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Global supply chains are on the move. Executives have been hit with the harsh reality that the risk (supply chain, geopolitical, cyber, IP, etc.) is far higher than they realized when they outsourced with an eye to cost. In addition to that 80 pound gorilla, they also have suffered with delays, disruptions, and uncertainty in serving customers due to lengthy distances and logistical risk. Thus, supply chains are on the move. Strategies need to be rethought, the end-to-end supply chain assessed, and future customer needs evaluated to get in front of this changing landscape. SIOP (Sales Inventory Operations Planning) is a key process and toolset for successfully navigating this transition with profitable growth fueling the process.

Risks Abound in the Global Supply Chain

Risks abound in the global supply chain. From Russia-Ukraine to China’s extreme risk including threats to Taiwan to the increasing cyber risk, executives are struggling to navigate the global supply chain. A few critical points that “tell the story” of risk include:

• Russia-Ukraine war: The war has disrupted the critical commodities of oil and natural gas. Europe put sanctions on Russia which left them in a bad situation in getting enough energy to power their current lifestyle as well as critical manufacturing, logistics and infrastructure needs. Thus, Europe has been scrambling to address backup sources of supply. In the interim, Russia sold oil and natural gas to China and India. The end result is price escalation in addition to “supply on the move”. Oil and natural gas is used in countless products from medical devices to glasses to phones, thus impacting the global supply chain.
• The China risk factor: China is simply a mountain of risk. China is the number one manufacturer in the world and accounts for almost 30% of the world’s output. Thus, from internal issues (severe water and energy shortages with “solutions” of permitting two coal plants a week) to threatening Taiwan (putting 90% of the world’s advanced computer chips and 60% of the world’s standard computer chips at risk) to monopolizing rare earths (produces 60% and processes 85% of the world’s rare earths) to buying up critical infrastructure around the world (such as controlling both ends of the Panama Canal) and controlling the South China Seas, China wants to control the world’s supply chains.
• Talent & Technology: Resources are limited around the world. For example, according to EY and an iMocha report, 81% of organizations are experiencing a shortage in skilled tech workers. Similarly, the risk of cyber attacks and supply chain security issues increase with each passing day. For example, according to Deloitte’s report 2023 Global Future of Cyber Survey 2023, 91% of organizations report experiencing one or more cyber incidents or breaches.

And now Israel is at war. Volatility, uncertainty, complexity and ambiguity (VUCA) is at an all-time high in recent history. The bottom line is that risks have reached a level that is unacceptable to many executives.

SIOP to Devise a New Path Forward

SIOP (Sales Inventory Operations Planning), also known as S&OP is a process that will help you navigate changing business conditions (such as these extreme risks). SIOP starts with a view into your future customer demand (sales forecast, customer orders, quotes, CRM) and translates that into manufacturing and supply chain requirements. The process will highlight capacity constraints (production, storage, resource), upcoming bottlenecks, forecasts for investment (equipment, inventory, resources), make vs buy decisions, and customer/ product profitability opportunities.

For example, when consulting with an industrial manufacturer that was concerned about risks in the end-to-end supply chain, and so used the SIOP process to visualize what should be done. Based on their demand plan, they were able to see impacts to their supply plans and where risks were in their current manufacturing and supply chain. Thus, they assessed and took action to transition to backup sources of supply, expand their supply base into India, pre-purchase critical commodities to give them time to assess their future needs, and they expanded regional manufacturing by sourcing offload suppliers. By taking these actions, they were able to secure supply to meet their aggressive growth plans.

Assessing Strategies

In our book, “SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth“, we discuss how SIOP will fuel transformative strategies for growth while mitigating risk.

