Clients are struggling to keep up with customer’s changing requests. Order backlogs remain relatively high (depending on the industry), but customers are pushing orders out at the last minute, pulling orders in without notice, adding future potential orders, and changing requirements on the fly. Production is scrambling to keep up.

80%+ of manufacturers simply do not have enough skilled production and support resources to keep up with the volumes, let alone with the volatility of the order backlog and changing forecasts. Not surprisingly, executives do not want to hire more resources than absolutely necessary as they are concerned about rising input costs and the uncertainty of their order backlog. To add fuel to the fire, the supply chain has been volatile as well with global unrest, strikes, and other disruptions as well as supply chains on the move. Read our recent article on how supply chains are changing. The production resources cannot keep up with changing conditions, and triage must occur.

Our best consulting clients are engaging in proactive business processes to get ahead of changing customer conditions and sales forecasts and the impact on capacity, production and replenishment plans as well as the reallocation of critical resources. SIOP (Sales Inventory Operations Planning) is a key process and toolset for successfully navigating this volatility while maximizing output and production capacity to support revenue growth.

An Industrial Manufacturer Case Study

An industrial manufacturer struggled to meet customer requirements. Order deliveries were lagging, capacity wasn’t allocated evenly across its ten production facilities and production at a critical site had almost 1000 hours of change overs per month for nine months in a row to try to keep up with urgent customer requirements. Several large customer jobs pushed out and others pulled in, keeping Operations scrambling.

We rolled out a SIOP process, starting by getting a handle on the sales orders and potential sales orders. A weekly meeting with Sales and Project Management helped to solidify the priorities of the demand plan (sales forecast). Although customers continued to request push outs and pull-in’s, when the requests were proactively worked with the team and the ERP system was maintained, better clarity emerged.

The demand was run through a capacity model, showing available capacity vs. operational requirements by production facility. The operational requirements were bucketed in categories of firmed sales orders, sales orders waiting on Engineering release, sales quotes that were better defined, and sales quotes. By evaluating near-term capacity, priorities could be established with Engineering, short-term capacity actions could be taken (overtime, supplementing production at additional sites, etc.), and proactive customer communications could take place.

More importantly, by evaluating medium and long-term capacity, the appropriate strategic decisions came to light. For example, the critical site showed as overloaded months in advance so that Operations could reallocate customer orders among production facilities within the same region to mitigate impacts on freight cost. The model could be evaluated with multiple what if scenarios so that Sales and Operations could address the bottlenecks proactively. Guidelines were set to reprioritize and set pricing for key customers, capacity could be reallocated, additional capacity could be planned, and capacity offload options explored.

The key is the connection between Sales, Project Management, and Operations and Engineering. As customer requirements change, capacity scenarios need to be reevaluated and impacts reviewed. Proactive communication and collaboration is a critical piece of SIOP to keep demand and supply aligned and optimized.

SIOP Maximized Production Output & Capacity

By seeing the demand and capacity picture in advance with SIOP, the executive team could maximize production output and capacity. They could do this by proactively addressing bottlenecks to level load the plants so that the scheduling teams could optimize the production schedules to increase efficiencies and reduce waste. By running like items, sizes, and material types together, changeovers are minimized. And by seeing the final assembly schedule requirements, labor and resource plans could be optimized.

Also by reviewing the full capacity requirements across all North America sites, capacity could be reallocated to maximize output, thereby minimizing the need for offload capacity. Each plant’s strength could be maximized and planned in advance while minimizing transfers between plants, freight to customers, and material price differences.

By addressing these supply plans proactively, materials contracts could be addressed in advance ensuring material availability which positively impacts manufacturing planning and output. It also typically provides opportunities for more favorable contracts and pricing. In addition to maximizing production and capacity output, SIOP improved the customer delivery performance, resulting in happier customers and additional revenue possibilities.

