Clients typically set goals; however, goals without an understanding of where you stand is non-value added. Although it is common to set goals and expect employees to achieve them, it is far less common for clients to understand how they will get from the current state to the desired future state. You must start by understanding where you stand in your supply chain. Unfortunately, although this sounds obvious (and Executives would agree), in reality, it is uncommon common sense!

How comfortable are you that you understand where you stand when it comes to your supply chain? We thought it would be of value to create a quick (2 minute) supply chain assessment quiz so that you can self-assess your supply chain. Learn more about the quiz here.

Client Example: Supply Chain Assessment for Service Turnaround

Our first step of any project is to perform a rapid supply chain assessment. For LMA to help a client, we must know the current situation. We do a review of people, processes, systems (ERP and peripheral systems such as CRM, CPQ, etc.), data, alignment with strategy, etc. Since we are focused on bottom line results, we must determine how to get from “here” to “there” on the quickest and smartest path while ensuring quick wins and value along the way.

For example, an aerospace manufacturer wanted to improve delivery performance to support key customer programs (Boeing, Gulfstream, etc.). In essence, they wanted to dramatically increase OTIF (on-time-in-full) from the mid 60%’s rapidly and reduce lead times to a more acceptable and attractive level for customers while maintaining or improving costs and working capital levels. The executives brought us in as supply chain consultants to upgrade their systems, processes, and talent to achieve these goals.

Our first priority was to perform a supply chain assessment. We reviewed their end-to-end order flow process, use of ERP, data, and skills/ talent. This provided us with a good understanding of their strengths, weaknesses, opportunities, and risks of execution so that we could put together a roadmap for success.

We stuck around and partnered with our client to roll out demand planning, master scheduling, capacity planning, and SIOP (Sales Inventory Operations Planning), also known as S&OP programs. Based on the assessment, we knew we could better utilize their ERP system and upgrade processes by entering forecasts, analyzing capacity plans and establishing supplier contracts with attractive pricing and stability. Additionally, we identified training and education opportunities and risks of execution so that we could mitigate potential bottlenecks. We brought service levels into the 90%’s, gained key customer confidence with improved scorecard performance, and improved margins by several points by rolling out materials forecasts, supplier contracts, and by gaining long-term visibility into operational capacity to minimize costs.

Client Example: Supply Chain Assessment to Turnaround an ERP Debacle

In an electrical equipment manufacturer, customers were upset due to lagging service levels and key employees were overwhelmed with an insurmountable workload following the launch of a new ERP system. After jumping into the details to work with their North American planners to unbury the schedule and to develop directional capacity information, we performed a supply chain assessment with an eye to use of ERP. There was no way to find a grain of sand in the ocean of details without assessing their supply chain and use of ERP.

Although we have a combined 99+ years of experience, 112+ successful client engagements with bottom line business results, 42+ ERP projects, and specialized manufacturing experience, jumping into the process and working with the key resources to turn around the execution didn’t provide enough information to put together a long-term path forward that would achieve the radical improvement required with the ERP system. Thus, an assessment was required with the full scope of ERP as it relates to supply chain and order creation and fulfillment.

We spent five weeks in an around-the-clock focused effort as the situation was urgent to gain a thorough perspective of the business processes, use of ERP and associated skills. After all, our team had to absorb what the ERP implementation team took a year to develop and roll out while understanding the impacts on the supply chain teams (demand planning, production planning, materials planning, capacity planning, etc.) and the correlation to the business bottlenecks. We reviewed business requirements, ERP functionality, offline spreadsheet processes, the status of data integrity, data availability, the status of training and development, availability of key resources, etc. Although it was a hair-raising process, we were successful in putting together an assessment, resource recommendations, quick wins and long-term solution to rectify the use of the ERP system to drive the business results.

The Bottom Line

Take a step back and assess what is needed to achieve your objectives. Don’t “stay in your lane” if you require a broader scope to ensure results even if you must have uncomfortable conversations and take risks in pushing back on standard assumptions. On the other hand, don’t fall into analysis paralysis. When you have a directional view that is assured to get you moving in the “right” direction (even if not 100% optimal), start moving. Avoid circular discussions and pivot back to the key points.

Also consider the people, the process, the system, the data, metrics and strategy in conjunction with each other. Focusing on technical without the process and people will not work, but focusing on the people without a good understanding of the technical and process aspects will not work either. In fact, you will come to inaccurate conclusions in your assessment that will make the situation worse, not better. Instead, use uncommon common sense, and you success rate will skyrocket.

If you are interested in reading more on this topic:
Why Planning is Impacted as Disruptions Abound

The post How Do You Rate in Supply Chain? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Disruptions have not stopped. China has been flying balloons over Taiwan. North Korea is threatening South Korea. Russia continues its war with Ukraine. Israel is at war with Hamas which has spread throughout the region, diverting container ships from the Suez Canal in addition to causing a bunch of other negative consequences. The Panama Canal is experiencing a drought and has reduced the number of container ships that can pass. It got so bad that tankers are now avoiding it altogether which has improved pricing to jump to the head of the line for container ships.

And this is before we bring up one of the hottest topics for companies – the skills gap. In essence, although the high level numbers have improved a bit, if you talk with executives, they are challenged to find resources with the appropriate skill sets. Only the companies advancing technology will thrive; however, it requires additional resources with technical skills to pursue these avenues. It is a complete jumble. If a client thinks they have the resources, it turns out they don’t know what the executives expect them to know. Or, as conditions change (new ERP system, new company ownership, changing economic conditions), they fall short. To read more about where the talent has gone and strategies for success, read our blog article.

Why The Issues All Fall to Planning

At multiple clients, the issues are stockpiling in Planning. We consider Planning to include the following areas:

• Demand planning
• Production planning & scheduling
• Replenishment planning (transfers, distribution)
• Materials planning
• Logistics planning (warehouse, transportation, international)

Here are the common causes that are flowing into the Planning Teams. Executives are frustrated and often think the people are the issue when it is the process, the system, the way the organization is set up etc.

