Ops leaders struggle to assess customer demand related risks in real time. This increases revenue risk. This is a bigger issue amid rising uncertainties like tariffs and inflation (circa 2025). Learn one of the many ways how Zyom helps customers such as Cambium Networks tackle Revenue risks.
Most Operations leaders can’t answer in real time, or even near real time:
Which portion of my planned customer demand is at risk this quarter?
Which orders are at risk?
“At risk” here implies a significant likelihood that customer orders would not materialize, or even if it does, cannot be shipped on time.
Changing signals make it impossible to get demand and supply plans aligned, even using well-crafted spreadsheets and sophisticated, but siloed systems — planning cycles drag, errors creep in, critical Revenue and cross-functional meetings and forums (such as Sales & Ops Planning or S&OP) result in more unanswered questions, and by the time the risks are visible, revenue is already slipping away, or worse (orders lost to competitors).
In times of “garden variety” uncertainty these questions to uncover risk are hard to answer. In an environment of high uncertainty such as now (starting circa Q4 , 2024, to late Q3, 2025 in the US), identifying demand risk has become increasingly frustrating. Largely due to tariffs and pressured trade relations which directly impacts significant trade volumes from partners across the board (larger partners such as the EU, Japan, South Korea, and relatively smaller ones like Vietnam), these risks have increasingly grown for US based product companies. And this without taking into account the slowing employment picture and persistent inflationary trends which, in many industries, is already dampening if not damaging demand.
Branded product manufacturers like Cambium Networks cut planning cycles by 60%-80% and gave key executives and operating team members direct line-of-sight into supply risk with Zyom, starting in 2017. Their SVP of Ops called it “a system that brought our vision to fruition.” Cambium continues to partner with Zyom as it navigates demand corrosive uncertainties.
If you can’t see revenue at risk until the quarter’s target is already slipping, and key operating team members are scrambling to get supply inbound, you’re too late.
Key Questions for COO and Operations team
What is one key system capability from a supply Operations standpoint that companies such as Cambium need to ensure they spot revenue risk as early as possible? How should this capability evolve?
What is one valuable decision prompt that the system can automatically provide to speed up decisions and actions from Supply Operations? This was not technically feasible prior to the advent of the newer generative AI technologies (late 2022 ChatGPT launch). i.e., traditional Machine Learning approaches till the public advent of GenAI (LLM) technologies.
To find out more, drop a comment here, or email us at: products@zyom.com
Sources & Acknowledgement: Zyom’s Cambium Networks Case Study.
John Duvenage provided key inputs to structure and composition.
Disclaimer: Generative AI was not used for composing any of the writeups on this site (including this one). GenAI was used to generate the pictures in this article and for content summarization. At this point of time, there is no plan to use GenAI to generate new content on this site. Readers will be informed in advance if this changes.
Effective inventory management is vital for companies operating across regions, especially during demand uncertainty. While healthy inventory levels provide an advantage, rising inventory levels can become a financial burden quickly. Channel inventory, in particular, can be misleading, masking underlying inefficiencies and costs. This article explores how COOs can increase a company’s focus and optimize inventory across the value network, enhancing efficiency and reducing risks that could undermine even well-run companies. UPDATE – don’t forget the Action section at the end.
In the Finance function “inventory,” as a default, is reported as a “Current Asset.” Ask those in Supply Operations. They’ll tell you that nothing could be farther from the truth. This is especially true in times when demand uncertainty[1] grows.
Managing inventory in companies that manufacture and ship products is a demanding exercise. It requires careful consideration of all the variables that impact demand and supply at various nodes of the value network (not just the supply network). Decisions have to be calibrated using data and inputs across functions – decisions, often based on approximations and imperfect information. And it must be done on an ongoing basis, otherwise important data or signals can slip through the cracks.
It becomes even more complex in cases where companies sell through channel partners (distributors, VARs[2], etc.).
Channel inventory, specifically Distributor inventory, is deceptive. Although, it is no longer on your company’s books, you are not off the hook for it either. Among many things, it depends on the skills of the channel partner in managing inventory and reordering, your contractual relationships, and other factors – such as inventory and ordering patterns across your value network.
If demand changes significantly, then orders for your products can swing up or down. Inventory sitting at your channel partners can also be returned in some cases (“stock rotation” for instance). This can lead to unforeseen reduction in your Revenue. Costs will also increase as you restock your channels with newer products and take receipt of older stock. In times of heightened and persistent demand uncertainty, it does not take too long before inventory is no longer an asset, but more a noose around a company’s neck.
In times of heightened and persistent demand uncertainty, it does not take too long before inventory is no longer an asset, but more a noose around a company’s neck
[1] measured by the rate of change of demand variability and demand volatility; *H1, 2025 has been a period of heightened uncertainty driven by the many sizeable tariffs directed by the US against global trading partners, “reciprocal tariffs” being the latest shell to drop in a scarred global trade-war landscape ; the impact of this on demand uncertainty (variability), already evident in many industry segments (based on direct and secondary data) is yet unfolding.
