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The first steps toward becoming a Company of Tomorrow Today

What does it take?

Customer Focused Business Transformation $1B division of a large High Tech Telecommunications company

Who would have known 20 years later that my experience with a transformational initiative would be so impactful, even in today’s standards?

This is a story about a company I worked for and our journey toward becoming a Customer Focused organization and the transformational changes required to achieve our goal.

This is an industry that was highly competitive with constant changes in demand, supply, and product development. The transformation took place 20 years ago and at that time our customers were demanding, expecting product to be shipped out the door the same day that they provided the order.

If we fast forward to today, the demands on organizations are even greater with pressures from globalization, social media and digital disruptors.

The following characteristics prevented us from meeting our customer’s expectations.

  • Functional organization structure
  • Long leadtimes
  • Lack of responsiveness

In Supply Chain, which I was responsible for, process cycle times were extremely long. As an example, we were often unknowingly expediting product that had just been cancelled by the customer and cancelling material and production that had just been re-ordered by the customer. This extreme latency in response times created constant knee-jerk decision making with added costs and the risk of losing business to our competition.

It was decided that we would embark on an organizational transformation.

1

First, we restructured the company to create four Business Units; one company operating like four companies each responsible for their own Revenue and P&L. Each business unit supported a group of customers. Each business unit managed their own production lines with their own staff.

2

We became a very lean flat organization with few levels of management. I was responsible for Customer Service, Sales and Operations Planning, Procurement, Master Scheduling, and Production Planning including all financial supply chain metrics impacting the P&L for our business unit.  KPIs included

  • Customer Service
  • Sales
  • Margin
  • Inventory
  • Inventory Obsolescence
  • Forecast accuracy
  • Supplier delivery
  • Purchase Price Variation
  • Supplier quality
  • New Product introduction schedule
  • Product Transfer cost and schedule
  • Indirect and Direct labor costs
  • Capacity utilization

With so many competing metrics the business unit managers naturally started focusing on balanced trade-offs, maximizing performance for the business unit. As an example, we quickly recognized that if we focused solely on reducing inventory it was at the expense of service. Likewise, if we focused solely on capacity utilization it was at the expense of inventory. Using scenarios, we could determine the appropriate balance of competing metrics and set targets.

3

My team was comprised of CSRs (Customer Service Reps) who were formerly planners, buyers or schedulers. Everyone was focused on the customer. The individual CSR’s also became responsible for KPIs that were formerly conflicting, such as service and inventory. The CSRs became high performing work teams, empowered to make decisions that added value to their customers.

My peer was responsible for Engineering and New Product Introduction. The two of us along with the production managers reported to the Business Unit Senior Director.

4

Within each business unit people were assigned horizontal process responsibility. For example, a CSR (Customer service rep) was responsible for their own group of products and supported the following processes

  1. Customer orders
  2. Purchasing
  3. Master Scheduling
  4. Production Planning

5

Change management and on-going training was a critical step in our success. It was necessary for the CSR’s to become familiar with all aspects of the supply chain. Unfortunately, it wasn’t a transition that everyone was able to make. The talent pool had to be ready for the change. The CSR’s collaborated with each other and always had access to subject matter experts within the group that supported the team during the transition and going forward.

6

Collaboration was required among peers in the business unit and across business units to maximize capacity, material, and labor across the organization.

At that time, social collaboration tools didn’t exist. Collaboration occurred in the form of meetings/conference calls. The business unit cross-functional ‘hives were co-located, often very close to the manufacturing floor.

This organizational structure would thrive with today’s social collaboration tools. Today, technology like Yammer, Kinaxis and others allows for spontaneous association, where people participate to problem solve ‘on demand’ based on the impact an event or decision has on their area of responsibility. In today’s world of globalization, you don’t know who should be involved or may be directly impacted by events. Collaborative tools enable the right people to get involved quickly to respond, resolve and make decisions in the NOW mode.

7

As a next step, we selected a software solution from webPLAN, now known as Kinaxis, that enabled the transparency of information that we required and helped us quickly create scenarios and understand the full impact of our decisions before we executed. The transparency of information was also extended to customers and suppliers sharing forecasts and production plans.

I recall being asked how my team could reduce inventory so effectively. What special programs had we implemented? The short answer was none. People just needed visibility to the right information to do their job. People inherently want to do good work. They just need to be empowered with the right tools to make it happen.

8

A monthly S&OP process was initiated. There was a strong management commitment with mandatory participation. My team had input to our business unit’s forward-looking plan. The plan was used as a goal; however, course corrections were constant.

Today best in class companies have implemented Continuous S&OP working in the NOW mode where disruptions to the plan are dealt with immediately and course corrections are made rather than waiting until the end of the month.

9

The CSR’s used exception based reporting with tolerance thresholds to prioritize their work. The pareto principle was used to help them manage their workload. The CSR’s had full exposure to sales and costs. The principles of segmentation were applied to service and inventory management. ABC stratification was performed quarterly

The key suppliers (based on stratification) were provided with weekly forecasts and inventory levels. A supplier replenishment program was implemented transferring the responsibility of triggering supply to the supplier. Contracts clearly defined vendor liability.  The challenges often associated with data accuracy in the system were also addressed. CSR’s were accountable for data integrity and certain data elements such as purchased part leadtime became the responsibility of the supplier.

10

The transformation was a huge success.

Customer calls were reduced and service ratings improved. Rather than the customer constantly asking for information, the CSR updated them regularly with status and was easily able to provide them with root cause and correction action for any schedule issues as it was under his/her direct responsibility.

Results included:

  • Increased Sales
  • Customer service 98% to request
  • Inventory reduction of 20%
  • Cycle time improvement
  • Direct and indirect labor savings
  • Employee empowerment

There were many lessons learned.

  • Business performance improvements result from eliminating silos
  • Good decisions come from empowering people
  • Provide people with the good processes and tools to make their job easier
  • People inherently want to do a good job. Support them and get out of the way
  • Collaborative decisions are better decisions
  • Business transformation while not easy is often a necessity at some point in a company’s lifecycle
  • Communication is key. Change creates fear that needs to be managed
  • Celebrate your success
  • It is a continuous journey. It takes work to keep up the momentum

Over the past 15 years I have been working in the consulting/technology field. I have met with 100’s of Senior Supply Chain executives in the High Tech, Industrial, CPG and Pharmaceutical industries. The advancements in supply chain within many industries has been impressive but the journey is never over. For others, such as Pharma, the focus on supply chain has been more recent, exposing significant opportunities for improvement.

Why not become a Company of Tomorrow Today? Companies of Tomorrow today are great innovators. They question everything.  They are fearless about new business models. They are disruptive innovators. What is stopping you from being the next Uber, Google, or Amazon?

Author

Carol Mcintosh, With 30+ years in Supply Chain, Carol has witnessed the success of aligning decisions and activities against a common set of objectives and a common strategy governed by the Integrated Business Planning process. Driven by the belief that “you can’t improve what you can’t see” she is devoted to making the supply chain “visible”.