A Hierarchy of Needs for Supply Chain Planning
Abraham Maslow created his magnum opus “Maslow’s Hierarchy of Needs” by studying the best performing humans and their needs. While reading more about his theory, I realized that best performing supply chain systems also possess certain hierarchical needs. Similarly to a human being’s need of self-actualization, supply chain systems are designed to achieve high service levels while being cognizant of competing pressures such as demand volatility, competition, etc. In this blog post I take a novel perspective on supply chain systems and their hierarchical needs to reach high service levels.
In his work, Maslow discussed a hierarchical set of needs which all human beings should fulfill in order to reach self-actualization — which he described as the final goal of the best performing individuals. His model is presented in a shape of a pyramid with the largest, most fundamental needs at the bottom and the need for self-actualization at the top. In his paper, Maslow underscored the importance of sequentially fulfilling these needs in order to reach the apex of the pyramid. Here is how I applied that sequence to supply chain systems:
- For any system to reach its end goal/state, it has to fulfill its most basic needs. In the domain of supply chain, Enterprise Resource Planning System (ERP) is that fundamental need. It provides a holistic view of core business processes and gathers important supply-demand data. ERP also drives the information flow between its business functions and stakeholders. An ERP system is analogous to “physical needs” in the Maslow’s pyramid, which provides an ideal foundation for fulfilling all the remaining needs for supply chain planning.
- After implementing an ERP system, a supply chain system needs systematically collected “Data” to move forward. It is crucially important that the data captured directly influences core performance indicators for supply and demand planners. This data might include information ranging from basic supply and demand data to demand order lines, with the exception of superficial big data. I’m not questioning the merits of “big data;” however, the basic, fundamental data which directly impacts key performance indicators (KPIs) is far more important, since it acts as a major ingredient for a firm’s supply chain strategy.
- Post satisfying the above needs, a supply chain system needs a Decision Support System (DSS), which assists management and planners make sound decisions backed by data and statistics. The DSS takes relevant demand and supply data and provides meaningful insights such as demand forecasts, replenishment plans, various stock levels etc. Moreover, the DSS is capable of analyzing unstructured data sets and providing valuable insights into supply and demand planning. Thus, the DSS is a fundamental weapon in the arsenal of supply and demand planners.
- In order to reach the ultimate goal of high service level, it is important to have a robust Sales & Operations Planning Process (S&OP). Supply chain is one of the most multi-disciplinary fields, involving diverse stakeholders, processes and constraints to achieve the organizational objective. An S&OP process aims to bring all these stakeholders on a common ground in order to create a realistic constrained roadmap for the firm.
- When all prior needs are satisfied, only then can a firm achieve the ultimate and the most challenging goal of high service level. Addressing these needs also provides a foundation for highly sustainable and profitable supply chain systems. These commonalities between the needs of human beings and supply chain systems, give a roadmap to achieve the highest service level, which a supply chain system is designed to attain.
I hope this blog post helps identify the needs of supply chain planning and provides a framework for enabling supply chain processes that achieve high service levels.
About the author:
Jayant Sharma works as a Business Analyst with ToolsGroup’s North America office. He holds a Masters in Science in Engineering Management with focus on Supply Chain & Business Analysis from Northeastern University. Engage with Jayant on twitter at @sharmajayant or at jsharma[at]toolsgroup[dot]com.
Click below for an executive brief on achieving service level excellence in supply chain planning.