The dual-mandate of inventory, structural implications
This results in the “dual mandate” faced by the COO and team, balancing two important but opposing needs –
– Carry enough inventory, including buffers, so you fulfill customer orders as needed, as they arrive
And
– Keep Inventory levels low so you do not have too much capital (money) tied up in stock, to run your operations
Compare two companies (illustrative example) –
For example, Company “A” that is carrying $500 Million in average inventory to fulfill $1 Billion of Revenue in a quarter,
versus
Company “B” that’s carrying $300 Million in inventory to fulfill the same level of Revenue – i.e., $1 Billion in a quarter
Company B has a significant structural advantage over company A.
So, inventory reduction is not an arcane, tactical task only to be initiated due to a near-term blip. Go ask your Supply Operations leader[1] to drive down inventory by x% (40%, as in the example above). And everything will be fine.
It is a critical initiative to drive down the capital requirements that gives your company a structural capital advantage. This requires careful attention to details while keeping an eagle-eye on the goal.
If you get this right, you can go much faster up the revenue and growth curve, having more freed up capital via healthy margins to allocate to smart growth (Revenue generating) initiatives.
Get it wrong, and you will not even know something is amiss for a long time. Then things can turn ugly quickly.
Get it (Inventory initiative) wrong, and you will not even know something is amiss for a long time, and then things can turn ugly quickly.
But inventory reduction, especially in channel centered selling models, is even more complex and difficult, as our experience and research shows. This is true whether you manufacture in-house or utilize outsourced manufacturing.
Status quo is often the biggest enemy.
David Cote (ex- CEO of Honeywell) articulates this well with a short story of his experiences as CFO at GE’s major appliance business, in his book – Winning Now, Winning Later (see “References” section at the end).
David’s story provides broad brush strokes on the key leadership mandate and insights gained. As a part of Zyom, we have worked closely with our customers’ cross-functional Operations team and their leadership in the trenches. We have been focused on achieving similar results in operations process optimization for our customers’ operations at physical product companies.
A key part of our customers’ successes has been our ability to collectively dive into the demanding details.
And, in almost all cases, we have come away with surprising findings as we have rolled out our end-to-end planning and execution framework and Operations Management Support (OMS) software system across product companies. Companies that were at different phases of their growth and development cycle.
We do not have inventory reduction numbers that we can share here. What is clear is that by slashing the end-to-end planning cycles by over 80%[2], we helped them achieve significant capital efficiencies – something they had not experienced before. How?
Very briefly – by achieving increased process velocity, across a focused set of end-to-end processes.
by slashing the end-to-end planning cycles by over 80%, we helped our customers achieve significant capital efficiencies – something … not experienced before. How? .. by achieving increased process velocity, across a focused set of end-to-end processes
The sustained[3]structural cost advantages that customers gained has freed up scarce capital which can now be allocated to other critical initiatives. This gives them an unprecedented operating advantage.
[1] working with Channel Sales depending on where inventory is high
[2] Based on analysis conducted and vetted by our customers
[3] Cost advantages achieved are structural (lower inventory levels to ship out the same revenue), hence recurring
Inventory levels rising ? Watch out!
Inventory (specifically, Channel inventory) is a double-edged sword. On the one hand, maintaining near-optimal channel inventory levels provides a competitive edge by ensuring fast and cost-effective order fulfillment. On the other hand, if inventory levels creep up too high, it can quickly become a noose around your neck – a heavy financial burden.
Left unchecked, rising inventory can impair your company’s financial performance in the near to middle term. This due to carrying much higher inventory levels for the amount of revenue shipped.
In case revenue growth shifts or slows down, you will be left holding the bag on ship-loads of inventory (much of which must be written down or written off).
Longer term, this will push your company into a corner, impairing your competitive standing.
As a Chief Operations Officer, you must ensure your inventory optimization initiative always bubble up to the very top. Make this a strategic initiative. Ensure ongoing support from the senior leadership. Mobilize all team members. Ensure it’s not just a tactical one-off.
See the ‘Actions’ block below. Drop us a line. We can share a picture and real-life stories around that. This can help your cross-functional team visualize how our customers and other senior operations leaders have successfully tackled this challenge, steering clear of those insidious inventory icebergs.
Actions for the COO:
How is inventory connected with process cycle time?
How will increasing process velocity help us lower the overall levels of inventory (finished goods, raw-materials and semi-finished stock, work-in-process)?
How should we go about increasing process velocity (which end-to-end processes)?
Have we received any “outsider in” perspectives on how you are making decisions in your value network (not just your supply network) and its impact on inventory? how is it leading sub-optimal inventory?
To learn more contact us here, or below. Stay tuned. As always your comments are a gift to all.
1) (Book) Winning Now, Winning Later: How Companies Can Succeed in the Short Term While Investing for the Long Term Author – David M. Cote
Disclaimer: Generative AI (GenAI) was used in a limited way for improving clarity of sentences only for this article. GenAI was not used for composing any of the writeups on this site (including this one), nor for any data gathering. GenAI was used to generate both the pictures in this article. At this point of time, there is no plan to use Generative AI to generate new content on this site. Readers will be informed in advance if this changes.
