Companies should seize opportunities to increase packaging efficiencies, improving profitability and sustainability

Since packaging is typically 10-40% of the retail price of products, there is no doubt it adds up to a relevant factor in product cost and waste. Packaging encompasses product design, prototypes and trials, materials, production, labor, shipping, and recycling and/or disposal. The most proactive companies pay close attention to opportunities to increase packaging efficiencies throughout the end-to-end supply chain to improve their profitability and sustainability.

Product Design Collaboration

Product design is at the heart of improving packaging efficiency. Our best clients take a collaborative approach to R&D and packaging design encompassing the end-to-end supply chain. For example, in a healthcare products manufacturer, the packaging engineer worked with R&D, manufacturing technicians, procurement resources, and logistics resources with a specialty in warehousing and transportation. In addition, customers, packaging materials suppliers, equipment specialists, and other resources took part in the collaborative design.

By involving these cross-functional resources, the full life cycle could be incorporated into the product design. In this case, they wanted to ensure the design encompassed the optimal packaging design to meet the customer’s visual, strength, and storage specifications while minimizing the materials, labor, and logistics costs. For example, the objective was to minimize the packaging materials while meeting product specifications. However, the team had to review potentially conflicting factors. For example, doubling the number of units of product per package would make the way the package fit in the box less efficient, the box might not be best designed to optimize the pallet, the pallets might not be optimized to fit on the truck, or the customer might not like the visual design or be able to fit the product in the storage area.

In addition, the product’s performance had to remain intact. Reducing the quantity of materials must not negatively impact the way the product worked for the customer. Compressing the product into the package must not negatively impact the absorbency of the product. Using redesigned materials in the manufacturing process must not impact product quality. This healthcare manufacturer successfully redesigned the product and reduced the total cost by more than 20% inclusive of materials, packaging, warehousing, and transportation costs.

Packaging Efficiencies in Bottling

There are vast opportunities to improve packaging efficiencies in the bottling industry. For example, Niagara has accomplished several key objectives in eliminating waste through packaging and innovation. They designed new packaging that eliminates the need for a cardboard tray in their cases and reduced the amount of plastic in their bottles by 60%. Thus, this packaging requires less materials and uses up less pallet space, allowing the company to reduce carbon emissions and ship more water per order.

Since 2009, Niagara improved its carbon footprint by 59% through innovations in design, lightweighting, and packaging. It has also increased its recycled content usage, which reduced greenhouse gas impact by bottle by 12%. Gaining these results requires a full lifecycle view of supply chain from product design through recycling.

Packaging Efficiencies at Amazon

According to Amazon, it continually works to reinvent and simplify packaging options. The company combines lab testing, machine learning, materials science, and manufacturing partnerships to accomplish this goal. Amazon notes that it avoided more than 2 million tons of packaging materials and reduced per-shipment packaging weight by 41% since 2015. The bottom line is that a significant reduction in packaging will reduce costs and improve sustainability.

Improving packaging efficiency can produce dramatic results. The healthcare products manufacturer, Niagara, and Amazon prove that by focusing on packaging design and innovation, tremendous savings in materials, labor, and freight will flow to the bottom line. In addition, carbon emissions are reduced and sustainability objectives are achieved.

Originally posted in Adhesives & Sealants, March 2024

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Clients that focus on providing a superior customer experience along with achieving optimal bottom-line results will perform better than competitors.

As companies are searching for ways to successfully navigate these turbulent times, the best ones are achieving a win-win focus on the customer and costs. Since the pandemic, there has been a heightened awareness of the customer experience as companies struggled with supply chain disruptions, delays, shortages, and the lack of resources. Similarly, as inflation has continued to be a drag on profits, companies are focusing additional efforts on cost reduction and margin improvement programs. Best yet, finding win-win solutions that improve the customer experience and cost will achieve substantial business results.

According to Zendesk CX Trends 2023 report, more than 50% of consumers will switch to a competitor after only one bad experience. This trend is not limited to consumers, as Zippia confirms with the finding that companies focusing on the customer experience increase their revenues by 80%. These are powerful statistics and demand attention. Clients that focus on providing a superior customer experience perform better than the rest.

Improving the customer experience without also improving the cost and margins will not support profitable growth. Thus, forward-thinking clients ensure cross-functional teams continually search for cost-reduction opportunities, experiment with new ways of doing business, and trial strategies to take performance to a new level. Continuous improvement alone will no longer cut it. The best companies focus on continuous iterative improvement as well as what can be seen as radical change.

