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Category: Business & Communities

Scottish farmers get their local supply network humming

Be the change you want in the world  . . . but be worldly too

Self-improvement experts will tell you that “you must be the change you see in the world”.  They are right.  But there is another view too.

Developed economies are so complicated that you cannot get anything done unless something else happens, often one or two steps away.

Some people shrug and go into a tail spin of mild depression.  Others set about organising their “supply networks” or “collaborative supply chains”.  They not only take responsibility for what they do themselves; they hold up a market opportunity for all to see and help a network of actors to understand all the points where they need to cooperate.

  • They hold up a real and significant market opportunity.
  • They shine a spotlight on the critical junction points in the supply network.

Farmers in the tippy-top of Scotland go upmarket and boost their local economy by quarter of a million

In this post, I’m going to summarize the triumph of Scottish beef and sheep farmers from the very tip of Scotland who, in one year of enhanced cooperation, gained an extra 10p or kilo or £37 per cow and £3 per lamb more than their peers serving the standard market and brought in an extra quarter of million additional pounds to the remote rural economy.

This is the story of Northern Highland Products, beef and lamb farmers in Caithness in Scotland and an Irish butcher who came to join them in bid to deliver premium meat to the British supermarket chain Sainsbury’s.

  • Northern Highland Products only wholesales quality products within 100 miles of the Castle of Mey.  Beef and lamb are their core lines and they also carry fish, honey, jam, cheese and pork.
  • The Northern Highlands has a strong history of livestock production on small farms.
  • The initial funding for setting up the Northern Highlands Products project in 2005 was a £71 000 grant from the Scottish Executive under its Marketing Development Scheme, some contributions by an initial group of farmers, an on-going levy on producers, and contributions from Caithness Enterprises and the Nuclear Decommissioning Agency.
  • Information from farmers is combined to forecast and manage supply and demand.
  • Delivery and price information is also pooled so farmers can benchmark their output against the average.
  • Mey Selections only buys livestock reared on Caithness grass and does not buy bulls.  Prices vary by quality of the carcass and track the general market but above the average.
  • Farmers have access to information (including organized training) about the whole supply chain so they understand how and why carcass classification ripples through to costs in processing.
  • Mey Selections sponsors a Producers’ Club to help producers share information among themselves.
  • Animals are slaughtered at one of three abattoirs to minimize travel and stress to live animals.
  • Mey Selections offer training to Sainsbury’s staff.

 

General principles about collaborative supply chains and supply networks

I could draw out some general principles about collaborative supply chains and supply networks but in business, general principles often feel like the “tail wagging the dog.”

Business is not a spectator sport and we have to deal with the real and immediate in the same way as shepherd still has to traipse the hills to find a lost lamb in inclement weather.   Do it now, or not at all.

Supply chains work when we have real opportunities that we want to exploit and sufficient knowledge of our industry to see what has to happen. Then we can exercise the leadership to shine a light on

  • The opportunity
  • The critical linkages.

Until we have that real-world knowledge and business-in-action, then we are simply apprentices in our trade and we should do what needs doing now – which is get some hands-on experience.

This post summarizes the information on the supply chain of Caithness farmers in the northern tip of Scotland and how improved collaboration and disciplined attention to what they do well locally led, in a single year, to an increase of a quarter of a million pounds into their combined businesses.

Don’t wait.  Be the change you want to see in the world.  But be worldly and organize what is already working and do it better by focusing on real opportunities and real tasks that need doing!

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Business in a jam – or jam?

We want to work

Undoubtedly, UK is in a financial jam; and undoubtedly, deservedly so.  But talking about what is wrong with Britain is a way of life for the chattering classes.

A business in a jam; the business of jam

This is a story about another kind of jam – one which you may not even buy anymore – though this story will have you looking at your supermarket shelf with more curiosity.

This is the story of McKays – an industrial jam-maker founded in 1938, in the berry-growing, marmalade-making east of Scotland around Dundee – perhaps better known for being home to several games-producers.  Paul Grant bought McKays from global giant, United Biscuits, in 1995.  In the following 12 years, the throughput of fruit and jam multiplied 10 fold.

