The Bullwhip Effect (Part III)

Return to Part II.

The writing is on the wall. The writing is on the Facebook Wall, like it was on the Berlin Wall. Only this time the writing is in real-time. The is in the real-time that it takes to save a life or protect an innocent company from bankruptcy by suspicion. From bankruptcy by the Bullwhip Effect.

Ironically, it won't be the really bad guys who are caught in real-time. You know, the ones who commit out and out fraud. Instead, It will be the companies who really are trying to play by the rules. Who are doing their best to keep the trust of their suppliers and their customers. But even those good companies who are caught up in a recall will benefit from the elimination or reduction of deaths, sicknesses and legal liabilities that would otherwise occur under the good 'ol one-up/one-down paradigm. Instead of hundreds or thousands of people becoming sick from a pepper salmonella contamination over a period of months, flattening out the Bullwhip Effect will mean that significantly fewer people will be sickened before the government regulators react with real-time information at their finger-tips. 

As an attorney who has had a fair amount of jury trial experience, I find myself wondering what a jury of Facebook users would think about questions like these in determining a food company's liability?

• Could the company have responded in real-time to the food safety incident?
• Did the company take full advantage of real-time technologies for providing food security for its customers?
• Was the company a good corporate citizen or did it recklessly ignore real-time technologies to the detriment of its consumers’ health? 

Actually, it's not inconceivable that a jury comprised entirely of users of social media (Facebook, Twitter, etc.) would be seated even today. I wonder how much ag and food companies have thought about that? It may even now be almost impossible for their attorneys to avoid juries who in their daily lives are reading the real-time writing on the Facebook Wall. But the companies who early adopt and bring forth VRM and whole chain traceability will be the companies who will benefit even if they end up in court. At least they will be able to look the jury in the eye and say, "We acted as good corporate citizens with the best available real-time technology. We saved lives that might otherwise have been lost. We played by the rules and we didn't try to bend them."

But the fraud-committing bad guys, they'll surely run the greater risk of being bankrupted into oblivion.

Juries rest at the foundation of democracy here in the U.S. They give voice to the voiceless. They send messages (i.e., verdicts and liability judgments) out to our society that are often heard as clearly as if the President had signed significant Congressional legislation. They're not real-time messages but sometimes they kind of feel like it because they often seem to come out of nowhere.

 A few years ago I prosecuted a prisoner for escaping from a penitentiary. He wasn't a bad guy in a violent sense. In fact, he wasn't violent at all. He was a middle-aged, property thief who was a kind of 'nice guy' among bad guys. The prison warden even designated him as a trustee so that he could work on the farm outside of the walls of the Big House. At least until he tried to escape at all of about 15 mph (24 kph) on a farm tractor. It didn't take long to catch him.

The prosecution of escape cases rarely go to trial because, well, what's the point? I offered the prisoner's attorney the minimum sentence of 2 additional years to do just so we wouldn't have to pick a jury but he said that his client wanted a trial. What? Huh? Why? "He wants a trial and I don't know why," the attorney said with a shrug. He was as perplexed as I was. Both of us knew that the prisoner risked receiving the maximum of 7 additional years in prison for making the judge and members of the jury go through an unnecessary procedure. That is, for wasting everybody's times.

So one afternoon the prisoner was transported over from the Big House to the courthouse. We picked a jury. I rested my case. The prisoner took the witness stand. He swore to tell the truth. His attorney asked him to tell his story. The prisoner said, "I escaped".

There is a tenet among trial lawyers that you should never ask a question that you don't know the answer to. I didn't have to ask the prisoner a question at all. He was going to be convicted. He knew he was going to be convicted. The jury's decision was made for them. There was no need for deliberation. The jury members were relieved that they would all be home well before dinner. But I had to ask him because I genuinely wanted know, "Why have we gone through this process of picking a jury and conducting a trial when you admit straight up to escaping?"

"I've been in and out of prison my whole life," the prisoner said. "The 5 or 6 times that I've been put back in prison was because whomever my attorney was at the time told me to plead guilty. I always did what I was told. This time, I wanted to do it my way. I wanted my day in court. I wanted to be heard. I escaped ... but now I have had my day in court. That's all I wanted."

The jury was touched. There was even a knowing smile or two in the jury box. They quickly came back with a verdict - the 2 year minimum that I had offered to begin with. The prisoner went back home to his cell in the Big House that night with a smile on his face. He had had his day in court. A jury of his peers had actually listened to him. And heard him.

