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As our long-term newsletter subscribers and ProVisors (trusted advisor network) colleagues are aware, we have used the Strongest Link in Your Supply Chain” as our tag line for a decade or longer. However, it has never been more relevant than it is today! As has been proven through the pandemic and continuing supply chain disruptions, any company’s performance is only as strong as the weakest link in their supply chain.

Every client has run into critical raw material shortages and/or extended lead times during the pandemic. For example, a building products manufacturer ran out of a few key materials, required to run 80% of their production lines. However, since they are proactive and innovative, they used a substitute material to minimize downtime and largely keep the lines running. An industrial equipment manufacturer was also proactive and took risk upfront and ordered critical materials and long-lead time items far ahead of required dates, and so although they experienced extended lead times, the impacts to their business was minimal. On the other hand, a consumer products manufacturer tried to run too close with inventory and when a key material was delayed, they experienced an outage on a key product until they could expedite delivery. No matter how each of these companies responded (or thought ahead), supply chain disruptions created volatility, at a minimum, to lost revenue and potentially customers, at a maximum. 

Clients’ customers have also experienced shortages which directly impacted the rest of their supply chain. For example, an insulation products manufacturer suffered lost revenue because their key customer couldn’t receive enough copper to produce at the levels required to support their customers orders. Thus, the customer scaled back on orders until the copper arrived, impacting our client. Our client was in a tight spot because they had reserved capacity to support their customer, and sales were not coming through in the timeframes expected. Because they had limited storage space, they had to scale back production as well; however, they pursued additional storage space to help their customer prepare for a quick start when the copper arrived. This scaled back volume also impacted staffing, and so they had to pivot to keep the lines running while evaluating how to maintain people while not increasing inventory beyond a sustainable level. Of course, as production scaled back, this impacted the manufacturers’ suppliers and so on. In essence, the weakest link (the copper supplier) created a ripple effect throughout the end-to-end supply chain.

Thus, we not only continue to embrace our tag line, The Strongest Link in Your Supply Chain, but we see increased importance and value in today’s supply chain disrupted world! Whether partnering with clients to rollout Sales & Operations Planning (S&OP) programs to realign demand and supply, or to upgrade Sales & Operations Execution (S&OE) / planning processes to improve customer service and operational efficiencies, or to select and/or better utilize ERP and related technologies to automate and streamline operations, our focus on partnering with clients to be The Strongest Link in Your Supply Chain will drive success.

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We are in a new era with more opportunity to grow than ever before. COVID is largely in the rear-view mirror, and the strong companies are getting stronger. Consumers have returned to the scene and are robust purchasers of products, homes and services. Are you ready to grow and scale? Have you taken control of your end-to-end supply chain so that you can take advantage of the opportunities?

Taking Control of Your End-to-End Supply Chain

To support customer needs and be prepared to pursue revenue opportunities, the smart are taking control. They aren’t waiting for the supply chain to straighten itself out. Read my recent article in Brushware about how the global supply chain will not realign anytime soon. Instead, we must take control! Answer a few questions to determine if you have control of your supply chain.

• If a supplier to your critical material or component is disrupted, do you have a solution to carry on without noteworthy interruption.
• If your customer changes product needs on the fly, are your manufacturing operations and supply chain agile enough to change on the fly?
• If your customer or supplier reconfigures its supply chain, is your supply chain resilient to accommodate successfully to changing conditions?
• If your product, ingredients or raw materials get caught up in global conflict, protestor delays or weather-related events, will you be able to serve your customers?
• If you gain new customers, will you be able to adjust your manufacturing schedules to accommodate for the new requirements?
• If your revenue grows by 50-100%, can you scale up successfully?

How are Clients Taking Control of the Supply Chain?

Our most successful clients are taking control of their end-to-end supply chain. As customers needs evolve, you will need to make the appropriate changes (operationally, financially, R&D/ new products, supply chain, etc.) to meet these changing customer needs and support revenue growth while meeting profit/ EBITDA objectives. How are the best clients pivoting to take control of their supply chain?