• Customer Service: If Customer Service doesn’t proactively manage customer requests, push back when appropriate, handle customer concerns proactively, enter sales orders with the appropriate fields filled in correctly, every issue will fall in Planning’s lap. As Planning plans and schedules, these issues will arise, and they will have to reschedule, expedite, etc. Additionally, as customers change their mind or orders are pushed out or in, if Customer Service isn’t on top of these issues and proactively communicating cross-functionally, the issues flow to Planning’s desk.
• Engineering: In CTO (configure-to-order) and ETO (engineer-to-order) companies, the product is not finalized until it goes through Engineering. If delays or mistakes occur during this process, the issues flow into Planning’s lap. Also, typically if customer approvals are required, the follow up falls to Engineering. If the customer is delayed in providing approval, they typically still want it on the original request date, even if the company has a policy against this occurring. It happens anyway and falls to Planning to resolve.
• Transactions: If the warehouse doesn’t ship, receive, and transfer on a timely and accurate basis, if production doesn’t enter production and issue materials on a timely and accurate basis, if whoever is responsible for scrap and usage adjustments don’t handle them on a timely and accurate basis, if the inventory team doesn’t cycle count, research and resolve root causes on a timely and accurate basis, the issues pile up in Planning. To determine what to plan, inventory must be accurate and performed on a timely basis. Another issue that arises related to transactions are design decisions made on the basis of minimizing transactions in one department that pushes the workload to Planning. Unfortunately, the fact that the workload will end up in Planning isn’t typically known, but it is what happens as someone needs to figure out what to do. If you don’t track at a detailed level yet you need to plan at a detailed level, Planning will have to figure it out manually.
• Suppliers: If suppliers struggle or transportation is delayed (such as the Suez and Panama Canal or via strikes), production must be rescheduled. Again, the issues wind up in Planning to resolve before moving on.
• ERP setup and use challenges: There are millions of setups and processes tied to how an ERP system is rolled out or upgraded. Thus, there are many ways the system can drive incorrect actions. For example, if an item is set up to flow through MRP when it should flow through a min-max planning process or vice-versa, the planner will not receive the appropriate signals. If your branches are not set up properly and in conjunction with your sales forecast, you can send the wrong product to the wrong place at the wrong time. If lead times and safety stocks are not monitored, you can run the plant out of materials or create an overage quite easily. If there are ECNs (engineering change notices) but the ERP system cannot handle them, the Planners might be left updating countless work orders to know what to produce and order.

In the last six months, we’ve seen Planning get bombarded with these types of issues across multiple clients in multiple industries and multiple geographies. It is a common situation.

Path Forward: Reactive to Proactive

Unfortunately, there are no easy solutions. In fact, that is how “we” have got into this situation. Someone has to figure out the path forward. If no one else does it and the ERP system hasn’t been designed to handle it yet, Planning will be your last resort. Thus, ensure you have the appropriate skills on your Planning teams. If they are supposed to catch whatever goes wrong throughout the lifecycle of an order, make sure your planners are ready to do that for an interim period of time. Have you provided ongoing training and education? Have you hired consultants to help your team upgrade the process? Have you invested in additional technology to support your team?

Look around you. Have you had several retirements of long-term employees? Are you sure someone has absorbed ALL of the relevant tasks? How sure are you that the tasks will be automated? How sure are you that they are no longer required if you’ve implemented a process change? How sure are you that your new resources understand the big picture? In several situations, smart executives wondered why these tasks couldn’t be automated. Of course, the answer is that they can be automated, but ONLY with a high-skilled resource(s) with practical experience that can ensure items don’t fall through the cracks. Don’t wait for retirements to occur to go backwards and think about the process. Plan ahead, develop career paths, and transition plans.

Have you implemented a new ERP system or new ERP functionality? Most likely, the ERP team said we will start with base information and add your requests to future phases. How sure are you that those requests will be covered in the interim period? Have you planned to bring on board the appropriate resources for the workload in the interim? Do your employees know what should be done? They might just know what doesn’t seem right, but not know what to do to make it better. Are there a few of those items that should be fought for instead of postponing to a future phase? If you don’t want your business waiting on the Planning Team, re-review if you hear any of these watch-outs. Supplement your team, provide support, and tie rewards with the outcomes you want to achieve for not just the ERP team, but also for those required to ensure success.

Pivot from reactive to proactive is the message. Think forward, invest wisely, provide training and education to your people, communicate clearly, hire leaders with the experience to “jump in” and take on tasks to “see” what their team members are experiencing and help their team climb out of holes. We are in a business environment that is not for the faint of heart. Strong leaders that are willing to take on smart risks, work hard, and pivot with changing conditions will deliver strong results.

SIOP: Reactive to Proactive

Smart leaders are rolling out a SIOP (Sales Inventory Operations Planning) process to proactively plan demand and supply. SIOP will alert you to bottlenecks, issues, the need to pivot etc. Forward-thinking companies are gaining an advantage as they have planned ahead to be agile, pivot quickly, and most importantly, are ahead of the curve in securing capacity, materials, and key resources.

Think ahead and pay close attention to what’s going on in your Planning Team. If the ball is rolling downhill, put stopgaps in place to catch it while proactively addressing the topic.

If you are interested in reading more on this topic:
Master Planning & Production Scheduling Case Study: Gaining Visibility for Results

The post Why Planning Is Impacted As Disruptions Abound appeared first on LMA-Consulting Group, a supply chain consulting firm.

According to Polaris Market Research, the market size of artificial intelligence (AI) in manufacturing is predicted to grow more than 41% during the next decade. Although the latest Sikich Industry Pulse found that less than 20% manufacturers have started to implement AI, the ones that want to thrive in the next decade are pursuing AI strategies that make sense to support their business objectives. AI can help manufacturers target where to focus and automate mundane tasks.

There are many uses for AI in manufacturing. A classic example is predictive maintenance. Instead of preventative maintenance, target where to maintain with predictive maintenance to maximize your efforts. Collaborative robots (cobots) work alongside people and often can perform tasks such as those requiring heavy lifting. Digital twins are virtual models of physical objects or layouts, and they can receive information about the object through sensors to get information about maintenance needs etc. On the software side, manufacturers are using robotic process automation (RPA) to handle high-volume, repetitive tasks that can be automated. 