So in the time that Sergei met Larry, founded Google, and took us to Google Street Maps and the Royal Channel on You Tube, a jam-maker in Scotland bloomed.  This post is about what we can learn from Mackays.  Their transformation is as modern as Google and is a practical working example of a idea that is often talked about abstractly.

MacKays worked on their whole supply chain but rather than trying to manage the whole chain and offload risk to suppliers, Mackays reformed the chain to manage variability. Because they can tolerate variability, they are able to up volumes, and of course grow at the phenomenal rate they did.

The market for jam

In 1997, Scottish jam-makers, MacKays, processed 30 tonnes of fruit into jam and marmalade which they sold to supermarkets as “commodities” – that is, they competed on price.

In 2007, they processed 350 tonnes and they had repositioned the MacKays brand as premium and sold a parallel line, Mrs Bridges, through independent retailers such as garden centres and hamper companies.

Premium jams

Premium jams depend upon “things staying the same”, or as we say in management-speak “taking the past into the future.”  We move in the opposite direction to the box-ticking, target-setting fiends, and concentrate on what is good and true.

  • McKays retained its traditional taste by retaining its traditional production of jam with a slow roiling boil in copper-bottom pans
  • They used Scottish fruit allowing them to extend the recognisable and valued Scottish brand.
  • They used local produce which allowed them to coordinate more closely and manage variability that comes with agricultural produce.

Government help

MacKays did receive a government grant that gave their bankers the commercial security to lend them the capital to expand.

Supply chain

There were four key issues to reforming the supply chain and increasing upstream demand for fruit by 1000%.

  • MacKays had sufficient belief in their product and consumers to envision both repositioning as a premium product and multiplying their volumes, not by a few percent, by multiples of 100%.
  • MacKays had sufficient belief in their suppliers to negotiate the delivery of clean, fresh, full flavoured fruit suitable for bottling rather than the fresh produce markets.
  • MacKays invested sufficiently in relationships to welcome farmers in the factory and to be welcome on their farms.
  • Because they had good relationships, it was easier to work through the inevitable variability that comes with agricultural produce.  MacKays retained a consultant as their agent for this work.

Learning from the jam business

These key five points translate to other businesses.

  1. What is good and true?  What is the equivalent of jam made with artisan manufacturing with fresh local produce?
  2. What is better and possible?  What is the equivalent of consumers who want a good quality jam?
  3. Who can we depend upon and what do they need?  Who are the equivalent of farmers who need clear signals about how our needs differ from needs of their other customers?
  4. Who will work more easily with us if they have a sound understanding of how we work and if we have a sound understanding of how they work?  What do our suppliers not understand about us and what do we not understand about them?
  5. And most importantly of all, where is there natural variability in the system and where we need to be available, pay attention, and work together to keep our business relationship intact and prosperous on both sides?  What is the equivalent of strawberries that are better some years than others and what does it mean in our business to adjust to variability in someone else’s part of the supply chain?

In this story, the slightly-new notions are that huge gains come, not out of investment or control or competition, but from

I hope this practical example shows you how networked supply chains work in ordinary, down-to-earth businesses but do remember that the details are different for every business.  And that business is not a spectator sport.   Talking about business does not make it grow.  We need to be doing something.  Now.

Reference: This cases study is part of a wider series of case studies on collaborative supply chains in agriculture in Scotland.

A career begins with an abiding preoccupation

Sleepwalking through life?

Today the GSCE results came out in the UK. For American readers, GSCE is like graduating from high school though you can stay and spend an extra two years working on A levels for university entrance.

Huff Post interviewed 4 boys from just north of London. I was immediately struck by two observations. The richer the boy, the more disorientated he was. And how all the boys expected a vague ill-defined authority to sort out their career for them.

The two poorer boys were infinitely better off in my view. Both had had an objective or some time. Both had responded to events, which might have been crushingly disapppointing, but were brushed off by simply finding another path to the same goal. But both, of course, exited the school system – not surprising if you know anything about the rigidity of class in the UK.

