Matt Weller
Founder, Naviga Supply Chain

And not just literally green in colour! True, it’s a big old boat with a V-8, that gets roughly 19 miles per gallon, and it predates modern emissions systems. But, it’s more environmentally friendly than it first appears.  

I’ve owned this car for 26 years. Usually it gets a thumbs up, people smile and wave. Recently however it gets some comments like, “you shouldn’t be allowed to drive that, you’re killing the earth”. This was said by a proud Electric Vehicle owner who just got back from a vacation in the UK.

So how can this car be “green”? The answer is simple, and it is the same answer that applies no matter if you’re talking about politics, the environment, or the many supply chain problems we have today:

Context is everything!

We are bombarded daily with sensational messaging that abandons context to manipulate emotional reactions, for anything ranging from political views to your next purchase of a good or service.

No matter the subject, if you’re serious about making real results, details and context matter. I’ll give an example and show how it applies to supply chain.  

A basic example:
My ’69 Chevy Impala has driven a total of 13,000 miles in the 26 years have owned it. That averages to 500 miles per year. Antique cars don’t get around much by modern driving standards!

In 13,000 miles, my car has burned approximately 684 gallons of fuel in the name of my own enjoyment. The hobby of owning and maintaining this car not only brings me joy but also challenges engineering problem solving skills, sourcing skills, and forces learning new skills (such as welding). It helps me to relax and encourages me to take time to productively de-stress.
Now let's look at how that compares to a vacation to the UK

Boeing advertises that a 777 averages between 150-200 gallons during taxiing and 4,000 to 10,000 gallons during take off. On average, a 777 carries 301 passengers and burns 0.013 to 0.017 gallons per passenger per mile[1] Based on this, a rough (but not at all exact) understanding of fuel burned to take a flight to the UK for the sake of comparison, can be attained. The detailed math has been provided at the end but the chart below shows the summary data.
Distance to UK (Toronto Pearson to London Heathrow)

7 hours 5 minutes, 5707 kilometers (converted to miles = 3546.165)[2]

If I add up total consumption of fuel over the entire lifetime of my car (53 years, 133,000 miles averaging 19 mpg) including the first 20 years when it was a daily driver, it equals roughly 7,000 gallons, still less than half of a one-way trip to the UK by the lowest estimates!

Without context, my car of course looks like it is causing more harm to the environment compared to a fully electric car. However, when looking closer at fuel consumption of our recreational habits, a one-way trip across the ocean caused approximately 27 times as much impact in just a few hours (41 times if you rely on the high estimates) than my car has in 26 years.

But wait! You’re comparing personal use with an entire aircraft you might say. Well, the data from above shows us that a single passenger accounts for between 60 and 122 gallons one way. By the time my friend makes his return trip, he’s burned the equivalent amount of fuel that my vintage car would use in 4.5 years on the low side, 9.3 years on the high side! However, if you consider how many planes are in the air at any given time, vs vintage cars on the road, the CO2 contribution of old cars becomes so miniscule that it is statistically irrelevant to the global (or local) problem.

To be clear, I am not suggesting people should not travel. Nor am I suggesting they shouldn’t feel good about owning an EV. But I am suggesting everyone should look at their own individual lifestyles and decide what impact they are having, what benefits they receive from it, and what is the compounded effect. There are no one-size fits all solutions, context is key and without seeing the whole picture we are basing judgements on assumptions that are likely to be false.
​
Why is Context Important for Supply Chain Resiliency?
We are living in a world of endless disruption, challenges, and problems. And just like environmental and political concerns, the problems are very real but many solutions are often “shell games” of selectively reporting and concealing different aspects of the problem, and almost always with a spin.

So how can you build a supply chain that is agile and resilient? With context!  Dr. W Edwards Deming, a world-renowned engineer and statistician, would refer to this as appreciating and understanding the system in which your business operates. There are two principles of systems I want to highlight:

1. You cannot understand a system as a whole, from within it.
2. You cannot correct a system by tampering with it, it will always become worse.