For example, in working with a water tank manufacturer, we wanted to upgrade the use of ERP and start using MRP (material requirements planning) recommendations for purchasing. Before turning MRP on, we had to perform a cleanup of data and add routing data steps in the system. The team was lean, and it was estimated to take a few months to prepare for go-live. The executive team did not want to wait to improve service and increase efficiencies, and so a technical expert on the team used RPA to write a code to automate the setups. We completed the preparation in three days instead of three months and started gaining results.

Another application for AI in manufacturing is a lights-out factory which runs with robots. Although full lights-out factories are rare, this application is gaining momentum across the globe especially as workforce participation rates remain low, manufacturers realize they need to gain control of their success and are reshoring, and margins remain tight with high material and labor costs. Robots can operate around-the-clock without lunches, breaks, and workers compensation claims.

For example, an industrial manufacturing client struggled to find the talent to run its manufacturing operations. They couldn’t keep up with demand, employees were frustrated, and customers were unhappy. They purchased a robot to perform production in a key bottleneck area of the facility; however, the robots couldn’t produce around-the-clock because there was nowhere to store finished product on second and third shift without material handlers. Thus, the engineering team developed an automated way for the product to be moved from the point-of-production. Past due deliveries plummeted as the system came online.

AI is also prevalent in supply chain applications that support manufacturing success. For example, sales forecasting and demand planning is supported with AI algorithms to better predict demand. Even in the most industrial of manufacturers, demand patterns have been difficult to predict, creating a need for AI to get in front of demand. AI is also used in inventory management and to prevent bottlenecks and predict what’s needed.

AI requires proactive design so that you can limit expense and minimize the high-skilled resources required to go live. Start with a rapid assessment of your business requirements, process and technical infrastructure and resources. Select a pilot to test your plans and results will follow.

Originally published in Brushware Magazine, January / February 2024.

The post Integrate AI in Manufacturing to Raise the Bar appeared first on LMA-Consulting Group, a supply chain consulting firm.

Although production and materials planning can be overlooked in its importance in most companies if going smoothly, it is cornerstone to success. Unfortunately, when not going smoothly, it can bring a company to its knees. For example, production might not know what to run, changeovers can be out of control, customers become unhappy, materials shortages persist, resources are scrambling to catch up with changing conditions, and chaos ensues. Read more about this topic in our article, The Million Dollar Planner.

An Industrial Equipment Manufacturer Case Study

An industrial equipment manufacturer struggled to keep up with month end sales goals when receiving last minute notice from Engineering of final design of the engineer-to-order item (bills of materials) before the item was scheduled to ship to meet customer requested dates. There were multiple stages to the manufacturing process (fabrication, weld, paint, final assembly), and parts had to be shipped offsite for process steps and married up along the way at the “right” time to make the orders come together.

The bottleneck and pacing item was the machine shop, yet visibility was limited to seeing which parts had to complete production at the same time, and the production schedule was completely manual based upon paperwork on hand since there was a lack of visibility in the system. The production supervisor would go through the work order packets, pick out manufacturing differentiators (size, material type, etc.) and group the packets in piles by the optimal run sequencing. For example, you run different sizes on different machines, and you would sequence by material type to be most efficient with changeovers.

Although the machine shop pulled out the stops on a regular basis to meet sales goals, it required constant expediting and coordination of process steps, was sub-optimal based upon the work order packets available at the time, and the process was completely dependent on a person (who also turned into a single point-of-failure). Since there was a lack of visibility, sales order availability frequently moved from month-to-month, creating concerns with predictability. And the machine shop ran less efficiently than it would have if there was visibility to the full scope of work order packets.

As we provided consulting support to this client, we learned about the optimal sequencing triggers (size, material type, etc.) and looked for ways to identify these triggers sooner in the process. Of course, it is never as easy as it appears. Thus, we had to work upfront in the sales quoting process to get a better picture of the demand plan by adding configuration strings (high-level identification of the item) into the process and system early in the process. By adding this information into sales orders, the team had better visibility to what was coming down the pike prior to Engineering’s final design so that we could gain visibility to plan capacity and materials (master scheduling) instead of reacting to sales orders late in their life cycle. We integrated this visibility into a SIOP (Sales Inventory Operations Planning) process to build a monthly cadence and review of critical sales and operational forecasts.

To address the machine shop scheduling, additional triggers had to be identified and incorporated into the data. Sales order statuses were also key to the process as sales orders went through engineering, production engineering, customer approval, material availability, and work order creation before the items were available to be scheduled. We built these statuses into a planning report along with key triggers and dates (incorporated from a production status review process). Once this report was built, a dashboard was developed for improved visibility and ease of use. This powered the production scheduling process and replaced the packets process so that the system automated the 80/20 and focused attention on what was meaningful to optimize the production schedule and ensure the parts married up at the right time.

Master Scheduling & Production Planning Results

As the client gained visibility to required capacity and materials, they were able to start making directionally correct decisions early in the process with the master scheduling process. As capacity bottlenecks arose, they were able to address proactively before “running into a wall”. For example, we gained visibility that paint was a future bottleneck, and so the head of Operations was able to put together the appropriate capital requests, gain approval, and order an additional paint system to support sales growth goals. Additionally, offload capacity was needed to supplement the weld area, and so leadership was able to pursue additional options prior to negatively impacting customers.

From a materials standpoint, Purchasing was able to look into the future and secure materials ordered from the Russia-Ukraine region while they were still available. While every client struggled to maintain service levels during COVID, our client was able to keep one step ahead and sustain higher levels of service for customers.

As the production scheduling process was upgraded, our client gained visibility to the machine shop and could optimize efficiencies and gain capacity. The head of Operations said he was able to double capacity to support sales growth. The production schedule was no longer dependent on a person; it became part of a process. Thus, this key resource could focus attention on further optimizing machine shop performance.

The Bottom Line

Pay attention to your planning processes as they will drive bottom line business results. Changing from reactive to proactive sounds far easier than it is when you get down to the details, but rolling out the appropriate process, data, and ERP system upgrades will propel progress. If you are interested in talking about implementing a master planning and production scheduling process upgrade to improve visibility and results, contact us.

Did you like this article?  Continue reading on this topic:
Production Planning Best Practices to Recover Capacity

The post Master Scheduling & Production Planning Case Study: Gaining Visibility for Results appeared first on LMA-Consulting Group, a supply chain consulting firm.

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.

