A collection of resources and commentary providing an introduction to supply chain management and related systems for students, practitioners, and anyone else interested in learning more about how to design, manufacture, transport, store, deliver, and manage products.
Monday, February 17, 2014
Pop-ups popping all over
Lean startup principles
Lean startup, the philosophy for
startups based on lean manufacturing, aims to eliminate the wasteful practices that
may hinder already financially crunched startups from blooming to their full
capacity. The focus of ‘lean startup’ is on simplifying processes and removing
everything that does not add value for the end-customer, essentially termed as
waste. This approach aims to help startups succeed with minimal external
funding, intricate business plans or the elaborate products.
The lean startup approach
encompasses the following ideas:
Creating order by
having processes in place and by testing them continually
Asking if a
product should be built. Establishing that the product or service will sell
once built by conducting extensive surveys, experiments and iterations
a Minimum Viable Product (MVP)
‘build-measure-learn’ feedback cycle by initially building an MVP to initiate
the learning process
Refining the MVP
over time while simultaneously assessing its demand
A practical manifestation of the
lean startup approach that I came across is a Pop-Up shop. Unlike a conventional
retail store made of brick and mortar, a pop-up shop opens for a very short
duration at a unique, strategic location.
These shops are put up by all kinds of companies, big and small,
especially startups, in an attempt to receive real time customer feedback and
assess demand of their products in a relatively inexpensive way. The concept
of Pop-Up stores has recently gained momentum, especially in the apparel industry,
which, for reasons of volatile demand and product obsolescence has the error margin
of a whisker. In November 2012, French luxury brand Hermes opened a pop-up shop
in Toronto to launch its new product line of silk scarfs. Similarly, a startup
might pop up at a particular location to test the demographics before setting
up base at that location.
Impact on the supply chain
The concept of Pop-Up stores leads
up to another one called Pop-up supply chain. The fundamental of a Pop-Up
supply chain is to leverage the available resources in a network to dynamically
switch between the distribution nodes as demand changes constantly. For a
pop-up shop, which lasts from a few days up to a few months, having a
full-fledged warehouse management system is a sheer waste of resources.
Moreover, since the store itself lasts for only up to a few days or a few
months at best, latency or high lead times are not acceptable. In such a case, strong and close-knit
relationships with suppliers is critical for the success of the shop as the
suppliers may have to provide supplies on very short notice and may even have carry
the inventory on the retailer’s behalf. In such a case, third-party logistics
providers such as UPS may serve the purpose of keeping the inventory in transit
and shipping it directly from the factory to the pop-up store.
In case of bigger retailers such as
Tesco, the supply chain needs to be adapted to make it compatible with the
multi-channel nature of the distribution of the retailer. Along with pop-up
shops and permanent showrooms, such retailers might also be involved in
e-commerce, in which case inventory management may become more challenging than
ever due to the varying nature of demand from each of these channels.
The question that I could not help but
think about relates to the other end of the supply chain. Though a pop-up store
may be an ideal way for retailers to assess demand, but the question that calls
attention here is whether suppliers are ready to handle the momentum that is an
inherent part of this approach. Moreover, for a company as big as Dell,
suppliers may as well be ready to bear the burden of inventory for the profits
they make from Dell. However, for
startups and smaller companies that are already struggling to meet financial
obligations, would suppliers really be interested in being highly responsive
and operating on the knife’s edge?