How to Become a Corporate Board Member

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How to Become a Corporate Board Member

Do you hope to win a corporate board seat? Or are you already serving on one? What strategies have worked for you?

Are you looking to amplify your career path? Perhaps you are looking for new business. Perhaps you just want to give back to your great city or country. No matter the reason, There are organisations looking for great leaders and fresh faces to help guide their business to success. Board position opportunities are out there and you will find out in this book why you should consider searching.

Service on a Board of Directors can provide and fine-tune invaluable professional development skills that can advance your professional career, such as public speaking, networking and leadership experience. It also provides exposure to other disciplines that you may not encounter in your day job, such as financial reporting, strategic planning, or market analyses, to name a few.

Many professionals view board service as a rewarding way to share their skill sets and talents with non-profits that serve a particular mission that they feel passionately about. You might follow or contribute to a charity that serves local residents in your community, or maybe you have a cause that is close to your heart. Your help and guidance will only help that charity or foundation raise further funds toward your favourite causes.

Working on boards gives executives unique access to business leaders across the region and provides the opportunity to demonstrate professional value through meaningful participation in board meetings. As a result, you might secure several new business leads and/or networking opportunities that will help further your current career.

Enjoying gains in your career as a benefit of a board appointment is not something you should feel guilty about, even if you are working in the non-profit sector. In fact, most professionals will tell you they are serving on a board as part of their company business development efforts. That does not meant they won’t meet their fiduciary duties as a board member. You have to put in the work to reap the benefits, so just remain an active steward on behalf of the organization, and any and all results are justified. That being said, business development should not be your only reason for joining the board.

Unlike leveraging board service for business development, supplementing income should come with a flashing caution sign. Paid board service probably won’t be your golden ticket to retirement. Although it is true that public companies (and many private ones too) provide compensation for service on their board of directors, you should not expect that you will automatically find a position that puts you in a higher tax bracket.

Companies that compensate board members, either a board of directors or professional advisory board, are seeking highly qualified individuals who have particular experiences, skills sets and background that meet the needs of the company. This is not to say that you may not possess these skills, but you should approach the position with a realistic appreciation of the fact that there are a limited number of highly sought after paid board seats available each year.

For instance, a young professional five years into their career is unlikely to be appointed to a public company board seat receiving more than $200k in annual compensation and stock options.

The biggest takeaway about looking for a board position. Be realistic and be true to yourself and the organization. If you take your service seriously and act in the best interests of the corporation, you will be a successful board member, and you will play an important part in improving the overall level of corporate governance that exists in your city or country’s corporate community and beyond.

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Buying Businesses In or Out of Bankruptcy

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Bankruptcy Cover

Buying a business in bankruptcy can provide unique opportunities as well as present significant challenges. In a bankruptcy sale, purchasers are afforded the opportunity to acquire assets at extremely discounted prices. Conversely, the bankruptcy liquidation process is rigidly structured and contains significant impediments.

A trusted and competent lawyer is an indispensable component of the acquisition process. Purchasing a bankrupt company can be complicated, and the services of a reliable lawyer will help avoid dead ends and financial pitfalls. The importance of exhaustive and thorough due diligence cannot be over emphasized.

A business in bankruptcy may be attractive for a variety of reasons. The bankrupt company may possess technology, product lines or services that are complimentary to that of the purchaser. The sale may prove to be a pathway to gain access to a new client base or geographic territory. A bankruptcy purchase may also serve as an effective way to eliminate a competitor.

A bankruptcy sale can include everything that the company’s management and the court believes has tangible value. When a business down business files for bankruptcy, the expectations of every party involved in the process is immediately diminished. Owners recognize that their valuations of the business must be lowered, while creditors realize that any chance to be fully compensated has vanished. As a result, all parties involved typically become more willing to accept far less than what they might have originally hoped or expected.

While a Chapter 7 bankruptcy results in complete liquidation, Chapter 11 reorganization is far more common. Most distressed businesses use the Chapter 11 filing option because it allows them to continue to conduct business during reorganization. Under this provision, debtors have the exclusive right to submit their own reorganization plan within 120 days of the original filing. After that period, creditors and other interested parties can submit their own plans.

Those looking to buy a business in bankruptcy can choose to align themselves with either the debtor or creditors in the plan development process. This provides a substantial degree of strategic flexibility in the negotiations. Asset purchase plans are then submitted to the court where interested parties have 20 days to file objections and offer counter proposals.

In many cases the buyer and debtor have already worked with the various creditors to reach a settlement agreement prior to the submission of the proposal to the court. Secured creditors who have encumbrances against the business and its property will be more rigid in their recovery expectations; however, they often grow weary of the process and lose confidence in management which often results in an opportunity to negotiate with them.

Unsecured creditors are in a subordinate position and have very little negotiating strength. Significant legal precedent exists that usually results in their recovery of only a portion of the proceeds from the liquidation of unencumbered assets.

It is important to discover every fact that is relevant to the pricing of a bankrupt company’s assets. This includes a complete and accurate representation of the corporation’s finances. These documents are most reliable when obtained through the bankruptcy court where they were submitted under oath. Important financial information would include the most current year of profit and loss statements, current and historical balance statements, a complete list of creditors and a schedule of assets and liabilities.

Other critical information such as customer lists, sales histories, employees and inventory is also vital to the process of obtaining a clear and exact valuation.

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Retirement

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Retirement

Some people transition seamlessly into a happy retirement and get right to the business of enjoying their new lives. But other people have a tougher time entering the retirement years. Some of these people may wonder whether they are really cut out for retirement at all.

