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The Strategic Benefit of SIOP

June 26th, 2019

SIOP (Sales, Inventory, Operations Planning) should not be relegated to the Planning Department. Although the planning group is a key participant and might lead the process, SIOP touches upon several strategic issues while creating alignment with Sales, Operations, R&D/ New Product Development, Finance, Purchasing, and others. As a CEO, you must become interested!

We have worked on countless SIOP projects with clients across industries as diverse as building products, food and beverage, healthcare, and aerospace.  It has proven to be the most effective at achieving the win-win-win of enabling growth while maximizing service, cash flow (inventory) and profit. For example, at one aerospace client, we put the fundamentals in place to support SIOP (scheduling, planning systems MRP/MPS, forecasting) and then rolled out a SIOP process involving all key aspects of the organization. Although our objective was to bring service levels from the 60%’s to the high 90%s, we not only accomplished that metric but we also improved margins by 5% and increased morale and engagement. What’s not to like with these results!

Critical Aspects of SIOP
Let’s start with just those elements that are most important to achieving results:

  • Can you get executives involved? Of course, it is better to gain executive involvement upfront.  However, I have found that it is quite doable to gain the involvement over time as well. For example, in one client situation, a key executive was not on board at any level at the start.  So, as we rolled out a pilot process, we convinced him to give the process a try. Once he sat in on the executive SIOP meeting, he became more interested because strategic issues arise such as make vs. buy, changes in sourcing, impacts to sales strategies and more.
  • What do you have to do to get directionally-correct information for making decisions? By NO means do you need perfect information.  In fact, if you wait for perfect information, your decision will be long past. Yet directionally correct information is imperative so that you can make fact-based decisions and/or gain approval from corporate or your Board for what you know must be done to succeed. I cannot think of a client situation where I couldn’t gain access to at least directionally correct information after an assessment, no matter how ancient their ERP system.
  • Will you involve all relevant departments in the SIOP process? If you focus on data and not the people, you will not succeed. The 80/20 of success is to bring typically disparate groups together to align on 1 plan/ path forward. It is much easier to say than to accomplish, and so those clients that do this well have a far higher success rate than the rest. You should involve Planning, Purchasing, Operations, Logistics, Customer Service, Sales, Finance, New Product Development, and any key area of your operation.

SIOP is not a quick resolution.  However, you can make quick interim progress . Similar to safety, it must become part of your day-to-day culture. As business conditions change, roadblocks naturally arise through the process. We’ve found that they have a FAR higher chance of being averted or minimized when they arise as part of the process instead of related to one person or department who typically is seen as the “problem”. Strategic issues also arise naturally through the process so that they are proactively addressed instead of resulting in a reactionary panic.

You can start the SIOP journey with an assessment of readiness with recommendations for improvement. Several clients have started with this approach so that they knew which building blocks to put in place and whether the benefits would drive a substantial return on investment at this juncture. If you are interested in this type of assessment, contact us.

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Do You Treat Your People as Critical Assets to Your Success?

June 24th, 2019

As several CEOs lament continually and as Steve Erickson, president of Corona Clipper, Inc. and UK Business Unit Group, said in our 2019 predictions document, talent is a hot topic in today’s tight labor market. Perhaps it is time to put a bit more thought into our talent.

As a consultant who works with organizations from a few million in annual revenue to multi-billion dollar conglomerates, it is quite clear that talent is an issue across-the-board. It doesn’t matter the industry, the size, or the ownership (private equity, publicly traded or closely-held). Talent is an issue that is top of mind of every executive interested in growth and innovation. The trick is whether you just think about talent or are willing to invest in talent. Which are you?

Certainly, those who invest are far more likely to retain top talent and develop new talent. In zero unemployment markets, there is something to be said about creating your own talent. If you aren’t focused on this topic, it is quite likely the competition will steal your talent away.