Technology driven transitions have a significant impact on companies, industries, and markets. This paper provides insights on preparing and executing effectively during such transitions. It analyzes the transition that the automotive industry is going through that has major risks and outsized opportunities. Two areas have been emphasized – operationalizing long-range planning and adapting structurally to market demand signals. The author outlines unique capabilities that Zyom specializes in to help companies navigate the complex and risky road ahead.
Technology driven transitions
All transitions, especially new technology-driven transitions, that are global in its reach, result in big risks, even for strong incumbents in the industry impacted by the change. Most of the risks are unknown, before the technology achieves suitable level of maturity for larger scale usage. Some can be existential risks.
However, in most cases, these transitions result in significant opportunities to create and carve out extremely large, market opportunities. A sizeable subset of these transitions have an outsized impact in altering user/consumer behavior in profound ways.
While there is a large body of work about the disruptive impact of new technology on companies and industries impacted by the change, most of it is focused on higher level competitive strategy.
While this is an important line of investigation, it suffers from a major shortcoming.
Far too often companies fall short in the vital area of executing – making their strategy operational. And this problem plagues larger incumbents who get knocked off their perch by these transitions, and strong, mid-size competitors alike.
This paper is a study of one of the most critical transitions that is ongoing in the automotive industry – from polluting ICE cars to lower-carbon alternatives – which is yet in its early innings. It offers new ideas and approaches for operations management to prepare, plan and execute during these transitions effectively and efficiently.
The points surfaced here can be utilized by cross-functional operations leadership (product, operations – sales and supply ops, and operational finance) for any other technology-led, large-scale transitions that are emerging or ongoing in any physical products industry.
Automotive – A massive, bumpy transition, a looming imperative
The automotive industry is in the middle of a massive transition. This has resulted in big risks, and sky-high opportunities.
A massive, seemingly irreversibletransition[1] is going on in the Automotive industry, starting with the large, well-capitalized economies– from legacy IC[2] Engines to Battery EV (or EV [3]) and other alternative energy auto options (hybrid, hydrogen, etc.), due to a confluence of many forces:
Adverse impact of fossil fuels on humanity’s well-being on a large scale – pollution, air-quality, grave hazards to ecologies and humans caused by oil extraction companies and ICE autos, which is also a key ingredient causing extreme climate uncertainty. In 2020, the transportation sector alone accounted for about 20 percent of global greenhouse-gas emissions (source: McKinsey, McKinsey__Study-on_the-future-of-mobility).
Resulting government regulations, along with controls, incentives and creative policies put in place by some of the largest global economy players and GHG[4] emitters – from EU to US to China, Australia, India, among many others.
Availability of suitable technologies & materials – Although technologies are still far from optimal – for instance, EV battery materials resulting in more mining, potential future conflict between energy and food supply chain needs[5], greater dependence on energy from utilities, most of which are still dependent on carbon-intensive/dirty carbon sources, the supply-side of these materials have scaled up significantly over the last 5+ years, so has driving range and charging availability[6].
Shift with bruising bumps in market demand[7] towards EV (and other low-carbon options), and away from the traditional ICE auto, despite higher prices of EVs/ alternatives versus ICE autos[8], near term demand slowdown notwithstanding.
A major transformation underway among legacy ICE auto-makers as they slowly but surely wake up to the serious competitive, potentially existential threats posed by the electric transition, as a means to cut emissions, the technologically smarter pure-play EV companies making it, and the rising public awareness around climate impact of ICE autos. Leading, pure-play EV makers, with their smarts in clean-sheet design in hardware, software, its integrated functioning, zero legacy operations baggage and consumer-friendly direct sales model, appear to have a sizeable lead over the legacy makers in engineering and manufacturing of EVs; as Jim Farley, CEO of Ford candidly admitted [9], not too long ago.
Lower complexity Bill of Materials (BOM), a transformed product – Despite challenges in manufacturing[10] EVs at scale and attaining suitable margins, from a BOM standpoint, the EV is a simpler, and in key respects, a superior product too – beyond being fossil fuel-free. In addition, with the EV, the auto is going through a radical transformation – from a mechanicals-heavy to an electronics and software heavy product.
Very Bumpy Transition guaranteed– As this paper was going to press (early January 2024) the drumbeat of downbeat and dismal news from the EV industry reached a high pitch. Demand for EVs appears to be stalling in the near term, down substantially from the rising trend that was emerging over the last 2-3 years (footnote#1). Legacy ICE automakers who had previously made bold commitments to allocate substantial resources to EV capacity, are reducing their EV commitments, often substantially (GM, Ford, etc.).
A sizeable number of legacy ICE automakers are instead cranking out more hybrids at the expense of EV’s to achieve their reduction goals.
The underlying EV technologies, and other ICE alternatives need to evolve and maturesignificantly and swiftly. Yet, it is clear to the informed consumer, especially those that can afford it, that they do not need a power station burning polluting fuel under the hood as they go from point A to B – the case with IC engines. For legacy ICE auto companies with significant direct emissions[11], transition to EVs and other low-carbon options, is a looming imperative.
In fact, this can be stated with a high degree of confidence[12] –for all ICE automakers, except very few, who started on their learning curve of EV operations a few years ago, the transition to a cleaner automotive technology, is an existential threat, as the inevitable shakeout takes place.
