How many of you have in your organizations all of the following?: a Lean or Lean Six Sigma program, a Digital program aimed at consumer or customer engagement, a supply chain integration program.
The outcome of these initiatives when run as three separate initiatives is altogether different -- and significantly more wasteful -- than those achieving these same three results from a single program.
Push & pull
“Lean’s core idea, maximize customer value while minimizing waste, feels particularly applicable to our times, as organizations must better understand what customers truly value” and “continuously improve customer value and efficiency based on real marketplace feedback.” writes the Wall Street Journal's Guest Contributor Irving Wladawsky-Berger. “Such a pull approach to business is quite different from the push approaches of the past.”
To view the detection of consumer demand and the supply chain as improvable in isolation is to violate the primary purpose of lean. This disjointed approach connects pull-oriented demand with a push-oriented supply chain. It inherently generates waste.
Isn't it obvious that if we know consumer demand we can convert our supply chain to pull? In several efforts we witnessed, this was obvious to many marketing people who evidently did not understand that consumer demand does not easily convert to demand for discrete product (part numbers).
In their efforts to understand the consumer, they made no progress improving the quality of forecasts to the supply chain. This leaves the supply chain to optimize the way it pushes. The supply chain focuses inwardly on building too many or too few products faster, cheaper and better, often under the guise of lean or six sigma.
What if you knew firm demand further out in the future than it took to make your product? You would get lean in a heartbeat. Your inventories would drop, your warehouse space would shrink, you would require fewer staff throughout the process, you would use less capital, less energy, less paper. Imagine the new profit and loss statement if you could somehow know what the customer would buy before you made it. You would have reached business nirvana.
What if you knew firm demand three days shorter than it took to make your product? Would you be willing to expend some effort to address that three days knowing how much better your company would operate if you could? Sure you would. If you could find out about demand one day sooner, if you could shorten manufacturing time by one day, and if you could find a supplier to bring your product one day sooner you would have it.
What if the difference was three weeks?
IoT and the new Lean
Here is where we are going. It is a secret so please do not tell anyone. Today GM cars can tell GM when the airbag deploys via its OnStar network. A deployed airbag symbolizes demand and it is relayed to GM before an order is initiated. It is imperfect but it correlates to demand. Demand is being known before product is ever ordered.
If Whirlpool, Samsung, LG and others have their way, they will offer the capability to detect food usage. Light bulbs will know when they are out. Your car already knows when it needs service and the service schedule and parts are known. Caterpillar is using the same approach to predict service on their machines.
This network of knowledge is called the Internet of Things. It is going to tell us that purchases are fairly certain well before orders are issued.
If we know about demand sooner, we can get leaner. If we can translate the better knowledge of demand into more efficient or more agile supply chains, we can optimize our costs on our terms. Want to be the low cost provider? You can do it. Want to build in differentiating features? You can do it.
David Williams, CEO at CRM agency Merkle Inc. and author of Connected CRM: Implementing a Data-Driven, Customer-Centric Business Strategy thinks we fail to see the connected nature of the solution for this reason:
Part of the problem is that this conversation is too rational. It makes too much sense. It's not like you meet with CEOs or CMOs who say they don't want to know who their customer is. Nobody is saying that they don't want or need to engage their customers on a one-to-one basis. This rationalization of the issue doesn't allow business to put a lot of rigor into the planning of these strategies, so they take a capability approach from different vendors, but the reality is they can't really operationalize those things because they don't have the proper organizational design. There's not been enough rigor put into the business piece of what economic or competitive advantage this level of engagement is really going to require. How much ... investment are we talking about over time?
Digital is lean because the detection of consumer demand is synchronized with your demand fulfillment and with your suppliers. All the power brokers in your organization steering their own ships to digital is not going to work. It is one holistic vision implemented in phases or it is... a waste.
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