Where is the vocation?

But I am not here to lament class – well not today anyway. I was struck that ‘careers advice’ was simply functional. Sign on here. Do this. Do that. I would like to see young people getting ‘to the heart’ of what interests them and defining their economic relationship with the world through a lens of their abiding interests.

Where is the abiding preoccupation?

In business, we might talk in terms of  ‘vision’ and ‘mission’. But look at the way the manufacturing giant Danone puts it:

If associating health benefits with the pleasure of eating is our permanent preoccupation, ensuring that products are made available to the greatest number of people is now the Danone’s new endeavour.

First, let’s ask ~ what is our permanent preoccupaton?  What do we return to time-and-time again because it is so important to us?  What do we hold so dear that it puzzles us that others don’t?  What are we always willing to work on, no matter the time of day or night?

And then, what is our priority right now?  What is the endeavour or practical project that is needed at this moment?

Vision and mission. Preoccupation and endeavour.  I like the second set of words a  lot more.  Don’t you?

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Don’t wait for government; start fixing the economy yourself

Economists will tell you when lots of us are competing for a customer’s dollar, the price will fall. In this post, I am going to give you a counter example from Scotland.  I am going to show you how we can make jobs and raise wages by co-operating with each other.

The situation

Let’s set the stage. Twenty-seven dairy farms who together produced 17 million litres of organic milk a year thought their industry was overcrowded.  Prices were falling and it seemed fewer and fewer farmers could make a decent living.

Luckily for them they have good extension services in Scotland and they got some help re-organizing. This is what they did.

Mission

To sell their milk only into the organic market where they get higher prices.

Execution

  • Acknowledged that to deliver fresh milk, end-to-end temperature control and hygiene in a milk supply chain is important and players have to co-operate in a process of give-and-take.
  • Noted that like consumers all over the world, Scottish consumers want Scottish milk simply because we all like to know where our food comes from.
  • Identified a mid-sized but Scottish dairy, Graham’s who already market organic milk and butter to supermarkets Sainsbury’s Tesco, Waitrose and coffee chain, Starbucks through an organization of 280 full time staff and a fleet of 100 refrigerated vehicles.
  • Arranged to supply Graham’s in return for milk pick-ups and level, consistent of supply which was achieved with seasonal pricing.
  • Provided dependable support so that Graham’s could develop a branded label to compete with supermarket ‘own labels’.

Results

  • In two years, the original 27 farmers achieved a price increase of 20% with a combined value of £7m (USD12m+).
  • Demand for organic milk increased possibly due to other factors but partly because it was available consistently and its source was pleasing to consumers.
  • The original goal of selling organic milk as organic milk helped achieve consistently higher prices.
  • Because Grahams could rely on dependable supply, they were able to take advantage of new opportunities that presented themselves downstream, particularly demand from upscale supermarket Waitrose, and pass the demand back upstream to the farmers.
  • Because the farmers, Grahams and the extension advisers had a track record of working together, issues which used to be subject of competitive bargaining could be addressed constructively and creatively.

The super-result: more jobs and a stronger economy

  • Consumers have more access to high quality food from a food chain they trust.
  • In exchange for being dependable and responsive, the current farmers have moved from believing their livelihoods were risky to better prices and consistent custom.
  • The producer has expanded their market and product range and know they could expand again if demand arose.
  • The farmers are able to welcome new organic dairy farmers to join the system.

Expand the economy one community at a time

What are the lessons to be learned from Scottish organic milk producers?

If you want to get your part of economy moving again, and I am sure you do, then:

#1 Don’t just think price and simple competition. Think supply chain which means lots of suppliers working with lots of producers and lots of retailers.

#2 Look for junctions where our naïve competition is creating silly inefficiencies.

#3 Use specialists in industry (as opposed to business) management to collect data from the supply chain and balance feedback and confidentiality.

If you mean to be in your business, then be in it.  Love it. Shape it. Don’t just try to reap a profit, but work to create the economy that allows us to reap a profit.

