Operating Parts’ Supply Chain in Uncertain times – Key Learnings

Parts are super critical. For Product companies the sum-total of all parts is what ensures that the product using the part is ready to make and ship.

Many parts shortages can be painful – economically, and what your logo stands for to the markets it serves, and needs to be attended to quickly but carefully.

This article starts with a short story (fiction) based on real life events, of a major planning dilemma – faced at the onset of the pandemic in the auto industry, and weaves its way across Billions of dollars lost in a short period of time by many companies. Not so for a few other industry peers.

Why? What happened?

This article underscores the critical role of operations planning and execution, and highlights key elements that can be learned, and applied quickly to improve the supply chains of parts (components/ sub-assemblies), ensuring uninterrupted supply, no matter what.

Parts, parcels and people – these three words pretty much summarize the biggest and sharpest pain-points that have come in sharp focus as global supply chain convulsions continue in the aftermath of the onset of the covid19 pandemic.

Sometime missing parts can make a hole in your plans to ship product. However, if parts shortages are chronic and unrelenting, it inexorably leads to big holes in a company’s revenue. Left unchecked, it can get quite grim.

This article is focused on Parts and cursorily touches on the “people” aspects.

Parts are super critical. For Product companies the sum-total of all parts is what make the product whole, and ready to make and ship.
Parts shortages, especially those that have a big impact across many products are painful – economically, and what your logo stands for to the markets it serves. And it needs to be attended to quickly but carefully.

“A major Planning dilemma”: of wait & wants – A short story, an outsized impact

First let’s start with a story (fictional) based on real-life events.
Its Q1, 2020, and the pandemic has hit the world – first landing in a few countries, it soon spreads like a forest fire throughout the world. In its wake, it leaves ports, factories and other nodes and links of the global supply chain frozen out.


Now, let’s hone in on one industry – the Automotive industry – that’s been recently feeling the tailwinds of growing consumer demand.


Jill, (fictitious name) head of Materials (parts, raw materials) Planning and Tier1 Supply, is feeling anxious. She brings this up again and again with her supervisor – the SVP of Operations at AutoMax1 – a traditional automaker (OEM) that’s been turning its fortune around over the last year or so.
A simplified graphical representation of an extended supply chain with multiple tiers of supply is shown here for reference (Auto supply chains are extended, multi-tier manufacturing supply chains, excluding distribution-only nodes)

Jill – “..Bottom has fallen out of the demand .. what should we do with the open P.O.s to the Tier1 suppliers?”

After quick deliberations, spreadsheets and even looking at systems, a decision is made.

Managers (across functions) – “Let’s just cancel the orders”.

Jill – “All the open orders, or a few?”

Pause. More discussions. Deliberations.

Managers (with inputs from senior leaders) – “All”

..

All Q1 and a big chunk of Q2, 2020 turns out be worst case scenario for demand, as predicted.
Auto industry demand crashes.
Other peers of Jill, and the SVP Ops at other car companies largely take similar or same actions.
..

Its late in Q2, 2020, and an anxious Tier 2 chipmaker calls in and pitches a contrarian scenario –

Tier 2 chipmaker – “Demand’s picking up .. it may pick up too fast .. we don’t know yet. Do you want to reorder (your chips)?”

Again, long pause. Jill is not sure. SVP of Ops is torn. Even management is at sea.

Finally, they decide – “no Thanks .. we’ll wait”.

Not all agree, but they are not the assertive voice/s.

..

Its late in Q3, early on in Q4, 2020 and demand is indeed picking up.

Exciting news for AutoMax1 management? Not really.

Jill and SVP of Ops are super anxious. They may have shot themselves on both their feet with their decision a few months ago.

They have already been testing the waters, started communications with the Tier1s and some key Tier2 suppliers – the ones that make the microcontrollers, or get it manufactured by the Foundries. These are the chips that go into nearly everything in their cars.

Suppliers have NO inventory. Nothing meaningful for a very long time – months, probably quarters.

And the foundries are not heeding their (the Tier2’s) calls for help either.

AutoMax1 gets their COO (even the CEO’s ready) on the line with the Foundry chief.

COO – “You’ve gotta help us out .. we need to ramp up and need these chips now.. This can’t wait a week let alone the months that you are quoting us”.

Chip Foundry Chief – “Sorry, we are really super booked. We cannot even fulfill all open orders from (our larger) consumer electronics companies.”

“They came way before you .. placed hard orders, and reserved capacity”. In effect, giant chunks of capacity are now gone.

