Ashu's Blog – left, right, and all in between

IT Service Management
June 27, 2014


At a BPM event recently in Orlando, I was chatting with a colleague about IT and the BPM responsibility. This guy is the SVP of IT operations and handles Infrastructure for his company. When someone asked him who from the business was responsible for the BPM aspects in his firm from the business side, his response was “We in IT are actually responsible for the BPM aspects and optimization therein.” Another guys goes, “The only real applications the business is concerned about is e-mail”   That set me thinking about IT Service Management, etc. Having spent some time doing ITIL work, I am familiar with the concept of IT service management, which involves moving:
 
  From...
  • Multiple points of contact with the business
  • Service defined and measured in technical terms (if at all)
  • Work driven by technology
  • Organized to support systems
  To...
  • Managed relationships established with customers
  • Service defined, measured and reported on in business terms
  • Work driven by service requirement
  • Organized to deliver service
So ITSM is all about better service at lower cost. But the challenges with a full blown ITIL deployment is that ITIL is far too generic for an organization to implement at a fast pace, in totality. Process reengineering and change management are always required and are rarely considered. Some practitioners have said that it complements other IT management methodologies like CMMI, etc. But the way I look at this is that CMM focuses on improving and appraises the maturity of application development.  ITIL is focused on best practices around IT Operations and Services. This kind of demarcation:  

ITSM 1

  The ITIL v2 broke these Operations into Service Support (ensuring that the customer has access to appropriate services to support business functions) and Service Delivery (IT services are provided as agreed between the Service Provider and the Customer).   But the key to achieving good IT service management even at a small scale is by using the following guiding principles:
  • Business Relationship Management: Ongoing liaison and relationship building with Client community.  Maintain an understanding of the business and IT requirements.
  • Service Delivery Management: Understand the IT Services provided and the businesses reliance on these Services.  Carry out the appropriate business liaison and escalation for Service issues.
  • Service Performance Review: Formally review service performance against agreed upon SLAs. And good luck with that J
  • Service Level Agreement Management: Maintain service definitions and assess implications of any changes
  • Service Enhancement Request: Receive and shape requests for new/enhanced services
 




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Supply Chain Excellence
June 7, 2014


Achieving supply chain excellence is complex and challenging, but success in achieving supply-chain driven competitive advantage enables superior customer service, profitable revenue for growth and significant increase in shareholder value. Inventory Management is the conductor of the symphony for Retail Supply Chain execution. It is critical for customer service since Inventory management is what initiates all merchandise movement and controls the timing within the supply chain
  • Supply chain assets and inventory usually comprise at least half of all non-store based assets
  • Supply chain activities typically account for as much as 40 – 70% of operating costs (including procurement  and markdowns)
  Some of the statements from retailers across all kinds of products:
  • “Assisted Inventory Management (AIM) helped us exceed our inventory-turn goal, making us the leader among national drugstore chains in this important productivity measure. We achieved inventory turns of 5.0 times for the year, up from 4.6 times in earlier years.” – CVS
  • “Positioned among the best in retail, our supply chain helps drive sales, reduce costs and ensure the availability of products our guests most want and need.” – Target
  • “We completed the conversion of each of our operating divisions to a common technology platform with greatly enhanced inventory management tools, permitting more sophisticated inventory planning and more precise by-store inventory allocation.” – Saks
  The three main components of the Inventory Optimization program address both the process and physical infrastructure of the supply chain.  
  1. Inventory Management Process  - this addresses end-to-end inventory management built on two core processes:
  • Foundational for continually replenished basic merchandise. Periodic automatic replenishment, long life, stable supply, short lead time to continually meet normal demand
  • Highly Variable which is typical of merchandise with high demand spikes due to promotions, fashion, short life and seasonal demand
 
  1. Network and Flow Strategy - Network Optimization starts with establishing a vision of alternative flow paths and ends with a full evaluation of end-to-end physical supply chain and a recommended distribution network strategy. One  has to assess merchandise flow paths to provide revenue growth, minimize supply chain costs and support overall inventory strategies.  Then one has to determine alternative distribution      strategies including buildings size and location, transportation strategies, inventory deployment strategies, and benefit based business cases.
 
  1. Store Operations – Design and implement a well-defined process for store operations related to receiving, shelf stocking, perpetual inventory accuracy and plan-o-gram maintenance.
  • Organization & Labor Planning
  • Life Cycle Management
  • Shelf Replenishment
  • Data Integrity Maintenance
  The idea is to push operations from
  • Stores Ordering for basic merchandise to Automatic Replenishment Approach which is centrally  maintained and helps with enhanced High Performance forecasting and allocation abilities
  • Store Reviews ( All replenishment orders to supplement simple forecasting & ordering logic) to Exception Only Reviews. No store review for standard items and examples of exception reviews: items with high inventories, poor service levels etc.
  • Limited Standards & Policies (In-stock policies and Service levels) to Standard Policies Across the Supply Chain. This is through reliable & repeatable inventory management processes and uniform service standards based on merchandise goals and category/SKU profitability
Forecasting SCM 2  




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RFID in the age of Mobility
May 10, 2014


Having done a lot of work in the supply chain industry, I am so intrigued by RFID and its potential once the costs go further down. Radio frequency identification (RFID) is a generic term for technologies that use radio waves to automatically identify individual items. RFID technology is not new or complex; it has been around since the early radar systems in the 1940’s. What is new is how manufacturing advancements have reduced costs of implementing RFID systems (particularly tags). These silicon-based electronic identification tags, consisting of a tiny processor, memory, antenna and can be read and written wirelessly and can be made cheap, without a battery. The main components of this technology are:
 
Tags
  • Device made up of an electronic circuit and an integrated antenna
  • Radio frequency used to transfer data between the tag and the antenna
  • Read-only or read / write
  Antenna
  • Receives and transmits the  electromagnetic waves
  • Wireless data transfer
  Reader
  • Receives commands from application software
  • Interprets radio waves into digital information
  • Provides power supply to passive tags
  IT Infrastructure
  • Reads / writes data from / to the tags through the reader
  • Stores and evaluates obtained data
  • Links the transceiver to an applications, e.g. ERP
 
 
Of course there has been a major drag in the adoption of this technology. The key challenges have been:
 
  Costs
  • Not only costs of tags and readers, but the costs of integration of the RFID technology into the IT technology stack - e.g. ERP, etc.
  Standards
  • Lack of worldwide data standards
  • Country-specific frequencies allocation
  Market
  • Vendors are very fragmented
  Technology
  • Tag and data overload – How do we handle the data?
  • Read-rate accuracy
  • Tag and reader collision – Signals can interfere with each other
  People
  • Privacy fears from the tracking provided by this technology
 
 
But more and more this technology is coming into mainstream. Especially after Walmart mandating the use of RFIDs in their supply chain management. Walmart believes that they can cut out costs and make their supply chain even more lean with this deployment.  
 
The uses of this technology are of course endless. I was recently reading about the CyberTM Tire from Pirelli Tire Systems that transmits information on road conditions and friction coefficients to the car's computer. Already some hospitals are using RFIDs to tag patients with wristbands to scan by hospital staff using PDAs or tablet PCs connecting to patients' data using a WLAN.  
 
