Tag Archive: inventory

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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Demand & Supply Are Out of Whack!

April 27th, 2020

Demand and supply are out of whack to say the least. Manufacturers that supply toilet paper, food, healthcare products and other essential goods are seeing a surge in demand whereas those that don’t are seeing demand plummet. China was under lock down previously (causing a delay in the pipeline), and they are now operating around 80-90%; however, now we are under lock down. Retail sales are non-existent, and so the warehouses are full of the wrong products. Thus, inventory and transportation assets are typically in the wrong place at the wrong time in the wrong quantity. Watch my webinar on just this topic to learn more…

What Should We Consider and/or What Impacts Could Arise? It will not be business as usual as you ramp back up. Be vigilant in staying on top of what is happening and how quickly you can turn the dial to ramp back up. If you go too fast, you could get your supply chain further out of whack and anger customers. On the other hand, if you ramp up too slowly, not only will you lose money but you will also see your competition speed by. Instead, be proactive prior to the end of the shutdown to start things in motion, pay close attention to what’s happening and adjust accordingly. Stay tuned for my eBook,  Future-Proofing Manufacturing & Supply Chain Post COVID-19 

Please share your stories, challenges, ideas and successes. Contact us and please join in our free webinar series and listen to our archives.

 



JIT Might Not Be What it is Cracked Up to Be?!

April 2nd, 2020

Just-in-time might not be what it is cracked up to be! Certainly, the coronavirus impacts should give us reason to question this rule at face value. Are you running so tight that you only have one bin, pallet or small supermarket to keep your facility running? If so, the question extends to your end-to-end supply chain.

Let’s assume you are a critical manufacturer struggling to produce key items during this coronavirus pandemic. Your suppliers should not be on lockdown since they support a critical infrastructure business; however, that doesn’t mean you’ll be fine. There are many considerations to review:

  1. Source of supply: Are your suppliers located in Asia and unable to staff during the peak of the coronavirus? Do you know what type of delays you’ll experience? Do your suppliers have contingency plans?
  2. Your suppliers’ suppliers: Even if you have a good handle on your suppliers, do you know the status of your suppliers’ suppliers? In an interconnected supply chain, we are only as strong as our weakest link. Who is your weakest link?
  3. Your transportation infrastructure: Even if your suppliers have product, can it get to you? Within what timeframe?
  4. Backups: No matter how well you’ve planned, the question is whether you have backups for critical materials/ ingredients that will ramp up rapidly as needed. Hopefully your supply chain is diversified geographically.
  5. Your customers: Are you in lockstep with your customers so that you are proactively managing demand or are peaks and valleys a surprise? Of course, the coronavirus was unexpected but the degree you fully understand your customers will determine your reaction time to changes in demand.
  6. Positioning of inventory: Do you have critical inventory positioned throughout your end-to-end supply chain?
  7. Your digital supply chain: Are you able to see into your extended supply chain? It could provide quite a benefit at this point.
  8. Additive manufacturing & robotics: Are you able to keep running with less people, socially distanced people and/or print on demand?

Using JIT (or any concept for that matter) without taking a 360 degree view is a bad idea! The cousin of JIT is lean manufacturing. I gained the attention of Wiley by writing that lean is just uncommon common sense (which of course simplifies it in order to make a point), but perhaps it is something to think more about. Have you put all these trendy concepts through a common sense filter? How about a risk filter? Let’s hope so! Otherwise you can be in a critical business and still not producing and running customers out of stock.

What is the answer? It depends! If you have put thought into your supply chain strategy upfront, considered risks, diversified your supplier base, invested in quality checks and top talent, and treated your employees well, it is likely your version of JIT will prove successful. On the other hand, if you saw JIT as a way to reduce inventory and were short-sighted in looking at your end-to-end supply chain and treating your employees and partners as trusted colleagues, you will likely suffer.

Getting ahead of the curve might be the only avenue to success. Consider creating a resilient supply chain and future-proofing your supply chain. Stay tuned and read more about it, and If you are interested in discussing a supply chain assessment, please contact us.

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The Strongest Link in Your Supply Chain



Future-proofing Your Supply Chain

February 21st, 2020

Disruptions abound in supply chain circles. Just consider any of the following recent events: the tariff war, global unrest, the Coronavirus, natural disasters such as the volcano in the Philippines, the Hong Kong protests and more.

We have never had a client that could claim that 100% of the extended supply chain (from suppliers’ suppliers to customers’ customers) was inside the U.S. So, we have to be prepared to navigate these types of disruptions and the related impacts.

Disruptions certainly go beyond your physical supply chain. What about your human capital, technologies (accompanied with processes) and strategies? Refer to our article on future-proofing your skills gap and assess which risks might be on the horizon in your industry.

When it comes to technologies, there is no doubt that emerging technologies are gaining steam and are starting to transform supply chains. Just consider the application of collaborative robots, automation, RPA (robotic process automation), artificial intelligence, IoT, blockchain, and predictive analytics to name a few. Big name companies are dropping big dollars into these technologies. When thinking about strategy, remember strategy is no longer a multi-year exercise. We must be thinking in terms of strategic sprints. Who knows what will happen beyond a year out!