AutoMax1 COO – “what can you do?”

Foundry – “Nothing really in the near term .. nothing material for the next 2-3 quarters.. we’re nose to the grindstone getting these orders shipped .. we’ll call you as soon as we see capacity open up ..”

A Famine

And that pretty much sums up what happened to a giant chunk of the auto sector in the 2nd half of 2020, and Q1, 2021, leading up to the President of the US and heads of state getting involved in ‘battling the Auto chip shortage problem’. Nothing helped. Not for the near to fuzzy midterm[1].

The chip industry, a notoriously cyclical industry, with high booms and terrible busts in demand and pricing, with its gigantic, capacity-intensive fabrication plants (fabs) were booked solid with orders from the consumer electronics industry, that came way ahead of these auto orders.

In fact, these competing orders had a higher priority for the right economic reasons – higher margin consumer electronics orders, that use leading edge technology, versus the Auto industry that’s been on the lagging edge for a while. Lagging, despite the move to EVs accelerating – with Tesla et al. clearly gaining ground in the auto-market through their simpler, super popular EVs. Anyway, that’s for a later write-up, not this one.

What happened next is quite well known. A mini-nuclear winter of sorts for the auto industry..

Thanks to chip shortages painful shutdowns ensued, first by car category (with lower or lower margin demand), then multiple categories, then manufacturing plants, then entire groups of plants and virtually most (traditional) auto-maker plants across giant swathes of the US and Europe.

A Feast (almost) in other places

Meanwhile, over in Japan, Toyota is humming along – and by the end of Q1, 2020 even guided a rosier shipments (Revenue) picture for the whole year.

Tesla, a tiny dot in the auto-manufacturing firmament a few years ago, is growing shipments every quarter – still small compared with traditional car industry volumes – but ramping up seriously (roughly 80% volumes year over year). And they seem to be unfazed too. In fact, Q4, 2021 turns out be eye-popping one – Tesla shipping way more than anyone would have predicted.

And that’s what brings us to the $500 Billion dollar question[2].


What happened?

How could Toyota, a large automaker, be resilient throughout 2020 and early 2021 (some of the pixie dust appears to have worn off since)?

It’s after all a traditional automaker with plenty of gas-guzzlers in its portfolio (i.e., cannot participate in the EV spike in market demand).

What has Tesla learned about making cars, parts and sourcing for their factories which their 100+ year rivals with their huge volumes (i.e., purchasing power) have not?

Learnings

First off – No, this article is not about the auto industry, the EV leadership of Tesla etc.

This article is about finer operating points (operations planning & execution) that many, even with decades of supply chain and planning experience, appear to have missed.

A clear disclaimer – what’s written here is a hindsight-based learning, a post-mortem, not specific to any industry. Sincere attempts have been made to remove all hindsight bias.

No claims are being made by the author (or teams he works with) that they could have done a better job at ‘predicting’ the rapid downswing in the ‘early pandemic’ days, and the rapid upswing in demand soon after, for those sectors that faced what’s been described above (including the auto industry).

This article focuses on some key supply chain operating principles and practices that may have to be dusted off, looked at afresh if not challenged outright, and other evolving approaches to managing manufacturing-intensive supply chains.

Here are a few –

  1. Identify key parts – This is not a straightforward exercise of looking at your highest dollar parts.
    What multi-variable analysis needs to be done to determine “key” parts?
    What additional ‘decision filters’ should be applied?

  2. Use “lean signaling” not lean inventory approach especially for key parts – Ideally disintermediate your supply chain (i.e., reduce number of tiers) at least for the newer products, if you can. In either case – with long, extended supply chains (Traditional automakers like GM, Ford, VW et al.) or shorter chain ones (like Tesla), ask this:
    How can I rapidly collaborate (not just communicate) with my significant N tiers of supply (where N is 1, 2 .. whatever)?
    What are best (if not optimal) inventory levels for key parts made by the TierN supplier?
    Is there a better way than legacy tools (EDI, spread-sheets like MS-Excel, Google sheets, etc.)?
    Are internet-based supplier portals adequate?

  3. Determine inventory levels for key parts – Toyota built strategic buffers for their key parts where and when needed. Toyota instructed its suppliers to carry months of inventory where previously they used to carry weeks’ worth only, the latter being in line with lean principles that is core to Toyota operations.
    How to determine what inventory levels are right? How & when to adjust?
    What analysis needs to be done rapidly? Which analysis can have longer cycle times?