Planning & Preparing for the transition
So, how should the auto industry prepare itself for this transition – both the traditional ICE automakers and their younger EV rivals? Following are 2 key takeaways based on Zyom’s research and direct industry experiences[13] even if transitions were not of the same magnitude:
Operationalize Long Range (5+ years) Planning – From operational standpoint, most long-range business planning cycles range from 12 to 24-month (hi-tech, electronics intensive industries).
In many industries, the range stretched out much more due to the choking of supply chains during the recent covid-19 pandemic, ongoing significant restructuring & retooling of supply chains, and altered goods flows due to strategic concerns over potential or actual lost capacity and resources
These stemmed primarily from the unpredictable conflicts impacting several regions – namely, Russia’s ongoing attacks on Ukraine (harness makers), China’s aggressive territorial postures towards Taiwan (semiconductor chips, rare earth/ other key EV raw materials), the Israel-Hamas war (OPEC majors’ region).
Our investigations indicate a longer time range planning process is required.
No, long-range planning cannot eliminate uncertainties caused by such unpredictable events. This leaves a big question – how is this (long-range planning) different from Business Continuity Planning?
The key word here is ‘operationalize.’
Most long-range plans are basically of limited use, if not futile, since many of the key leaders who design and implement it – manufacturing and supply chain, sales, product-line management – realize, that planning for anything beyond 2 to 3 quarters, in rapidly changing, technology change intensive industries – is, at best a guestimate, in the worst case an output of little use – because plans beyond 2+ quarters are perishable, and it’s a fool’s errand to try and bring it back to life, or worse – modify those to utilize it in running operations.
Operationalize implies the ability of tying these long-range plans with plans in the tactical horizon (2-6 quarters out), ensuring these are not only tied with overall strategy, but also considers likelydisruptions along various operating links, nodes, peoples, and evolving economics – macro and micro – across business cycles.
This is where a complete commitment to cross-functional knowledge, and capability sharing and collaborative planning is required across supply chain partners (product enterprise – auto OEMs, in this case, and their key suppliers – Tier1, some Tier2, and others upstream), and across functions within the auto OEMs (Product Line Managers, Sales and Manufacturing/ Supply Chain operations, and Cost/Value engineering).
Shrinking Window of opportunity – Legacy automakers, in the US and EU especially, need to make concerted efforts in operational long-range planning, since their “window of opportunity” to stay competitive maybe smaller than they think (case in point – Labor strife at the Big-Three[14] in the US resulting in a 25% labor cost increase[15], EU mandates for 100% EV production effective 2035).
Pure play EV manufacturers in the US, EU and Asia, except a few[16], may also have a rough road ahead, with a smaller and potentially shrinking “window of opportunity” versus legacy, ICE vehicle makers, due to the intrinsic capital-intensive nature of the industry (requires significant capital investment up front in plant and equipment), and extrinsic factors such as – intensifying competition from current EV leaders (Tesla world-wide, BYD of China), structural debt-intensive nature of recent macro-economic revivals (post covid-19 pandemic) – elevated inflation and higher interest rates, which has dampened EV demand based on the latest data (footnote#1). Large EV markets, such as China, are facing severe slowdown in demand.
In addition, unpredictable geo-political trade impasse (e.g., US versus China, EU v. China) also threatens to severely constrain critical raw-material inputs, and choke EV trade volumes.
Governments & the long view – A key contributor to long-range planning are governments and their productive engagement with new industries. In large, well-capitalized economies that are relatively free of state-control (the US, EU, Japan), private enterprises are driving most of the innovation, with some government support (example, loans to EV, battery and charging infrastructure makers). Automakers in the US, EU and mature economies that are currently leading EV adoption have benefited from this.
Chinese automakers’ selling price for EV is similar to the prices European automakers sell ICE cars for!
However, these automakers will find their hands tied as aggressive overseas competition heats up. Case in point – Chinese automakers’ selling price for EV is similar[17] to the prices European automakers sell ICE cars for!
A chunk of this anomaly can be attributed to the command-and-control structure of China’s (and similar) economies which enables national “champions.” However, governments and industry leaders in the US, EU and other free economies will be putting the economic success of their auto industries at grave risk without digging deeper.
What has benefited such an anomalous success in economies such as China, is a very long planning horizon[18] (10+ years). This has enabled companies in these economies to scale, often quite fast, capture a significant share of the nation’s market, and subsequently expand globally as well. Case in point – BYD, which started as a battery supplier in the late 1990s to mobile phone makers, and eventually expanded into making EVs. As of Q4, 2024, BYD is the largest EV automaker world-wide, having recently surpassed Tesla.
Market Demand Signals – Big changes are afoot in this area, especially driven by the pure-play EV automakers. From a channel only centered (i.e., dealership only) demand generation and fulfillment model, to an OEM driven demand-gen and fulfillment model (via OEM showrooms, e-commerce website, etc.). This has profound implications for the OEM, and its supply chain, despite resistance to move away from the dealership model by large players[19].
The new model lends itself well to a BTO (build to order), or CTO (configure to order) model of managing manufacturing supply chains. This can be a significant game-changer for the auto industry. Like many other channel-intensive industries[20], auto industry has traditionally suffered from excessive supply clogging in downstream supply chain nodes – at dealers and distributors, who are the preferred, and often the only way, to fulfill end-customer demand.