Pertinent Examples

A healthcare products manufacturer wanted to grow sales after a prolonged period of product stability without an upgrade. In addition, key raw material costs increased significantly due to rising input costs derived from oil and natural gas. However, the company was owned by a private equity firm that wanted aggressive growth and a rapid increase in profitability, and they expected price increases to be offset as well as cost reductions to occur while increasing service levels. These conflicting goals could only be resolved with a cross-functional innovation team.

The leadership team empowered a cross-functional team including R&D, Packaging Engineering, Operations, Supply Chain, and Logistics. The primary focus was on redesigning the product so that it would provide improved performance for the customer while using less materials, optimizing packaging, and improving operational costs. The team involved both customers and suppliers in a collaborative design effort to find opportunities to redesign materials to work better yet reduce usage and scrap, optimize how the product ran on the production lines, and minimize warehousing and shipping costs with compressed packaging optimized for storage and transportation. The team launched an upgraded product line that spurred a 30% increase in sales while reducing costs by 20% in addition to offsetting key input price increases.

Additionally, the manufacturer implemented a demand planning and vendor managed inventory (VMI) program for its number-one customer. By looking into its customer’s demand data and inventory position at its distribution centers across the United States, the company was able to optimize its replenishment plans and reallocate products in a way that maximized customer service levels and reduced lead times while minimizing inventory levels internally and at its customer. In addition, the company was able to plan, which enabled it to optimize truckloads, utilize ideal routes, and maximize the volume of product per truckload, thereby saving 20% in freight costs. Most importantly, it soared to the top category on its customer’s scorecard.

Another medical device manufacturer followed the same path by working closely with its key customer to optimize product designs to provide innovative customer solutions while making the product less expensive to manufacture. It also invested significantly upfront in upgrading to ISO 13485 to ensure compliance and customer satisfaction while expanding the value internally across the entire shop (medical and non-medical) to standardize and promote efficiencies throughout the product flow. The company expanded business with its key customers and improved efficiencies with standard processes and automation wherever possible. Additionally, it assessed customer and product profitability and reviewed operational improvement ideas to reduce scrap rates and improve efficiencies.

Forward-thinking companies think strategically about creating a win-win of enhanced customer value and bottom-line results. Clients that focus on the customer and develop innovative and collaborative solutions tend to also outperform their competition in profitability and performance. During times of volatility, the companies focused on customers and cost will rise above the noise.

Originally published in Adhesives & Sealants Industry, December 2023

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Proactive Backlog Management to Dramatically Improve Service

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Executives are struggling to keep up with inflationary raw material prices, elevated customer requirements, margin pressures, and the lack of people to fulfill key roles. Thus, they are looking to their ERP system and related supply chain technologies for answers. Given the lack of talent and the cost prohibitive nature of an ERP upgrade, CEOs are choosing to search for alternatives to support profitable growth. Thus, simply better utilizing your ERP system is quite attractive as it will turn an already-existing underutilized asset into a strategic advantage in the marketplace, supporting profitable growth. 

Implement Critical Costing Strategies

Many clients get overzealous and want to track costs to the nth degree of detail, yet these great intentions do not result in progress; instead, CEOs become frustrated as they get overwhelmed in data with no visible progress. On the other hand, our best clients do not strive for perfection; instead, they focus on directionally correct strategies to estimate labor, track material costs, and determine what is material (germane) to their business. They prioritize quality over volume.

Smart Cost Reduction Strategies

Once you know your costs, you can decide what to prioritize that will have the largest impact on the business. For example, prior to jumping into the supply chain consulting role, I was a VP of Operations and Supply Chain for a mid-market manufacturer. There was constant pressure from the Board of Directors to reduce costs, specifically labor costs. However, our assessment showed that material costs were number one (by a wide margin), freight costs were number two, and labor costs was further down the list. Thus, it was a constant battle, yet we remained focused on material costs.

We implemented advanced processes for tracking material usage and scrap in the ERP system instead of focusing attention on detailed labor tracking as that would have been like chasing pennies. A 5% reduction in material scrap had a 3 to 1 advantage over a 5% reduction in labor costs. Similarly, it made sense to work with logistics partners and technology providers to implement systems such as TMS (transportation management system) to consolidate multi-stop truck loads and optimize transportation lanes to minimize freight costs and ensure high service levels.

Analyze Customer & Product Profitability

Costing will support additional analysis that will prove critical to decision making. Our best clients focus on using the data from their ERP system to develop customer and product profitability analysis. Evaluating these trends can provide direction on where to focus on sales, which costs to attack that will have the largest impact on margins, and pricing decisions on key programs or in low margin products and/or services.

