The Mark of Canes

I recently visited a company that uses Microsoft Excel spreadsheets to manage its inventory. This is not unusual – many small businesses use Excel to manage areas of business for which they do not have a purpose-built system. But this visit reminded me how dangerous it can be to use Excel for certain types of business activity.

(To be clear: Excel is an outstanding business tool and I use it all the time. But like any tool, it works best when used for appropriate purposes.)

At this company, their Excel spreadsheets are manually updated when shipments arrive, when they get around to it. And they’re updated again when products are shipped out, some time after the fact. They use these spreadsheets for information about inventory: what’s in stock, when to replenish and how much to order. They also use them for costing inventory, including landed costs like duty, brokerage and freight. So these are pretty important business tools, right? Now read this question and answer exchange with the business owner:

Q: How closely do the on hand quantities in your inventory spreadsheets agree with physical inventory?

A: Well, whenever we do a count there are many differences. In fact most products are incorrect. And we often cannot find products in the warehouse that the spreadsheets say are in stock.

Q: In that case, how can you place reliance on them?

A: We use them more as an indicator than for absolute availability – we usually do a physical check when we need to know for sure…

Q: How much time is spent updating the spreadsheet (daily)?

A: Not too much – perhaps an hour or so at the end of the day, on busy days a little more.

By my calculation, this company spends 25 – 30 hours per month updating an “inventory management system” that is of little or no use and cannot be relied upon. It’s clearly a waste of time and effort, but is this also a limiting factor in terms of the company’s growth potential? I believe that it is, and that many small companies limit their growth potential by using inappropriate business tools. It’s the old “penny wise, pound foolish” trap.

If your inventory is managed as part of the overall business system (“ERP”) software, and implemented properly, inventory is updated naturally as the underlying business transactions are processed. You’re invoicing your customers and paying your suppliers for products anyway, so why not have the inventory updated automatically when you do so?

I had two phone meetings scheduled for today, and in each case the other party, a potential supplier, was to call me at the pre-arranged time. They had an engaged sales prospect who had requested a phone meeting, which in these tough economic times is gold – or so one would think.

My 10am meeting called me around 10:07, with no apology for being late. No big deal, you may think, after all it was only seven minutes. But remember, you only get one opportunity to make a positive first impression. My feeling when the meetings started was: if this is how I get treated when they’re trying to woo me, imagine what it’ll be like if we’re actually “married”.

My 2:30pm meeting has not as yet called, or emailed an apology, which I guess is why I have the time to write this now – at 2:50pm. As you can imagine, I have zero intention of doing any business with either of these companies. I have the perhaps old-fashioned view that if you ask someone to set aside time to meet with you, whether in person or by phone, you either show up on time, or let them know ahead of time if you’re running late.

Remember Sales 101? Treat your prospects and customers with respect. That means being polite, punctual and honest. When you go into a meeting, arrive on time, put away your Smartphone for the duration, and give them your 100% undivided attention.  And guess what? It’s even more effective than it used to be, because so many of your competitors have abandoned good manners.

My customers are my business partners, and I go out of my way to nurture those relationships. I’d like to feel the same way about my suppliers – and in general, I do, because I eliminate those that treat me poorly, no matter how good their product appears to be.

Potential Blue Link suppliers: you have been warned!

Microsoft will release Office 2010 this year. And yet so many Office users have not yet switched to Office 2007 from older versions. Why are people using office productivity software that is several years older than their computers, cars and cell-phones? I mean, would you be caught with a cell-phone circa 2003? Yet if you’re using versions of Word, Excel, etc. prior to Office 2007, then 2003 is the best case scenario.

While cost is surely behind some of the reluctance, I believe the main reason many have not switched to 2007 is the radically re-designed user interface. The “ribbon” used in most Office 2007 applications is so different from the previous menu bar and icon-based toolbar interface, that most of us on first seeing the Word 2007 screen went something like, “OK, where’s the hidden camera and how come I don’t get the joke?”

Now after using the new interface for a week or two and enduring a brief but painful and frustrating learning curve, almost anything you want to do actually becomes easier to find than in the older versions. But who wants to go through that much pain? Yet like it or not, as new computers arrive pre-loaded with Office 2007 (and soon 2010) most users will either have to adapt or switch to some other productivity suite – and learn another unfamiliar interface.