With all the talk and concern about dwindling retirement funds and our shaky economy, many retirees and soon to be retired are concerned about the financial aspects of retirement planning. But what about retirement living?

In other words, what would you like to do with the rest of your life?

Financial issues aside, there are a lot you can do to make retirement living a great time of life.

When I was younger, I thought retirement living would be boring.

But I’m setting up joint ventures, meeting new people, and I have a part-time job I like as a writer. My days have a variety I never had before.

Here are a few retirement living tips. As you read these tips, think about how they apply to your life.

Retirement living is about more than money. Financial planners tell us to start thinking about retirement living decades before we’re ready to retire, and it’s good to make a retirement planning checklist about five years before your retirement date.

While you are thinking about how much money you will need in retirement, think about what you want your life to look like, and how you want to feel.

Make life plans. It’s important to plan for the non-financial aspect of retirement living by considering what will make you happy. Maybe you will climb Mt. Kilimanjaro, go dog sledding in Alaska, make time to write that novel you have been thinking about, or even continue to work part-time. Make a life plan and tick off your experiences as you move ahead.

Find a purpose. When making your retirement living plan, look for things you can do on an ongoing basis that bring you joy and add structure to your life. This can include travel, hobbies or even training for a new career.

Keep your mind sharp. “Use it or lose it” applies to your brain. If you feel the need to replace the intellectual stimulation you found at work, try learning a foreign language or a musical instrument, or join a book club. Lifelong learning offers many opportunities to keep your mind sharp. How about checking out the lifelong learning classes offered by your local community centre or college?

Volunteer. Getting involved in your community is a great way to give back, and it’s a wonderful opportunity to interact with people and make new friends. Senior Corps offers volunteer opportunities tailored for older adults.

Develop new friendships. A measurement of whether people are successful at retirement living is the strength of their social network; that includes family and friends. Check out groups that help you meet new people or join community or religious organizations that have members who share your interests. It’s possible to meet people and make new friends even if it’s difficult to get around.

Did you know that friendship helps to increase longevity?

Ask your spouse or partner. If you live with someone or have a close partner, retirement living becomes a shared experience. It’s important to make time for you and your partner to both share your dreams; you might be pleasantly surprised to learn that your partner wants to join you on that Mt. Kilimanjaro climb, and he or she may have ideas you will enjoy.

Increase your financial stability. If you can’t afford to retire yet, what about partial retirement? This can include working part-time in your current job or finding a retirement job that is new and interesting and will also help you earn money.

Keep your spirits up. The life changes that come with retirement living can be challenging, but your attitude plays a big part in whether you will find happiness in retirement living or not. Check in with yourself to assess your mood; if you feel sad or hopeless it’s important to see your doctor or a professional counsellor. Learn the signs of and senior depression (or ask a friend or family member to assess your mood) and don’t be afraid to ask for help.

Remain healthy. Carter brought up an old adage: A lean horse for a long race. With increasing life spans, retirement living can be a long race, so get yourself in shape. That means eating well, watching your weight and staying active. When you feel good, it’s easier to stay positive and open to new experiences.

I retired at 47 and look forward to my next decade of retirement living. I wake up every morning and wonder what I will learn today rather than what will I do today.

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Franchise Business

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Franchise Business Cover

Have a better mousetrap but scared to death that the world is actually beating a path to your door? Trouble sleeping at night wondering who will knock off your operation first? Certain that yours is the next, if only you could get the capital? Tired of reading about companies and thinking, I have a better franchise concept than that company?

Maybe you, too, should consider franchising.

In general, companies decide to begin franchising for one of three reasons; lack of money, people or time.

The primary barrier to expansion that today’s entrepreneur faces is lack of capital and franchising allows companies to expand without the risk of debt or the cost of equity. Since franchisees provide the initial investment at the unit level, franchising allows for expansion with minimal capital investment on the part of the franchisor. In addition, since it’s the franchisee, and not the franchisor, who signs the lease and commits to various service contracts, franchising allows for expansion with virtually no contingent liability, thus greatly reducing a franchisor’s risk.

The second barrier to expansion is finding and retaining good unit managers. All too often, a business owner spends months looking for and training a new manager only to see that manager leave-or worse yet, get hired away by a competitor.

Franchising allows entrepreneurs to overcome many of these problems by substituting a motivated franchisee for a unit manager. Interestingly enough, since the franchisee has both an investment in the unit and a stake in the profits, unit performance will often improve and since a franchisor’s income is based on the franchisee’s gross sales and not profitability monitoring unit level expenses becomes significantly less cumbersome.

Finally, opening another location takes time. Hunt for sites. Negotiate leases. Arrange for design and build-out. Secure financing. Hire and train staff. Purchase equipment and inventory. The end result is that the number of units you can open in any given period of time is limited by the amount of time it takes to do it properly.

For companies with too little time (or too little staff), franchising is often the fastest way to grow. That is because it’s the franchisee who performs most of these growth tasks. The franchisor provides the guidance, of course, but the franchisee does the legwork. Thus franchising not only allows the franchisor financial leverage, but it allows him to leverage his resources as well.

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Joint Ventures

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Joint Ventures

A joint venture is when two or more businesses or people pool their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared.

Reasons you might want to form a joint venture include business expansion, development of new products or moving into new markets, particularly overseas.

Your business may have strong potential for growth and you may have innovative ideas and products; however, a joint venture could give you.
1. More resources.
2. Greater capacity.
3. Increased technical expertise.
4. Access to established markets and distribution channels.

Entering into a joint venture is a major decision. This book gives an overview of the main ways you can set up a joint venture, the advantages and disadvantages of doing so, how to assess if you are ready to commit, what to look for in a joint venture partner and how to make it work.

