14 Bringing it all together

Business Strategy – identify target customers

Supply chain is all about matching supply with demand, so that resources can be effectively and efficiently deployed.

Forecast long-term trends (years out)… make manufacturing location determination (long-term supply chain design)… a firm’s cash reserves are a critical resource that is managed by the finance organization of a firm. These reserves are used to invest in future assets that are needed for the firm to thrive and grow. Supply chain can help provide input on effective resource location decisions.

Forecast near-term trends (12 -24 months out)… make machinery and equipment determination, decide on one, two or three shifts, make hiring plans and other resource demands. Supply chain can help a firm know if they have the supply capacity and resources to accommodate fluctuating levels of demand. Also, if there are resource bottlenecks with the supply chain, this information can help marketing and manufacturing plants adjust their build schedules.

Sales and Operations Planning – creates a 12-month monthly operations plan that includes volumes to be produced. This will be impacted by manufacturing strategy: level or chase.

Explain level versus chase.

Materials Requirement Planning – takes the monthly S&OP schedule and creates a weekly plan for the upcoming month or two. Uses bill of materials to translate the production plans into materials requirement plan.

With the MRP in place, a firm can release ship schedules to their suppliers. The timing of these releases are important, especially if the numbers change from week to week.

Suppliers themselves may have some flexibility in the volumes of products they can supply, however, large fluctuations can result in a supplier not scheduling enough workers, or scheduling too many workers for the amount of production needed. Providing visibility and predictability in schedules helps a supplier run more efficiently and results in improved economics and pricing for its customers.

Since the objective is to “Win All YOU Can”, where “YOU” is the supply chain, an effective supply chain manager will always try and do what is possible to help members of its supply chain to be more efficient.

Supplier ship schedules – depends on what is in transit, what is the safety stock inventory strategy, what is in inventory and if the supplier is behind or not on past week orders

Innovation:

In this section pull from the recent POMS journal article about innovation is matching demand and supply signals.

Customers (either B2B or end consumers) are more closely placed near the location of demand and can provide the company with up to date and accurate information on what is happening with the demand of a product.

Suppliers are more closely placed near the location of supply of resources and can provide the company with up to date and accurate information on what is happening with the supply of resources. When new demand arises, or new resources are available, either are opportunities for innovation, however, innovation will only take place when those signals are aligned. For example, a supplier deep in the supply chain may come up with a new material that they feel can substitute for another material currently being used. The new material could offer new features or a reduced cost, thus why the supplier feels it should be considered. It won’t be used, however, until other firms in the supply chain agree to its usefulness to the end consumer.  In essence, innovation in supply must find a market for that new resource. Example: Goretex developed by NASA for astronauts but over time, the market found uses for the material in shoes and outdoor equipment and is now the mark of high-end and expensive boots, rain and ski shells and other materials that allows venting of moisture yet keeps rain from penetrating the other side of the material. This was an example of a resource innovation that eventually found a market. Keeping strong relationships with suppliers and their suppliers allow a company to keep a pulse on the dynamics of resource innovations.

The other situation is demand-drive innovation where demand shifts in ways that require new products and solutions to be developed that are not yet in existence. The Covid-19 pandemic was as much a demand disruption than it was a supply disruption. Overnight, consumer behavior changed in ways that demanded new products and services. Companies tried as much as possible to shift their business models to match the new demand. Those firms that were most flexible or those that already provided products and services that increased in demand were most successful while those firms that could not change their business models did not fare well.

Case Study

One example of effective flexible business models during the pandemic is PlaqueMaker Plus Inc., a small family business headquartered in Indianapolis, Indiana. PlaqueMaker Plus produces award plaques, name tags, ID plates, gifts, engravables and other products that companies use to recognize employee performance. The company was started over 30 years ago and has grown to be an effective player in this market. The Covid-19 pandemic posed a serious challenge to the company – overnight, companies faced the uncertainty of existence that wasn’t there the day before. Companies didn’t know if the global shutdown of economic activity would result in their bankruptcy or would be a temporary downturn only. Discretionary spending was immediately halted, including purchasing awards, plaques and other gifts for employee recognition. Orders to PlaqueMaker Plus dried up overnight.

One thing that the company had done over its decades of existence, however, was establish strong relationships with its suppliers. One such company was their supplier of acrylic that was used to make plaques and award covers. Owners Edson and Tracy Pereira knew that orders for awards weren’t returning any time soon, but they did see a significant rise in demand for acrylic derived dividers at schools, businesses and other public spaces that wanted to provide physical yet see-through barriers for their customers. Edson and Tracy didn’t need to put together lengthy powerpoint presentations on their ideas and convince a board of directors that they should change business strategy – since they were the owners they could immediately take action and they reached out to their acrylic supplier and negotiated a purchase agreement for their ENTIRE stock of acrylic. Edson and Tracy used their personal savings to fund this large purchase and were able to quickly take this action before other customers could access this supply of acrylic. PlaqueMaker Plus turned all the acrylic into dividers and sold all that they could make to local schools and businesses. Ironically, those months provided some of the greatest financial performance the firm had experienced in the span of time. As business returned to more normal levels and