Tag Archive: operations

Supply Chain Heroes: How CFOs Can Help Save the World

March 25th, 2020

As Published in: Oracle/Modern Finance

Early this year, the largest asset-management company in the world made a bold announcement: It would start redirecting investments away from fossil fuels because of climate change. In his annual letter to CEOs, BlackRock CEO Larry Fink stated that “climate risk is investment risk,” and that risk is driving a fundamental reshaping of finance.

“Because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself,” he wrote. “In the near future—and sooner than most anticipate—there will be a significant reallocation of capital.”

For manufacturers, retailers, and others that move business or consumer goods, a reallocation of capital will require tighter alignment between the CFO and supply chain leaders. This is already happening among the leading-edge CFOs I meet because they recognize the end-to-end supply chain is driving customer experience, profit performance, and working-capital improvements.

As more companies start reshaping strategy in response to climate change risk, this CFO/supply chain alignment will become more critical to achieving business and environmental goals. In fact, CFOs could find themselves being the heroes of the next decade’s climate-change success stories.

Assessing the payoff for climate change initiatives

CFOs will need to be front-and-center to assess climate change initiatives related to packaging, material handling, transportation, and logistics because changes in these areas tend to have widespread impact.

For example, consumer packaged goods (CPG) companies are feeling the most pressure from climate change activism right now. Packaging is a big target for waste reduction but switching container sizes or materials can have direct and indirect cost implications. There’s a change in direct costs for replacement packaging, but material handling and transportation costs also could shift because of weight, storage, handling requirements, and other relevant factors.

Another example is investment in technology systems. For instance, buying products that are sustainably sourced and handled is important to a lot of consumers, and trust is essential for companies that want to differentiate themselves on this point. New blockchain applications are enabling this verification down to a granular level. While an ideal investment from a marketing point of view, what will the impact be on logistics? Will shipments slow down or speed up? How will the change affect fulfillment and customer satisfaction?

Cloud applications and other advanced technologies have made it easier to conduct real-time analysis and identify upstream and downstream impacts from business decisions like these. Such decisions will require collaboration and ongoing discussions between finance and supply chain leaders to meet all business requirements successfully.

Supply chain health and environmental health are linked

Even if a company isn’t a leader in climate change-reduction efforts, improving supply chain performance will naturally make operations more environmentally sustainable. I’ve seen this over and over again in my decades of working in supply chain management.

Supply chain services and assets are expensive and don’t usually generate cash, so they’re a frequent target of cost reduction. The outcomes of these cost-reduction efforts reduce environmental impact because fewer miles are traveled, inventory replenishes more often and doesn’t become obsolete, and there’s less material waste in damaged goods and over-packaging.

This might be an obvious example, but when you think about on-the-horizon innovations, such as biofuels made from landfill waste and autonomous vehicle and aircraft deliveries, you can see how supply chains could become proactive enablers of reducing climate impact.

Another reason for CFOs to focus on supply chain when developing an impact-reduction strategy is it could help recruit supply chain talent. We’re experiencing a shortage of supply chain professionals across manufacturing, retail, logistics, and a range of other companies. Having a solid stake in climate change-reduction efforts could help attract limited talent, especially Millennials. A recent survey found that 75 percent of Millennials said they would be willing to take a pay cut to work for a company that is environmentally responsible. And nearly 40 percent said they have chosen one company over another in the past because their choice had a better environmental record.

Millennials will comprise three-quarters of the workforce within six years—so statistically, companies with stellar environmental practices will be a top position to recruit talent.

Finance and supply chain: Teaming up for sustainable operations

First and foremost, CFOs want to be good stewards of business assets. For many companies, the supply chain is central to value creation. So, it’s not surprising that CFOs at these companies are paying closer attention to their supply chains from a cost point of view.

Now, climate change is raising risk in ways that require a rethinking of how to grow and protect those assets. As markets begin to respond and shift, supply chain leaders and CFOs will find themselves facing the challenge together.



Are You Waiting Too Long to Future-Proof?

February 10th, 2020

Although most economists do not see an immediate recession, there are plenty of concerning signs along with global volatility. Unfortunately, concern alone can create a recession unrelated to underlying factors. Meaning, we could have terrific fundamentals and results yet still go into a recession if fear takes over! I wouldn’t want to be dependent on avoiding fear in the marketplace. Would you?  This is why it’s important to future-proof manufacturing operations and the extended supply chain!

