The supply chain is dynamic and rarely, if ever, in a steady state. It is made up of so many moving parts each affecting the others, that it can often be difficult to work out the real ‘root’ cause of the ‘symptoms’ we see today or tomorrow. Let alone address them so that they never occur again and supposedly never have an impact again on our operations going forward.
So given this environment, how do we ‘get a handle’ on what’s really going on in our supply chains and how can we better drive more innovative methods, ideas or products?
Let’s start with some very common and quite basic processes that affect our supply chain operations in every way, from efficiency, effectiveness, lead times, cash, and delivered cost to affecting forecast accuracy, potentially creating stock outs and unsatisfactory or poor customer service.
Because these difficulties can seemingly pop out of nowhere and catch those who haven’t prepared an alternative solution off-guard, the supply chain is the perfect place to be driving greater levels of innovation as a means to effectively compete in our markets.
We already know that we can’t play it safe in our organisations anymore, and that we need our employees to take calculated risks and not be afraid to fail, yet we have created organisations that are full of people who have quickly got the message that failure (or learning lessons through taking calculated risks and failing) will not be tolerated and so they play it safe, never risking or growing! So, if at the very heart of innovating is the need to take calculated risks and risk failing, what do we need to do to drive innovation into our supply chains and how do we lead by example?
1.Make sure you are Planning to Win – not Failing to Plan! Consider moving to Demand Driven Planning.
Business Operating Model and Demand-Driven Planning
Benjamin Franklin once said “By failing to prepare, you are preparing to fail.” Planning is a critical function for supply chains because it ensures that the supply chain activity actually reflects the strategy of the corporation.
We need to adopt a demand focused approach to planning, moving away from plant level production planning to an enterprise wide demand plan which allows a focus on meeting customer needs without sacrificing operational efficiency.
Critical to the success of any Demand Plan is having all stakeholders, including sales, marketing, finance, operations, product development, logistics and customer service(the entire end to end supply chain) agree on a consensus Demand Plan and then resulting Revenue Plan.
It seems simply intuitive and sensible to plan based on customer demand doesn’t it? It also seems sensible to create an enterprise wide demand plan which all functions have bought into, independently of the impact on specific functions.
Here’s where the concept gets tricky, because whilst this works in theory one still needs to know the best way to deliver this plan ensuring that it is delivered in the most cost effective manner for all concerned, and this ‘optimisation’ is a complex modelling task, well beyond the capability of typically one or two individuals, usually lowly paid demand planners with a calculator or disparate bits and pieces of advanced planning software operating in isolation of the whole.
Nevertheless, our first suggestion is, if you are not already doing demand driven planning then you need to start moving towards the idea of an enterprise wide demand plan, agreed to by all stakeholders so it can be implemented.(Demand driven planning has been in place since the 90’s in major multinationals with complex supply chains. Don’t fall into the trap of adopting a solution that is modelling in a no constraint environment, because all supply chains have constraints!)
2.Rapid Planning and Integrated Execution – because we cannot anticipate every type of supply chain disruption.
In supply chains, agility is the name of the game and those who are the most adaptive are the ones who thrive. Executives must adjust their supply chains to match with the market’s ever changing needs. But how does one actually do this?
We have plenty of examples for smaller businesses where everyone is in the same room and they all just know what’s happening, but how do we do this when we are much larger?
Having a working Sales and Operations Planning Process (S&OP) or Sales and Operational Execution (S&OE) process (for retailers ,this positively influences the critical ‘last mile’) is what makes this happen. This process forces the right people to be in the right place at the right time, evaluating useful, correct and relevant information, making the right decisions because they understand the consequences as the result of ‘what if’s or scenarios which have been prepared specifically for their decision making. The results of their action are mapped, monitored, measured and the impacts assessed vs the plan so that organisational learning can occur.
It forces, improved planning, collaboration, transparency, connectivity, appropriate and useful analyses, and real time understanding. It forces formalisation of decision making, and supports the process of understanding what actually happened and ensuring learnings for the future. It forces the supply chain to implement the organisations strategy and not be in the often found position where ‘never the twain shall meet!’ Shakespeare’s Macbeth.
3.Upgrade Our Product Development Process to Accelerate Profitable Innovation
Finally, the secret ingredient so seldom done which adds extraordinary value (profitability) every time!
Having a formal product lifecycle management (PLM) process which feeds into your enterprise wide demand plan and your S&OP via the very first step, your product portfolio management process.
This will singlehandedly increase your profit margins. As lead times collapse and customers demand more uniquely customised solutions to meet their very specific needs, product lifecycle management and all associated activities such as new product introduction(phase in), product discontinuation(phase out), design for manufacturability and leveraging across the entire product and infrastructure characteristics become critical functions in strategically managing your product portfolio. This delivers improvements in parts re-use, reduced design cycle time, ultimately reduced new product development costs, and quicker time and lower cost to market, driving revenue increases and improved perception of the firm as an innovative leader in it’s market.
When was the last time, you evaluated your profitability or even margin by product? Do you know which products your profitability is actually coming from now and into the future? Does your organisation behave in a way that supports these current high margin and future hi margin products? Are you helping your sales people sell more of these products? Are you actively monitoring the product lifecycle of these products and have developed product extensions and potential alternatives ready to go when needed to drive long term sustainability? Do you understand the portfolio of products that your organisation has with respect to the role of each product by type and it’s contribution to the whole? (Development, Growth, Pillar, Core, Niche) And if you do, what is the implication of that on how you behave in the market, how your organisation behaves with respect to funding further product development, vis a vis the product life cycle plan, such as extensions or even replacement? How does all of this integrate with your enterprise wide demand plan? What are the assumptions in this plan around your product portfolio, your product lifecycle plans, and are these correct, have they been updated, and is this part of your organisations planning?
There are many relevant examples we can cite here of planning not being done or going wrong, no bought into enterprise wide plan, no S&OP/OE, no strategic product portfolio management, limited or no lifecycle management process. The impacts can be far reaching.
Conclusion
Our three innovative solutions to the most common supply chain problems today are:
- Consider moving further towards demand driven planning by creating an enterprise wide demand plan.
- Ensure you are responding to the market effectively and efficiently through rapid planning and integrated execution via S&OP or S&OE
- Ensure you have a process in place to manage your products (Strategic Product Portfolio Management Process) and as part of this a formal Product Lifecycle Management Process.)
If you are not doing all three of these, then there is some room for you to ‘lead by example’ in the implementation of these tried and tested, nevertheless innovative processes and solutions into your business.
In future blogs we will advise further on how you can create the right conditions for even more innovation in your supply chains.
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