Did you like this article?  Continue reading on this topic:
Optimizing Business Decision Tradeoffs with SIOP

The post SIOP / S&OP: Proactive Approach to Maximizing Production Output & Capacity appeared first on LMA-Consulting Group, a supply chain consulting firm.

Why Is Inventory Accuracy Foundational to Success?

Inventory accuracy is foundational to success. Most clients aren’t concerned about inventory, and they shouldn’t be if they can count on what their system says. However, in every case, inventory must be maintained to ensure your foundation is strong and will support customer service, revenue growth, operational efficiency, and cash flow goals. It is also foundational for maintaining financial records and a foundational requirement for Sarbanes Oxley.

For example, a security products manufacturing client called with concerns about decreasing profits. They were concerned that they couldn’t predict their costs and therefore their profit, and they thought it related to their use of the system. After performing an assessment of their people, processes and systems, it was clear that putting costs in their system didn’t make sense until they had a solid foundation to build upon. Inventory accuracy was one of those foundational elements that had to get in place before advanced layers of process and system capabilities were added. Fast-forward four months, and their inventory accuracy was intact, base product data was available, and they had gained control of their business and were better able to predict performance – and could advance from there.

Essential Inventory Accuracy Basics

Inventory accuracy boils down to a few simple concepts including:

• Process disciplines: The 80/20 of inventory accuracy success requires process disciplines to be implemented throughout your company. The tricky part of this equation is explaining the importance, establishing the connection points between processes, marrying the processes with the systems, and ensuring priorities are in place to complete processes and system transactions on a timely basis, in the correct sequence, and with the appropriate controls in place. Process disciplines cover from receiving and production to transfers (intercompany and intracompany) and shipments. In essence, any transaction that impacts inventory must be included.
• Use of the system: If process disciplines are intact, the only other root cause we’ve seen over a combined 100 years of manufacturing and distribution experience is the use of the system. Not all scenarios are created equal. For example, in several situations, intracompany transfers were an issue from an inventory standpoint. In a consumer products manufacturer, their system didn’t allow for tracking intransit properly, and so their inventory “disappeared” while intransit. In a building and construction products manufacturer, their system was highly capable, but the long-term processes didn’t account for transfers properly. Again, the result was “invisible” inventory.
• Root cause analysis: It is common to have inventory inaccuracies. No client has 100% inventory accuracy over the course of a year as perfection is cost prohibitive. On the other hand, many clients can maintain reasonable inventory accuracy with process disciplines and cycle counting. This suffices whereas only the best (around 20-30%) have substantial root cause analysis built into the culture and routines. If reasonable “works”, why strive for the best? They have fewer high skilled resources tied up in maintaining the foundation. Instead, these key resources are focused on profitable growth and advancing the business.

With these three essential inventory accuracy basics, a strong foundation is intact.

Maintaining Inventory Accuracy with Cycle Counting

The key to maintaining inventory accuracy is cycle counting. In essence, it is counting a subsection of your inventory on a daily basis to confirm your inventory accuracy foundation remains intact. Although there are many strategy options, common sense rules the day. ABC cycle counting means you count the material items (in terms of value, volume and/or customer impact) more frequently (that usually account for 20% of your items that equal 80% of your value) while counting the least material items (that usually account for 80% of your items that equal 20% of your value) less frequently. Instead of counting and adjusting, counting and adjusting in a vicious cycle, you focus attention on root cause analysis and resolution. Doing this for the “A” items will positively “B” and “C” items as well since the same process disciplines are required.

How Does a Physical Inventory Fit Into the Picture?

In most situations, once you implement a solid cycle counting process where you cycle through your full inventory at minimum on a yearly basis, you can provide evidence to Finance Auditors that your inventory will be “better” than performing a physical inventory. For example, if the people counting aren’t familiar with the units of measure and products, counting errors increase. Thus, many companies no longer require a full physical inventory. On the other hand, if inventory accuracy metrics start going off-track, it might be time to regroup with a physical inventory and a reimplementation of cycle counting.

The Bottom Line

You don’t want to be sitting happily and unwittingly in a house of cards. Thus, don’t have your house sit on a faulty foundation. Prioritize the appropriate resources to set up solid inventory accuracy processes and tracking mechanisms. If you aren’t in front of inventory variances and root causes, consider bringing on a supply chain consultant. You won’t need significant expertise long term for inventory accuracy alone, and so a short-term expert might fit that bill. Once intact, provide training and education, and make sure a regular review of metrics with Executives is a part of the process. It can be incorporated into the metrics slides of a SIOP (Sales Inventory Operations Planning), also known as S&OP, process to get a regular cadence with Executives.

Please contact us with your stories, issues, and ideas on inventory accuracy and cycle counting. And, please keep us in the loop of your situation and how we can help your organization upgrade your inventory accuracy processes to support profitable growth in addition to satisfying compliance objectives.

P.S. To get ahead of the curve on where to focus for the best results to build on your foundation to get ahead of the competition, download our complimentary report, and The Road Ahead: Business, Supply Chain & the World Order.

The post Why Is Inventory Accuracy Foundational to Success? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Introduction

In today’s volatile and complex business environment, CEOs and Executives are constantly seeking opportunities to gain a competitive edge, increase profitability, and deliver exceptional customer service. Often, the key to unlocking these opportunities lies within the company’s supply chain – a complex, multi-layered entity that, if managed effectively, can significantly elevate a business’s performance. That’s where a Supply Chain Consultant steps in.

A Supply Chain Consultant is more than a guide; they are transformation agents, who can redefine your company’s supply chain to enable profitable growth, drive efficiency, improve operational performance, and enhance visibility, responsiveness, and customer satisfaction. A consultant can bridge the gap between your supply chain’s current state and its potential, leveraging their expertise to get in front of changing circumstances, mitigate risks, use technology, and align your supply chain strategies with your overall business goals.

Hiring a Supply Chain Consultant is not merely about solving immediate challenges; it’s about foreseeing and preparing for future trends, adjusting your operations to meet changing market demands, and making your supply chain resilient to disruptions. CEOs should care about hiring a Supply Chain Consultant because, in doing so, they are not only optimizing a crucial aspect of their operations but also investing in the company’s long-term success and sustainability.

This article will guide you on how to hire the right Supply Chain Consultant, arming you with the knowledge you need to make an informed and strategic decision that will empower your business to thrive in today’s dynamic marketplace.

I. Understanding the Role of a Supply Chain Consultant

A Supply Chain Consultant plays an instrumental role, encompassing much more than just advice and guidance. This professional stands at the intersection of business process expertise and content mastery in the fields of manufacturing, supply chain, and ERP and related technologies.

At its core, the role of a Supply Chain Consultant is fourfold:

• Provider of Expertise: A Supply Chain Consultant offers informed advice and counsel, deeply rooted in the end-to-end supply chain (from your suppliers’ suppliers to manufacturing and distribution operations to your customers’ customers) and related technologies. Their expertise ranges from an understanding of the best practices and systems of demand planning / sales forecasting to a comprehensive knowledge of manufacturing processes, resource allocation, order fulfillment and production planning processes to the nuances of distribution, logistics and product movement.
• Strategist and Planner: They act as the architect of your supply chain optimization. They evaluate the current state of your supply chain, identify opportunities, bottlenecks and inefficiencies, and map out a solid execution plan for improvements, ensuring alignment with your company’s growth objectives and financial goals (profits, margins, working capital).
• Innovation Driver: As the harbinger of innovation, a Supply Chain Consultant brings to the table cutting-edge solutions and forward-thinking strategies. They drive transformation within your supply chain, introducing technological advancements and novel methodologies that enhance process efficiency and generate greater margins.
• Hands-On Guide & Educator for Implementation: Beyond devising strategies, a Supply Chain Consultant actively participates in the implementation phase. They provide hands-on support during the rollout of new processes and tools, oversee the change management process, and educate your team about new practices and the rationale behind them.

Viewed holistically, a Supply Chain Consultant scrutinizes every aspect of your supply chain—from product development, procurement, and production, to order fulfillment, distribution, and customer service. Their objective is to create a cohesive, agile, and resilient supply chain that can not only meet the current market demands but also adapt and excel in the face of future trends and challenges. In essence, a Supply Chain Consultant serves as a vital ally in unlocking your organization’s potential for profitable growth and sustained success.

II. What to Look for in a Supply Chain Consultant

Identifying the right Supply Chain Consultant is a strategic task that demands a discerning eye and careful consideration. You need an expert who can swiftly navigate the intricacies of your organization’s processes while adapting to your unique needs. Here are some key traits to seek in a Supply Chain Consultant:

• Broad Process Expertise: Your ideal consultant should possess a comprehensive understanding of manufacturing and distribution processes that spans across diverse industries. While industry-specific knowledge can be valuable, a consultant with wide-ranging expertise can apply insights and best practices from various sectors, fostering innovative solutions that transcend traditional industry boundaries.
• Innovative Thinker: While problem-solving skills are important, what sets a stellar consultant apart is their ability to drive innovation. Look for a consultant who doesn’t just react to issues but proactively seeks opportunities for improvements, leveraging their knowledge of the latest trends, technologies, and methodologies.
• Proficiency in ERP Systems, Related Technologies & Data: In today’s tech-driven business world, a Supply Chain Consultant must be well-versed in the use of ERP (Enterprise Resource Planning) systems and supply chain technologies. These systems serve as the backbone of integrated supply chain management, and your consultant should have the skills to maximize their potential, optimizing your supply chain’s efficiency and agility. Turning data into insights can provide you a competitive advantage in the marketplace.
• Adaptable Approach: Rather than seeking a perfect cultural fit, look for a consultant who can seamlessly adapt their style to meet your organization’s needs. The ability to adjust to diverse work environments, understand your organization’s nuances, and mold their approach accordingly is crucial in driving success and ensuring effective collaboration. For example, if you are using SIOP (Sales Inventory Operations Planning), also known as S&OP, you will gain insights into what to adapt to ensure you are set up to not only meet changing business conditions but to also to ensure profitable growth.
• Results-Oriented: Lastly, an effective Supply Chain Consultant should always prioritize results. They should have a proven track record of delivering tangible outcomes and creating lasting impacts. Check their past projects and references to ensure that they can translate their strategies and plans into concrete improvements and notable ROI. 

Remember, your Supply Chain Consultant will play a key role in shaping your supply chain’s future. Taking the time to find the right expert who embodies these qualities can lead to substantial improvements in your ability to meet and exceed your growth plans, operational performance, customer satisfaction, and, ultimately, your bottom line.

III. Top Methods to Find a Good Supply Chain Consultant

Searching for a top-tier Supply Chain Consultant is a strategic endeavor that should be approached with care and due diligence. To help streamline this process, we’ve curated the three best ways to find an adept Supply Chain Consultant:

1. Leverage Professional Networks: Industry conferences, trade shows, and networking events are valuable platforms for connecting with industry experts and potential consultants. Such forums provide opportunities to understand a consultant’s thought leadership and see how they interact with their peers. Additionally, seek recommendations from your professional circles, including colleagues, business partners, or industry associations. Word-of-mouth referrals can often lead to valuable connections with trusted and vetted consultants.
2. Online Platforms: LinkedIn and Google: In today’s digital age, online platforms like LinkedIn and Google are indispensable tools in your search. LinkedIn, with its vast professional network, can help you discover consultants who have the right mix of experience and skills. You can explore their profiles to understand their expertise, track record, and professional connections. Google, on the other hand, allows you to conduct a broad search for consultants, delve into their online presence, read client testimonials, and check their portfolio of work.
3. Client References and Case Studies: Once you’ve identified potential consultants, review their references, testimonials, and case studies. This will give you insights into their professional conduct, style of work, and the kind of results they have achieved for other clients. Specifically, ask about projects that had similar objectives to yours. This will help you understand how they might handle your own supply chain issues.

Remember, the process of finding a good Supply Chain Consultant goes beyond simply checking off a skills list. It’s about finding an expert who aligns with your business goals, understands your industry, and can bring valuable insights to your operations.

