The journal where Craig’s work was published was one of seven in a pool of contenders for the prize, which was judged by top researchers at universities in North America and Europe.
The winning paper breaks new ground in the field of retail research, which largely has examined business-to-consumer relationships in the past. Craig and his co-authors moved upstream in the supply chain to focus exclusively on the relationship between supplier service levels and retailer demand. By conducting a field experiment at Hugo Boss, Craig and his team were able to quantify the impact of a supplier boosting its fill rate, or the percentage of a customer order satisfied by a shipment. Specifically, an increase of only 1% in supplier fill rate lead to an 11% increase in retailer demand.
What does this mean for suppliers to retailers? Even the best ones, Craig and his team found, can fuel substantial increases in retailer demand by working toward incremental service-level gains. And those who ignore this link are missing out on a prime opportunity to boost profit and grow market share.
While only about two in every five undergraduate supply chain-focused students at universities are women, they hold a scant 3 percent of executive-level leadership roles at Fortune 500 companies. The Management Sciences department at Fisher College of Business this fall has launched a new initiative seeking to grow those numbers at both ends of the pipeline.
The department this academic year welcomed its first round of scholars in the Pathways for Women’s Excellence in Supply Chain program, a group of eight first-year undergraduate women at Fisher College of Business. Each student has received a $2,500 scholarship, funded by this year’s Pathways Scholars sponsors: Columbus-based Motorists Insurance Group and Wendy’s Quality Supply Chain Cooperative.
Management Sciences Department Chair Ken Boyer said he worked to launch the program for reasons both personal and practical. He’s the son of one of the first women to earn a bachelor’s in mechanical engineering from the University of Wisconsin 60 years ago.
“Barriers to women in a variety of professions have been greatly reduced in the intervening decades,” Boyer said. “Unfortunately, this is far different from saying there are no challenges.”
Indeed, data from research firm Gartner shows women staff only 20 percent of supply chain leadership roles at the director level and higher. This comes as the nation’s supply chain workforce faces a troubling shortage as waves of baby boomer retirements crest.
Krista Pohlman, senior director of program management for Wendy’s QSSC, said developing the company’s talent pipeline was a key motivator in signing on to fund the Pathways Scholars program.
“We really want to be a world-class supply chain organization,” Pohlman said. “To collaborate with Ohio State in an effort to bring more women into this industry is something we’re immensely proud of.”
Ralph Smithers, assistant VP of Associate and Community Engagement at Motorists, said the company approached the opportunity with similar goals.
“We’d like to increase the number of women in the supply chain management field, and it’s a great opportunity to work with Fisher on this,” he said.
The scholars in the program, in addition to their funding, connect with mentors from Motorists and QSSC over the course of the year and receive coaching from Fisher professors. They also connect with supply chain organizations through several exclusive events hosted throughout the year. Already this fall, the students have toured Wendy’s and Wendy’s GSCC, attended a National Association of Women Business Owners conference, and met with supply chain leaders from JPMorgan Chase & Co., Nestle USA and DSW Inc.
Ultimately, Boyer said, the participating students will be well-positioned to find supply chain leadership roles as they enter the workforce.
For information on the Pathways program and sponsorship, check out its website or contact Ken Boyer at firstname.lastname@example.org.
An unconventional effort to reform Ohio’s K-12 education system is sending a new pack of leaders out with more than an MBA from Fisher College of Business and a certification to serve as a principal.
They can wield some foundational operational excellence tools, as well.
Fisher this summer graduated 30 students as part of the BRIGHT New Leaders for Ohio Schools program after they spent nearly a year working as administrators in high-poverty schools around the state and completed an accelerated MBA program at Fisher. The program, launched in 2015 with $3.5 million in state funding and help from Fisher and the Ohio Business Roundtable, takes business professionals from a variety of backgrounds – largely non-education – and deploys them throughout the state as principals. BRIGHT fellows, as they’re called, must serve as a school administrator for at least three years after graduation.
At a presentation prior to graduation, a number of BRIGHT fellows showed the results of their work tackling the A3 problem-solving methodology, one of a few tools Center for Operational Excellence Executive Director and BRIGHT educator Peg Pennington introduced to the curriculum.
“The BRIGHT program itself is an experiment, so I thought to myself, ‘Why not do an experiment of our own here?’” Pennington said. “These problem-solving skills – A3s, root-cause analysis – are powerful tools anywhere, and I think they can really help cut to the heart of some of issues that plague our education system.”
For the BRIGHT fellows, those issues included lagging math and reading scores, a lack of collaboration between upper- and lower-grade students and educators, truancy, and discipline referrals, among others. Pennington in her classes with the BRIGHT fellows showed how the A3 and root-cause analysis can properly define the problem and, medically speaking, move past managing symptoms to truly treat the underlying ailment.