A joint venture differs from a merger in the sense that there is no transfer of ownership in the deal.

This partnership can happen between goliaths in an industry. It can also occur between two small businesses that believe partnering will help them successfully fight their bigger competitors.

Companies with identical products and services can also join forces to penetrate markets they wouldn’t or couldn’t consider without investing tremendous resources. Furthermore, due to local regulations, some markets can only be penetrated via joint venturing with a local business.

In some cases, a large company can decide to form a joint venture with a smaller business in order to quickly acquire critical intellectual property, technology, or resources otherwise hard to obtain, even with plenty of cash at their disposal.

How does a joint venture work?

The process of partnering is a well-known, time-tested principle. The critical aspect of a joint venture does not lie in the process itself but in its execution. We all know what needs to be done specifically, it is necessary to join forces; however, it is easy to overlook the “hows” and “whats” in the excitement of the moment.

We will look at the “hows” in our review of the “Critical Factors of Success” later in this book. For the moment, let’s keep in mind that all mergers, large or small, need to be planned in detail and executed following a strict plan in order to keep all the chances of success on your side.

The “whats” should be covered in a legal agreement that will carefully list which party brings which assets (tangible and intangible) to the joint venture, as well as the objective of this strategic alliance. Although joint venture legal agreement templates can readily be found on the Internet, we suggest you seek the appropriate legal advice when entering such a business relationship.

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Lean in Unionized Environment

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Lean in Unionized Environment

One question I get asked a lot is whether Lean can work in a unionized environment. Fortunately, I have had the opportunity to work in a unionized environment. The engagement did not start out as an Lean engagement, but as the continuous improvement project wore on there were more and more opportunities to influence in more and more Lean methods. The engagement itself was to help set lead the implementation of a solution into an operational support area. Doesn’t sound very Lean right? But I thought it was a great opportunity to try to extend Lean practices into the realms of Application Management Services, otherwise known as Maintenance and Support.

The People

Without a doubt, the people I met and worked with were some of the most client-focused, motivated people I have ever met. In fact, everyone on the project team was incredibly focused on value to the customer. At every turn, there was mention by people of the impact that current issues were having on the end clients and co-workers. Were there a few people who were the stereotypical ‘Union-worker’? Sure. But in my experience the percentage of those type of people are pretty consistent across both unionized and non-unionized environments.

There were a few issues to used Lean that were perhaps more prevalent in a unionized environment though.

The Challenges

Roles – The primary challenge was that unions typically have a large component of their footprint being the formalization of roles and the responsibilities of each role. In addition, the corporation itself also further segmented these roles into functional departments. These functional departments, like Quality Assurance, were the only departments that was authorized to perform those tasks. An interesting thing happened on projects though. People from these different functional areas were assigned to the project and the project was then given the authority to use them in whatever way they saw fit. The projects were also co-located. So the projects were quite a bit more Lean compared to the rest of the organization. But you always had to be careful so make sure everyone was totally happy with how the team self-organized as one person could submit a union grievance if they did not like the work they were doing and if they thought it was outside their official role. Unfortunately when the project was over and it was transitioned to the Maintenance and Support areas, we were less successful in having the team self-organize and had to adopt more structured roles. It is an interesting note that the client knew that this structure was not as responsive and efficient, but they required the process to be aligned and use their current organizational structure.

Compensation – Compensation in a union environment is again a very formalized process and is based upon role and seniority. As we worked on the projects, it really did hamper the ability to recognize people even in informal ways. (like offering to buy someone a lunch) If you wanted to offer someone a perk, you had to offer everyone the same perk whether they were involved or not. This seems like a small thing but it ended up being a constant conundrum for the project.

Documentation – The documentation requirements were quite extensive for two reasons. One, they used documents as the transfer of knowledge between one department to another. Two, they evaluated people’s competencies and their readiness to be promoted to the next level based upon the deliverables they can produce. As you can imagine, this was a problem in trying to move toward more Lean methods. In addition, these documents frequently sat on the shelf for long periods of time after they were produced and became stale.

Hierarchy – Once we transitioned to Maintenance and Support, all departments had managers that assigned work. This was a traditional push system of work. The people were not empowered to pull work at all. Eventually this was a major issue as it really limited the ability to be Lean and focus on Value and Flow.

What did we do?

So you may be saying to yourself, this seems like a failure and Lean can’t work in a unionized environment. I would say that is incorrect.

One aspect that I thought we were very successful was implementing a Kan Ban board and limiting Work in Progress(WIP). The Kan Ban board was also extremely helpful in letting management see exactly what we were working on. Until we implemented the Kan Ban board, it was not uncommon for people to be juggling 20-30 items at once and not informing people of issues. As you can expect, the team also was very energized and focused by the use of the Kan Ban board combined with a Daily stand up to discuss the work they had planned for the day. These practices are still being used today in that area.

As far as the other issues discussed, although they were prevalent in the union environment, I have seen them exist to an equal or greater extent in other large corporations. These are not just union issues. I would propose that they are management issues.

Can Lean be implemented in a union environment? I would say yes, but there are challenges that need to be addressed. But just like anywhere else, you need the commitment from management that the client’s needs and value will drive the organization’s structure and not the other way around. The challenge with a union environments is you need this agreement from not only the company’s management, but also the union management.

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Lean Sustainable Supply Chain Management

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Lean Sustainable Supply Chain Manageent

Lean Sustainability Supply Chain Management. It’s More Than Just Being Green.

