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The Over-Caffeinated Entrepreneur
with David J. Dunworth
An entrepreneur with a new product idea will need to review whether the market will embrace it, buy it and recommend it to other buyers. Without thinking through the entire sales force’s ability to sell and the operations team’s ability to produce the product effectively and efficiently, the entire product launch might just be moot. It is imperative that this process be considered critical to an effective entry to the marketplace.
Five Step Review Process
- Product Review
- Market Demand Review
- Supply Chain Review
- Financial Audit Review
- Overall Evaluation
The Five Step Process of review is perhaps the most important thing an entrepreneur or emerging enterprise can implement to positively impact success. The process of review will not only provide cross-sectional collaboration, information sharing and planning deployment, it will also create a critical guideline or operating procedure for all product launches, company initiatives or the reconciliation of an activity. Top management participation is critical to this review process as it impacts long range planning in addition to a product launch or other activity.
Through the use of a formal review process, management can create an 18 to 24 month forecast defining product demand, inventory planning, supply chain involvement, production and staffing planning. The review will also shed light on staff and other resource levels, and what adjustments in operational efficiencies might be necessary to reach the goals.
The Product Review process balances the needs of the customer with the overall potential for a new product in the space, but also analyzes costs within the entire supply chain, and makes visual the operational shortcomings or abundances and the performance metrics to benchmark.
The Market Demand review must not depend only on forecasting by the market research team, but must be developed by all stakeholders in the process. Effective market research and competitive analysis will determine the potential of a new product, in addition to customer survey and analysis. Needs analysis is also a good way to find a differentiator for the product to better position its brand identity. Using What-If analysis is an effective method, because they will provide comparison between orders and demand, provide input from supply chain participants and consensus between operations, supply chain, marketing forecasting teams, research teams and management. The amount of information available will determine the direction, and thereby define demand requirements.
The Supply Chain Review takes a look at the entire chain, and includes procurement, logistics, inventory, operational capacity, warehousing, and raw materials shortages, includes manufacturing and the company’s ability to keep up with demand.
At this stage in the overall review process, the supply chain and market demand reviews are matched up using the aforementioned What-If scenarios. The balance between product mix, market share demand, market share goals, supply chain constraints, manufacturing shortcomings and abilities, and the likelihood of success come into play. The supply and demand reviews are then agreed to by all stakeholders in the review process to determine the financial impact on the company.
Financial Auditing reviews the entire supply chain to identify shortcomings, opportunities and compares it to the demand plan. The Financial review is responsible for more than margin adherence, revenue targets being met and forecasted profitability, it has an overall responsibility to ensure that the company’s budgets meet the assumptions, and identifies concerns when the market demand falls short, or whether supply chain costs spike due to resource shortages. The financial auditing process also identifies potential profit and loss issues management reporting must reflect.
The Evaluation Process incorporates a series of comparisons that help management make the right decisions, above and beyond the obvious. Past performance may not come into play with a new product launch, so the available information may be less then enough to make sound decisions; and that is when the use of key indexes of profitability become most useful. These keys include analysis between forecasts and supply chain planning, measuring actual demand versus planned demand, profitability by market segment, customer type and suppliers. They also include analysis of output by operations, backlog or excess on-hand inventory, lead time for resources, vendor or supplier difficulties, and pricing for raw materials and a host of other management review functions such as cash management and debt to earnings ratios.
Much like the Transformers: There is more than meets the eye!