And as this become more prevalent there are other uses that are surely ridden with privacy issues. There is much research where people are looking at ways to monitor real time health in individuals. There is a RFID implanted in the human wrist that send signals to the health insurance company at all times. When you wake up in the morning and go for a jog; you arrive at work and an email from the company (always monitoring your vital stats) sits in you inbox, proclaiming a reduced premium for the day. You have breakfast at McDonalds over the weekend. Lo and behold, your premium just went up.    
 
RFID
 
RFID 2




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IT Spend Analyses
April 26, 2014


A few days ago I was in a CIO roundtable in Atlanta and one of the CIOs mentioned that despite the state of the economy their IT Organization was thinking of spending some if their budget on some innovative initiatives so that when we get to the bottom of the J-curve in the economy, they’d be ready to win over strategic goals. Really set me thinking – how are companies dividing their IT spend on keep-the-lights-on operations and strategic or innovative investment. Top executive management these days has two main questions:
  1. How can the IT organization be transformed to be an enabler of creating  business value rather than just being a cost of doing business?
  2. How can we achieve better results at a lower cost?
  I guess it’s always important for the IT organization to evaluate internally how IT’s value contribution to the business should be planned, managed, and assessed. Unfortunately, the link between business value and IT is often not understood by executives and especially in times like these IT spending levels are overly-squeezed. The common issues that we have seen:
  • Typically, IT spending level is based on historical or competitive benchmark levels
  • Lack of recognition for IT contribution on business side
  • Short term, simple IT cost cutting drives down value adding and innovative IT initiatives first
  • As a result, IT capabilities deteriorate and mid-term IT operating costs rise
  • Eventually, higher IT operating costs eat away funds for innovations and this furthers the overall IT budget explosion. A big vicious circle!
  Of course a company’s position on its spending is dependent upon many macro factors:
  • Number and size of competitors
  • Industry growth rate and rate of change
  • Industry margins/pricing
  • Product differentiation factors – physical products or knowledge assets
  Mandatory or non-discretionary IT investments are for keep-the-lights-on functions - IT Operations, regulatory, etc. Things like technical support, IT infrastructure management, technical upgrades to infrastructure components, required maintenance, enterprise-wide project support fall in this category.
 
  Discretionary spending, which is about IT investments that are Strategic, Enabling, and Sustaining, are on things like R&D (focus on future technologies), etc. These investments should create a strategic or economic advantage in the market, create barriers to entry, etc.   As written by Michael Treacy and Fred Wiersema in their classic book, Discipline of Market Leaders, there are three basic "value disciplines" for a company to pursue – operational excellence, customer intimacy, and /or product leadership. If the direction of the company is clear, well-communicated, and well-understood, then some strategic IT investments are driven from the same:  
  • If there is a product/service innovation  focus, then the company needs to focus on increasing value to existing customers, developing new markets and channels, etc. Examples of initiatives are eInnovation, eDesign Collaboration, PLM, etc.
  • If the company is focusing on Customer Intimacy, then the company needs to improve understanding of its customer needs, increase customer insight, etc. The initiatives fall in realms like Customer Insight (Inbound Marketing), Integrated View of Customer (DW, Analytics), etc.
  • If the company is trying to create new scales and reduce interaction costs between partners and customers, it needs to invest in increasing service levels at lower costs, concepts like “Super” Distributor, Supplier Collaboration, etc.
IT Spend  




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Fleet Management
April 2, 2014


Fleet Management, of which Strategic Sourcing is a core part, is an integrated set of actions, which occur in a rational and logical manner, with the overall objective of attaining lowest Total Cost of Ownership (TCO). Key issues in fleet management involve capital commitments and management, as well as operating effectiveness and cost.  Fleet asset utilization is not typically tracked or measured, which leads to unwanted outcomes, such as having more vehicles than necessary, additional operating and maintenance costs and not always having the right vehicles for the jobs they are needed to do.  Additionally, fleet costs are usually   fragmented and a rarely captured in total, which leads to problems in trying to adequately and accurately assess operating efficiency and evaluate out-sourcing opportunities.   The first step for true optimization is getting a good handle on the existing fleet in terms of its make-up, utilization and operating cost, reviewing the administrative and operating practices related to procurement, operations, maintenance and disposition, as well as determining replacement scheduling. The foundation is based upon the following three areas:
  • Strategy (replacement scheduling, outsourcing/insourcing and fleet organization)
  • Operations (vehicle pooling, maintenance & repair, inventory management, fuel management)
  • Administration (Standards & specifications, fleet utilization, budget & cost reporting)
  The areas to explore the fleet management practices:
 
Data
  • Fleet inventory (including but not limited to manufacturer and model year, type, location, VIN #, GVWR, acquisition price, options purchased, lease payment, annual operating and maintenance costs, sale price if retired, auction fees and class – how it’s used)
  • Equipment Utilization – Miles, hours or both on equipment where there may be two measures of utilization
  • Fleet “spend” at invoice level and at options level if available.
  • Current agreements and in progress negotiations
  • Current leases, short term rentals, and ownership models

 
Fleet Rationalization, Utilization and Fleet Mix - Once the standards and specifications process has taken place, putting rigor and focus in the area of rationalization and utilization brings value and savings to the company and fleet. The goal of this component of the process is multi-dimensional:
  • Ensuring that the proper utilization targets by class and location (e.g.,: metro v. rural) are set and used to reduce the number of low-use vehicles in the field
  • Rationalizing the fleet based on job function and job assignment.
  • Developing a fleet policy that optimizes the use of pooling vehicles, how and when to use short-term rentals and take home vehicles.
  • Identify fleet operating needs that may include needs for surplus vehicles including seasonal work requirements, construction projects, regulatory mandates, etc.
Focus on the 80/20 rule when it comes to prioritizing fleet opportunities.  Develop standards and specifications for the portion of the fleet that can be standardized and will provide the highest value/impact, such as passenger vehicles, SUVs, LD and MD trucks aerial and digger derricks.  Utility and construction equipment is often overlooked  
  • Fuel - In most cases, not incorporating the sourcing of bulk fuel (v. fuel management services) as a part of any fleet sourcing engagement. Past   experience has shown that this exercise returns almost no incremental  value and usually devolves into an exercise around sourcing transportation from supplier fuel racks to client bulk tank facilities.
  • Maintenance & Repair - Achieving the lowest TCO for fleet, maintenance and repair is an integral component of the equation. Inherently  maintenance and repair costs will decrease as an output of developing the standards and specifications and replacement schedule process. Other areas should also be evaluated, such as opportunities for network consolidations of maintenance and repair shops, etc.
  • Determining a “Levelized” Replacement Schedule - Developing a “Levelized” Replacement Schedule is a key concept in improving fleet management and obtaining benefits from strategic sourcing. Sharing the information with both internal finance and external vendors and suppliers is instrumental in planning for future fleet acquisitions and capital needs as well as structuring multi-year deals.
   Fleet TCO  
 
In summary, maximizing fleet effectiveness depends on managing it like a business, in an integrated and holistic fashion, across two major dimensions.
  • FLEET OPERATIONS – Operating revenue, Operating costs, Contribution margin, Productivity metrics and measures, Performance metrics and measures
  • FLEET ASSET MANAGEMENT – Fleet sizing, Standards and specs, Strategic sourcing, Life-cycle management, Maintenance and repair, Disposition management
Fleet Mngt 2      