It is important to note that tampering is the inevitable result of making changes - no matter how big, small, or well intentioned - while not understanding the system fully and quantitatively. And two concepts that go along with these are:

• Correlation does not equal causation
• Not everything already existing is problematic, not everything new is improvement, and problematic vs improvement cannot even be measured without quantitative context.

For any business with a supply chain (which is pretty much any business!), you cannot understand your own system from within. It requires persons and/or data from outside your system to detail out the realities, unbiased by internal interpretations, goals, preferences/beliefs, or politics. It also requires a structured approach to evaluate those realities that can stand up to scrutiny. It requires specific investigation into the business since while fundamentally all businesses have the same overall challenges (profit/loss, labour/productivity, markets) the details (context!) are what makes one fail and the other succeed. No two companies have the same details. The variables in every system must be understood in detail to provide proper context.

Without this level of attention, things get worse. Today’s supply chains are a global example of this in real time where solutions are attempted in isolation rather than considering the entire system. We are making public policies, trade decisions, staging political campaigns, throwing money at some areas while ignoring others, and we still try to do this from an isolated solution-selling point of view, not from a data-based system solution point of view. Locally, at the individual business level, (particularly Small and Medium Enterprises) surviving the day takes priority. So, in turn, as an overall system, things get worse at the local level, which in turn drives global system errors, which feeds back to the local level in a runaway feedback loop.

We can’t “tamper” our way out of these challenges. And we can’t improve any system that we do not see or understand. When you see social media posts especially about supply chain that say “25% of companies have X supply chain problem” or “40% of manufacturers think Y” as an example, you know immediately it’s misleading if it doesn’t specify: what companies, in what industry, making what products, based on what commodities, in what geographies, under what trade agreements, based on what data, from what source, collected for what purpose, funded by who, etc. Because it all matters.

Context is King. Beware any person or product that evades providing specific (data based) context to anything, as they are not contributing to the solution. The only way out of our biggest business challenges are straight through them, navigated by context.

Further Reading

• I highly recommend looking up Deming’s Funnel Experiment to understand tampering as well as his definitions of common cause and special cause variation. A google search turns up a short video that illustrates these concepts, the link can be found in the footnotes below)[3]
• Peter Senge’s detailing of systems and bullwhips in “The Fifth Discipline – The Art & Practice of the Learning Organization”)

 
Math calculations explained
Fuel consumed in flight (gallons per passenger)
Low end: 0.013 x 3546.165 = 46.100
High end: 0.017 x 3546.165 = 60.285
 
Taxiing consumption (gallons per passenger)
Low end: 150 x 2 (taxi at take off, and at landing) = 300 ÷ 301 passengers = 0.997
High end: 200 x 2 (taxi at take off, and at landing) = 400 ÷ 301 passengers = 1.329
 
Take off (gallons per passenger)
Low end: 4000 ÷ 301 passengers = 13.289
High end: 10,000 ÷ 301 passengers = 33.223
 
Total consumption (gallons per passenger)
Low end: Flight (46.100) + Taxiing (0.997) + Take off (13.289) = 60.386
High end: Flight (60.285) + Taxiing (1.329) + Take off (33.223) = 122.000
 
Total fuel consumed by the aircraft (gallons):
Flight
Low end: 0.013 x 3546.165 = 46.100 gallons per passenger x 301 passengers = 13,876.100
High end: 0.017 x 3546.165 = 60.285 gallons per passenger x 301 passengers = 18,145.785
 
Taxiing (gallons)
Low end: 150 gallons x 2 (taxi at take off, and at landing) = 300 gallons
High end: 200 gallons x 2 (taxi at take off, and at landing) = 400 gallons
 
Take off (gallons)
Low end: 4000 gallons
High end: 10,000 gallons
 
Total fuel consumed by aircraft (gallons) =
Low end: Flight (13,876.100) + Taxiing (300) + Take off (4000) = 18,176.10
High end: Flight (18,145.785) + Taxiing (400) + Take off (10,000) = 28,545.785
 ​

This is the 5th and final installment in my series concerned with Creating a Supply Chain from Scratch.