The worst thing you can do is wait for a recession to act. It is similar to a natural disaster. For example, when my house burned down in a fire, I was fortunate that it was an isolated incident. I was able to find alternate housing nearby while the house was rebuilt. I was also able to gain priority with a builder, etc. Instead, if I was caught in one of the devastating California fires, I would be one of many people struggling with the aftermath. Of course, I would be a pebble in a sand quarry in that case. The same is true would be true with a recession, global unrest or a natural disaster. Have you thought through how you will continue operations to satisfy customer demand?

One Tip to Implement This Week:
We’ll make this quite simple: Stop and determine if you have backup plans at a minimum.

Think through the following:

  1. Sources of supply
  2. Resources, skills and trusted advisors who support the business
  3. Operations
  4. Logistics infrastructure
  5. IT and ERP system infrastructure

What are you going to do about it? Are you willing to invest in future-proofing? I’d be willing to bet that any executive willing to make prudent investments in future-proofing might have to take a temporary ‘hit’ with the initial investment but will surpass the competition by a minimum of 10 fold in the future.

For example, one of our clients thought about what they should do to get ahead – not just survive. When the competition was increasing capacity in China, our client was moving out of China and into Vietnam. They were ahead of the curve and had far less roadblocks and bottlenecks along the way to overcome. There is definitely something to be said about being early to the party and leading the way.

Think about taking a calculated risk to lead instead of follow. In today’s Amazon-impacted world, you cannot afford to be a follower!

 



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.

Did you like this article?  Continue reading on this topic:

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Customer Care 1.01 & The SLURPY Method by Guest Blogger, Steve Weimar

October 1st, 2019

When we think of who’s responsible for developing and retaining the customer relationship business owners and CEO’s too often feel this is solely the role and responsibility of the Business Development or Sales team. I’m here to tell you that mindset is narrow-minded and can lead to a parade of lost business, sometimes in a very short time. Everyone in the company plays a role in customer retention!

When we think of why a customer buys from us and how to retain them we need to look at every aspect of our business, who adds value and who are the Contact Points or CP’s. We also need to adopt a simple company operating philosophy I call SLURPY, not the drink at 7-11, but a set of 6 basic principles that are critical to both customer and inter-departmental relationships.

 

S     Smile into the phone or in a meeting – it’s hard to communicate negatively when you smile

L     Leave your personal issues at home – distractions at work or in a meeting can derail your ability to concentrate and perform in a professional manner towards customers

U    Understand that the customers purchases are funding your compensation and benefits – no customer purchases, no job, no money

R    Respect your customer – business is people working with people. That means all types of people!

P     Problem Solving can be some of the most important customer and inter-departmental building and retention experiences – if handled improperly they can derail the relationship. Remember, in every problem lies the solution.

Y     You treat customers and your colleagues as you would want to be treated – think about the times you’ve had poor service. Is that what you want for your customer or colleague?

Now that we understand SLURPY, let’s see how understanding your company’s many CP’s are an extension of SLURPY and can make or break a company and customer retention.

CP1

Receptionist or Automated Attendant is usually the most common touch point in an on-going relationship but can be the first contact point ever for that prospect. This is where I see successful companies shine while others fail miserably. If this is the first CP at the company this position needs to be taken seriously and not considered an entry-level hire.

  • Live Attendants must come across as happy and cheerful on the phone and if they are really at the top of their game will be able to recognize those callers who regularly call the company and acknowledge them with either a “Hi (first name of caller) who would you like to talk to?” If they call for the same person or persons each time you should add that to your response such as “Hi (first name of caller), Sue is on a call right now, would you like to leave a voice mail or would you like to speak with someone else?” Invest in this position versus feeling this is an entry-level position in your company.
  • Automated Attendants can be a valuable tool or the kiss of death. What you want to have is a quick and easy means for inbound calls to reach their destination. This is accomplished by first recording a short but cheerful message with department code options and a method to enter extension numbers and/or a Directory (EXAMPL:E: Dial 1 for Customer Service, 2 for Sales, 3 for Accounts Receivable or 4 for the Company Directory). They should also have an option to reach a live person at any time to prevent customer frustration. I don’t know about you, but I’m not a big fan of Automated Attendants as many take too long to reach a live person. My recommendations if you have an Automated Attendant are…don’t go into a long-winded sales pitch or history lesson about the company on your recorded message. Use the KISS (Keep It Simple Stupid) method and help your customers reach their desired party quickly, just like you would want to be treated when you’re the caller.

CP2   

Customer Service typically has more CP’s with the customer than the Biz Dev or Sales Mgr. Customer Service can, and in many cases is, the most important CP in the customer relationship. A single call from a customer to an unhappy or rude Customer Service Rep can dismantle months and even years of customer relationship building. Ways to improve your customer relationship through Customer Service:

    Make sure to communicate back and confirm tasks, questions and order details before ending the call.

