The Rapid Response Institute

Tag: supply chain

  • Why Corporate Initiatives Fail

    Why Corporate Initiatives Fail

    According to the Cambridge Dictionary, one definition of initiative is. “A new plan or action to improve something or solve a problem.”  In corporate parlance this often translates into yet another short-term and often politically correct effort to demonstrate forward motion/social citizenship.  Often forgotten faster than the evening news cycle as new searches for performance take their place.

    Organizations of all types, public, private, profit and nonprofit etc. tend to announce new initiatives with great fanfare and pronouncements about ‘transforming our culture.’  So why do they continuously fall short of expectations?

    According to a Forbes Survey released just before the pandemic, “When participants in our survey were asked to create a list of reasons for (change programs) failure, ‘insufficient budget’ was cited by 23% and ‘insufficient time’ by only 17%.  Instead, participants ranked poor communication (62%), insufficient leadership and support (54%), organizational politics (50%), lack of understanding of the purpose of the change (50%), lack of user buy-in (42%) and lack of collaboration (40%) as the most critical issues.”

    In aggregate, the article suggests a total failure rate of70%.  This percentage level was first put forth in the early 1990s and is accepted by many as still correct today.  While empirical evidence is sketchy, none-the-less, the perception of failure remains high.

    This tracks with other project failure statistics this author has seen over the years.  Yet, all of these failure attributes are human and therefore, manageable and correctable.

    Today’s Buzz

    The economy is always front and center.  More so today given Inflation and Supply Chain problems.

    In this blogger’s opinion and in order of priority other key issues include Diversity, Inclusion and Equity (DEI), Climate Change and Environmental, Social and Governance (ESG).  While different organizations may face other challenges, these Four tend to dominate the news.

    Often issues overlap or compound, thus exponentially amplifying the impact on society.  For example, the electric vehicle (EV) is touted as a lynchpin to ‘fixing’ the Climate Change issue.  However, supply chain issues currently limit battery production and one can surmise this is a long-term problem and not simply current shortages or delays.  If this is correct, meeting desired climate metrics is problematic.

    Diversity, Equity and Inclusion

    Perhaps the most emotional of the Big Four, DEI seeks to level the so-called playing field for all regardless of ethnicity, gender or behavioral preferences.  Almost all organizations have a DEI Initiative underway.  Yet, they seem to be stalling much to the frustration of advocates.

    According to one source, “The DEI industry is dominated by what scholars call ‘personnel managers,’ employees in human resources.”  This is also the observation of this pundit as well.

    LinkedIn profiles include, Chief Diversity Officers, any number of DEI consultants and others carrying similar titles as well as commercial organizations offering DEI products and solutions.  Much like the plethora of Safety Culture ‘experts’ and tools that emerged after Deepwater Horizon offshore drilling rig disaster in 2010.

    From a recent Korn Ferry article, “Experts say companies must treat DE&I as they would any other business issue and use data analytics to understand why things aren’t working.”  This author interprets this to mean that DEI must be incorporated into ‘the way we do business‘ or part of the organization’s culture.

    No longer a simple initiative, the next Chief Diversity Officer may be a Caucasian male or even redundant.  Then, DEI will no longer be seen as a separate and different department.

    Energy Transformation

    The president of the United States recently said, ““ it comes to the gas prices, we’re going through an incredible transition that is taking place that, God willing, when it’s over, we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over.”  As many countries implement Climate Change policies, this transition is economically rough to say the least.

    And with no guarantees that these efforts will actually reduce the earth’s temperature decades out, is this a Big Bet with major consequences to all of us.  In our last blog, Innovation: The Key to the Global Future we addressed the economics in detail.  Interested readers should refer to that piece.

    An extensive assessment was developed by Bjorn Lomborg in his latest book, False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet.  His credentials include the fact that he believes in global warming and is not a ‘denier’ as the phase goes.

    Caution to the lemmings jumping off the Energy Transition cliff, this is the ultimate initiative as it is political by nature.  Fickle by nature, political winds can change quickly and with that the value proposition.

    To some extent we are seeing this already as governments seek to address spirally energy costs, i.e., Germany restarts coal-fired power plants.  We might see more of this after the US midterm elections in November.

    ESG

    This initiative is treated as if it is new.  Well run companies have always enjoyed higher equity value.

    In 2011, we published our White Paper, Asset/Equipment Integrity Governance: Operations–Enterprise Alignment.  In that paper, we quoted, “During that period (2002), McKinsey & Company in conjunction with the Global Corporate Governance Forum conducted a study and found that over 75% of over 200 fund managers would value a stock at a higher price point if the company could demonstrate it had strong governance in place.  Moreover, the study also revealed that for western markets, firms with strong shareholder rights averaged 12-14% higher stock prices.”

