How platforming builds a more resilient supply chain

This is an excerpt of the original article. It was written for the July-August 2021 edition of Supply Chain Management Review. The full article is available to current subscribers.

July-August 2021

We all know the old saying: “When the going gets tough, the tough get going.” It has been repeated so often it’s cliché. I’d like to suggest a variation: “When the going gets tough, leadership matters.” To say that supply chains have had a tough time of it would be an understatement. Despite the positive vaccine news here in the United States, global supply chains are not out of the woods yet.

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COVID-19 has exposed just how easily supply chains can buckle under pressure. The fragility of globalized supply chains was on full display in the spring of 2020 as exasperated shoppers stared at empty shelves while manufacturers struggled to meet demand for everything from baking flour to bicycles. Many of the worst pandemic supply chain disruptions, including border closures, plant shutdowns due to COVID outbreaks and ship backlogs at ports, have eased in recent months. However, new pressures from inflation and commodity shortages are heating up as demand for housing, electronics and consumables grows across the United States.

A supply chain is only as strong as its weakest link, so operating in a post-COVID world requires a comprehensive approach to managing risk across the entire network. Complexity is the Achilles heel of the supply chain and companies with complex product portfolios inherently have more potential points of failure throughout their networks. Given the lessons of the pandemic, many companies are recognizing that managing complexity starts with design and they are turning to portfolio platforming as a key tool for simplifying their supply chains and building supply chain resilience.

Platforming is a design framework that leverages a common set of design, engineering and operational parameters and maximizes the use of modular or standardized components throughout the portfolio. Building off modular components accelerates innovation while enabling greater supply chain flexibility, particularly though postponement and late-stage customization. The goal is to enable variety where it matters (to the customer) while strategically minimizing its impact on the back end (in the supply chain). A well-executed platforming strategy reduces cost and risk across the entire value chain.

The cost of complexity

In the pursuit of growth over the past decade, companies have added new products to their portfolios at record speeds, largely driven by strong consumer spending, increased consumer demand for personalization and an expanding number of channels for shopping. Simultaneously, many have also been slow to exit legacy products, fearful of jeopardizing consumer loyalty or losing shelf space to competitors.

For some, this has created crippling complexity. For example, the line of fishing reels produced by a manufacturer of leisure sporting goods ballooned to 10,000 retail SKUs across hundreds of design platforms. This company, like many others, heavily indexed on innovation to drive sales; however, because nearly every reel was redesigned from the ground up, each new SKU drove the rampant proliferation of materials and components. This complexity required significant time to manage and added costs throughout the supply chain. Furthermore, portfolio management became increasingly cumbersome, which eventually slowed down their new product development cycle.

Why other solutions are inadequate

Efforts to address complexity are often superficial and may fail or only be partially successful because they focus on the symptoms of the issue rather than the root cause—the product portfolio itself.

SKU rationalization is a common approach for addressing portfolio complexity by trimming slow-moving or margin-dilutive SKUs. Unfortunately, this approach is frequently pursued ad hoc, which may leave the portfolio unbalanced. Complexity is also like the Hydra. Chopping off the tail in one category may cause it to regrow elsewhere. Finally, cutting out the dead wood often addresses only legacy, low-volume SKUs that are sitting in warehouses as inventory. These SKUs are rarely the ones causing operational challenges.

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