In the the March/April 2017 “Lean Culture,” I described quality function deployment (QFD) as a useful method to force rigor when determining what customers are looking for in a product or service offering. This includes identifying the things customers know they want as well as finding their critical hidden desires. A properly conducted exercise using QFD enables businesses to determine the degree of product customization required, the necessary lead time, feature and function combinations, the degree of integration and other differentiators needed, and more key information about potential products and services.
In this article, we will delve into how to use the resulting information to determine the best way to plan and deliver on those needs competitively and sustainably. The first task is determining how many supply chains are needed and the type of each—make to stock, make to order, engineer to order, and others. This is essential, as the choice drives much of the physical supply chain network design, including balancing the best possible fulfilment performance—centralized versus decentralized—against the limitations of capital equipment, human talent, material supply, contract manufacturing options, service requirements, country content requirements, and additional factors.
It’s helpful to use the Supply Chain Operations Reference (SCOR) model to define the performance attributes that best align with customer needs and competitive positioning. There are more than 250 SCOR metrics that are organized in a hierarchical structure from organization level 1 to process level 2 to diagnostic level 3. The first three attributes (reliability, responsiveness, and agility) are considered customer focused; the latter two (cost and asset management efficiency) are internally focused.
Part of the QFD methodology also includes assessing a firm’s relative position to the competition regarding each critical customer need as a strength, parity, or weakness. This becomes an input to determining the company’s desired position in the future—be it superior, advantage, or parity—for each key performance metric. Care must be taken at this stage to limit superior targets to the most critical factors. It’s imperative that the chosen attributes align with what customers care about most for each supply chain. For larger firms, the same product and service combination may vary in different industries or geographies.
The next step in this process involves what-if scenarios related to given volumes of business throughout the product life cycle horizon. Team members use this tool to decide which approach offers sufficient upside flexibility while enabling employees to manage downside risks in the supply chain. The ultimate choices solidify the physical and financial approach to fulfilling market needs in the years ahead. Note that it’s common to begin with a highly centralized design that morphs into a more distributed plan as the hypotheses about the future are proven or debunked over time.
Armed with a well-thought-out strategy, the company now again leverages the SCOR model to work through which best practices and talent types are required to execute at the targeted level of competitiveness under each key performance metric. It’s also here that the sales and operations planning (S&OP) design and parameters can be fully defined for each supply chain, taking in the specific attributes of each.
From there, a rapid assessment of readiness is performed and gaps are identified, such as shortfalls in sources of supply, talent, access to efficient distribution, adequate information about technology capabilities, and servicing after-sale customers, among others. Finally, S&OP can be aligned to effectively handle the plan, source, make, deliver, return, and enable aspects of the supply chain execution cycle.
With a clear roadmap of what customers want and how to deliver it, supply chain management professionals will be able to optimize detailed operating plans at maximum effectiveness.
Ron Crabtree, CIRM, SCOR-P, MLSSBB, is chief executive officer of MetaOps, a master MetaExpert, and an organizational transformation architect. He is the author or coauthor of five books about operational excellence and the online magazine at MetaOpsMagazine.com. Crabtree also teaches, presents, and consults. He may be contacted at firstname.lastname@example.org.
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