    We previously addressed ESG in detail and how it fits in our Relationships, Behaviors, Conditions (RBC) Framework  (risk mitigation).  The operative word is Relationships.  This will include every stakeholder, so the impact can be substantial.

    For some organizations, ESG is new and the source of value in the annual Letter to Shareholders.  For others, business as usual incorporates those premises.  Begs the question, which organization would you like to invest in?

    Concluding Thoughts

    In this corporate animal’s experience, initiatives are seen as short-term events.  Leadership’s ‘rubber stamp’ does not carry gravitas.  Employees often ‘wait them out’ and go just about their business.  Others create media splash which dies quickly as well.  Only when change is codified in the organization’s culture do new approaches add sustained value.

    Initiatives fail because neither the board room nor the factory floor see them as adding value.  Fads driven by political winds, activists or social desires come and go.

    Strong governance is a proven value add.  A diverse workforce can add value but climate change as currently practiced will most like fail and fail Big and Expensive.  Society has addressed similar economic issues and will again.

    Are Your Organizational Initiatives Sustainable or Simply Fads?

    For More Information

    Please note, RRI does not endorse or advocate the links to any third-party materials herein.  They are provided for education and entertainment only.

    The author’s credentials in this field are available on his LinkedIn page.

    Disclaimer, the author has no personal or business relationship with Bjorn Lomborg or his publications other than reading and commenting on his latest book, False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet.

    For those start-up firms addressing energy challenges, the author is a member of Global Energy Mentors which provide no-cost mentoring services from energy experts.  If interested, check it out and give us a shout.

    For more information on Cross Cultural Engagement, check out our Cross Cultural Serious Game.  You can contact this author as well.

     

  • A Windy Position

    A Windy Position

    In a recent online discussion, this pundit put forth the thought that fiberglass wind turbine blades can pose an environmental problem when decommissioned.  This position was quickly challenged with the rebuttal that burning coal ‘kills’ kids so it did not matter if discarded blades litter the countryside as it is worth it.

    According to research quoted by the European Wind Energy Association, “With wind turbine blades likely to account for some 50,000 tons of waste annually by 2020, growing 4 times by 2034 the landfill is not a viable long-term solution.”  Moreover, “Findings from the University of Strathclyde indicate a global increase of wind turbine blade waste from around 400,000 tons per annum in 2030 to around two million tons by 2050.”

    My rebuttal to the kills kids argument–what will this do to global population health?  Keep in mind, this is only one source of industrial (and consumer, i.e., EV automobiles) decommissioned assets.

    Disposal/Recycling

    “Glass-reinforced polymer composites (GRP), used in wind turbine blades around the world, is recognized as a hard-to-break-down source of pollution.”  Research is underway to address this problem and mostly likely progress will continue going forward.

    “Currently only a few recycling techniques are available to treat such an enormous quantity.  So most have been landfilled and many continue to be buried today.”  Other current options include:

    • Grinding–turning fiberglass into powder.  A labor intensive process that provides filler for other purposes
    • Incineration–the ash is usually disposed of in a landfill

    • Pyrolysis–decomposes into three recoverable substances: pyro-gas, pyro-oil, and solid byproduct— all of which can be recycled

    “While the overall life of the wind turbine does cause less pollution than coal-fired power plants do, the initial solution of just burying the fiberglass doesn’t seem in line with the goal to cause less pollution.” (Ibid)

    Really?  How is this saving the planet?

    Clearly, these alternative disposal processes have a financial cost greater than simply burying the blades.  If not, they would be used more frequently.

    Future generations will have to address this issue much like the current one continues to deal with asbestos from the past.  The KIDS will end up dealing with and paying for the folly of their parents and grandparents.

    A Contrarian Posture

    As noted, there is a romanticism about renewable energy sources, most commonly wind and solar.  However, we believe in the ‘no free lunch’ model.  There are risks and cost associated with every form of energy.

    In two recent editions, Heavy Metal Rocks and Going Green? Or NOT! we took an initial look at the financial cost over the renewable lifecycle as well the environmental impact that will need to be addressed.  The edition is a continuation of the premise that, “Technology Romance must be met with Fiscal Realities.”

    Society will eventually recognize the environmental damage done by solar and wind energy systems can be very high.  By then, the harm may have been done.

    As an example, many oil and gas assets are approaching end of life.  The decommission costs are very high and increasingly regulations are changing to hold asset owners accountable for these costs.  Generally, accountants refer to these as Reserves.

    Shouldn’t renewable asset holders be required to set aside reserves to cover the disposal of assets as well?