David Maile, a longtime plant farm owner who transitioned out of the business two years ago, signed onto the BRIGHT program and found himself as an administrator at Highview 6th Grade Center in the Cincinnati suburb of Middletown, where the poverty rate has jumped from 9 percent to nearly 14 percent in about 15 years. Maile leveraged root-cause analysis and A3 problem-solving to improve math scores in the school, where he said much of the challenge was in bringing a level of consistency and precision to data collection.
Other process-improvement projects were of a more qualitative nature. Jeff Greenley, a lawyer by training, worked in the Switzerland of Ohio School District in Appalachian Ohio, the highest-poverty region in the Buckeye State. Greenley’s school housed a wide age range of students that rarely interacted, in large part because they didn’t see the value in it. Greenley did.
After defining the problem via an A3 and enacting countermeasures, Greenley finished the school year with more than four in five upper-grade students helping out and interacting with elementary-age students. The A3 process, he said, was eye-opening.
“There are not a lot of tools at our disposal in education to think about operational problems,” he said. “This is a hammer we can use to hit the nail.”
Regardless of the challenge, the BRIGHT fellows discovered very quickly that data was a crucial asset in their problem-solving journey – even if it wasn’t used as such in their schools. Astrid Arca, an economist for the state of Ohio, served in the same Appalachian school district as Greenley and took on the challenge of improving reading and math schools in a student population with a high percentage on so-called individual education plans. The data needed to cut to the heart of the problem, Arca found, existed – but weren’t being analyzed to inform instructional practices.
“There was almost a fear of the data,” she said, “and most of my job was removing those barriers.”
BRIGHT leaders are hoping that spirit has a transformative effect in the schools where its graduates are heading this fall and beyond, even if the difference in background for many fellows hasn’t gone unnoticed. Deborah Copeland, a BRIGHT principal coach with a nearly 30-year background as an elementary school principal, acknowledged a level of skepticism around “outside” people taking a leadership role in education. Often, she said, it just takes spending time alongside the fellows to see that they have the skills and capability to drive change.
“It’s been a joy watching these fellows coming in with a different perspective, full of hope and promise and not weighted down by the barriers that those of us who’ve been in the trenches often get blinded by,” Copeland said.
The BRIGHT fellows themselves are the source of a telling data point: About 90 percent had K-12 principal or assistant principal jobs locked in at the start of the school year.
A group of undergraduate operations students at the Fisher College Business bear the distinction of being the first in the world to earn a new professional certification seen as a stepping stone another key resume-booster.
A total of 15 Fisher students recently passed a version of a new exam through the American Production and Inventory Control Society (APICS) to earn the “Global Supply Chain Associate” (GSCA) designation. This brand-new designation is the culmination of a year’s work among faculty at several universities nationwide, including Andrea Prud’homme, a clinical faculty member at Fisher who also serves as an associate director for the Center for Operational Excellence. The Fisher students took part in a test launch of the program, which is set to roll out internationally this fall .
Prud’homme said a key motivation in creating the GSCA designation was the fact that undergraduates often don’t have the time or money to pursue the well-known Certified Production and Inventory Management (CPIM) designation.
“This gets them started should they wish to pursue CPIM certification,” Prud’homme said. “Additionally, many of the companies that hire our undergraduates provide incentives and support for new hires to become CPIM-certified.”
Spotlight on MassMutual at IT Leadership Network forum
After a visit from Menlo Innovations CEO and Joy Inc. author Rich Sheridan May 13, COE’s popular IT Leadership Network forum series returns June 3 with a presentation from Dalton Li, a vice president who leads the continuous improvement practice for $29 billion-a-year MassMutual Financial Group.
In this session, which kicks off with a networking breakfast, Li will provide an inside look at MassMutual’s approach to lean deployment, its coaching strategy, and its support system for sustaining gains. Li began his career as a nuclear submarine officer based in Annapolis and later served as an assistant professor for the U.S. Navy before working at consultancy McKinsey & Co. for six years. He joined MassMutual in his current role in 2012.
Formal invites for this session are set to go out early the week of May 2.
Innovation Summer series
Just a few weeks later, COE kicks off a three-part “Innovation Summer” series led by Associate Director Aravind Chandrasekaran. This series, set for June 16, July 14 and Aug. 18, tackles questions including: How can companies leverage lean/Six Sigma practices to build more agility for innovation teams inside their organization? How can they carry those across the supply chain? And how can these best practices cultivate an idea from its earliest stages?
Across this trio of sessions, you’ll hear from innovation icon 3M, Buckeye/NFL greats and business owners Bobby Carpenter and Anthony Schlegel (pictured, left), and more.
Registration for the first of the three sessions will open the week of May 9.
‘Build Your Brand’ workshop
COE’s semi-annual Women’s Leadership Forum series returns June 24 for a workshop with Krista Neher, CEO of Boot Camp Digital. This “Launch Yourself” session will help attendees define, design and deliver a powerful personal brand online.