The new model lends itself well to a BTO (build to order), or CTO (configure to order) model of managing manufacturing supply chains; this can be a significant game-changer for the auto industry
With the ability to switch to a more BTO or CTO centric model, and tightly aligning or cutting out the intermediary (dealership channel), demand generation and, end-to-end demand through supply planning, manufacturing execution and final customer order fulfillment is now the purview of the OEM. This will lead to much better visibility and better controls over finished goods stocks, long lead-time parts and sub-assemblies’ supply, faster feedback loops for corrective actions to be taken to right-size inventory, and get closer to the product mix that is selling in the market.
In addition, the virtuous cycle of rapid feedback on product options (options’ desired/ not desired/ hated) and rapid flow of product gaps/issues into product engineering, will provide a clearer line of sight on customer needs versus automakers’ aspirations.
With a clearer picture of demand, the industry can shift away from ‘Build to Forecast’ and all its ills (including, working capital tied up in dealer inventory) towards a primarily BTO/ CTO approach, and its virtuous cycle (lower inventory, better fulfillment, better understanding of customers’ product preferences, and perceptions).
Any residual capacity, if available at the end of a plan period (quarterly, every 6-months), can be used to build products that are in demand, or need fewer price-reduction type actions to move the inventory downstream from “stocking locations” to customers, or the capacity can be held back for vital upgrades and maintenance, or just planned downtime (theory of constraints and its virtues). In fact, even with rising demand, there may be a need for proactiveresidual capacity planning (à la inverse of “yield management” used in the airline industry).
even with rising demand, there may be a need for proactive residual capacity planning (à la inverse of “yield management” used in the airline industry)
A singular opportunity – Getting this transition right
History has some datapoints for us. At the turn of the last century (1880s to 1920s) the personal mobility industry in the US was going through one such major change (from horse drawn carriages to cars). From over 200 automakers, the field collapsed to eventually 3.
How did the last 15-20 dynamic automakers fall, leaving the field to the Big Three?
Better marketing, better manufacturing processes (Ford’s mass-production lines), better mix management (no options or very few), others? That maybe a topic for industrial historians to dive into. What is clear is that the Big Three were able to scale up their production effectively, meet the demand of a growing base of new consumers (sales, re-fueling and service), and do it all while keeping price points attractive, bringing increasing number of customers into the fold, and achieving and maintaining healthy profits.
Today (circa early 2024 and over the next 5-7 years), both legacy ICE automakers and pure-play EV makers face big challenges as they navigate this significant industry-wide transition.
Neither the incumbent ICE automakers, nor the disrupting EV makers have an unsurmountable advantage over the other, although select EV makers – Tesla and BYD – appear better placed.
This transition, like any transition of this magnitude, promises to be full of peril and near-term pain. However, there is an extremely outsized opportunity of industry-wide leadership for those that ‘survive’ this transition, achieve target unit economics to attain profitability, are able to sustain profitable operations, and the many unforeseen and un-plannable macro-economic and industry-wide disruptions that may surface, and throw the transition off course.
The grand prize is to be in the Big “x” (EV) makers (“x” being the unknown – will it be 3 in cars? 3 in pickups? 3 among truck makers, etc.). These handful will dominate the electrified (or alternate energy) vehicle future.
Automakers that effectively utilize these ideas, stay laser focused on mid and long-term profitability (2 to 10+ years), and ensure that in all major decisions they stay the course on ‘real sustainability,’ will ensure that they remain a force to reckon with for years, potentially decades to come. They will also play a vital role in the world’s safe transition towards net-zero and net positive environmental goals.
For the road ahead – A unique opportunity to gain an operational advantage
The transition and resulting changes expected in the automotive industry globally over the next 2-10 years will be complex and fraught with risks. This transition will be anything but linear (maybe, sizeable transition from ICE to hybrids versus EVs comes first, EVs later).
Both legacy ICE automakers and EV pure-plays – will need to become more cost competitive, while doing a delicate balancing act – simultaneously ramping up volumes of some products (EVs, hybrids, etc.) and throttling down on other legacy ICE products, while meeting a myriad of other critical needs (investors, regulators, competitors, public and others).
This is a time for companies to lean on specialists.
Zyom specializes in providing the most cost competitive operations management support system that has directly supported companies in industries going through transitions. How?
Zyom specializes in providing the most cost competitive operations management support system that has directly supported companies in industries going through transitions
By helping companies effectively utilize their cross functional operations teams, starting with manufacturing and supply chain operations, pinpointing specific areas of operational improvement, and implementing the needed capability in full. In many cases, this has resulted in a significant operating advantage – making companies among the most cost competitive in their industry, while balancing the needs of being demand responsive with progressively increasing volumes.
Industry leading results – briefly
Utilizing Zyom’s capabilities, a networking infrastructure provider in a new vibrant industry segment, achieved 10x the scale (volume shipped) within 4+ years, while achieving and staying profitable, and becoming an industry benchmark for cost-competitiveness in the process.