  4. Build real ‘relationships’ with suppliers (Tier2 and their sources, as needed) – Component (part) makers would love to work directly with the product makers (the ones whose logo goes on the product). This could be especially critical for mid-size and smaller companies that cannot command part makers’ attention via large, strategic buys. They know full well that one such wrong decision can put them into a deep working capital hole for a long time, or push them into extinction.
    Which component makers? What meaningful processes can you collaborate on?
    What are “must-haves” to make sure collaboration works (data, process, decisions, metrics)?

  5. Plan for business continuity all the timeBusiness Continuity Planning (BCP) is not just for isolated worst-case events, such as the Fukushima disaster that froze auto supply chains, Taiwan earthquake that rattled consumer electronics – including the large behemoths. BCP is an ongoing process effectively used by those that are succeeding to secure the supplies needed, no matter what.
    How will you do this (process, people, parts, partners)?
    What parts to focus on? Which products?
    Which ones to defocus from?

  6. Understand your key parts very well (passing acquaintance isn’t enough) – Get to know the technologies that go into your key parts, especially complex/ line-stopping ones very well (e.g., batteries for EV makers, microcontrollers for automakers, WiFi chipsets for wireless equipment makers, etc.). Build the technology skills needed so you can turn on a dime and change product design if a part’s supply shortage becomes persistent.
    Which technologies (chip design, etc.)? What skills? How to motivate learning?

  7. Design for resilience and responsiveness – Back to the story above:
    Jill, the planning lead and her supervisor, the SVP of Ops were at a standstill and could not take decision to increase the supply even when the chipmaker dropped hints. There could be many reasons. Here are a few –
    • Role of planning in the org: does it have the right level of visibility and sway with the executive team? i.e., could they have pushed a more aggressive supply plan without being worried about untoward consequences (i.e., losing faith of the management, or worse)
    • Skills – Has Master Planning/ MRP/ Capacity Planning and related supply side operations planning skills been rethought through and retooled, especially for extended and evolving supply chains? Has demand planning been rethought through? Planning must be thought through for end-to-end Demand and Supply Planning. And then rethought through periodically in light of changes.
    • People-centered Processes and collaboration – Did AutoMax1 have a comprehensive process (including S&OP) which they could use to avoid bias? How good was their supplier collaboration to ensure clear supply signals – strong and weak signals (e.g., chipmaker signals noted above)?
    • Tools – What’s the burden of legacy? Were they going to war with bubble gum and duct-tape to put together their plans? Many legacy systems are a lot clunkier, difficult to use and error-prone, given cloud and internet-native tools can be designed and tailored for operations. And they suck up not only time but a lot of people too.
    • System – Were they educated about responsiveness which is not a demand side or supply side approach but an end-to-end approach? End-to-end from Demand through to Supply planning – not as ‘islands of Planning’. Execution signals have to be inbuilt into Planning.
    • Scaling mindset – A scaling mindset means looking at the future to be an opportunity to grow in a planned manner. How do planners avoid the “hunker-in-the-bunker” mindset that’s the default, especially in operations planning when faced with extreme uncertainty like what happened at the onset of the pandemic – circa Q1, 2020?

Question Assumptions

When faced with unprecedented uncertainty past assumptions have to be questioned.

Good planners know every plan has in-built assumptions.

Great planners know when to question those assumptions out aloud, so management gets it loud and clear. In the above case of Jill and AutoMax1, did they listen to the skeptical, dissenting voices among procurement and supply planners. The planners/ procurement team members may want to understand the signal better from the supplier/s (the chipmakers saying demand is ‘perking up’) before giving their procurement plans a massive haircut.

Great Operations leaders know Planning is a critical ongoing process that requires smarts and creativity, and focused attention of the top management (CEO, COO, Leaders of Operations and Sales, Products).

and,

The more inputs the better, especially from outside the 4-walls of the company, e.g., Sales channels, Suppliers, et al.

Most importantly, the age-old truism – not to be wedded to “a Plan”.

Plan, by its very nature is a point-of-time output of the process and needs to keep changing to support smart execution.

While nothing is better (for planners and senior strategists) than having a “run rate” product base to plan, those deep into planning and its subsequent execution, and have seen a few seasons (i.e., are experienced) know that ’stasis’ (standstill) is the absolute opposite of good planning – the wrong place to be. It’s after all a “rate”, i.e., change over time.

Companies that use this time of uncertainty to upgrade their team’s skills and equip themselves with better processes and systems based on learnings above will have all the pieces in place to go for a stronger rebound when demand turns around, and catch the downdraft in their demand much earlier, preventing grave preventable losses (E&O among others).

