Archive

Archive for the ‘Supply Chain Operations’ Category

Transitions and Turbulence – how to ride it out?

February 19, 2017 Leave a comment

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.

 

3in1-fall-plan-ride-surf

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.

wipeout-surfer-nicolas-colombo-v2

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.

2010_mavericks_competition_klein_bearbeitet-v2

 

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)

What’s the demand? Solution to a most demanding enterprise

October 20, 2016 3 comments

A hard problem – What’s the demand?

Pinpointing what is the real demand that a product company has to build to – this is clearly one of the hardest Operating problems in the Hi-tech branded products industry. Let’s try to uncover why? Why focused energies need to be expended at the senior-leadership level to ensure that the right approach and yes tools are applied to solve this problem.

Different Roles, Different lenses

Experienced industry practitioners well know “Demand” for a company’s products may mean different things to different functions.

final-blogpic-pinpointing-demand-zyom-img_5752-v2

For the CEO this starts with the current and next year’s target, crystallized out of a periodic business planning cycle (Annual, Quarterly) into target Financial numbers (Dollar forecast) – often a range. In the best cases, this is arrived at collaboratively with inputs from Finance, Sales, Marketing, Product Engineering and Operations. Although, we have some data-points to believe that Operations maybe involved sub-optimally to the detriment of the company’s execution to its business plan.

For the Sales leader this means current Quarter’s & next quarter’s Sales forecast.

For Marketing, this is looking at Product Mix and plan based on product launches, transitions, events.

Engineering cares most about baking feedback from recent launches and providing reliable launch time-frames.

For the Operations leader and team this means determining – what is the net demand that has to be built and shipped in the current & next cycle (monthly, quarterly) and prepare in case demand flexes. In essence answer –

What is the net Demand that Operations needs to build or buy for?

As plan adjustments are made based on how Sales is tracking to their numbers and other factors impacting demand, Ops needs to answer – What to plan, source, procure, build, ship, deliver & manage the myriad changes to – so that quarterly financial numbers are met or exceeded.

Often, this is made harder by the fact that Operations are downstream recipients of the company’s Annual or Quarterly Plan, sometimes not pro-actively involved at the get-go in the business planning process.

Degrees of difficulty

What is the demand that Operations should execute to, becomes harder to answer due to many factors. Let’s consider these –

  • Young companies in a growth mode go through many changes rapidly – growing the number of products, establishing the number of Channels they sell through, the number of customers and countries they deliver to. This means that the structural value networks themselves are changing, sometimes quite frequently.
  • In addition, the demand from these different Sales channels and direct customers is fluctuating. By Sales Channels we mean all the indirect channels through which a company sells. This includes Resellers, VARs (Value Added Resellers), Distributors and VADs (Value Added Distributors).
  • A system to support Operations do this is very often the Achilles heel. Experienced Operations leaders know ERP provides valuable Supply data & some input data to determine demand, however they cannot depend on their ERP systems alone for fast and accurate planning and re-planning for Demand.

Demands thinking out of the box

ERP is not a panacea or cure-all. Most experienced Operations leaders know they have to think and act out of the ‘ERP box’ if they want to get to their demand picture quickly and accurately, in an environment where change is a constant.

Operations leaders know they have to think and act out of the ‘ERP box’ .. to get their demand picture quickly and accurately

To make this happen, experienced Operations leaders direct their teams to extract data from ERP, merge it with other data and intelligence from outside such as emails, in their own offline spreadsheets and then determine demand. However, they dread this and know fully well they can only go so far in managing their demand with spreadsheets.

Spreadsheets are errors prone and cannot be relied on for collaboration.

When any of the inputs change (say, inbound P.O.s), inputs that are needed to determine real customer Demand to be fulfilled – the spreadsheet(s) go through a domino effect and all numbers become incorrect instantly. The process to change the data in spreadsheets to re-compute demand is painstaking and does not meet the cycle-time or accuracy needs of growing enterprises in competitive markets where collaboration is a pre-requisite.

Operations teams need a specialized system. A system that can rapidly reflect all upstream changes (such as Sales execution, Marketing actions) impacting demand.

Operations teams need a specialized system.. added on top of ERP. .. cannot be done in your ERP system

As we head deep into Q4, the ability to rapidly generate “Demand for Build” reflecting changes and shifts is a critical one – and these capabilities need be added on top of your enterprise systems like ERP. It cannot be done in your ERP system.

Dynamic companies such as Ruckus Wireless, Aerohive Networks have done just that and reaped significant benefits. Implemented right, such a system can be a key factor in scaling operations, while facing changes that impact growing demand. How do we know this? We have provided the system for their Operations teams. Please pen down your thoughts below or reach out to us at Zyom. We would love to share more.

p.s. This blog post is dedicated to the memory of Doyle Westley of Aerohive Networks, a respected collaborator

%d bloggers like this: