In supply chain planning, businesses have to decide: should you sell-what-you make or make-what-you-sell?
Sell What You Make
Sell-what-you-make is a push strategy. This approach works for businesses with regular demand and economies of scale that drive profitability.
Push strategies get a bad rap in the "demand driven" zeitgeist that comprises Very Online Supply Chain Marketeers. However these companies can enjoy a commanding position on their industry's cost curve. These businesses rely on long-term agreements with tier one and tier two suppliers, fixed labor contracts, and "sweating the asset" to support their approach. But these companies can also become dependent on promotions, financing, and other commercial levers to make sure shipments keep pace with production.
Make What you Sell
Make-what-you-sell is a pull strategy, where production is in the service of demand.
While they may hold some standard parts or raw materials in inventory, make-what-you-sell companies don’t commit to final production until they know more about what the customer wants—be it forecasts, inventory targets, or other signals.
A strategic buffer is like a parachute. It can save you once.
Good make-what-you-sell companies will use S&OP and S&OE processes to align supply with demand. In a demand review or analogous S&OE meeting they will plan the demand, providing clear guidance to supply-side teams. This helps the company capture sales opportunities while keeping inventory minimized and the supply line synchronized.
Both MWYS and SWYM have their place, but there’s a third path: Choosing where to meet the customer. This involves making-what-you-sell then selling-what-you-make. The connection is the time fence.
Meeting the Customer at the Time Fence
Imagine a fence dividing your time horizon. On the near side of the fence, you're in the SWYM period—your capacity, costs, and product mix are increasingly fixed, and you’re selling what you’ve already planned to make. Any change in one commitment could directly affect another, such as decisions to break into the schedule or expedite.
On the far side of the fence, however, you're in the MWYS period. These are open expanses of green pasture. This is where you have flexibility—costs are variable, raw materials aren’t purchased yet, you can adjust shifts, or source long lead-time items from across the globe. This is where you can adjust production to match what the market needs, without losing your proverbial shirt.
The cumulative lead time plays a critical role in determining the location of that time fence in supply chain planning. It represents the total time required to source raw materials, produce goods, and deliver them to the customer. The longer the cumulative lead time, the later the fence must be placed, pushing more decisions inside the SWYM period where you have less freedom. Shorter lead times allow companies to keep the fence closer to the present, enabling greater flexibility and responsiveness in the MWYS period for adjusting to market demand.
You'll want that fence as close in as possible. When calculating your time fence, you will be tempted to leave out lead times for onery items. You may use a strategic buffer that allows you to do just that. While this is common, remember that buffer is like a parachute. It can be used one. Once it's gone you're exposed to the real cumulative lead time.
Does your sales team and operations team agree on what your strategy is, sell-what-you-make or make-what-you-sell? If you use a time fence, is everyone using the same one?
At IBP2, we help businesses decide among these strategies, and engineer the collaboration needed to support MWYS, SWYM, or a SWYM to MWYS handshake. By identifying where that fence sits, we help companies decide when to lock in production for cost savings and when to keep options open to maximize revenue.
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