Using Customer and Product Profitability to Make Strategic Decisions

In an industrial manufacturing client, after implementing a SIOP (Sales Inventory Operations Planning) process, we could analyze product groupings and work centers for an engineer-to-order production process. We pulled data from their ERP, CRM (customer relationship management), and CPQ (configuration and quoting system) systems, consolidated, and analyzed the data, created business dashboards, and put it into a visual format. Their executive team could see demand and supply impacts.

Thus, we could see a capacity bottleneck in the large size of a particular line of products nine months down-the-line. Because we had capacity limitations in the facility, we evaluated offload options to supplement capacity. However, because the client had unique capabilities and the product required large storage capabilities, there was no profitable, short-term solution. Thus, the Sales team could evaluate customer profitability to set pricing and extend lead times while the Operations group worked on a long-term plan to support growth plans.

Improve Operational Performance with Production Scheduling

In concert with costing and analyzing customer and product profitability as part of a SIOP process, the next logical step is to execute seamlessly, delivering bottom line results. There are many opportunities to roll out additional ERP functionality to increase output, improve efficiencies, reduce waste, increase customer service levels, and accelerate cash flow.

For example, when consulting with a building products manufacturer, they wanted to increase output and improve customer service while keeping costs under control. Although they knew what orders were required, customers constantly pushed orders in or out, and there were multiple process steps on the shop floor, resulting in chaos and confusion on the production floor. We worked with the planners to roll out a production schedule to get ahead of these changing conditions, sequencing items optimally for production efficiencies and minimizing the raw material inventory required on hand. 

The Bottom Line

Instead of following the latest fad and investing significant funds into additional systems, there are vast opportunities to better utilize your ERP system, assuming it is a modern ERP system. Explore functionality to deliver a superior customer experience, enhance your employees’ efficiency and engagement, and to automate repetitive processes. Bottom line results will follow.

Please contact us with your stories, issues, and ideas on better utilizing ERP and related technologies. And, please keep us in the loop of your situation and how we can help your organization upgrade your processes with ERP system functionality.

P.S. To get ahead of the curve on where to focus for the best results and how to utilize ERP and related technologies, download our complimentary report, and The Road Ahead: Business, Supply Chain & the World Order.

The post Better Utilize Your ERP System (3 Strategies for CEOs) appeared first on LMA-Consulting Group, a supply chain consulting firm.

CLAREMONT, Calif., March 21, 2023 /ExpertClick/ — Manufacturing and Supply Chain Expert Lisa Anderson, MBA, CSCP, CLTD, known as the Strongest Link in Your Supply Chain® and President of LMA Consulting Group Inc., predicts that establishing processes is critical to strengthening the supply chain during tumultuous times. LMA Consulting Group works with manufacturers and distributors on strategy and end-to-end supply chain transformation to maximize the customer experience and enable profitable, scalable, dramatic business growth.

“Between high inventory levels, increased pressure to improve customer service while maintaining profitability and recent challenges in the financial markets, manufacturers need to have a process in place to ensure that their supply chain is resilient. The pandemic forced companies to stockpile inventories. Now, it’s a different story. Customer demands have changed making those inventories obsolete or irrelevant. Yet, we find many companies struggling because not only is the wrong inventory in the wrong place at the wrong time, but sometimes they have no idea what inventory is needed where,” commented Ms. Anderson.

Optimizing the supply chain to withstand operations to improve efficiencies, reduce costs, maintain profitability and position for business growth requires communication at all levels. “It is critical that operations, sales, finance, IT and others understand the customer and their needs so that the company is in a position to react and respond. No matter the industry, competition is fierce these days. Manufacturers need to be flexible and nimble, have their supply chain in place and be ready to respond. That is why implementing a process like SIOP (Sales Inventory Operations Planning), also known as S&OP, establishes a protocol that requires communication between departments to focus on customer needs. Once in place, the process will allow for transparency which will lead to transformative strategies for growth,” she said.