    Lifecycle Cost Structure

    For capital assets with significant planning, development, manufacture, deployment, operations & maintenance and finally decommissioning costs there is another dimension.  The Asset Maturity Model was developed to assist management understand how to best maximize asset performance over decades, in some cases.  This model is integrated into an economic value model which we be discussed herein.  There are also a number of tools and standards available to assist management, such as ISO 55001–Asset Management.

    In April 2022, Bloomberg published a piece, “Wind Power’s ‘Colossal Market Failure Threatens Climate Fight.”  The Global Wind Energy Council deemed the current wind energy situation a ‘Colossal Market Failure.’

    Blaming a mismatch (alignment) between governments policies and current markets, the risk is not only that net zero targets will not be met but the supply chain is contracting.  Moreover, one study suggests that for the US net-zero policies will cost more than 12% of our Gross Domestic Product (GDP) in 2050.  To put this in perspective, today Social Security cost 5% of GDP and Medicare/Medicaid 6.4 percent–11.4% combined.

    The ‘lack of alignment‘ is a major determent to successful organizations.  In our recent blog, ESG Explained we discussed the role organization and its ecosystem governance at length.  Building on our 2011  monograph, Asset/Equipment Integrity Governance: Operations–Enterprise Alignment; A Case for Board Oversight (AEIG) we developed the case for Operational Excellence as part of ESG.  Energy and supply chain management are key components of this enterprise approach.

    Total Cost of Ownership (TCO)

    TCO is a function of the acquisition cost, including all engineering, design, deployment, installation etc. as well as ALL costs associated with its lifecycle OPEX, including decommissioning, abandonment, and environment remediation.  It is all encompassing.  It is the long-standing metric that all projects must understand and model accordingly before a Capital Expenditure (CAPEX) is authorized.

    The following list are documented per citation links.  These are taken from a recent article challenging the Return on Investment (ROI) of current green initiatives.

    Readers will note that some are social costs, i.e., transition costs to new energy sources currently provide minuscule contributions to the Energy Basket.  These costs will grow dramatically going forward.

    •  “Making a transition from fossil fuels to green energy is costly.  Solar and wind can only deliver electricity, which accounts for less than a fifth of total energy consumption.
    • When the sun doesn’t shine or the wind doesn’t blow, prices rise quickly and we have to revert to fossil fuels for backup.
    • Batteries are inadequate and expensive, easily quadrupling solar electricity costs and failing to provide much power.
    • In 2021, Europe only had battery capacity to backup less than 1 ½ minutes of its average electricity usage.  By 2030, with 10 times the stock of batteries, and somewhat more usage needed, they’ll have enough for 12 minutes.
    • The Bank of America has found that achieving net-zero will cost $150 trillion over 30 years, almost twice the combined annual GDP of every country on Earth.
    • The annual cost of $5 trillion is more than all the world’s governments and households spend every year on education.
    • In a new study, McKinsey finds most of the poorest nations in Africa would have to pay more than 10 percent of their total national incomes every year toward climate policy.  This is more than these nations combined spend on education and health.
    • Reducing emissions just 80% will cost the United States more than $2.1 trillion every year from 2050, or more than $5,000 per person, per year.
    • The annual US cost of World War II is estimated at $1 trillion in today’s money.  Every year by 2050, climate policy could cost Americans more than twice what they paid during the Second World War.
    • Surveys show few people are willing to spend more than a few hundred dollars a year on climate policies.  Asking people to spend tens or hundreds times more is a recipe for failure.”

    These are significant tangible and intangible costs.  In this writer’s opinion, the business case has not been made for these and other total cost line items.  A more extensive study should be considered by readers who want to do a deep dive on these economics.

    Keep in mind, that these broader issues do not take into consideration regarding daily operations and maintenance.  These must be factored in as well.

    Finally, while these are ‘opinions’ from reputable sources, why are they not considered the economic models used today?  Seems like Data Bias, doesn’t it.

    EVPM

    Beginning in 2004, recognizing many of the TCO components as well as the economic value potential from a CAPEX, we developed what came to be known as our Economic Value Proposition Matrix model (EVPM).  This model is now mature, robust as well as integrating a Risk Matrix.

    It is an excellent tool for assessing both Tangible and Intangible components of value and cost.  Additionally, a free version is available and it is fully supported with training as well as other materials (including a video).

    Importantly, EVPM “Translates technology into the Language of Business” which make it an excellent tool for preparing to meet with the Chief Financial Officer (CFO) and/or Budget Committee.  Management makes decisions as a function of the risk associated economic value brought to the organization.  While technology has a level of romance to it, financial issues are the major decision making driver.

