Week 2 summary

ZAKIAH SUHAIMI: Welcome, Learners. I’m Zakiah your mentor for this week. And here with me is Professor Janet Godsell, the lead educator for this this week called peak planning. How are you doing, Jan?

PROFESSOR JAN GODSELL: Hi, Zakiah! I’m doing really well, what about yourself?

ZAKIAH SUHAIMI: Yeah, I’m well. Thank you. So it’s quite interesting, this week, because we have a very interesting topic. I believe this is one of your favourite topics I guess?

PROFESSOR JAN GODSELL: This idea planning or orchestration, you know, hence the title, The Global Orchestra is one that’s dear to my heart, and as you’ve probably seen that from both week one and week two, the planning really is the glue that holds the supply chain together. It’s that core supply chain process that sits across source, make, deliver, and return. And it’s the thing that drives connectivity base internally and then externally to customers and suppliers. So a really important topic.

ZAKIAH SUHAIMI: All right. OK, so this week we have three main blocks. The first one is planning fundamentals, followed by planning for different types of events, and the third one is data-driven supply chain. So moving on to the first block. So it is quite interesting to see some of the learners try to adapt the planning process in their daily life. So we have one of the learners tried to explain how did he do the planning process to become a qualified lawyer? So what’s taught you about this topic, Jan?

PROFESSOR JAN GODSELL: Yeah, just a comment. I really enjoyed the example about the lawyer, too. I think it’s really nice. And if learners haven’t seen it, it’s a nice one to look at. But what that was trying to bring out was something around the different levels of planning. There’s strategic, and the tactical, and the operational. And what you can do across those different time frames.

And I suppose this is one of the interesting things about planning, is that it is both very strategic in its nature, and as we move from that very strategic timescale further in, we perhaps move away from this concept of planning to one of control and to adjustments to make sure that we stay roughly on target. I particularly enjoyed also some of the debates around asking people what motivated a publicly listed company. And unlike when I ask the classes of MSc students, where people typically say it’s answer 3, which is a balance between customer and shareholder value. I think our learners are quite astute.

I mean, the majority of them actually have said that the primary objective of a publicly listed company is to deliver shareholder value, which is quite correct, but they also built on it quite correctly. And this is where– I wouldn’t say it’s a trick question, but there’s a nuance to the question– because the way in which you’re going to deliver shareholder value is by understanding customer value and delivering it at lowest possible supply chain cost. And this is a really important consideration and underpins quite a lot about what we do in the field of planning. Because fundamentally, customers value different things. And the reason they buy things are different, which creates different demand patterns.

And those different demand patterns, as was a theme for the second block, on planning for different types of events, can actually lead to different types of supply chain response for those different demand patterns. And that can also actually lead to the need. And that’s one of the ways in which we can actually achieve supply chain flexibility.

ZAKIAH SUHAIMI: All right. Yeah, we can see that planning plays a very important role to balance the demand and supply. So moving on to the second block, planning for different types of supply chain. So how do you see the importance of doing the planning, in coping with different changes in the marketplace?

PROFESSOR JAN GODSELL: So I suppose, just as a segue between the two blocks, it’d be great, if people haven’t and don’t mind doing so, if they can actually complete the planning and personality exercise that was at the end of that first main content block. Because that’s really, really useful for our research. Because one of things that we found is that we as humans, we fear loss more than gain. And that actually means that we take some slightly unusual planning decisions. We’d rather have too much of something than not enough of it. We’d rather overcompensate to make sure we didn’t lose a sale rather than miss a sale.

And that can cause quite a range of different effects in the supply chain. And actually, linking that to the different types of events, some of those strange demand patterns are actually created by individuals responding in strange ways to external events. So for instance, in the ‘why do we not plan like we used to?’ discussion, so why do we leave the purchase decision quite often now, for Christmas or Mother’s Day, until the last minute? It’s because we can. However, there would be real benefits to the actual supply chain. It would actually reduce supply chain costs if we actually were to be more considered and actually placed that order slightly earlier.

Because by not planning, we create these huge peaks and we’re not really aware of it. And I think that to me is one of the critical lessons about planning. We talked about last week the tip of the iceberg, and everything’s hidden– the invisible world of supply chains– but perhaps the most invisible supply chain process of them all is planning. And what we are trying to show this week by using examples like Aldi and Lidl and why they’re so successful– they essentially have this segmented or two-tier supply chain structure working.

Then they have this nice, stable demand pattern base product, and then they have these sale days where they create a ‘when it’s gone, it’s gone’ type supply chain to create consumer interest for special items. One of the learners mentioned Zara. It’s a very similar strategy to Zara has. Zara operates a ‘when it’s gone, it’s gone’ type strategy. They have materials and manufacturing capability prepositioned, but they plan to run out. They distribute to stores on the same day, one same day, same timeslot every week. And if goods have not met that waggon when it’s going to be distributed from their warehouse in Spain, then those goods, don’t go until the following week. They don’t chase demand.

And what they always try to make sure is that a store gets a refreshed range every week, but they try to always give them slightly less than they actually need, because one, it encourages the consumer to buy it when they see it, but second, it means there’s no inventory leftover to minimise the supply chain waste. The reason they can get, not away with it, but the reason it works so successfully for them is that next week they replenish with a new, exciting product. And so it creates quite a exciting and dynamic retail model, where consumers want to go to those stores and buy things when they see them.

But it also creates a very efficient supply chain that’s not exploitative of people within their base. So it’s really, really important to think about the different types of events, the different types of demand patterns that they create, and then how we then configure our supply chain to respond. But equally, tying into the first block, is very important for businesses to actually think about their strategy. You know, how do they create demand, and fulfill demand, and how do they lift that bar higher and lead to the possible growth.

ZAKIAH SUHAIMI: All right. Interesting discussion though. All right, so moving on to the third block, data-driven supply chain. So we could see that some of the learners noticed the emergence of IoT in driving data. So what are the key learnings that they can get from this data-driven block?

PROFESSOR JAN GODSELL: So I think it’s really exciting times for supply chains. Because in a way, if we said that we’ve got humans in supply chains that sometimes overreact, in a way, if that human signal is replaced by a true demand signal that’s IoT enabled, then we’re going to have smoother, more efficient supply chains because they’re not having to respond to that artificial surge created by humans. For me, the critical thing though, and what the Costa express case study identified, it wasn’t just blended managed inventory.

And so the replenishment of the physical side of the material, why it worked so well is it also provided a very accurate picture of what had actually been consumed, so it enabled the financial flow as well as the physical material flow. And if you think– for instance, successful companies like Uber, balancing demand and supply very nicely through their market mediation platform– again, what they enable is automatic. They know exactly who’s taking what journey. They can charge the customer for it immediately. But they’ve also got a very clear audit trail to enable them to then ensure that the driver is reimbursed for that journey at the end of the month.

It enables both the delivery of the service in that case, but it also supports the delivery of the financial aspect. And for me, that’s a critical aspect of how we use IoT and how we create more data-driven business models.

ZAKIAH SUHAIMI: All right. So, Jan, we have come to the end of the run that we do. So any last word from you?

PROFESSOR JAN GODSELL: No. Just thanking the learners for continuing to engage. I think the quality of the comments is very, very high. Thank you for your excellent facilitation this week. And, as I say, just encourage people, if they don’t mind, maybe have a look at the planning and personality exercise, and don’t forget about our cohort challenge on padlet about creating those end to end supply chains for those everyday products. Thank you. Thanks, everybody. I hope you look forward to next week.

ZAKIAH SUHAIMI: All right, thank you, Jan, for this week’s round up video.