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Vol 31 - No 05 - July/August 2005 Branch news : South West - Latest Thinking in Demand Management At a joint meeting of the South West Branch and the Somerset & Dorset Manufacturing Network (SDMN), it seemed like a daunting task to write a fresh report when the main subject matter has already been in a Control article written by the evening’s speaker, Derek Thomason of USP (Unipart Solutions Practice). Have no fear! There was enough new offering to make it very worthwhile and a thoroughly enjoyable event. Derek introduced us to Unipart’s self-contained consultancy practice with a video of the Government’s view of Process Improvement (PI) through the words of the DTI’s boss, Patricia Hewitt (now Secretary of State for Health). Apart from giving a glowing endorsement of Unipart University and Unipart itself as a great place to work, she made the brave statement that the Government departments and our schools should be using the same PI techniques. Please let it be, especially in her new job! The Challenge for UK Industry As we were with representatives of local manufacturing industry, many of whom were owners or directors of their own enterprises, it was good to focus on defining and managing competitive space. Derek’s hypothesis was “UK companies do not make good decisions, especially in good time.” This is particularly true when synchronising the availability of resources to deliver the goods with the time when the customer will be excited enough to buy. Associated with that is the frequent mis-match of the customer’s real wants and needs with what the supplier thinks they are. Each business consists of a set of capabilities (processes, technology, products and relationships) which define its Competitive Space. Derek defines this space in four interrelated dimensions, like a 3-dimensional radar chart: These relate the company to its ‘external landscape’ – the environment that shapes the Competitive Space. For example, the current infrastructure of a company may include all manufacturing from purchased raw material to finished product. In order that a company can focus its attention on what will give them most competitive edge it is a valid choice to outsource all manufacturing while concentrating on design and marketing. This is what Domino, the specialist printer company, has done. Other good examples used included Zara, the clothing chain. They have engineered their supply chain to allow stock-outs without getting too flustered – it’s better to have a few lost sales than to have loads of excess products at the end of a season and to need to get rid of them in sales. Another example was THE (Total Home Entertainment) which markets all sorts of products for couch-sitters. They have worked with major customers such as Sainsbury’s to integrate their activities forward into the domain that had traditionally been the retailer’s. They therefore become more expert in their own products than the retailer could ever hope to be. The lesson for many companies is that they need to allow themselves the time and space to make strategic decisions like the examples above. Too often companies will stick to the tried and tested formula (“We’ve always prided ourselves on our manufacturing / marketing / design capability”) even when doing it a different way will assure their future success. By the time they need to review their competitive space, it is often too late. Understanding Customer Value Even when the Competitive Space is well understood, the next question is if there is the right level of understanding of the customer. After all, we need to make good decisions about dealing with customers if we want to keep them. In one of Derek’s case studies, a timber products company had a marketing strategy based on assumptions of customer needs. They asked for help in developing a supply strategy to deliver the marketing one. It takes a brave consultant to challenge the stated needs of the customer, especially when they have not yet signed the contract! But that is what is needed to get proper credibility and to help the customer get what they truly need, not just what they think they need. In this case the simplest way to get to the right starting point was to ask the obvious question, “Where is the evidence?” Obvious, but too rarely asked. In the case study, the original customer needs analysis had been provided by the sales department. But their focus was about generating revenue, not about satisfying the customers’ real needs. A more detailed survey (just ask them!) showed that the customers really did not want 24 hour service, but really wanted fast response to order enquiries, and deliveries on time to promise. Out went the plan for a £6m distribution centre, and in came a greater focus on response and on-time delivery. So don’t let the sales people ask the customers what they want!!! There were not too many raised eyebrows at this – tells you something, doesn’t it? Derek used some interesting phrases to describe this process of finding out what the customer is really saying. What drives cost? The last session of Derek’s presentation got us all thinking about another aspect of making good decisions – understanding cost drivers so that we can decide on the profitability of customer relationships.He took us through a simple but effective calculation of costing using a standard costing approach compared to an ABC (Activity Based Costing) approach. The results were dramatically different. Since these are the key decision support mechanisms for most companies, it seems only sensible that we challenge them to give us the best answers. Full Circle Remember all of those articles about Closing the Loop? Maybe you’re not as old as I am, but I always like to see presentations coming back to the original hypothesis. In this case, it was all about making good business decisions, in time to be successful. Derek’s original premise had been that we have many choices to make in running our businesses, and these will dictate when our products and services will be available to meet the customer’s needs. Here the motto becomes ‘Only sell what’s in your barrow, or make sure that your barrow is big enough, and you get the product in time.’ Many thanks to Derek. It was a shame that there were not too many IOM members there, but I certainly got my money’s worth. Bob Powell, FIOM Related Topics:
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