Category: Eagle Eye Strategic Focus

Why SIOP is Critical to Thriving During & Post COVID

August 12th, 2020

COVID-19 has disrupted every business. Some are growing far faster than supply can keep up, while others have dropped like a rocket. Still, others have almost identical dollar volume yet double the number of orders at half the order size, creating significant disruption in warehousing, shipping and transportation. And yet others might have less severe changes in volume with certain customers thriving and others dormant – all creating mix disruption.

The supply side is no different. Previously reliable suppliers can be suspect at best. Previously high-quality, low-cost suppliers have skyrocketing costs as airfreight is required to keep customers’ satisfied. Risks have increased dramatically with the uncertainty of cash flow and long-term ‘institutions’ of the industry are disappearing overnight. With this high level of disruption across both demand and supply, misalignment has run rampant, costs are increasing and customers are frustrated.

SIOP (Sales, Inventory Operations Planning) Cuts through the Disruption
You know the story. The busier we get, the less we have time for improvement yet we spend double or triple the time to achieve the same outcome because we can’t set aside the time required to start or maintain an improved process. I’ve been there and am familiar with the excuses! With that said, STOP and look around you. You are on a hamster wheel with no end in sight. Implementing SIOP, even if simplified to what is achievable under current conditions, cuts through the disruption to stabilize your supply chain.

What is SIOP?
Quite simply, SIOP is about finding a way within your environment to realign demand with supply. You have to start with demand or you will forever chase your tail. To simplify the best practices across industries (aerospace and defense, building and construction products, food and beverage, healthcare products), geographies, company sizes that apply to manufacturing, supply chain, logistics and service organizations with supplies, you should focus on these keys:

  1. Proactive management of demand: Talk with customers.  Find out about your customers’ customers and every customer type within your channel until you get to the end customer (consumer, business using your product, patient). Ask about and observe evolving customer needs. Review historical trends.  And, put a stake in the ground with a starting point forecast. Outcome: typically 12-18 month rolling forecast
  2. Proactive management of internal supply: Talk with your internal teams. Understand changing capacity and staffing levels (manufacturing, warehousing). Realign temporary and contract assistance.  Understand your resiliency to changing demand (overtime, increasing staffing, efficiency improvements, maintenance and engineering support, etc.). Realign with R&D/product development requirements and your support resources. Outcome: typically a capacity plan (production, storage), high-level staffing plan and key decision plan (make versus buy, product/customer transitions, machinery and equipment plans) for at least as long as your longest lead item – 12-18 months.
  3. Proactive management of supply partners: Talk with suppliers. Find out about your suppliers’ suppliers capabilities, their likelihood to meet schedules, ability to meet cash flow needs and risk of shutdown (whether temporary due to COVID-19 or another disruption or permanent (going out of business)). Outcome: typically a sourcing and supply plan by key suppliers/ commodities for at least as long as your longest lead item – 12-18 months.
  4. Proactive management of your logistics network partners: Talk with transportation partners, brokers, 3PL/ 4PL partners and understand the extended supply chain, potential risks, possible options as disruptions occur, etc. Outcome: typically a logistics network and goods movement plan for at least as long as your longest lead item – 12-18 months.
  5. Take stock of inventory: Do you have strategic stock of critical items? Items without a robust backup supplier? Items in countries of higher risk of shutdown? Are you so busy running in circles that your slow moving and obsolete is expiring under your nose? Outcome: typically an inventory investment plan for 12-18 months.

Pre-COVID-19, clients went through a SIOP cycle with a monthly cadence. The typical processes included:

  1. Demand review meeting
  2. Supply review meeting
  3. Alignment of demand and supply (not always requiring a meeting)
  4. Inventory review meeting (often incorporated into the supply meeting)
  5. Executive SIOP review meeting (in some cases, quarterly made sense)

During COVID-19, we have taken these same concepts and adjusted to changing conditions. No two clients are alike in what makes sense to rapidly realign demand and supply and maintain this alignment.  Yet, there is one item in common across the board:

A weekly alignment on just the critical customers, internal resources, suppliers, logistics network partners and review of inventory

Read more about SIOP and related concepts in our eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19. If you’d like a rapid assessment and recommendations for your situation, please contact us.

 

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Future-Proofing Your Supply Chain

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What’s Going On Around the World?

July 11th, 2020

After receiving questions from multiple people about “What’s going on in Asia?”, we dug into what’s going on around the world (at a high level). In today’s globally-connected world, it isn’t a question you can ignore!

Starting with Asia, from a supply chain point-of-view, product continues to move. All three China ports are open and the volume has picked up. China’s capability was back up to at least 80% of the pre-coronavirus levels. However, once China started ramping up after the first infection wave, N.A. and Europe were under lockdown, impacting customer requirements. According to CEOs from across the U.S., they experienced delays initially but it is largely back to ‘normal’. On the other hand, we are also hearing that some folks are experiencing extended lead times. It certainly can depend on the product, material, specific supplier, etc.

