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Just-in-time inventory means just in time for the largest, most powerful member of the supply chain. Its suppliers are forced to carry more inventory so they can always perform to the big dog's satisfaction. Working capital follows the same pattern: The most powerful player improves cash flow while its partners bear the brunt of long payment cycles.

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Ultimately, the only purpose of the buffers and caches we rely upon today, such as diskettes and compact discs and DVDs, is to overcome real or perceived supply inefficiency. As our networks become hyperefficient we will rely upon storage less and less. In other words, if you believe in a future of ubiquitous connectivity, where we can get all the digits we want wherever we are and whenever we want them, we'll have little or no need to store them or carry them around.

For too long, a black-and-white myopia has applied scale either everywhere or nowhere in manufacturing industries. We would argue for a more nuanced view - a fundamental reinvention of scale. This reinvention can be accomplished in most industries by breaking the operation's value chain into vertical functions and horizontal product flows, examining the real cost drivers, and finding those parts of the business where scale applies and those where it does not. By applying the concept of scale differently across different parts of a business, a firm can unleash real power and unlock hidden value.

When examining any complex business model, it becomes obvious that being exceptional at your business means becoming extraordinarily efficient at handling exceptions. Breaking away from the anticipated and structured is the very foundation of innovation and, we would claim, is impossible without a focus exclusively on your company's core competency.

If you approach the market with the idea that exceptions are the norm and then prepare your organization to deal regularly with the unanticipated, you'll see that few really important transactions are routine. Ask your customers about your ability to handle exceptions. It's generally high. If it's low, the market is ripe for competitive innovation or a government-sanctioned bureaucracy.

Many manufacturers look at cost data primarily as justification and leverage for continually trimming expenses, rather than as a source of insights about scale, capital spending, labor deployment, technology, logistics, and supply chain efficiency - all critical factors in measuring how well a company's manufacturing processes stack up against the competition.

An important and often overlooked aspect of operational excellence is regularly comparing actual costs to budget assumptions - not just the numbers in the plan. Understanding assumption deviations will help improve the accuracy of future forecasting.

While today's "enterprise" may be inextricably linked to its supply chain partners, ERP systems continue to define the entrprise as being principally focused on internal transactions, decisions, visibility, and reporting. This view can limit the supply chain's flexibility.

Many companies believe that they incur no incremental costs when they add just one more feature to a product or one more term or condition to a contract. Yet these seemingly minor changes accumulate over time into significant financial costs; IBM research has found that they can account for 15 percent to 20 percent of total business costs. The rule of thumb across industries is that the cost of complexity increases by 20 percent to 35 percent for every doubling of complexity. Furthermore, we've found that 30 percent to 50 percent of the difference in cost structure between high-achieving suppliers and average suppliers of the same product comes from differences in design or in the complexity of the companies' product line. Operational inefficiencies account for another 30 percent -- and they're largely a result of overcomplexity.

In the business world, the equivalent white lie to, "The check is in the mail," is: "Our suppliers are our partners." Both statements represent promises that should be kept, but aren't. They represent good intentions, but lack reality.