SIOP: A Look Forward

In our book, “SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth“, we discuss how SIOP can support these types of improved results. As companies navigate the exaggerated volatility of the global environment and try to keep up with changing customer needs, SIOP becomes an essential tool in the toolkit to survive, let alone thrive. Our best clients are utilizing SIOP as a way to take control of their future and manage their options instead of letting their situation manage them. In fact, they are taking SIOP to the next level with advanced technologies and by connecting SIOP to their customers and suppliers to gain an end-to-end supply chain view.

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Optimizing Business Decision Tradeoffs with SIOP

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The State of Affairs in Manufacturing & Distribution

Manufacturing is on a downward trend after eight months of PMI (purchasing manager’s index) below 50. It dropped to 46 in June. China’s manufacturing also shrank for a third month in a row to a PMI of 49. Yet manufacturers backlogs remain relatively robust in many industries, leading executives perplexed on what to do about capacity shortfalls.

Logistics is in largely the same shape as the Logistics Manager’s Index (LMI) hit a new all-time low of 47.3 for May, down 3.6 points from April and operating in contraction territory for the first time. Thus, not surprisingly, the Freightos Baltic Index, which measures freight volumes and prices globally, shows average daily spot rates from China/East Asia to the U.S. West Coast at $1,324 per 40-foot container, down from more than $14,000 a year ago. Yet, products aren’t easy to find and get delivered on the rapid expectations consumers expect.

On the other hand, supply chains are on the move. Smart companies are reshoring, nearshoring/ friend-shoring, expanding manufacturing capacity and getting ready to scale up rapidly to meet customer expectations. As manufacturers struggle with rising interest rates and consumers focus on services, weak ones will get absorbed or go out of business, leaving an opportunity for those ready to take on the volumes. The same is true on the logistics front. As the West Coast ports struggle to finalize labor negotiations, container ships are on the move to the east coast, leaving distribution and transportation suppliers ready to support the volume with aggressive growth. It is a time where the winners and losers will separate, leaving vast opportunities for forward-thinking executives.

What are the Implications for Capacity Planning?

Companies need to expand capacity yet remain resilient and flexible so that they can also maximize profitability and accelerate cash flow. In order to do that, it is vital to get on top of your capacity capabilities. The majority of clients do not have clarity of their capacity (upcoming requirements as compared with available capacity). Thus, they struggle to know if they can take on customer orders and deliver it with the appropriate level of customer service (meeting the customers’ expected lead time and delivery performance with high OTIF (on-time-in-full)). When opportunities arise, poor service will kill the opportunity quickly. Also, if you don’t understand your capacity, you will not allocate it optimally and maximize your capacity; thus, losing profit opportunities.

Capacity planning is a key element of the SIOP (Sales Inventory Operations Planning) process: it takes your demand and translates it into your capacity requirements (manufacturing, equipment, storage, transportation, talent, etc.). By evaluating capacity, executives can get in front of changing business conditions and determine how to optimize their capacity to scale up or down quickly to meet key customer needs while maintaining margins.

Client Example: Using Manufacturing Capacity to Scale Up to Meet Sales Forecasts

In a storage manufacturer, a key to success is to have the capacity capabilities where needed when customers need it. As logistics changes occur (such as the transition from the west coast to the east coast), storage systems will adjust in concert. Since storage systems are bulky and freight costs of inbound and outbound freight is expensive, it is important to have capacity available where its needed at the “right” time.

It is not for the faint of heart to get a directional view of manufacturing capacity for a storage solutions manufacturer. The good news is that shop floor employees can move between machines and equipment to produce what’s needed; however, the bad news is that this makes understanding capacity availability challenging because not all products require the same number of people or skills to produce. By using a SIOP and demand planning process, customer orders, likely customer orders and quotes are available. Assuming engineering is on target in completing product designs, using a capacity planning process, this demand plan can be translated into directionally correct requirements (weight and hours) by plant and customer.

However, required machinery, equipment and labor requirements doesn’t provide valuable information if you can’t compare to available capacity. It sounds much easier than it is in reality due to the complexities. Typically in these types of operations, there are many different work centers (work areas) that are not alike in terms of capabilities and labor requirements. Similarly, products are not created equal; each product can require different numbers of people, different skills and it will go through multiple work centers before completion (fabrication, weld/ final assembly, paint). Storage requirements are also not created equal. Thus, a simple available capacity calculation across a work center or group of work centers is not feasible. However, using the forecast as well as historical run rates and weights by product, summarized by work center and production area can provide a directional view of available capacity.