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Supply Chain Excellence
March 30, 2014


Achieving supply chain excellence is complex and challenging, but success in achieving supply-chain driven competitive advantage enables superior customer service, profitable revenue for growth and significant increase in shareholder value:
  • Supply chain assets and inventory usually comprise at least half of all non-store based assets
  • Supply chain activities typically account for as much as 40 – 70% of operating costs (including procurement and markdowns)
Retail 3      
  1. Scientific Retailing: Overview of the High Performance Retailing framework, demand and supply value drivers
 
  1. Inventory Management: Inventory Management is the conductor of the symphony for Retail Supply Chain  execution. It is critical for customer service since Inventory management is what initiates all merchandise movement and controls the timing within the supply chain
    Some of the statements from retailers across all kinds of products:
  • “Assisted Inventory Management (AIM) helped us exceed our inventory-turn goal, making us the leader among national drugstore chains in this important productivity measure. We achieved inventory turns of 5.0 times for the year, up from 4.6 times in earlier years.” – CVS
 
  • “Positioned among the best in retail, our supply chain helps drive sales, reduce costs and ensure the availability of products our guests most want and need.” - Target
 
  • “We completed the conversion of each of our operating divisions to a common technology platform with greatly enhanced inventory management tools, permitting more sophisticated inventory planning and more precise by-store inventory allocation.” – Saks
    The three main components of the Inventory Optimization program address both the process and physical infrastructure of the supply chain.  
  1. IM Process:
  • Addresses end-to-end inventory management built on two core processes:
  • Foundational for continually replenished basic merchandise: Periodic automatic replenishment, long life, stable supply, short lead time to continually meet normal demand
  • Highly Variable typical of merchandise with high demand spikes or problematic supply: Demand characteristics are promotions, fashion, short life and seasonal while supply is typically private imports and private label
 
  1. Network and Flow Strategy
Network Optimization starts with establishing a vision of alternative flow paths and ends with a full evaluation of end-to-end physical supply chain and a recommended distribution network strategy.
  • Assesses merchandise flow paths to provide revenue growth, minimize supply chain costs and support overall inventory strategies.
  • Determines alternative distribution strategies including buildings size and location, transportation strategies, inventory deployment strategies, and benefit based business cases.
 
  1. Store Operations
  • Determines store level inventory processes that maximize the customer perceived in-stock (several studies show 40-70% of outs occur due to store defects).
  • Design and implement a well-defined process for store operations related to receiving, shelf stocking, perpetual inventory accuracy and plan-o-gram maintenance.
    • Organization & Labor Planning
    • Life Cycle Management
    • Shelf Replenishment
    • Data Integrity Maintenance
    The idea is to push operations from
  • Stores Ordering for basic merchandise to Automatic Replenishment Approach which is centrally maintained and helps with enhanced High Performance forecasting and allocation abilities
  • Store Reviews ( All replenishment orders to supplement  simple forecasting & ordering logic) to Exception Only Reviews. No store review for standard items and examples of exception reviews: items with high inventories, poor service levels etc.
  • Limited Standards & Policies (In-stock policies and Service levels) to Standard Policies Across the Supply Chain. This is through reliable & repeatable inventory management processes and uniform service standards based on merchandise goals and category/SKU profitability
Forecasting SCM 2        




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Lean and Six Sigma
March 16, 2014


Recently I was on the panel of a CXO discussion around how to optimize costs and increases business productivity, when someone from the audience asked about Lean Six Sigma and its relevance, especially in today’s economy. They asked is it Six Sigma that has been more effective or have Lean principles helped more? And how exactly do they differ? That set of dialog encouraged me to write this post. There is always debate about Lean and Six Sigma being so close that practitioners love to dichotomize in their thinking.  

So what is Six Sigma?
  • A Metric? - Less than 3.4 defects per million opportunities of product produced/ service rendered
  • A Vision? - Six Sigma is an overall strategy to accelerate improvements in processes, products, and services
  • A Value? - Strive for continuous improvement in all activities
  • A philosophy? - A proven “pursuit of perfection” business initiative that creates breakthroughs in profitability, quality, and productivity
Six Sigma practitioners follow these tenets as a business philosophy:
  • If something cannot be measured, we really do not know much about it.
  • If we don't know much about it, we cannot control it.
  • If we cannot control it, we are at the mercy of chance.
Six Sigma started in the manufacturing industry with emphasis on management of efficient processes, efficient management of people, dedication to measurement systems, etc – mostly Operational Excellence. But it became apparent that business success was more than the absence of negatives (defects, delays, cost overruns). Six Sigma then began to encompass positives like customer loyalty and delighters in new products. From operational excellence, Six Sigma has moved towards Customer Intimacy and Product Leadership value disciplines through its DFSS / DMADV tools. There is always debate that Six Sigma does not go that well with a Innovation focus. But all said and done the tools offered are used everywhere in different flavors and different terms:
  • SIPOC - A top level process mapping tool to document a process in the context of suppliers who provide inputs which are transformed into outputs for the customer.
  • Cause & Effect Matrix - A process of identifying problems, finding their causes, and creating the best solutions to keep them from happening again (fishbone diagram).
  • Failure Mode & Effects Analysis (FMEA) - A tool used to identify ways the process can fail, estimate the risk of the failure, identify causes of failure, prioritize actions to reduce failure risks, develop control plans to prevent failures
  • VOC - The “Voice of the Customer”; the customer specifications/ requirements that dictate acceptable and unacceptable outcomes and drive actions.
  • VOP  - The “Voice of the Process ”; the companies processes doing what they need to produce products/ services.
  • CTQ - “Critical to Quality”; characteristics that significantly influence one or more of the customer requirements.
Of course, recently Six Sigma has begun to be used in the IT industry as Six Sigma for Software.  

And what is Lean?  A philosophy that shortens the time line between the customer order and the shipment by eliminating waste (non-value-adding activities). This philosophy is based on the following principles:
  • Value – what the customer buys
  • Value stream – how value is delivered
  • Flow – putting value added steps in sequence. The “flow” or “value-stream” perspective represents a shift from vertical to horizontal thinking. Flow is enabled when materials and processes are standardized across the supply chain to reduce complexity.
  • Pull – triggering flow from the customer needs. E.g. have only projects in IT that the pipeline can take i.e. Demand Management.
  • Perfection – continuous improvement
  Value Added
  • Any activity that increases the market form or function of the product or service.  (These are things the customer is willing to pay for.) For .e.g in the Airline industry – actual flying time or in the Healthcare industry – diagnosis/treatment.
Non-Value Added = Waste
  • Any activity that does not add market form or function or is not necessary.  (These activities should be eliminated, simplified, reduced or integrated.). For e.g. in the airline industry – lining up to check –in or in the Healthcare industry – sitting in the waiting room waiting for an appointment. There are specific categories of waste that Lean targets:  
  1. Excess (or early) production - Overproduction
  2. Inventory - documents, forms, supplies
  3. Waiting  - e.g. delay in obtaining an appointment or test results
  4. Transportation (to/from processes)/ Motion – for e.g. leaving exam rooms for equipment, chart forms
  5. Extra Processing like inspection
  6. Defects
  7. Underutilized people / resources
The way I look at it is the Lean is the management philosophy and Six Sigma is a great set of tools that help you chart your path. You have got to use the Six Sigma to first reduce variation and then deploy Lean management to take your processes to a newer level altogether. Some thoughts to leave you with what I always do :-)  

