IN THE FIELD

THINKING OUT OF THE BOX

UNCONVENTIONAL APPROACHES HELP REALIZE SAVINGS

My “thinking out of the box” started at age 10 when I watched planes fly above my home bordering a desert in India. I wondered if I would ever get out of the box and fly in a plane. Little did I realize, I would eventually fly weekly as a supply chain and procurement consultant across the US and Canada.

My first job was in management services, and I was thinking out of the box. The first day, I looked at the annual report. I realized the excise duty tax, then 300 per cent, formed the largest spend. Perhaps no one had questioned it for 25 years. In India, the 20-page excise duty act was intended to be a manufacturing tax, but was charged on selling price, which is double the manufacturing cost.

I approached the legal department, and a case was filed and won, after five years, at Supreme Court. This produced substantial savings for the company.

So, this gave me my first principle look at the top spend. It also allowed me to think outside the box, even if the goal looks impossible, like changing interest and brokerage fees at banks. Credit card spend was originally not an addressable spend until Citibank questioned it, saving $1 billion. Others then followed.

Another example was at a $2-billion procurement transformation. I asked the customs duty rate, and everyone told me that in the US, in the oil industry, there was none. I applied my next out-of-thebox principle: don’t just believe what anyone tells you, even a C-level executive. Verify it.

When looking again at global AP spend, I found no duty was paid in the US. However, treasury transfers were over $300 million for duty payments in other countries on US-made products. Discovering this saved tens of millions in quick-hit savings by duty reduction on CKD (“completely knock down parts,” split into two parts to reassemble locally). This reduced the duty rate.

The third principle is to assume people give suggestions based on their own limited, and perhaps not updated, knowledge. While consulting at a large retail organization I suggested a WMS solution along with a best-of-breed advanced supply chain retail solution. This raised the objection that their legacy system was the best. They even had 150 staff maintaining it.

Cued in to such statements, I proposed two software solutions which, when implemented, generated $1 billion dollars in savings.

KEEP LEARNING

To enable effective out-of-the-box thinking you must continuously add to your knowledge. Books can be out of date. Read current innovation articles and get alerts. Read magazines in waiting rooms. For example, reading about nano technology and other solutions helped me 20 years ago to think outside of the box about placing a nano robot in or on ship containers. That has become today’s reality.

A recent out-of-the-box thought I’ve had is to contribute to an AI/ML solution for CEOs of SMEs. The solution would allow them to talk to their computer each morning, asking five things they need to do that day. The computer provides suggestions, for example about offering a 3.5per cent discount to client A to close a sale (let’s say, using Salesforce Einstein AI); replace machine B to save $1 million in product quality costs and increase in production (by using linear programming optimization/decision trees, MRP, and so on); audit vendor C invoices to save over $1 million (using AI/ML analysis of invoices and fraud detection); increase price of product D by 8.3 per cent (using linear programming/price elasticity of demand); and increase media advertising 23 per cent (as it generates more customers per dollar as shown by AI due to recent customer social attitude changes).

Out-of-the-box thinking will always keep you well-liked by the CEO. For example, for replacing 200 vendors with only two that have a higher gross margin, all procurement staff is replaced by vendor’s staff for free, eliminating one per cent of revenue obsolescence write off, or saving all warehousing and shipping labour costs.

In another global organization, out-of-the-box thinking involved using, in three to four months, a courier IT parcel tracking system in manufacturing steps, logistics and online customer delivery, thus avoiding a $1-billion planned IT investment over two years.

Another of my pet out-of-thebox ideas is an AI/ML solution that matches candidates searching for

Eugene Fernandez, B. Eng., CSCMP, CPSM, P. LOG, PMP, is principal consultant at Eugene Fernandez & Associates Ltd.

“Assume people give suggestions based on their own limited, and perhaps not updated, knowledge.”

jobs to local positions, without those candidates needing to apply. The software makes these matches based on the job description, manager, company culture and other criteria, then proposes one person for the job. One day, if you’re looking for employment, that person could be you. SP