Reviewing capacity requirements vs. available capacity by plant and production area will give Operations leaders their marching directions. For example, in one facility they had plenty of fabrication operators are had excess inventory of these parts yet customer service was suffering. The bottleneck was in weld operations, and so work in process (WIP) was stuck waiting for weld. As they trained weld operators and expanded the capabilities of a few fabrication operators, they were able to catch up and improve their OTIF (on-time-in-full) metrics.

As they gained a view into upcoming capacity, they could see potential bottlenecks in advance so that they could proactively handle them. For example, the plant could see that they had more requirements than capacity two months into the future; however, they could absorb it (level load) in advance if they could get engineering to complete the designs. Thus, a priority list was developed and managed with engineering. Additionally, they could evaluate whether they could fulfill a key customer project that another plant couldn’t handle on time and transfer the project to a nearby site so that it could be delivered on time without negatively impacting margin. On the other hand, if a critical project came up that required advanced manufacturing capabilities, they could see the impacts of transferring the volume to another facility with these capabilities and incorporate the cost impacts of the additional freight. They also had the opportunity to potentially transfer the volume to their Mexico facility which would add freight yet mitigate the labor costs. The bottom line is that capacity visibility supports revenue growth with minimal impact to profitability.

Client Example: Expanding to Storage, Freight , & Engineering Capacity

Although the focus has been on manufacturing capability, the next priorities are storage, freight and engineering capacity analyses. As the plants have the capability to see into the future and want to level load operations in a way that maximizes operational performance (running in the optimum sequence to minimize inefficiencies and waste), engineering capacity becomes the bottleneck. Seeing which orders / projects should be prioritized across sites will give a priority list to Engineering. If you add available engineering capacity into the picture, it might lead to hiring additional engineers or supplementing with short-term resources.

The same holds true for storage and freight capacity. Since the product is bulky and can only be stored outside for certain periods before fading, storage capacity should be managed. If you have significant customer orders coming down the pike, you could decide to produce ahead to keep customer service intact without adding unnecessary long-term manufacturing capacity. In this case, you could calculate storage capacity by region (to minimize freight costs). This goes hand-in-hand with transportation and freight capacity.

Final Thought

Capacity planning is cornerstone for any manufacturer or distributor as you must serve customers, maximize operational efficiencies, reduce waste, coordinate resources, right-size inventory levels, and execute plans.

Refer to our blog for many articles on capacity planning, production planning and related concepts. Also, read more about these types of strategies in our eBooks including SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth and The Road Ahead: Business, Supply Chain & the World Order. If you are interested in talking about implementing out best practices for production scheduling to drive cost reduction and inventory reduction while maximizing your customer experience, contact us.

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Production Planning Best Practices to Recover Capacity

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Lisa Anderson facilitated a panel discussion at the New England Supply Chain Conference and Exposition on managing capacity in complex and volatile environments with Shari Ruelas General Manager of Commercial Products Chevron, Alejandro Bustamante Senior Advisor to CEO & Board of Directors of Poly/HP, and Dan Raatjes SVP & COO King’s Hawaiian Holding Co.

To learn more about NESCON click here.

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Managing capacity during these turbulent times in a complex, volatile, long-lead time environment has proven quite the challenge. During the pandemic, sales volumes either dropped like a rock or skyrocketed with no middle ground. Most manufacturers have not been able to keep up with demand in the last year or two and extended, prolonged lead-times have become the norm. How can you thrive during this time of volatility, uncertainty, complexity, and ambiguity (VUCA)?