In today’s business environment, companies are being held accountable to a growing list of stakeholders who assess company performance against a variety of criteria, from financial and operational performance to labour practices and environmental issues. The pressure for greater transparency in all areas of performance is increasing; not only for consumer-facing companies, but for all business entities throughout the supply chain; including manufacturers who are several steps removed from the ultimate consumer.

To be effective, a supplier risk-assessment program must address sustainability issues in the broadest sense, assessing vendors’ financial and economic viability as well as social responsibility and environmental sustainability.

In many businesses, the procurement, internal audit and enterprise risk management functions provide focus on supplier risk concerns and offer language that helps describe risk. Yet industry research indicates there is still a significant lack of clarity in terms of how and what to measure in order to accurately assess risk in the supply chain.

For example, more than half of the businesses in a recent Compliance Week study expressed dissatisfaction with their current approach to supply chain risk assessment, even though they said managing supply chain risk was a top priority. The top challenges these companies cited were a lack of good data on vendors, poor visibility into the use of subcontractors, and limitations in their ability to compare vendor risks.

Such shortcomings become even more critical in today’s industrial environment, where lean production practices make manufacturers more vulnerable to short-term supply disruptions.

Beyond these fundamental supplier viability measures, the concerns of today’s broader range of stakeholders must also be addressed. These concerns are measured against social and environmental criteria such as reduced waste, lower carbon emissions, minimized environmental footprint, and a host of social issues, from fair labour practices to immigration and employment policies.

A Bi-level View of Supply Chain Sustainability

Corporate responsibility involves much more than just “being a good corporate citizen.” In the broadest sense, corporate responsibility encompasses a business’s financial and economic responsibility to its stakeholders including customers, suppliers and investors as well as doing business in a way that is socially and environmentally responsible.

Including sustainability in the supply chain involves much more than just “being green.” Broadly speaking, sustainability means managing performance in a way that supports the long-term viability of both the business and the wider community in which it exists.

These multiple facets of sustainability affect an organization on several levels, and their impact on a company’s financial performance is demonstrated over varying time frames. In this sense, any effort to improve supply chain viability must address at least two levels; economic and financial sustainability at a basic level, and social and environmental sustainability on a second level.

Economic Viability

The risk of supplier failure is always a concern for manufacturers, but it grows even more acute during periods of economic fluctuation. A recent CFO Magazine study determined that approximately one out of every seven midcap companies poses a potential credit risk. Moreover, the study found significant risk across nearly three dozen disparate industries.

The consequences of supplier failure can be devastating, causing a crippling effect on a company’s day-to-day operations and even threatening its ultimate survivability. In today’s lean manufacturing environment, where inventories are kept to a minimum and critical equipment and skilled labour are stretched thin, supplier failure very quickly leads to stalled production and lost revenue. Moreover, switching critical suppliers during a crisis following an unexpected failure is, at best, a costly and difficult response.

Unfortunately, traditional supplier risk management initiatives typically track and respond to after-the-fact performance and quality metrics, rather than focusing on forward-looking elements of disruption risk that could provide an early warning of the risk of supplier failure.

Environmental Sustainability and Social Responsibility

A comprehensive supply chain sustainability initiative must also address the second level of issues, ascertaining that suppliers’ business practices are sustainable from an environmental and social perspective. In recent years, many leading retail and consumer goods companies have taken high-profile steps in this area, assessing their suppliers’ performance against an array of metrics that fall under the general heading of “corporate responsibility.”

To cite one prominent example, Walmart several years ago broadened its annual report on “Ethical Sourcing” to encompass the wider topic of “Global Responsibility.” In addition to requiring vendors to demonstrate a commitment to sound business ethics, the retailer’s assessment tool also addresses such issues as energy consumption, greenhouse gas emissions, the sourcing of raw materials, reduced waste, more effective use of resources, and support for more vibrant workplaces and communities.

Moreover, even though many mid-tier manufacturers might not be directly measured by initiatives such as these, the effects of such assessments cascade throughout the supply chain. As a result, more and more manufacturers not only are required to assess their own performance, but also must make sure their suppliers do the same.

Accessing and Assessing Supplier Information

Addressing both aspects of supply chain sustainability; that is, both the immediate financial and economic factors and the longer term social and environmental issues can be especially challenging when some critical vendors are privately held rather than publicly traded. Most privately held companies are understandably protective of financial information, especially if they fear their disclosures could put them at a competitive disadvantage or weaken their negotiating position on pricing or other contract terms.

In the same way, your company’s public assessment of its corporate responsibility performance might be called into question if the only source of information is the self-reporting of suppliers whose records are sealed. As many businesses have discovered in recent years, the potential of a backlash against such perceived “greenwashing” poses its own type of reputational risk.

To be effective and to be credible the information that a supplier sustainability assessment gathers and presents should be timely, proactive and objective. Each of these attributes is essential.

Timely: In view of the speed with which supplier failure can affect lean operations, traditional, dated financial reports are inadequate. What is needed is a rapid deployment supplier rating process that will provide early visibility to key financial performance indicators. In the same way, the company must be made aware of changes in its suppliers’ social or environmental risk immediately.

Proactive: The financial indicators being tracked must be leading indicators of coming performance, rather than reactive indicators of past performance. A proactive approach identifies potential risks, such as a supplier’s anticipated cash flow or credit problems, in advance, while there is still time to address these risks before they affect delivery of critical materials.

Objective: Just as suppliers are reluctant to share confidential financial information, they might hesitate to report comprehensive raw data on environmental or social concerns. In both cases, an effective way to overcome this reticence is through the intervention of an objective third party that can assure confidentiality. A CPA firm, for example, can analyze suppliers’ proprietary raw data; financial and otherwise and then report results to the buyer in abstracted, risk rating form. Confidentiality is thus maintained, and suppliers can be more forthcoming in sharing critical information.

