Beyond Lead Time: A Supply Chain Maverick's Quest for Responsiveness

Supply chain management involves understanding customer demand uncertainty and designing a supply chain to respond effectively. The goal is to deliver products or services 'late' and 'now', regardless of challenges, while avoiding inventory altogether. This requires gaining visibility to real demand, ensuring capacity is responsive, treating inventory as a symptom rather than a solution, and moving towards flexible and frequent delivery in small lots. These principles are the foundation for effective supply chain management.

The Base Supply Chain Story
There's a story that you need to be able to tell relative to the supply chain and supply chain management. The
story starts with what is a supply chain. It is a the network of processes, entities, technologies, fund-flows that
enable the right product or service to get to the right place at the right time at the right cost to and through a
network of interrelated partners where most of the time, those partners are not something part of or in your
organizational control.
The science to make this happen as efficiently as possible is known as supply chain management. The supply chain
is called a chain for a number of reasons but key are two points: 1) there are in many cases intermediaries
between the end consumer and the producer for very value-added purposes (geographic proximity, lot size
disparity between the amount that can be economically produced, and the amount consumed, late stage
differentiation and tailoring, etc). Because there are for-profit intermediaries, there are entities acting
autonomously to their own profit agenda and as a result, natural delay in moving product through from one link in
the chain to another and 2) there are steps in the process as determined in a sort of left to right flow of
functional players in the supply chain that again organizationally and from an expertise standpoint tend to act
autonomously to their own purpose. In most supply chains there is a process flow from new product
development depicted on the "left" of most supply chains and sales depicted on the "right" in so called make-to-
stock model (the most prevalent model in most economies) supply chains. The supply chain is typically depicted
then as a process flow from new product development to, sales & operations planning (plan), to procurement
(buy) to manufacture (make), to warehousing and distribution (move), to sales/return (sell).
The challenge of supply chain management is that the delay caused by autonomous entities or functions not
working to the same agenda causes reduced visibility and thus (as with any traffic) reduced speeds and inherent
waste … so-called hedges just-in case something bad happens (like a planned or unplanned delay in two unrelated
partners doing their respective thing). These autonomous but linked operations or functions stand in contrast to
the unstated but assumed expectations of a customer that simply says why can’t I have it now, at a great price,
without planning or hassle.
Obviously, the job of the supply chain professional is to move the product or service through the chain as
efficiently as possible so in that sense there is an optimization problem at hand with all its quantitative method
implications. But intuitively we all know how this would or should work (efficiently/effectively) in its simplest
form. The easiest way to perform supply-chain management would be to fulfil all supply requests from end-
consuming/paying customers after the customer specifies their need and the supply chain executes with the
exact measure of supply, capacity, human capital, energy, etc necessary to return the exact requirement in the
quantity, time frame (approaching zero), and quality expected. Fancy supply chain names describing this sort of
practice model include pull, make-to-order, configure-to-order, assemble-to-order ... concepts we'll talk about
throughout the semester.
However, in many cases for many good and challenging reasons, the ability to respond to demand once it is know
or understood is tempered, stopped, or balanced against a typically unspecified and sometimes arbitrary and
arguable expectation around time-to-deliver, called the Customer Expected Leadtime (CELT) based on the
historical and current technologies and paradigms to make that product/service available to the buying market (eg.
you used to have to buy a book at a bookstore located within 1-50 miles of your home. A reasonably-rich-but-not-
all-item-available pallet of books were available immediately at a "retail" price if you were willing to make the trip
to go buy it at the local store and take it home that day. Today's paradigm is that I can have access to an almost
infinite selection of books, that can be delivered instantaneously at "retail-minus" prices through use of an
electronic device. This new product/channel method becomes the new expectation for this industry assuming
that the method has reached what I call the DVD/BlueRay tipping point in popularity. Think now about items that
you “expect” to always be available and on (unplanned) demand: groceries, medicines, emergency medical
services … et. al.