Ms. Anderson and co-author Diane Garcia recently released the e-Book SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth. The book is complimentary on the LMA Website at: https://www.lma-consultinggroup.com/siop-book/, can also be found on Amazon digitally and on-demand print at: https://www.amazon.com/dp/0998823252?ref_=pe_3052080_397514860 and on iTunes: https://books.apple.com/us/book/siop-sales-inventory-operations-planning/id6445675614?ls=1.Ms. Anderson also provides supply chain updates through Supply Chain Chats, a series of short videos that address current topics, issues and challenges related to supply chains.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., specializing in manufacturing strategy and end-to-end supply chain transformation. She focuses on maximizing the customer experience and enabling profitable, scalable, dramatic business growth. Ms. Anderson is a recognized Supply Chain thought leader by SelectHub, named a Top 40 B2B Tech Influencer by arketi group, a Top 50 ERP Influencer by Washington-Frank, one of the most influential in Supply Chain by SAP and a woman leader in Supply Chain by RateLinx. She was recently interviewed on Fox News, in early 2021published a Special Report, Emerging Above & Beyond: 21 Insights from Manufacturing, Supply Chain & Technology Executives, the ebook, Future-Proofing Manufacturing & the Supply Chain Post COVID-19, and her primer, I’ve Been Thinking, strategies for creating bold customer promises and profits. A contributor on topics including a superior customer experience with SIOP, advancing innovation, and making the supply chain resilient, Ms. Anderson is regularly interviewed and quoted by publications such as Industry Week, Bloomberg, and the Wall Street Journal. For information, to sign up for her Profit Through People^TM Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.

As originally published on ExpertClick on March 21, 2023

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Originally published in Adhesives & Sealants Industry Magazine, December 2022

Companies can focus on win-win-win strategies to impact people, profit, and the planet with supply chain strategies that reduce packaging, modify materials, improve processes, and reduce transportation and logistics costs.

By Lisa Anderson, Founder and President, LMA Consulting Group

With the increase in interest in the three P’s of the triple bottom line (people, planet, and profit), packaging rises to the forefront. It is controllable, and there are several options for how packaging can contribute to the triple bottom line. Starting by expanding your view from your suppliers’ suppliers to your customers’ customers, you’ll find several opportunities for recession proofing your business by partnering with supply chain partners to achieve the ultimate win-win-win.

Almost every raw material and finished good requires packaging. If you can minimize packaging without impacting product quality, you will have a direct impact on the triple bottom line by reducing materials and waste while increasing efficiency, effectiveness, and profitability. You could also redesign packaging to better utilize the packaging design to improve the carbon footprint, profitability, and people’s lives.

When assessing sterile medical applications, you could research the clinical requirements for the barrier. Good packaging design, material selection, and composition can minimize the requirements for the barrier. In a non-sterile application, you might evaluate the use of recycled content and biomaterials.

Pertinent Examples

As it relates to packaging design, material selection and composition, an adult incontinence manufacturer wanted to redesign the materials to perform better yet use less materials in the product for a win-win-win for the customer, manufacturer, and supplier. The R&D, Package Engineering, Purchasing, and Supply Chain teams collaborated closely with the supplier to develop new materials that would achieve the objectives. After several iterations, trials, and revisions, the team accomplished the triple bottom line. Less materials were used in the product, less packaging was required, less waste occurred on the lines with close alignment between operations, equipment suppliers, and key suppliers, and the product performance and customer satisfaction improved.

From a logistics perspective, the resulting packaging was designed optimally to maximize the product in the box, on the pallet, in the warehouse, and most importantly, in a truck so that they could gain up to 20% additional product on the truck for the same price. It also optimized warehousing and storage requirements so that they could shut down an overflow storage facility, not only reducing the movements but also reducing damage and wasted packaging materials.

In another example related to this manufacturer, the team was able to minimize the waste associated with the construction and elastomeric adhesives as well as the fastening tapes by focusing on the manufacturing process. Operations put attention on centerlining the process, asset care, and people development, and these “basics” delivered consistent results over time. Since materials were a preponderance of product cost, these saving went straight to the bottom line, but, more importantly, the people felt engaged, and the customers could count on receiving quality products that met their specifications on-time so that they could serve their patients.

In a life sciences manufacturer of proteins, a cross-functional team focused attention on forecasting sales by package sizes so that they could better align their operations resources to priority tasks to have the right products in the right package in the right place at the right time. Since they had several custom products in custom sizes, it wasn’t a simple task to standardize what was achievable while gaining a directionally correct view by package sizes so that they could set their bottling schedule to align with customer demand. However, after creating a demand plan to support sales growth objectives and translating that plan into bottling requirements by size, they were able to reduce waste, minimize non-essential inventory, and support aggressive growth targets with high on-time-in-full percentages and reduced lead times, creating loyal customers.

Winning Strategies

In each of these examples, the manufacturer communicated and coordinated across the end-to-end supply chain to achieve success. Within each supply chain partner, a cross-functional team participated to ensure the packaging and product was designed, redesigned, and adjusted with the supplier, manufacturer, customer, and even the end customer in mind. The most successful companies are focusing on win-win-win strategies to impact people, profit, and the planet with an eye across the supply chain to reduce packaging, modify materials and composition, improve processes, and reduce transportation and logistics costs while improving overall performance to the customer.