What You Can Do Now

Developing and implementing a supplier viability initiative is obviously a long-term undertaking requiring ongoing commitment, but following are four immediate steps an organization can take to get started.

The first step is to identify the subset of suppliers that are most critical to the company, and then identify those about which the company is lacking important information; both basic financial viability metrics and longer-term corporate responsibility indicators. This analysis must consider the strategic objectives of the organization and incorporate an understanding of the risks that could have the most impact on these objectives.

Next, develop a credible set of supplier financial viability metrics that reflect your company’s specific supplier risk profile. Ideally, this will encompass a diverse set of inputs including data generally not available as part of traditional supply chain management.

Concurrently, develop a comparable set of corporate responsibility metrics. Begin with widely recognized standards and best practices, and then adapt them to reflect the particular environmental and social issues most pertinent to your business.

Finally, develop and implement a program for timely and accurate reporting of all key metrics, employing third-party intermediaries as necessary to encourage supplier compliance and openness. Third-party support is often critical because of the hesitancy of private suppliers (especially troubled ones) to share their information directly with the customer.

In all instances, the risks being mitigated must be weighed against the costs of accessing and presenting such information. The goal is to strike a pragmatic balance that accurately assesses critical economic, social and environmental concerns.

In today’s business environment, where supplier failure can pose an immediate risk, and where customers and other stakeholders demand greater transparency, such a proactive program for accurately and credibly assessing supplier viability and sustainability can be critical to a manufacturer’s continued success.

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Sustainable Urban Supply Chain Management

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Sustainable_Urban_Su_Cover

Supply Chain optimization is a topic of increasing interest today, whether the main intention is to maximize the efficiency of one’s global supply chain system or to pro-actively make it greener. There are many changes that can be made to improve the performance of a supply chain, ranging from where materials are purchased, the types of materials purchased, how those materials get to you, how your products are distributed, and many more. An additional question on the mind of some decision makers is. Can I minimize my environmental footprint and improve my profits at the same time?

Supply chains are critical links that connect an organization’s inputs to its outputs. Some challenges in the past included lowering costs, ensuring just-in-time delivery, and shrinking transportation times. However, the increasing environmental costs of these networks and growing consumer pressure for eco-friendly products has led many organizations to look at supply chain sustainability as a new measure of profitable logistics management. For many companies, the largest opportunity for improving sustainability performances such as reducing carbon emissions, water use, and toxic chemicals is in its global supply chain. For example, up to 60% of a manufacturing company’s carbon footprint is in its supply chain, for retailers, that figure is closer to 80%.

Companies must confront the reality that their supply chains can no longer be opaque. Stakeholders demand more accountability. If we add the financial benefits of energy and resource efficiencies to this mix, a sustainable supply chain makes long term business sense and creates a competitive advantage for companies worldwide.

“Going Green” is becoming a higher priority for companies large and small, as regulatory bodies and consumers around the world push for more readily-available information on corporate carbon footprints and companies’ plans to control / reduce their carbon emissions.

Many changes you make to your supply chain could either intentionally or unintentionally make it greener, so effectively reducing the carbon footprint of the product or material at the point that it arrives at your receiving bay. Under the right circumstances, if the reduced carbon footprint results from a conscious decision you make and involves a change from ‘the way things were’, then there might be an opportunity to capture some financial value from that decision in the form of Greenhouse Gas (GHG) emission credits, even when these emission reductions occur at a facility other than yours.

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Lean Government

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Lean_Government_Cover_for_Kindle

As Lean manufacturing and “Lean fill-in-the-blank” take root in mainstream business consciousness I am noticing more mention of “lean government” by politicians as well as press releases. I am afraid; to many people Lean government means something similar to the dreaded “lean and mean” or “lacking resources to pay for basic services”.

So what is a Lean government?

First let’s take an operational excellence approach to this question and outlined what we describe as 8 Workable Strategies for Creating Lean Government.
1. Synchronization to Customer Demands.
2. Understand Variations in Customer Demand.
3. Create Work Cells.
4. Eliminate Batching Work and Multi-Tasking.
5. Enforce First in, First out.
6. Implement Standardized Work and Load Leveling.
7. Do Today’s Work Today.
8. Make the Value Stream Visible.

While the above 8 workable strategies does a great job of explaining Lean transaction, it falls short of defining Lean government. Saying that processing information or serving customers one at a time in a flow synchronized to demand is Lean government would be like saying that having everyone working on an assembly line from call to cash in a manufacturing organization is the definition of a Lean enterprise. There’s simply more to it than that.

Perhaps if you do not have the type of government as we do in the U.S and Europe; with lawmakers who attempt spend tax payer money building bridges to nowhere. If you have a government that is free of these types of boondoggles then focusing on Lean transactions in the various ministries and offices may be a sufficient definition of Lean government.

But I am looking at the question of “What is Lean government?” from the perspective of the staggering basket of boondoggle that is the U.S. and European government. It’s a bigger target, so my definition of Lean government has to work harder. A Lean government is one that will:
1. Solve people’s problems based on facts, by using the scientific method.
2. Provide the highest quality of life to as many people as possible.
3. Do this at the lowest cost.
4. Do this as quickly as possible.
5. Do this in a way that is sustainable beyond your tenure in government.

Lean government is improving quality, cost, and delivery through kaizen.

Kaizen is about getting rid of waste, burden and variability in all of their forms. The U.S and European government are number one source of waste in the world. Why do I say this? The United States and Europe has the largest economy in the world. They have the largest tax base and collects the most taxes. They spends not only these taxes, but also what it can borrow from other governments! Much of the spending is waste. We are the champions of the world when it comes to government waste. It is shameful, but it is also a tremendous opportunity.