Customers that switched supply to Vietnam prior to coronavirus have experienced high levels of service and are generally happy. While there aren’t a lot of numbers coming from Vietnam, it appears as though manufacturing has largely carried on to the levels needed. Of course, if you were in process of transitioning to Vietnam when coronavirus hit, it probably has been put on hold. India shut down for a month during coronavirus but started up essential manufacturing early in the ramp up. India hopes to ramp up manufacturing as companies accelerate the de-risking process from China whereas Vietnam is already in that position and hopes to expand. Japan and South Korea largely carried on through coronavirus. The only noteworthy disruptions were caused by shortages of supplies from their extended supply chain. Overall, there were initial delays with Asian supply, and the degree varied quite significantly based on the source of supply.

With that said, there are increasing levels of concern about a second wave of coronavirus hitting the Asian supply chain. Beijing has been in lockdown with surging cases of coronavirus. Although not integral to the supply chain, it is a bad sign of potential negative impacts to come. It is recommended to bring inventory in ahead of the holiday season and to be cautious with paying cash upfront as several small and medium size Chinese suppliers are struggling.

In Europe, it varied significantly by country. German manufacturers kept operating throughout the coronavirus lockdown. Since they saw the virus coming from what happened in Asia, they implemented social distancing and other protocols throughout rapidly. Certainly, Spain and Italy were impacted more severely and shutdown for a period of time. Several European and U.K. car manufacturers shutdown due to lack of demand and significant disruption in the supply chain. Aerospace companies in the U.S. experienced issues receiving essential components from Europe during the pandemic. Overall, CEOs across the U.S. said that supply from Europe wasn’t interrupted significantly.

U.S. manufacturers of essential products were largely able to continue producing. Of course, depending on the customers’ served, volumes dropped dramatically and disappeared (suppliers to hospitality for example) or experienced aggressive growth (lawn and gardening, toilet paper, PPE).  However, on average, volume dropped to 50-70% of the pre-coronavirus levels. CEOs from multiple industries have said the biggest issue has been disruptions in the supply chain. There are examples of essential U.S. manufacturers experiencing issues receiving materials/component parts from Mexico, Europe and Asia. Not every country had the same definition of essential. Consequently, there is a lot of talk about regional manufacturing and reshoring.

Brazil has been hard hit with the coronavirus recently, and manufacturers have been forced to shutdown. No part of the world has escaped this pandemic! Thus, the global supply chain has come into the forefront and is taking a seat at the table. Are you going to chase your supply chain or build appropriate diversification and flexibility and identify acceptable levels of risk upfront in your strategy discussions?

We are seeing a surge of supply chain strategy assessment and roadmaps. Are you evaluating your supply chain so that you can take charge of your future? There is no such thing as no risk.  Understanding your customer profiles, changing customer requirements and associated product supply strategies is a place to start. If you’d like to discuss your strategy, please contact us.

 

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Immediate Strategy

May 7th, 2020

Do you want to be Amazon or Sears? Sears used to be the Amazon of its time, but they failed to change with the times. There is little life left in this former powerhouse of retail. On the other hand, Amazon continues to evolve and is clearly doing quite well in these trying times. In fact, our clients are experiencing growth across the board in only one category – e-commerce. Amazon continues to rule the day!

As I state in my eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19, if you want to be more like Amazon, you will rethink strategy but NOT like you might think. It should not be a lengthy process that looks across multiple years. Instead, create an ‘immediate strategy.’ What does that look like? Read about an immediate, 3 and 9-month strategy in the eBook:

  1. Immediate Strategy: Focus on establishing immediate priorities, assessing risks and understanding your customers, suppliers and other partners.
  2. 3-Month Strategy: Focus on how to keep moving forward and increasing value
  3. 9-Month Strategy: Focus on how to redesign to take advantage of the opportunities

As you think through the strategies outlined and determine your path forward, please keep us in the loop. We are interested in your journey, what works, and what pitfalls to avoid so that we can share insights and ideas. Don’t worry. We will protect the innocent; however, keep in mind one of the tenets of the eBook is to fail forward with innovation. Those who innovate will have a unique opportunity to sail past the competition as the world creates a new normal over the next year. If you’d like to discuss your strategy, please contact us.

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Coronavirus and the Economic Impacts
The Strategic Use of Data



Coronavirus & Economic Impacts

April 1st, 2020

After concern about health and safety is worry about the economy and our livelihood. Thus, we thought we’d address this topic with the latest information by the experts….and a few of our thoughts thrown in for good measure.

According to the economic update by the Inland Empire Economic Partnership, “When Will We See the Light at the End of the Tunnel?“, we are headed into a recession (not surprisingly), but all hope is not lost! In essence, the report talks about two scenarios.

