New Product Launches and the Supply Chain

When we talk about sustainable competitive advantage, we always mention that innovation is the key to it. When all the companies round the globe know about it why still about 80% of the new product launches fail in the market? Innovation is a key competitive weapon in today’s marketplace. And yet, companies have trouble getting their products to market. 

Prominent failures highlighted in the recent press include delays in the launch of Airbus 380 that potentially wiped off five billion Euros of the value of its parent company and Sony’s struggle to make sufficient Play Station 3 consoles for the holiday season. Toy4us was doomed for not meeting the customer’s expectation of delivering toys before Christmas evening.

Studies imply that developing and launching new products is becoming harder. Why is this so? While increased intensity of competition might partly explain this, we believe that the lack of a better understanding of the critical role of supply chain in innovation is one of the key contributing factors.

Traditionally, product launch decisions have been considered a marketing function. The success of a new product and its launch, however, critically depends on all aspects of the supply chain from design to sourcing to manufacturing to distribution. To ensure the success of a product launch, one needs to pay close attention to supply chain design, sales and operations planning, as well as supply chain coordination. The criticality of the various supply chain activities will depend on the nature of the innovation. Finally, companies need to create a launch process, identify key stakeholders (marketing, supply chain, finance, and operations), establish key metrics and develop a dashboard for launch readiness and success 

Business Process Re-engineering Vs Business Process Management

Please do not be misguided; the following discussion is not focused on the difference between the Business Process Re-engineering and Business Process Management but on aligning various schools of thoughts.

Business Process Management is considered to be comprised of four distinct stages:

1. Process Identification and Information gathering
2. Process Mapping
3. Process Analysis
4. Process Improvement

Now we have one school of thoughts which says BPR is a part of TQM, as it is involved in the improvement of the processes just like TQM. This means that already existing processes are considered as important and useful, and improvement is based upon the current “as is” process.  Thus BPM focuses more on continuous improvements.

However the other school of thoughts suggests that BPR is entirely different philosophy, as it considers the existing processes as useless and generates innovative process design with dramatic results. Also because BPR is a risky proposition and involves high agility, an organization could not be in “BPR” stage throughout. BPR focuses on breakthrough innovative approaches.

I feel that both of the above thoughts could be combined in figure 3

BPM supersedes both BPR and TQM without a doubt as BPM is more a strategic orientation but BPR and TQM both have strong operational view of process improvement. Though, TQM and BPR both have different approaches towards process improvement but as mentioned that they both have strong operational view of process improvement so they can be separated but will still be inside the superset BPM. 

Borrowing the concepts of supply chain: Where Lokpal could fail, RACI can still work!

If you are one of those Facebook freaks, you sure will be more informed about the aspects of the Lokpal bill, then those who watch the bias views on television.

In case you are geeky person, who is most of the time busy either with his computer or mugging notes; now is the good time to read about the Lokpal bill so that you can understand this new concept of RACI in a better way.

Now for those who think Lokpal is a perfect tool to eliminate corruption think again.

What do we do when we identify a flaw with the system? We find the person responsible, humiliate him, punish him, and then we believe we have corrected the system. Of course we did but temporarily!

Now let me introduce to you our borrowed concept of "RACI".
R : Who is Responsible ?
A: Who is Accountable ?
C:  Who should be Consulted ?
 I:  Who should be Informed ?


RACI says that you should not only be finding the person responsible for the process but also the person who is accountable or owner of the process. System could only work efficiently when the person who needs to consulted and informed about the recent developments are kept in loop and adequate efforts are put on sustaining and enhancing the system.

Now do you feel the difference of how things are done and how should they be done?

Identifying only the first actor solves only the part of the puzzle; we do need to move beyond to improve the system performance and the processes performance.

Supply Chain Vs Value Chain : Do you know the difference

Ever Wondered what is the difference between a value chain and a supply chain?

If you haven't thought about it; now is the time! In case you know the answer then you must be one among the brilliant souls who has ever walked down on earth; In case you don't read on to enrich yourself with one of the management fundamentals.

In common practice, a supply chain and a value chain are complementary views of an extended

Enterprise with integrated business processes:

• Both chains enables the flows of products and services in one direction, and of value as represented by  demand and cash flow in the other.
• Both chains overlay the same network of companies.
• Both are made up of companies that interact to provide goods and services.

Then where lies the difference?

When we talk about supply chains, however, we usually talk about a downstream flow of goods and supplies from the source to the customer. Value flows the other way. The customer is the source of value, and value flows from the customer, in the form of demand, to the supplier. That flow of demand, sometimes referred to as a “demand chain” is manifested in the flows of orders and cash that parallel the flow of value, and flow in the opposite direction to the flow of supply. 