 I was touched, too. It was one of those teachable moments that we find ourselves surprisingly carrying with us, and from time to time reflecting upon. People want to be heard. People don't want to be managed into "doing the right thing" and muzzled in the process. Even in a losing effort. The need to be heard is a powerful human need. That's the bull's-eye that VRM is aiming to hit. It's the right target.

I began this three part series of journal entries referencing comments that Frank Yiannas made at the second annual meeting of the Arkansas Association of Food Protection. He said something else that I hadn't mentioned. He said that when he first took on the food safety position at Walmart that their marketing department wanted to broadcast the message that food safety was now a priority at Walmart. Yiannas said that - to the surprise of the marketing folks - he nipped that at the bud. His reason? Food safety is not a priority because ... priorities change. Food safety is a commitment ... and commitments don't change.

If we can just get VRM and whole chain traceability connected with Yiannas' corporate philosophy of food safety committment, there will be a whole lot more customers feeling like they are able to do it their way with companies who are truly acting as good corporate citizens in a real-time world. Lives will be saved. Customer loyalty will be increased. Liability risks for companies and industries will be eliminated or reduced. Lots of money will be made.* And maybe, just maybe, the global trust bust - identified as being real by the largest retailer in the world - will begin to fade away.

This is the third and final part of a three part journal entry. Feel a need to comment? Please do so at Data Ownership in the Cloud on LinkedIn.

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* And kept from the hands of the dreaded trial lawyers! :-) Like Bill Marler says, "Put me out of business - please!"

The Bullwhip Effect (Part II)

Return to Part I

I ended Part I stating that industry had been essentially leaving the customer out of the equation, too. What I meant was that enterprise class systems like the Customer Relationship Management (CRM) Systems offered by so many companies ...

... are a significant part of the problem.

Customer Relationship Management is about companies trying to manage their prospect and customer relationships. CRM systems contribute (or, maybe I should say, reinforce) one-up/one-down information sharing in supply chains and ipso facto the Bullwhip Effect. And Michael Hinshaw makes the point that even though billions have been spent on CRM over the last 15 years ($9+ billion in 2008 alone), overall customer satisfaction has remained flat. To the right is a simpler version of CRM.

The flip-side to CRM is envisioned to be Vendor Relationship Management (VRM). VRM would provide to people – individuals who recognize their value as customers, and wish to better define the terms of their relationships – the software, tools and ability to manage their vendor relationships, as well as their interactions and experiences.

To the left is a simple picture of VRM in which a consumer is able to conveniently manage multiple vendor relationships. The critical thought leadership for VRM is found with Doc Searls and the VRM Project at Harvard's Berkman Center but VRM in the marketplace still largely remains a vision.

Picking back up from Part I on the concept of viewing food safety regulators as a kind of consumer, and mashing together VRM (from the perspective of customers) with a whole chain traceability system for supply chains (from the perspective of food safety regulators) it would more or less have to look like this:

"OK," you say, "that's a nice, neat, REALLY simple picture but isn't this already happening on Facebook? Can't the Customer, Producer, Wholesaler, Retailer, and even the Government Regulators all become Facebook friends and experience right now this mashed-together vision of VRM and whole chain traceability? And isn't this what Social CRM is all about?"

No, no and ... no.

The challenge is not one of fixing the latest privacy control issue that Facebook presents to us. Nor is the challenge fixed with an application programming interface for integrating Salesforce.com with Facebook. The challenge is in providing the software, tools and functionalities for the discovery in real-time of proprietary supply chain data that can save people's lives and, concurrently, in attracting the input of exponentially more valuable information by consumers about their personal experiences with food products (or products in general, for that matter). Supply chain VRM (SCVRM)? Whole chain VRM (WCVRM)? Traceability VRM (TVRM)? Whatever we end up calling it, we know we will be on the right track when we see a flattening out of the Bullwhip Effect, won't we?

On the one hand, Facebook is highly relevant to this discussion because (a) it has over 500 million users, many of them businesses and government agencies, and (b) because it has helped to raise the expectations of its users regarding the availability of - and their hunger (no pun intended) for - real-time information. On the other hand, we are a long way from seeing headlines that read "Facebook immediately identifies and confirms source of salmonella contaminated peppers" or "Facebook tracks food ingredients in dioxin scare" or "Facebookers receive real-time e. coli food recall notices based on their hamburger actual purchases".* For that to happen, we need a few more ingredients added to the mix and one of them is the metadata ...

... by which each of the participants may be empowered to keep the degree of control over their data that will free it up for real-time access (and analysis) by others. Yes, it's ironic. Give more control to consumers so as to get more, better quality data from them about their experiences with food products? Makes perfect sense to Doc Searls and the VRM folks. They get that VRM is the ironic reflection of CRM.