Registration for this limited-capacity session will open the week of May 16.
Check out COE’s events page for save-the-dates on additional events into the fall and through 2017.
Furthering Fisher College of Business’ reputation as a top operations research powerhouse, a Management Sciences professor recently received honors from a major engineering journal.
IIE Transactions, the flagship journal of the Institute of Industrial Engineers, honored Fisher Prof. W.C. Benton Jr. with the ‘Best Paper’ award. He’ll be formally acknowledged at the publication’s research conference in May.
Benton’s award came for his “Determining Core Acquisition Quantities When Products Have Long Return Lags.” This research tackles a common problem for closed-loop supply chains: Having a sufficient supply of reusable products, a tricky balancing act between accidental shortages or inventory overloads. Benton in his research culled live data from original equipment manufacturers and remanufacturers to develop a new forecasting approach that better balances product returns with demand volume.
At Fisher, Benton is the Edwin D. Dodd Professor of Management and a professor of operations and supply chain management. He’s a prolific researcher whose more than 120 articles have appeared have appeared in publications including the New England Journal of Medicine, Journal of Operations Management, and many others. He has consulted for a wide variety of public- and private-sector entities throughout North America.
by special contributor Nathan Craig, asst. prof. management sciences, Fisher College of Business
The retail shopping experience today is one of incredible convenience for customers and extraordinary complexity behind the scenes.
Customers have grown accustomed to the seemingly sleight-of-hand ease with which many retailers stock shelves and fill online orders, while their supply chains are under increasing pressure to keep up. For suppliers and retailers alike, a blip that keeps a shelf empty or stalls a shipping date is an invitation for competitors to creep in—or for customers to take aim on social media.
Retail, in short, has never been better positioned to deliver the multi-channel experience customers crave. But the stakes have never been higher. One slip in the journey from factory floor to customers’ hands costs time, money and brand loyalty.
Major supply chain disruptions—natural disasters and strikes, to name a few—might catch headlines, but they’re rarely the culprit behind empty shelves. The kinds of problems that wreak the most havoc, we’ve found, might surprise you.
Correctable and costly
Our research, published in the Journal of Operations Management, comes after years of examining how retailers can better leverage their vast supplier networks to improve the end consumer experience. These opportunities are exciting and lucrative. An earlier collaboration that examined supplier management practices at Hugo Boss found that increased supplier reliability can increase both demand for a brand and the supplier’s profit, even in the face of expense-adding measures that strengthen the supply chain.
Modern retail techniques such as online ordering, in-store pick-up, and pack-by-store distribution pay dividends in a fast-paced industry with razor-thin margins. But executing these practices is challenging, creating chances for suppliers to miss the mark. Even if the retailer properly forecasts demand, products can get stuck in supply chains.
We spent months scouring data on supplier errors at a major distribution center (DC) for a 700-store retailer—for anonymity’s sake, we’ll call this big-box chain Omega. Examining a full year of Omega’s orders from its suppliers, we found about 7 percent of all orders suppliers delivered deviated from Omega’s specifications. Less than half of these, however, were “classical” errors such as late delivery and short quantities. The majority of the errors involved the complex labeling, packaging, and information exchange requirements that support modern retail supply chains.
These errors are correctable, but doing so costs time and money. If a supplier doesn’t properly document an inbound shipment, it can’t run through the retailer’s automated receiving system. Instead, the retailer’s employees must manually inspect and identify the shipment. Products with incorrect price tags, packaging, or display elements (like hangers) must be adjusted by the retailer’s employees before hitting the selling floor.
Research in the retail arena has paid little attention to these correctable errors, which we’ve found are more frequent than others and come with substantial costs. Rework time and labor hours for correctable errors alone, we calculated, could cost around 5 percent of the Omega DC’s annual operating budget. That’s close to $25 per product per year on average across hundreds of thousands of items. Extrapolating from Omega to the retail industry suggests that these errors cost retail supply chains billions of dollars annually.
Chargeback, move forward
If retailers have had difficulty determining the financial impact of these frequent, correctable errors, they’ve had even more when it comes to properly recouping costs from errant suppliers.
Retailers’ chief weapon in reducing the immediate cost of supplier errors is the so-called chargeback, which docks supplier revenue after errors and can shave up to 10 percent off the supplier’s top line. Our research found the Omega DC’s supplier chargebacks often under- or overestimated the cost of rework, even when doling out millions of dollars in penalties per year.
Hitting the mark on chargebacks not only could stabilize retailer revenue but avoid the contract disputes endemic in these arrangements. To help retailers get there, we’ve analyzed the kinds of products most harmed by fulfillment errors and found a way forward for retailers working to balance fluctuations in supplier performance with their own inventory holding policies.
