Co-Founder, Berlin KraftWorks Inc.
In part 2 of this series, I talked about the chaos of the very early stages of any company, or product and how to approach that chaos as both infinite complexity but also infinite opportunity.
Since its neither practical nor productive to try to create a product or supply chain system that is all things, to all customers, all at once, we’ve got to apply some boundaries to the complexity and opportunity. We need to focus – on the data, activities and risk/reward opportunities that will best bring us toward our goals. Preferably with the least amount of time, effort, and cost wasted as possible.
The planning hierarchy is the structure and the lens through which to achieve this. And, as a structure it allows you to apply a System Thinking approach to planning your product and your supply chain. The structure is applicable to any company that produces a physical product, regardless of if they are a start-up, or a well established multi-national giant. The key however, is in how to apply it. To understand that you have to have a relentless focus on your customer, and your business case to provide value to that customer as well as to the business (if the business cannot generate value, it won’t be a business for very long!) The hierarchy is the roadmap, how you decide to get there will determine your operations strategy and the overall success, profitability, and sustainability of your company. The further we go down the planning hierarchy, the more detailed and short term our decisions (and repercussions) become. But each level needs to be aligned to supporting the business case above all else.
A typical planning hierarchy (applicable to any manufacturing company) appears as follows:
Applying this framework to a start-up
In a start-up (as with any company) things need to be considered from two views simultaneously from day one: how will decisions impact the project/company today, and how decisions impact the project/company tomorrow and beyond. Building a brand-new supply chain from scratch is no different, since project or business decisions made today can have implications and costs that the company will have to bear for weeks, months or possibly for the entire product life-cycle including cost, risk, effort to produce, and agility to react quickly to changing market conditions.
For start-ups it can be difficult, if not impossible, to know all that you need to know for success. This is the complexity or chaos I’ve mentioned previously.
In order to overcome this, most start-ups will forgo any consideration of supply chain and focus on marketing and product engineering while leaving supply chain to a later date when there aren’t so many variables. In most cases, these firms will invest time and money into developing a product, only to have to do much or all of it a second time to produce a product that can actually be viable for manufacturing and supply chain, that will actually generate a profit, and will deliver measurable value to the customer. This time lag can be deadly to early-stage companies, who will either run out of funding or simply be beaten to market by a better organized competitor.
Instead, I argue that the planning hierarchy can be adopted to meet and overcome these complexities during development, not after. And the process will result in a purpose-designed supply chain that develops concurrently with the product.
Let’s walk though some ways to apply this.
Business Level Considerations (Annual Outlook/Consideration)
At the top of the planning hierarchy, your supply chain must consider the business case. The business case is the anchor. If this isn’t solid, anything tied to it will be no better. At the top of the planning hierarchy are the long-term and broad concerns to be responded to.
Long term considerations:
While nobody can expect to understand these elements fully (especially sales forecasts) for a new product or for an early-stage firm, it’s worth mentioning that they need to be understood as well as they can be and be constantly challenged when new information is available. The business case grows and matures in this way, and the complexity of the supporting planning hierarchy will grow and mature accordingly to support it. In the planning hierarchy, these are usually annual considerations since to change direction in any of these elements requires a major reworking of all supporting systems. It is also important to note that this is why supporting systems should be no more complex then necessary, for maximum agility in times of crisis.
Operations Considerations (Shorter term, typically monthly)
Once the business case is identified, vetted and validated, product development can begin in earnest. There may already be some napkin sketches or even conceptual models, but now all that must be tempered with the requirements of the business case. The development will look up to the business case and also any available feedback from potential customers or markets as a guide.
Inputs and outputs here can, and will, change more frequently than the business case, especially in product development because new information is learned as the development cycle progresses. In a production environment, this is a monthly exercise. But in a start-up, it should be considered at any decision affecting the product development and design.
A criticism I have often heard is “why spend that time for things that are only conceptual, isn’t that waste?” The answer is a firm no. All of this work, if documented, becomes your supply chain knowledge base specific to your product and it will inform both your design and your supply chain strategies as you go. It will orient your products and your operations towards viability at first, and competitive advantage over the long haul by steering you clear of pitfalls and avoidable challenges.