Lean government needs to address waste at both a strategic level (which pain should we relieve first?) and at a logistical level (how can we deliver the most relief as quickly and cost effectively as possible?). In our economy there are thousands of trained professionals who go to work every day to solve exactly these types of problems. Unfortunately, we don’t seem to have sufficient numbers of them at the top of government to make a significant difference.

Lean government is not about how civil servants or political leaders come to power. In the United States there is something fairly close to direct elections. In other countries there are monarchies. Neither system is inherently more or less wasteful. Common sense would suggest that a system of direct elections would do a better job of making sure that the customers’ voice (the will of the electorate) was reflected in policy and spending. Yet there have been benevolent dictatorships in history, as well as disastrous examples of popular rule.

Lean government is not about a balanced budget. Businesses also carry debt. Businesses take risks, shoulder debt and strike out in bold new directions from time to time. Governments are not too different in this way. Governments invest in infrastructure (build roads, airports), identify demographic trends (what the population will need in the future) and craft policy based on some combination of facts, faith and will of those being governed. The key is to do this with minimum waste and where there will be maximum effectiveness.

Lean government is not replacing the human capacity for making decisions with one strictly based on numbers. But a Lean government would certainly be more fact based than the faith-based Presidency enjoyed in the United States today. By their own admission facts come in a distant second to faith in today’s administration. I don’t know how to do kaizen without facts. I admire people who do.

In the absence of facts, I go with faith. In the presence of facts that do not agree with faith, I question the facts. But I generally regret it when I ignore the facts. It takes a kind of faith to rely on the facts that are presented to you when making decisions. A Lean government would learn from the factual results of these decisions, good or bad.

Economist Milton Friedman said “the business of business is to do business” or to make money in a sustainable way. The business of government is to redistribute wealth (tax and spend) for the maximum good of the maximum number of people in a sustainable way. A Lean government should do this as effectively as possible. That means doing it rapidly with low transaction costs while strategically avoiding boondoggles, also known fondly in U.S and Europe as pork.

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Lean Tools

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Lean Tools

Lean core idea is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources. “More for less”

Lean has a very extensive collection of tools and concepts. In this book we discussed the importance of these tools and our understanding of what they are and how they can help. This is an excellent way to get you started on your Lean Journey. We dedicated a chapter per tool; with a brief description and short explanation of how each tool can improve your business. If a tool captures your interest or resonates with you in some way; explore it further to decide if it is something to pursue now…or later. Many of these tools can be successfully used in isolation, which makes it much easier to get started. On the other hand, the benefits will compound as more tools are used, as they do support and reinforce each other.

A lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste. To accomplish this, lean thinking changes the focus of management from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers.

Eliminating waste along entire value streams, instead of at isolated points, creates processes that need less human effort, less space, less capital, and less time to make products and services at far less costs and with much fewer defects, compared with traditional business systems. Companies are able to respond to changing customer desires with high variety, high quality, low cost, and with very fast throughput times. Also, information management becomes much simpler and more accurate. A popular misconception is that lean is suited only for manufacturing. Not true. Lean applies in every business and every process. It is not a tactic or a cost reduction program, but a way of thinking and acting for an entire organization.

“Where do I start?” seems to be one of the most commonly asked, and most intensely discussed and debated, topic on the various discussion forums over the years. Yet a clear consensus hasn’t really emerged.

Normally I don’t wade into those discussions when the question is asked generically. The reason is that without specifics about the situation, it is really hard to answer. There isn’t a clear set of step-by-step directions that say “Start here” followed by (2), (3) and so on.

Here is how I look at it.

The theoretical end-game (which you likely never reach) is perfect one-piece-flow at takt time, with a perfectly safe work environment, producing 100% defect-free product, with no environmental impact, delivering it exactly when the customer needs it, without any wasted motion.

The practical end-game comes when the laws of physics and the limits of known technology become the limiting factors for further progress. (And even in that case, this is a usually a limit of human knowledge, which can be improved.)

The beginning is where ever you are!

There is no first step.
There is only the next step that moves you incrementally and tangibly toward perfection.

That next step is going to depend largely on what you are starting with.

The variation of starting points is what confounds the efforts to set down a formula. Any abstract attempt to answer the “Where do I start?” question must build in assumptions that answer the “Start from where?” question.

Here are a couple of examples.

If there is so much clutter and junk that people have to move things out of the way just to get work done, then absolutely, begin with the classic starting point – 5S. That can take anyone a long way as they learn to question why something is out of place, and come to realize that introducing new things into the workplace can will alter the way work is done. Best to do it on-purpose than randomly.

On the other hand, if the place is fairly neat, and most of the things are where they need to be, or close, and “looking for stuff” is not a huge impediment to the work, then I might be inclined to let workplace organization naturally evolve as part of the effort to establish some degree of stability.

If there is a hugely varying customer demand signal hitting the shop floor every day, calculating takt time is an exercise in frustration. If nobody believes it is possible to stabilize the demand, they aren’t much interested in hearing about takt. So the “first steps” might be to work on a leveling system so people have some solid ground to stand on.

It comes down to what is, right now, disrupting the effort to smooth out the work.

Maybe it’s quality and tons of rework. Then we have got to work on that. Or part shortages. Then at least contain the problem until a long-term solution can be put into place.

Sometimes it is leader’s knowledge. They don’t believe, or don’t understand, how improvement is possible. Countermeasure? Because “knowledge” is the next impediment to improvement, the “first step” becomes some kind of leader education, study mission, or other experience that is going to give them some confidence that they can do better (and it won’t be painful to get there).