The other ingredients? I'll finish up with those in the next - and final - journal entry. But I will say that I'll be returning to those interesting comments made by Walmart's Frank Yiannas .....

Continued in a final Part III.

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* Actually, for an example of an implementation that is technically achievable right now, see my earlier blog Consortium seeks to holistically address food recalls. Substitute in "Facebook" for "Food Recall Bank".

The Bullwhip Effect (Part I)

There were interesting comments made last fall at the second annual meeting of the Arkansas Association of Food Protection. The comments made by Frank Yiannas, Walmart's Vice-President of Food Safety, continue to resonate with me.

The first thing that struck me was Yiannas' belief that the U.S. is currently experiencing several food safety incidents per year on the scale of the Jack in the Box incident of the early 1990's. That's a chilling perception. In the e. coli epidemic of 1993, four children died and hundreds of others became sick in the Seattle area as well as California, Idaho and Nevada, after eating undercooked and contaminated meat from Jack in the Box. It was the largest and deadliest e. coli outbreak in American history up to that time.

Another takeaway was Yiannas' belief that the food industry is consequently experiencing a "global trust bust" when it comes to food safety. 

I've been thinking a lot about Yiannas' comments and here are some of my conclusions .... 

A significant reason for the continuing series of food safety crises (notwithstanding the recent passage of the Food Safety Modernization Act in the United States) is that the food industry's global and domestic supply chains are increasingly experiencing the Bullwhip Effect. This effect is directly attributable to the inefficiencies of one-up/one down supply chain information sharing.   

What do I mean by one-up/one down information sharing? The requirement of one-up/one-down means that vendors must know what is going on inside of their four walls which means they must know what is coming in and what is going out. Representative laws or regulations requiring one-up/one-down information sharing are: 

• EU General Food Law
• Hazard Analysis and Critical Control Point (HACCP) plans
• US Bioterrorism Act of 2002
• US Food Safety Modernization Act

Industry will tell you that one-up/one down information sharing is the way it's "always been done" in supply chains. It ignores, avoids or by-passes many or most of the efficiencies of computer networking and the Internet. It also avoids or by-passes many the thorny "data ownership" and privacy issues presented by the Internet. 

But the "global trust bust" in food safety is building a fire under the boiler, so to speak. And the boiler is reaching its boiling point. It's looking less and less like things can be done the way they've "always been done".

Food safety officials in a recall investigation are like consumers, albeit armed with law enforcement powers. The character above who is wielding the bullwhip could just as well be a consumer as a recall authority. The bullwhip, whether wielded by a consumer or a food saftey recall authority, is representative of a the effect of a demand.

When the Bullwhip Effect appears it is clear evidence of a less than optimal supply chain directly attributable to the inefficiencies of one-up/one-down information sharing. When a consumer makes a demand for a product, the Bullwhip Effect causes product restocking to take days, weeks, or longer ...

... similarly to how it takes days, weeks, or longer for a demand in a traceback investigation to provide the information required for determining (hopefully) the roots of the contamination and how pervasively contaminated a supply chain has become. A consumer who comes to a store to purchase a product that is out of stock causes a Bullwhip Effect in the supply chain. Similarly a food safety recall authority who comes to the store to find out why a customer became sick (or died) also causes a Bullwhip Effect in the supply chain.

OK, so you say, "What can be done about it?"

Well, the food safety recall authorities know what they want:

[T]he regulators want a traceability system that is consistent, speedy, covers the entire supply chain, has electronic records, has interoperable systems, and covers domestic and imported foods. ”

In other words, they want it all! The label they have given to what they want is a "whole chain" traceability system. A "whole chain" product tracing system consists of information elements provided by persons in the supply chain to other persons in the supply chain or to regulatory officials (e.g., during a traceback investigation). See Product Tracing Systems for Food, 74 FR 56843 (3 Nov 2009). To the right is a simple drawing of the real-time, "whole chain" monitoring that government regulators seek in order to overcome the Bullwhip Effect in food recalls.

To drill down a bit more, the government seeks to conduct real-time monitoring of the critical transactional events (CTEs) of supply chains.

And they want to see electronic one-up/one down transactional information sharing like this ...

... to become something more like this ....

The challenge for industry is that government wants "whole chain" traceability and, "[o]n top of that, [they want] industry to develop the tools and to pay for the system."

But that's a real challenge for industry if for no other reason than that the government regulators have left one critical player out of the CTE supply chain, that being ...

... the customer.

But then, come to think of it, industry has also essentially left the customer out of the equation.

Continued in Part II.