LOGISTICS AND KNOWLEDGE

Knowledge is perhaps the least recognized and least understood resource in the management and success of any business. It cannot be seen, touched, or easily quantified, but is very much a resource. Knowledge is possibly the resource that is most often wasted in an organization. In the functions most commonly associated with business strategy, such as research and development, engineering, marketing, and finance, knowledge is at the very core of their existence — knowing what customers will buy, knowing how to build those products, knowing how to make customers aware of the offering. The operational areas, however, are often thought to be subordinates to the plans developed in the strategic areas.

The hierarchy of strategies in most businesses tends to look like Figure 9.1. While the strategies cascade from corporate strategy to product and marketing strategy to manufacturing strategy to, finally, logistics and procurement strategies, it does not mean that the functions lower in this hierarchy, the so-called “support areas,” should be devoid of creativity and the search for new, better ways to conduct business. To the contrary, the innovative logistics organization can, in fact, influence (and even drive) corporate strategy. Think back to those pillars of excellence highlighted earlier in the book. Companies like Wal-Mart, Toyota, 3M, and Dell, among others, rely on distinct logistics capabilities to separate their businesses from the crowd.

Interestingly, when the operational areas of supply chain management (logistics, manufacturing, and procurement) are tapped for competitive advantage,

Figure 9.1. The Common Hierarchy of Strategies.

once achieved the advantage can prove not only significant but sustainable. Companies that achieve competitive advantage through these operations-oriented bastions of excellence do so by thinking, constantly challenging the status quo, by tapping internal bases of knowledge, by seeking new sources of potential advantage. This environment is in contrast to companies where strategies are set forth and handed down to operations as marching orders for execution. Creativity and challenging the status quo may not be rewarded, but instead actually discouraged and quelled in these settings. Going to work in places like this can resurrect images of those 1960s zombie movies where brain-dead figures show up on the scene and mindlessly pursue their own survival needs. Not only can workplaces that fail to nurture knowledge be miserable places to work, but they also consistently perform below par.

CULTIVATING KNOWLEDGE

Companies can call on both formal and informal means to avoid the waste of knowledge. Formal means include internal, company-sponsored training and educational opportunities at universities and professional associations through degree programs, certifications, seminars, and colloquia. Internal training is critical to building applied knowledge of company culture, values, and processes. However, the outside training is important as well, providing an “unbounded” normative influence on the way things should be, rather than the way things are. Unfortunately, outside training is often viewed as a luxury, reserved for those precious times when a company finds itself in a cash-rich position, with ample budgets for education. At all other times, training remains on hold, yet these are the times in which team member development is probably most critical!

Education in any form continues to offer the quickest, most solid return of any investment available. That much said, it must be recognized that not all knowledge gained through training exercises will translate into improved performance in the business. This is sometimes attributed to a lack of relevance or opportunity for application. In other instances, there is a simple “evaporation” of the knowledge when the material fails to be processed or “sink in.” The student or instructor may be equally to blame for this outcome. For this reason, both students and trainers must be held accountable for the learning. These considerations help to minimize the wastes of knowledge sometimes found in formal educational venues.

Knowledge can also be developed by less formal means on the job by simply asking questions or seeking assignments in different areas of the business to broaden one’s horizons. Nurturing cross-functional thinking among team members provides an appreciation for different problems, perspectives, and approaches. While it is hard to instill, individuals who demonstrate strong interest in what they do and an innate curiosity can go a long way toward solving the problems of the day and taking the business to uncharted, positive territory. These are truly rare individuals though. If you have made the effort to read this far into the book, you just might be among this rare set of motivated, deep thinkers.

MANAGING THE FLOW OF KNOWLEDGE

Once knowledge is gained, it often becomes captive to the individual. All organizations must have mechanisms in place to ensure that information and knowledge are shared to remedy the “islands of knowledge” phenomenon that plagues many companies. Sharing ideas and perspectives raises the general level of knowledge and understanding throughout the organization, across functions, raising the level of play for the company and building a sense of belonging to a team striving for a common objective. The sharing of knowledge is particularly important in those do-or-die situations, such as entering a new market, managing a critical start-up project, or introducing a new product line. Sadly, in the absence of established mechanisms for capturing knowledge gained by veterans of past endeavors, current managers are likely to repeat the mistakes made by their predecessors. Unfortunately, these mistakes can prove costly not only to the company but to the individual. Careers can be cut tragically short when mistakes are made and the manager “should have known better.”

Similarly, best practices may be tucked away in one functional area or at a particular facility. Those practices should be communicated for application to other areas of the business, raising the company’s overall level of play. Instilling a culture of continuous improvement throughout the company encourages best practices to be shared openly. The same may be true of sharing methods and tools that have proved valuable in one area or another. Too often, waste is created through duplicated effort in different parts of the company when a little collaboration might not only eliminate the redundancy but also lead to a more robust method, tool, or solution to a common problem. Companies that regard knowledge as a critical competitive resource by managing their knowledge effectively tend to enjoy greater ability to innovate and respond.

