Your Supply Chain is Obsolete

Today's supply chains aren't ready for the emerging demand economy


Repositioning the customer value proposition. Management must take the lead in realigning organizational resources around providing customer value as defined in the new demand economy. Value does not mean cost; it is much broader. The focus is on recognizing the different value requirements for each customer grouping and then maximizing the value determinants. To get to the answer, several types of questions should be posed to the organization, such as, What products/services will deliver customer value? How can our product be differentiated? How do we insulate this value proposition from competition?

Implementation Requires a Cultural Change and New Tools

We introduced two new strategic actions, the overall producer strategy of networks using collaborative processes and the market strategy repositioning to focus on the new value spaces defined by value proposition modeling.

Implementation will require cultural change and a set of new tools. As was pointed out in the introduction, implementation is more counter intuitive than difficult to achieve. New management concepts need to be introduced, embraced and put into daily use; these include dynamic simulation modeling and demand pull balancing. A new organization structure touched on earlier in this article will be required, and external relationships with suppliers and others must be orchestrated with significantly increased sensitivity to the economics of others.

Organization into Customer Intelligent Agencies. To put customer-centric management into effect, companies must change how the internal organization operates. Closer cooperation and synchronization are the keys. In the traditional structure, manufacturing, distribution, procurement, marketing, product development and sales each worked to their own functional requirements and needs, which seldom were coordinated at all and only loosely coordinated in the best case. Most companies will have multiple value spaces and will need an identical number of customer agencies to produce the values required.

The new agency organization is a ground-level operating group that has singular responsibility to deliver the value propositions defined for a particular customer group or value space. Every member of the team will be required to fully express the value proposition and the methods to be used to achieve competitive advantage. In the new organization, all functions are grouped under one leader who balances conflicting objectives within one value space to achieve the best levels of service, cost, inventory and capacity utilization. Decision makers in the agency are yoked together to serve one set of customers and to deliver the necessary values in concert and from one set of numbers and one set of performance goals carefully crafted to match the value proposition for which they are responsible.

These reassembled teams come from existing functional organizations and have full responsibility and authority to deliver. In the ideal case, specific manufacturing resources are dedicated to each agency. In practicality, some agencies may need to buy capacity from another agency's dedicated resource. Procurement of materials will be the exclusive responsibility of each agency, while master contracts on a global basis may be developed by enterprise level executives. The agencies are focused on on-time service, performance and value with the final decision on sourcing made at the agency level not the enterprise level.

The new agency organization is a group of highly simplified structures with cross training and cross-functional responsibility. In practice, the organizations have implemented time-advantaged strategies that result in very short replenishment and planning horizons. A multiple-month planning schedule will become a three-day to a one-week schedule with a hierarchical planning structure allowing highly simplified data structures with which the team must deal. As a result of the shorter times, simplified data and hierarchical planning structure, the new organizations have significantly fewer people and a maximum number of doers. They are nimble due to the simplification. They are taut due to the singular focus on one set of customer-centric goals. They are significantly lower cost. Typically, a 30 to 40 percent overhead cost benefit comes from these agency organizations.

  • Enhance Your Experience.

    When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

Already have an account? Click here to Log in.

Enhance Your Experience.

When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

OR

Complete the registration form.

Required
Required
Required
Required
Required
Required
Required
Required
Required
Required
Required