As Jim described in Part 1 of this series, DDSC is an exciting new and powerful operations strategy that -- when planned and executed effectively -- produces major benefits for all trading partners in any end-to-end supply chain. From customers to suppliers, dramatic benefits will be derived from several areas of performance, including:
higher customer order fill rates
higher in-store in-stocks
decreased inventories for all trading partners
reduced working capital lower costs to serve
These benefit categories, and more, have been proven and reported by the companies that have planned and executed the DDSC transformation.
So, the potential benefits are dramatic, and the idea sounds correct and exciting. What should we do to get started? I will layout the
10 steps required to start & to formulate the DDSC plan.
STEP 1: First, we need to assess the current operations model and its performance. This step is necessary to not only fully understand how products are forecasted, ordered, sourced, stored, and delivered, but also to confirm the current state of performance, which becomes the baseline. Defining the right key performance indicators (KPIs) is necessary, for example as the minimum:
A. Order Fulfillment:
Times -- order cycle times -- for replenishment and other demands
Costs -- order costs -- costs to serve for both customers and consumers
Services -- perfect orders; fill rates
B. Supply Chain Operations:
The Network
Inventory levels
The 4 flows: Physical; information; cash; and work
Knowing where we stand today – the current state – provides the baseline for targeting where we want to be after the DDSC transformation.
STEP 2: Next, we need to assess our supply base. If we are a retailer, we would examine our key product suppliers. We'd exmaine their ability to change, their willingness to collaborate, and their importance to us. If we are a finished goods supplier, we examine our component or materials suppliers, our contract producers, our co-packers, or our packaging and other suppliers – for many of the same criteria. We also want to review our key accounts (retailers) to best position a DDSC transformation. It is very possible that the larger retailers are already collaborating with certain product suppliers on sales and operations planning (S&OP), which is a component of DDSC, but not the entire strategy.
STEP 3: We need to evaluate our current operations strategies and processes to determine: (a) their effectiveness in enabling true DDSC; (b) their capability to drive true DDSC; and, (c) their
ability to be changed or reinvented. The major business processes involved in demand and supply management can be mapped to show their key steps and decision points. This step is very important for the success of the DDSC transformation, and thus requires more than a cursory review. The KPIs mentioned earlier, and the productivity of processes and people together with the requisite collaborative culture, will determine the DDSC's effectiveness and thus the new performance. No amount of automation, or willingness to work harder, or trading partner communications, will overcome weak strategies, underproductive processes, resistant cultures, or inadequate skills.
STEP 4: Once the assessments are completed, we can move to formulating the new operations strategy. Strategic planning is more an art than a science; yet, how operations strategies are developed or focused need not be a complex exercise. The strategic assessment earlier will provide the gaps and opportunities that need to be adjusted in the strategies. These, then, can be proposed and then approved via workshops with the operations leaders.
The joint strategy meetings with selected suppliers, and if appropriate, selected retailers, are equally important. Collaborations with trading partners can be successful, if they are facilitated properly and managed well.
STEP 5: Once the strategies are clarified, and collaborated with the key trading partners, then the new or reengineered business processes should be addressed. The process mapping done earlier in the assessment will lead to what changes are necessary. These may be truly transformational; or, they may be incremental. The key tip here is to define the new processes, obtain the buy-in and commitment from process owners, and secure executive approvals for their integration. The supply chain organization needs to work across units with this, involving sales, finance, merchandising, sourcing, and others. In our next part three of the series, Brenda Enney will discuss further both the processes – and our next step on organizations.
STEP 6: The organizational changes needed may not be significant, but there will be certain modifications in roles and responsibilities. Converting a supply chain organization to a demand-driven focus may require certain shifts in functions as well as tasks. Converting the overall operations of a business to demand-driven may require others – in sales, customer service,
and procurement, especially. While many of these can be done through process definitions and teams, the organization itself may need changes.
Adoption of an effective change management program will be part of the plan. Converting to a DDSC will definitely require change, and how effective the management of this is applied will determine how substantial are the resulting benefits. Again, Brenda Enney will address this further in part three.
STEP 7: We need to evaluate our current technologies for their capability to enable the new strategies and processes. Many companies today have some type of ERP system; however, many have determined that this is not adequate for a true DDSC. Many companies also have specialized software for point solutions, and they often determine these are not easily integrated to enable true DDSC; nor are they powerful enough to flow demand and supply information – near real-time – across the trading partners.
One of the executives of our partner firm -- One Network -- will address this question in part four of this series.
STEP 8: Now, we are ready to integrate all steps 1-7 into the plan for DDSC. This means that we document:
The assessment of the current state
The review of our supply base (and customers)
The needs for new strategies and business processes
The needs for new technologies
And, we complement these with any other needs that complete the plan. Then, we add the targets we can expect to achieve as a result of the plan. The preliminary business case could be developed at this point, without the details of cash flow projections. The objective here is to gain approval for the feasibility of this initiative.
STEP 9: Once we have the plan developed and some degree of corporate approval to proceed, we can move to specifying the Integrated plan for true DDSC. This step will involve task definitions, collaborations with trading partners, and time lines. It will also specify the pilot tests needed to "prove the value proposition" – which customer(s), which suppliers, and which product groups will be tested.
STEP 10: Final approval of the plan gives us the roadmap, the time lines, and the detailed planning tasks. This step involves launching the Initiative and applying a program management methodology (often a program management office). The key tip for this step is to insure that a strong management team is assigned to achieve the plan and its milestones as defined, and to report progress effectively and regularly.
These 10 steps may sound like they require a long and complex exercise to develop the DDSC plan. This is not the case with a DDSC transformation for any normal business. Suitable tools, methods, benchmarks, and proven approaches exist that enable the smart company to move through these steps in weeks, not months. The creation of a complete DDSC plan that is actionable and detailed will normally require a maximum of 6-8 weeks.
The plan will specify the work to be done, by whom, and when. Thus the time to benefit will vary depending on the companies, trading partners, and complexities of the supply chains and processes. Our experience to date is that, once the plan is launched, and the work tasks are underway, the pilot tests can be producing results within 6 months. The benefits of the pilot tests alone will very likely exceed expectations and excite all to roll-out the DDSC across the enterprises.
So our point of view is that every company should strive to become demand-driven, and these ten steps will get each and every company the plan for doing so. The benefits are well worth the efforts and best wishes for you to set them. Thank you.