Expert Panel’s Challenges & Opportunities

Not only is this an area that frequently arises in client projects since we work with several engineer-to-order (ETO), configure-to-order (CTO), and other complex manufacturing companies such as high-volume CPG (consumer products) companies, but I led an expert panel for NESCON (New England Supply Chain Conference & Exposition) on just this topic. We had experts from several diverse angles of the global supply chain:

• Chevron: Shari Ruelas, General Manager Americas Commercial Products
• Poly: Alex Bustamante, Sr Advisor to CEO & Board; Former Executive VP Global Ops
• King’s Hawaiian: Dan Raatjes, SVP & Chief Operations Officer

A few of the challenges that arose during the conversation:

• People, people, people
• Managing capacity when your product is selling at negative numbers 
• Figuring out how to navigate extended port delays
• Keeping up with dramatic increases in volume

Trending Strategies for Success

A few of the common themes that arose during the discussion include the following:

• Nearshoring: Companies realize they need more control over their supply chain and should locate manufacturing closer to the customer.
• Supply Chain Optimization (Quick insource/ outsource/ offload/ change supplier decisions): During the pandemic, the successful companies quickly pivoted on their make vs. buy decisions. In fact, the successful companies insourced and outsourced simultaneously if needed to meet customer demand. For example, Poly did all of the above in addition to pivoting away from the Long Beach port and moved to a Mexican port and saved a month in lead-time.
• Productivity & efficiency: The proactive responded to changing conditions and figured out how to gain productivity and efficiencies rapidly. Chevron did what had never been done before and made significant productivity improvements.
• Scale rapidly: With proprietary intellectual property, scaling quickly is the key to success. King’s Hawaiian is building multiple facilities simultaneously.
• People, people, people: As is typical with every expert panel I’ve led over the years, it was unanimous that the key to success is considering your people as your #1 asset. 
• Technology advancement: Technology, innovation, automation, digitization

Check out our article on the best practices in capacity planning covering rough cut capacity planning, manufacturing capacity, supplier capacity, and logistics capacity. Unfortunately, the situation is quite simple. If you don’t plan ahead and have the capacity to support your customers, your competition will.

Please keep us in the loop of your situation and how we can help your organization thrive during these times of volatility and disruption. There will be more winners created than at any other time than since emerging from the Great Depression. To gain additional ideas and insights on how to best navigate these volatile times and thrive, read our new eBook Thriving in 2022. Learning from Supply Chain Chaos. Download your complimentary copy.

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Sales Growth: Can Operations & Supply Chain Keep Up?

Almost every client has the opportunity to grow substantially. The question is whether their operations and supply chain can keep up. Unfortunately, across the board, planners are wringing their hands to expedite orders, prioritize customers, schedule additional production, understand the impact on inventory across their facilities, and increase capacity.

If that wasn’t enough, customer orders are changing on a daily basis (due to shortages from other suppliers, changing market conditions, etc.), forecasts are in a constant state of flux, manufacturing capabilities are constrained (due to lack of people, flexibility, trials and/or difficulties in running with substitute materials, etc.), and the extended supply chain (material purchases, warehousing/ distribution, transportation) is in chaos. Thus, how should we answer the question on whether operations and the supply chain can keep up?

Rough Cut Capacity Planning

From a best practice point-of-view, in order to answer the question on whether you are prepared to grow, you need to focus on rough cut capacity planning. Ideally, you have a SIOP/ S&OP process (sales, inventory & operations planning) process with a clear picture of demand. However, in 80% of the situations, this is not the case. Thus, start with demand although don’t get too wrapped up in creating the perfect demand plan that you lose sight of your capacity plans.

At a minimum, review last year’s sales and current customer orders, incorporate key trends and mix changes, and start there. For more details on developing a demand plan, read about creating predictable revenue with demand planning best practices. The bottom line is that you’ll need a place to start with what to produce, purchase, replenish, and/or store.

Start your capacity planning process with whatever data you have. Ideally, you have a long-term production plan, purchase plan, and/or replenishment/ distribution plan. From a systems perspective, these can be referred to as a master production schedule (MPS), material requirements plan (MRP), and distribution requirements plan (DRP) although they also can be all rolled into an ERP/MRP system. Don’t worry about the debate of MRP vs. Lean as both are valuable for different purposes. For capacity planning, you’ll need a longer-term view of requirements, and it doesn’t matter if you use MRP or Kanbans.