The good news is that help is available, of a nature that makes the learning process quite painless; but for some reason it’s apparently a well-kept secret. See the links at the end of this post, which lead to resources on the Microsoft website that aid in the transition from Office 2000/XP/2003 to Office 2007 in a simple but powerful way: choose a command from your familiar Office 2003 interface, and the tool shows you how to do the same thing in 2007.

For example, to emulate inserting a comment in Word 2003 I selected Insert, then Comment on the tool:

And the tool shows me how to insert a comment using the Word 2007 ribbon:

(Click on the above images to see a larger version.)

So if you’re moving to Office 2007 (or thinking of it), I suggest you bookmark these links:

Word 2003 to Word 2007

Excel 2003 to Excel 2007

In a few weeks I’ll post some comprehensive information about Office 2010.

Book distributor Foundation Distributing Inc. recently implemented a pack verification system.  It makes use of handheld devices to scan items that have already been picked in a separate process, and verify them against the order being packed.

Foundation’s president, Pat Chown, shared some feedback from his customers with me. Firstly, 100% of customer feedback has been positive since the system was put in place. Packing errors, both actual and perceived, have virtually ceased altogether. The italicized words in the previous sentence provide food for thought, because the one benefit is obvious, but the other less so.

It’s a given that a properly implemented system, which scans items and compares them with the order, should virtually eliminate any errors in the packing process. Yet there’s a less obvious, but no less valuable, benefit. And that’s the elimination of costly extra shipments due to customer error on the receiving end.

Pat shared the story of a customer reporting a short shipment after pack verification had been implemented. The folks at Foundation reviewed the order and determined that they had, in fact, packed what was ordered, and could prove it via the system. The customer consequently determined that the items had been received after all, but had been mishandled at their end.

In the past, Foundation would have simply shipped the apparently short items at their own expense. It makes me wonder how many other distributors out there dispatch unnecessary “make-up” shipments under similar circumstances.

Foundation’s experienced a healthy ROI on this technology implementation. And that’s consistent with the company’s technology investment in the 11 years I’ve been dealing with them. That’s because Pat has a vision of how technology can be implemented as a strategic asset, and he’s always very clear about the objectives of any technology investment.  A small number of measurable objectives is preferable to a large laundry list of non-quantifiable “wishlist” items.

Back in the day…

It was a rainy day, several years B.E. (before e-mail), when the CFO proudly unveiled his new month end package of reports. Pointing to a stack of paper about 3 inches high, he enthused about the 20% reduction in the number of reports: “Think about how many trees we’ve saved.”

Once I stopped laughing, I remembered that I was part of a team performing time and motion studies for this organization. Over the next month we followed the distribution and usage of the monthly report package. Fourteen percent of the pages were reviewed briefly by clerical employees. And 6% of the pages were actually used by management. The remaining 80% of the paper stack was filed without ever being looked at. And I know this for a fact – because one month we substituted blank pages for around half the reports, and yes, those blank pages were dutifully filed as well.

We distilled the reporting package down into a handful of detailed reports, and eliminated the remainder in favour of a few exception reports. Other than financial reports for committee meetings, nothing was printed unless it varied from pre-determined norms. So instead of dumping a detailed list of all training course transactions, for example, a report which used to run to over 50 pages each month was summarized onto a single page. This was supplemented by one page for each course that qualified as an exception – typically no more than 3 or 4 per month. The 3 inches of paper had been trimmed to less than a quarter inch – and every single page printed was in fact used. Oh, and the CFO was replaced for medical reasons (paper cuts).

Fast forward to the present…

It is now so easy to create reports on any and every piece of data in an organization. And we don’t have to print the reports any more – we can save them electronically as PDF files, and we can email them. We can have automated reports emailed to us at regular intervals. This seems like a great idea, so we start with one or two time-sensitive reports weekly. When that seems to work well, we expand the process and soon we’re receiving a couple of reports by email every morning. By the time we reach 15 reports flying into the inbox every day, we’re almost back at square one: we get the reports, but there’s too much information and not enough time, so we end up ignoring most (or even all) of them – they essentially become internal spam.

