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.
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
Profitability has again taken center-stage when evaluating the near-term operational performance of Product companies, and their long-term prospects.
This article highlights some of our learnings & experiences regarding –
What are the different pathways to profitability, or growing profits?
What to watch out for?
These learnings are from the vantage point of Operations leadership, and for all who lead, or support cross-functional operations.
In the current backdrop of an ongoing pandemic, persistent inflation, the corrective actions being taken by central banks, its confounding impact and a widespread feeling of uncertainty, Profitability has taken center-stage again when evaluating the near and longer-term operational performance of Product companies.
This article highlights some of our experiences and learnings to answer the questions – What are the different pathways to profitability, or growing profits (for companies that have achieved profitability)?
What to watch out for?
These learnings are for Operations teams, their leadership and all leading or supporting cross-functional operations (Finance, IT, Engineering).
Putting Profitability on the back-burner will burn your enterprise
Companies that pursue ‘growth only’ approach, without careful attention to “profitable growth”, risk losing sight of the insidious effects of factors that will erode eventual economic value of the enterprise. How? Growth, especially growth at a breakneck speed* invariably leads to poor quality of attention being paid to anomalies in ‘cost of growth’. Growing costs creep in even when a company grows in line with plans. With unplanned growth, growing costs become bad news that arrives too late, eventually derailing the path to profitability for larger and mid-size product companies alike.
A Company that loses their ‘path to profitability’ (including sustaining their profits), loses the chance to maximize its own value and provide maximum value to customers. Key questions for company leaders –
As you make Plans, especially those with longer-range impact (e.g., adding factory or warehouse capacity), do you have a clear picture of its impact – on existing customers, on profitability?
What if (.. list any of the many changes here) happens?
* Seen in the pandemic times circa 2020-early 2022 in a subset of IT goods and e-commerce industry
Manufacturing & Supply Chain Operations teams are core to any product company’s mid to long-term survival and profitability; their evolving mandate
Over the last 2+ decades, this author has observed the slow, almost inexorable slide downwards, of the role of “Manufacturing and Supply Chain Operations” teams in companies that design, make and ship branded products – across many industries (from Hi-tech electronics to consumer appliances, to name a few).
As ‘outsourced manufacturing’ in several industries, stripped away the ‘physical assets’ (machines, tools, materials) that Operations teams were responsible for, operations teams shrank – often, with good reason. Unfortunately, the Operations function’s importance as a strategic partner of the CEO, as a part of the executive team, shrunk too, overwhelmingly – except, in those organizations where the Operations leaders were strong change influencers and facilitators, and the CEOs and other influential leaders were clear about it. Clear about the fact that – Operations team and their leaders arecore to the company’s success – whether manufacturing is outsourced or not.
This phenomenon was upended by the global pandemic starting circa early 2020, as factories, materials needed, ports, and people working these, froze up, and buckled under their weight of the pandemic.
Only those companies can serve growing markets profitably in the longer term, when key leaders and the CEO are clear that Operations team and their leaders are core to the company’s success – whether manufacturing is outsourced or not, and the Operations mandate will need to evolve
It appears that this, among other reasons, have resulted in a shift, which is yet a ‘work in progress’. Indeed, Operations teams are now playing key roles at companies, at least among stronger ones, often in new, strategic settings – in some cases, the Operations leaders getting invited to share their “supply chain insights” in quarterly, financial, market-facing calls, alongside the CEO and CFO.
This is the right time for Senior leadership at Product companies to work closely with their Operations leadership team and build out the necessary competencies and capabilities needed, so they are not caught flat-footed, and new ways of operating are developed and implemented, as the pandemic persists, and other major “supply constraining” events take place (war, weather-related/ climate-change induced disasters, and their aftermath, etc.), some of which may seem deceptively “further out”. Key question –
What key Operations capabilities and competencies are needed now?
How will the Operations function evolve – Can Ops step outside of the ‘cost control’ function (traditionally, a “comfort zone”), and contribute directly towards the ‘profitability’ function?
How can Operations step outside of the ‘cost control’ function (traditionally, a “comfort zone”), and contribute directly towards the ‘profitability’ function?
We have seen transformative results when Operations leaders have such a mandate. However, a ‘mind-shift’ is needed.
For example, during a time when one of the largest integrated Steel plants in India, Tata Steel, was facing severe input constraints, our founding advisor’s work to optimize operations directly helped expand profit contribution even as total output volume went down, resulting in a radical rethink of how to manage operations (International award-winning work by Dr. Gopal P. Sinha**).
A word of caution here – Do not go back to the old ways – i.e., diminished attention to the Operations function when these “economic clouds” start clearing up and “headwinds” to Revenue growth diminish.