From a technology perspective, you might not have an ERP system that supports these functions. Don’t despair as you can start by converting your sales forecast into a directionally correct production, materials, and/or replenishment plan.

Manufacturing Capacity

Let’s start with a long-range view of a production plan in units or hours. Break your production into product groupings ideally by work center groups or production cells if possible. If not, break into whatever groups make sense from a manufacturing point-of-view that you can do quickly. You can always evolve over time. From a rough-cut perspective, there is no need to worry about days and weeks. Think in terms of months or quarters, depending on the needs of your business. There is also no reason to worry about items. Stick to larger product groupings when dealing with rough cut capacity. This is a pitfall several clients fall into. They get bogged down in item details and never get a directional view of required capacity.

The tricky part is that you’ll need to put your requirements into a base unit of measure. For example, you cannot add boxes, pieces and ounces together and make sense of capacity figures. This is a constant challenge even with sophisticated clients. For example, we worked with a life sciences manufacturer, and we thought it would be an easy exercise to convert milligrams and grams, into milligrams. Although that issue was solved with a simple calculation, there were also custom products with different units of measure. Unfortunately, 1 unit could be 1 microgram or 1 unit could be 1 milligram, but they both said 1 unit. Thus, we had to design a directionally correct way to convert custom products into the base unit of measure so that the data would make sense for capacity analysis.

You’ll then convert production requirements into a base unit of measure that makes sense across all products. Compare these requirements by product grouping to your available capacity for that product grouping. It will give you a place to start. Advanced clients review requirements as compared with various staffing configurations, overtime, full capacity, transferring capacity among sites, and additional scenarios to find the optimal approach to meet customer needs while maximizing operational performance and meeting inventory targets. They also review improvement opportunities to increase output and capacity. In addition to staffing, review machinery, equipment, tooling, and other support functions vs. requirements. The key decision becomes how to adjust capacity in alignment with requirements in the optimal manner. It is rarely ever a straight line in manufacturing. For example, if you need 1 crew, 5 days a week on average, you are likely to need 1.5 crews during peak season and .75 crews during low season or you need 6 days a day on average throughout the year, making it difficult to run overtime continuously yet not requiring a 7 day schedule.

Supplier Capacity

Similarly, to manufacturing, once they have a long-range view of requirements in a base unit of measure by commodity groupings, they convert the base unit of measure into purchase plans. The most successful clients provide material and commodity level forecasts to suppliers so that they can plan for capacity. They also incorporate into contracts and pricing within ranges or they partner with suppliers to build Kanban systems with stockpiles of strategic materials. Frequently, there is significant opportunity for improvement in service, reduction in lead times and shared cost savings with collaborative planning so that suppliers can proactively plan capacity as well.

Logistics Capacity

Similarly, to manufacturing, once they have a long-term view of requirements in a base unit of measure, they convert the base unit of measure into space requirements to evaluate storage and material handling equipment needs. There are various storage strategies and associated equipment needs with tradeoffs depending on volumes, frequency, storage size, and several other factors. For example, you might evaluate storage needs in pallets, bins, cubic feet, and other alternatives. Order frequency, handling requirements, and picking needs are also relevant factors. After collecting your requirements by groups of products or customers (as there can be different requirements by customer), you’ll compare with available capacity. Similarly, to manufacturing, you can choose to increase capacity in several ways and you can build flexible options into your strategy.

Transportation capacity is also a key topic so that you can plan for the appropriate number of trucks, container loads, or packages and can optimize the mode of transportation, service levels and rates. For example, if you will need an average of 3 trucks per week to go across the country, you might plan ahead and send intermodal to save money. Or you might decide to put together a milk run with a consistent route that your transportation partner builds into a consistent plan. You might decide to build a multiple-stop truckload for certain routes if you don’t have enough product for one customer to fit on a truck. There are several options to evaluate; however, in order to ensure you have sufficient capacity to deliver your customer orders on time and to support your transportation needs, forecasting your transportation requirements ahead of time will not only ensure higher service levels, but it will also provide opportunities for cost savings.