SIX SIGMA is about supporting different situations with different and specific tools: ss 1  

And LEAN is about looking for efficient solutions and reducing waste: ss2




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Payment and Transaction Processing economics
January 5, 2014


Ever since I worked at American Express and I still hear from folks that “oh these credit card companies make 4% of the transaction dollars”, I feel like documenting the whole flow of this industry and see the economics behind this. The way the transactions work are very well explained on this virtual school link: http://virtualschool.edu/mon/ElectronicProperty/klamond/credit_card.htm The mix of payment instruments evolves from the dynamics between customers, retailers and issuers – cash, checks, credit cards, debit cards, fleet cards, mobile payments, biometric payments, etc. From the retailers’ perspective, the range of instruments that retailers choose to endorse depend on the costs and benefits of each – with remaining transaction values as below:  CC processing 4  

For credit card transaction processing industry in particular, the value chain of this industry is as below:

CC processing Value Chain

But the current trends in this industry are as below:

  • Merchants, like Starbucks, have expanded pre-paid and store-card operations with payment processors, bypassing high cost clearing/ settlement networks
  • A consortium of major banks, such as BofA, Chase and Citigroup, have started or purchased a rival clearing / settlement network
  • Game-changing mobile and  internet initiatives, like GSM and Paypal, have expanded into the traditional payments marketplace and captured a small but growing market share
  • New lower cost alternatives, such as RevolutionMoney,  have successfully attracted merchants in direct competition with traditional providers and established a low cost credit card alternative
  • Core banking providers have developed integrated payment solutions embedded in their core banking applications
  • Interchange is the fee Processors pay to the issuing banks via VISA/MasterCard and these rates are set by VISA/MasterCard through their associations. Typically interchange rates are based on a % of volume for credit cards & a rate per item for debit cards. This is evolving as new players are jumping in.


Plus add to this the mobile payments with companies like Google Wallet jumping into the fray. The mobile ecosystems consists of the usual players- retailers/merchants and financial institutions but also adds handset manufacturers and network operators.

CC processing 1

Due to these platforms that needed built, the adoption varies in geographic areas. Currently the percentage of people that currently use a mobile phone for Banking Transactions at least once a month (according to EDC-GSMA Mobile Financial Services Survey):

CC processing 2




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Big Data – within, at, and outside your Company boundaries…
November 16, 2013


So the title of this blog is so uninviting and overflowing in people emails that I will have to do Push marketing to make people read this :-) .But with all our clients in almost all industries - from hospitality to financial services to retail - I never leave some strategic meeting where people wonder about the true strategic value of Big Data and get questions like “Is it really that new? “You know us oldies in business and technology, we have seen it all and someone just came up with a new buzz.” “What is this hoopla about the elephant called Hadoop?"
 
Well, like all things in life there are always perspectives and point of views. The usage of a process or technology to effect the top line growth and operational efficiencies is up to the culture, intent and execution mastery of organizations.
 
So Big Data from social media impacts a lot of business functions but greatest is in the front end of any business – your customer relationship management (CRM) processes and systems. It implies a fundamental shift in the way organizations interact with prospects, customers, employees, partners and other stakeholders. Leaders must take the first critical step of changing their mindsets and revising some long-held beliefs about building and managing customer relationships.
 
Big Data1
 
The traditional 4 Ps of marketing (famous framework by Jerome McCarthy) has a new dimension – PEOPLE. The technology has enable people to talk to anyone within the organization or outside.  
  • Outside the organization there are Customer Peer - Customer peer conversations (Opinion sharing, Discussions, Idea sharing, Complaints, Questions, Jokes, Gossip, News, Etc.) for Information sharing, Relationship building. These are “Off Board” Outlets – (e.g. Facebook, Twitter, YouTube, etc.) Public Internet Outlets that organizations do not control, but can choose to participate in
  • At the company - customer touch points there are Customer - Employee conversations (call centers, chats, forums, Sentiment Monitoring, Brand association monitoring, etc. for Information sharing, Relationship building. These are “On Board” Technologies – that can be integrated into your public facing website to engage your constituents. Examples include discussion forums, ratings and reviews, idea solicitation communities, blogs, etc
  • Within the company walls there are employee – employee conversations (Opinion sharing, Questions, blogs, Etc.) for Information sharing. Hopefully nothing like NSA goof-up. “In Board” Technologies – that leverage social media techniques to facilitate collaboration and knowledge sharing between an organization’s internal employees.
So Big Data especially in the Entertainment & Hospitality business is surely evolving and rapidly for usage. Hotels, travel agencies, airlines, vacation clubs, and other industry players are unlocking the power of Big Data to dramatically improve products and services, thereby enhancing their competitive position and benefitting customers.  
  • Enhanced revenue management: Hotels recognize that data analytics are helpful in establishing the optimal price for rooms and ensuring that as few as possible are empty. Hotel chain Marriott takes this approach further, using big data for price optimization in restaurants, catering, and meeting spaces too.
  • Better relationships with hotel guests: When customer data is aggregated, instead of being fragmented across a hotel’s various divisions, the analytical insights lead to better marketing and customer service.
  • Targeted Marketing Promotions and Targeting is being focus even more to enhance extra marginal revenue.
But a major caveat to using all this is – data quality. I was on a Consulting panel recently where a good friend mentioned that companies are like true organisms – with a brain, muscle, fat etc. But the data is truly the blood that keeps this organism alive and running. I loved this analogy and carried it further in my head. Bad data can spoil the functions. Also polluted data (aka too much alcohol in the blood) can be devastating. Some threshold is OK. But that’s why we have data czars (aka police) catching folks doing DUI (aka management making wrong decisions under the influence of bad data). Now with sudden infusion of more diluted blood into the stream, how can we use the RBCs (red blood cells) properly. The elimination of a lot of White Noise in this big data to get to the little clusters of information wealth is where value is. The things to note on Big Data are:
  • User-generated content is often triggered by emotion
  • Amplified via the “viral effect”
  • Impact cannot be stopped or undone
  • Does not follow the conventional rules of commerce
  • Forces companies to act in shorter cycle times
  • Fast and truly global




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Healthcare Payment Integrity
October 10, 2013


A lot of Health Plans can generates incremental prevention savings by improving existing business practices, increasing the enforcement of claim payment policies, and developing new, robust solutions to increase claim payment accuracy.   PI - 1    
 
Health claims functions everywhere face a similar set of challenges which inevitably lead to claims overpayments.  Claims overpayment is one driver of increased medical cost that clearly can be controlled. In this world of Obamacare and the uncertainty associated with it, a lot of Healthcare companies are honing up this capability.  
 
PI - 2  
 
      The typical methodology for calculating incremental prevention savings is structured around the establishment of a savings baseline using the four following inputs:  
  1. Payment Ratio Report: To calculate a      ratio that can be applied to a denied claim in order to derive the      expected value of the denied claim (i.e. to determine the value of the      claim, had it been paid). This is generally done by extracting all finalized      paid claim lines over a 12 month period. Then one has to group the data at      the claim type level (Facility/Professional) and calculate the ratio of      the paid amount (net of any member liabilities) to the billed charges.
 