    The Energy Basket

    It is useful to look past the hype to see what the US energy basket actually looks like.   Slightly over three percent comes from wind and only 1.3 % is solar.  Fossil fuels (petroleum natural gas and coal) represent 79% of our current energy consumption.  In the opinion of this writer these disparities have been basically the same for decades.

    China and India burn 14 million tons of coal per day!  By all accounts, coal will play a major role in power production in these economies for some time to come.  As a function of the global percentage of coal used; China over 50%, India over 11% and the United States at approximately 8.5%.  Moreover, an assessment of its use by 130 countries is available to interested readers.

    The debate about ‘Clean Coal‘ continues.  None-the-Less, most likely coal will continue to be used for decades.  Keep in mind that 2050 is less than 28 year away.

    While regulation plays a role in the energy mix, economics are the fundamental driver.  Until the economics of non fossil fuels change, the basket will most likely not.

    The Lone Ranger is Missing

    Listening to some, it seems that all we have to do is focus on the Energy Transformation and in only a few short years magic will happen.  Hate to tell everyone, there is no Silver Bullet.  Transformation will take decades and should be led by those driven by market forces.

    One example, on April 29, 2022 the Texas Department of Transportation (TxDot) announced the two year closure of a major highway artery in the Houston metropolitan area to replace a concrete ramp.  Point being, road construction is well understood and a major proven technology and process.  Still, it will take a significant amount of time to perform this upgrade.

    How can we assume a major Energy Transformation using new technologies will unfold as optimistic parties suggest?  History suggests this is not likely.

    Closing Points

    This long time energy careerist believes that various energy sources from the basket should be used as economically appropriate.  While we all have an interest in a low pollution environment, if the economics as shown in this piece are close to correct, the resulting economic damage may be greater than a somewhat warmer planet.

    The data presented herein are documented.  The sources and quality of the data can be challenged but it should not be ignored.

    Finally, this piece has focused primarily on wind energy.  A similar analysis needs to be taken for every energy source including fossil fuels of all kinds.

    The demand for energy will continue to grow and even exponentially.  Clean fossil fuels are available and without strong energy balanced policies the future is bleak for many and not just because of climate change by the significantly higher cost of living and loss of opportunities due to energy starvation.

    The energy challenges are complex and dynamic.  This blog is not a comprehensive review, but simply a focus on a narrow aspect.  For example, we did not delve into issues such as Carbon Capture & Sequestration.  A calm, rational, economics discussion is in order.

    What does Energy Transition mean to you and how will you help the Less Fortunate be better off?

    For More Information

    Please note, RRI does not endorse or advocate the links to any third-party materials.  They are provided for education and entertainment only.

    For more information on Cross Cultural Engagement, check out our Cross Cultural Serious Game.  You can contact this author as well.

  • ESG Explained

    ESG Explained

    According to Investopedia, “Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments.”  Definitions of the three components are pretty straightforward:

    • Environmental–Generally refers to the stewardship of the planet and how organizations facilitate that responsibility.
    • Social–Facilitating organizational responsibility to the global society, at all levels from the globe to the local communities firms operate in.
    • (Corporate) Governance–Typically, the umbrella organizations put in place to assure issues such as transparency, fraud, safety culture and ethics are in compliance with social norms and local regulations.

    Since the Deepwater Horizon incident of April 2020, operators (oil and gas companies) have extended and enhanced the above criteria to their supply chain ecosystem and in some cases even customers with a Safety and Environmental Management System (SEMS).  This is true of most other Critical Infrastructure sectors as well.

    Likewise, the Sarbanes-Oxley Act of 2002 enhanced transparency and increased fraud protection after the Enron (and other) scandals.  Other incidents have triggered governance changes as well and some are referred to in linked materials.

    Why Is ESG Important?

    By one account, approximately $12 trillion in investments made in 2018 were driven by those who consider themselves socially responsible.  According to Forbes, in 2019 this accounted for almost 25% of total investments and are seen through the lens of sustainability.  Moreover, between 2016 to 2018, the growth rate in such firms grew at 38 percent.

    These numbers confirm our research going back to the turn of the century and perhaps earlier.  In 1993 we controversially posited that the Principles of Scientific Management were applicable to software development by Knowledge Workers.  Developed by Frederick Taylor, his monograph was published circa 1911.

    In other words, owners (investors) have always demanded top notch, legal and ethical performance.  Activist investors, i.e. Carl Icahn are not new.  As always, they have a very important role to play in the current markets.

    Asset/Equipment Integrity Governance

    There is a buzz of newness to ESG; however, from a contrarian perspective, this is not necessarily the case.  After the Deepwater Horizon failure with significant loss of live and many billions in economic losses to many parties including BP, it became clear that traditional Governance models did not have a focus on operations and the management of capital assets, i.e., manufacturing plants, marine vessels and other revenue producing sources.

