these are costs to the organization.  Removing this material from the warehouse increases your available space and therefore your available capacity.  Your people need to work around the material to get at the material they truly need which slows them down.  This does not even consider the extra time taken during any physical inventories to recount what is essentially dead stock.  Having clutter in a warehouse is also detrimental to employee attitude in that clutter naturally encourages messiness (lack of space if no other reason) and people that work in a messy environment tend to develop messy habits that lead to a general lack of follow through on the discipline needed to go that extra mile for things like customer service and proper inventory accuracy.  ANYTHING that negatively impacts on inventory accuracy will, in the long run, cost the company a significant amount of money just trying to fix it and work around the issues created by incorrect inventory quantities.  Invariably poor inventory accuracy leads to larger, just in case, inventory levels which absorbs warehouse capacity leading to an even messier environment and eventually to a requirement for a larger warehouse and more people.  Sadly, this requirement is perfectly justifiable based on the inventory that must be kept in order to ensure no stock outs for either production or customers.  Are we getting the picture here?

In our personal lives most of us are very comfortable that we are not hoarders… but how easy is it to park your car in your garage?  Do you have boxes piled up against the walls in your basement?  Do all your clothes fit in one closet and is there anything there that you have not worn for more than two years?  Are you sure you are not a hoarder (or at least a hoarder in training)?  But, you can justify everything extra that you have laying around the house as “just in case”.  Are you applying the same mind set at work?  In the end always remember that the only reason for having inventory is if it is cheaper to have than to not have.  Anything else should be gotten rid of.  While just a general good clean out might work, you might want to look at, implement, apply the principles of 5S to the issue.  5S is a standard tool in Lean Thinking that can easily be applied in not only a production environment but also in an office, warehouse or even at home.  Even if you are sure you have no clutter laying around you might be surprised what a 5S audit would turn up.  Think about it, it may be one of the cheapest cost savings and efficiency improvement tools you ever implement.

Having issues with your inventory?

Always remember that inventory is a symptom not a cause.  You have inventory because of issues with your processes and removing excess or dead inventory IS a process, one that many companies are not particularly proficient at.  Again, in the end, the only reason to have inventory is when it is cheaper to have it than to not have it.  Do you have excess inventory and do you understand the harm this is doing to your bottom line?  Do you need help understanding and getting control of your inventory?  Contact Ed White at Jade Trillium Consulting to discuss whether we can help your organization and how best to proceed.

Hope you enjoyed this posting.  Talk to your friends and co-workers about their experience and thoughts on this topic, especially what it means for your organization.  And, as always, I would love to hear back on your (and their) thoughts.  Just fill in the comment box below along with your contact information to let me know what you think.