Plan(t)ing Your Supply Chain Harvest

Plan(t)ing Your Supply Chain Harvest

By Chris Oleksy

The inaugural column set the stage for this supply chain series with a discussion of SCOR, the Supply Chain Operations Reference model. That article described the five business processes SCOR encompasses: plan, source, make, deliver and return. Now let’s focus on what I think is the most underappreciated and disrespected component of supply chain execution: aligned supply chain planning.

Spending my entire life in the Midwest has certainly indoctrinated me to the concept of harvesting. It doesn’t take a genius to know that you cannot harvest what you don’t “plan(t)”—especially for a business in which the demand pattern is seasonal. A wise planner in a seasonal manufacturing business once told me, “Planning is like planting the seeds to a harvest. In the off-season, or ‘growing season,’ you must plant [manufacture] the seeds to your harvest so that when the sales season arrives, you will have product to harvest [sell].” While this sounds simple, many people still misunderstand this concept.

In the age of LEAN this and LEAN that, many within manufacturing enterprises take planning for granted and believe that planning is not needed if your supply chain can quickly respond to changing conditions. Even when your supply chain can respond to pure pull or demand flow signals, planning is still required in other elements of your supply chain model. Remember, planning is not just for manufacturing but also for how you make, source, deliver, return, research and develop, for instance.

Please don’t misunderstand my point. I am a tremendous advocate of LEAN-Six Sigma thinking—in all areas of supply chain, as well as W. Edwards Deming quality circles and the Toyota manufacturing model. Few can argue against the benefits of such models. Just like planning, these concepts are not simply for manufacturing. Leaning out how you do everything, including how you plan, is imperative!

I have always proclaimed that, before you can plan or configure your supply chain, you need to know where your business is headed. In other words, a farmer must determine his business direction before harvesting. Determining whether to plant corn, soybeans, wheat, peas or any other crop first requires business direction analysis and planning. A farmer doesn’t simply go outside and till soil. Thought-based planning is required.

This simple analogy applies to your own business in the medical device industry. One of the most common supply chain execution errors I have seen during my career is when organizations jump to configuration or action before knowing their business direction. This “misalignment of good intentions” destroys supply chain execution and costs organizations millions of dollars and customer goodwill.

Many “Plan-Do-Check-Act” models can help ensure that your planning is aligned. I like a simple four-tiered approach (shown in Figure 1). This adaptation of various models is simple to understand and use.

Tier #1: Business Direction

Determining your business direction takes a lot of work and soul searching within your organization. Companies that have their business value proposition nailed down tend to be superior in their industry because their supply chain has been aligned correctly. Look at Best Buy, Wal-Mart and Target. These retailers are examples of companies having clear business directions with supply chains aligned for support.

Many known models exist for aid in determining your business direction. Regardless of which one you choose, make sure it helps focus your organization on the end goal…the prize! For instance, ask yourself: Is my organization’s primary focus to be the new technology leader, such as a Medtronic or Johnson & Johnson, or is it to provide the lowest cost medical device that may not be the newest technology? This value proposition is critical because it determines what you will do in the remaining tiers.

Tier #2: Configuration

As in the example above, configuring or aligning your supply chain plans is dependent on your business direction. For example, if your organization is focusing on low cost, your focus is likely more geared towards taking costs out of your supply chain. If the focus is on providing the newest technology or therapy, then Research and Development (R&D) will likely reign supreme. This doesn’t imply that you ignore one area for the other—it simply means that your planning focus aligns activities with the type of organization you plan to be.

Again, misalignment of activities can destroy your supply chain.  For example, although R&D will reign supreme in a medical device leader, having strong supply chain talent to ensure your supply chain supports the business direction is critical. Knowing when (planning) to outsource or insource product can make a huge competitive difference if configured correctly…or incorrectly.

Leading product leadership companies often outsource manufacturing to focus their organizations on their business direction: new technology. In future columns, I will describe various supply chain configurations, such as outsourcing both on- and offshore.

Tier #3: Actions

After you have determined your business direction and configured your supply chain, determining who/what/when/where/how etc. is simple. However, be very careful not to jump to actions without first mastering the first two tiers.

As you read this article, ponder how many times your organization has taken action on items that were not configured to a business direction. One of the most common problems is when inventory reductions have been implemented without ensuring the supply chain could operate without that inventory. Remember, inventory is the resultant of the way the supply chain operates. Lean out the supply chain, and the inventory will go away! 

Tier #4: Metrics

Many books are available on metrics; thus, the only advice I will offer now is to ensure your metrics are aligned to allow proper feedback to your supply chain. Notice the iteration loops in Figure 1. Measuring something of no value will end in no value. The old cliché of “you get what you measure” is often true. Therefore, make sure you know what you want, and measure it in an aligned fashion.

Indexed metrics often are some of the best metrics to use within supply chain because they measure different indices simultaneously. Supply chain execution is about mastering the synchronization of indices. Therefore, indexes are often very helpful.

Now You Can Plan(t) Away

You must correctly plan supply and value chain elements, including how you source, make, deliver, return, research and so on.  You can only do this if you have correctly determined your business direction. Correct planning and configuring are the balancing of needs with resources to ensure your business direction is a success.

Ask yourself now: What is my organization’s business direction?  How should it plan sourcing activities? How should it plan manufacturing activities? How should it plan deliver activities, etc? Is your supply chain aligned with your organization’s business direction? If you plan to harvest corn…make sure you plan(t) the right seed!

Chris Oleksy is president of ATEK Companies, headquartered in Minneapolis, MN. Chris has more than 20 years of leadership and supply chain experience in the medical device and manufacturing industries. You can contact Chris with comments, ideas for column topics or requests for advice (for possible inclusion in a future column) on supply chain execution by e-mailing [email protected].