Home' MHD Supply Chain Solutions : MHD July-Aug 2017 Contents The product step is the first step in the
monthly process, in recognition that until there
is clarity on what the latest plans are for new
products and the overall product portfolio,
then it is impossible to generate a credible
unconstrained demand plan, which is the next
step in the process. It then follows logically that
only when the demand plan is defined that the
supply step can assess how to respond to meet
the demand requirements.
As can be seen from Figure 1., each of the
product, demand and supply steps have two
arrows feeding the process from the reviews.
One arrow points to the next step and one
arrow points into the ‘integrated reconciliation’
process. These arrows indicate the key
integration points that enable a successful
implementation of IBP.
For the overall process, this integrated view
of the future is set up to provide a minimum
24-month rolling future projection of the
business performance. For the product step in
particular, of course, when reviewing product
development in line with the strategic product
roadmap for the business, then the horizon
for most companies will extend out to 5+
years. While this is perfectly appropriate when
managing the individual product step, the key
for the IBP process is that there is an integrated
plan delivered from the product step over the
agreed IBP horizon (minimum 24 months).
To achieve this level of integration, a key design
consideration for the product step is to ensure
that there is a new product master plan (NPMP)
that reflects the latest plan, updated monthly
through the cycle and fed to the other steps in
the IBP process. One of the practical challenges
for companies is to ensure that this NPMP is
designed with a clear understanding of what
information is required by the demand and supply
steps to allow them to develop their respective
plans, while maintaining one of the core principles
of IBP – ‘one set of integrated numbers’.
Some companies have the tendency to ‘over-
design’ the new product master plan. They
incorporate too much information, instead of
just critical information required by demand,
supply, and finance organisations to develop
their respective plans.
The strengths of a new product master plan
design that is commonly used by our clients is
that it is easy to see what has changed since
last month, what projects have moved in or
out since the previous month, and issues that
need to be resolved. This information is vital
to achieving one of the core principles of IBP
developing ‘one set of integrated numbers’
that incorporates product management,
demand management, supply management,
financial management, and strategic planning.
See Figure 2.
What is new product demand?
In order to have an effective demand planning
process, we must plan all sources of demand
including new products. In order to do this, we
must also have a clear definition of what new
products are. This definition tends to vary by
company and industry as well as the length of
time products continue to be classified as new
products after launch.
New SKU or part numbers do not always
mean new product. While this may seem like
an easy way to quickly define new products,
the definition has some pitfalls. New SKU are
created all the time for a variety of reasons.
We may have a new packaging size, labelling
requirement, quality specification, or other
minor modification that requires a new part
number, but draws very little if any on R&D or
product development resources.
Will the newly launched product be new to
world, new to industry, or new to the company
(product leader)? If the answer to this question
is yes to any of the three categories, it is a likely
indicator of new product demand. See Figure 3.
A brief overview of product
and portfolio management
Product and portfolio planning enables the
business to take control of its future. By
planning growth, we can determine what
course of action is necessary to achieve
desired results. The quality of that growth in
the form of profitability, market share and even
gross revenue is determined by our ability to
successfully launch new products according to
the business’s strategic plan.
Those businesses that incorporate innovation
within their product portfolio by launching
new products that are typically new to the
world or new to the company, typically enjoy
When developing this definition,
one critical question to ask
is: “Does development of the
product consume or utilise
R&D or project management
resources?” If so, it is a pretty
good indicator that the product
should fall within the definition
of new products.
Figure 2. New product master plan.
Figure 3. New product demand along with baseline demand.
MHD SUPPLY CHAIN SOLUTIONS — JULY / AUGUST 2017
SUPPLY CHAIN 55
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