    In our book we addressed a New Risk Environment from large corporate operations in which ‘failure is really not an option.”  We stated as a risk element, “Escalation of Consequences: The level of consequences of a disaster in the energy industry can now be larger than from the accidental release of a multi-megaton nuclear weapon.”

    Still governance models continued to struggle.  We believe that in the critical infrastructure sectors there is a lack of strong bonding, in other words top management is still hands off and operating from historical ‘control’ models that are no longer relevant or applicable.

    We do not believe this will change until a Strong Bond (tightly coupled) model is adopted.  We define the term as, “A strong model is used by High Reliability Organizations (HRO) and as part of that model, trained; knowledgeable personnel are empowered to make the right decisions in the field.  The strong model provides an organization with the capability to become and remain and HRO.”

    In 2011, we released our monograph, Asset/Equipment Integrity Governance: Operations–Enterprise Alignment; A Case for Board Oversight (AEIG).  In addition to developing a financial model documenting the Return on Investment (ROI) from strong governance, a Compliance Model, as well as a robust AEIG Matrix which incorporates an Asset Maturity Model are part of the solution.

    The AEIG extends the enterprise governance model to include the full ecosystem including subcontractors to its primary supply chain partners.  While not directly addressed at the time, Diversity, Equity and Inclusion (DEI) is implicit in the model.

    This roadmap is comprehensive and is a good starting point for developing and implementing a vigorous ESG initiative.  Other monographs in our Changing the Dialogue series (exploring our New Business Dynamics) include Structural Dynamics and Rapid Response Management are available online.

    Relationships, Behaviors, Conditions

    Scroll down on The Rapid Response Institute, Operational Excellence Platform page and you will find our R B C Framework Cultural Transformation model.  Shown below for ease of readership.

    The R B C model was originally developed to research international (cross cultural) negotiations.  We have extended it to support the transformation process to a robust and model organization culture such discussed herein.  Readers should note that this model is focused on Operational Excellence and is comprised on Processes & Methods supported by Enabling Tools.

    Built on Structural Dynamics which was developed as part of Dr. Shemwell’s doctoral dissertation in 1996.  It is defined as, “The morphology or patterns of motion towards process equilibrium of interpersonal systems.”

    This proven Framework is grounded in Management Science yet is a useful tool (Roadmap) that real originations can successfully and cost effectively implement.  We believe it is the best approach for attaining ESG.

    Summary

    One can view the current ESG status as part of a continuum to hold organizations accountable as appropriate and frankly, increase their Operational Excellence.  We have long known that firm’s that are well managed command superior stock market multiples and greater equity value.

    Many ‘self-serving’ consultants and pundit would have us believe ESG is breakthrough Thought Leadership in need of their help.  Nothing could be further from the truth.

    In the early 1990s, we document the history and evolution of Management Science/Thinking.   It is not written in stone, like most human endeavors it evolves and has for thousands of years.  ESG is a step in this continuum.

    How is Your Organization Addressing the Requirements of Active Investors?

    For More Information

    Please note, RRI does not endorse or advocate the links to any third-party materials.  They are provided for education and entertainment only.

    For more information on Cross Cultural Engagement, check out our Cross Cultural Serious Game.  Two current online games; Safety Culture and Diverse Teams specifically address issues raised by ESG Criteria.  If you have any questions, please contact this author as well.

    Graphic Source: The Rapid Response Institute derived from a Storyblocks image under license.

  • Learn from the Big Guy

    Learn from the Big Guy

    We have all heard the flight attendant say, “Thank you for flying with us and welcome your destination, another on time arrival.”  Usually stated with gusto, as if an on time arrival was uncommon!

    Pundits and politicians are telling us that Santa will be late this year.  More salt on the wound, the jolly elf may not have everything on our list.  “Say it isn’t so, oh the humanities.”  Pass the eggnog please, Clark.

    This prognosticator suspects they are all wrong!!  Every young child knows that Santa, Mrs. Claus and their host of elves make all the toys, all year long at the North Pole.  So what’s the problem?  They are wrapping (pun?) things up even as you read this piece, right?

    Well, the dirty little secret is that somewhere along the way, Santa outsourced and even offshored his manufacturing and much of his distribution.  Must have been when the elves went on strike during Y2K.  Toy manufacturing no longer takes place at the North Pole.

    Be ‘SMART’ About Things

    However, Santa is a visionary.  He is a SMART Manufacturing Early Adopter, even an Innovator.  Shortly after, “The term Smart Manufacturing was coined in 2006 at a National Science Foundation workshop on Cyberinfrastructure,” Santa secretly developed his Proof of Concept and later a Pilot at a North Pole toy facility.  Legend has it that by 2012 he was deploying enterprise level SMART Toy Manufacturing at global scale.