• Supply chain footprint: SIOP looks forward to future customer requirements and determines how to reallocate manufacturing and change the supply chain footprint (reshoring, nearshoring, regional manufacturing, additive manufacturing) to support key customers and grow the business while mitigating risk in how product is manufactured, distributed, transported and delivered in the order fulfillment process. Vast changes are occurring. For example, Apple is moving from China to India, Dell is moving from China to Vietnam, HP is moving from China to Mexico, and Intel is building a ‘mega’ factory in Germany and expanding capacity in the U.S. with its first new manufacturing facility in 40 years.
• Supply chains on the move: As the supply chain footprint evolves, the global logistics landscape must change to support it. Thus, as I said at the IMUI international conference, shipping routes will change and evolve with changing business conditions and risks. For example, in addition to keeping up with manufacturing changes, as China becomes risk laden and the South China Seas becomes uncertain at best, companies will continue to move manufacturing and/or change shipping routes. As delays consume shipping routes such as the Panama Canal, companies will find alternatives, and as strike risks impact supply chains such as the West Coast ports, shipping routes move (and the East Coast gains in this example).
• Examining links: SIOP opens the door to examine every link in the chain. From enabling margin analysis by product groupings, customers, markets and regions to examining the customer experience, the SIOP provides for holistic as well as departmental strategies.
• Margin vs risk: SIOP also provides the data and process for evaluating cost reduction opportunities, pricing strategies, sales channel and marketing options, operations and supply chain alternatives, and inventory and capacity fulfillment options while assessing customer value-add business risk.
• Talent & Technology roadmap: Last but not least, SIOP translates demand and supply plans into talent and technology requirements. More importantly, the resource requirements can will be impacted by the technology roadmap, and so the best SIOP strategies proactively address talent and technology to optimize, digitize and thrive. There are simply not enough resources at any company. Only those that automate, utilize technology and innovate will survive, let along thrive.

As risks abound, the best in class will utilize the proven process of SIOP to proactively navigate changing conditions in a manner that is not only supportive of profitable growth but is also focused on critical risks and long-term success.

Innovation: A Forward Take on Risk

Beyond the uncommon common sense strategies to ensure predictable revenue and EBITDA growth, executives must develop a culture of innovation. The world has become not only complex and convoluted, but also a maze of geopolitical risk dependent on advanced technologies. These advanced technologies escalate risk further as they are dependent on commodities in risk abundant regions of the world and carry the threat of cyber attacks. Thus, the smart are innovating. Only forward-thinking innovators willing to do what most executives will not do (such as invest when everyone else panics) while remaining calm, resilient and strong will thrive for decades to come.

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

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CLAREMONT, CALIFORNIA – September 29, 2023 –  Manufacturing and Supply Chain Consultant Lisa Anderson, MBA, CSCP, CLTD, known as the Strongest Link in Your Supply Chain® and President of LMA Consulting Group Inc.,  underscores the pivotal role of Enterprise Resource Planning (ERP) systems in modern business strategy. LMA Consulting Group specializes in supporting manufacturers and distributors in strategic planning and comprehensive supply chain transformations, focusing on enhancing the customer experience and facilitating robust business growth.

In a rapidly evolving digital age, the emphasis on ERP systems has never been more pronounced. More than just supportive tools, these systems are integral for sustaining profitability and addressing evolving customer needs. “Modern ERP systems are no longer just about transactional processes. They are now pivotal in meeting customer requirements, supporting automation and integrating other essential technologies like AI, IoT, CRM and e-commerce. The real question today is not just about possessing an ERP system but ensuring it aligns seamlessly with business aspirations and customer expectations,” stated Ms. Anderson.

Given the hefty investment ERP systems often represent, their implementation requires meticulous planning and strategic alignment. “A roadmap is essential for achieving desired outcomes. I’ve seen instances where the urgency led to ERP implementation without data migration causing elongated post-implementation recovery phases, resulting in lost customers and revenue,” she added.

A strategic evaluation, coupled with a thorough ERP assessment, can guide businesses in identifying core business requirements, discerning profit-driving factors and ensuring that their ERP system aligns with their overarching goals. With the complexities of ERP solutions, where each provider is touting unique features, seeking external expertise provides an unbiased perspective, allowing businesses to navigate the complexities with clarity and confidence. 

For deeper insights into navigating the complex landscape of ERP and global supply chains, download Ms. Anderson’s special report The Road Ahead: Business, Supply Chain & The World Order. Additionally, her resource SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth offers invaluable strategies for organizations. Download it at LMA website,  Amazon and Apple.