Through the previous 4 installments, I’ve talked about key foundational elements for any supply chain – regardless of the product. The capstone that brings it all together is Supplier Management, and I will describe my own approach in this final article.
Please note, in order to keep this down to a reasonable read, I will speak in general terms. For a detailed explanation of any of these elements, please contact me and I will be happy to expand on specific elements with examples.
 
Supplier Management: The Approved Vendor List Process
The Foundation
I refer to this entire process as the Approved Vendor List (AVL). The AVL is the output, but the underlying processes are required to identify reliable sources of supply and manage a supply base capable of delivering goods and services at the right price, quality, quantity, and date. The core components of the AVL are required to make the list functional. There are four (4) core processes and two foundational components which underlie this (and other processes), without which the ability to manage suppliers is compromised.

Foundation Stones: Material/Service Specifications and Purchase Order Terms and Conditions

​Material / Service Specification
The Bill of Materials (BOM) dictates the materials/service specifications and is part of the design intent. It is the foundation for all supplier management processes, and the last word in what is required in combination with individual material specifications for items in the BOM. To better understand the Material/Service Specifications, please refer to part four of this series. 

Purchase Order Terms and Conditions
Purchase Order Terms and Conditions are critical to any supplier interaction. From the beginning of an interaction, they set the tone of the relationship, define who is responsible for what, establish how quality will be determined and measured, and finally they stipulate how disputes will be resolved. Failure to clearly communicate with the supplier is by far the #1 root cause of poor supplier performance complaints that I have seen over the years. Ultimately, you own responsibility for communication as part of design responsibility, but also as part of your business strategy. It is unwise, and unfair, to rely on suppliers to assume they know what you need.

The Four Core Processes
Non-Disclosure Agreement  
In order to ensure an adequate level of due diligence, a non-disclosure agreement should be signed prior to the exchange of any sensitive information with any party. You will want to find out key things related to your supplier’s capabilities, status, and stability. You will also need to share with them key details about your own operations for context. It is best if this agreement is mutual. Please Note - While NDAs are used globally, they are not necessarily valid in some countries! Do your homework to ensure your confidentiality agreements will be recognized in foreign jurisdictions.

Supplier Self-Survey
In order to have a baseline set of data upon which to evaluate any new supplier, a Supplier Self-Survey should be completed. (Please contact me directly if you would like some examples around how to create a supplier self-survey). I use this survey to reveal summary process capability, financial status, and organizational fit information pertinent to making a reliable determination about a supplier's suitability to provide any product or service. This document should be reviewed in a cross-functional manner with input from Finance, along with any other functional group which is involved in defining the product or service requirement such as Engineering and Customer Service. Don’t overlook Quality personnel, their input is critical. In many situations QA staff will champion this part of the process.

Under no circumstances should this survey be used as a replacement for an initial supplier visit/site audit. It is critically important to see your supplier’s operations firsthand, as this always reveals information you would not otherwise know. Most often, it reveals information that is beneficial to everyone involved as it may uncover previously unknown opportunities. A site visit with a completed self-survey in hand, helps to guide and verify the supplier’s suitability.

New Supplier Approval Process
This is required to validate new sources of supply, and ensure new suppliers can meet the needs of the organization reliably and in a repeatable fashion. This process depends on the Supplier Self-Survey as a data collection framework, as well as the NDA Process as a means to ensure due diligence in sharing sensitive information. You will need to consider how to “try out” this potential new supplier, with a trial, samples, or first-off production. There are various ways this can be done as it depends on many factors, your specific requirements should be considered to determine the best practice here.

If the trials go well, the same group that considered the survey details should reconvene to determine if this supplier should be placed on the AVL. Its best to add a supplier on a conditional basis, such as a set period of time or the successful completion of a set volume of production before they are on the list unconditionally.

