Planning discovery-driven

The approaches listed above have value for both individual company and supply chain applications. Two other techniques have particular value in improving SCM practice during product design (1) discovery-driven planning and (2) the employment of stages and gates to manage product introduction. Both tools have natural extensions to supply chain formulation as the product is developed. 

Discovery-driven planning establishes assumptions made regarding the marketing, distribution, and manufacturing of a new product. McGrath and MacMillan formulated the tool that applies where a new supply chain 

In essence, planners establish assumptions about the costs, revenues, and profits from the new product. In this process they must make educated guesses about the structure and performance of the supply chain, including elements both internal and external to the company. Planners then set milestones for the implementation process. At these milestones, they compare actual results to assumptions. The outcome is anticipated in the planning and then discovered through this process. If the technique is well executed, contingency plans are at the ready to react when reality departs from the assumptions. 

It is in the preparation of operations specifications (item 2 above) that the technique adds value for supply chain management. Here, planners must explain their assumptions regarding distribution, production, and marketing costs within the constraints provided by the reverse income statement. The following paragraphs briefly describe the process. 

This is a methodology for establishing economic assmnptions to be encountered in introducing a product concurrently with the technical side of new product development. The tool is described in an article by Rita Gunther McGrath and Ian MacMillan. We believe that discovery-driven planning is especially applicable where a new supply chain is needed for a product. 

In essence, planners establish assumptions about the costs, revenues, and profits from the product. In this process they must make educated guesses about the structure and performance of the supply chain, including elements 

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McGrath, R. G. MacMillan, I. C. 1995. Discovery driven planning. Harvard Business Review, 73(4) 44-54. 

Pierantozzi, R. 2005. Implementing discovery driven planning at Air Products and Chemicals, Inc. Personal communication. 

McGrath, R. C., and I. C. MacMillan. "Discovery-Driven Planning." Harvard Business Review, July-August 1995. 

The income statement establishes the viability of the product in business terms. It is reverse because one starts with the required profit from the product. This is a foundation principle of discovery-driven planning. It requires that product strategists have such a goal in mind as they authorize products for development. Planners, using the profit objective, work backward to the required costs and revenues. In doing this, they will arrive at supply chain cost limits for manufacturing, materials, and distribution. 

The functional activity specifications give rise to detailed assumptions that are measurable. For example, an assumption about market share will lead to sub-assumptions about sales per customer and number of customers. The number of customers would, in turn, drive assumptions about distribution channels and inventory levels. In this step, discovery-driven planning provides an important discipline. Assumptions must be reduced to writing, examined for realism, and then measured as the venture unfolds. 

Discovery-driven planning will be particularly useful in avoiding mismatches between customer demand and supply chain design. For any one company, a new product or delivery process can fundamentally alter the economics of present supply chains. It might have the effect of rendering them useless for the innovation. It would be an error to assume a new product should ride to market on the back of a legacy supply chain that will not work. Discovery-driven planning is a way to avoid the trap. 

Like discovery-driven planning, stage-gate design places checkpoints in the development process for review of progress and outcomes. However, it only focuses on the pre-launch phase of the product life cycle, not the post-launch phase. Discovery-driven planning extends further into the product life cycle, covering both before and after launch periods of the product life cycle. 

Gate 3. Decision on business case Perform conceptual design of newsupply chain (if applicable) Prepare first-cut discovery-driven planning model Apply SCOR model... 

Gate 5. Precommercialization business analysis Test early discovery-driven planning assumptions... 

House, Charles H. and Price, Raymond L., The return map tracking product teams, Harvard Business Review, January-February 1991, pp. 92-100. McGrath, Rita Gunther and MacMillan, Ian C., Discovery-driven planning, Harvard Business Review, July-August 1995, pp. 44-54. 

Because the plarmer must docmnent performance in the supply chain, discovery-driven planning is valuable for guiding supply chain planning. It is also an excellent time to quantify the irmovative or functional supply chain design. The specifications will be different for the two types. Functional products will show narrower margins so the supply chain design will emphasize... 

A gate, according to Cooper, has inputs or deliverables, decision criteria, and outputs. One such deliverable could be updated assumptions using the discovery-driven planning technique. Cooper advocates that the gate decision process should have two parts. The first part decides whether the project is sound. This is done as if the project is the only one under consideration. Assuming the project is sound, the second decision addresses the project s priority. This requires evaluation of resources and priorities to determine if the project should proceed past the gate. The decision may allow the project to proceed, call for its cancellation, or place it on hold until resources are available. 

The recommendations for a "supply chain stage-gate process" call for early consideration of needed supply chain changes. The initial assessment at Gate 1 is whether a supply chain change is needed at all. At Gate 2 developers should know the type of product it is in the case of a new-product situation. At this point, we believe candidate partners should be identified. The business case at Gate 3 should produce a discovery-driven plan that requires documentation of supply chain assumptions. 

Test early discovery-driven planning assiunptions. 

Measure performance against discovery-driven planning asstrmptions. 

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