The answer for each product is far from clear-cut and entails a number of factors, all of which have a complex interplay. How much does it cost to hold the product? How tight is the margin? How damaging to the retailer is it to have pent-up, unsatisfied demand?
Understanding how all these factors interact lets the retailer maximize its improvement efforts and helps prevent knee-jerk reactions to improving supplier performance. Depending on the product and supplier, a retailer might benefit more from simply padding inventory than burning time and money on boosting reliability.
With a global network of hundreds of thousands of suppliers making the modern retail machine run, it pays dividends for retailers to be efficient and effective as they keep apace with customer demand. Especially when one wrong bar code can do so much damage.
A longtime staffer in Fisher College of Business’ Management Sciences department was honored this week with a top service award from The Ohio State University.
Laurie Spadaro, assistant to the department chair in Management Sciences, received the Distinguished Staff Award, given to only a dozen staff members each year who have served the university for at least five years. Spadaro joined Ohio State nearly 18 years ago and has been with Fisher for 11 years.
Staff are nominated for their work in making a significant difference for colleagues or customers, providing outstanding and ongoing excellence in service, and developing creative solutions to problems that ultimately make their department more efficient and effective.
Department Chair Kenneth Boyer in his nomination called her the “heart of the Management Sciences department” who’s never afraid to problem solve and innovate. Associate Professor James Hill, meanwhile, said Spadaro’s “willingness to contribute to the team, her positive attitude and her selfless approach to her job have assisted in building a department faculty, staff and students can be proud to be a part of.”
Spadaro also has maintained a commitment to continuing education, attaining her bachelor’s in business administration in 2013 from Mount Vernon Nazarene University and earning a Lean Six Sigma Yellow Belt through MoreSteam.com this year.
Fisher College of Business and Shelton, Conn.-based Productivity Inc. this week announced the launch of the Lean Manager Certification for Services program, the first session of which is set for Jan. 26, 2015. The program teaches senior- and mid-level managers how to apply lean principles in the pursuit of process excellence through a blended learning model of in-class work and on-the-job application. It’s an offshoot of Fisher’s Lean Manager Certification Program, whose fall session wraps today.
The program is designed for those in the insurance, banking, government, retail, laboratory and health-care sectors, along with those on the service process side of manufacturing.
Lean management techniques have their roots in the manufacturing sector but have rapidly been taking hold in the services sector in recent decades. The Center for Operational Excellence at Fisher, for example, began as the Center for Excellence in Manufacturing Management in 1992 and was renamed a decade ago, reflecting broader industry membership that today includes Huntington Bank, Grange Insurance, Nationwide Insurance, Cardinal Health, and others.
Click here for a brochure on the new Lean Manager Certification for Services program.
A new survey on operations management in U.S. middle-market companies shows them uniquely positioned to make sustainable process improvements but still trailing their larger peers in developing formal implementation programs.
For example, 70 percent of the 250 mid-market C-suite executives surveyed said their companies flag and discuss problems instead of covering them up, a building block of operational excellence practices. Only 60 percent of the 150 C-suite executives in $1 billion-plus companies surveyed said the same, by comparison. Similarly, roughly two-thirds of mid-market companies say they dig deep for the root cause in problem-solving efforts instead of seeking a quick fix, up from 55 percent of larger companies.
Both mid-sized and larger companies, though, appear to have the same Achilles heel: Sustaining gains once they’re implemented, perhaps best-reflected in how they fared in daily management measures. Roughly two-thirds of both mid-market and large companies said they expect their leaders to visit operations frequently, but that same vigilance isn’t applied to other daily management system components, namely just what, exactly, these leaders will see. Only about half of all companies surveyed said visual controls are maintained at all levels of the organization.
Results on the whole point to a high rate of success for middle-market companies seeking big improvements in operational effectiveness, in no small part because of their size.
“(Mid-market firms) are large enough to institute formal processes but small enough that their leadership is still closely involved in the day-to-day functions,” Dr. Ward said. “Leaders can be closer to the work of the business, which helps them to communicate strategic goals, be more involved in developing the skills of employees, and recognize and solve problems as they arise.”
A gap still appears to exist, though, between mid-market companies’ agility for operational excellence and their formal execution efforts. Only 41 percent of surveyed middle-market firms said they implement some sort of operational excellence method, which ranged from Six Sigma and Lean to Toyota Production System and Theory of Constraints. Nearly three-quarters of their larger counterparts said the same.
This gap, Dr. Ward said, likely stems from a greater tendency among mid-sized firms to use these programs in an effort to improve customer satisfaction. This outcome can have more varied, and even nebulous, payoffs than results on a balance sheet, making it more difficult to justify a continuous improvement push from an ROI perspective, he said.
Middle-market firms can take heart, however, in one key measure on the same front: For those that make a Lean or Six Sigma push, they’re deemed more successful than larger companies.