Frugal Supply Chain
Perhaps it is my mid-west upbringing. Perhaps it is a pass through from my bit of Dutch ancestry. My kids call me cheap but I proudly call myself a Frugal Execution Master. I live this way and lead this way and the results are in. Frugality leads to creativity and results and is a forcing function that limits resources in order to drive the best minimum viable product. While start-up companies usually don’t have much choice based on their financial backing, if they follow the best practices of frugal design, they will do more than save money. As Navi Radjou talks about in Jugaad Innovation, in this world of increasing constraints there is value to solving problems under pressure. Jugaad is a Hindi word that means overcoming harsh constraints by improvising an effective solution using limited resources. The key ideas to Jugaad, according to a Harvard Business Review article are:
Inclusion
Thrift
Bottoms Up Contribution
Flexible Thinking
These principals can equally and similarly apply to designing frugal supply chains which is my passion. Especially for hardware companies, these principals of frugality can guide decisions, speed up implementation and prepare companies for the twists and turns that are inevitable when launching a hardware product company. Let’s throw these key Jugaad ideas into the context of supply chain design.
Develop with a cross-functional team – A Jugaad innovator is not solving for an elegant solution. She or he, or better yet, they (let’s be inclusive) are solving for the masses. There is a consideration of cost, availability and solution.
Bring in the extended team. Pull in the manufacturing, customer service, packaging, logistics experts. Invite your target customers in. Get their input on buildability, availability, shipability and whether the product solves the problem.
Talk about the costs on day one. Build a model of costs. Take all of them into account. Consider volume, minimum order quantities, supply availability, logistics, overhead, labor costs. Bring this up again and again.
Pick the right partners and then leverage synergies. Know their strengths and use them to strengthen your team.
Leverage what is already out there. Build on other’s ideas. Off-the-shelf and good enough is better than perfect, expensive and hard to get.
Constrain cash – I am a big fan of process when the time is right but infrastructure doesn’t have to cost a lot of money. Use light-weight, cloud-based apps to solve problems. If you can’t model what you need in a spreadsheet you probably aren’t ready for an app. Go slow to go fast. Finish the design before you build in a manufacturing factory. Learn about what happens in low volume in those initial factory builds before you ramp to high volumes. Investors want to see high volume in a short time but they are also very happy to see backlog. Consider keeping some tasks in house for a while. While it can trip you up if you let it go for too long, it can be a great learning investment if done carefully.
Can the team build some pre-released units?
Can you ship those to your beta customers with a personalized note?
Can the engineers take customer service calls for the first quarter?
Listen – Usually problems are known to some before they are know to all. Listen for the canaries in your organization. Bad news is best heard early. Follow each failure to root cause and corrective action. Hold design reviews regularly and get the input from the full team.
Adapt to the inevitable pitfalls – Something will go wrong. Force them to go wrong early. If you have followed the first ideas of listening to a cross-functional and engaged team, you are set up to quickly see and then have the experts to react to the problems that will come up. Watch market traction and be willing to modify or pivot. Constrain your supply until you have proven that your product hits the mark.
Frugal innovation is a process that is used in emerging markets to solve problems with local constraints. The concepts drive the innovator to do more with less and to eschew complexity and cost in favor of solving a problem for the masses. Frugal Supply Chain has other implications that I haven’t explored here. What value is there to keeping our supply chains close? Can we improve our solutions by designing our own processes rather than adapting to processes at large contract manufacturers? Do we complicate our solutions by depending on far-flung supply? Can we leverage what is already available and simply adapt to solve a problem? These are all questions for another time but as a Frugal Execution Master, they are on my mind.
Without frugality none would be rich and with it very few would be poor. Samuel Johnson English Writer 1709 – 1784