Incorporate Capacity Planning into a Monthly Review Cadence

Review your capacity plans as a part of your monthly SIOP/ S&OP process. Gather inputs from appropriate parties, compile and synthesize data, and design a monthly review of required capacity vs. available capacity for your critical areas. Start with your key machines, overloaded people/ positions, and your most bottlenecked resources. This will quickly highlight strategic decisions and/or bottlenecks that require attention to meet your customer needs.

Refer to our blog for many articles on planning, capacity and related systems. Also, read more about these types of strategies in our eBooks such as The Road Ahead: Business, Supply Chain & the World Order. If you are interested in talking about what it would take to purse the capacity planning and SIOP journey in your business, contact us.

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Recovering Capacity with Production Planning Best Practices

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Clients are growing quickly. No matter the industry and company size, clients and colleagues are seeing growth. The only question is how quickly and whether they can keep up. Capacity constraints are popping up everywhere. On the logistics front, Southern California has no available space; the ports are backlogged, prices are rising and 3PLs are maxed out. On the manufacturing front, having enough capacity (machines, people, specific skillsets, technology, supply etc.) is quite the battle and disruptions abound. What are you doing to get in front of this situation?

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Inventory has emerged as a hot topic lately. In today’s Amazon-impacted business environment, customers expect rapid, customized deliveries, the ability to change their mind anytime and easy interactions (placing orders, returns etc.). Since clients are growing, they are also concerned with keeping up with the increasing volume. Thus, they have responded  by stocking more inventory to support increased sales and to respond to these increasing expectations.

However, as clients are taking a step back, they see inventory tying up bunches of cash unnecessarily.  Just because they have more inventory doesn’t mean they have the ‘right’ inventory in the ‘right’ place at the ‘right’ time. Inventory not only ties up cash, but it also increases costs. We are hearing about concerns regarding space, efficiencies, transportation cost impacts and more. In essence, there is a double hit to cash and profit yet the appropriate level of inventory (varies by network and strategy) is required to meet customer expectations.

In addition to pursuing inventory improvement programs to maximize your service, cash and margins such as SIOP (sales, inventory and operations planning) and proactive vendor managed inventory/ collaborative inventory programs, you might want to consider your capacity.

We had a client a few years ago who called because service issues had started to arise and customers were angry. Leadership thought the the operations team was under-performing because there must be something wrong with them since sales revenues were not increasing over 5% a year.

As we dug into the issue, we found that the product mix changed significantly which drove a greater level of operations requirements for the same dollar volume. When this occurred in the past, it didn’t create a problem (lending support to the perception that the operations team was at fault).  Yet, it turns out that as people left, they stopped replacing them because they wanted to bring down costs.

In the past, since they had excess capacity (machinery) and a small excess level of trained, highly skilled direct labor resources, they could produce what was needed as conditions changed without a problem. They no longer could use this magic bullet!

Would it make sense to maintain excess capacity/skills in a key bottleneck area of your operation (whether manufacturing, technical or office)?

If you’d like to talk about your inventory and/or capacity situation further, please contact us.

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As we toured several e-commerce facilities such as UPS and Amazon, it became obvious that the sheer volume during peak season presents a huge dilemma. For example, UPS goes from 250-300 containers per night to 450 during peak season. Now that is quite a surge! Amazon has similar surges and stated facts such as 68 million orders on Cyber Monday. 

Peak season occurs in other industries as well. For example, building products companies tend to have a summer season since there are more issues to navigate in winter conditions. Since we’ve worked with a large number of these companies, we’ve seen it range from a low of around 10-20% surge to almost 70% of the year’s volume was sold during the summer. That can definitely be a challenge to navigate!

In this case, we are talking about labor but the same issues relate to machine capacity, storage capacity, transportation capacity and many others. We find that this topic alone can achieve a significant return on investment as companies better align demand with supply. In fact, in 80% of our clients, these types of programs do the best job of achieving bold customer promises and profits simultaneously. 