    Today, some of Santa’s Helpers appear to be struggling against the firm deadline.  Their level of ’empowerment’ and creativity will determine how well the territory they are responsible for fares later this month.

    For those in real trouble, one suspects that Santa has already done two (2) things.  First he has probably sent in Teams of supply chain Subject Matter Expert elves to help suppliers get processes back on track  Additionally, he has transferred business from those who might miss the deadline to those forward looking firms that value High Reliability Organizational traits and will perform against the deadline.

    Santa is not only SMART, he and his organization are Resilient!

    Disruptions Amongst Us

    When things go bump-in-the-night with a supply chain, the worst thing Santa’s Helpers can do is fib.  Check is in the mail, dog ate my homework, I over slept, my car would not start, my computer crashed and so forth and so on.  Like most parents of small children, he has heard it all before over his long life.

    Santa always knows ‘who has been bad and good,’ and Data Analytics does not lie about his supply chain ecosystem.  You can try to hide but you cannot run.  While coal is out favor these days, Santa still have plenty to deliver as necessary.  Coal in your stocking would ruin a Carbon Free Holiday, so behave.

    Yes Virginia,

    There is a Santa Claus and he has never screwed things up!  He will fly from his distribution center at the North Pole the night of December 24th.  As he always has.  On the morning of the 25th, kids all over the world will celebrate.  The supply chain Grinch will not steal from the kiddos.  All will be joyful and full of song.

    Santa will deliver, despite the challenges faced.  If he can, why can’t your organization?  For those who have seen the movie Miracle on 34th Street, you know he is real?  In that movie, he delivers a house to a skeptical young girl.  He found a way.

    Santa has a global distribution problem– yet he always delivers on time to the largest customer base of all!  He has to for if he failed and his customer’s lost faith in him, it might be the end of the month of December as we know it.  The stakes could not be higher.

    Usher in the New Year

    Paraphrasing the late Secretary of Defense Donald Rumsfeld, “You go to war with the supply chain you have, not the supply chain you might want or wish to have at a later time.”  A later time always comes regardless of preparation or not.  If your organization is one of Santa’s Helpers/Suppliers that did not have business processes that were ‘smart’ enough this year, Happy New Year!  Start January 2nd to transform the old ways.

    For more about SMART Manufacturing, keep an eye our for the release of our 2022 book, “Smart Manufacturing: Integrating Transformational Technologies for Competitiveness and Sustainability.”  We will announce it on these pages when it is available.

    Hope you all found a bit of holiday cheer in this piece.  The story may be tongue-in-cheek, but the message is real.  It is time for all of us to ‘Get Smart.’  For those of you who were children of the 1960s, you will get the pun.  For the rest of you, GOOGLE IT!

    Happy Holidays

    For More Information

    Please note, RRI does not endorse or advocate the links to any third-party materials.  They are provided for education and entertainment only.

    For more information on Cross Cultural Engagement, check out our Cross Cultural Serious Game

    We presented, Should Cross Cultural Serious Games Be Included in Your Diversity Program: Best Practices and Lessons Learned at the Online Conference, New Diversity Summit 2020 the week of September 14, 2020.  Check Out this timely event and contact the organizer for access to the presentations!!

    You can contact this author as well.

  • Heavy Metal Rocks

    Heavy Metal Rocks

    Not the rock bands of the 1960s–1980s, but the mining required to extract the heavy metals necessary for electric vehicles and other renewable energy solutions.  So, what is a heavy metal and why do we care?

    Typically, “In science, a heavy metal is a metallic element which is toxic and has a high density, specific gravity or atomic weight. However, the term means something slightly different in common usage, referring to any metal capable of causing health problems or environmental damage.”  Often these toxic elements are carcinogenic.

    For most readers this will not come as a surprise.  The heavy metals in batteries can be recycled, thus minimizing their negative impact on the environment and subsequently, humans and other life forms, i.e., the food chain.  However, smaller batteries are typically tossed into the trash.  Larger ones such as lead acid automotive batteries are usually reclaimed (for a fee to the consumer).

    From this pundit’s perspective, it is too early in the technology maturity to fully understand how millions of EV (electric vehicle) will be recycled effectively and economically.  Managing the lifecycle of these ‘elements’ from mining, use, recycling and reuse is a significant component of these renewables.  There is a cost associated with this process, both monetary and socially.

    Total Carbon Ownership

    In the business, the term TCO usually referees to the Total Cost of Ownership.  Updated, this Lifecycle metric may better reflect the Total Carbon impact of a product/solution, i.e., large scale batteries, solar panel, fossil fuels, etc.