The natural status for most consuming customers is that "order late" and "now" is always the preference if not
offset by other constraining matters like money, etc. So the natural expectation of customers as history has
improved is to try and move more and more products and services into a category where we do not have to plan
for the purchase or plan late in our need cycle and 2) expect that once I do specify a need that my wait time is from
nominal to nothing.
A starting premise for many operations and supply chain science courses is to accept that this disparity requires
excess capacity to exist in the supply chain so the supply side can run as it best can efficiently without
inconveniencing or disappointing the consumers (demand side's) natural tendencies for "late" and "now". As a
result, a great deal of time is spent teaching (particularly undergrads) the nature of the "make to stock" model and
the "guess-plan-buy-make-move-and sell at a discount supply chain strategies that go with it including elaborate
inventory planning and management strategies.
Since most of you are 1) new to operations strategy and 2) will be using your supply chain knowledge in ways to
test the assertion of others or at best-managing your own capital and entrepreneurial ideas, it is more important
to get you to think about the original premise, then strive always to first think about ways to do the easiest and
most straight-forward thing which is to serve customers that want to plan late, or not at all, and expect their
purchase to be (ideally) delivered "now". Starting there means having a totally different toolset at your disposal
and knowing two major techniques and tenets of supply chain will serve you in this effort.
1) Evaluate where the product or service contemplated fits on the Demand/Lead Time 2X2 model. (a
key to being "demand" not "supply" oriented)
1 Simchi-Levi, et al, Designing and
Managing the Supply Chain where Lead Time represents the time through the supply chain functions –
Time needed to plan, acquire raw material, produce, stage in appropriate-geography warehousing, and
transport to final customer.
2) Understand, question, and test operating strategies suggested against the four tenets of great supply
chains.
The Lead Time in the Demand / Lead Time 2X2 should be thought of in terms of a line that runs from left to right
where items on the left represent those products or services, because of today's delivery and business paradigms,
that are most-expected to be available without consumption planning, specification, and always available for
immediate delivery or pickup. These items are often represented by commodities; items/services with low-
differentiating specification, considered staples used frequently by mass numbers of consumers, and are (in order
to sell effectively) expected to be available all the way to the natural end of "impulse buy" expectation and
availability. Products/services like milk, bread, chewing gum, People Magazine, orange juice concentrate, pork
bellies, hotel rooms, dry cleaning, gasoline, ... others all fit in this category (plus or minus). Most of these items
are made with Make-to-Stock Methods then pushed through channels or echelons of entities that hold inventory
closer and closer to the customer as we move “downstream” in the supply chain. That said, note that Pull/MTO

looms just above a Continuous Replenishment Model which says another way to think about short lead times is to
act like a lemonade stand or Starbucks, … want something? … it’ll be right up.
The Lead Time in the Demand / Lead Time 2X2 extends to the right with the extremes on the right end being
products that because of the complexity of their specification, the dollars expected to be spent, the need for
tailored custom requirement, or sometimes because of the remoteness of the need to the location of much of the
supply, that the customer "naturally" expects there to be more planning and lead-time involved in the purchase.
Products/services like space shuttles, Lamborghinis, custom fit clothing, some durables, some electronic devices
(e.g. elaborate storage, testing, or computing devices), snow-skiing hippodromes inside shopping malls in Dubai)
are all extreme examples of items on this end of the continuum. Also mass produced items that are used
produced in scale in one location and shipped from there sometime are represented on this end of the continuum
because of the lead time for transportation. So items from the Pacific Rim shipped in bulk by boat may also be on
this end of the continuum.
Products and services then (based on current delivery paradigms) that fit in the middle then might include
computers ... now more towards the left, clothing (depends on the kind), washer/dryers (remember our Lowes
example), automobiles, etc.
Your job then as a supply chain savvy ... is to understand which model best serves the product/service you plan to
deliver. Demand uncertainty is something very unique to where the product/service is in the new-product-
development and introduction-maturity curve. New technology or uncertain deployments usually occupy the
upper half of the 2X2, while more mature, stable, predictable; the bottom half. That is NOT the end point
however. Remember the base premise! Homeostasis for most customers (ie demand) REGARDLESS of the
current delivery paradigm is "late" and "now" (because it offers the most flexibility to consuming demand if it costs
no more to do so). So the supply chain professionals' real job is to continually challenge how far (SCM-wise) we
can move the item in question toward the “short” end of the lead time and “high” end of the uncertainty vertical
column using the key supply chain management strategies of the day (to be learned in this course but include VMI,
postponement, risk-pooling, collaborative forecasting, mixed-lot transportation, and dozens of others). In short,
the preferred sequence is always (and I don't say "always" lightly) 1. Sell computer 2. Make computer. Your
challenge as a supply chain MBA educated at the University of Colorado, Leeds School will not be FIRST to ask how
we should manage inventory BUT to ask and challenge how we can avoid inventory all together.
In this way, you will have started the conversation as the customer/demand expects you to, which is to respond
best to my requirement for "late" and "now" regardless of challenges in the supply chain. The fortunate news is
that designing supply chains without assets ALSO tends to deliver best response to customer requirement. Think
first, NO-TRADEOFF, we need both high response to demand as well as efficient, least-total-cost supply chain
performance.
Next, given where you've positioned the product/service in the Demand/Lead Time 2X2, use the four tenets of
great supply chains as initial tests for how to move most responsively and efficiently toward a supply chain (supply
side) response. Those tenets include:
1) Gain visibility to real (end-consuming) demand ... this is to say know where you are in the supply
chain and work to gain a basic and frequent understanding of who captures real/consumptive
demand and how you can play a role in discussing its patterns among supply chain network
partners.
2) No substitute for capacity - this is to say that the basic physics of responsiveness start with making
production and delivery capacity as
nimble and responsive as possible without losing efficiency in its use. Think first about flexible
capacity then later what to do if you need inventory, et. al. Contracting methods, lean techniques,
partnering relationships, synchronized operations will all be key in this tenet.