One supply chain at a time, at home in our own communities and ‘without waiting for no one.’

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5 benefits about thinking of your business as part of a collaborative supply chain

Supply chains & networks: How do they fit together?

Collaborative supply chain, distributed supply chain, supply network . . . business has long stopped thinking about business as discrete entities.  When Toyota developed long-term, stable relationships with suppliers to allow it to have shorter, quicker, more responsive relationships with its customers, business was changed forever.

Hi speed computers provide us with the tools to take the idea of a collaborative supply chain and turn it into a supply network.  We have to think differently though and many of us ask, is it worth it?

What is the payoff for thinking about our supply chain as a collaborative network?

These are the FIVE benefits that we hope to gain.

  • Be alerted to opportunities more often
  • Get an appropriate team together much faster to respond to opportunities
  • Produce better products and services more profitably and at a lower price
  • Provide the critical mass for genuine innovation (rather than mimicry and spin)
  • Develop skills as a team that can only be developed when a team works together for a while

And isn’t this just talk?  How do we measure these benefits and show ROI?

Metrics can be developed for each of the FIVE benefits.  An industry association might ask its members, for example

  • How many interesting leads did you receive this month?
  • How many leads did you leave on the table because you lacked the resources to respond and how many consortia did you form or were invited to join?
  • Of the consortia whom are working, how many believe they will be able to improve quality, margins and price?
  • How many consortia believe they have the critical mass of skills and resources to work innovatively at the forefront of their field?
  • Does the consortium compete against other named consortia and when do they go head-to-head?

And how does this talk of networks affect HR  – not the form-filling bit of HR – but the organisational design and management?

Equally, somebody say in HR who is working on collaborative supply chains would ask similar questions.

  • What is our supply chain at the moment?
  • What line of sight do we have of the supply chain upstream and downstream and can we document our understanding of the supply chain the way we document a job in-house?
  • When do we receive incoming messages about leads?
  • When do we receive data that allows us to investigate our position in the supply chain?
  • What projects have we going on that focus on improving our position in the supply chain?
  • What projects are put aside because ‘we aren’t big enough or good enough to do them’?
  • What holds people up and if we changed the question to what do we do well, what opportunities emerge?
  • Who does our supply chain compete with and how do we monitor them?

 

That’s enough for going along with.  From these lists, you should be able to see how other people manage their supply chains; what industry associations can and should be doing to raise the profitability of the entire industry; and what HR should and could be doing to upgrade HR to the contemporary networked world.

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Living with meaning in a Zizek world

In my last two posts, I encouraged you to read Zizek in the original and gave you my take on the curious impotent rage that we are seeing all over Europe.

I am arguing that we are all up-to-our-eyeballs in the mess we rail about and that we got into the mess because we abdicated responsibility for our lives and our tantrums are signs of more abdication.

Simply, to adapt Zizek words, we will start to feel good about things when we are able to put on a list what “no one else will do it for [us], that [I] have to be the change [I] want to see.”

The tricks of a psychologist

As a psychologist, I always listen for the ”I” and the “we”.

  • What is the person in front of me actually going to do?
  • Who are they doing it with or for?
  • Of all the things they talked about, which brought a light to their eyes?

Zizek moments and psychology

We are in a Zizek moment when we retort that we are unable to do anything because the system makes us impotent.

We are focused, in short, on the ‘not living’ rather than the ‘living’.

These moments aren’t fun and this is the psychology of getting our attention back on the ‘living’.

 A small example of giving to Caesar. . .

To take a simple example, I lock my car when I leave it at Milton Keynes Railway Station.   Don’t you?

I accept that there is plenty of nonsense in the world but I act sensibly.

I don’t devote a lot of time to thinking about security at Milton Keynes Railway Station but I don’t take it for granted either.  Most of all I vote for people who treat the security people around the station fairly and I pay my rates so they can.  Don’t you?

Do you abdicate the responsibility for the conditions under which we live?

Read what Zizek says about Greece:

“When the protesters started to debate what to do next, how to move beyond mere protest, the majority consensus was that what was needed was not a new party or a direct attempt to take state power, but a movement whose aim is to exert pressure on political parties.”

