By Gary Cokins and Toby Hatch, Directors, PACE
Perhaps you thought that Santa, Mrs. Claus, and all the Elves at North Pole Operations just magically get all the toys made and delivered on Christmas eve each year? Nothing could be further from the truth. North Pole Operations uses our framework – the Profitability Analytics Framework (PAF) by the Profitability Analytics Center of Excellence (PACE) - to plan and execute the big Christmas eve delivery every year.
No organization can escape the global pressures to better execute their executive team’s strategy and improve productivity - not even Santa Claus and his team. Here is how they do it.
The PAF always starts with the three primary stages of Strategy:
• Formulate the strategy
• Validate the strategy
• Implement the Strategy
Formulating the strategy for the North Pole Operations
There are various ways to formulate the strategy (using a balanced scorecard for example), but whatever method you use, all stakeholders need to be included. In this case:
Mrs. Claus – Chief Operating Officer and logistics
Elves – manufacturing and gift wrapping
Santa and Reindeer – Naughty & Nice List, and gift distribution
Head Elf – Human Resources, and gathering children’s wishes
And any other mythical stakeholders that can help mitigate challenges with weather, supply chain, etc.
Validating the strategy
This is key to ensure:
The Elves have the equipment, time, and supplies to make and wrap the required toys
The delivery route reaches all children on time
There are enough reindeer (and magic dust) for delivery and enough Elves to make the toys
As there are more and more children each year, Santa’s workshop needs to be continuously upgraded to automate those activities that can be automated, leaving the magic bits for the Elves to do.
Executing on the Strategy
After validating the strategy and creating the Key Performance Indicators (KPIs), tracking them is easy, in this case #gifts made (in various categories), #deliveries on time, #satisfied children, etc. Three Elements There are also three elements for the PAF essential for success:
Revenue and market management
Operational planning and cost management
Resource and investment management
Although most companies, even non-profit companies, are concerned with where revenue comes from and when – for the purposes of this story, Santa’s revenue stream seems to be endless. And, for the most part, Santa and his team have an excellent understanding of their target market. Other companies need to put a lot more effort into this stage.
Operational planning, however, is extremely important for North Pole operations. They cannot afford production to slip at all as their delivery date is non-negotiable. They may be able to substitute some gifts should their production schedule falter at bit, but not delivering the finished goods is simply NOT AN OPTION.
Cost management, in this case, is not as critical to North Pole operations as it is to most companies, however I am sure Santa and Mrs. Claus are not wasteful people, are environmentally conscious, and would like to be as frugal as they can be. Having a firm grasp on what toys cost to make and fairly compensating their Elf and Reindeer workers are important to them.
Resource and investment management are indeed critical to North Pole Operations. Some resources – such as Elves and Reindeer – are more difficult to get more of, so it is imperative that they are utilized appropriately. As they continue to automate more to meeting the growing need for gifts for children around the world, they need to maintain their equipment investments and keep it in top form for a smooth manufacturing process.
Analytics and Artificial Intelligence
Analytics and Artificial Intelligence play a huge part in North Pole operations as well.
Artificial intelligence is being employed during the “children’s wishing” phase to help forecast what toys are needed to make the children happy and to get a jump start on toymaking and smooth out the manufacturing phase.
Analytics are used to monitor operations during the manufacturing process and run “what-if” analysis if there are challenges with supply chain, or challenges with equipment or Elf labor.
Analytics are also used during distribution to help track progress, but also to do real-time what-if analysis if there are weather challenges or other possible interruptions. They are also used for tracking deliveries and, after the big night is over, analytics are used to determine how well they did, how efficient they were, and look for improvements for next year.
Indeed, PAF is very helpful to Santa and his North Pole Operations, and it can be helpful to you too.
Merry Christmas to all!