3) Inventory is not your friend - this is a corollary of tenet 2, emphasizing that inventory is the product
of capacity and should be considered a bet against (typically) an unknown or unspecified demand.
Sometimes it will be a correct bet, sometimes it will be incorrect. The key here is to think of it as a
result and or symptom, rather than a (first) strategy or solution to customer service.
4) Move toward an ability to flexibly and frequently deliver in small lots - this is to remind the supply
chain professional that typically the first job in moving items (goods or services) “short” side of the
lead time “x” axis line is to focus on the processes in operations/production/plan-buy-make-deliver
that force operations to first make products of high-specification quality, frequently in small lots,
deliverable to customer frequently and in small lots (high mix inside a full trailer/transport vessel) to
customers.
Lean on the shop floor, extends inside-out to plan/buy elements on the left of the classic supply
chain model and to the move (inventory, warehousing, transportation) elements on the right. The
premise is that no supply chain element can be expected to move nimbly until there is a nimble,
rhythmic, pattern expected and executed on the shop floor (or base of service operations). When
this flexible, rhythm is established internally, external elements or partners can more easily follow.
This is the base story for our class. We will amend the story as techniques, methods, and research are revealed
and discussed in class. Commit this story to memory or at least make it part of your study conversation with
yourself and classmates. The frequency and proficiency you tell the story will translate into your ability to be a
viable and sought-after addition in the executive suite. Our stated goal ... get you to the C-suite and keep you
relevant there.
Now the Cliff Notes version:
1) The SC definition – right stuff, right place, right time, right cost, coordinated, planned, and delivered by a
group of partners in many cases you don’t know or control
2) The challenge – the Supply Chain is more (these days) a webbed network of profit-seeking, autonomous
entities (for one) and an internal network of functions each playing their part in the delivery but because
of expertise and other factors also act autonomously at times or all the time (for two)
3) The dilemma – this autonomy and asynchronous flow among often unrelated entities causes delay in the
demand/value chain. Delay hampers visibility. Poor visibility often results in managers hedging and
waste (in additional stuff like inventory, capacity, etc) so we can do things just-in-case. You can choose to
be a just-in-case SC manager or a different kind that at least starts with a different premise … no-
tradeoffs.
4) Some premises and concepts that help the SCM with the dilemma – first understand where your product
or service fits in the demand/lead time 2x2. While certainly not the only models to describe products or
services, Simchi-Levi and pals have done a nice job of making a big portion of the challenge describable in
a finite number of options on page 195 of your text with the demand/leadtime 2X2.
5) Key’s to keep in mind … the mind of the customer, often unstated is I don’t want to plan for a need and
when I want it I want it now REGARDLESS of the SC managers challenges to balance all the balls, so one
good rule is to make it as simple as possible … ask yourself the question, how can I create a model that
can best respond to “no plan” and “now” that is short on the lead time axis and uncertain on the demand
axis of the 2X2.
6) Techniques to keep handy – well “no plan” and “now” more and more call for an ability to PULL (or apply
a pull model) which is best served by keeping the 4 tenets of good supply chains handy:
a. Get visibility to consumptive demand regardless of position in the SC
b. No substitute for capacity
c. Inventory is not your friend
d. Make and deliver frequently in small lots.

7) The 4 tenets are hard to pull off and still make it marketing, finance, operations, outside partners, and the
executive suite’s idea so you as a SC savvy have to think of ways for them to think it was their idea FIRST!
(ahhhhh!) . You must think of a hypothesis of the way through, write it down, test it for BS, stick it
firmly in your hip pocket (never letting it see the light of day except quick looks to keep your questions on
track), and then start asking everyone in the chain great questions till they tell you (get/prove/disprove
and replace), what you were thinking in the first place. Then quick! Give all the credit away and
implement as fast as you can.
There … it’s that easy … it’s that hard.