There are many ways to invest in talent:

  1. Provide mentor opportunities – If your organization looks for ways to support the growth of employees with mentors, you are bound to be more successful than the norm. In our experience, the best companies realize that people need to learn through practical application and mentoring provides this opportunity.
  2. Invest in leaders to encourage continuous coaching – aAyearly review is quite useless. Who can remember what happened that long ago and understand how to improve or build on a strength? Instead, I found that 90 day one-on-one performance conversations with a limited number of objectives do the trick. Continuous feedback and investment of time can go a long way. But let’s not expect leaders to know how to conduct these sessions if we haven’t invested in them. Remember, it trickles down hill.
  3. Provide training opportunities – Search for training topics that will supplement what your employees should understand. For example, any employee in operations and supply chain should take APICS courses to understand the fundamentals of supply chain and operations management and related principles. If nothing else, it will provide the body of knowledge and associated language.
  4. Provide experiences – In larger companies, there might be job rotations or overseas assignments.  No matter the size, there are cross-training opportunities as well as enabling visits and collaborations with customers, suppliers, systems and technology providers, consultants/experts and other partners.
  5. Allow the freedom for experimentation – To encourage new ideas and innovation, it is important to design programs that educate employees as well as provide a framework to try out new ideas. In our consulting travels, we find that employees who are allowed to test new ideas in a safe zone feel invested in.
  6. Address poor performers – Instead of ignoring your poor performers because it is an unpleasant task or you are worried about repercussions, proactively address them. Work with them to turn them around or move them out of the organization, and you’ll unleash your top talent.

Why not merely increase your engagement by investing in your already-existing talent? According to all the surveys, engagement is at horrific levels in the vast majority of organizations yet engagement is key to driving performance. It doesn’t take a rocket scientist to figure out investing in your people is not only common sense but it can do more good for your bottom line than almost anything else. The key is to not treat investment as throwing money at an issue but instead seeing it as a priority. Let us know what ideas you have to engage your most critical assets.

 

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Participation is More Fun

June 20th, 2019

During my recent trip to Sicily, Prague and Belgium, I went on several food tours. I have found food tours can be a fun and interesting way to get to know an area, as well as the food that is unique to the area. So, of course, when in Italy, what better than to have a food tour and make your own pizza! We sort of participated in making limoncello which is always a great taste to include on a tour.  And, we definitely made chocolate treats on a chocolate tour in Brussels.

Each time an activity was included, it added a new twist to the food tour. Isn’t that true with work as well? If you want someone to learn a concept, develop an exercise or a way for him/her to participate. Since returning, I taught a CSCP (certified supply chain professional) class at the Target distribution center and another class with two students at the University of LaVerne/  We had interesting interactive discussions. The students brought up real world examples to participate and relate the concepts to everyday work scenarios and gain immediate advice on a few issues. Bringing concepts to life with active participation is much more memorable than just talking or droning on about a topic. How can you bring concepts to life at work?

One tip to implement this week:
Think about how to build clarity and build participation into your conversations, presentations and discussions. As Jerry Seinfeld says, “I will spend an hour taking an eight word sentence and editing it down to five.” Similarly, I’ve noticed it might take our team at least that long to distill one key concept into a graphic. It is well worth it if the point is clearly communicated and our recommendation is understood and supported. In this case, think about how to engage your team, audience or client to participate in the solution. Not only will they understand it much better but they also will be aligned with it!

There is an art to developing participation exercises that will engage the audience while achieving your end outcome. I find it much harder than it appears. Ask your favorite speakers, educators and leaders how they do it. Take note when someone does it well. How do they introduce the exercise? How do they engage the team? Do they tie the results to the next topic or business need? Little things go a long way. For example, try making your exercise relevant to the audience. When explaining the importance of bills of material for a clay company, we used play dough to make some simple items (thanks to my colleague Diane Garcia for that great idea!). I’d love to hear your ideas for successful participation.

 



Why Supplier Management is More Important Than You Think

June 17th, 2019

Supplier management has been a theme this week. I taught a CSCP (certified supply chain professional) class session about supplier relationship management and SRM software recently. An attendee had a great example of the impact of poor quality.  Her company was sending an entire container load of product back to Asia with defective parts.  This was bound to have negative impacts on the customer. After all, they were already delayed.  Now, they were spending another month on the water to start over again. That led us to discussions on backup suppliers.

Next, I spent quite a bit of time on webinars and calls one day talking about the critical importance of supplier lead time, reliability, safety stock, lot size and how these factors impact our ability to maximize service, profit and cash flow. And, I presented to APICS Ventura on “The Resilient Supply Chain” We had intriguing discussions on the trends of vertical integration, supplier consolidation, allocation of key materials (and how consumer products are gaining priority access with the leftovers being allocated to industrial companies), the impact of tariffs on sourcing, and several more topics.