Deliberate & Intelligent Collaboration is the only way for any company to succeed
While this is true for enterprises of any size, irrespective of their relative position in their industry, it is especially true for younger (growing startups and scale-ups) and mid-size companies that have to innovate and grow their products and offerings. “Collaboration” with a capital “C” can result in many intuitive and non-intuitive benefits. Highlighted below is one –
Unexpected “value” and “insights” from suppliers and their products, especially those with a “collaborative” approach. Credible smaller providers (i.e., with proven success), may have a lot more to offer than larger providers, since “innovate and execute” is core to their survival and growth.
For example, in one case, a Procurement executive at a growing, mid-size product enterprise was “surprised” how a system (provided by Zyom) significantly improved collaboration with Finance, reducing time in hand-offs between Ops and Finance, and eliminating errors which resulted in higher supply costs, in addition to other primary benefits. Question –
Have you explored any credible, new ideas in managing cost, and improving profitability with all your suppliers?
Supply driven “Inflation” needs a different mindset & tools
As the US, Europe, Japan and most free-market economies grapple with the most severe inflation in the last 4+ decades, it is an imperative to approach this ‘inflation’ cycle with a different mindset, in terms of operational execution.
In this case, persistent inflation was triggered largely by a once in a 100-year pandemic resulting in massive, cascading disruptions to global supply chains, choking supply severely (demand largely intact after the initial shock), the resulting policies (government, central banks, even companies – inducing more demand), subsequent uneven return to normalcy (China, an important global player, has entered a dangerous phase 2 of the pandemic, as of December 2022). Geopolitical unease between the US and China, the attack on Ukraine by Russia, has forced speedy rethinking of supply sources, making matters very difficult for those operating global supply chains.
The Chief of Operations always had a dual mandate – Right amount of flexibility at an optimal cost, which are at odds with each other.
Flexibility implies flexibility in the manufacturing and supply network – capacity, inventory, etc. Costs include all product and operational costs that impact cost of goods sold.
Increased flexibility directly leads to higher costs, often a step-function increase.
In light of the evolving global pandemic and ongoing supply constraints (though, getting better), key questions for Operations leaders and the CFO are –
What specific decisions can Operations directly support to address the profitability squeeze (due to inflation)? How? (Latter will require new tools)
What key new metrics are needed? What traditional metric/s needs to be revisited?
What specific decisions can Operations directly support to address the profitability squeeze (due to inflation)? How?
Stop looking for (system enabled) answers in the wrong places
To navigate successfully, in this new, rapidly changing environment requires a Rethink – especially regarding process,data and analysis support needed by cross-functional Operations teams. Do not expect a zero-risk mindset to work if you are trying bring on-board any new capabilities that your enterprise currently needs, or maynot know that it needs. The right partner can help uncover these ‘unknown needs’. And casting off this zero-risk mindset is a prerequisite to drive profitable operations.
Too many companies scale operations to reach a certain ‘threshold’ volume, only to decide, without adequate due-diligence, that their growth is being constrained because their existing ERP system cannot “scale up”, and that they need ‘add on’ ERP capabilities from the incumbent, or (worse) start implementing a new ERP system.
This is a classic “integrated-solution out of the box” logical fallacy which is played upon by entrenched incumbent providers (especially ERP software provider and their cohorts). Why is this a fallacy?
This is a classic “integrated-solution out of the box” logical fallacy which is played upon by entrenched incumbent providers (especially ERP software provider and their cohorts).
Most ERP[1] systems have been laggards, even to date (2021 – 2022), in vital areas such as “Planning”, especially context-rich planning, which, ironically, is what the ‘P’ in ERP is supposed to stand for.
Some ERP suppliers have plugged their holes partly with acquisitions. Despite this, they struggle and make their customers struggle, under the unending burden of their long, expensive implementation cycles, often, even for basic ERP (Accounting/ General Ledger, Inventory) capabilities.
Unfortunately, since risk-aversion in adopting and implementing systems runs high among decision influencers, the malaise persists. “No-one got fired for buying XYZ” being the prevalent mindset (replace XYZ with any of the afore-referenced providers) – a system largely built to be a repository of transactional data, is stretched and patched to “add on” other capabilities – in the name of “integrated solution”, only to fall woefully short.
Looked at another way- a largely “commodity” software with “General Ledger/ Accounting” as its core, has been stretched and bloated to be utilized for highly specialized and often strategic needs, without having qualifying capabilities or people to support the extensions (at the ERP provider). This is damaging in the short and the long run for the product enterprises deploying these, given the predictable longevity of these implementations.
The questions to ask internally is –
Can we wait 2-3 years to get these critical operations management capabilities***? And incur the costs (of waiting)?
Do we understand our “systems” decision blind spots and biases?
Are we even looking at the right type of system solution or provider partner?
