A Strategy for Agility in 2021
October 15, 2020
As GDCA enters the last quarter of our fiscal year, and our third quarter of this pandemic, it's time for us to start our FY21 planning process.
As GDCA enters the last quarter of our fiscal year, and our third quarter of this pandemic, it’s time for us to start our FY21 planning process.
Like most other companies, this is the time we reflect on performance against current year goals, assess the outlook for the coming year, and adjust the course for our enterprise.
Unfortunately, 2020 has turned out to be quite a show. Unlike previous years, we’re having to contend with the impact and outlook of uncertainty created by this ongoing pandemic and unfolding global geopolitical-socioeconomic tumult.
The only thing it seems we can predict with any level of certainty is that things will continue to be unpredictable. Therefore, I’ve been thinking a lot more about Agility lately: The ability to think, understand, and move quickly and easily.
When it comes to agility in business, the ability to think, understand, and move quickly and easily, I advise people to review their Product Portfolio Management (PPM) capability.
PPM is the dog that wags the PLM tail
Many of the embedded OEMs I know, the companies who make the computers that control all kinds of defense and industrial systems, are reviewing their product portfolios with the objective of gearing their available resources to match their 2021 investment priorities.
Companies who are relying on their traditional PLM processes to manage what they’re going to do with each product (including sending out EOL/end-of-life notices), may not be thinking about the true cost of and ROI contribution of individual products in their portfolio, because they don’t have the indirect cost data available. This is where PPM can yield real benefits.
PPM involves evaluating each product’s performance, identifying risks and opportunities, prioritizing high-value products, optimizing resource allocation across the portfolio and balancing the product mix among strategic buckets. (e.g. OEMs who are looking to reduce overhead by increasing the amount of work they direct to lower cost contract manufacturers would consider the investment required to move production over to a different supplier.) Done right, this practice aligns the product portfolio with business strategies to achieve target revenue and profitability…and agility.
Combining PPM with robust PLM processes, means OEMs can maximize the ROI of every single order while keeping their existing customers happy and eliminating products in their portfolio that present low-value distractions.
GDCA is known for our traditional Product Pruning services. This is an innovative enhancement to OEMs’ PLM processes, which involves partnering with a legacy equipment manufacturer who can help provide sustainment options for their customers to get the support on legacy products for as long as it’s needed.
However, many folks are not aware of the Lifecycle Optimization work we do to take traditional PPM processes to the next level – improving embedded OEMs’ overall agility and profitability.
Get in touch with your 2021 product priorities
Although it’s necessary to “place some bets” on what the market will demand in 2021 and beyond, I’m advising everyone in the embedded computing equipment supply chain to ALSO invest a larger share of their business improvement investments on Agility.
Fortunately, most OEMs are in touch with the basic lifecycle stages of each product in their portfolio: Introduction, Growth, Maturity, and Decline.
Figure: MARTIN ERIKSSON, 2017
OEMs are adept at using these stages to broadly project the expected ROI from categories of products for the upcoming year. Many will communicate a customer-facing classification for products in their Decline phase – often times announcing these products as “Legacy” or “EOL” (end-of-life).
Unfortunately, these customer-facing classifications are typically too blunt for OEM/internal operational teams to make informed decisions about whether or not it makes sense for them to entertain future RFQs for these EOL’d products.
A Product Marketing VP for a large embedded OEM once told me, “When we send EOL notices, customer just don’t listen!”. This results in OEMs spending a lot of time and resources on fulfilling order requests that are simply not profitable.
Why aren’t many of these RFQs profitable?
In short, some of them are just too hard to fulfill, let alone quote. Many of them need obsolete electronics components that are difficult to procure, or product-specific technical skills that may no longer be available within the company.
Other products have seen a significant fall-off in demand and require OEMs to incur the overhead to seek new contract manufacturers who will accept low volume, creating greater compromise and risk when they must then recreate the “recipe” to achieve a reliable production yield. In the end, it falls on engineering resources to support the request.
What would it be like if you could quickly triage RFQs for products that have been EOL’d?
You could be more Agile.
You could give the customer a quick response. You could quickly decide whether or not you want to invest resources to respond to the RFQ. You could quickly identify risks and resource impacts. You could quickly evaluate an order’s impact on your existing priorities. And you can move forward.
Establish Internal Lifecycle Classifications
The easiest thing OEMs can do to quickly triage RFQs for EOL’d products is to move beyond using customer-facing lifecycle stages to guide internal decision-making. Instead, they’d benefit more from establishing internal product classification that give them a better idea of what it would take for them to quote and provision an obsolete design.
For example, there’s a notion that old designs are easy to build if you can only get the electronic components, but what if the only technician who knows how to troubleshoot a product retired recently?
What if the CM you were using to make the EOL’d product has exited the defense business and you have to stand up another CM? What if your supply chain manager is struggling (or failing) just to stay on top of quality issues you’re already having with existing CMs?
Most OEMs wouldn’t want to attempt difficult orders like this if they had all the information. This is agility. Unfortunately, it’s pretty common that OEMs don’t have this information and just continue stiffly slogging through their existing business processes.
This is why I often advise OEMs to get control of all the issues they know about old product designs, and then put systems in place to guide what they want to do in certain situations.
Enhance your PLM processes
When I advise OEMs to get clear on how they want to handle different scenarios BEFORE they experience them, the most common response is that this work is the responsibility of a special team.
Sometimes they’re called the PLM or Lifecycle Management team, or maybe it’s the “Sustaining Engineering” team. These teams are tasked with handling all the exceptions associated with requests for EOL’d products.
These teams are set up to fail, typically because they have a huge backlog of requests, and their priorities are constantly shifting. I have yet to see an embedded OEM who holds their sustainment team to the same on-time performance standards as other operational teams.
In addition, they often struggle to get the support they need to succeed from the rest of the organization, because organizations who rely on efficient processes have difficulty dealing with process exceptions. This often results in a log-jam of old product RFQs that suck valuable resources from the rest of the organization.
That’s not to say that internal sustainment teams might not have a place in your organization. However, these teams would be more effective if they were sustainment managers instead of sustainment doers. And the rest of the organization would be more effective if they didn’t have to worry about whack-a-mole obsolescence management or devising strategic sustainment work that undermine their main business objectives.
This is why I also advise embedded OEMs who have customers who want longer-than-usual support to strongly consider the value of an outsourced sustainment partner as a force multiplier to their existing sustainment capacity.
Freeing yourself from the mindset that you either have to force your customer to upgrade, especially during times of uncertainty, or drain precious resources to sustain your products by yourself in-house, is a good first step to increasing your agility in 2021 and beyond.
Ethan Plotkin is the CEO of GDCA, Inc. (www.gdca.com), an innovative California company that specializes in manufacturing and repairing “obsolete” computers that control defense systems. Discontinuation of these older circuit-cards routinely breaks supply chains, not only preventing Government programs from achieving affordable readiness, but also undermining Industry’s profitability objectives. Ethan is a passionate advocate for Planning as a means to eliminate electronics obsolescence issues and frequently writes and speaks on the subject. Previously, Plotkin was an international business consultant based in Europe - working across all aspects and phases of business improvement projects and large programs.