  1. Denials Baseline: To determine the value of historical denials associated with a particular payment integrity initiative prior to prevention implementation.  This establishes a savings baseline that the company seeks to exceed through implementation of robust prevention measures.
 
  1. Leakage Baseline: To determine the value of claims inappropriately or inaccurately paid associated with a payment integrity initiative prior to prevention implementation.
 
  1. Denial Rate: The Baseline Denial Rate represents the percentage of the total suspect population that the Client would expect to deny for a particular claims payment integrity initiative prior to prevention implementation. This is done by dividing the value of the Denials Baseline by the value of the total suspect population for the initiative.
    PI  




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Customer Loyalty
May 21, 2013


  customer_loyalty  

Over the years working with Loyalty programs with so many companies in the Retail sector, I feel I can summarize some observations:
  • True customer loyalty is created when the customer becomes an advocate for the organization
  • Rewards alone don’t generate loyalty. If a loyalty marketing program is just about earning points you end up buying loyalty not earning it.  The loyalty      is to the program not the product or the company.
  • Rewards-only programs can be easily replicated by the competition, will quickly be commoditized and become a defensive play that no competitor can afford to unwind.
  • Loyalty can be attained, but the organization has to work at it, continuously, and it will not possible with all customers.
  • These is NO One-Size Fits-All Loyalty Program
  • A win-win relationship must be established, and this cannot be accomplished if both parties cannot realize benefit. The two poles must be attracted to each other.

loyalty 1

1. Compelling Value Proposition
  • That which provides the customer with a tangible benefit if he or she decides to join a benefit program.
  • Leading organizations adapt the value proposition for different segments of clients.
 2.     Satisfaction
  • Customer satisfaction is the degree to which customer feel their needs are met.
  • Short-term perspective, very much based on the transaction with the customer.
 3.     Loyalty
  • It is a feeling of connection to, and belief in and enterprise and its proposition, created by a “feel good” factor from interaction that lead to continued relationships.
  • Loyalty is ultimately the crucial measure and it is more difficult to achieve than satisfaction.
  • A customer can be dissatisfied despite being loyal.
  • Loyalty can only be created on the basis of trust and repetitive positive experiences over time.
 4.     Advocacy
  • The pinnacle of customer loyalty is where the      customer acts as an advocate for the enterprise.
In the last years, many banks talked a lot about the importance of customer knowledge but only few of them have put successful actions behind their words. Companies still struggle with the basics of revenue growth areas:
  • Customer Segmentation: Who are my customers, and how do they differ?
  • Differentiated Treatment: How should I treat each customer segment?
  • Optimization: How can I optimize treatment decisions to maximize value at an individual level?
The ability to classify or cluster customers / prospects based on certain business rules or inherent customer data behavior, pattern using advanced statistical modeling tools and techniques.  To effectively use the gold mine of customer information, banks must develop at the same time the capabilities to aggregate, analyze, and use the customer data. And the best way to develop these capabilities is to create a specific unit at Headquarter level / enterprise level. Let’s call this unit “Marketing Factory”.
  • The first is create an integrated view of each customer: marketing analytics achieves this goal developing superior data management capabilities
  • The second goal is understand and predict customer behaviours: marketing analytics achieves this goal
    • Developing propensity score
    • Realizing segmentation and profiling analysis
    • Realizing analysis of customer profitability and long term potential value
    • Developing analysis on customer satisfaction and loyalty
    • Develop marketing and sales dashboard
  • The third goal is to provide insights that directly improve sales effectiveness. Marketing analytics achieve this goals:
    • Identifying relevant commercial events and related offer
    • Defining next product to offer for each customer
    • Identifying the most profitable combination of customer segment/channel/product thanks to optimization tools
  loyalty 2  




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A fool with a tool is still a…
March 7, 2013


Today I was chatting with the global CIO of a fortune 100 company and just discussing how the alignment of his initiatives was going. He had some interesting analogies of how the business conducts the IT aspects of its business. He said, “If you run a small business and you buy MS Excel, it doesn’t mean that you can manage cash flow better. Accounting is has a process to it, a language, etc. that is key to understand before you do things on XLS.” He added, “Its like my daughter buying an expensive digital camera - doesn’t mean the pictures will be better. You need to understand the basics of field of depth, lighting, speed, apertures, before you can leverage that tool to your advantage”.   The debate between TOOLS vs PROCESS and what is more important happens at every strategic meeting and decision making juncture. The third leg of the stool – PEOPLE – is always assumed present or can be brought in easily.   Processes and tools go hand in hand, so the question again is which one comes first though- the chicken or the egg conundrum. It all depends on the industry you are playing in, the position you are in and so most importantly which CAPABILITIES you need.  Technology is ever evolving, and with tools resulting from technology, one can argue that tools must lead the way for the activities we perform. But a good product, for example, has a limited life span in the marketplace. A good product development process, however, enables a company to create appealing new products over and over again. The alignment of processes and tools, is about Efficiency - it is all about HOW the organization should be doing what it decides to take on. For this companies need to think in 3 dimensions:
  • Differentiation “on the outside”—They need to have a clear view of what makes them unique—product, sales, service, brand, or business model. They need to deliver a consistently positive experience for customers in each market segment.
  • Simplification “on the inside”—They need simplicity in everything they do and this means standardized or componentized internal products, processes, and systems, with scalable and repeatable business models across the enterprise.
  • Execution mastery—They need to prioritize execution as a core capability with the right leadership skills, culture, and change and risk management.
 




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Metrics Galore…
February 16, 2013


As more and more companies embark on historical looking metrics to gauge performance or future looking predictive analytics to make savvy business decisions, the debate on what to measure is often always on in the c suite.   The importance of measurement is widely understood to try to effect the right behavior. Data translates into information, which finally morphs into knowledge or wisdom that can be used by the organization to create some sustainable competitive advantage.  But before we explore why we need to measure and what we need to measure, it’s good to understand the different nuances of measurement systems:
  • A Measure is a quantitative indication of the extent, amount, dimension, capacity, or size of some attribute of a product or a process. It is a single data point (e.g., number of defects from a single product review).
  • Measurement is the act of determining a measure.
  • A Metric is a measure of the degree to which a system or process possesses a certain attribute.
  • An Indicator is a metric or series of metrics that provides insight into a process, project, or product.
  The use of metrics or scorecards should encompass the following objectives:
  • Verify achievement of deliverables associated with the initiative/project.
  • Behavior Modifier - Verify achievement of financial gains anticipated from the initiative/project.
  • Cause and Effect Relationships -Verify benefits achieved were a result of the efforts of that particular initiative/project.
  • Accountability for results - Make sponsors accountable for results within their areas.
  • Enable reuse of processes, models, etc. for future initiatives.
  Some of the good principles while designing these metrics:

    
  1. At Level 1, you need to restrict the number of KPIs at each organization level to 10
  2. These should be linked to strategy
  3. The organizational structure is guiding for KPI breakdown, with special “perspective” reports
  4. Selected KPIs must be valid, simple, measurable and controllable
  5. KPIs must be structured in a logical, mutually exclusive, breakdown structure and should consolidate upwards
  6. Define clear and structured ownership of KPIs to avoid local optimization
  7. High quality of KPI structure is crucial for organisational acceptance and needs to be prioritized during KPI design
  8. KPIs are designed to govern results on group level. Governance culture must be in line with the governance structure on which the KPI design is based
 