Certainly, it depends on your particular industry, company strengths and position, and so it could take many forms. For example, a client supplying the building products industry has been vertically integrating manufacturing capabilities to quickly pivot to changing customer needs and to grow market share. Another client has been sourcing new manufacturing partners both regionally and around the world to build offload capabilities to meet increasing revenue opportunities. Other clients are expanding key manufacturing capabilities, purchasing equipment, and hiring people to grow inhouse capabilities whereas others are proactively expanding their footprint to provide greater flexibility in the future. Other clients are rationalizing skus and prioritizing strategic and profitable customers. Last but not least, another client is evaluating its supply chain network of outside distribution centers to reposition, consolidate and/or expand to meet changing customer conditions while continuing to manage working capital closely.

Taking Control With SIOP (S&OP/ IBP)

Our most successful clients are utilizing customized and collaborative SIOP (sales, inventory and operations planning) processes to understand customers’ needs, create revenue predictability, and, most importantly, to define what’s required to be able to deliver these needs successfully, predictably and profitably. Our most successful clients are definitely taking control to meet significant revenue opportunities whereas the mediocre continue to hope the supply chain will straighten out on its own.

During the monthly SIOP process, the potential and probable revenue opportunities are highlighted with enough clarity so that the executive team can take control over the strategic decisions required to support profitable growth. For example, a life sciences manufacturing client took control over the supply chain by building an additional facility to support growth. However, you don’t build a facility and gain customer approval for the new process quickly, and so they had to take control and develop an interim solution as well.

They knew they had to get a better handle on their forecast so they could carefully navigate how to increase interim production and meet customer orders. After reviewing historical growth rates by customer and product line, incorporating quotes with high probabilities of success, reviewing inventory agreements, monitoring new growth channels, and reviewing with sales and product teams, we defined a base forecast to launch the SIOP process. This enabled manufacturing to see into the future and define the specific proteins required to support the growth trajectory prior to the expanded facility availability. This allowed the manufacturing leader to take control and scale these specific proteins, reallocate space, build skills, purchase equipment, and order long lead-time materials to support growth, and it enabled the quality and bottling leaders to plan capacity accordingly to meet the interim demand. Additionally, modifications could be made to the frequency, volume and manner in which the manufacturing facility replenished its European and Pacific Rim locations to ensure customers’ needs were met. You’ll find more examples of how to grow and take control of your business by being directionally correct with sales and operations planning in our blog.

Customer Success with SIOP

SIOP is not a magical off-the-shelf solution. It is tailored to each client and the unique circumstances, strategies, differentiators, people, processes, systems, and data. As you get a directionally-correct monthly cadence going with cross-functional and potentially cross-organizational engagement, strategic issues and related roadblocks will emerge. These issues become the focus to create customer success. Whether success is created by improving OTD/ OTIF (on-time-in-full), reducing lead-times, or simply scaling production and logistics to meet increasing and evolving customer demand, SIOP will provide a framework for success.

Refer to our blog for many articles on SIOP. Also, read more about these types of strategies in our book, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth. If you are interested in talking about what it would take to purse the SIOP journey in your business, contact us.

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The squeeze continues. During my Aerospace & Defense speech recently on the Resilient Supply Chain, the concept of vertical integration arose as Boeing and Airbus are expanding and squeezing the middle in a noteworthy fashion. Similarly, according to Journal Star Walmart and Costco are moving to eliminate the middleman by moving towards farmer-to-shopping cart strategies.  

Walmart started bottling milk in its new Indiana facility. This move eliminated Dean Foods and their 100 dairy farmers and replaced them with 30 farmers and cooperatives. Walmart is controlling the entire supply chain from farm to shopping cart including transportation, a vertical integration strategy rarely seen to this extent and scale in agriculture. Similarly, Costco established a chicken farm to grow, slaughter and distribute chickens in Nebraska, eliminating suppliers like Tyson Foods and Pilgrim’s Pride. Both of these initiatives could create significant disruption as well as opportunity. 

Are you staying comfortable, waiting to be disrupted or taking the proactive approach to create disruption?

What Should We Consider and/or What Impacts Could Arise?

Getting to the top and/or to a comfortable position and riding the wave isn’t a viable strategy if you wish to be around for the long-term. Stay up-to-speed on what is going on with your industry, competitors, customers, suppliers, region and more. Don’t hide your head in the sand. Instead, choose to take the realistic yet optimistic view and turn it into reality. 

In addition, start looking at how to build an agile and resilient end-to-end supply chain. There is no telling when your supply chain might be squeezed or something will change. The more agile and resilient you become, the more successful you’ll be! If you’d like some tips for managing disruption, take a look at our resilient supply chain series. 

March 26, 2019

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Certainly, we are well-known in supply chain circles; however, what does that mean? This topic has come up somewhat frequently lately – should we call this position an Operations Manager or a Supply Chain Manager? Which will get us the best fit talent?

Because we are known as supply chain experts, we continue to talk about the supply chain even though LOTS of people – including potential clients – are unsure what in the world that means. For a while we talked about operations but that definitely didn’t provide the appropriate vision since our passion surrounds providing bold customer promises and profits. Nowhere does operations convey customers and growth. We also talk about manufacturing since it is our sweet spot within the supply chain! As the slogan touted at the Manufacturing Summit’s reception on Valentine’s Day, “We love Manufacturing”. The bottom line is the “what to call what so many companies desperately need” dilemma has proven frustrating!

In our case, we have decided to convey our vision of the supply chain in pictures – who doesn’t like a good picture? (Note our updated homepage)

I brainstormed this topic a while back with my global consulting strategy group (and so I want to give them a shout out and thank you), and we had fun creating concepts to visualize the supply chain:

1. From cradle to grave – It certainly does go from beginning to end -and beyond with reverse logistics and after sales support. It is a bit dreary but nicely descriptive -and there are plenty of clients who should put some items, customers and poor performers ‘in the grave’ sooner than they do. Have you noticed this too?
2. From inception to reception – This appeals to me as it spans the inception of an idea for a product or service to the reception by the customer or client.
3. Coal to car – A manufacturing metaphor related to the same theme so, of course, I appreciate it. Henry Ford owned the coal mines that made the steel that made the car.
4. From concept to cash – This also appeals to me because it conveys the result of the supply chain – translating concepts into cash.
5. Creation to application or creation to customer– Appealing from a creative and technology point-of-view. I have to say – many clients have issues in ‘application’. And, many people who know me will say, “how did you come up with 2 more C’s with creation to customer?!”
6. Significance to service– Since I have a passion for the customer side and wholeheartedly believe that you won’t have happy customers without happy employees; thus, significance to service hits the nail on the head as well.

Do these provide a picture of the supply chain? Which do you like best? I hope to hear from you!

One last thought on supply chain. You’ll notice that purchasing is only one aspect of supply chain; logistics is only one aspect of supply chain; and so on. In fact, isn’t the supply chain never-ending? It doesn’t really end but feeds the next loop within the supply chain?

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When I talk about The Manufacturing Connector(SM), I am referring to the comprehensive process to connect the rapid assessment and identification of key priorities with the execution of results through the right combination of end-to-end supply chain expertise and improvements in people, processes and systems.

When going into additional depth when it comes to people (Profit through People), I find that it is where I spend 80% of my time and attention for my most successful clients. Thus sit up and pay attention!

The reason people are cornerstone to success and my original brand was “Profit through People” even though I focus on end-to-end supply chain topics is because people make or break success. I can’t think of a success story within my clients or contacts where people didn’t play a vital role. Can you?

For example, in order to radically slash lead times, it takes more than dictating a change to Customer Service; instead, it involves each aspect of your order fulfillment process from taking orders to planning production, collaborating with suppliers, managing capacity, resolving operational bottlenecks, implementing the concept of flow (lean thinking), etc. How can such a change be successful unless leaders rise to the challenge, cross-functional teams get formed, culture change occur, metrics get measured, and change management becomes commonplace?

Now expand your thinking to your supply chain partners. Are you collaborating with your customers? Do you have communication processes in place with your bank? Can they support your cash flow needs? How about your insurance carriers? Attorneys? Contract manufacturers? Etc.? It must be one, inter-connected web to succeed, and it will boil down to people!

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