A Fortune 100 electronics industry leader radically redesigned their cross-functional processes utilizing Zyom to minimize inventory related costs, in response to a single product transition resulting from new technologies that had cost the company $10s[21] Million.
Ready to get into the Driver’s seat?
What makes the set of capabilities that Zyom equips its customers with unique are its innovations in these distinct areas:
Closed loop operational planning and execution
Product and Operations cost optimization
Smart collaboration across functions and value networks
The capability set delivered is based on the specific transitions and changes the companies are planning for, or faced with, yet general purpose to evolve as needs evolve. Utilizing these, Automotive and other physical product companies can focus on specific, tailored capabilities to attain, maintain, or sustain profitable operations.
Ready to gain an operating advantage, or just get a copy of the Paper from which the above information is extracted, please reach out to the author via comments, or via https://www.zyom.com/contact.php .
Automotive companies, seeking profitability at scale, will gain a unique operating advantage, while navigating the ongoing transition – the twists and turns in the road ahead.
[1] As an early draft of paper went to press (Dec, 2023), news was pouring in about a potential slowdown in EV adoption in the US; click here for more: Why America’s Car Buyers Are Rethinking EVs, Bloomberg, Jan 2024
[2] IC = Internal combustion (as in IC Engine) or fuel-burning engines
[3] EV (or BEV) = Electric Vehicle (aka, Battery Electric Vehicles)
[4] GHG = greenhouse gases; the ones that trap heat causing climatic temperature rise over time
[20] Parallels with the channel-inventory intensive nature of Computing (PC) industry of 1990s are worth noting; Dell raced ahead utilizing a ‘Dell-direct’ model leaving larger incumbents – HP (Compaq) and IBM behind
Often product transitions in product companies lead to serious turbulence. In product and innovation driven companies – such as hi-tech electronics and consumer goods, this can become a traumatic experience with big tangible losses in excess & obsolete inventory & near-term lost revenue. The longer term lost market opportunities and customer goodwill can have a corrosive effect on its competitiveness. This need not be the case. This blog provides a case summary derived from a real-life Product transition experience at a dynamic consumer goods company, and what the company learned through a methodical postmortem collaborating with an external partner.
Often transitions lead to turbulence which becomes a traumatic experience for all involved.
This need not be the case. As a real-life scenario described below reveals, with a concerted effort a consumer goods company was able to figure out the causal factors which impeded the success of a product transition and how they could preempt it in the future.
The scenario and the solution approach have broad applicability in the hi-tech electronics and other product innovation-driven hardware industries as well.
Transitions are of various types – sometimes these are driven by technology-changes, sometimes due to competitor actions, and on other occasions due to product refreshes which may result in phase-out or reduction in volume of older products.
In this note we will cover the transitions that Product enterprises go through when they make major changes to their products or product lines in the context of this case.
Wipeout in Transition – A Consumer Goods Case summary & Key Takeaways
A large consumer brand faced the deadly effects of a product line transition that went totally off the rails. Upwards of $20MM (USD) in losses (inventory obsolescence and write-downs) were recorded.
Management recognized this event, and the fact that this was caused by a single product transition – in other words, a single product event. They wanted to get to the bottom of this fast.
There were hunches and hypotheses, but one of the key decisions made was – let’s have someone from the outside do an operational postmortem of what went wrong and determine what it would take to ensure this didn’t recur in the future. An intensely collaborative exercise with the external partners uncovered two major takeaways –
1) Trust factor depletion – there was a major erosion of trust between Sales and Operations (Procurement & Supply Chain Ops) that took place over a period of time in the recent past before the product transition debacle.
At that time, Product demand was perking up and was being diligently reported by Regional Sales teams, yet Operations apparently got cold feet when responding to the demand – not fully ‘comfortable’ with the ‘optimistic’ numbers from Sales. Shipment volumes were consistently lower than the order volume – resulting in long lead-times, ‘unhappy customers’ and potentially ‘lost sales’. While the part about ‘unhappy customers’ and ‘lost sales’ could not be conclusively established, it was clear that the Sales teams were unhappy with the lack of fleet-footedness on the part of Ops when demand “signals” from Sales were being explicitly communicated to them.
Sales made their displeasure with Ops clear to senior leaders. While such Sales-Ops mismatch on demand is not uncommon, the contentious nature of the recent Sales-Ops interactions and the fact that volumes shipped by Ops was always chasing the growing demand, made the pendulum swing too far to the other side when the next change hit, namely this product transition with several technology changes in the new product.
Takeaway: when the ‘trust gap’ between Sales & Ops grows noisy, it’s time for leadership to pay attention and act on the data-points.
2) A Transition Planning process and owner and a tool – Except for quarterly business reviews, Ops glitches – such as a missed delivery, or growing lead-times – rarely get top leadership’s attention, unless it directly impacts a large customer/channel partner or revenue. As such these operations ‘micro-events’ are stashed away in corporate (tribal) memory as one-offs with lessons learnt based on isolated reviews. This works for most garden-variety operational issues, most of the time. Not so for transitions.
Transitions are a critical time and a critical driver of future revenue from new products.