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Agile Development and Testing
February 8, 2013


I was working with some digital marketing folks and they have agencies doing the websites and mobile apps for them. The discussion with business on trying to get to short time-to-market always leads to how IT and agencies are building the websites. “Agile” comes up without fail. I have written a bit before about Agile Methodology and received feedback from so many readers.   Before analyzing the points of the Agile Manifesto in detail, it is important to consider the last sentence. The Manifesto does not state (as an example) that “responding to change” is important and that “following a plan” is not important.  This is a common misinterpretation.  Looking more closely, it states that both items provide value, although “responding to change” provides more value than “following a plan.”  In other words, it is important to follow a plan, but it is even more important to respond to change.   There are several different flavors of Agile Development that I wrote in details about - Extreme Programming (XP), Crystal by Alistair Cockburn, Scrum by Ken Schwaber, Feature Driven Development by Jeff DeLuca, Dynamic Systems Development Method. But the Agile themes and principles are somewhat uniform:  
  • Welcoming change:  Embrace change in order to promote faster delivery of value to the customer and, ultimately, a superior and more creative solution.
  • Deliver working software early and often:  Deliver working software to the customer as early and as often as possible.
  • Simple design (YAGNI):  Add only what you need to the system. YAGNI = You Aren’t Going to Need It.
  • Pair programming:  Developed code by having two developers working on a single computer with one being a developer who thinks tactically about the method being created, while the other thinks strategically about how the method fits into the class.
  • Continuous integration:  Integrate software changes into the evolving solution as quickly and continuously as possible.
  • Close customer collaboration:  Work closely with the customer to ensure that their concerns are incorporated into the systems development process.
  • Measure progress through working software:  Measure progress by measuring the number of required features, or user stories, that are actually working in the application. Maintain constant pace.  Work a reasonable schedule with no “heroic” peaks.
  • Continuous improvement. Consider what is working well and what is not working well—and then adjusting the process accordingly.
  • Test-driven development:  Test early and often. The test is used to drive design and programming.
    • Continuous Integration: This can occur as recommended by Agile, but instead of going directly to Production, new functionality goes to a “Staging” environment, enabling thorough functional testing and providing a platform for users to observe the impact of the sprint.
    • Addresses concern for quality: The V-Model Test Stages exist for a reason.  Agile Methods theoretically drive exceptional Component (and possibly Assembly) Testing but do not take a holistic view of validating functional requirements or integration with upstream and downstream applications.  The “Staging” and “Integration” environments enable the execution of Application Product Test and Integration Product Test.  Also, normal Product Test documentation would be required and entry/exit criteria would be adhered to entering IPT (but not APT).
    • Folks generally advocate limiting the number of mid-pass releases into a test environment to avoid disrupting that test (and injecting quality issues). However, it is assumed that lower-level Testing (i.e., Component and Assembly Testing), through the concept of Test-Driven Design, will enable higher quality code to be delivered to APT which offsets the need for tightly controlled code drops in the test environment.




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A Smart phone a day keeps the doctor away
January 24, 2013


Another splurge on the media in the New Year is the deluge of ads for health and weight loss. They know the new year’s resolution is the time to close new members into gyms, diet courses, equipment sales, etc. But in this day and age of health options and the onslaught of mobile technology, it’s amazing to see how this industry is evolving. The interactions with people and patients is going from “episodic” to “continuous” with the advent of this technology:  
  • SIMpill: Smart pillbox to monitors medication and communicate with doctors
  • Proteus Pill: Ingestible sensor which sends digital signal to on-body receiver
  • Asthma Assistant: A 6-month pilot study of children and teens with severe persistent asthma found that the technology-enabled daily communication helped patients to better manage their conditions. Over the study period, patient adherence was high and there were no emergency department (ED) visits among the study population, compared to a national average of 2-3 annual visits among asthma patients. This technology enables data collection by the patient and then on a as needed basis monitoring by the medical team and provide feedback based on medical algorithms.
  • Diabetes Assistant: LG Glucophone is already in use in S. Korea – this works alongside Infobia’s Eocene diabetic management system to ease the task of blood glucose management. The results of the blood tests will be sent to a secure server that graphs and manages the disease, sets up automatic texts of results and creates reminder alarms.
  • Texting for health: Available at http://www.texting4health.org/page5/page5.html. Nearly three-quarters of the people in the US have cellphones. SMS can be used to remind patients about their medications and also deliver info and encouragement to help patients manage their health.
    • In 2006, the drug maker PediaMed launched a mobile compliance campaign called 8TDAZE involving a prescription acne treatment called TAZORAC. – remind teenagers to apply the treatment regularly.
    • Text4baby is a free mobile information service designed to promote healthy birth outcomes and to reduce infant mortality among underserved populations.
  • Mobile Imaging: http://www.sciencedaily.com/releases/2008/04/080429204303.htm
    • Nearly three quarters of the world population don’t have access to essential medical imaging technologies (ultrasound, MRI, etc.). UCB researchers are creating portable medical imaging using mobile phones (data acquisition + display; remote computer for processing). The data acquisition device can be made with off-the-shelf parts that somebody with basic technical training can operate. As for cell phones, you could be out in the middle of a remote village and still have cell phone access. 
  • Diagnosis:
    • Symptom Navigator: Use the Symptom Navigator to figure out what you’re suffering from.
    • iEyeExam: With this app, you can give yourself a quick eye exam.
  With 85% of physicians using smartphones, there are many areas that mobile solutions will get into on the provider side too:
  • Schedule and scheduling management
  • Clinical record management
  • Patient accounts management
  • Accounts receivable management
  • Electronic insurance billing
  • Insurance claims management
  • Online patient registration and communication
 




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Retail - Holiday shopping
December 14, 2012


With the holidays around the corner, everywhere you go, you get stuck in traffic especially if you are near a mall these days. The online and offline activity this season determines the economic flavor for at least a quarter or so. The retail industry anyway is pretty broad in that the value chains work differently for different consumer products and goods. But there are certain trends that are common:
  • “Retailization” is spreading as businesses across all industries vie for closer customer connections
  • Retail channels are continuing to blur and expand, generating new expectations from consumers and more cross-channel challenges for retailers
  • Shoppers are continuing to gravitate toward products and experiences that offer individual focus, interaction, customization, and cradle-to-grave offerings
  • Demand for online capabilities (and for a consistent experience) is increasing
  • Demographic shifts in spending power are driving retailers to rethink go-to-market strategies
  In these scenarios, when you begin analyzing the individual company needs, it is clear that winners will survive and gain market share by doing three things right:
  • Identify target customer by each purchase of target items
  • Identify measured value and reference value for daily average contribution profit separately for purchaser and non-purchaser groups, and variance of both values is identified as effect.
  • Convert to effect of entire profit increase
  The winners in retail spend less money but target the customers more scientifically and execute their investments more swiftly. To understand this, it is important to lay out the details of the value chain of the company. Finance, IT, human resources, and GNFR combine to manage the business, which consists of demand generation and demand fulfillment through various channels.   The retailers have to connect with its customers, whenever they want, however they want, seamlessly.  