IV. The Hiring Process: 4 Steps to Prepare for Success

Hiring a Supply Chain Consultant is a critical decision that can significantly impact your business operations. To ensure a successful engagement and outcomes that align with your objectives, here are four steps to prepare for success:

1. Define Desired Results: Before engaging a consultant, clearly identify what results you aim to achieve from the consulting project. It’s vital to focus on the desired outcomes rather than specific tasks. Whether it’s enhancing operational efficiency, boosting customer satisfaction, or improving cash flow, having a clear vision of the end goal will guide your decision-making process throughout the project.
2. Prioritize the Project: Ensure your organization is ready to fully commit to the consulting project. This means prioritizing the project within your business and dedicating key resources to support it. Remember, the more your organization invests in the project’s success, the more likely it is to yield the desired results.
3. Onboard the Consultant: Just like a new employee, your Supply Chain Consultant needs to be properly onboarded. This includes sharing key business information, introducing them to important stakeholders, and providing access to necessary systems and data. A well-executed onboarding process will enable the consultant to quickly understand your business environment and start contributing to your project.
4. Set Up Regular Check-Ins: Establish a regular communication schedule with your Supply Chain Consultant. Regular check-ins allow you to stay informed about the project’s progress, discuss challenges and successes, and make necessary adjustments. Open and ongoing communication will help keep the project on track and aligned with your business goals.

With these steps in place, you’ll be well-prepared for a successful engagement with your Supply Chain Consultant, paving the way for transformative improvements in your supply chain.

V. Hiring a Supply Chain Consultant: The Top 5 Essentials

Choosing the right Supply Chain Consultant is not a decision to be taken lightly. Your selected expert will play a pivotal role in driving significant improvements in your supply chain operations. Here are the top five essentials to consider when hiring a Supply Chain Consultant:

1. Broad Expertise Across Multiple Industries: A consultant with broad-ranging knowledge across various industries will bring diverse insights and best practices to your company. They’ll be adept at applying lessons learned from one industry to another, fostering unique, innovative solutions that could give your business a competitive edge.
2. Experience in Various Manufacturing & Distribution Environments: Different manufacturing environments (job shop, process, configure-to-order (CTO), etc.) come with unique challenges and opportunities. A Supply Chain Consultant with experience across multiple manufacturing and warehousing settings (pick, pack and ship) will have a more holistic understanding of supply chain complexities. They can use this understanding to identify the most efficient and effective strategies for your specific environment.
3. Balance of Strategy and Tactics: Your chosen consultant should be able to think strategically, keeping your company’s long-term goals in mind, while also being able to dive into the nitty-gritty of day-to-day operations. They should be capable of devising robust strategies and then translating these into tactical plans that drive real, tangible improvements in your supply chain.
4. Agents of Change: Change is inevitable in business, and it’s often the key to unlocking greater efficiency and profitability. Look for a consultant who is not just open to change but is an active agent of change. They should be able to guide your team through transformation, providing necessary training and support, and fostering a culture that embraces change.
5. Proficiency with ERP & Related Technologies: The most effective Supply Chain Consultants are proficient with various ERP systems and related technologies. They understand the critical role technology plays in modern supply chains and are able to leverage these tools to optimize your processes, improve data visibility, and enhance decision-making.

With these five essentials in mind, you’ll be well-equipped to find a Supply Chain Consultant who can deliver the expertise and results your business needs to excel in today’s dynamic and competitive market landscape.

VI. What to Expect from a Supply Chain Consultant

Hiring a Supply Chain Consultant can be a transformative decision for your organization. Here’s what you should expect from your consultant:

• Comprehensive Assessment: A Supply Chain Consultant should start by conducting a thorough evaluation of your current supply chain operations. This involves understanding your processes, identifying bottlenecks and inefficiencies, and benchmarking your performance against industry standards.
• Clear Strategies and Action Plans: Based on their assessment, the consultant should provide clear strategies and action plans to improve your supply chain. These strategies should align with your overall business goals and should be presented in a manner that’s easy for your team to understand and implement.
• Expert Guidance: A consultant should offer expert advice based on their knowledge, experience, and the latest industry trends. They should guide you in making informed decisions that boost your supply chain’s efficiency and resilience.
• Performance Improvements: You should expect to see improvements in your supply chain performance. This could be in the form of your ability to meet growth goals, improved lead times and delivery performance (OTIF), enhanced customer satisfaction, reduced costs, improved margins and accelerated cash flow.
• Change Management Support: Implementing new supply chain strategies often involves significant changes. A consultant should provide support during this transition, helping manage resistance, training staff on new processes, and ensuring the changes are implemented smoothly.
• Regular Communication and Updates: A good Supply Chain Consultant should provide regular updates on the project’s progress. They should be open to your feedback and be readily available to address any concerns you may have.

Remember, the right Supply Chain Consultant should be a partner in driving your business’s success, and these are the expectations you should have from them.

VII. Red Flags When Hiring a Supply Chain Consultant

As with any hiring process, there are potential red flags that could signal that a Supply Chain Consultant may not be the best fit for your organization. Here are some to look out for:

• Lack of Relevant Experience: While a consultant may have experience in supply chain management, if they lack experience in the broader supply chain or specific challenges you’re facing, they may not provide the most effective solutions.
• Overpromising Results: Be wary of consultants who promise dramatic results without demonstrating a clear understanding of your organization and its supply chain. Real, lasting improvements take time and a deep understanding of the nuances of your operations.
• Poor Communication: If a consultant fails to communicate clearly during the hiring process, it’s likely to continue during the project. Effective communication is critical to a successful consultant-client relationship.
• No Concrete Plan: A competent consultant should be able to outline a clear plan of action based on an initial assessment. If they can’t provide a plan or their plan is too vague, it may be a red flag.
• Inflexibility: Each organization is unique, and a one-size-fits-all approach often doesn’t work in supply chain management. If a consultant seems rigid in their methodologies and unwilling to adapt to your specific needs, they might not be the right fit.
• Lack of References or Track Record: If a consultant can’t point to references or examples of past successes, proceed with caution. A proven track record is one of the best indicators of a consultant’s capabilities.

Paying attention to these red flags can save your company time, resources, and potential frustration. Remember, hiring a Supply Chain Consultant is an investment in your organization’s future, and it’s crucial to select the right individual for the job.

VIII. Common Mistakes to Avoid When Hiring a Supply Chain Consultant

Hiring a Supply Chain Consultant is an important decision, and it’s crucial to avoid common pitfalls during the process. 

