Dancing to the drumbeats

The current pandemic is a tough reminder for us to go back to the basics and focus on the fundamentals of supply chain. Are we listening to the consumer signals? Are we orchestrating our company’s response in a unified and aligned manner? Are Procurement, Manufacturing and Distribution working for their individual functional goals or a common company goal?

These are some of the basic questions each company should be asking during normal times. It is quite clear by now that those who thought through these questions during normal times are much better off in the current situation. Unfortunately, such companies are only a handful. The vast majority is now forced to answer these questions, either consciously or intuitively, to structure their pandemic response.

Let us take a look at the importance of these questions.

Demand Signals

Consumers give us continuous signals on our products by purchasing less or more of it. These signals are actually at a very granular level. However, conventional demand planning techniques aggregate it over a large geography, time bucket, and product group. Such an aggregation destroys the richness and discerning power of the actual signal. The aggregated demand is then used to project future demand at an aggregate level and use it for various supply chain actions.

Current pandemic has forced us to disaggregate this data for supply chain actions. Looking at sales on a monthly or a weekly basis makes no sense... it has to be tracked and read on a daily basis. Since consumers are buying higher quantity of certain skus and lower quantity of other skus in a product group, we must now learn to read this data at sku level instead of reading it at product group level. Similarly, sales must be tracked at individual store level for proper replenishment.

Getting used to such granular demand signals and using it for supply chain actions is the basic requirement of a Demand Driven Supply Chain, which we are forced to adopt during these tough times. I sincerely hope that companies retain this mode even when we reach the new normal.

Orchestrating Supply Chain Response

Efficient supply chain response requires that all its constituent pillars take their respective functional actions in sync, much like various musicians in an orchestra. Taking the simile further, an orchestra needs a conductor who sets the pace of the symphony. In a similar way, dance troupes require a drummer who sets the pace for everyone to match their steps to its drumbeats.

Who could this drummer be in a supply chain context? Who decides the pace of our operations? Who decides how much to buy, how much to produce and how much to distribute? If we want to design an efficient supply chain, this drummer has to be the consumer, who determines the rate of consumer demand at the most granular level. Can we truly listen to her drumbeats and orchestrate our supply chain actions accordingly?

Conventional demand planning techniques in Sales & Operations Planning (S&OP) and Integrated Business Planning (IBP) try to estimate the future pace of drumbeats and dictate various supply chain actions. It is akin to running the orchestra without the conductor, where every musician plays the entire symphony to his memorized rhythm. As we know very well, the actual drumbeat in the current reality of pandemic differs widely from the estimated one. Moreover, this pace varies from day to day, place to place, and product to product.

Isn’t is better to listen to the actual drumbeat and play the entire orchestra in an aligned rhythm? Shouldn’t it be sensitive to the minutest change in rhythm over the symphony period?

Demand Driven Supply Chains do exactly that when they sense actual demand signals at a granular level and use it for all their supply chain actions.

Aligning the Goals

It is wonderful to see the Procurement, Manufacturing and Distribution functions keep their individual goals aside during the pandemic and work towards the common company goal of serving the consumers faster. As the portfolio mix has changed during the pandemic, all the functions have quickly realigned to the new reality to present a unified and well-orchestrated response. If the market requires small batches of certain products, these are produced on the production line and smaller batches of input materials are procured. If a distribution lane requires daily servicing with smaller vehicles, it is done.

The current pandemic has forced that these right supply chain actions are taken every day to survive through the crisis.

When the crisis subsides, shouldn’t we imbibe these learnings in the new normal and adopt the practices of Demand Driven Supply Chain as the new way of life?