We have found several ideas to fill peak capacity periods. Of course, there is no formula for success as each company has unique circumstances that lead us to recommend different solutions for like-companies. However, a few ways to meet peak capacity include:

1. Hiring temporary workers for the peak season – of course, this strategy sounds like an easy win. If only it were that easy! UPS starts hiring seasonal workers prior to the holiday season in order to provide training. In 2018, they expected to bring on 100,000 seasonal workers. Over the last 3 years, 35% were hired into a full-time role after the peak season, creating an interesting enticement. Since every e-commerce related business needs seasonal workers, you need to provide some sort of benefit or enticement to fill these positions. 

2. Overtime – of course, this is commonly used throughout manufacturing and logistics organizations. We’ve seen many aerospace firms running at high rates of overtime for many months, even years, in a row. It can be a tricky issue as employees become accustomed to higher paychecks, and the costs add up. On the other hand, people get tired and can get less productive and want a break. Counterintuitively, it can also be the better financial decision given the learning curves associated with complex manufacturing roles. Of course, the answer is, “It depends”.

3. Hiring people with developmental disabilities – as our Inland Empire Economic Partnership leadership regional academy toured Goodwill and we have worked with clients such as Oparc, we have learned that people with development disabilities can be an ideal solution to fill peak capacity.  Thanks to Oparc for their research statistics: 1 in 7 people have intellectual or developmental disability; however, only 19% participate in the labor force, leaving a significant opportunity to supplement the labor force. Studies show that these folks rate higher in reliability, productivity and loyalty. For example, a DuPont study showed that 90% of employees with Disabilities rated average or better on job performance. According to Walgreens, disabled employees had 40% lower accident rate, 67% lower medical treatment costs and 78% lower overall costs associated with accidents. And Marriot shows a 6% turnover rate vs. 52% overall. It is worth checking this option out! Please contact us for a referral.

4. Partnering with companies with counter cyclical peak seasons – again, have you thought about partnering with strange bedfellows? Why couldn’t an e-commerce company with a winter peak season collaborate with a building products industry with a summer season? In a way, the 3PLs follow this model. Having counter cyclical clients is an important aspect of maintaining a strong workforce as a 3PL. 

5. Outsourcing – one of the advantages of outsourcing and overflow capacity is that you can use it when you need it. Of course, you’ll pay a premium but it can still provide maximum value in several cases and meet the peak season requirements. 

6. Leveraging your extended supply chain – you never know what collaboration might make sense with your suppliers, customers and other supply chain partners until you ask. Explore the possibilities.

One thing is definitely true. You will not succeed during peak season if you wait until it hits to address your capacity shortfalls. Be clear on your strategy and make sure to build it into your plans. It isn’t all about peak season. Perhaps off-peak is “the time” to upgrade your infrastructure such as your ERP system, your business processes and to explore your customer collaboration opportunities. If you’d like an expert to weigh in on your plans, contact us.

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In thinking about the answer to the question, “What if you sell more?”, most sales people would cheer. Most accountants would add up the additional revenue and profit.  And, often, the Operations resources would be glad the leaders are in a good mood.  But does anyone know if we are set up to successfully handle the increased sales if they occur?  

There are several questions to consider in evaluating ‘what if you sell more’. It all boils down to capacity.

1. Machine capacity – do you have the machine capacity to keep up with the increased demand?  If not, can you retrofit a machine?  Can you use a machine from another facility?  
2. Labor capacity – it is very frequently a significantly bigger issue than anything else. Do you have the people to turn up the volume?  Can you add another shift?  How about overtime?  Do you have a partner who can supply temporary workers as needed?  If you have the sheer numbers of people, the question becomes, do you have people with the appropriate skills for the specific products being sold?
3. Supplier capacity – even if you have the manufacturing and logistics capacity, it won’t matter if your suppliers cannot keep up with demand.  What are your suppliers’ expectations?  Do they have flex capacity?  Will they prioritize you?
4. Cash reserves capacity – none of this matters if you do not have the cash reserves or liquidity to fund sales growth.  Aggressive growth sounds like a pleasant problem to have vs. cutting back; however, if you cannot fund growth, it can quickly become unpleasant.
5. Infrastructure capacity – will your internal people, processes and systems support the increased demand?  Will increased volume lead to decreased margins?  Customer complaints?  Loss of visibility?  Or can you scale effortlessly? 