Several high-level categories should be assessed as you think about your supply chain:

  1. Sourcing – Are you sourcing from China? Is this a viable path forward to source 100% from China? There are increased risk factors to consider. Listen to an interview I conducted with John Tulac, international business attorney, on future-proofing and doing business with China. It is time to reevaluate your supply chain footprint.
  2. Logistics – There are significant disruptors transforming this industry, ranging from e-commerce and the the Omni-channel to robotics, additive manufacturing and the digitization of the supply chain. If you aren’t incorporating these impacts in future-proofing your supply chain, you will be left in the dust. These are concepts of focus for the consortium for logistics success in the Inland Empire to enable companies to stay informed and keep up with the fast pace of change.
  3. Manufacturing – Industry 4.0 is transforming manufacturing and changing the landscape. It will be a pivotal year that separates the winners vs the losers as advances are made. See what the National Association of Manufacturers’ Leadership Council sees as critical issues
  4. Demand & Supply – There is no doubt, there is a keen interest by business owners, executives and private equity leaders on creating predictable demand and forecasting sales. The more we understand our demand plan, the better our operational performance, supplier performance and customer performance. Read about SIOP (sales, inventory, operations planning) and how it can help future-proof this area.
  5. Inventory – As the disruptions abound and executives fear a slow-down, the proactive management of inventory and advanced collaborative programs are gaining in relevance. Pick up some tips and strategies in our recent article ” Inventory Management as Fashionable as Automated Intelligence for Distributors” for ACHR News.
  6. Metrics & Predictive analytics – Keeping a pulse on performance should remain a top priority while forecasting what will be needed.

Getting ahead of the curve might be the only avenue to success. Consider creating a resilient supply chain and future-proofing your supply chain. Stay tuned and read more about it, and If you are interested in discussing a supply chain assessment, please contact us.

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Forget About Reducing Inventory; Perhaps You Have the Wrong Supply Chain Strategy



Forget About Reducing Inventory; Perhaps You Have the Wrong Supply Chain Strategy

December 16th, 2019

Clients and colleagues have demonstrated a heightened interest in inventory reduction recently despite not yet seeing the full value! Certainly with everyone worried about a potential recession in 2020, they are starting to think about not tying up as much cash in inventory but that is not the 100 pound gorilla. The real question is why we are thinking about corporate mandates and full warehouses instead of seeing the bigger picture – reevaluating our supply chain.

Of course, maximizing your customer service (on-time delivery, quicker lead times), margins/efficiencies and cash flow (inventory reduction) is an important standard best practice. To learn more about how to achieve this win-win-win, read our recent article ” Inventory Management as Fashionable as Automated Intelligence for Distributors” for ACHR News. Yet, it could become “rearranging chairs on the titanic” if your supply chain is not set up to deliver maximum performance. So, instead of jumping to erroneous conclusions, take a step back to reevaluate your end-to-end supply chain strategy.

When I was a VP of Operations & Supply Chain for a mid-market manufacturer, our private equity backers and Board of Directors were always asking about labor costs. It didn’t matter that labor costs was our smallest cost element. In fact, material cost was the 800 pound gorilla at around 70% of product cost, followed by freight. If we could double labor cost to reduce materials and freight, it would be a smart decision. Yet, it was never viewed that way. So, if a smart private equity group and executive team can bark up the wrong tree, we all might be speeding down the freeway but going in the wrong direction.

Typically, labor cost is 8-12% of the total cost of ownership. How does that compare to your materials cost? Unless you are in a labor-intensive industry, perhaps you better take a second look. Next there are freight costs. Not only do freight costs continue to rise but the rules, regulations and delays can be astounding. In a recent California Inland Empire District Export Council (CIEDEC) meeting, the new sulfur emission rules for shipping arose because costs will have to be passed on to importers and exporters. Of course, we don’t have to mention tariffs and global unrest. Now, let’s add inventory carrying cost into the equation. It is a minimum of 6%.  Yet, most experts (and clients) agree that it is truly a minimum of 25% and could be as bad as a 1:1 ratio. Just think about how often your customer changes his mind, all the expediting you have to do to serve customers and the systems and complexity your team has to manage. Is it time to reevaluate?

ERP system
Let’s not forget that this equation isn’t just an insource or outsource question. There are lots of opportunities. For example, you might want to think about the following questions:

  1. Where are your customers?
  2. Where are your suppliers?
  3. Is there disruptive technology that could impact your cost ratios?
  4. How complex is your supply chain? Have you thought about the price of complexity?
  5. Do you have a robust ERP system to support customer expectations while achieving profitable growth?
  6. Are there supply chain partner programs that could completely change the game?

No matter your situation, it is worth revisiting. Corporate strategies last NO MORE than a year so why are we leaving our supply chain to old rules? Instead, we should be future-proofing our manufacturing and supply chain business.

Stay tuned and read more about it If you are interested in discussing a supply chain assessment, please contact us.

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