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.  Ms. Anderson is a recognized Supply Chain thought leader by SelectHub, named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, in the Top 10 Women in Supply Chain by Warner PR, in the top 55 Supply Chain & Logistics Experts by flexport, and a woman leader in Supply Chain by RateLinx. She has been interviewed by Fox News and published the ebook, Future-Proofing Manufacturing & the Supply Chain Post COVID-19, Her primer, I’ve Been Thinking, provides strategies for creating bold customer promises and profits. An expert on the SIOP process (Sales, Inventory Operations Planning), 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, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.                 

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As COVID continues to rage and some areas of the country are locked down, many businesses struggle. On the other hand, by all reports, many other businesses had their best year ever in 2020. What is clear across the board is that the pace of technological change has accelerated. Whether it is due to going virtual and other COVID impacts, trying to keep up with changing customer needs, being resilient to ever-changing conditions, and/or the desire to increase profitability, what was expected to be in place by 2025 is being put in place imminently. Are you prepared for this digital transformation?

Which Technologies are Relevant?

It absolutely depends on your industry, supply chain partners and your unique situation; however, there are lots of conversations, progress and focus on ERP, artificial intelligence/ machine learning, IoT, augmented reality, automation and robotics, autonomous vehicles, blockchain, cyber security, business intelligence, CRM, B2B/ B2C, demand and supply planning, WMS and many more topics. By all accounts, if you tried to pursue each of these objectives, you are likely to fail miserably. So, where do we start?

Start with Your Base

Just as you cannot worry about window dressings for a house with a shaky foundation, you cannot think about progressive technologies if you are built on a house of cards. Will your ERP system support advancement? Or, will you struggle with a hodgepodge of software that will not enable growth and profitability?

Although I am not a proponent of upgrading ERP without a substantial reason (after all, it is one of the most significant investments of time, money and resources you’ll ever make), you also cannot be left in the dust. More companies will pull away from the pack during these turbulent yet opportunistic times than in any other within the foreseeable future. Are you prepared for success? If not, you must start by upgrading to a modern ERP system. In today’s environment, there is no possibility for success without a solid, scalable ERP system that supports providing a superior customer experience, allows for both efficiency and resiliency, enables configuration to support differentiation while also supporting easy upgradability and facilitates the seamless integration with best in class technologies to support evolving business needs.

If you are interested in whether it is time to upgrade (or not) and how to select an ERP system AND partner, please refer to our blog for countless articles of value or contact us for assistance.

Did you like this article? Continue reading on this topic:
The Prominence of Manufacturing & Supply Chain Technology

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Even the best of clients have all sorts of data issues. It is actually quite surprising how this issue runs across industries, company sizes and types of ownership. So, what should we do about it? Let’s talk through a client example and the successful path forward.

Situation

Although quite technical and successful in designing manual processes, this client had a plethora of data issues. Item attributes and customer data was inconsistent. Data anomalies were rampant. And the list goes on. Although not ideal, it wouldn’t matter if it didn’t negatively impact employee morale, the customer experience or profitability. However, they had hit the wall in terms of frustration, scalability and predictability.

Solution

It definitely isn’t as simple as saying “fix your data issues”. In fact, we started by actively not focusing on this gorilla in the room. Instead, we looked for improvement opportunities. We started by reviewing workflows, understanding processes and asking about desired outcomes while finding out what the experts of each process step thought the bottlenecks were and asked about ideas for improvement. After seeing how the process steps came together and taking ideas from multiple clients and process owners, we designed a path forward. This roadmap would take tangible steps forward to achieve immediate improvement while laying the groundwork for long-term transformation.

From a data point-of-view, we tackled a small subset of data related to an area of key importance. This enabled us to find small wins on the roadmap to a digital transformation. For example, we identified a small subset of products and customers to focus on for data integrity, forecasting and predictive analytics. More importantly, we could gain a series of incremental improvements along the way while building a solid infrastructure to support scalable, profitable growth.

Did you like this article? Continue reading on this topic:
The Strategic Use of Data

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How Do ERP Systems Work?