As much as selling more if a great problem to have, it pays to think about it before you run into it unexpectedly.  Some companies get carried away with rules and regulations designed to stifle Sales.  That doesn’t work either!  Instead, think proactively, plan for the likely, think through contingencies and remain light on your feet.  And, you’ll be able to answer the question, ‘what if you sell more?’ with a resounding “YES!”.

The post The Resilient Supply Chain: What If You Sell More? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Several of my clients are in the aerospace industry. In that industry, supply chain readiness audits are commonplace. These are especially prevalent today as growth in that market is substantial. Companies must be prepared for significant growth to support the doubling of the world’s fleet in the next 20 years to give their customers comfort in their long-term viability.

Although this is especially prevalent in aerospace, I’m finding double digit growth widespread in the marketplace today. How ready is your supply chain? There are several aspects that should be reviewed to make sure growth will be seamless. A few of the top ones include: 1) Capacity readiness. 2) Staffing readiness. 3) Supplier readiness. 4) Financial readiness. 5) Process readiness. 6) Systems readiness. 7) Network readiness.

1. Capacity readiness: What is your projected demand? Turn that demand into machine hours. Do you have enough machine capacity to support it? Make sure you look out into the future long enough to cover growth with plenty of time to research, order, install and ramp up your machine(s) successfully.
2. Staffing readiness: Similar to capacity readiness, it is also imperative to review staffing. What does your demand plan say when converted into people needed? How many do you need to hire? What support positions are required? Do you need to fill gaps with temps or contractors? What skills are needed? This will also lead to cross-training and skills development. Neither can be accomplished overnight; however if you start months and years in advance, you’ll be successful.
3. Supplier readiness: Once you know what you’ll need to produce and outsource, you’ll know what supplier support will be needed. Are your suppliers ready to grow at the rate required? Do they even know about your growth expectations? Will you need additional suppliers? Will you need to partner with your supplier to create new materials/ products?
4. Financial readiness: Growth requires cash. It seems like such a great problem to have; however, growth causes far more complications than contractions. Although unpleasant, it is easy to figure out how to cut back yet it is not so easy to be prepared for growth. Have you figured out what your capacity, staffing, supplier support and other infrastructure requirements will be? Do you have the cash to support the ramp up? You will have to pay before you get paid. Cash flow planning is essential.
5. Process readiness: Doing more of what you’ve been doing is rarely sufficient. Instead, consider process improvements. Will lean principles improve your ability to grow quicker? Will SIOP (sales, inventory, and operations planning) support your growth? Are your foundational processes sufficient to support double digit growth? Are there opportunities to be more efficient and/or create customer loyalty? How about customer collaboration programs?
6. Systems readiness: One of the best ways to support growth without adding significant overhead is to leverage systems. Most companies use 20% of their ERP systems at most; consider how to increase that percentage in the “right” functionality to support your business. Is there additional technology that could provide a massive return on investment and support your growth? Keep updated on technology trends and pick those that will fit with your strategy and help deliver results.
7. Network readiness: Remember to think about your entire supply chain network. Are you producing the right products in the right facilities at the right time? Is there an opportunity to re-balance and improve your ability to grow profitably? Where are your customers and suppliers in relation to your facilities? What types of transportation and distribution nodes do you utilize? What lead time should your network support? There are many considerations to think about when evaluating your network.

Although evaluating your supply chain readiness is paramount to support growth, there is no reason to wait for your customers to request an audit. Integrate supply chain readiness into your yearly strategy review process. This way you’ll be in front of your customers and ready for unexpected opportunities. Imagine the possibilities to grow quicker and larger!

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