The post How Packaging Can Contribute to the Triple Bottom Line appeared first on LMA-Consulting Group, a supply chain consulting firm.

If there is one thing in common with every client (big or small) in the current business environment which is characterized by significant volatility and uncertainty, it is the increased level of complexity of supply chains. As the old saying goes, you are only as strong as your weakest link in your supply chain! That has proven true and has led to unfettered complications in successfully navigating the current supply chain environment. In fact, it is why we are have been focused on helping clients become “the strongest link in your supply chain”.

Customers do not care about the complexities of our supply chains. They want the “right” products delivered at the “right” place at the “right” time at the “right” price. In fact, during this volatile post/emerging from pandemic timeframe, customers are laser focused on which suppliers can provide solid delivery performance as measured by high levels of OTIF (on-time-in-full) and a superior customer experience. They will give volume to customers that can deliver!

On the other hand, companies are laser focused on increasing operational efficiencies so that they can deliver to customer expectations while meeting profit objectives. Because of the significant level of supply chain disruptions and increased money supply, costs are escalating. Companies want to limit the price increases they have to pass on to customers as they will lose the business if substantially more expensive than competitors without a commensurate increase in product quality or service. Thus, there is an increased interest in increasing efficiencies, automation, and “doing more with less”.

Utilizing ERP to Improve Service & Decrease Costs

Almost every client has an ERP system; however. ERP systems perform the transactions required to support taking orders, purchasing materials, planning production, picking and shipping product, handling returns, and invoicing customers. NOT every client has a modern ERP system. In today’s world of global, complex supply chains and increasing customer requirements, advanced functionality is needed to support customers without adding armies of people to support the processes. Additionally, modern ERP systems provide additional opportunities to automate, digitize, predict what needs focus (example: predictive maintenance vs. preventative maintenance), and they enable the collection, assimilation and analysis of data for decision-making.

Performing a quick assessment of your business needs as compared with your system functionality and capabilities is a great place to start. When evaluating whether an ERP upgrade is needed to support customer and profit objectives, we recommend starting with a comprehensive yet directionally correct assessment of business process requirements. For example, when working with a control panel manufacturer, we quickly determined that their current ERP system would not meet their growth plans. Not only were they struggling with multiple add-on software options that didn’t seamlessly connect, resulting in double keying and a hodgepodge of data, but they also needed advanced functionality with customer relationship management (CRM), configure-to-order (CTO) and engineer-to-order (ETO) and related customer interfaces, and advanced reporting and analytics. Thus, an upgrade was required.

Therefore, we started a deep dive of business requirements to select the appropriate software. We talked through and observed the business process requirements that would support sales and customer relationship management, engineering design, order entry, configure-to-order, production planning, purchasing, operations, shipping, invoicing, accounting, quality control, data management, and reporting/ data analysis. Based on that, we documented business requirements and, most importantly, identified the critical success factors that were unique to their industry, company, specialized process, and /or unique system requirement. Armed with this data, we were able to develop a request for proposal, demo ERP systems, compare pricing, and decide upon the best fit system to meet their objectives for the best return on investment.

Utilizing Other Technologies to Increase OTIF, Reduce Costs & Inventory

In addition to utilizing an ERP system, to meet the increasingly complex customer requirements without adding overhead, other technologies will add value. Similarly to evaluating business requirements for ERP systems, start by evaluating your needs to support customer and profitability objectives. Some of the technologies required to support success in the current volatile and uncertain business environment are as follows:

• CRM (customer relationship management) software to proactively manage customers and potential leads
• Forecasting software to forecast customer demand
• Advanced planning software to go beyond traditional MRP and simple planning systems to better navigate complex supply chains
• Warehouse management software (WMS) and warehouse execution system (WES) to increase warehouse efficiencies and achieve fulfillment objectives
• Transportation management software (TMS) to optimize transportation planning and freight costs, lead times and service objectives
• Predictive maintenance systems (using artificial intelligence and internet of things (IoT) to predict maintenance needs to target resources
• Manufacturing execution systems (MES) to monitor manufacturing performance and tied to machines with IoT
• E-commerce systems to support B2C and robust B2B effectiveness
• Business intelligence systems (BI) to analyze data and consider what if scenarios
• Predictive analytics to take BI and data to the next level
• Blockchain although this type of software remains in an R&D phase for the majority of businesses
• Additive manufacturing/ 3D printing to print products on the fly
• Digital twins, robots, drones, RFID, autonomous vehicles, virtual reality, and more

The key is not to get caught up in fads. Start with your business requirements and determine the “right” place to invest to support your business objectives where the efforts and investment will support critical customer requirements and/or provide a significant return on investment.