I am excited to be featured in SelectHub’s extremely popular and recently updated article, “How Do ERP Systems Work?“. It provides a good foundation into the world of ERP and what you’d do with an ERP system. Although most clients have an ERP system of some type, by NO means do they understand how ERP systems work and the true value of an ERP system.

Perhaps we should spend more time understanding such a critical topic. After all, an ERP system upgrade will be one of the most significant projects your company will embark upon. Although the financial commitment is substantial, the resource commitment is far greater! On the other hand, if you bury your head in the sand too long, your risk will rise to unacceptable levels and your customers’ needs will not be supported.

Naturally, since the pandemic hit, many ERP projects have come to a grinding halt because the first thought is to conserve cash. However, in surveying ERP suppliers supporting clients ranging from small and medium size closely-held businesses to private equity backed companies and large complex organizations, although there has been a slowdown, there are several clients taking the opportunity to get in front of the technology curve so that they will be ready to grow rapidly and profitably as they emerge from the pandemic. They are slowing down some areas of the project while focusing efforts on the critical functionality or areas of the business that need a technology boost. For example, we are working with a client who took the opportunity to develop an IT roadmap so that they’ll be prepared to succeed post COVID-19. To think through your options further, listen to a SelectHub panel discussion on “How to Do ERP During COVID-19“. We are interested in your feedback and stories.

One area that is of common interest is business intelligence (BI) software. If clients can slice and dice data to understand customer and inventory patterns, utilize predictive analytics to better navigate COVID-19 demand changes and support future customer needs, and develop operational dashboards to manage performance and take cost out of the business, what’s not to like? In reviewing the spectrum of available options, there are a few impressive, relatively easy-to-implement tools. Clients are interested in what will deliver immediate value.

Read our eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19 to dig into these concepts further as well as to start thinking through your technology roadmap.

The post What’s Going on in the World of ERP & Business Intelligence? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Does Technology Have a Seat at the Table?

Do you consider your technology leader an integral member of your executive team? If not, why not? Prior to the coronavirus pandemic, technology was starting to take over the world. With the acceleration of e-commerce, the expanded use of ERP systems, artificial intelligence applications to create predictable demand and automate repetitive tasks (and of course Amazon Alexa), the internet of things to connect objects and applications such as those used in autonomous trucks, blockchain to trace the chain of custody from farm to table across the globe and robotics to automate manufacturing and warehousing processes, IT was critical.

Now that the pandemic has hit, technology is playing an even more pivotal role. The world has gone remote. Users are gaining comfort with technology at a record pace. Additionally, because there are many complications in navigating coronavirus with employees (rules, regulations, social distancing protocols, and many more), executives are starting to see a greater advantage in proceeding more quickly with their technology roadmaps. By taking advantage of the opportunities to grow the business and improve the customer experience, employers can reallocate employees from repetitive tasks (which also can require close proximity to one another) to ones that will add value to the business.

Read our eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19 to dig into these concepts further as well as to debate whether to move forward with ERP upgrades or hold off to preserve cash and to be reminded of the critical importance of cyber security and protecting against cyber criminals. Also, one of our favorite topics is addressed, the MacGyver approach to moving forward with your systems infrastructure while navigating the slow ramp up following the pandemic. It is NEVER all or nothing. Invest smartly. Utilize already-existing talent and tools. You’ll speed on by your competition.

Join our Navigating Through Volatility webinar series to learn about how ESRI is using cutting edge technology and location intelligence to drive supply chain resilience and recovery. It certainly will stretch your mind when it comes to using IT/ technology to drive business value, and more importantly, value to the community. Perhaps it will inspire you to think about technology differently.

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The topic of Systems Transformation seems to be arising more frequently lately.  How do you know if it is time to consider a systems transformation?

Let’s start by defining a systems transformation.  In essence, a systems transformation is an upgrade to the way you perform business – inclusive of your people (allocation of resources, skillsets, etc.), processes, systems and information flows/ collaboration partners.  

Although there is never a bad time in terms of elevating your business performance, the investment and disruption might not be ‘worth it’.   In other words, does the return on investment make it the ‘right’ time?  