    • Follow up the call with a quick email detailing the topics and/or order details
  • Go the extra mile. EXAMPLE: An order is placed 30 minutes after shipping cut off. Don’t promise it will ship but work with Operations to see if this is possible then communicate to the customer. I’ve even seen the Customer Service Rep take the package to FedEx or UPS to make sure the customer is taken care of. Little things make a difference.
  • Make every attempt to diffuse friction and issues within reason. Remember, these are sometimes the most important calls and gives the Customer Service Rep and the company a chance to solve the problem and make it go away for the customer.
    • Advise the appropriate Sales Rep/Biz Dev person of any issues brought up during the call and what you plan of action you are undertaking

CP3       

Sales/Business Development is typically responsible for initiating and maintaining the on-going customer direct relationship but they also have some critical obligations and tasks to keep the customer happy, engaged and continuing to buy the company’s products or services.

  • The adage of Under Promise and Over Deliver is in some cases hard for the Sales/Biz Dev teams to adhere to. By being too optimistic and over promising you’ve established unrealistic expectations for the customer which can lead to loss of trust and a damaged customer relationship. In addition, it causes internal conflict between many departments within the company who are left with trying to pick up the pieces when the promise is not met.
  • Written confirmations of the offer, the company’s defined policies and procedures, product performance capabilities, shipping schedules, pricing, delays, product issues and more are ways to create and maintain a solid, trusting and long-term customer relationship. By sharing these with other departments you can make others feel included and informed.
  • Whenever possible, customers need to be pre-qualified to see if they are a fit with the company. Strange as this may seem to some readers not all prospects should be customers. For instance, a company known in the industry for violating MAP (Minimum Advertised Pricing) policies may do more harm than good to the company and its other customers. Same is true for prospects or customers who cause so much turmoil in other departments that they undermine the cohesive synergy of the company and its employees. You have to be willing to turn down or lose the customer if they aren’t a fit for the company.
  • Build on your customer relationships with regular contacts and meetings, meal events away from the office as customers are more relaxed and open in their discussions. Build relationships where possible that are long-term and go beyond business as those are harder to lose and typically less vulnerable to pirating by a competitor. But…don’t let down your guard.

CP4

Accounting, and specifically Accounts Receivable, plays a key role in a company’s success or lack thereof as cash flow is a critical component of survival. Sales and Biz Dev staff typically want to distance themselves as far away as possible from the role of collecting payments from customers and fail to realize the difficulty of this job. An over zealous and aggressive AR Rep or Manager can undermine the customer relationship. Some ways to improve this customer interface are:

  • The AR and Sales/Biz Dev teams have regular calls or face to face meetings to review problem accounts and work together to resolve the issues. Define a plan to improve.
  • Sales/Biz Dev can make sure AR is aware of extended terms and or pricing, disputes, customer cash flow issues, problems or anything that could stall on-time payments.
  • Get the Sales/Biz Dev person involved if AR is unsuccessful in collecting payment.

CP5

Operations is another opportunity to positively impact the customer relationship and the value to its customers. Additionally, Operations can add relationship value many ways:

  • Produce a quality product, package it properly to prevent shipping damage, ship the product on time and communicate any delays or issues to Sales and Customer Service.
  • Have some level of controlled flexibility in shipping lead times and order cut-off times.
  • Work as a team player with Sales and Customer Service to satisfy the customer.
  • If you deliver products to your customers in company owned trucks make sure the trucks are clean and the drivers are well groomed and courteous as they are representatives of the company. They should report back to the appropriate department whenever they hear of an issue with a customer or the delivery.
  • Meet regularly with Sales and Customer Service to discuss customer feedback, conflicts and issues and define a plan to improve.

CP6       

Marketing delivers your company’s messages to the world and strategically positions the company for success. They communicate the company’s value proposition and product or service differentiation in a consistent and strategic manner. Additionally, they should communicate your We Care customer philosophy as part of the many messages they deliver. Some added elements to support customer retention are:

  • They should have a direct connection to the company’s customers for research and feedback about the company, market channel, products, competitors, etc.
  • Be included in key customer and/or prospect meetings as needed to gain more direct input
  • Communicate their plans to the team in advance of launch
  • Track KPI’s for the various marketing programs and share them with the Team
  • Meet regularly with Sales and Biz Dev to discuss their marketing plans and programs

CP7

Technical / Warranty Support is your company’s 911 call center. They are either fielding problem calls or delivering answers regarding products. Your staff needs to be problem solvers and trained to diffuse conflicts. In addition, they should have in depth knowledge of all the company’s products and a general knowledge of competitive products and how they compare to yours.  Customers want quick answers and solutions but also want to feel you care. Some ways to go the extra mile are:

  • A quick follow-up email and/or phone call later in the day or the next day to see if the problem was resolved or to advise that a warranty replacement part or unit was shipped. You can add another layer of follow-up in 30 or 60 days, if warranted, to make sure all if well.
  • Advise the customers Sales Rep of any problems so they are in the loop.
  • Track technical and warranty support calls to create KPI’s that can be shared with the Team.