If the organization has a lot of functional silos that are disrupting each other, it could be really beneficial to take a cross-functional team through a really deep exercise to understand how their system works and why it performs as it does. (this is a good time to use the current-state value stream map.)

How do you know?

Ah – and that is why people ask the question in the first place.
As much as I hate to say it, I think the answer is “from experience.” This is one place where it might be worth your while to bring in someone who has done this a few times and get an opinion.

But if they tell you where to start without first personally assessing where you are, I did question the quality of the answer. “There is no substitute for direct observation,” or, to use the Japanese jargon, genchi genbutsu. You can’t answer the question without first understanding the specific situation. At least I can’t, which is probably why I stay out of those debates!

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Lean Business

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Lean Business

Lean business principles lead to processes that minimize waste in delivering products or services to end users.

Lean Business Improvement focus on how you use your available resources in the most efficient way, without adding stress. Also providing effective methods and processes resulting in a calmer work pace since everyone knows what, when and how to do their job. To enable this it is important to have a company culture that sees every problem as an opportunity to become even better.

A lean organisation understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste.

To accomplish this, lean thinking changes the focus of management from optimising separate technologies, assets, and vertical departments to optimising the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers.

Eliminating waste along the entire value streams, instead of at isolated points, creates processes that need less human effort, less space, less capital, and less time to make products and services at far less costs and with much fewer defects, compared with traditional business systems. Companies are able to respond to changing customer desires with high variety, high quality, low cost, and with very fast throughput times; information management also becomes much simpler and more accurate.

A popular misconception is that lean is suited only for manufacturing. Not true. Lean applies in every business and every process. It is not a tactic or a cost reduction program, but a way of thinking and acting for an entire organisation. Businesses in all industries and services; including healthcare and governments are using lean principles as the way they think and do.

From the standpoint of lean thinking, value begins and ends with the customer. Customers require a particular product or service from your business, and you must provide it in the amount necessary and on the customer’s schedule. Determining the product or service that provides value to the customer stands as the first task for the business.

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Lean Retailing

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Lean Retailing Cover

If time is money, then being lean is both. Thanks to mega retailers worldwide, lean principles have rapidly spread to a variety of different manufacturers, such as consumer foods, apparel and food/beverage.

Over the past few years, these retailers have dramatically changed how they do business in order to stay competitive in the marketplace. How products are ordered, how inventory is moved throughout distribution centers and barcodes vs. RFID technology for inventory management have all been taken into consideration in order to work as swiftly and efficiently as possible.

While lean thinking has been rapidly expanding amongst large manufacturers and retailers, there are still a lot of companies that have hardly implemented any lean concepts.

At the end of the day lean is about adding value for customers; but how can companies do that while also reaping in benefits for themselves?

Lean opportunities for retailers fall into three basic categories:

1. Retail Strategy
For lean concepts to be successfully applied within a retail or wholesale organization, departmental strategies need to be aligned with and support an overall lean company strategy in order to efficiently function as one lean, cohesive machine.

2. Merchandise Management
When it comes down to it, efficiently managing merchandise comes down to having the right product at the right price at the right time. To achieve this developing, securing, pricing support and communicating the retailer’s merchandise offering effectively is of the utmost importance. Failing to manage merchandise using lean principles causes waste, taking away value from both the customer and the enterprise.

3. Store and Distribution Operations
Store and distribution operations tend to be where companies have the biggest amount of waste. Depending on how many stores are involved, it can be one of the hardest areas to manage, making lean principles seem unattainable. But distribution is all about optimizing trade-offs between handling costs and warehousing costs, maximizing the warehouse while maintaining low costs and minimizing time.

It’s All About the Customer

In a retail environment, it’s crucial to consider store operations and process improvements from the customers’ point of view before making lean improvements. Remember, what’s good for the customer is good for your business; it’s just about finding the right solution.

Analyzing in-store logistics can be very beneficial to becoming a lean organization.

In addition to those crucial last customer-facing moments in the retail environment, such as e-commerce, adds an entirely new layer of challenges to becoming a lean organization.

Identifying where customers will see value across all channels and applying lean concepts to these areas is crucial in retail and wholesale environments in order to succeed in today’s competitive market.

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Lean Banking

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Lean_Banking_Cover_for_Kindle

The principle of lean banking is all about identifying areas of waste and inefficiency within a banking Organisation, and applying proven methodologies to generate high quality solutions. The aim of this book is to help banks improve their customer experiences, get the most out of their staff and reduce monetary and other forms of waste wherever possible.

In response to the recent economy’s woes, banks have placed a growing premium on reducing costs and improving operational efficiencies and many banks have turned to lean programs as a useful tool. Most of these banks will find themselves disappointed, however, because few lean initiatives, in our experience, deliver the expected results. The near and longer-term impact on costs proves to be far less than expected, and any gains in efficiency prove to be either temporary or too limited in scope to make a real difference. There is no fundamental, lasting change in the way the bank conducts its operations and hence little impact on long-term performance.

The problem is not with lean itself, however. Indeed, we believe that lean has much to offer banks. The problem lies in the approach and implementation. Typically, banks go wrong in one of two ways. One, they apply lean too narrowly and from too limited a perspective. There is no cohesive, end-to-end view of the process itself or the alignment of all of its elements. Alternatively, the effort is driven solely from the top down and fails to engage and involve the key people who actually perform the critical tasks within the process. This leads to a lack of process ownership and accountability. The end result, in either case, is that the lean effort delivers only a fraction of its potential benefits.