Why do we abdicate to others?

Of course, we delegate to others, yes.  If there is a security person at Milton Keynes Station, I don’t interfere while they are doing their job.

But abdicate, no.  I can’t say “There is no security at the station.  You must fix it.”  I can’t bluster and stamp my feet and say “There is no security.  I am your employer as a taxpayer. You must fix it.”

I must act definitively.  “We have seen this pattern of events.  Please tell us what action you will take to change the pattern and suggest a date that we can meet to review whether the actions have been effective.”

And I must be clear what I am going to do if I am still not satisfied.  What is the point of stamping my foot?

“To riot [even if it is a middle-class tantrum] is to make a subjective statement, implicitly to declare how one relates to one’s objective conditions.”

Tantrums not only accept our position of powerlessness.  Tantrums say we are OK with our position of powerlessness.  Don’t come to me later complaining.  I will only ask you: Well what do you want to do about it?”

I can never be too enthusiastic about

“impotent rage and despair masked as a display of force; it is envy masked as triumphant carnival.”

It’s like over imbibing.  You will regret it in the morning.

So what do psychologists suggest when you are feeling impotent?  Indeed when you are overwhelmed with indignation at your impotence?

#1  Let’s stop thinking that this is a first in history.  We are not alone in this. Read the old works and read the new like Zizek .

#2 Think back to Jesus Christ saying to his followers:  Give unto Ceasar . . .   Get involved in as much nonsense as you have to . . . but keep it on the periphery of your existence in the way you lock your car at the station. . . it is not your life.

#3 Learn from feminist Germaine Greer who wrote short chapters that women could read on the loo – the only place where they have peace and quiet.  Find five minutes every day to be quiet.  A park is nice.  But be effective on this at least.  If it the loo is the only place possible, then the loo, it is.

#4 Think back over the last 24 hours about what is ‘good, true, better and possible’, and do more of it. Sounds naff?  Try it.  When you are more purposive about what you want and take active steps toward it, it tends to move toward you.  When it happens, your main reaction is going to be, “Eh? This easy?”  Yes, it is normal to be suspicious but when you move toward something, it comes to you. On the other hand, if you are faking it, it will blow you a raspberry.  I repeat, what you move towards will move towards you.

#5 Where you have a choice between two good things, do the one that’s better for other people too.

That’s it.  Shit will continue to happen but you won’t be so directly implicated and you won’t be sitting around thinking that some vague person in some vague office should be sorting it out.  That is no way to live.  Your life is going to amount to what you are willing to be responsible for.

To find out what you are willing to do, because it is your choice, not mine – find five minutes to review each 24 hours.  Celebrate the good, the true, the better and the possible, however small, particularly the small . . . and do more of it.

And then you will be like Zizek – watching the Zizek moments with Zen-like calm, waiting for more people to catch on. Then sociological conditions will change and we will have a new sociologist to read. Enjoy.

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So 21st century: a Zizek moment

Zizek and the politics of our age

Zizek, one of the most important thinkers of our age, tells us that much of the time, we cheerfully go along with nonsense like – derivative trading – telling ourselves all sorts of ‘porkies’ [for non-British readers that is Cockney slang for a self-serving deceit].

We reassure ourselves (rather greedily) that we will not be the victim when the ‘house of cards’ collapses.  Not for us ‘ask not for whom the bell tolls, it tolls for thee’.  Oh no, somehow it is OK to go along with what we know is wrong.

A Zizek moment

And when it does go wrong, when quite inevitably the scam is revealed in all its shocking-ness, we express indignation in a useless tantrum.

We tell the ‘authorities’, we tell some nameless, faceless people over whom we have no power or influence even if we did know who they are, to sort it out, or “we will be cross”.

Having abdicated our future when we joined the scam, we abdicate again by claiming that ‘someone else must sort out the mess.

Writing of the current Spanish demonstrations, Zizek comments “the indignados do not (yet) claim that no one else will do it for them, that they themselves have to be the change they want to see”.