Turn Data into Insights

Data is especially essential to driving OTIF and efficiency improvements. Simply tracking information in your ERP system and related technologies is not enough. It is more important to use your data to evaluate progress towards objectives and make directionally correct decisions to move the business forward. The key is to turn data into insights.

When your data analysis is achieving directionally correct results, it will make sense to take it to the next level with dashboards and slicing and dicing ability with a business intelligence solution. Once you can slice and dice data and have a dashboard available with the push of a button, consider moving on to advanced data topics such as predictive analytics. Instead of solely using data for decision-making, you can take it to the next level and predict your future so you can get ahead of the competition.

The Bottom Line

To succeed in these volatile and uncertain times, there is no doubt you’ll need a modern ERP system and related technologies to automate, digitize, meet customer expectations, accomplish more with less, and make directionally correct decisions rapidly by turning data into insights. Don’t go overboard and do everything and accomplish nothing, but get started on your journey with an assessment of your needs immediately before your competition passes you by.

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Achieving Customer Growth by Turning Data into Insights

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CLAREMONT, Calif., July 9, 2019 /PRNewswire/ — Manufacturing and Supply Chain Expert Lisa Anderson, MBA, CSCP, CLTD, president of LMA Consulting Group Inc., confirms that supply chain resiliency requires acute attention to inventory and cost pressures for manufacturers and distributors. As predicted in her 2019 forecast, “Manufacturing & Supply Chain in the New Normal,” ever-changing customer needs, increased expectations, tight labor and transportation challenges are the ‘new normal’ and key issues for manufacturing and the supply chain.

Economic volatility and what Ms. Anderson calls the Amazon Effect – high customer expectations requiring rapid deliveries, accessibility and flexible, customized service – is putting pressure on costs and inventory levels. 

“It’s like the perfect storm, tariffs, last minute changes, rapid delivery requirements and increased customer demands are challenging the supply chain. In turn, inventory levels are increasing. Add in elevated labor and logistics costs and it gets tougher and tougher to control costs,” Ms. Anderson explains. 

The result is an increased focus on improving inventory turns to accelerate cash flow, as well as an emphasis on re-shoring and near-sourcing.

“Aligning sales forecasts with operational capabilities is critical for manufacturers to thrive. In our 14 years of consulting, sales, inventory and operations planning (SIOP) has consistently delivered the strongest increase in business value. Leveraging best practices in demand planning and better aligning sales forecasts with operational capabilities will drive significant improvements in customer performance and the bottom line,” she says.

LMA Consulting Group works with manufacturers and distributors on strategy and end-to-end supply chain transformation to maximize the customer experience and enable profitable, scalable, dramatic business growth. As a result of her work with manufacturers and distributors and financial knowledge of factors affecting the bottom line, Ms. Anderson has been appointed by the Logistics Council of the Inland Empire Economic Partnership (IEEP) to lead the effort to develop a consortium for logistics, supply chain and advanced manufacturing success. 

“Inland Southern California leads California in job creation and manufacturing growth. We are in an ideal situation to become a global leader in logistics, advanced manufacturing and export excellence. I’m very excited to be spearheading the effort with the IEEP to create a Consortium of Excellence to support the future of the industry and accelerate regional growth,” she says.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation.  She focuses on maximizing the customer experience and enabling profitable, scalable, dramatic business growth Ms. Anderson has been named a Top 40 B2B Tech Influencer by arketi group, a 50 ERP Influencer by Washington-Frank, ranked in the top 46 most influential in Supply Chain by SAP and named a top woman influencer by Solutions Review. She recently published, I’ve Been Thinking, an inspiring collection of 101 strategies for creating bold customer promises and profits. A regular content contributor on topics including providing a superior customer experience with SIOP, advancing innovation and making the supply chain resilient, Ms. Anderson is regularly interviewed and quoted by publications such as Industry Week, tED magazine and the Wall Street Journal.  For information, to sign up for her Profit Through People Newsletter or for a copy of her book, visit lma-consultinggroup.com.

Originally published on PR Newswire on July 3, 2019

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According to a Hackett group study, the benefits of SIOP (Sales, Inventory & Operations Planning) can be dramatic. First, let’s back up to describe SIOP: It is an integrated business process that aligns demand with supply and through which the executive /leadership team continually achieves focus, alignment and synchronization among all functions of the organization. In our experience with over 20 SIOP projects, our clients have experienced these same results (and often even better ones), no matter the industry, company size or priority. Simply put, when done well, you’ll have more cash, profit and revenue. What’s not to like!