Here are some mistakes to steer clear of:

• Not Clearly Defining Your Needs: Without a clear understanding of the outcomes you want to achieve with a consultant, you risk hiring someone who may not be the best fit for your specific needs. The focus should not be on tasks; look for a consultant who will bring results.
• Focusing Solely on Cost: While cost is an important consideration, don’t let it be the deciding factor. The cheapest consultant is unlikely to provide the best value. Remember, hiring a consultant is an investment. Evaluate potential candidates on the value they can bring to your organization.
• Overlooking Cultural Fit: Even the most qualified consultant may struggle to deliver results if they don’t fit well with your company culture. It’s important to ensure that the consultant’s work style and values align with your organization’s culture.
• Ignoring Red Flags: It’s essential to pay attention to potential warning signs during the hiring process. Ignoring red flags, such as lack of communication or vague plans, could lead to difficulties down the road.
• Skipping a Results Check: Even if a consultant seems perfect, don’t skip checking references, testimonials, and case studies. Listening to previous clients can provide valuable insights into the consultant’s reliability, professionalism, and effectiveness.
• Expecting Instant Results: Improving a supply chain takes time. It’s a mistake to expect immediate results. Be patient and give the consultant sufficient time to analyze your operations and implement changes.

Avoiding these common mistakes can help ensure that you hire the right Supply Chain Consultant for your business, facilitating a fruitful and successful partnership.

IX. How Top Executives Select a Supply Chain Consultant

Many top executives understand the immense value a competent Supply Chain Consultant can bring to their organization. They also recognize that the selection process is a strategic decision requiring careful thought and consideration. 

Here’s a peek into how these successful executives approach the task:

• Align with Business Goals: Top executives understand their business goals clearly and look for consultants who can align their strategies and recommendations to meet these goals.
• Look for Proven Expertise: These leaders value proven expertise. They look for consultants who have a strong track record of success in managing complex supply chains, especially in their industry.
• Emphasize Communication: Top executives understand the importance of clear and effective communication. They seek consultants who can articulate complex concepts clearly and can effectively collaborate with various stakeholders (from executives to planners to I.T and manufacturing employees.
• Value Creativity and Innovation: In an ever-evolving business landscape, the ability to think creatively and innovatively is highly valued. Top executives look for consultants who can provide out-of-the-box solutions to their supply chain challenges.
• Prioritize Long-term Value: These executives don’t just look for quick fixes. They understand that a Supply Chain Consultant can provide the most value by making sustainable, long-term improvements to their supply chain operations.

In conclusion, hiring a Supply Chain Consultant can be a transformative step for your organization. 

The right consultant can support profitable growth, streamline your operations, uncover efficiencies, unlock the potential of your ERP system and related technologies, improve relationships with supply chain partners, and ultimately boost your bottom line. 

As a CEO, you may want to consider whether it’s time to invest in a Supply Chain Consultant to propel your organization forward in this competitive, globalized business environment. 

Remember, the key to successful hiring lies in knowing what you need, taking the time to find the right fit, and setting clear expectations for the engagement. 

With the right approach, your partnership with a Supply Chain Consultant can be a game-changer for your organization.

The post How to Hire a Supply Chain Consultant: A Comprehensive Guide for CEOs & Executives appeared first on LMA-Consulting Group, a supply chain consulting firm.

The post Manufacturing Matters: An Update on Supply Chain Challenges, Opportunities appeared first on LMA-Consulting Group, a supply chain consulting firm.

Originally posted in ASI – Adhesives & Sealants Industry – June, 2023

Innovation allows companies to achieve higher levels of growth, profitability, employee engagement, and success.

According to the Global Innovation Index (GII), Switzerland ranks first in the world with the US edging out Sweden for the second position. China continues to ascend and is in the eleventh position, and the only middle-income economy within the top 30. India also rated number one in the lower-middle income category. It is apparent that innovation, growth, and success seem to go hand in hand. This insight rings true in the business world as well. The most innovative clients have the highest levels of growth, profitability, employee engagement and success.

New Product Development

One of the most visible forms of innovation is developing new products and submitting patents. No manufacturer can thrive long term without a keen eye to research and development, designing new products, and upgrading existing products. The World Intellectual Property Organization (WIPO) reported that the demand for patents hit record levels in 2022. It is no accident that India’s patent applications shot up by 25% as they emerge in the manufacturing realm. China filed the most international patent applications, followed by the US and Japan.

New products can drive success. For example, at a lighting manufacturer, the CEO put a heavy emphasis on designing new products to enter new markets and maintain their top position in their industry. He was one of the only executives investing in people at the height of the Great Recession. Excellent talent was available, and so he hired when the competition cut and invested resources into research and development. Fast-forward a few years and they had developed new products, got architects to spec their products into plans, and they were growing steadily in the new market.

Supply Chain Innovation

Innovation does not come just in the form of new products. You can reconfigure, repackage, develop new services, and find ways to meet unmet needs. These forms of innovation can be far more important as few people develop the new sticky pad. Even the iPhone was an iteration of the iPod which was simply a better “Sony Walkman”. Supply chain innovation can be a critical ingredient to success in the next decade. During the pandemic, executives learned that supply chain should be integral to their strategy to drive profitable growth. Start with your ideal customer and find the best way to grow and innovate with them.

For example, in a piping insulation manufacturing company, providing high quality products and rapid service was cornerstone to growing the business. They had built a distribution network to position product closer to their customers to provide short lead times and quick turnaround service; however, since they didn’t store all items at these distribution centers, they also experienced increased freight costs to supplement customer orders and ship direct from the manufacturing facility when needed. Service suffered because the right product was not in the right place at the right time, and storage costs increased with this model and due to the bulky nature of the product. Thus, a focus was put on innovating the supply chain model to find a new solution to provide short lead times and high service levels while minimizing costs and inventory.

The executives invested in supply chain consultants, supported innovation with trials/ pilots of new replenishment strategies, rolled out advanced ERP and planning system functionality, reviewed and upgraded processes, and designed inventory analytics to support improved service at lower costs and inventory levels. Not only did service levels dramatically improve from the high 30%s to the 90%s for On-time-in-full (OTIF), but costs and inventory levels were reduced. As improved and predictive information became available with business analysis and reporting, they also were able to make key pricing, product rationalization, and service policy decisions sooner and created a resilient supply chain.