The bottom line of each of these discussions is that proactive management of suppliers is of ever-increasing importance in today’s Amazon impacted business environment. If you don’t have what you need, when you need it, where you need it, in good quality, and within cost guidelines, you are likely to lose vs. your competition. And, this includes last minute changes! Do you consider your supplier your partner or someone to negotiate with and gain an advantage over?

What Should We Consider and/or What Impacts Could Arise?
It is NOT all about cost. Of course, the hot topic on executives’ minds is how to achieve scaleable growth, so profit and cost are important topics.  Yet, smart executives realize it is quite easy to sacrifice the future by saving pennies in the present. Similar to the mistakes made several years ago when it didn’t matter whether it made cost-sense or not (ie. Boards were demanding outsourcing regardless of the financials), many Boards are demanding supplier concessions without looking at the extended supply chain impacts. Instead, stick up for looking at total cost and taking the value viewpoint! Of course, this means you’ll be focused on costs but it won’t be your sole focus.

We talked about several scenarios where you had to invest financially upfront in order to achieve longer-term success. For example, we talked about keeping a more expensive backup supplier and giving them 20% of the volume. Boards and private equity backers weren’t too happy with the extra cost yet this risk mitigation technique saved the day on more than one occasion. When the material went on allocation, the main supplier struggled or the ports/transportation infrastructure broke down, those who planned for the inevitable bump in the road had uninterrupted supply from the backup supplier and satisfied customers while the competition fell further behind. Are you thinking about your suppliers like a cost or a partner?  You’ll find more information on these types of topics on our resilient supply chain series.

 



Language & Why Quality Is Lost in Translation

June 14th, 2019

I recently returned from a trip to Europe and it highlighted why language and positioning matters. Of course, when visiting Sicily, Sorrento, Prague and Bruges, different languages and dialects were spoken.  However, my comments about language and positioning relate to English. On a day tour in Prague, we had an extremely knowledgeable guide who wanted to tell us everything she knew. We could understand her English.  However, she was opinionated about where we should stand when listening, whether we could stray to take pictures, and whether we could ask questions if she hadn’t told us what she thought we should know. She didn’t position her language in the interests of her customer, so it really wasn’t as enjoyable as other tours where the guides clearly didn’t have the same level of experience and expertise.

I bring this up – because I still was glad I went on the day trip – however, this same topic has arisen multiple times in business in the last several days. In one project update call, the project manager presented important information. Yet, the way he presented it made it seem like the world might be coming to an end, even though it was FAR from reality and not his intention. It could have had drastic unintended consequences if we hadn’t spoken up to re-position.

In another client meeting, the group was talking about relevant details but all the CEO heard was blah, blah, blah because he wanted the bottom line – what those details meant. Of course, he wanted to know that the details were reviewed but the lengthy and wandering explanations made him feel uncomfortable in the conclusion (perhaps we protest too much) instead of confident. The details were intended to provide evidence to support, yet it backfired similarly to the guide’s endless stream of facts instead of focusing on the highlights that were relevant to the customer. Instead, speaking with confidence and conveying that details were considered (without going into detail), highlighting the bottom line result would have done the trick. I can’t tell you how many valuable superstars in clients are overlooked because they don’t know how to use language and convey their ideas successfully!

One tip to implement this week:
As someone who started out horrendously in presenting and positioning, I can tell you with confidence that it is a learned skill. Start wherever you are and make a new effort to improve. Don’t worry about perfection.  It is DEFINITELY overrated. Just strive for improvement on a daily basis. According to my consulting mentor ,Alan Weiss, if you improve by 1% a day, in 70 days you are twice as good. If you think about it, that is really quick!

Start by positioning what you say in the best interest of your audience,not in the light of what you assume is in their best interest. This alone can be revolutionary!

When I was a VP of Operations, I couldn’t understand why a plant manager, who reported to me,  seemed to believe what she said.  It was obviously untrue.  It’s wasn’t until my best friend in an unrelated field explained that people believe their own perceptions and they don’t have to match reality. I was thinking from my point-of-view instead of hers.

How many times have you used arguments to gain approval, funding or resources/support that you would use vs. those that would appeal to your audience? More than we’d like to admit I’d guess!