Just as individuals can serve as “islands of knowledge” in a company, so too can a company in the supply chain withhold critical knowledge that would benefit the whole. This is the case when companies practice an “information-is-power” approach to dealing with trading partners in the supply chain. The truth is that failing to share valuable information, knowledge, and skills only leads to suboptimal performance of the larger supply chain system, usually to the detriment of the very party holding the other supply chain members captive. Academics are now talking about concepts like the “knowledge chain”* and “knowledge supply chain,” recognizing that imbalances (or “asymmetries”) in information and knowledge serve the purpose of providing only short-term gains for the benefiting company, gains that often reverse into losses when disadvantaged trading partners elect to walk away from the relationship or simply become defunct as a function of the abuse.

So while knowledge is a less tangible resource, it is no less important than any of the more visible ones. An important take-away from this discussion is that complacency is the enemy of knowledge. As Confucius once said, “He who believes he knows everything, knows nothing.” There is no bliss in ignorance. In the military, when strategists are aware of a problem or situation even though its gravity and causes are not fully understood, it is called a “known-unknown.” This situation is far more preferred to the unknown-unknown, where one does not know what one does not know. To some extent, realizing what one does not know can be an epiphany that accompanies education and increased knowledge. Just as the unknown-unknown is feared in the military, so too should it be in business.

Equally important in our discussion of the wastes in knowledge is to recognize that nowhere is there mention of information technology (IT) as prerequisite for development and utilization of knowledge. Clearly, IT can support the exchange of information, but the application of technology provides no guarantee of gains in knowledge.

THE RIVER OF WASTES

Many of the wastes described in this section probably seem all too familiar to you. Anyone would be very fortunate (or untruthful) to say that they experience none or even few of these wastes. To sum up, these various inefficiencies and nonvalue-added consumptions of resources represent a river of wastes. Unfortunately, many of us are drowning in that river.

To take the “river of waste” analogy further, imagine two landmasses divided by a body of water. You are on land, blessed with certain resources and skills. Across the water on the distant shore reside your current and prospective customers. The key questions become “What do we have to offer them?” and “How do we reach them?” Recall that logistics provides that physical connection to your trading partners. Your first inclination might be to build a boat to traverse the water.

Let’s think of the boat as a ferry. No question, in the absence of a better way to cross the water, the ferry can provide a valuable, if not necessary, function. Yet, it is not the easiest to use, the most enjoyable, or the most certain of all services. Despite the best efforts of the company, the service is only available when the ferry is at dock and in service, with everything and everyone fully functional. Until these factors are completely aligned, there is no action and you wait. If the line is particularly long, you might have to wait through several shuttles before you have the opportunity to cross. Yet even when aboard the ferry, the speed of service is not particularly swift, perhaps working against a strong current. The service is also prone to any one of several possible disruptions: inclement weather, low water, high water, waterborne obstacles, ferry operator strike, etc. You get the idea. And in the event you encounter rough waters, you could become seasick! Oh, and don’t forget the various forms of pollution created with each crossing. If the ferry is part of a pleasure trip, the novelty of its quirks and inefficiencies may not bother you but rather may, in fact, be charming. But if you have business to tend to or find yourself in an emergency situation, it can be an unsatisfying or even loathsome experience.

Logistics in most companies looks and acts something like the ferry. As illustrated in Figure 9.2, the ferry is immersed in the water, the very “river of waste” that the service is trying to overcome. Service is hit or miss in its inconsistency. It is prone to disruption. It is dependent on a few key individuals. And, unfortunately, the experience leaves customers wishing for a better way.

Now let’s assume that you are enlightened enough to replace the ferry service with a bridge, a beautiful suspension bridge that spans the distance between the two landmasses, say you and your customers, like that in Figure 9.3. The bridge rises high above the water, free from the river of waste, providing an efficient connection between the landmasses. It offers a robust solution

Figure 9.2. The Many Ills of a Ferry Service.

to the basic need of crossing the water. Only the most extreme conditions will ever cause it to close, so flow is constant and smooth. Speed, safety, and variability are controlled by the individual experiencing the service and are dependent on the need, not the whims of a disenfranchised operator. This is exactly what Lean Six Sigma Logistics promises the enlightened manager — an opportunity to provide the greatest value to customers free from the disruptions and wastes found in the conventional means of connecting a company to its trading partners in the supply chain.

Figure 9.3. The Logistics Bridge.

Unlike the bridge, Lean Six Sigma Logistics does not call for the huge investment, bands of specialized experts, or years to take the concept from the drawing board to completion. What is required to build the Logistics Bridge are three critical understandings:

1. Logistics Flow

2. Logistics Capability

3. Logistics Discipline

These principles of the Logistics Bridge Model are described in the next section along with their supporting tenets.

This book has free materials available for download from the
Web Added Value™ Resource Center at www.jrosspub.com.

* See, for instance, Holsapple, Clyde W. and Jones, Kiku, Exploring primary activities of the knowledge chain, Knowledge and Process Management, 11(3), 155–174, 2004.