Web:
  • Product available for order on-line and collect in store or local delivery
  • Relationship with amazon.jp and other partners for non-stocked items
  Shops:
  • 24 hour operations
  • Staffed to hourly profiles
  Mobile:
  • Loyalty support
  • Ordering capability
  • E-Payment through phone
  • Supervisor (B2E) enablement
  Loyalty across channels:
  • Extensive network of partners with shared, integrated loyalty program
  • Customer (history) identifiable in all channels
  • Customer call centers should be effective and efficient
  They need to have product centric operations, focused on “Right Product, Right Place, Right Time, Right Price”. Forecasting has to be driven by macro-factors as well as local conditions:

   

 

   




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Application Rationalization - Get Healthy and Stay Healthy
December 4, 2012


It is widely understood that if a person eats right and exercises then he or she can lose a desired amount of redundant weight and be healthy. But in many cases if the person returns to the same habits of unhealthy eating and lack of exercise then the unwanted weight will return. A recent study by researchers at the University of Missouri (as described by the website Science Daily) takes it a step further. What they found is that even with regular physical exercise, people who are otherwise sedentary are at higher risk for chronic diseases such as diabetes, obesity, and liver disease. They found that it is not enough to exercise regularly if a person otherwise sits in one place for most of the day.   Likewise, keeping IT operations healthy requires more than occasional bursts of helpful activity to rationalize and standardize. For many companies, a majority of IS and IT budgets are allocated to application maintenance and support, often up to 85%.  Not only does this decrease profitability but it reduces available capital for discretionary spending and strategic initiatives.   Several major factors have contributed to an increased focus on simplifying the application portfolio through rationalization and improved portfolio management including:   
  • Many years of distributed IS/IT spending and investment within specific functions and/or organization boundaries (no enterprise-wide investment management process)
  • Increased cost pressure and desire to improve the synergy of IS/IT investments across organization boundaries (eliminate redundant vendor/technology investments, consolidate IT assets)
  • Growing need to integrate infrastructure and enterprise solutions across external customers, suppliers and partners
  • Significant merger/integration activity to achieve economies of scale and remain competitive
  • Growing demands from the business to increase the strategic utilization of information technology and produce greater impact from the existing levels of IS/IT investment
  Unless applications are appropriately managed, the entire IT budget becomes operations and maintenance.    

 

  Rationalization is an ongoing activity to be re-examined as part of a regular exercise like annual planning.  Business–IT alignment and integration require that both parties take stock of the current situation, consider in what ways they wish to improve, and then determine how to get there. There are different “physics” that get the firm to this hairball of applications and infrastructure—governance and funding mechanisms, organization structure, changes in capabilities, leadership gaps, etc.   Some key characteristics of potential companies needing this:
  •  Cloned Systems
  •  Shadow Spending
  •  Past M&A Activity
  •  Lacks budget for initiatives
  •  Stove-Piped Investment
  •  High Maintenance budget
  The Solution
  • Application Rationalization is a systematic approach to improving the business performance of IT application portfolios by reducing current system complexity and by aligning application direction to the priorities of the business. The primary objectives of an application rationalization effort include:
    • Improve the overall investment mix available to fund strategic new initiatives
    • Reduce complexity of the application and resulting infrastructure environment to improve ability to integrate business capability across internal and external parties
    • Reduce cycle time for new initiatives by eliminating unnecessary application/system complexity
  Application rationalization is most successful when completed in conjunction with an effort to change the leadership, processes and organization disciplines that manage and control IS/IT spending.  Most companies have separate efforts underway evaluating the IS/IT operating model and governance direction.  These efforts are complementary to application rationalization activities, and should be pursued in parallel to the application rationalization activities. Application Rationalization drives value for our clients across business, Information Systems (IS) and Infrastructure (IT) areas:    

Business Value Levers
  • Decrease business process cost
  • Improve asset utilization
  • Better decisions with shared information
  • Improve people and skill mobility
  • Improved agility in acquisitions
  IS Value Levers (Apps)
  • Decrease application development and maintenance cost
  • Decrease interface and integration costs
  • Decrease conversion cost of new efforts
  • Consolidate and reduce software licenses
  IT Value Levers
  • Consolidate servers and server support
  • Consolidate and reduce storage costs
  • Decrease system software licenses
  • Simplify and enhance development tools and development environment
  • Reduce Operations Support Costs
  Application rationalization initiatives should be treated like a program—they require the proper attention, training, budget, communication, staffing and skills, and partners. The application renewal strategies need to be grouped into logical programs. The team needs to identify organizational and process impacts and create near-term and long-term roadmaps. Like any other initiative, the team needs to identify a benefits realization method so that the business case progress can be manage




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Print, Print, away…
October 8, 2012


No matter how much people say we are completely digital, there is a still a demographic that prints and uses paper. Surely electronic media continue to reduce paper demand and specially world demand for graphic papers is decelerating. But paper is all around us. Forest Productswhich refers to goods manufactured from the forest (trees) includes everyday products like lumber, pulp, paper, and packaging.  Products include common items such as paper, lumber, corrugated packaging and facial tissue. The North America forest products sector is inching toward a gradual recovery in 2011, with a slowing recovery from 2012-2017. The key emerging markets for forest products are Asia, notably China, Latin America, and Russia.   Forest Products generally fall into five distinct categories. 
  1. Wood Products includes building materials like lumber, plywood and particleboard. 
  2. Tissue includes paper, bathroom tissue and facial tissue.  This segment will sometimes include technically complex, specialty items like baby diapers. 
  3. The paperboard segment includes products like corrugated and pharmaceutical boxes.
  4. The Market Pulp segment is a business-to-business segment and is not an end use form.  Market pulp is fluff or baled in form and is sold by companies to other forest products companies who in turn convert the pulp into paper, tissue, paperboard or some other product. 
  5. The Paper segment is fairly diverse and covers a range of items such as newspapers, paper grocery sacks, magazines and catalogs.
   

The forest products value chain is relatively straightforward, although individual process steps can be technically complex.
  • First, logs are harvested from a forest.  Increasingly, large forest products companies are divesting themselves of their land holdings and outsourcing the harvesting function.  The big drivers of divestment have been interest in timber holdings by the alternative investment community and the desire of forest products companies to unlock captive balance sheet value.
  • The logs are then transported to a saw or pulp mill.
    • In the saw mill, logs may be scanned to optimize yield before processing.  After unloading from a truck or train, the logs go through the sawmill and are cut into various forms of lumber and veneer. 
    • In the pulp mill, the logs are unloaded and then may be cut into smaller sizes before being chipped.  The wood chips are conveyed from the chip pile, screened and sent to a digester along with chemicals.  The chips and chemicals cook for a set amount of time, are released into a blow tank that separates the fibers, and then are sent to washing and possibly bleaching. A pulp-chemical slurry is formed in stock prep and piped to the paper machine, where it is formed on the wire.  The formed sheet then goes through several sections which remove water and then is wound on the dry end of the machine into a large roll called a jumbo roll, which can way many tons. The jumbo roll is typically immediately slit into smaller, easier to manage rolls of paper.
  • Conversion is an all-inclusive term for operations occurring after the paper mill.  Conversion can refer to sheeting, which is the process of turning web rolls into sheeted product.  It can refer to the manufacturing of corrugated products.  It can refer to the manufacturing of laminate.
  • Finished products are distributed to customers via truck, rail, and ship.
  • The final step in the value chain is recycling.  Recycled materials are sorted and reintroduced to the pulp mill.
 