Thus, the primary difference between a supply chain and a value chain my friend is a fundamental shift in focus from the supply base to the customer.

Supply chains focus upstream on integrating supplier and producer processes, improving efficiency and reducing waste, while value chains focus downstream, on creating value in the eyes of the customer.

Integration - Recent Trends in Supply Chain -Part 2

Now that when you have learned the concept of Convergence, let me provide with one more interesting concept which will help you in understanding the next recent trend in the supply chain.

Now we are going to talk about four types of uncertainties which have been haunting various industries for centuries. And in case you can find a break through solution to solve few of the untamed one –bingo, you have earned a billion $$$ my friend.

The four types of uncertainties are as follows:

Process uncertainty, control uncertainty, demand uncertainty and supply uncertainty.

Of course I can provide you with the definitions of all of them, but I am shrewd person who have a personal agenda of not allowing you to become a billionaire. Therefore I will want you to search about them on your own, and maybe, just maybe you may stumble upon some more good pointers which may further help you.   

Now let’s get back to topic.

Organizations have found it easier to tackle process and control uncertainty with a relative short term planning, emphasizing more on cost control and adherence to the laid processes. In order to control the supply uncertainty all work processes have been integrated, EDI has been deployed vastly.

The most difficult task across industries is to take care of demand uncertainty. Excess inventory of finished goods causes overall supply chain costs to go high, on the other hand lack of inventory may create stock outs which has much greater costs. Organizations have now focused in integrating all the members across the supply chain, synchronizing the material flow across the supply chain and finally engaging into a new concept of CPFR (Collaborative Planning Forecasting and Replenishment).

Thus we see that recent trends suggest a movement towards risk adjustment and Integration of supply chain across all members.

Convergence - Trends in supply chain - Part 1

Today I will like to talk about various recent trends that are observed in the supply chains across globes. Although details of these trends could be found if searched on internet, my purpose of mentioning them here to provide a pointer to the information, which else would have take a lot of time to be discovered or identified.

It will be difficult to imbibe loads of information on one go therefore; I will be providing details regarding the recent trends also in the coming posts.

Let’s begin with the concept of vertical vs. virtual integration.

One of the most recent trends is the movement of industry from Vertical integration to Virtual integration that is outsourcing. Of course the concept of outsourcing is not new to anyone but complications involved with outsourcing are immense. Given that so much is outsourced to the suppliers that they truly appear to be an extension of a firm’s own business. Therefore in order to succeed what is most important is to merge their metrics with firm’s own metrics. 

This dear friend is called CONVERGENCE. The phenomenal new trend which aims at enhancing collaboration, reducing costs and improving profitability across the supply chain.

Oil expense Indicator - Symptoms of another slow down?

Recently I came across an interesting concept of “oil expense indicator” and how it has impacted the economies round the globe.

The importance of oil cannot be underestimated.

Oil is a key global cost because it is crucial to every part of the economy, powering manufacturing and the production of food and other commodities, fuelling transport as well as being a building block for industries such as plastics and electronics.

Oil expense indicator is defined as the share of oil expenses as a proportion of worldwide gross domestic product (GDP).

Since the year 1965 this ratio has hovered around 3% and has exceeded 4.5% only during three periods: 1974, between 1979 and 1985 and in 2008.

•          1973-1974: The first global "oil shock", oil prices rocketed after an Arab oil embargo in response to an Arab-Israeli war disrupted oil flows and triggered panic buying.
•          1979: Revolution in Iran affected most of the country's oil output and was followed by a long Iran-Iraq war, bringing a second "oil shock".
•          2008: The burst of house bubble propelled speculative buying of new debt instruments and as a result oil prices exceeded 100$ a barrel and went to as high as 147$ a barrel.

James Zhang, an analyst at Standard Bank, says the danger level comes with the oil expense indicator at around 5%. "$100 per barrel represents about 5% for the 'oil expense indicator', which we think would be a threshold on an annual average level to potentially kill off global growth," he said.

With US default crises, the price of Brent oil has come down to around 100$ a barrel. However if the U.S. government decides third phase of quantitative easing it will result in relative increase in the commodity prices including oil again.

No doubt the consumption of oil has increased to a much greater extent because of developing economies like India and China, but the high price of crude has hardly to do anything with real demand and supply of oil. Speculative trading in commodity has caused disproportionate increased in the price of oil and unless a limit is imposed on speculative trading of oil and other commodities, there exists a good chance that “oil expense indicator” may indicate bleak future.