Keep in mind that the AVL will be used by Engineers and Designers as the first consideration of available resources as they do their work, and Sourcing professionals will use this list to validate if their needs can be first met within their existing network (best case) or if work must be done to find a new supplier. From an R&D standpoint, it can be a waste to spend days searching for suppliers if the existing supply base is capable to meet the requirements. As such, this list needs to be maintained as a living document. Business decisions will rely on it, and supplier status can change drastically from approved to disqualified in short order. ​

Introduction
The gaming industry is a dynamic landscape of constantly changing and improving technology. When competing digitally, success can hinge on laser focus and split-second reaction time. Brink Bionics wanted to help gamers achieve their best, and have developed the Impulse Neuro-Controller to improve click speed.
​
The Impulse Neuro-Controller is a fingerless glove with sensors that detect the first neural impulse that goes into the finger. This detection then reduces the time between intent to act and execution. Brink Bionics had a 3D-printed proof of concept and were beginning to plan for production when they were introduced to Berlin KraftWorks (BKW). As a new company they were advised to have a design review, and review of their electronics to set themselves up for scalable manufacturing. ​

In part 3 of this series, I discussed the planning hierarchy and how it can be adapted and used to create both a model through which to structure a supply chain (from both a strategic and executional perspective) as well as how it can be used as a lens to prioritize supply chain activities.   

Its critically important to have a set of rules or standards around which to compare and contrast strategy and execution. It is the Bill of Materials (or BOM as it is commonly referred to) that sets these standards. Many early-stage companies believe that supply chain begins once the BOM has been established, but this is a critical error. This is because the BOM doesn’t exist on its own. While the BOM informs supply chain of required materials and specifications, it is the supply chain that informs the BOM itself about what it can viably include. Therefore the BOM serves as the bonding point between two iterative functions: supply chain and product design.

However, it is important to remember that the BOM as a completed data set is merely the result, and a snapshot in the evolution of that data. It will continue to evolve with the product. The journey to get to a completed BOM is at least as important, if not more important, as the BOM itself.   

Avoiding unobtanium
Throughout my career I have seen failed product launches due entirely to designs that have not been informed by critical factors such as: supply availability of specific parts, international trade considerations (logistics, regulations, customs, etc.), and even social/political/economic factors of either the regions of the materials supplied or the regions where the product is being shipped. That’s because a BOM can only represent what goes into something, it cannot represent why or how. It is in fact the journey of iterative exploration of different materials, parts, suppliers, manufacturing methods and supply regions that informs as to the viability of any design consideration, and invariably will influence design towards the lowest risk options while maintaining the overall functional requirements of the design. Sometimes functional requirements cannot be supported after supply chain research, and this is better to discover early on (as opposed to pre-production). Baking-in materials or processes into a design that are impossible to buy or support reliably (humorously referred to as “unobtanium”) is a recipe for failure. Often however, the design viability can be improved drastically with early iterative interactions between design and supply chain.  

Part specifications
Perhaps the most important part of the process is the creation of specifications for each and every item which will eventually be included in a BOM. This is as equally important to supply chains as they are to product design. In Design, all the components must act together as a system, ultimately focused on the form, fit, and functional requirements of the end product as dictated by the business case. For every item in the BOM, specific requirements must be spelled out including not just dimensions, and tolerances, but also (for commercially available components) approved brands, models, and manufacturer specifications.  

Even more important still, is the understanding of why all those specifications are required, relative to the greater system in which they are to become a part of. It goes farther to support strategic management of materials and supply strategies, also referred to as “Plan for Every Part”. These specifications are always arrived at through continual trial and error, testing and refinement. In supply chain, its impossible to source products, evaluate potential suppliers, or manage inventories or demands, without specifications. It is those specifications which will measure what will be acceptable, and what will not. For this reason, sourcing is often executed after much or all the BOM has been established. However, this is far too late and ensures delays, and risks failure in the development process.

Instead, supply chain must work hand-in-hand with engineering through the design process, considering possible sources, and manufacturers in concert with the engineering effort. Supply chain also needs to engage possible suppliers for advice (particularly for any item made to specification – but not exclusively since “off the shelf” products must also be fully specified and understood) to understand manufacturing limitations and opportunities for efficiency. All of this must be gathered and relayed back to engineering as meaningful data, and engineering can then reciprocate with design iterations that are viable from a supply chain point of view.  