In the frenetic activity to launch a new product with new technology-set, a big process component was missed – How to plan the transition? What’s the ideal way to transition? What if things went off the ‘desired’ course – push-out of launch dates, lower shipments in channel than Sales plans? How to navigate the transition in such cases? Even experienced Ops teams often miss this. A conscious effort has to be made to chart out the transition process and more importantly all the moving parts involved –
What is the Product’s Transition Plan? When & how to change it?
Who is responsible for transition planning?
Whose inputs are needed when making changes?
How do changes affect decisions and plan? How to communicate decisions and plan changes?
Key Takeaways: First and foremost a Transition Planning process needs to be defined working across functions.
Next, the ownership of the Transition planning process needs to be clearly defined, including the cross-functional team members.
Finally, there is a need for a tool – a digital transition planning tool which companies can use to generate transition plans fast, plan & decide among different ‘What-if’ scenarios, re-plan in real-time if needed and distribute the resulting actions across all team members quickly so follow-up execution can be completed before it’s too late. A metaphorical surfboard to ride out the transitions.
Think about it. In day to day Operations, most of the planning resources and energies are deployed on products in various stages of volume production. However, for critical product transitions which can be a make or break for smaller companies, we think the same (Volume Production Planning) approach will do.
No it will not.
Product transitions have their own patterns and noise – as this company found out too late..
With careful thought, planning and attention of the right cross-functional team guided by Operations, companies can smoothly ride out a transition “wave” and catch the next one to go higher.
(Thanks to Alpana Sharma and John Duvenage for edits and organization)
The Sales kick-off went quite well. Now is the time to take one more look at what 2014 looks like from the vantage point of forecasting before real constraints set in.
Economic forecasters have long utilized ‘leading’ and other “indicators” as a barometer to predict where the economy will be headed in the future. Inspired, we have pulled together the following ‘early’ indicators that can provide useful ingredients in influencing if not generating a Company’s forecast. While all forecasts are off, early indicators can be used to understand the ‘trajectory’ and a portion of the variance in the forecasts that is otherwise hard to estimate.
Here are some early indictors and macro-data[i] as you craft your forecast for 2014.
Early indicators – the Macro
Weather events & the US – Climate .. or at least the weather took center stage early in January as temperatures plunged in vast swaths of the US disrupting life and business. The near term effects have been significant but not severe. The initial price tag of the big chill is placed at $5Billion (as of early January 2014). Doesn’t appear devastating given nearly 200 Million people were affected. However, long-term effects should be lesser to none.
The good news – the US economy turned in a fair 2013 (3.2% GDP growth in Q4, 2013 versus 1.9% for the year) and early indicators suggest 3% for 2014. In the near-term the US certainly seems to be back on track, and maybe at the wheel in terms of driving the global recovery.
Estimated Impact – Of storm – Near-term only (3 weeks to 2 months); US Growth – stable for 9-12 months[ii]
Emerging markets – Short-term growth prospects have been hurt. Turkey made headlines with an egregious interest rate hike in January. However, emerging market countries as far-flung and diverse as Argentina, South Africa, Indonesia and India seem to be facing stiff economic headwinds too. Brazil seems drawn into a stagflation, just months from the big kick-off!
Estimated Impact – Near to Mid-term (9 to 18 months depending on markets)
China’s growth phenomenon – China’s slowdown has arrived per data and economists – 7.7% GDP growth in 2013 Year-over-Year, versus 7.8% growth the year before. While debate is split about future direction of this important market, all data points to a gradual deceleration and not an absence of growth. Structurally, data regarding the supply-side limits are cause for bigger concern (China’s working age population fell by 2.44 Million in 2013 after falling the year before – The Economist Jan 25th 2014).
Estimated Impact – Near to mid-term slower growth (10 to 12 months); Longer-term growth could be adversely impacted.
Japan and EU – These key developed markets still seem to be stuck in neutral with dangers of deflation not gone.
Estimated Impact – Tepid growth. Foggy at best for the next 6-9 months
Housing starts – A key “leading” indicator of future economic activity is in positive territory in the US, Germany and England (Jan 2014 compared to a year ago).
Estimated Impact – Could imply some progress for Construction and related businesses (home products, home solar products, other home/consumer products).
Early indicators – the Micro
New orders and new customers – Both are good early indicators
Orders for new products –are valuable early indicator, especially for industries such as the Hi-Tech electronics industry that rely heavily on new products for significant portions of their revenue stream. For example, for the Wireless networking industry, how are the orders coming in for the 11ac products (based on new networking standard) and how are the prices trending.
Inventory (especially Channel Inventory) & lead-times – are key early indicators. While channel inventories are typically co-managed, tracking this can provide valuable clues.
Backlog – A very good gauge in the near-term to establish revenue trend. However, this needs to be taken with a pinch or heaps of salt. Why? This depends on how effective are your supply chain fulfillment operations.
And that’s where the rub is – since some of these indicators depend on a ‘healthy forecast’ so we are back to the ‘chicken and egg’ problem.
These are a few of the key ingredients to consider as ‘early indicators’ in updating or building your forecast – at least for the mid-term: 0 to 6 months.
