What Can A Newborn Teach You About Supply Chain?

After nine months of preparation, there you are, ready or not, she smiled at you and you smiled her back, then you know that everything is gonna be alright. Here is my compilation of learned lessons that my newborn has explained me about Babies Supply Chain.

Plan and Measure – Baby Dashboard

First of all, believe me that when you are in the middle of a crisis, the last thing you want to struggle with are spreadsheets or complex files. Therefore, it makes a lot of sense that any tool at Gemba (following Lean principles) should be clear and simple. In our case, my wife and I opted for using a whiteboard divided in two sections: Meals and Needs, so everyday we were writing down the hours and quantity of milk plus number of nappies used.

At the end of the week, it’s amazing the number of conclusions and decisions that you can make based on all the data collected

In conclusion, some of the first learnings were:
1. Forecast projection of number of nappies that we will need in the future months.
2. Correlation of sleep hours and regularity of naps against the quantity of feeds.
3. How external factors, such as: temperature (ºC), unwanted noise (dB) and unexpected events (relatives coming home); influenced in her cycles.

Balancing Supply & Demand – Nappies case

After doing a lot of research, the best approach for buying most of the Baby things is a economy of scale. In particular for nappies, there are several uncertainties that need to be taken into account. For example, Will X or Y brand irritate my baby’s butt? which size will she use? (weight of ultrasound is only an approximation), will X or Y brand be good enough? and so on and so on.

At the time of placing big orders, keep always in mind that you can mitigate potential damage in favor of potential gains

In principle, supermarkets and internet promotions are totally ‘unpredictable’ but don’t stress yourself, there is a certain pattern and seasonality (specially before summer) to get the best deals from each of them.

Maintaining a Safety Stock is crucial to cover the risks of Supply and Demand, and not as a level of inventory to be kept

Additionally, I excelled at the concept of Safety Stock, because maintaining a Nappy Safety Stock is crucial to cover the risks of Supply, i.e. your online order got late or promotions are not good enough to buy yet … and Demand risk, that happens when your forecast is inaccurate, which is very common when your baby suddenly starts pooping more often than before.

Just in time – Infant’s formula milk

In the case your baby needs infant’s milk, choosing the brand is a mission-critical decision. You are not going to change it unless there is a medical condition.

Here, your supplier sourcing selection should be very careful, in contrast than diapers, some formulas are not available in all the retailers and they are uniquely sold in specific drug stores.

As a result, you will have to identify very well the critical factors of your suppliers, some of the most important are as follows:

  • Capacity – Can I trust that online (Amazon) or local store (Carrefour) will have Stock enough?
  • Lead time – How long is going to take me to buy a new one since she/he finish the box?
  • Commitment to Quality – Very important when your baby starts eating solid food, then you will have to decide among Bio, Organic or Standard vegetables and fruits

As a rule, JIT strategy works very well with infant’s milk, essentially find out trusty Suppliers and do not keep big amounts of inventory – elimination of waste, because of the considerable costs and baby’s uncertainty

Last but not least, baby’s demand is a pull system and in many cases extremely difficult to predict, so if you don’t create any procedure to prevent you from getting out of formula (home-made Kanban) you will find yourself with no stock left to feed her – Is there any bigger pressure than that?

Conclusions

Having a baby is probably one of the biggest and hardest life’s experiences, so trying to stay positive is fundamental. Eventually I’ve been ironic in some of the experiences described before and most of the activities would have never been accomplished without my partner. Infinite thanks to my wife.

References:

  1. Lean systems: “The Machine that changed the world” James P Womack, Daniel T. Jones, Daniel Roos
  2. Dad university “What They Don’t Teach You In School”
  3. Economy of scale https://www.britannica.com/topic/economy-of-scale
  4. 10 Cs of Supplier Evaluation https://www.mindtools.com/pages/article/10-cs.htm
  5. JIT and Kanban systems https://www.toyota-global.com/company/vision_philosophy/toyota_production_system/just-in-time.html
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Why is Supply Chain the Rockstar of Consumer Pharma?

The obsession of drug makers to re-evaluate and minimize Operational costs is the New Black. Nowadays Consumer Health (over-the-counter or GSL drugs) has a profit formula quite similar than the Retail business, but unfortunately delivering safety and quality are simply not enough.

The decrease trend on sales of the biggest US drug retailers (WBA, MCK, CVS) is due to the consumers shift from traditional to online shopping “the Amazon effect”.

As a consequence, because of discounts and pricing pressures, the profit strategy is getting lower. Moreover fighting against Amazon is not a solution, it’s just like a patient who tries to cure himself using a Placebo.

So what?

Industry really needs a Turn the ship around, which implicates radically changing Supply Chain Strategy from Deliberate to a more Emergent one.

Indeed, the future is getting harder to read and winning strategies that used to work in the past are not effective anymore … this is the point that differentiates you from the rest.

In particular, if we analyze the evolution journey of Retail and FMCG to an Agile Supply Chain Management, we will obtain a present-day version of the 3 pillars of Organizational Transformation: People, Processes and Technology.

  • Companies like Walmart Unilever and P&G are hiring the best talents where market skills and in-depth technical knowledge are the priorities to ensure creativity coming from top-rated professionals.
  • Their excellence in processes goes from the latest up-to-date Lean methods (TOC, 6Sigma …) to the most innovative Customer Segmentation, Supply Chain Resiliency and Circular models. 
  • They invest in technology. Advanced Analytics such as: machine-learning and AI enhances and even automate, decision making by reinventing operational models.

… and this is just the beginning.

Supply Chainers who are able to adapt its company value chain, make good products even better and at the same time improving Profit Margin, will ensure that the company model will not be disrupted in the future.

References:

  1. Bezos Starts the online drug war https://chiefexecutive.net/bezos-starts-the-online-drug-war/
  2. Gartner Top 25 Supply Chain list http://www.argentus.com/gartner-global-executive-partner-speaks-about-2017s-top-25-supply-chains-list/
  3. Deliberate versus emergent strategy https://hbswk.hbs.edu/item/the-business-of-life
  4. 2018 Trends to disrupt pharma supply chains https://www.pharmalogisticsiq.com/regulations/news/2018-trends-to-disrupt-pharma-supply-chains
  5. Beyond Supply Chains Empowering Responsible Value Chains http://www3.weforum.org/docs/WEFUSA_BeyondSupplyChains_Report2015.pdf