Category: The Strongest Link in Supply Chain

Is Demand Planning/ Sales Forecasting Hype or Valuable?

September 9th, 2019

According to Gartner statistics,significant bottom line results can occur with just a 1% improvement in forecast accuracy. In fact, there are staggering improvements in lead time, inventory reduction and margins, so why not at least explore the idea? There are lots of worries expressed by clients and contacts:

  • We cannot predict what our customers will order!
  • Customers don’t even know what they will order! (And, in seeing these ordering patterns, I concur that this is often-times an accurate statement.)
  • Since we are using lean, our lean consultant told us we no longer need forecasts.
  • We are a small company and don’t have resources to focus on forecasting
  • And my favorite, “Why in the world would our significant sales team listen to you?”

I just have one question, if depending on the industry and study, a 1% improvement can lead to a 2.7% to 7% improvement in cash flow and minimally a few percentage points cost improvement in key categories such as freight, wouldn’t you be remiss if you didn’t consider your forecasting process? Of course you would be!

We have yet to run across a client that couldn’t improve the forecast, no matter how daunting the task seemed. Since the outcomes are substantial, it was worth the effort.  And, the effort was typically minimal compared to aligning the people on the forecast.

A few tricks of the trade in driving results with forecasting:

  1. Let your tool (whether Excel or a sophisticated system) do the work for you – From an 80/20 standpoint, there is no doubt that a simple tool will perform far better than even your best person. Develop your base.
  2. Focus on exceptions – On the other hand, your team is best equipped to provide insights and feedback on exceptions. Use their strengths.
  3. Drive results, not blame – Remember, the definition of a forecast is that it will be inaccurate. I’ve yet to run into a client with a perfect forecast. With that said, the three most impressive were across the board – a $100 million dollar facility of a multi-billion dollar aerospace organization with a manually generated forecast, a close to billion dollar consumer products company with a home grown system and smart people, and a rapidly growing <$10 million dollar manufacturer with an Excel-based system with smart, agile and process-oriented people. None of these folks ran around blaming anyone with forecast inaccuracy yet they all outperformed their competitors.

Perhaps it’s time to take a second look at your sales forecasting process. Who is responsible? How does it work? You never know what you’ll discover as you shine a flashlight on the process. If you’d like to discuss forecasting and demand planning further, contact us.

Did you like this article?  Continue reading on this topic:
The UGG Founder, the Amazon Effect in Healthcare and Why Demand is Key
Have you Thought about Increasing Demand??
The Strongest Link in Your Supply Chain
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Recognition and the 2019 LMA Advocate Award

August 20th, 2019

 

On the 10 year anniversary of my business, I recognized 10 people for 10 years as LMA Advocates – people who have gone over and beyond, resulting in LMA Consulting’s growth and success.  I truly appreciate their support, expertise, ideas and feedback.  I would not be here today without them – and certainly not leading a growing and leading edge consulting practice that partners with manufacturers and supply chain organizations to create BOLD customer promises and profits.

Ever since my 10-year bash, I’ve recognized one person each year on the anniversary of LMA Consulting.  Thus, on my 14-year anniversary, I’m thrilled to announce Ron Penland as our 2019 LMA Advocate.

Ron Penland and I have known each other for over 10 years.  We have collaborated for the mutual benefit of manufacturers, distributors and significant service organizations. We got to know each other well in ProVisors (where I lead the Ontario group) and Renaissance Executive Forums (where Ron leads Inland Empire groups). Not only has Ron been instrumental in introducing me to several key clients, but he also provides significant value with his leadership. His numbers speak volumes. For example, his member CEOs sell their companies for significantly higher multiples than peer companies/ executives. I appreciate the expertise  and advocacy Ron has contributed over the years.

One tip to implement this week:
Are you recognizing people who have been instrumental in your company’s growth and success?  More importantly, are you paying attention to the contributions along the way that result in the ‘big wins’? I grew up outside Chicago, and my brothers played hockey. My mom read us all a book on Wayne Gretzky who set the record for goals (894) as well as assists (1,963). The best players (Gretzsky) pass the puck in hockey! USA Hockey recognizes not only people who score multiple goals but also the people who achieve multiple assists. If you get 3 or more assists, you earn a “Playmaker” in hockey. Who is your “Playmaker” at work?

Find the gems in your organization and recognize them.  Thank them in front of their peers.  Tailor their ‘award’ to what is meaningful to them.  Perhaps your winner wants to be on a special project team or attend a conference. Why not make it meaningful and demonstrate your appreciation for the contribution to success?

 

 



Manufacturing is on the Move

August 17th, 2019

 

Reshoring was at record levels in 2018! Manufacturers are starting to return as they see the total costs of offshoring combined with the rising costs in China and improved competitiveness of the U.S.

