Design For The Future In Supply Chain - A Need Of The Hour Program For The Organisations Striving For Growth!
The majority of organisations have continuous improvement programs (KAIZEN) part of their supply chains. The majority of these improvement projects are focused mainly on improving the efficiency of the supply chain. As a result, driving transformational change is always the biggest missing link in the supply chain.Most organisations take their existing network as the foundation and then try to drive value from it. Many times, the core supply chain doesn't get changed, but we try to refine it a bit to drive value out of it. On the other hand, transformational changes produce dramatic results in a supply chain that result in really higher ROIs.
Nevertheless, transformational changes are only possible if we question the current base supply chain network itself. The great news was that, following the COVID wave in 2019, most of these organisations made the decision to move in the direction of challenging their base network itself. In this article, I have discussed about a proven framework for driving design for the future in supply chains.
This Framework Consists Of 4 Stages
Stage 1: As Is State Or The Current State Mapping
As part of stage 1, we map out the as is state or the current state. In other words, we map out the entire existing supply chain. Although there are so many tools available today for documenting the current supply chain, the value stream map has always been the top pick.
With a value stream map, you can document the following,
• Current Supply Chain
• The Flow Of Products
• The Flow Of Information
• The Different Technologies & Systems Involved
• The Different Decisions We Make
• Even The Current Performance Data
Out of all the four phases, this phase of documenting the current supply chain is the most crucial one. Further, if this exercise has to be financially focused, you can also complete a unit economics map as part of the value stream mapping itself, wherein we talk about the unit cost spent at each stage of the supply chain we map.
Stage 2: Analysing The Current Value Stream Or Supply Chain
Basically, phase two consists of analysing the current value stream or supply chain once phase one is completed. I recommend the three-prong analysis:
• Dipstick Analysis
First, we will perform a dipstick analysis where-in we will not go deep into all aspects of the supply chain but we will conduct a dipstick analysis of every node or function within the supply chain and evaluate its performance. The dipstick study is entirely focused on evaluating your current state. Thus, it could result in areas that are the key bottlenecks within the supply chain.
Benchmarking is the second analysis that is suggested to be conducted, which is a very effective exercise if done correctly. Therefore, you may decide on a mix of primary and secondary research on the industry and find out how your competitors are doing, and how you compare with them. But before you do that, you must devise a list of key performance indicators that reflect the health of your supply chain. You would then find the benchmarks for the sector, evaluate your organisation against the benchmarks, and will be able to decide where the organisation stands today and what the road map looks like moving forward.
• Gap Analysis And Stress Analysis
Among the favourites is a gap analysis or stress analysis. I prefer to call this a stress analysis. The reason is, at this stage, we are not going to arrive at the current gaps but we focus on what could potentially become a bottleneck. And to arrive at this, we simulate the supply chain using multiple constraints and then find out areas that could become a bottleneck in the future. If a choice is to make between the dipstick benchmarking and stress analysis, the stress analysis exercise is very proactive because it is going to prepare your supply chain for some issues which could come in the future as a bottleneck. And then you are going to mitigate it right now itself and this would yield the organisation a competitive edge.
In most cases, to do proper stress testing a simulation model of the current state is built and multiple scenarios are run on that. I have used grounds up excel or SQL models or even used Python/Tableau for simulating this.Once done with all this analysis, you will end up with a list of opportunities. Prioritisation techniques should be used to decide on the focus areas/final solutions. Thus, it is recommended to do a quick ROI analysis and then use that to prioritise it.
Stage 3: Simulation And Modelling Phase
Now the third phase is the simulation and modelling phase, and this is the actual design for the future. What is done in this particular phase is that for each of the opportunities we have prioritised, we are going to consider and come up with multiple ways we can solve or fix that issue thereby reaping the value prop out of that opportunity.
Thus, here we are going to use design thinking tools to come up with the best way forward. And specifically, you should develop your simulation model wherein you can run multiple futuristic scenarios to decide which solution would yield you the best return on investment. This model would be completely different from the earlier stress testing model since the goals of both of the models are unique.
Earlier during the analysis phase, we had conducted the ROI. Here as part of the design for the future phase as well we do a very extensive ROI estimation. It is because in the supply chain there is no single defined way of solving a problem- it is always multiple ways of solving a problem. And in most cases, it is an optimised solution rather than a best solution. Thus, it is very essential to conduct an extensive ROI analysis and for that, the simulation and modelling tools are very crucial.
Stage 4: Implementation
Once done with all these above phases, the last phase is implementation. It is very essential that this realisation phase is handled well as it is going to be a huge change in the organisation. Change management thus has to be followed right from phase one throughout this transformation. And as part of the implementation phase, the first and foremost thing you should come up with are:
• the stages of implementation
• pick up all the low-hanging fruits (Quick wins)
Gradually you go for the next set of improvements which could be short-term and then can go for the long term. And in this way, you can drive your implementation effectively. We should also do a proof of concept and do it on a very smaller scale. Start by evaluating whether your solutions are going to get you the intended results and then you can go for a full-fledged implementation in your organisation.
Though I called this as a Design for Future in the Supply Chain framework, by the techniques we have used we can also call this a network modelling exercise in the supply chain