A British example of a Zizek moment

Let’s take a British example.  The News of the World tapped phone messages.

But who did not know that before this year?  Pleassse.

And who did not encourage them?    At least 3 million people gave them money every week.  I’ve be known to read The Times when it popped up on my screen.

But what is with the outrage characteristic of a Zizek moment?

We are outraged because we knew what was going on all the time and if we didn’t actively take part, we encouraged it or condoned it.

We are outraged because we are caught out in the lies we tell, chiefly to ourselves.

And we are outraged because like an emperor with no clothes, we are caught with no life plan accept bouncing from one scandalous scheme to another.

If you like being outraged, then, please, carry on.  If you don’t, psychologists have do-it-home advice

In the next post, I’ll lay out the do-it-at-home tips for you.  There is no need to spend oodles of money.  Indeed I wouldn’t take your money because unless you do get started at home, not even millions of dollars of professional help will get you going.

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Not heard of ZIZEK? Why should you read ZIZEK?

I must say that a few months, I had not heard of ZIZEK.  But we all should have heard of Zizek because we are going to hear a lot more about him.

Why should a mechanic, a fireman, a hairdresser and god forbid, a member of the chattering classes, read sociology?

I know a lot of people who never read any sociology and the live quite happily.   Maybe they are happier than us too.  And they probably are richer and more powerful too.

But not knowing about the sociology of your time is like not knowing that the banks deal in derivatives that are 10x the value of real assets.  Even if we don’t have the big money to play on the derivatives market, we should at least understand that

  • liberalization of banking means derivatives
  • and derivatives mean a banking system that has electronic (or printed) money
  • that there is more than one derivative (so to speak) for each tonne of wheat or gold that they say they own
  • and there is not 10% more but 10x more paper than things.

90% of derivatives are what you and I think of as a pyramid scheme.

So we read sociology because we don’t want to be caught out holding useless paper assets

Any economist or financier reading this will wince at my crude explanation but you do see my point.  If you willfully persist in ignoring the basics of social science, don’t cry when you are standing in a Northern Rock queue when the bank almost falls over.  Don’t cry when your pension turns out to have been invested in derivatives and they turn out to be worth 10% of their face value or nothing at all.

And we are tired of the argument that there is nothing you and I can do

Many people will talk to me as if I am an idiot, and say “there is nothing we can do about the mess of our politics and economics”.

That indeed maybe true too.  I am not telling you to start fixing the derivatives system.  But I am explaining that knowing more about sociology will mean you will be the patsy less often.

We begin by knowing what is going on

I am pointing you here to a commentator who is worth reading, even if he writes real sociology that requires a little concentration.

So you go and read Zizek. 

In my next post, I will try to give my understanding  of what  Zizek says about the way we are living.

And I’ll do what psychologists do: translate what Zizek says into what you  and I can do ourselves – apart from read him.  So go read.  See you later on my next post.

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The basics of managing a collaborative supply chain (Part 5 of 5)

In this the last of a series of  five posts on collaborative food chains, I’ll sum up by asking whether the Scottish pig industry achieved a ROI (return on their investment) in an information system that collects data across the whole supply chain.

Was this just an annoying additional set of ‘paperwork’, or does the system supply information that allows players up-and-down the food chain to work out why variations occur and what can be done about them?

Improvements depended on knowledge of the entire supply chain

The Scottish pig industry described two examples of vitamin supplements on the farm helping to control quality control at the abattoir (by reducing ‘drip loss’) and in the shop by slowing discolouring (which you and I don’t like when we buy meat).

These examples show that a business cannot be dependent only on information collected within their own business. They need information on businesses on either side of them in the chain. The pig industry provides that in 4 quarterly reports.

Improvements depend upon us experimenting systematically to find the causes of unexplained variations

These reports are obviously ‘after the event’. They are not part of the day-to-day management of operations which generate forward momentum. They are an additional diagnostic system to help us understand ‘unexplained variation’.