*** 2-3 years based on actual data from Zyom. less than 50% probability of expected outcome in areas of planning, context-specific analytics, operations execution
On Leadership, in brief
With a seasoned Operations leader at the helm, who has seen a few operating seasons, and knows about “why” and “what” of specialized Operations Management systems, these de-risking debacles (“let’s do it all in our ERP system modules”) are pre-empted – i.e., cognitive biases and fallacies mentioned before, avoided or overcome. However, the very companies that need such leaders – growing mid-size companies or younger, faster paced scale-ups – do not have access to such leaders in a timely manner.
The question for the CEO and senior leadership team is:
Do we have a seasoned Operations leader who not only understands the business needs (what’s needed in the supply chain, team) but also recognizes the unique data and system enablement needs of operations? If not – identify a suitable partner (internally, and externally).
Do they know (or have adequate support to identify) what types of software systems outside of ERP are available and effective to support Operations teams?
Implementation is It.
Perhaps this is the most important learning of all.
In fact, this is where most worthy operational change goals can bite the dust, especially if “lets extend the (heck out of out) ERP system” mindset persists, when considering system enablers. This is where specialized providers (such as Zyom) create a better world for Product companies and its system users, by being laser focused on Implementation, no matter what. This is the only way meaningful changes are implemented and benefits realized.
Once the initial “visioning” has happened, the hard and soft requirements have to be “implemented”, whether in changes to processes, or to software systems enabling the process change. This is where many, if not most, ambitious digital enablement efforts fall way short. Digital transformation remains a distant pipe dream.
A sizeable volume of words won’t be enough to cover key learnings about such system implementations and how it is effectively integrated into processes (potentially, a future post). Needless to say, to attain/sustain/grow profitability, a new way is required – new collaborations and potentially new systems and tools.
.. to attain/sustain/grow profitability, a new way is required – new collaborations and potentially new systems and tools
Because, this is where the rubber hits the road, and things can go flat and flounder, or zoom forward, even soar.
With a new 2023 starting, this is the right time to sketch out such a change, talk to such a partner.
Making a company scale is vital. For hardware product companies (offering physical goods), this is especially key when technology is still in its early stages of adoption. Scaling early provides a solid competitive anchor in the markets they serve, making it harder for follow-on competition to achieve similar scale or size. Most research and case-studies have overlooked a very important piece of the scaling puzzle – scaling operations effectively and rapidly – both the Demand and Supply-side.
The author derives ideas and inspiration from an example of scale available to us in abundance – that of us, Humans, and attempts to answer the following question –
Why is it that some companies can achieve scale and grow, while others in the same or similar industry with promising products cannot?
Utilizing experiential evidence of scale from directly working with a company that scaled significantly in a short period, and utilizing direct and indirect knowledge from other companies, including past experiences, the author arrives at, what could be fairly counter-intuitive answers.
One specific capability in particular stands us in good stead.
What is this capability? How to develop & utilize this capability?
This article could give you some fresh ideas as you plan to scale in the new year (2019).
To Scale is Human – Evidence from the long arc of Pre-history
Travelling back into the mists of time, an alien would have wondered, looking at us – the Human species, whether we could even make it past a few millennia.
The Homo Sapiens were not the best equipped, the strongest, of great size or anything spectacular to have survived, let alone thrive on Planet Earth.
There were many competing “human like” species (Hominins), some stronger, many better adapted for the conditions they were living in (Neandertals in Europe, Denisovans in Asia, among others).
Somehow, we survived and they did not. Somehow, we were able to not only overtake the other Hominins on their home turf, but we went from strength to strength until, ours was the only surviving human-like species left.
Today, we dominate the planet, and have changed the geography of the planet, not just the history. When it comes to scale among living beings, there is no better example than us – Humans (1,6).
How did this come about? Many things appear to have happened along the way, corroborated by scientists. One in particular stands out – we gathered beneficial mutations – physical, cognitive and social – along the way.
While there are different views on how it came about –
the single most beneficial “mutation” that the H. sapiens evolved was the propensity for active collaboration with totally unrelated individuals.
This singular ability of ‘being able to engage with others in complex, social activities towards joint goals’ – scientists conclude – is one of the key reasons the modern human (H. sapiens) survived, outlasting other hominins (2,3).
So, how is this related to the operating success of the modern-day enterprise.
Using experiential evidence from a company going through critical phases of its development life-cycle, in a young market-space, we would like to share how this ability of being ‘peerless collaborators’ is a critical capability that separates the best run companies from the also rans.
Determining Demand – A hard problem. Reasons why this is hard problem. Why current systems are a bottleneck. Thinking anew about Demand and systems needed – in ever intensely collaboration-dependent enterprises & their value networks
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.
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
respond2demand - Zyom Blog 