According to an Industry Week article by Harry Moser, almost 1400 companies announced the return of 145,000 jobs in the last year. This trend was starting to occur prior to the tariffs. Now, the tariffs are expediting the return. Manufacturers are also realizing they can gain a competitive edge with rapid customization close to their customer base.

Additionally, even in commodity products, companies are reevaluating how to remain competitive and diversified. Hasbro is the latest company to look at diversifying away from China. According to Industry Week, Hasbro, the largest toy maker globally, said that it planned to move from 75% to 50% production in China by the end of 2020. They are looking at Vietnam and India.

There is a transformation occurring. Executives are more concerned about relying on any one source of production (China), and are diversifying. Intel is reviewing its global supply chain.  And, there are rumblings that Apple and Amazon are working on a plan B.

What Should We Consider and/or What Impacts Could Arise?
Speed and agility are critical to thrive in today’s marketplace. Start thinking about how you can radically reduce lead times while accelerating cash flow (reducing inventory levels) and increasing profitability. It is no easy task . Yet, it is what is required to thrive in today’s Amazon-impacted world. What can you do to get ahead of this curve?

Like the big dogs from the Industry Week article, should you be thinking about diversification? Or should you be re-shoring? Or should you buck the trend and offshore while everyone else is re-shoring? There are many companies who would be in far better shape if they had taken that approach 10-20 years ago when every Board member wanted to see an increase in outsourcing. There are no perfect answers except to be thinking about these impacts on your industry, your supply chain partners and on your company so that you can take a proactive stance instead of a reactive one. What will you do to successfully navigate these waters?

Certainly, re-shoring, near-shoring and diversifying are topics related to creating a resilient supply chain. If you are interested in an assessment of your situation, contact us. You’ll find more information on these types of topics on our resilient supply chain series.



Is Your ERP System Scalable?

August 14th, 2019

erp successSince we happen to be working on 3 or 4 ERP system projects concurrently, the topic of ERP is top of mind.

Let’s start by saying upfront that we turn down ERP selection project requests. Not everyone needs a new system. Perhaps a process upgrade and better utilization of your current system will sustain your business for 3-5 years. If so, why divert attention? On the other hand, waiting “too long” will quickly spiral into disaster. How do you know which of these is your situation?

An ERP upgrade is one of the most significant initiatives a company can undertake, and the statistics aren’t good. 80% fail to achieve the expected outcome! Yet, if your ERP system isn’t scalable, hiding your head in the sand will lead straight to unmitigated disaster. Thus, it’s best to be proactive, diligent and strategic when it comes to this topic.

Selecting a system isn’t something to delegate to your IT person. Instead, it is something you must “own”. After all, if your system will support your resources so that you can grow the business with the peace of mind that your system will enable a high level of customer service with additional customer-friendly capabilities (such as a customer portal), support your #1 asset (your employees and partners) behind the scenes and allow your business to scale with minimal if any investment of time and resources, it suddenly becomes quite relevant.

The 80/20 of success relates to just two items:

  • Your critical success factors – what is unique to your company or industry and/or what drives customer differentiation and profitability
  • Your design and implementation partners – although the focus typically goes to the software, as with business, the 80/20 of success is with people and partners.

Having an ERP system that supports your business objectives is another key component of creating a resilient supply chain. If you’d like a rapid assessment on whether your ERP system will support your growth and business objectives, contact us. And please check out our resilient supply chain webpage.



How Any U.S. Company Can Survive a Trade War with China

August 5th, 2019

 

With all that is going on with China in terms of trade wars, currencies, natural resources and more, it begs the question of what we should be thinking about doing business with China. Is it prudent?

Thanks to APICS Inland Empire and International Business Attorney and expert, John Tulac, we are sharing APICS-IE’s webinar on “How any Company Can Survive a Trade War with China”.

Note: The webinar is about 60 minutes.

What Should We Consider and/or What Impacts Could Arise?
We should be aware and considering potential impacts on our business. Think about any direct ties to China with supply as well as indirect ties with our extended supply chain. Undoubtedly, everyone has at least an indirect tie to China, and so we all better think about impacts and implications!

Stay on top of trends and highlights. Get involved with organizations such as APICS-IE to participate in events and network with resources. For example, make plans to join our semi-annual symposiums where we feature an  executive panel and networking opportunities.  Mark your calendar for our Fall 2019 Symposium on “Collaborating for Advanced Manufacturing & Supply Chain Success“.

Also, contact experts such as John Tulac to help navigate more complex situations. Remember, a penny saved that costs you thousands and hundreds of thousands down-the-line is by no means “a penny saved”.

Certainly, the topic of trade wars relates squarely in the resilient supply chain camp. If you are interested in a resilient supply chain assessment, contact us. You’ll find more information on these types of topics on our resilient supply chain series.