Here’s what you can do: define the (very small number) of key metrics that you absolutely need in order to perform the most important parts of your job.  Now determine which of these are only relevant when they fall outside of normal limits, and turn those into exception reports. For the remainder which require regular review, decide on how frequently you really need them, and obtain those reports at that frequency. Now cancel all other reports, and review this strategy regularly (as these requirements will evolve over time). 

Bonus hint: if a report gives you information about which you cannot take any action, it’s probably not a useful report.

A young man takes a look at existing technology, and how we humans interact with it. He thinks we can do better, so he explores the possibilities. Take 13 minutes and watch this amazing video. If you don’t watch it, the rest of this blog will make no sense – as usual. (If you’re in a hurry, skip ahead to 4 minutes 30 seconds in.)

The mind boggles at the real world potential for this approach to the human machine interface. In addition to the “cool” applications you see in his presentation, there’s exceptional potential for the more mundane aspects of business technology – and perhaps for some more trivial pursuits as well.

On The Serious Side…

Consider a warehouse where, as items are picked and packed for shipment, those items are checked against the order and the Inventory system is updated in real-time – without the pickers and packers doing anything other than picking and packing. No computer or handheld devices. Imagine further that as the picker picks an item off the shelf, an image of that item is projected onto the box for comparison. If you’re packing items that require special packaging or handling, video and audio instructions guide you through the process wherever in the warehouse you’re doing it – again with no handheld or static computing device.

On The Lighter Side…

You’re on a first date – nice restaurant, good conversation so far. And of course your thoughts and gestures are projected onto your date’s shirt, which is only amusing until you realize that the wall behind you is, in fact, a mirror…so you make your escape, only to get pulled over by a cop while driving home. He got suspicious when he saw the row of shot glasses projected onto your windshield.

In my opinion …

Yes, we should remember the unfulfilled hype of previous emerging interfaces like the Tablet PC. But this is different. I suspect in a few years’ time we’ll see this interface approach replacing the “tied to the desk” metaphor in many environments. And we’ll all be better off for it. Of course, for application developers, this represents either a big threat or (as in my case) an excellent opportunity.

More than 40 years ago, Marshall McLuhan coined the phrase “The Medium is The Message”. The form of a medium used to disseminate a message embeds itself in the context of that message. This means that the medium influences how the message is perceived. Fast forward four decades, and that’s still valid – witness YouTube and the Smartphone.

What about business processes and technology? The conventional wisdom when I started working in the IT / ERP industry was: define the optimum business process, and then seek out the technology to automate the process most cost-effectively. In the 21^st century, is this still a valid proposition?

Consider this:  20 years ago a small distributor doing 100 sales orders a day could (and did) manage with pen & paper – all the shipping, billing, accounting and collections. Currently it’s somewhere between unlikely and impossible to do this without some form of accounting / ERP system. If we consider the last 20 years, did the software evolve to cater to changing business processes, or did the software evolution fundamentally change the optimum business processes? In this example it’s quite clearly the latter. You may still be able to ship 100 orders per day with a manual system, but you’ll definitely be incurring significantly higher costs on multiple levels (more employees, slower collections, higher inventory levels and reduced margins as examples) and therefore uncompetitive.

So if the technology is the business process (at least to a degree), then how can one go about improving business processes without taking into account both current, and future, technological trends?

Missed Opportunities

In my experience, businesses frequently select new or upgraded ERP / Accounting systems based solely on the fit their existing business processes. The risk here is that you miss an opportunity to improve your business, usually by taking advantage of new technologies to tweak and evolve the shape of the business. Smaller businesses in particular face enormous difficulties in getting a handle on what’s technically possible, and this is often exacerbated by software salespeople anxious to close business quickly / at all costs.

Get Out Of the Tunnel

When considering your ERP / accounting system, and improvements to your existing business processes, avoid tunnel vision. You should not only be looking at solving problems and bottlenecks in the present system; you should be proactively trying to identify opportunities to take the business forward over the next few years. An ideal vendor (or consultant) will look beyond just the “pain” that you identify, and help uncover productivity improvements that you may not have thought of. The resulting solution may, at first blush, appear to cost more – until you factor in the benefits.

The evolution of business processes and best practices is clearly tied to technology. Therefore this should be an ongoing process for most businesses. To quote McLuhan again: “If it works, it’s obsolete.”