Sufficiency in the Midst of Uncertainty | E. 101

Tom Pierce, the President of Integrated Information Systems Incorporated provides valuable insights based on his diverse background in problem-solving, logistics modeling, and consulting. 

 

Introduction

Our guest, Tom Pierce, the President of Integrated Information Systems Incorporated provides valuable insights based on his diverse background in problem-solving, logistics modeling, and consulting. The episode explores the impact of technology and human behavior on the supply chain, challenges in decision-making related to expenses and stock management, and the importance of honesty, transparency, and human connections in supply chain management.

 

Topics Covered

• The mindset required for effective decision-making in healthcare expenses

• The social and psychological dimensions of business decisions

• Transparency and human connections in supply chain management

• Data quality challenges and human intervention with digital technologies

• Overseas supply procurement and its implications

• The importance of truthfulness in buyer-supplier communication

• The bullwhip effect and technology's role in accelerating it

• Cost-risk versus schedule-risk: organizational motivations

• The impact of just-in-time vs. just-in-case inventory strategies

 

2:45 The Impact of Technology on Problem Solving

"Once computers made their appearance, and yes, I am so old that I learned how to use a slide rule and the calculator was in advance, so I'm that old, but as computers came on the scene, the only reason I was interested in them was because they could help me do things to solve problems quicker, more efficiently, all of that. So I've grown up with the introduction of technology into previously very human, very brute force, mental math, pencil and paper, problem solving, but it's very hard to condense 40 years of what technology has done to the ways we solve problems and the ways we create new ones. Everything we did humanly good and bad has been accelerated and amplified by technology.:

 

6:17 The Impact of Technology on Human Behavior

"It's rather amazing how much our computers have been created in our own image and exemplify, manifest the same flaws that we as people exhibit when relating to each other, but it's less inhibited."

 

10:34 The Impact of Financial Incentives in Organizations

"I don't think that's a bad thing. I think people should be rewarded financially and get fairly compensated for their investment in in technology, you know, and people that do well should be rewarded for doing well. I got no problem with that."

 

13:26 "Just in Time Inventory Practices"

Well, if it's not broke, don't fix it. Well, that doesn't mean don't have spare batteries. When my flashlight goes out in the middle of the night, I want to be able to go into my pantry or my workshop and get more batteries, but that's not lean unless you can predict exactly how many batteries you're going to need and then the ideal becomes, "Well, we'll just have an Amazon ready to deliver to batteries same day," and just reduce and reduce and reduce the carrying cost of your inventory, and I blame the Walmarts and the Targets of the world for doing just that. They leaned out their own cost by offloading those costs to their suppliers, so the just-in-case part, right? In case of disaster, well, that's your vendor's problem, because your big and powerful and you can insist, if you want to do business with us, then you've got to maintain stockage objectives and you've got to reply 24/7 replenishing my shelves, because I don't want to maintain a big warehouse. I just want to move parts through.

 

15:07 Just in time versus just in case

"If your only motivation is profit, that's a really good business model for a finance person. Mhmm. It's not a great business model if what you're really trying to do is continuously improve your product and your service and the delivery times and, you know, customer lead times, all that."

 

19:30 The Deception Game in Business

“I need to know when my parts are going to arrive and I need you, as my supplier, to meet that date, because I'm counting on it, but I'm not going to tell you that I'm fudging the date a little bit, because I want to build myself a little cushion, because I'm telling my boss it's going to be here by February, so I'm telling you I need it by January, and you've got sub-tiers and if it goes seven levers down, now you've got people running around like mad people trying to do things six months earlier than they're really needed. And if you're good and successful, it goes through the chain and it ends up on somebody's shelf six months earlier than it was really needed”

22:42  The Bullwhip Effect

“The more you fudge, the more you hedge, the less honest you are, you end up with what a lot of people in supply chain refer to as the bullwhip effect, right? You make a slight quick motion with your wrist on the handle and on a really long whip, the tip of it is going to break the sound barrier. You can have that dramatic effect on a really long supply chain as the amplification, and again, technology amplifies and accelerates that.”

 

 

25: 19 Predictability in Supply Chains:

"Level is more predictable when your forecastability, your coefficient of variance, Ratio of standard deviation to mean is, well, one expert that I trust highly says, when it's greater than 20%, You're entering an area, a quadrant, that they would call unforecastable."

 

32: 10 The Importance of Trust in Leadership:

"I will trust you until you give me not just one, maybe two or three reasons not to trust you. Maybe the answer should be seven or 70 times seven, but my default position is going to be in trust until I have a reason not to trust you. I believe well-informed leaders make better decisions, so there's way too many people that are afraid to tell the boss the truth, to tell the shareholders the truth, to tell the clients the truth, to tell  well-informed people throughout your living experience perform better.”

 

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You’ll Also Hear:

1. The Impact of Technology on Human Behavior: We discussed the interplay between technology and human decision-making in supply chain management, emphasizing the psychological and social aspects involved. Understanding the mindset needed for decision-making related to expenses, shelf life considerations, stock management, and tolerance for excess stock is crucial in today's rapidly evolving healthcare landscape.

2. Transparency, Trust, and Communication: Honesty, transparency, and human connections are essential for effective supply chain management. We explored the challenges of data quality, the need for human intervention in digital technologies, and the implications of deception and lack of transparency in communication between buyers and sellers. Establishing trust and honest communication is vital for well-informed decision-making and effective leadership.

3. Balancing Cost and Risk: The episode delved into the concept of cost risk versus schedule risk in business and the implications of the healthcare industry's focus on cost and slim operating margins. We explored the balance between maintaining emergency inventories of life-saving equipment and outsourcing supply chain overseas to manage costs, highlighting the impact on organizations' motivations and incentives.

 

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