Operational excellence is no longer enough. Innovation has become cornerstone to success. There will be more opportunity than ever before during the next decade, but only for those companies continually innovating and improving with changing circumstances. Those that innovate will be ready to take advantage of market opportunities and will pivot with evolving conditions. Will you innovate and grow or decline and die?

Lisa is founder and president of LMA Consulting Group, Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. She recently released SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth as an e-book that can be found at https://www.lma-consultinggroup.com/siop-book/.

The post Supply Chain: Innovate to Thrive in the Next Decade appeared first on LMA-Consulting Group, a supply chain consulting firm.

Why Balance Customer Orders, Inventory, & Profitability?

If you want to serve your key customers successfully (with high on-time-in-full (OTIF), short lead times, and proactive service) so that you can take advantage of the opportunities coming down the pike while addressing the hard realities of the current business environment (potential recessions, high interest rates, and less access to capital), you MUST balance sales, operations and inventory.

Otherwise, you will have one or more of the following issues arise:

• Inventory Overload: Too much inventory of the wrong products and WIP (work-in-process) in the wrong place at the wrong time.
• Slow Moving Inventory: Too much slow moving or obsolete inventory
• Production Schedule Disruptions: Not enough of the right inventory in the right place to keep production running smoothly.
• Weak Service: Not high enough service levels to ensure you can maintain and grow your business during turbulent times, let alone meet business plans
• Not Prepared for Growth: Not able to take on significant opportunities coming down the pike. For example, as companies expand manufacturing in North America, customer orders continue to increase down-the-line in the supply chain
• Skyrocketing costs: If you aren’t balanced, you have to spend more to meet customer objectives.
• Inflation cost increases: The only way to offset the massive cost increases related to inflation is to be able to get in front of what’s coming.

Instead of these dire consequences, the smart are proactively balancing customer orders, inventory and profitability.

How Do You Balance Sales, Inventory & Operations?

The good news and bad news is that balancing these factors does not require significant capital investments, the latest technologies like ChatGPT, and a mountain of resources. It simply requires rolling out the appropriate strategy and tactics that is uncommon common sense. Roll out the appropriate strategic processes largely encompassed with Sales Inventory & Operations Planning (SIOP), also known as S&OP, processes. Focus solely on achieving directional progress, and you’ll gain quick wins.

However, strategy alone will not “work”. It has to be accompanied with the appropriate tactics which is the execution of the fundamentals required to support Sales & Operations Execution (S&OE). If you aren’t familiar with S&OE, don’t fret. It is a common term in software circles, but in manufacturing and supply chain circles, it is known as supply chain planning and includes demand planning/ forecasting, supply planning (master scheduling, production planning, material planning, replenishment planning, inventory planning, production & labor scheduling, etc.), operational execution, shipping, receiving, etc.

Client Examples: Using SIOP / S&OP To Balance Sales, Inventory & Operations

The SIOP process is geared to aligning sales with operations, customers with suppliers, and demand with supply.

How SIOP Fueled Growth for a Biotech Manufacturer

For example, a biotech manufacturing client couldn’t meet aggressive sales goals with high enough service levels to ensure customer loyalty and future growth. Sales was frustrated and executives were concerned about how to support future growth goals. On the other hand, Operations didn’t have the information to prepare in advance to meet the service objectives with the aggressive goal goals. They were concerned about spending money until they knew the product wouldn’t go to waste, and management was concerned about hiring manufacturing employees until volumes were confirmed in enough detail to know the work centers and skills required. The bottom line: Sales was out of balance with Operations. Thus, the right inventory was not available in the right place at the right time.

After rolling out SIOP in combination with S&OE (as you cannot have one without the other), we developed a directionally correct sales forecast by geography, product and unit of measure that “added up” to the growth goals (in dollars) in a way that made sense when viewing by customer, product groupings and growth rates. Simultaneously, we focused attention on understanding capacity (production requirements vs. available capacity by key work area and equipment). It quickly became clear that we had to reallocate a few resources to the bottleneck operation, and we gained approval to hire a few people to support the growth plans. Once the bottleneck operation smoothed out, we gained efficiencies in down-the-line operations, and most importantly, customer service improved and customers gained confidence. Sales, Operations and Purchasing also had insights that enabled cost reductions, product rationalization plans, and key pricing decisions. Nice side benefits to the aggressive growth goals!

How SIOP Accelerated Cash Flow & Reduced Debt by Increasing Inventory Turns

In another example, an aerospace manufacturer had turned the company around following the 9/11 downturn and was interested in selling the business. Thus, they wanted to maintain their excellent service levels while maintaining/ improving profitability and reducing unnecessary debt. We had to balance sales with operations and inventory to reduce unnecessary inventory (not required to support service, spikes in sales and predictable disruptions in supply) while focusing on operational performance. Thus, we assigned executive leadership to the topic to emphasize the priority, clarified the sales plans, and focused attention on inventory planning processes (again, the combination of SIOP/ S&OP and S&OE).

In this case, we had to balance profitability/ margins by site with customer orders and inventory plans. We rolled out improved business processes, better utilized the ERP system, provided training and education to the inventory teams, and we aligned the goals of the Site Leaders with corporate objectives and the Inventory Leaders. Inventory levels came down by 30% in key product lines while maintaining/ improving service levels and growing the business. The company was also better positioned for sale and for continuing operations so that no matter which path was chosen, the company was in a healthy, robust position.

Path Forward

SIOP can be an important process in aligning people (within your organization and with your supply chain partners) and processes (demand and supply) to improve service, support growth, reduce debt, accelerate cash flow, and improve profitability. During times of volatility (inflation, recession, stagflation, technological advances, talent shortage), there will be more opportunities for those companies prepared for success. The winners will be separated from the losers and opportunities will abound. SIOP requires focus, but it doesn’t require capital intensive investments. There is no downside to becoming more profitable, having greater access to cash, and better serving customers and preparing for growth.

Refer to our SIOP webpage for more information, our blog (SIOP category) for hundreds of articles, and learn more about SIOP and what’s important for a successful implementation in our new release eBook, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth. If you are interested in talking about how to improve profitability, free up cash, and/or improve service, contact us.

Did you like this article?  Continue reading on this topic:
SIOP/ S&OP Playbook: Creating Predictability & EBITDA Growth

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