Here are questions to ponder in answering that question:

1.  What are your growth plans? – If you are performing well and growth is slow, you are unlikely to require a systems transformation.  However, if you expect solid levels of growth, you’ll need one. There are two reasons: 1) Even if you are providing an exceptional customer experience currently, to maintain that with growth is a different ballgame.  2) As you grow, if you don’t want to add people to support each new level of growth, you’ll need to devise systems to grow in a scalable, profitable way.
2. Will your margin levels sustain your business needs?  – Of course, no one would complain about increasing margin.  However, the key question is what has to be done to achieve the result?  Take a look at whether your profitability and margin levels are sufficient to satisfy stock price expectations, investor needs, reinvestment plans, business valuation goals etc.  We have run across “cash cow” businesses that yield enough profit for the owner’s lifestyle and objectives. There might not be a reason to invest in an upgrade. After all, there is risk and disruption with every activity of this magnitude.
3.  What are your customers’ expectations? – No matter your growth and profitability, if your customers’ expectations are changing or increasing (as they often are in today’s Amazonian environment), the key question is whether you’ll be able to meet them with your current setup.  We see that it can go either way – depends on the industry, your customers, the marketplace etc.
4. What are your employees’ expectations and capabilities?  – Will your employees stick with you if everything remains status quo.  This can completely depend on your employees. We have run across people who prefer “what works” and are quite happy not to upset the apple cart.  On the other hand, we have also seen many job seekers look for new opportunities because the executives weren’t interested in growth – the company’s or the employees.  It is important to think through what will happen. If you choose the status quo and your employees don’t align, it might force you into a different strategy, and you’ll be worse off for not thinking proactively.

On another note, if you don’t have employees capable of leading a systems transformation, you will need to shore up your team.  Certainly you can supplement with short-term resources to fill in gaps and consultants to advise on skills not required over the long-term but you might also need to fill in gaps within your team.  Don’t overlook this critical component but also don’t let it deter you from making the leap.

5.  Do you have the funds?  This is the one that deters most executives.  It is quite tempting to hold off until later when it seems like it is a ‘better time’.  However, are you defining better time as one when you feel better or one as defined by the questions above?  As my consulting mentor says, there is always money. It is a matter of priority. Recently, we ran into a client that has never borrowed money.  It can be a smart and prudent strategy if it supports your business objectives. However, the CEO was questioning whether he should continue this strategy.  If it is the ‘right time’ for an upgrade and it will provide a return on investment over the long-term, he should absolutely borrow to fund the near-term investment to gain the value down-the-line.  

Of course, that doesn’t mean you should dig a hole the size of the Grand Canyon to fund your systems transformation.  We have seen many executives accidentally throw money out the window when it wasn’t the best timing or get carried away and spend ‘too much’.  In these cases, you might never recover from your upgrade! Gain advice from experts with an eye to return on investment. Keep in mind that taking prudent risk will be required!

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The post Are You Ready for a Systems Transformation? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Lately, we’ve been called into several clients with ERP challenges that directly impact business growth and success.  Do you desire profitable growth?  If so, add ERP into your strategic discussions. Would you delegate a decision that could literally “make or break” your customer service, profit margins (or lack thereof) and ability to grow?  I think not! 

There has been a widespread need to consider ERP as a strategic topic.  For example, these scenarios have arisen in the last month:

1. In one manufacturing company, the ERP system was holding them back from growing.  For a family-owned business, that is the equivalent of a noose around the neck!  
2. In another manufacturing and distribution business, they couldn’t figure out their costs – this issue certainly provides challenges for profitable growth.  
3. And in yet another situation, the ERP system wouldn’t support the business processes adequately and therefore would hold the owners back from getting away from the business (even for an extended vacation), let alone increasing the value of the business.  
4. A complex enterprise also struggled to further utilize their system for management decision-making due to data integrity obstacles and the lack of flexible reporting.

As I enjoy stating the obvious (as one of my favorite clients used to say about me), none of these situations are desirable!  Instead of ending up butting your head against the wall, start thinking about ERP as a strategic topic and include it in your executive meetings.  

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