    TCO = Carbon as a function of two major lifecycle elements; Operations and Decommissioning.

    For this purpose we define Operations (aka Use) as the lifecycle process from mineral extraction, manufacturing, deployment and maintenance.

    Decommissioning is the process of taking out of service, removal and appropriate disposal of components, including recycling.

    Follow on from our blog of November 2, 2021, where Milton Friedman detailed the complex supply chain required to manufacture a simple yellow graphite pencil, one can only imagine how complex the requirements are for a wind turbine.  Carbon neutral is not a simple problem to solve.

    Enter Structural Dynamics

    Many readers understand that Machine Learning Algorithms use the statistical multivariable method, Multiple Linear Regression–defined as, where “one variable is estimated by the use of more than one other variable.”  While this tool can be useful when assessing the impact and relationships of several independent variables, it does not necessarily help organizations to understand their TCO.

    Theoretically, every economic actor in the supply chain or the decommissioning process can calculate their carbon footprint for each​ product/step they control.  In the real world, such intangibles, i.e., safety are open to interpretation, ‘fudging’ or worse.  Moreover, we can expect large gaps or errors (inadvertent or otherwise) in carbon models that must be addressed if we are to realistically address the carbon problem.

    In the 1990s as a result of watching a number of systemic enterprise failures and/or poor performance, and wondering how this happened with such regularity the questions was raised–why?  This led this author coin the term with the subsequent book, Structural Dynamics: Foundation of Next Generation Management Science.

    Most do not understand the processes and structural changes at work on a daily basis.  Focused on near term performance metrics, they lose sight of the forest while concentrating on the trees.  The subsequent disruption caused is often rapid and economically cataclysmic.

    Structural Dynamics uses tools such as Structural Equation Modeling (SEM) to seek to identify the underlying process and structural movements.  It appears to be a useful tool to address the Total Carbon Ownership that organizations will have to address in the very near future.

    Dealing With Residuals

    Whether heavy metals or carbon, organizations must also assure ESG (Environmental, Social, and Governance) criteria are met throughout the energy lifecycle.  However, there is a cost associated with these and other organizational structures from the deployment and/or use of energy of all types.

    TCO is a decades long cost that can transcend actual corporate life, i.e., acquisition, bankruptcy, etc.  Currently, the oil and gas industry is littered with assets no one claims ownership.  Two cases follow:

    • Stranded assets are, “those investments which are made but which, at some time prior to the end of their economic life (as assumed at the investment decision point), are no longer able to generate an economic return, as a result of changes in the market and regulatory environment.”  These resources are no longer worth continued investment.
    • Abandoned assets have reached the end of life.  By one source, it is estimated that there are approximately 53,000 Gulf of Mexico offshore oil and gas well in this category.  Remediation costs range from $500k to $10 million per well–min $26.5 billion.

    It is reasonable to expect that all sources in the ‘energy basket’ will have similar end of life futures.  Green is therefore, not unique.

    “Forewarned is Forearmed”

    A Serious Assessment

    This pundit believes that scant attention has been paid to the lifecycle (economic and social) price of renewables and that the Total Carbon Ownership cost has never been calculated–certainly not published.  However, there are tools that will shed light on this going forward.

    TCO is a function of a detailed and long lifecycle, not unlike oil and gas assets that in some cases are over half a century old.  Any subsequent model of this process is by default complex, detailed and full of unknowns, or unmeasured latent variables.

    The approached this writer has developed using Structural Equation Modeling driven by Structural Dynamics seems well fitted to address this longitudinal and futuristic problem.

    For many, the so-called ‘green energy’ seems without consequences.  The history of energy suggests otherwise.  A full assessment using Structural Dynamics can reveal gaps, misunderstandings, errors and omissions.

    This model will advise management and even regulators what the true cost of an energy source is.  The approach is worthy of a serious discussion.  By the way, this model works for all sources of energy including coal and other fossil fuels as well as renewables.

    What is Your Firm’s TCO and How Can It be Lowered?

    For More Information

    Please note, RRI does not endorse or advocate the links to any third-party materials.  They are provided for education and entertainment only.

    Interested in Cross Cultural Engagement or DEI, check out our Cross Cultural Serious Game

    We presented, Should Cross Cultural Serious Games Be Included in Your Diversity Program: Best Practices and Lessons Learned at the Online Conference, New Diversity Summit 2020 the week of September 14, 2020.

    Contact the author for information on these and others subjects covered in the Critical Mass series.

  • The Secret of the Pencil

    The Secret of the Pencil

    The writing instrument, the pencil is purported to have been invented in 1795.  It has been around for a while and continues to serve a useful purpose.