The types of results fall into three buckets:

1. Working capital – Undoubtedly, freeing up inventory to increase cash flow is becoming a greater priority as executives realize just how much cash is tied up in servicing customers’ Amazon-like expectations with global supply considerations. Therefore, it is not surprising that we’ve received a serious uptick in requests to increase inventory turns. SIOP is always a part of the solution. Hackett research says 20-30% improvement is to be expected. We have certainly found this to be true.
2. Cost reduction – whether we term this cost reduction or margin improvement, 5-10% improvement is what the Hackett study shows. We have seen these results, even by default (when the SIOP program was focused on improving service). Thus, if they can be achieved by default, they certainly can be achieved with focus! Items that fall into this category include material cost reduction, freight cost reduction, labor productivity improvement, and fixed cost optimization.
3. Sales growth – According to the study, a 2-4% improvement is not uncommon. We have experienced dramatic results in this area with lead time reduction, on-time delivery performance improvement, customer scorecard wins and strengthened partnerships that lead to new and expanded sales opportunities.

For example, in a significant metals-related aerospace business, we started the SIOP journey to reduce inventory levels to free up debt. By partnering with sales to better understand customer requirements and by better aligning the sites on a single plan and set of priorities, we were able to align demand with supply. It was truly about alignment as the performance measurements couldn’t be completely changed (and they often didn’t support the same decisions as SIOP) yet we gained executive alignment and focus. This led to our ability to align the various functional areas on a single objective while still recognizing the site level objectives. Therefore, we were able to reduce the inventory in the core product line by 30% while ensuring customer satisfaction levels were maintained or improved.

The question isn’t whether you’ll benefit from implementing SIOP. The only question relates to what you’ll achieve based on your priority focus. Will it lean in the direction of margins, cash flow or customer loyalty and revenue growth? If you’d like to learn more about how to benefit from SIOP, read about it in our blog, explore our proprietary process for SIOP, and read about how to implement SIOP in our book, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth, or contact us to discuss an assessment.

The post SIOP/ S&OP and Bottom Line Benefits appeared first on LMA-Consulting Group, a supply chain consulting firm.

In today’s Amazonian environment, it is quite clear that the customer’s experience is #1.  It doesn’t matter what issues you have; if you cannot make sure that your product or service is delivered on-time with value-add service at a reasonable price, you will lose the business.  

In talking with a group of aerospace CEOs who are being squeezed between the Tier 1/2 suppliers (those who supply Boeing and Airbus with plane ready parts) and their suppliers who are metals suppliers (mills/ metals service centers) and outside processors, it is a tough position to hold!  However, just as Mirna Elnar, CEO of Acrua Spas said in our supply chain resiliency video series, there is always a solution when you think innovation.  

In this example, many of the suggested solutions from executives and procurement resources alike were to find opportunities to redesign/ improve the product and process to achieve a “win” for the Tier 1/2 suppliers (improved manufacturability with better efficiencies and/or less scrap, less materials while maintaining specs/ performance, having the “right” inventory in the “right” place at the “right” time etc.) while also achieving a “win” for the CEO (better margins/ better cash flow) and ideally a “win” for their suppliers (more predictable demand, etc.).  A win-win-win is achievable if you look hard enough.

This relates to a situation I found myself in while VP of Operations & Supply Chain for a mid-market manufacturer.  We found private equity backers and were able to make it through in terms of cash flow by the “skin of our teeth”.  We even were able to convince suppliers to take a haircut.  So far, so good.  Then, oil and gas prices rise which impacts 70% of our material cost which impacts 70% of overall cost.  NOT good.  Also, we find that our product lines are all mixed up in terms of which ones cost less to produce vs. the sales price for various customer segments because we had recently merged 3 companies into one.  Also NOT good.  

Our customers were a bit angry about service issues that arose when we cut over to a new system and merged the 3 businesses into one.  Also NOT good.  And the largest segment of the business hadn’t updated products in years because they planned to sell and so was in desperate need of an upgrade to grow sales.  A fact but also NOT good.  Lastly, our product is light but fluffy (which makes it larger in size) which carries a high transportation cost.  NOT good either.  But we had good suppliers and an innovative and committed team.  GOOD!  So, how can we turn this into a “win-win-win”?

We decide to kick off a redesign project to find a way to straighten out the product tiers, improve performance of the product, reduce the cost of the product and reduce the freight cost associated with the product to boot.  A bit of a tall order?  Yes but a challenge as well!  