Overcast or Sunny? For those who dare to Forecast
Even with the best processes and systems the age-old truth holds – All Forecasts are incorrect, especially at the get-go. However companies can disproportionately benefit if they:
i) Include ‘early indicators’ in the forecasting process in a simple way
ii) Make Forecasting (the process) one of the book-ends of the Demand Planning process, which flows seamlessly as a part of the overall Sales & Ops Planning and execution process
And yes, lets plan to loop back after the proverbial dust has settled on the quarter (or, quarters) to figure out how far off was the Forecasted Demand. And while we are at it.. why not find out why, and how the indicators have changed. As the adage goes..
“Forecasting is the art of saying what will happen, and then explaining why it didn’t! ”
As we prepare for another spin around the sun, we found it fitting to reflect back on 2013 learnings, and take a glimpse at our crystal ball for the journey ahead in 2014
Takeaways – 2 short stories
Thanks to interactions with our customers, partners and other practitioners, the year was chock-a-block full of learnings. 2 highlights:
1) How does a young company know when they have entered the Operating or ‘O’-Zone? Over the last 4+ years we had the privilege of watching a company (Ruckus Wireless www.ruckuswireless.com) blossom into a significant player in a newer segment of the networking industry. As a solution provider, we have worked and thought hard about the development lifecycles of high growth, high change industries for over a decade, wondering how & when a company knows that they have come of age, or entered the critical ‘O’-Zone, as we define it. O for Operating. As defined in a previous blog (http://bit.ly/MemoToChiefExec ) young Product companies that enter the O-Zone see big changes- from shipping 10s or 100s of units a month of a handful of products, they are quickly thrust into a bigger, rapidly growing Operation – 1000s, potentially tens of 1000s of units being shipped, and this transition can be a mean one. Managing this transition requires the ambidextrous qualities of careful orchestration as well as rapid,intuitive decision-making and execution.
This year we got some great data-points. Those at the forefront of Supply and Sales Operations functions– Order Fulfillment, Supply Chain, Channel Sales managers – enjoy a key vantage point to see this transition as it unfolds. This valuable insight (that a young Product company has entered the O-Zone) if utilized in a timely manner can be harnessed for a greater Operating advantage that can be sustainable over several years.
2) Where do the Highest Impact Collaboration initiatives spring from? How? – As young companies enter the Operating Zone of their development cycle, processes and systems related to collaboration cannot be left to chance or management directives. Systematic Collaboration becomes especially critical between functions that may appear to have conflicting objectives and metrics in the near-term – for example, Sales focus on Revenue Growth and Ops on Cost Control. However, collaboration cannot be regimented through management directives. The genesis of high impact collaboration initiatives happens usually in the trenches, and its success rests exclusively on the efforts of those that get the work done. Take the case of ProductCo – a Product Company (all names changed for anonymity).
As volumes have grown quickly at ProductCo, fulfilling orders in a timely manner has become challenging for Operations. Shelley in Supply Chain Ops figures out that she ships a portion of products every week to the same Distribution partners and her colleague on the Channel Sales side – Julia – needs support. Support, so she can systematically compile sales data, interact with her Distribution partners effectively to understand downstream demand and provide quick signals back to Shelley in Ops, with all the data literally at her fingertips. Shelley (Supply Chain) runs this need by her manager, who points them to a systems vendor for brainstorming. Out of Julia (Sales) interactions with the vendor springs a collaborative system which will yield data and demand insights for the ProductCo in the near-term and on an ongoing basis. No major hullabaloo over the choice of systems, just a single-minded focus on working jointly with the vendor, across functions to improve the customer experience – through faster and accurate collaboration utilizing fresh data. All this happened because the initial thought to change came from within, was nurtured by a progressive management and collaboration culture, and effectively implemented working with a solution vendor as a partner.
Leaping forward in 2014.. and beyond
a) Collaborating systematically across functions and partners will gain traction going beyond cookie-cutter approaches : 2014 will see the onset of specialization in a critical collaboration area- Sales & Operations Planning and Execution. Dynamic companies will demand more than the cookie cutter approaches that have been offered to date. Industry specialization, smarter demand management methods, more tailored data and workflow linkages which will result in a faster and smarter collaboration between Sales, Supply Chain and their partners.
b) Leading companies and younger aspirants will refocus on profitability and away from a singular focus on Revenue growth only– Whether motivated by competition, financial valuations, cost of capital or more mundane business prudence, leading Product companies will focus back to product and operational profitability, and will be rewarded richly (http://reut.rs/1hagYpN ). Those that fall short will start seeing their valuations drop, resulting in erosion in market standing over time. Profitable Revenue growth will become the mantra of those who are at the head of the pack and intend to stay there.
c) System Implementation will capture center stage as a core success factor : As the botched rollout of the Affordable Care Act (ACA) website revealed (http://bit.ly/ObamacareIssues), bringing a website “up” is no guarantee of its success. Systems implementation requires a rich, complex set of interconnected activities to be completed in a timely and cost effective manner. This fate has also befallen many a system implementations in the private sector too. Since private companies can afford to throw a blanket of secrecy over such bungling, we hear only of the spectacular failures (http://ubm.io/JpGedn). 2014 and beyond will bring renewed focus to the arts and sciences of effective systems implementation.
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