- Step Six - Which Technologies Are Available to Execute This Design?
- Step Seven - What New Business Risks Might This Design Create?
- Case Example
- Case: Multinational Manufacturer and Brand Marketer/Retailor of Cosmetics
- Industry and Competitive Landscape
- Organizational Situation
- Leadership Response
- The Power of Structured Dialog in Solving Supply Chain Problems
Step Six - Which Technologies Are Available to Execute This Design?
We finally come to the technology selection moment in our digital leadership journey! You may be thinking that this is too late in the game for the technology discussion. In fact, technology is part and parcel of the entire segment design process as it is integral to the discovery of insights used to understand customer needs and is part of the business modeling process in imagining new ways to satisfy customer demand (Wu et al., 2016). This point of the digital journey is not the first time we have thought about how to use technology. It is, however, good practice to delay the selection of technologies until the segment has been defined and designed. Making technology selection a key part of the design process runs the risk of the segment process being made to fit the technology, rather than the technology fitting the segment. The design process is iterative and needs insights about technology capabilities to take advantage of them. Leadership and discipline is required to delay the investment in scaled technologies until their best use has been determined. There is also the chance you may overinvest in a technology that might be useful in a less-than-critical customer segment. Your highest and best investments in technology should be dedicated to areas where your segment values are highest, or where a strategic implementation of technology could become a source of competitive advantage (Alaybayi et al., 2019). As mentioned earlier, one of the goals of becoming digital is to create “hard to replicate” supply chain value. This is where strategic technology deployment can mean the difference between automating an existing process and creating a new transformational business outcome.
Step Seven - What New Business Risks Might This Design Create?
In our final waypoint along our digital leadership journey we come to risk management.
New business models, new data exchanges, technological innovation, and value chain partner integration require a new take on risk management. Existing or traditional reactive risk models will not be adequate in the face of these new business demands. We will take a closer look at the risk management aspects of DSC in Chapter 7. The key reason it is deemed a waypoint on the leadership roadmap is that once the segment design is ready for implementation, it is imperative for leaders to think through risk implications before scaled-up deployment. Achieving transformational performance improvement cannot be considered successful if we are putting our own firm, or that of our value chain partners or customers, at material risk.
Case: Multinational Manufacturer and Brand Marketer/Retailor of Cosmetics
Industry and Competitive Landscape
For this case company, the senior leadership team issued a memo to its supply chain leaders about the new competitive reality the firm was facing. The memo highlighted increases in global competition, the need to find new ways to capture and create value, the need to become more integral to the overall firm’s strategy execution, and the increased complexity of end-to-end operations. The need to act collectively, rather than individually was also communicated.
The leadership team then issued this call to action: The supply chain team will need to drive cost reductions of over 5% in the next 12 months. At the same time, they needed to retain their customer satisfaction and recommendations. They highlighted that they could not sacrifice quality in pursuit of efficiency. The need to improve operations was positioned as a way to improve customer loyalty, which would dive revenue improvements. They divided into three teams that would each take on various critical focus areas. The first team would focus on cost management and was charged with delivering a reduction in Cost of Goods Sold while reducing the cost of poor quality. The second team was charged with improving customer experience. They were asked to improved service levels and increase the on-time-in-full ratios. The last team was asked to focus on systems and process improvements. This meant improving order accuracy and implementing data governance and quality initiatives. The teams were asked overall to collaborate to meet their respective goals and at the same time build a supply chain of the future.
The Power of Structured Dialog in Solving Supply Chain Problems
This case illustration replicates an example of the kind of problemsolving dialog that can be created with supply chain leadership programs designed to encourage collaborative problem solving. The quotations are actual comments (with identities hidden) made by executive education program participants in a leadership program that was delivered over the course of several weeks utilizing an online learning platform. Each subsection below represents a snapshot of program activities, as well as a curated excerpt of participant dialog associated with the program module. This sample dialog took place in one instance of a leadership program for approximately 40 supply chain executives in a global manufacturer and brand marketer of cosmetic products.
Activity One: Challenges and Opportunities in End-to-End Supply Chain In this exercise, participants were asked to identify one strength or vulnerability in their own segments of the supply chain. Having an E2E mindset is essential to developing a world-class supply chain
One participant wrote:
I think one way we could improve current forecasting is through a detailed historical data analysis. Not just looking at historical sales, but really digging into what made those sales and how those sales were made.
Director Purchasing & Production
Activity Two: Issues and Forces in Supply Chain
Discuss your perceptions of availability, adaptability, and affordability of our supply chain. Firm level challenges, and the landscape challenges of availability, adaptability, and the affordability of the supply chain.
In this next activity, another participant added to the idea around the details of sales forecasts with this comment:
the team has a many different individualized, ad-hoc models - no one is taking the same approach to create or evaluate their forecasts.
Assoc. Dir. Inventory Mgt.
Activity Three: Discuss One Supply Chain Strength or Vulnerability. How does this strength (or vulnerability) impact E2E?
I believe we can improve our forecasting by avoiding optimistic bias. Whenever I see the "excess list," I believe it is too long, and the items on it are taking up valuable space in our warehouse. If we had avoided optimistic bias, many of the items may not have ended up on the list.
Sr. Specialist Inventory Control
Activity Four: Competitive Implications of Demand Planning
Carrying inventory is expensive. Aligning incentives and developing an accurate forecasting model can help reduce inventories. “Recommendations to create alignment:
- • Make sure all teams are aligned on company goal: “put the customer at the center”
- • Segment the assortment
- • Get alignment from the different teams on segmentation and define rules and goals for those groups
- • Based on what the teams agree on (goals, rules, etc.), create reporting to measure progress and compliance
- • Incorporate into bonuses. ” BREAKOUT GROUP 3
Activity Five: How Can You Improve Your Forecasting?
What can you do to improve forecasting? How would improved forecasting impact your role and customers?
A great point brought up by “Andy”, people working together, functioning as one team, sharing best practices is a start. Involving the right people, trend and market analysis, and deep historical analysis, will help with forecasting accuracy and help with having the right products at the right place, at the right time.
Assoc. Director Sourcing
Activity Six: Forecasting and Inventory Management
How should you proceed? What ideas do you have about incentive alignment, inventory mgt, E2E recommendations?
We think that the main incentive for forecasting is driven by sales and the necessity to stay in stock. However, we need to be more strategic and strengthen our forecasting through market intelligence and determine if we met or exceeded our hurdle rate post launch. As a company we need to have a level of acceptance that being in an О OS position is more cost effective than having to expedite or putting ourselves at risk for having excess inventory.
BREAKOUT GROUP 6
Activity Seven: Demand Planning Live Event
Observations and decisions, estimates of stockout costs, forecasting at your company, alignment ideas
Our operation department goals should also not compete against each other as well. They should all be aligned for success and then the outliers only need addressing. This will create a robust end to end supply chain. Synergy is key. Changing the mindset and evolution is important as well. To not continue to follow a process just because it is what we always have done.
BREAKOUT GROUP 4
Activity Eight: Live Event: Critical Decisions - Wrap Up
Observations and decisions. Implications of course business challenge. Your cohort’s learning and next steps
We’re identifying more and more initiatives to increase value or reduce cost with more than $13,000,000 identified, and we were able to pull together a nice cross functional team about a week and a half ago to identify another $5,000,000 of additional stretched savings, which maybe if we weren’t doing some of these crossfunctional break-out, the team wouldn’t have been as willing to share their ideas in a very cross functional way.
SVP Global Ops