CP8

Engineering and Product Development are directly responsible for developing products of high quality that do what they say they will do as a bad product can damage, and in some cases ruin, the company’s reputation and damage customer relationships.

They also need to provide a solution to the customer’s needs and/or desires. In many successful companies the end-user and the target channel, or customer base, are included in pre-product planning and research. This allows companies to design what the customer needs and/or wants which leads to success.

Bottom line, every department and employee in the company is responsible for the company’s success. By harnessing the talent of the TEAM and creating a collaborative working environment, long term customer retention becomes part of the company’s DNA and operating personality.  This will be obvious to customers as they interact with the various departments and a sense of WE, not I, will permeate in every aspect of your business. I recommend developing KPI’s (Key Performance Indicators) to track major focus points and use those as a scorecard of your company’s performance. One additional method of grading your company’s performance can be gained through annual customer satisfaction surveys. If done correctly these can be quite eye-opening and a valuable self-improvement tool.

By: Steve Weimar STI Enterprises, Inc.



Manufacturing Expert, Lisa Anderson, Sees Impacts of Artificial Intelligence on Manufacturing Profit, Inventory Levels and Cash

September 20th, 2019

Manufacturing Expert, Lisa Anderson, Sees Impacts of
Artificial Intelligence on Manufacturing Profit, Inventory Levels and Cash

CLAREMONT, CALIFORNIA – September 19, 2019 –  Manufacturing and Supply Chain Expert,  Lisa Anderson, MBA, CSCP, CLTD, president of LMA Consulting Group Inc., predicts that artificial intelligence (AI) and human learning will impact most aspects of manufacturing resulting in improved profits, inventory levels and cash.

“Our manufacturing clients have really embraced the power of AI since the first of the year.  From improved forecast accuracy impacting inventory levels to more openly working with changing customer needs and the overall customer experience, manufacturers are seeing the effects of using this data,” Ms. Anderson commented. LMA Consulting Group works with manufacturers and distributors on strategy and end-to-end supply chain transformation to maximize the customer experience and enable profitable, scalable, dramatic business growth.

“Despite the fact that manufacturing, especially in Inland Southern California continues to be strong, manufacturers need to be smart. By integrating AI with tried and true techniques such as SIOP (Sales, Inventory and Operations Planning) and taking advantage of predictive analytics and other human learning technologies in conjunction with ERP systems, manufacturers can become better at forecasting and exceeding customer expectations.  In fact, for every one percent improvement in forecast accuracy, there can be a seven percent improvement in inventory levels and therefore cashflow,” she said.

In an effort to support clients, Ms. Anderson is active with the Board of Directors of the Inland Empire Economic Partnership, where she represents the Logistics Council whose initiative is developing a consortium for logistics, supply chain and advanced manufacturing success. “AI and other forms of technology are transforming manufacturing as we know it. From reevaluating sourcing and enabling robots to predictive maintenance and shortened design times, AI offers up vast potential. Successful manufacturers are strengthening their hold. Supply chain and other manufacturing professionals are sharpening their skills to take advantage of these resources. It takes work, smart management and a strong team to be successful. A perfect storm for manufacturing success. The evidence is in the growth we see in Inland Southern California (also known as the Inland Empire),” she concluded.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation.  She focuses on maximizing the customer experience and enabling profitable, scalable, dramatic business growth. Ms. Anderson is a recognized Supply Chain thought leader by SelectHub, named a Top 40 B2B Tech Influencer by arketi group, 50 ERP Influencer by Washington-Frank, a top 46 most influential in Supply Chain by SAP and named a top woman influencer by Solutions Review. She recently published, I’ve Been Thinking, 101 strategies for creating bold customer promises and profits. A regular content contributor on topics including a superior customer experience with SIOP, advancing innovation and making the supply chain resilient, Ms. Anderson is regularly interviewed and quoted by publications such as Industry Week, tED magazine and the Wall Street Journal.  For information, to sign up for her Profit Through PeopleTM Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.
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