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Are You Really Thinking Outside of the Box?

A company's approach to strategic supply-chain planning might not be as innovative as it thinks. Shekar Natarajan, director of supply chain at Pepsi, shows how to make sure that you're considering all the angles.

What is true "out-of-the-box" thinking in the area of supply chain planning? According to Natarajan, it's more than a matter of busting conventional wisdom. Companies in search of innovative thinking need to take four critical steps, he says. The first is to have in place "diametrically opposite alternative" plans. The second is to constantly evaluate those plans, based on changing conditions and sensitive variables. The third is to understand that the planning process is continuous in nature, with no defined end point. And the four is to make sure that the right people are in the right jobs.

Take the question of how to determine the right degree of automation within a warehouse. There are a number of factors to be considered: handling processes, storage requirements, communications, the physical nature of the building and transportation, to name a few. By considering opposing possibilities, ranging from total automation to totally manual processes, a company can determine the precise mix between the two. Pepsi is currently facing such a decision at a warehouse in Tampa, Natarajan says. It must take into account a variety of complex factors, from cost reduction to customer service. By adopting a multi-scenario approach, the company gains the flexibility to treat order building different from order fulfillment.

The trick, of course, is nailing down where along that range of possibilities the best answer lies. "The most important thing is to understand what are the assumptions that you have, and what are you trying to solve for," says Natarajan. At the same time, a company must guard against the tendency of people to cluster around a consensus, whether or not it yields the best answer.

Going forward, a good plan must be adjustable in line with changing conditions. "There's nothing like an end state that you have to go after," Natarajan says. "You have to remember that it's always a transient thing." That doesn't mean a strategic plan should be altered on a daily basis. But creative scenario planning will build into the plan regular points at which planners can take a fresh look at the question, he says.

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