  1. Optimistic scenario: It assumes a decline in infections by early April with the virus under control by June, passing of the stimulus package, existing medications adopted to treat the serious effects and a vaccine ready within a year. In this case, we’ll go into a recession but the economy will start turning up in the 4th quarter or at least by the first quarter of 2021. It will be a V shaped downturn.
  2. Pessimistic scenario: In essence, the assumptions above do not come true, and the vaccine takes 18 months to develop. Certainly, the outlook isn’t as rosy with this scenario, and there won’t be a recovery in 2020.

We all hope the optimistic scenario is the likely outcome. As the report states, the Wall Street Journal surveyed 34 professional economists and categorized them into “pessimistic”, “baseline” and “optimistic”, and the IEEP “optimistic” outcome is more in line with the Wall Street Journal “pessimistic” outcome, and so this signals hope.

As it relates to businesses, non-critical businesses are certainly going to struggle until the coronavirus is under control. In several states, these non-critical businesses are shutdown. In some cases, employees have been let go; others furloughed; some are working remotely if feasible and some are finding creative ways to keep the business running or are changing directions as best as possible. Clearly unemployment claims are surging.

With that said, more opportunities are born during recessions than any other times so keep your eyes open. For example, perhaps you can tweak your products so that you can supply some critical products during this period. Or, perhaps you can develop a new product that can launch as soon as businesses are re-opened. Or have you thought about a new service that could make you stand out from the crowd as businesses start to ramp up? Or how about stealing top talent? I just love the story of a CEO of one of my clients. He hired a talented engineer during the Great Recession when he was let go and no one else was hiring, and that resource helped him excel to first in his market following the recession.

For those businesses considered critical, the picture is a bit brighter. For example, I am working with a food bar manufacturer, and people are stockpiling food bars. Thus, volume has spiked for food bars sold through grocery stores and Costco. In their case, it has trailed off for weight management bars and so they have a mixed bag. Certainly, toilet paper manufacturers cannot keep store shelves stocked! Medical products are also in high demand.

The $2 trillion dollar stimulus package was signed into law. There is assistance for individuals, businesses and workers. We are continuing to post resources to explain the benefits. I thought this article did a good job in describing the stimulus benefits (thanks CLA), and there is loan availability and forgiveness included as well. Stay tuned for updates on our coronavirus resources webpage.

Stay tuned with our coronavirus resources webpage. We will continue to add the latest economic forecasts, stock market analyses and more. However, instead of fretting about the future, take a step back (after all, you are probably in lockdown) and think about how you should reposition your business for the future. It is an opportune time to rethink strategy. If you’d like help to discuss further, please contact us.

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Future-Proofing Your Skills Gap

February 17th, 2020

Since talent has become a strategic topic for any executive who wishes to thrive in 2020 and beyond, it should top of mind for every manufacturing and distribution business owner or executive. Have you put time aside to think about this critical topic with your top team? If not, stop now and do it!

We have recently re-surveyed manufacturing and distribution executives, hiring managers, and related trusted advisors.  There is unanimous agreement that the skills gap remains. We also talked with business owners and executives from a wide range of manufacturing and distribution industries.

Talent is a hot topic for several critical reasons:

  1. Demographics – As baby boomers retire, it is leaving a gap in experience and expertise. It is a struggle to absorb or replace adequately.
  2. Technology – With the increase in technology required to run our businesses while providing not only a superior customer experience to grow but also with high levels of profitability and working capital, having talent with the skills to maximize the use of technology is essential. It is also changing the makeup of the talent required.
  3. Skilled Trades – There is a significant gap in the skilled trades such as CNC operators. There hasn’t been enough focus on the high school and community college career path into the sector. Those that find a way to bridge this gap have a leg up on the competition.
  4. Leaders – Whether high-tech or low-tech, leaders play a pivotal role in performance. It is FAR too often we see executives trade down to save money instead of looking at the return on investment over a multi-year period!
  5. Complexity – We live in a global, complex world with increasing rules and regulations to navigate.

How can we future-proof talent? There are a few priorities we should pursue immediately.

  1. Think Ahead: Don’t hire, retain and train for what is needed today. Instead, focus on where you’ll need to be in one year to thrive.
  2. Partner: If you need skilled trades, technology savvy resources and the like, consider partnerships. Successful executives have set up programs with local community colleges, partnered with trade associations such as the Association for Supply Chain Management (APICS – listen to the video below), collaborated with a makerspace academy such as Vocademy, brought in trsuted advisors, collaborated with competitors and more.
  3. Evaluate Technology: Evaluate which technology will provide a return on investment and spur profitable growth. There is no need to chase shiny objects but you should think prudently about how to accelerate success.
  4. Mentor: There is little better than establishing a mentoring process. Although training can be effective, people learn quickest through behavioral change modeling and feedback.
  5. Be attractive: You are in competition for your talent – both retaining top talent as well as finding new talent.

Proactively addressing this Skills Gap and future-proofing your manufacturing operations and extended supply chain is cornerstone to growth plans.

Lately, we’ve seen an increase in interest for an organizational structure and talent assessment to ensure the organization is shored up to deliver performance plans. If you’d like assistance in evaluating your readiness to meet business objectives, please contact us.

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