The importance of revision control
Of course, as the design is evolving a tremendous amount of time and effort will be lost if there is no mechanism in place to track the evolution as well as documenting every change and the specific reasons for the change. For engineering, this is the process where all the learning and intelligence (IP) around the product is developed and retained. So it is also true with supply chain, as supplier and component strategies depend on understanding the intimate details (and challenges) of every specific part. Supply chain is sometimes affected by revisions, and other times is the cause of revisions (supply problems OR possibilities of better items/technologies become available) but a complete knowledge of the evolution is required to strategize and optimize the supply chain as well as manage day-to-day operations once in production.  

Shared ownership is no ownership 
While the BOM is the connective tissue between engineering and supply chain, responsibility for the BOM, its revisions and specifications lie squarely with engineering. Why? Because the BOM is the stated design intent of all components relative to the end product (or in other words, relative to the system they must work together in). Design intent cannot be shared jointly by supply chain and engineering, nor should it ever be. Likewise, responsibility for supplier relationships, strategies and sourcing methods lie squarely with supply chain and cannot be shared with engineering. These are, in effect the “design intent” elements of the supply chain system and production execution that must produce those specifications dictated by engineering. While both design intent and supply/execution strategy inform and influence each other, anything less than a clear delineation of ownership will make everything run amuck in short order.   

​When creating a supply chain from scratch, the finished BOM is only a snapshot in time. The knowledge generation, supply strategies, and overall viability of the supply chain is made or broken by the journey to the BOM, not the BOM itself.   ​

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.

Operational considerations:

• How and where will future production be carried out?
• What will be the required volumes short term vs longer term?
• What is the availability and pricing of any materials being considered?
• How will the product move to the end customer?
• Are there regulatory considerations?
• How much effort would be required, how much capacity is available to make it, and what cost margins must be ensured?
• What kind of inventory will be required and will there be supply chain challenges such as lead times or availability which may driver higher inventory costs?

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:

• What manufacturing processes will be required?
• What kind of timeline will they be needed in?
• Where are these processes located (Local? Off-shore?)?
• What kind of management costs/effort are typically required to produce?
• Is material and/or components generally available?
• What are their specific lead-times?
• Do the components have a forecasted lifecycle and if so, are they near end of life or pending release?
• Are there any regulatory considerations in terms of handling certain materials, shipping, or health & safety concerns? How will those be mitigated?

 
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:

• Where will inventory be stored, and how will it be managed?
• What will be the quality standards/tolerances required by the design, and what is required to ensure them in production? What is realistic and achievable?
• What is the cost/risk/benefit trade off of those requirements?
• How will your supply chain (including operations) need to be structured to support the product being developed?
• What are the staffing and/or resource considerations to support the development ideas, and do they support or detract from the business case objectives?

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. 
​

Want to read more in the Creating a Supply Chain from Scratch Series? Click the links below:
Part 1 - Understanding What a Supply Chain is and When to Start Establishing Your Product's Supply Chain
Part 2 - Understanding Chaos and How to Work With It
Part 3 - The Planning Hierarchy: Unlocking the Path Forward
​Part 4 - The Bill of Materials - The Journey is At Least As Important as the Destination
​Part 5 - Supplier Management

Introduction
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.  ​

In part 1 of this series I discussed some fundamental ideas and approaches required to start from scratch and build a supply chain system. If you take those to heart, you will find that you are immediately confronted with incredible, unlimited complexity and variability around what to do next. I call this chaos, that which is unknown, impossible to know, and virtually impossible to plan for. In an early-stage company, or at the earliest stages of any product development, chaos is all that exists.  

Chaos can present itself to organizations as: 

• Unknown markets 
• Unknown customer requirements 
• Unknown technologies 
• Unknown operational conditions – politics, economics, a pandemic, or any other disruptive event 

We are told that we need to plan, set rules, buy technology, and invest capital with the promise that we will eliminate chaos. But how do you eliminate that which is unknown and impossible to know?  