We have the information systems now to run experiments.  For example, I can ask, if I add Silenium and Vitamin E, will the colour of the meat hold up all the way to the 2nd or 3rd day of display in the store?  Perfecting our craft becomes a matter of understanding consequences along the line.

3 simple lessons for managing collaborative supply chains in other industries

To draw out lessons from the Scottish pig industry for other industries:

  • Collect data across the whole food chain so people at the beginning can help solve variations later in the food chain.
  • Remember this is a diagnostic loop.  It provides data after the event.  It is does not tell us what to do when.  That is management.  But used correctly, and an extra diagnostic loop helps us understand what is important and what is not.
  • Don’t think quantity and control.  Think variations and unexplained variance.  We want to understand what is happening so we can bring good food across the system from farm to plate.

Does the new system help provide better food at a good price?

Well, I hope so because to be well-fed, I need farmers to be making a fair living and I also want farmers to know when I am walking past their food in the shop and not buying it.

A free market system of letting the incompetent go broke is naïve.  Of course we learn some things by chance but in a system as complicated as a modern food chain, we also need a sophisticated feedback system so that everyone who is really into what they do, can do a better job – with data, proper analysis, and well thought-out experiments to understand events beyond our immediate control yet affecting us and being affected by us in small part.

I hope these five posts have helped explain why collaborative supply chains are a critical part of business in a developed economy.  The Scottish pig industry is a good example, down-to-earth, close-to-home and relatively easy to imagine why we collect and share information at industry level.

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The basics of managing a collaborative supply chain (Part 4 of 5)

This is a series of posts using the Scottish pig industry to explain collaborative supply chains.

In post 1, I described the problem of complex supply chains.  Feedback gets lost.  Or to use an example, if I don’t like the bacon on my plate, the farmer does not get to hear about it.

In post 2, I explained that in years gone by we thought food had to be cheap or expensive and there was no in-between. Toyota showed in the car industry that there is an in-between when we move from cheap high-volume to agile, just-in-time supply systems by working closely with our suppliers. Computers make it easier to work collaboratively across a whole sector.

In post 3, I briefly described the diagnostic system that runs in addition to the management system.  Information is sent out every quarter that allows everyone to see the whole supply chain and to work out where variations in quality are happening. I ended that post by staying that a management system will tell us what is explained variance and what is unexplained variance.

Explained variance allows us to act; we have to think about unexplained variance

Simply when we understand the cause of a ‘blip’, we can take action, confidently.  When we see variations that don’t have a known cause, then we have unexplained variance and we have to stop and think.  So what are our choices?

What can we do about unexplained variance?

Unexplained variance means one of three things:

  • We need to do more analysis to see if any of the factors we had thought to be important, and have been dutifully recording, indeed account for dips in quality.
  • Maybe there is no answer, at least for now, and we are going to have to plan for variations in quality (more wastage).
  • Or we can investigate further and collect data on new factors to see if they explain variations as they happen, not only in our own business, but further along the line.

 

Unexplained variance might have its cause several steps removed in the supply chain

You might think that everyone does this already. They do – with the data they have.  But by working together across the whole food chain, the Scottish pig industry is able to help farmers see if there is something they can do on the farm that will help manage variability much further along.

  • To take a simple example where the farmer’s action brings a clear and immediate benefit to the farmer – giving a pig Vitamin C shortly before it is sent to the abattoir reduces the drip-effect, i.e., maintains the weight of the meat and gives the farmer a better price per carcass
  • To take another example that benefits the whole industry and gives the farmer a better price eventually because average prices are higher – giving a pig Selenium and Vitamin E slows down the discolouring of meat, meaning it looks a heap nicer in the supermarket and I as a consumer are willing to keep it in my mix of groceries.

When we can match data on what is happening in our business with data on what is happening in businesses up-and-down the chain, we might find new solutions to unwanted variations.

Once we know what to do and what to look for, future variations done to these causes, become of course explained variance – which is good, we know what to do now.

But is this science good business?  Is there a ROI on a collaborative supply chain?

In the next post, let’s ask whether the Scottish pig industry got a ROI (return on their investment).

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