Tag: optimization
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Demand Driven For Configurable Products
Lane Strategy
It amazes me how sophisticated companies are getting with their supply chains. The recession has forced even more sophistication. As a way to weather the storm, companies are segmenting their supply chains to manage demand volatility better. I was talking to Jack Becker, VP of Supply chain for an electrical goods company, who described this as “3 lanes on the highway”. We just call it the “Lane Strategy”.
The fastest lane is the stuff that customers buy a lot of, and we build often. The middle lane is slower stuff, tends to be more configurations. The slow lane is the one-offs and custom builds. The key thing to remember is that the segmentation is demand driven, based on what customers are buying, and what is moving through the supply chain.
The key success factor for the lane strategy is to have a method to convey the lanes to the sales reps and distributors. Sales is the “mouth of the beast”, and it drives volatility and cost through the supply chain.
“We have had numerous attempts at trying to create a segmented supply chain ”, Jack said. “However, the sales guys will sell whatever is easiest to sell, and what they know to sell. So we had to device a way to make it easy on them to sell what we wanted the customers to buy.” Success finally came when Jack implemented a sales tool that would recommend configurations to the sales reps, and color code based on availability and the Lane Strategy.
“We offer a configurable product. Our biggest opportunity is that customers do not fully specify what they want. They just specify a few features they want, and leave the rest to the sales rep. They want the sales rep to recommend a good choice. Like we see on Amazon e-store…. But we are not selling simple stuff like books. Everyone on our team talked and agreed about an “Amazon like strategy”, and we knew that we needed sophisticated tools to accomplish that for our products, which are highly configurable. However – if our sales reps could recommend a few configurations at the point of sale, it is a win-win”.
“Supply chain folks typically think about the supply side of the equation. The key to success for a demand driven supply chain is managing the demand at the point of sale. Recognizing this opportunity and leveraging it has been the biggest key to our success!”
Emcien offers a product mix optimization solution that is a sustainable solution and process for the lane strategy.
More details on the execution of this strategy in the next blog….
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Optimization is the big win – but getting started is key
When I started studying complexity and realized the huge adverse impact it was having on companies, I was determined to “find it and get rid of it.” There are many places where that formula will lead to big improvements in everything – profits, service, quality and more. More and more companies are discovering how to do this. In some cases it is pretty simple. Just having the courage of their convictions that it will make things better is all that stands in the way of eliminating complexity.
Well, I found that is not completely true – at least not all the time. There are some situations where what seems to be a simple complexity elimination process turns out to be quite a bit more… complex! The real issue is not just complexity reduction. It is “optimization” of complexity. Get rid of the wasteful part and structure processes to use the right level of complexity.