    In the following video, the late economist Milton Friedman describes the process for manufacturing this simple longstanding tool.  The point he makes is that regardless of the simplicity and maturity of a product, it requires a robust supply chain from raw material through the distribution of the finished product.

    He makes the case that no single organization can make this simple tool without help from many economic actors and the thousands of organizations employed either as employees or part of individual supply chains.  This is a powerful argument for free market behaviors.  Well worth a little over 2 minutes of your time to view.

    As of this writing, there is probably more discussion about the global supply chain than this writer can remember.  The last time we saw such exposure was after the 2011 Tōhoku earthquake and tsunami, offshore Japan.  However, it was specific to goods and services provided from Japan.  This time it actually is different.  The current shipping disruption is purported to impact on the US holiday gift giving season.  The resulting impact on firms of all sizes may be dramatic and even impact on all levels of politics.

    States like Florida and Georgia and others are arguing that Asian shippers gain value by landing at their ports versus the closer ones on the West Coast of the United States.  If the economics bear this model out, significant long-term changes may be made.

    Pundits, including this one like to talk about Creative Destruction and the systemic changes that can come about as the result of an event.  While the pandemic may be the causal incident, the global supply chain will likely be the lasting impactful change in global commerce.

    As with the simple, mature product the pencil, every firm’s lifeblood is its supply chain.  How it works through this transformational period may help declare the winners and losers going forward.

    In our forthcoming book, we address the emerging Smart Manufacturing model and the role of the supply chain in the future.  Expect this component to become even more important.  Disruptions like the current one will ruin more than just the ability to manufacture automobiles.  Those with weak SC strategies will most likely fail.

    What is Your Firm Doing to Develop the Robust Supply Chain of the Future.

    For More Information

    Please note, RRI does not endorse or advocate the links to any third-party materials.  They are provided for education and entertainment only.

    Interested in Cross Cultural Engagement or DEI, check out our Cross Cultural Serious Game

    We presented, Should Cross Cultural Serious Games Be Included in Your Diversity Program: Best Practices and Lessons Learned at the Online Conference, New Diversity Summit 2020 the week of September 14, 2020.

    Contact the author for information on these and others subjects covered in the Critical Mass series.

  • Chain of Custody: Is Your Management System Ready?

    Chain of Custody: Is Your Management System Ready?

    “This eliminates the possibility for human error.”  This is an actual quote taken from one of the many blockchain ‘credible’ websites readily available—citation withheld to protect the guilty.    And, the Titanic was unsinkable!

    From another credible sources, “Is blockchain secure for my business?  Simply put, it can be.  But, not by just turning the key.  Security will depend on a variety of factors, none sic (not) the least of which requires a robust risk management framework?”

    In their white paper, KPMG argues that while the current blockchain frenzy is focused on the new technology, the question of its applicability to a business solution remains elusive.  Falling in love with a ‘shiny new software object’ has been seen before.  Most recently, digitalization and IoT.

    The organization’s economic buyer requires more depth in the decision-making process.  Has a valid Business Use Case been developed for its implementation?  This can be a time-consuming activity as the various constituencies must be queried to assess their assessment of the Economic Value of this CAPEX.  Unfortunately, there are no shortcuts to this risk mitigation process.

    This blogger has focused on the need for Governance and appropriate Management Systems for many years.  Historically it has been a challenge for business and government entities to keep up with the explosion of technology.

    While third parties are often the weakest link in supply chain management and this is one of the problems that Chain of Custody solutions address, technology alone is not a solution.  As with any transformational initiative, the broader impact, unintended consequences as well as other tangible and intangible exposures must be understood and managed accordingly.

    Just for the record, human error can never be eliminated.  It is human folly to believe that a technology can free us from our human nature.  High Reliability Organizations (HRO) recognize this frailty and respond accordingly.

    The promised of today’s technology suites can be of high value.  History teaches us that this value may not be realized if the problem being addressed, their implementation and sustained (maturity) processes are inadequately formulated.

    How Will Your Organization Assure It Will Realize the Value from Blockchain Investments?

     

    https://advisory.kpmg.us/articles/2017/securing-the-chain.html

    Shemwell, Scott M. (2018, October). How to make the case to the C-Suite: Selling Large Scale Data Management Projects to the C Suite. Foundations: The Journal of the Professional Petroleum Data Management Association. Volume 5 Issue 2. pp. 6-8.

    https://sceweb.uhcl.edu/helm/RationalUnifiedProcess/process/modguide/md_bucm.htm

    https://therrinstitute.com/economic-value-proposition-matrix/

    https://therrinstitute.com/are-organizational-governance-models-broken-why-cant-management-get-a-handle-on-things/