Detailed Production Considerations (Weekly)
In production, this level of detail is a weekly review cycle, but in a start-up, it becomes something completely different.
Start-ups that are just developing their products aren’t engaged in capacity planning or master scheduling of production. Instead, consideration needs to be given to how, at a detailed level, your product will be produced based on the development done to date.
Detailed production considerations:
Figuring these out post-development is far too late, and will force a re-do of much (or all) of the development cycle to re-align with the realities of supply and resources, before any real production can happen.
The opportunity here for a start-up, is to really research what resources are available and weigh cost against value. This is where you can build your database of who is out there, and what they can offer and share that with the development team. Its also a good opportunity to build relationships and vet ideas with potential manufacturing or supply partners who are subject matter experts. This is where the heart of your new supply chain – data guided by knowledge, will start to grow.
Daily Execution Considerations
At the bottom of the hierarchy is all the detailed day-to-day considerations of producing your product. In production, this would include daily activities around the shop floor – scheduling machines and people, daily material consumption and replenishment, as well as shipping and receiving (both your finished goods to customers, but also incoming supply of materials) to name just a few things. Ultimately, the details at this level will determine your profit margin, your quality, and your ability to satisfy the customer. In many ways the work done at higher levels will frame how effective work at this level can be.
For a start-up, this can be applied as additional detail to the elements already described when considering specific aspects of the design and how it will be produced in scale.
Considerations for daily operations:
Bringing it All Together
This is just the beginning. There is more that can be done to apply this hierarchy to a start-up, in order to streamline development and build a viable supply chain concurrently. Much more in fact than I can touch on in a short blog. But hopefully this illustrates how this framework can serve to cut through complexity and unlimited variability inherent in start-ups with a repeatable, scalable supply chain structure that can grow with the firm and guide the product development towards successful execution, by designing and developing with the end in mind the whole time. The effectiveness of the end result be governed by your supply chain, for better or worse. They key to remember is that it is never too early to start this process.
Aurea Technologies Inc. (Aurea) is the company behind the Shine Turbine, a portable wind turbine charger for handheld electronics. Aurea's mission is to provide clean energy independence and Shine’s patent-pending technology creates energy faster than any other portable renewable product currently on the market. The Shine Turbine is the first of a series of renewable microgrid products created by Aurea, to provide users freedom from the electrical grid. Aurea had created a working prototype of the Shine Turbine, but as a start-up, they were looking for guidance to establish their supply chain in preparation for production.
Aurea is currently finalizing the Shine Turbine technical design and preparing to launch directly to consumers through Kickstarter. The Kickstarter campaign launched in June 2021, it will be a 1-month campaign with a goal of selling 500-1000 units to backers. Once the campaign is over Aurea expects to have the final product in the backers’ hands within 3 months and then they will transition to selling the Shine Turbine through retail channels. The initial goal is to be set up to produce and ship 500-1000 units per quarter.
Advanced Video Technology Solutions Ltd. (AVT) was formed by Engineering graduate, Chris Cavalieri and faculty member, Adrian Kitai, both of McMaster University in Hamilton, Ontario. They started the company based on their innovative ideas for configurable, large scale displays. One idea was a 6’ by 6’ seamless LCD screen, which used AVT’s own technology to blend images from an array of small LCD-hybrid screens into one large seamless image capable of displaying up to 100MegaPixel. This exciting project came with a few challenges, the first of which focused on their supply chain. AVT needed help sourcing materials, services and components, as well as managing the logistics and tariffs that came from importing to the U.S. for processing, before arriving in Canada. They reached out to Berlin KraftWorks Inc. (BKW) for assistance.
Once the BKW team had worked through the design and sourcing challenges, they worked with AVT to create a test portion of the screen. This was a scaled down version of the screen which would later become part of the finished 6’ x 6’ screen. AVT was then ready to order the final pieces and assemble the full screen. The full-scale display is due to be delivered to AVT’s client in Q2 2021, with high hopes of future development of the project.