[1] Derivative of estimates the current size of the chip industry and the auto-industry losses


[1] Estimates vary from 2-3 quarters to 6-8 quarters out from late 2021


Acknowledgments:

The author would like to thank Colin Todd and Fred Harried for some of the learnings mentioned, and to all the (customer) colleagues at Cambium Networks for in-depth discussions and working sessions with Zyom on some of the topics mentioned in the article; All of the above contains copyrighted materials from Zyom Inc. Please acknowledge this when using any of the content.

Uncertainty, Volatility and a new operating advantage

Uncertainty mixed with volatility, such as what the financial markets and various macro-metrics are signaling is an explosive mix, even for very well-run companies. In times like these what companies can earn (Revenue, Profit) becomes uncertain. One thing remains certain – there are many opportunities to learn.

But, when it comes to learning that’s useful for the operations of hardware product companies, there are far too many stories wasted on a few large companies and speculative, often misplaced assessments made regarding specific ‘traits’ and ‘tools’ of successful companies that helped them achieve operational excellence (a la Apple, Cisco, etc.).

Here are four specific, contrarian lessons from dynamic, younger companies that despite their smaller size and vulnerabilities took on much larger competitors, often successfully, achieving solid operating success.

You would find these useful for your operations to tide over this period of variability/ volatility in demand-supply, and utilize the operating capability outlined here to your advantage in 2020 and beyond.

From a new vantage point – Contrarian Prudence

Contrary to conventional wisdom, companies can learn a lot more from smaller, younger companies that despite their smaller size and vulnerabilities, took on much larger competitors and often prevailed, and attained an enviable customer and revenue base in a (relatively) short period of time.

Finding patterns in this group is more relevant, especially for younger or smaller companies and startups, looking to carve their niche.

As a part of a startup, Zyom, we have learned something quite counter-intuitive working alongside some dynamic, highly competitive smaller companies. One, in particular (let’s call it Company “RapidR”), stands out, among peers. We will use a sum-total of our experience at this and other companies to highlight a few key learnings, some quite contrarian.

This company was able to navigate through the last ‘Deep Recession’ in the US (2007-2008) while still a small company, and came racing out of it, scaling steadily and then at a furious pace, taking on, often successfully much larger competitors, and establishing a strong position for itself.

What follows are a few lessons learned working with this (RapidR) and other companies in the networking and broader Hi-tech electronics products industry, some of which fly in the face of conventional wisdom and “management best practices” Continue reading “Uncertainty, Volatility and a new operating advantage”

Transitions and Turbulence – how to ride it out?

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.

 

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

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.

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

Operating in 2013 – Have you considered this Transition?

It’s that time again when the best and brightest roll up their sleeves and dive into ‘reading the tea leaves’ – some even compulsively. No, I am not talking about the November 6th Elections. I am talking about the longer-term (12 to 18 month) business planning cycle.

Dynamic companies all over the world have started, or are well into their 2013 Planning process.  Irrespective of their fiscal planning cycles, this is a critical time to pause and invest energies in making projections for the year ahead. Among the many transitions, have you considered this?

Plan carefully and deliberately for Product Transitions – Product transitions (major or minor changes in Products) are a critical time for technology-intensive companies. To stay focused, I will discuss those changes to products caused by “sustaining” [1] improvements in product technologies. For a computing tablet maker (such as Apple’s iPad) this could be a better display (e.g., ‘Retina’ display), more memory, etc. While many of the critical ingredients needed to run Operations during such Product Transitions are well understood by Product Companies, several key variables remain elusive:

  • How will the new product (or new revision) ramp-up in volume? Will it meet targets?
  • How will it impact the demand for existing products?
  • How to manage the upside and downside risk?

These are just a few of the critical questions that cross-functional Product and Operations teams have to answer. Done right, Product Transitions can generate the next new source of Revenue and Growth.  Any slip-ups, on the other hand, can deal a rough hand to the company– millions of dollars of unplanned inventory write-offs, or open the doors for competitors to sneak into a nascent market.

Interacting with cross-functional Operations and Product teams at companies such as HP and Samsung, I got some rare insights. The single biggest one –

Processes & Planning for Product Transitions have unique needs and need to be given focused attention and resources.

So, as you go through your planning cycle, set aside some bandwidth to carefully account for this process. If you have comments or need some thought starters, please drop me a line.


[1] Clayton Christensen ‘The Innovator’s Dilemma’

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