How Much of the Chain Does Your Strategy Encompass?

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I heard a story not too long ago about a company that had focused itself on sales but not much else. Company leaders had installed high-end sales automation tools from a major CRM vendor. They had trained their salespeople in the Miller-Heiman sales methodology. And they had given all their sales folk incentives that were kick backside in value to them, should they achieve their individual and team goals. And it worked. Oh, how it worked. Within two quarters, they started selling product at a pace that increased their revenue more than 26 percent per quarter. This went on for about six or seven quarters.

But they had forgotten something. Because of the way the politics and organization of the company worked, a.k.a. siloed, they had forgotten to inform the manufacturers and warehouses and the delivery/logistics group and pretty much everyone along the supply chain that they were going to do so well—and that they had planned out a major push to do so well. After all, what did sales have to do with logistics or delivery or production and the like? Well, folks, this wasn’t good, and over time, orders began to clog the supply pipes; and inventory wasn’t available; and 90 days’ backlog was not uncommon; and yada yada yada.

The planners planned for the demand chain, not for the impact of sales success on the supply chain.

The contemporary business ecosystem—with the customer at its hub—demands that the enterprise—nay, the extended—value chain be involved in the strategic planning of a brand holder. I say "brand holder," because collaboration between the brand holder and its channel, be it a suppliers channel or a value-added partner channel, is absolutely necessary in defining how to approach and provide the services and products that a customer needs in a timely fashion.

An example of how this might work is found in what is becoming a rapidly accepted planning practice called Collaborative Planning, Forecasting and Replenishment (CPFR). This is cooperative planning between all suppliers and the brand holder to improve inventory management and delivery time to the customer. In the corporate ecosystem that we lived in not too long ago, this would have been unthinkable, because CPFR transparency reveals processes and information on production and maintenance of products historically protected by the various companies that are involved in this planning. But in the highly volatile customer ecosystem, collaboration between the brand holder, distributors, suppliers and delivery services is mission critical. The forecasts have to be timely and accurate, and they should fulfill customers’ needs at reduced cost or the customer will go elsewhere.

What makes all of this tricky is that, despite the obvious complexity of planning throughout the value chain, the customer doesn’t care to see that. For example, there is a best practice called capable to promise (CTP) that integrates asset management systems with inventory and other supply chain systems to optimally give a customer highly specific information on his delivery time for a product. Something like, "We can deliver it to you May 21 between 9 a.m. and 10 a.m." Each part of the strategic plan for CTP is a set of complex processes, and while the number varies, typically it can be around 10 sets of processes. Here’s a sample set:

  • Manufacture to order
  • Maintenance, repair and operations scheduling/planning
  • Resource allocation and planning
  • Order management
  • Sourcing scenarios/planning
  • Order simulation for the sourcing scenarios
  • Date and quantity controls
  • Alternative supply models
  • Partnership/Distribution channels and processes associated
  • Scheduling, delivery and logistics planning

But with all this strategic planning and thinking and complexity comes an enormous irony, because these are the CTP processes from the customer’s point of view:

  • Order
  • Deliver

The planning and processes involved in the extended value chain are irrelevant to them, and yet you still have to plan, plan and plan again, for you to make sure that you provide the simple "value" customers are demanding: paid-for products, delivered on time and according to what you told them.

The involvement of the extended value chain in this is pretty much complete. You are dealing with the demand chain (sales, marketing and support—and up-sell/cross-sell opportunities); asset management; the supply chain (inventory management; delivery and logistics; and distribution); what the now acquired ChannelWave used to call the support chain (those suppliers, vendors and partners who have their own demand, supply and support chains but collaborate with you on theirs); and order management. There is no way around it in the 21st century business model we have to adapt to. To please that one customer, it not only takes a village, but also it takes a planning commission to build that village. So all that complexity leads to that simple bucolic ideal: a totally happy customer. But don’t put any planning into that extended village "chain," and you have a customer mob not attacking with pitchforks but simply walking away. That just wouldn’t do.

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