Embrace the chaos 
We are taught to view chaos as a bad thing. I argue that creativity in its purist form is chaos, and no innovation or leap of progress can be made without it. A music composer takes infinite complexity, the unlimited chaos of sounds, colours, and emotions and blends them into a masterpiece. Successful businesses don’t spend much time trying to avoid chaos, instead they manage those things that are within their control and build processes that can respond ever quicker to changing complexities and those things they can’t control. Life is chaos, to attempt to live life chaos free is futile.  

If you are at an early-stage and building a supply chain from scratch, then you owe your very existence to chaos. Your new firm or product idea was born because existing companies or products failed to respond to some changing need, some complexity, some type of chaos. It is up to us to embrace and harness the power of chaos.  

A balance between order and chaos 
In part 1, I mentioned that you need to focus on those things which you can control. Those controls are required to ensure that your firm operates consistently, predictably, with known costs, benefits, and measurable progress for any given activity. In supply chain, this means that there is a hierarchy or universal organization of elements which must exist (and must exist as an interactive system) before any of those elements can function well. Back in the day, we referred to it as “the planning hierarchy”. My former professor and mentor, the late Lloyd M. Clive (co-author of the seminal book “Introduction to Materials Management”) used to tell me “tattoo that hierarchy onto your brain, and you will be able to navigate any conceivable supply chain challenge". After 20 years of testing that assertion, I can confirm that he was exactly right. However, and this is critical, this structured approach should not be applied to prevent chaos. Instead, consider that it is required to bring your focus where it needs to be to consistently and predictably manage what is known while also harnessing chaos by providing a system flexible enough to learn and adapt on a dime.  

Processes for process’s sake – an unmeasurable waste 
I have seen countless firms build process upon process, implement technology upon technology, in order to “improve performance” without consideration of the overall business case, or without a system thinking approach. This approach is flawed. The inevitable outcome is a strict, inflexible set of policies and processes which do the opposite of perform, they absorb capital and time (an unrenewable resource) and most often end up existing for the sake of existence. We’ve all just witnessed a great example in real life with young start-ups pivoting to fill PPE needs faster than the well-established firms could react, and go on to prevail in delivering value to their customers. Start-ups are full of chaos (unlimited complexity), while mature firms are full of order (constraints applied to reduce complexity). But its chaos that demands order to constantly evolve. 

The planning hierarchy need not be complicated, in fact its better if it's not.  It should be continuously measured and reviewed against the business case, to ensure that it is controlling that which can be controlled, predictably and reliably. And the business case should be continually measured against performance to the customer needs. Anything beyond that is waste. Early-stage firms will require only basic elements in their planning hierarchy, and if any of them become more effort to manage than the benefit they provide, you have to consider that it may be going too far.  

Consider Continuous improvement, a well-known (and important) part of effectively managing process. But if there is a shift in the business case, or processes are no longer supporting the business case (ex. dominant focus on local-level performance metrics instead of system-level) firms are at risk of creating more waste in continuous improvement instead of improving performance. Dr Russel L. Ackoff, a pioneer in System Thinking once said “Continuous improvement isn’t nearly as important as discontinuous improvement.” And indeed, he was right. Discontinuous improvement is chaos. It is step-function change, as opposed to gradual ongoing improvement. It’s also the ability to pivot and adapt quickly when conditions or requirements change unpredictably, or when the customer demands it.  

For early-stage companies, the adoption of process controls and best practices is not nearly as important as adaptation of principles to the specific situation of the firm or the product. 

Putting it together  
I usually tell those who are building a supply chain from scratch, to embrace the chaos but keep that seatbelt on. Process and a hierarchy are required to reduce the chaos to manageable terms, but the key is to adapt these to the firm's needs, not to adapt the firm to the process needs. If viewed with a system thinking mindset, the task of balancing chaos with order will be dictated by how well the firm understands and delivers to its customer. Chaos allows the firm to be creative, and well-developed order allows the firm to quickly adapt to changing conditions with greater speed, ease, and repeatability However, it’s critical to remember that the customer is the most important part and process must never consume more than the value it delivers.  
​
In my next post, I’ll explore the planning hierarchy in detail and how it becomes the foundation for any firm’s supply chain (and operations), and how it can be adapted to early-stage firms.  ​