Forest Products Megatrends are that Biomass energy is key. As all industries set goals for the use of renewable energy, forest products, as a trendsetter in this area, will be held to higher standards for renewable energy use.  Partnerships inside and outside of the industry will be necessary to further advance in this area. Another key area is Capital Spending. In an effort to protect liquidity, companies are cutting back on capital spending.  Expansion projects, especially those outside of the emerging markets, will be few and far between.    Due to the ability to flex manufacturing capabilities and the global presence of major firms, the forest products industry tends to be fairly fragmented when compared to other commodity industries that have gone through major consolidation like oil and steel.  

An important aspect of the forest products industry is the focus on sustainability.  An outgrowth of this has been the development of certification programs, which validate or verify topics like wood source, harvesting practices, and product recycled content.  There are three major certification programs currently competing in the industry:  Sustainable Forestry Initiative, Program for the Endorsement of Forest Certification, and Forest Stewardship Council.  Certified forest products could serve as an important source of competitive advantage in the future.  

Although players currently tend to concentrate in a segment of the industry, many can and do manufacture alternative products.  For example, a coated paper manufacturer like Stora Enso or NewPage will likely have the flexibility to produce coated or uncoated paper of varying thickness or weights from hardwoods and softwoods.   

Over time, there has been an oscillation between pure play in the segment and vertical and horizontal integration. International Paper is a good illustration.  At the companies integration peak in the 1990’s, International Paper owned millions of acres of timberland, operated a chemicals division, and manufactured products that included kraft paper, printing and writing papers, boxboard, wood products, high and low pressure laminates, and oriented strand board among others.  International Paper has divested most assets except those directly related to the manufacturing of paper and packaging.  Generally speaking, forest products companies have found difficulty extracting the perceived value that integration would bring.    

<<Please PRINT this blog for the paper industry>>  





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Tomorrow starts today – Future Shoppers and Retail
September 25, 2012


The changes that come across our daily lives are centered around 4 major components: shoppers, technology, society in general, and environment that we live in.  

The Changing Shopper - Over the next 10 years, demand for better and highly personalized service is bound to go up as a result of consumers rapidly embracing newer technology. Concerns on sustainability as well as that on consumer health & well-being will also find more prominence in the interactions that an organization has with its consumers
  • Global demand for organic products continues to grow, with sales increasing by over $5 billion a year, according to The World of Organic Agriculture: Statistics & Emerging Trends
  • According to the Natural Marketing Institute (NMI), the American Lifestyles of Health and Sustainability (LOHAS) industry  is currently valued at US$209 billion, and estimated to comprise approximately 19% of the adult population in the United States, equaling a market of 41 million consumers
  • According to a report published by the Waste & Resources Action Program (WRAP), total food waste in the supply chain amounts to 11.3 million tones and total packaging waste to 5.1 million tones.
  • Consumers are increasingly leveraging technology (web 2.0, social networking etc.) to stay one step ahead of consumer product & retail companies
  • The growth of mobile features and device convergence such as wallet phones will drive up mobile sales
  The Changing Technology - In the coming years, newer business technology will enable manufacturers and retailers to become more adaptive of the rapidly changing environment
  • RFIDalready is and will continue to be a key technology to enable supply chain transparency in the future:
    • Conair, a company that manufactures food processors, blenders etc. is leveraging RFID to item -level tag products from its manufacturing location in China to Wal-Mart stores in the US to enhance product visibility
    • Kimberly-Clark is collaborating closely with Wal-Mart through RFID technology by sending tagged pallets & cases to the retailer’s distribution center.
    • American Apparel successfully piloted RFID at the item level and, once funding is secured, expects to roll out RFID to all of its 260 stores in the futured
  • The growth of mobile features and device convergence such as wallet phones will drive up mobile sales and Store visits will be enhanced by dynamic digital displays and personalization through a hand-held device or the customers own phone
    The Changing Society - The aging of societies in developed countries will have unexpected economic and political consequences. On the other hand, developing markets will see the rise of middle class and also witness increased levels of urbanization
  • It is estimated that the world economy will be about 80 percent larger in 2020 than it was in 2000, and average per capita income to be roughly 50 percent higher, according to UnHabitat
  The Changing Environment - Increased regulatory pressures from Government, depleting level of natural resources and shift of economic power towards the developing markets will completely alter the environment in which an organization functions
  • Unprecedented global economic growth will continue to put pressure on a number of highly strategic resources, including energy, food, and water, and demand is projected to outstrip easily available supplies over the next decade or so
  • Water scarcity will worsen due to unsustainable use and management of the resource as well as climate change
    • By 2030, the earth’s projected eight billion inhabitants will need 25% more water
    • By 2025, 2/3rd of the world’s population will be living in water stressed areas
    • It is interesting to see how this will impact food and beverage giants - Nestlé, Unilever, Coca-Cola Co., Anheuser-Busch, etc. – will approached 575 billion liters per year
    I guess the next couple of generations will really live in a different world after all.

 




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The high cost of bugs
September 13, 2012


The quality of IT applications are the backbone of most business processes today (whether customer-facing or internal), yet, according to Forrester Research “one-third of business stakeholders are dissatisfied or very dissatisfied with the quality of their software.” Poorly tested and integrated software has a severe effect on a business’s customers, sales, partnerships, employees and financial bottom line. NIST conservative estimate of the cost of programming errors in component interoperability just in the capital facilities industry in the U.S. alone is $15.8 billion per year - A primary driver for this high cost is fixing flaws in incorrect data exchanges between interoperating components. Software bugs cost the U.S. economy around $60 billion annually, or about 0.6% of the gross domestic product, as per the Cost Analysis of Inadequate Interoperability in the U.S. Capital Facilities Industry, GCR 04-867.   There are umpteen methodologies and automation mantras to get QA done in an effective and efficient manner. But the root of the issues lies in how the software is produced in the first place:

     

The picture above describes the interaction of a holistic Quality Planning with Quality Assurance and Quality Control disciplines with other areas. It consists of Test Planning, Test Execution and Test Management. As below, the key is to focus on:
  • Are we developing the right thing? – Requirements
  • Are doing it correctly? - The Process
  • Are we using the right tools?


 

Project Managers and Release Managers should understand how the activities outlined in this document fit into the overall context of project and iterative workflows. It is the responsibility of Senior Management, Project Managers, Systems Project Managers, Release Managers and Software Quality Assurance to determine and ensure appropriate tailoring and necessary compliance/deviations. A “common understanding” is critical to the successful analysis, design and implementation of a Software Quality Process that provides both Full and Iterative Life Cycle Testing and Quality—that is, testing across the entire application development or deployment lifecycle and within iterative development (and prototyping) cycles. Testing and Quality are a major process that starts at the beginning of a project (during the requirements phase) and is not considered complete until after the successful product deployment—thus the phrase: “Full Life Cycle Testing”. The following figure depicts an illustrative operational model of a QA testing organization:





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