In this book, we discuss what we consider to be the optimal means of deploying lean in the banking sector. Specifically, we advocate a holistic lean program that addresses underlying processes and employee behaviours and attitudes. We also recommend an incremental, pilot-based approach to adoption, one that allows banks to generate quick wins and establish a culture of continuous self-improvement. These elements, we believe, can mean the difference between an unsuccessful lean initiative and a truly transformational one.

Finance leaders are facing a hailstorm of accounting, regulatory, and management challenges, creating pressure to improve the efficiency of Finance and information quality. Externally, stakeholders and regulators demand more transparent and reliable information in less time.

Internally, business leaders require fast, accurate, and increasingly transparent information to support smart, informed business decisions. Meanwhile, overlapping and inconsistent data, manual reporting, disparate systems, and aging technology lead to poor information quality.

By reducing costs and releasing capacity, Lean can contribute significantly to the bottom line. Financial institutions leveraging Lean report results of 20-30% cost reduction within 12 to 18 months and maintain cost-efficiency ratios below the industry average. Unlike other process improvement methodologies, Lean does not require significant capital investment. Lean concepts and tools are relatively easy to learn and apply and often boiling down to common sense.

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5S Office Management

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5S Office Management

When was the last time you saw your desktop?

If your answer is, “Hmm…I don’t really remember,” do you realize how much time and energy you are wasting just looking for stuff? I am guessing that you already know you are wasting time. Or maybe you are so embarrassed by your messy office that you don’t even let clients see it. You end up meeting with clients in a conference room. You did like to get your office cleaned up, but you have no idea where to start.

Let me suggest a concept called; 5S. 5S is an organizational tool born out of the Toyota production system called Lean.

The basic idea behind 5S office management is that a messy office is full of waste. Not only the waste you can see, i.e. the mess; but the time wasted in looking for the right file, your phone, eye glasses. You get the idea. (Caveat: Lean tools like 5S are designed to work together to create a synergistic whole. Ideally, they should not be implemented individually, but rather as a part of an entire Lean organization. That being said, 5S is something you can implement today, with the understanding that your goal is to create a more effective and efficient office as a whole.)

One of the first tools everyone seems to jump to is 5S. Lets implement 5S to start our lean office journey, whether that is the right answer for them or not. On the manufacturing floor, 5S is more straight forward. Employees may not like it at first but 5S has an easier time getting accept on the manufacturing floor.

The flip side is in the office. 5S is very applicable in the office but harder to apply appropriately. I can’t count how many times I have heard, “You are not taking my pictures away from me.” or “It is stupid to label my phone and stapler. I know where they are and where they go.” Who am I to argue? I totally agree and would feel the same way.

When I stopped to think about it, people felt this way because of the improper understanding and/or execution of 5S in the office. Most likely someone came in and dictated how they were going to clean up their area and label everything and they would be graded on it.

That is not the intent of 5S. It is to quickly surface problems so they can be recognized and addressed.

So when and how does someone apply 5S to the office appropriately?

The first answer is when it is a shared space. If someone else will have to use the same area or desk to do the same or similar work, then this is a place that 5S can help. Just like the manufacturing floor someone can come in and spend too much time re-arranging the desk area for their work or spend too much time looking for something that is out of place. Unlike your own personal desk that no one else will use. If no one else will use it, then why label, because you know where everything is. Even “messy” people have a system so leave it be.

A company that I visited recently did a great job of applying 5S to the office. The work was processing layouts through a computer system. People had their own desk, but could have to share it with others. So if Mike left on vacation, Maureen would come to his desk to do that work, because no matter what the layouts had to be processed that day. So they standardized the colour of the folders for “To Be Done”, “In Process”, and “Completed”. They standardized what drawer the folder went into when completed and how the work area was laid out for the work. The work area was the computer and the things directly around it to get the job done. They also standardized where their visual signal for needing the next job was on the desk so no one had to search for it. The rest of the area was for Mike to personalize with his pictures, calendars, and what not. It did not interfere with the work that was needed to be done.

The group became more efficient and standardized without losing any personalization because of this, for 2 years this worked very well and there was ownership. The only reason it isn’t around now is because of new technology that eliminated that work. The challenge is to know when and how to use 5S, especially in the office.

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Reshoring

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Reshoring

Reshoring is essentially the opposite of offshoring, it is a term used to describe the act of bringing back offshored manufacturing to a country.

A number of American and UK companies moved their manufacturing facilities to Asia in search of lower costs; Recent survey found that a little over a third (37%) of those with annual sales above $1 billion said they were planning or are seriously considering moving their production facilities away from China and back to America or UK.

When asked why they would be bringing manufacturing to the U.S. or UK, most companies said it was because of the increasing labour costs in China.

The International Labour Organisation revealed that real wages in Asia rose by 7.1-7.8% a year between 2000 and 2008.

In the beginning of 2011, for the most part, most people thought that this was just impossible, that there would be no reshoring to the U.S. or UK, that everything was going to China, manufacturing was leaving the country and will never come back and I think the striking thing is how much that’s changed in the last three years.

You went to China because it was just so cheap you couldn’t help it, But if you’ve got the engineers and people in the U.S. or UK, and the customer base in the U.S. or UK, you’d like to be close to the customer. It gives you a shorter supply chain.

Below are number of reasons why companies are reshoring, such as:
1. Improving the quality and consistency of inputs.
2. Enhancing the ability to respond to customer demands.
3. Reducing the Total Cost of Ownership.

There are reasons why a government would want to encourage reshoring, such as; bringing jobs back home, balancing budgets, helping recruits enter the workforce, and improving the country’s defence industrial base.

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