We were successful in achieving ALL of these objectives by turning supplier negotiation on its head.  Instead of demanding price concessions, we partnered, provided upfront information on our objectives (including cost reduction objectives), collaborated on the design of new / improved materials, redesigned products and packaging, collaborated with customers to make sure we aligned with their needs and priorities, collaborated with equipment suppliers to put it all together and turned supplier negotiation into customer collaboration, achieving a win for our customers, our business (and therefore our private equity backers) as well as our suppliers.  There are too many people to thank but a quick shout out to Bill Weber, Keith White and Rick Finlayson seems appropriate.    

Are you stuck in thinking about cost concessions or are you looking for the “win-win-win”?

The post The Resilient Supply Chain: Does Supplier Negotiation Work? appeared first on LMA-Consulting Group, a supply chain consulting firm.

“I have yet to hear of a company vision, mission, or strategy that’s related to cutting costs.”

Over my 25-plus years as a supply chain and operations professional, I cannot count the number of times a CFO or board of directors has demanded cost-cutting initiatives. Yet, the most dramatic improvements have occurred when we were not focused on cutting costs.

It’s a certainly a contrarian viewpoint, but one that’s well worth pursuing. Instead of saving pennies, focusing on the customer experience delivers bigger bottom-line results.

Of course, it all depends on how you proceed. If, as your primary objective, you search for ways to spend as little as possible while satisfying your customer, it’s likely you’ll fail on both counts. On the other hand, if you devise a strategy to create win-win plans with your customer in mind and/or in conjunction with your customer (and potentially your customers’ customers), you might just find opportunities for dramatic supply chain improvement and increased profits for each member of the supply chain.

For example, at a large aerospace company, margins were not up to expectations and, at the same time, service levels were low. A quick solution was needed to right the ship. Instead of running around communicating cost-reduction mandates and focusing on whatever savings could be found regardless of the down-the-line impacts, the company took a leap of faith.

That meant slightly increasing inventory levels on work-in-process to start producing items the company was confident customers would need, even before they placed firm orders.

Despite a thorough evaluation of historical trends, talking with customers, and reviewing market signals, the approach at first created significant amount for all levels of management, because the initiative could have increased costs without adding value. Customers’ experience took the top-of-mind position, though. And within 18 months, the service issues were resolved, the company was able to supply customers that forgot place orders on time by assessing a surcharge, and margins increased by 5%.

Another company, a mid-market manufacturer, was struggling to turn around the business. Sales were declining as a result of a prior service failure, and the board constantly requested cost cuts and asked a ton of questions about reducing employee expenses.

One noteworthy approach the company followed was partnering with its top customer to collaborate on placing orders using a vendor-managed inventory (VMI) process. By viewing the customer as a partner and collaborator instead of an annoying complainer, the manufacturer found opportunities to improve its customer’s service across all locations while reducing both its inventory levels and those of the customer. In turn, that freed up cash and reduced cost for both companies.

More specifically, the company was able to move inventory to the appropriate customer distribution center to meet unexpected orders; optimize multiple-stop truckloads, thereby reducing freight; and decrease warehousing and freight expenses by optimizing pallet and layer quantities.

In addition to VMI, the company communicated to its suppliers upfront about its need for price decreases. It leveraged its suppliers’ expertise to learn how to optimize the production runs. Although the company preferred less waste and improved efficiencies, it was willing to prioritize waste over efficiencies, because that had a significantly larger impact on the company’s financials.

In addition, the company brought together a group of experts from the end-to-end supply chain to redesign and improve products. Results included developing materials that required less usage, which reduced the company’s costs without a negative impact on the supplier’s margin; and providing an enhanced customer experience. Both revenue and margins increased.

Think carefully about your real objective. Are you truly interested in cost cuts? For my part, I have yet to hear of a company vision, mission, or strategy that’s related to cutting costs. Most likely, there is concern over margins. But why? For example, do you need to price strategically in order to grow the business?

Keep asking questions until you have thought through the “why.” Don’t jump impulsively to a cost-reduction strategy. Instead, consider communicating your end objective and why it’s important. Engage your employees in the process of finding ways to provide a superior customer experience, while keeping your objectives in mind, and cost reduction will follow.

Lisa Anderson is the founder and president of LMA Consulting Group, an adviser on supply-chain matters to manufacturers and distribution organizations.

Originally published in CFO Magazine on November 29, 2017

The post Satisfy Customers First, and Cost Cuts Will Follow appeared first on LMA-Consulting Group, a supply chain consulting firm.