Tag Archive: planning

Should I Upgrade Now or Later?

October 10th, 2019

A Client Question
Since we have a simple reorder point system largely in place and we plan to focus on an ERP upgrade in the coming year, should we continue to roll out MRP (material requirements planning) and DRP (distribution requirements planning) or should we just put our efforts into the new ERP system?

In this case, there is still much of the planning process that is done manually. However, a manual process could be good or bad. Employees forced to perform manual processes learn the process in detail yet they might not understand why they are doing what they are doing. Would there be a larger benefit in learning the process in the current system and then re-learning in the new one or vice-versa? After all, resources are limited and the people performing these roles understand key customer requirements in detail. How should we best utilize their time for maximum benefit?

The Answer
In this case, resources are limited. So, the key question becomes how to best leverage the planners to meet customer expectations while getting ready to support the future. Since the simple reorder point works but only to a degree (since they cannot see their bill of materials explosion) in this case, the rest has to be manually calculated. When looking at a configure-to-order situation across multiple sites not connected by DRP, inventory disappears and the complexity of planning materials increases. Also, unfortunately, the only resource that gains an understanding of MRP / DRP concepts is the material planner. The production planners remain unclear as to how these concepts apply. So, it makes sense to roll out the concepts in the current system so that the team gains exposure to how it works. This understanding will prove valuable in implementing the new system, and most importantly, if the material planners do not have to spend countless hours manually calculating numbers, they can provide better service to customers, as well as contribute valuable input in setting up the new system for success.

Food For Thought
Although the MPS/ MRP module of ERP systems can be valuable in improving service and reducing inventory, they do not always make sense. Take a step back to look at the complexities in your planning process. Have you overbuilt the process? We also find that simplifying creates substantial improvement for almost every client. Perhaps you should simplify rather than add complexity, even if you already own the system or your key resources think complexity is needed. At least 80% of the time, we simplify to some degree.  We might take what seems like a step back to simplify in order to take a giant leap forward.

If you are interested in running your situation by us, contact us.

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The Value of Alignment: Sales, Operations & Finance

May 30th, 2019

Alignment might sound like a fluffy concept, but it delivers bottom line results. Our most successful clients have achieved the most substantial results from alignment. Although SIOP (Sales, Inventory, Operations Planning) gets a wrap as a technical topic, in our experience, it is the alignment portion of SIOP that delivers the bacon!

For example, in one client project, the Sales Leader was concerned about service levels. He knew that service was the differentiator in the marketplace, and if they didn’t have quick lead times and responsive customer service, it would negatively impact his ability to grow the business. On the other hand, planning knew that sales tended to come in dramatic spikes which were hard to predict in advance and so strategic inventory could make sense. Operations wasn’t too keen on inventory since they had a lean mentality with the view that inventory was ‘bad’, and they were concerned about capacity and staffing. Accounting set rules on overhead rates as a percentage of sales on a monthly basis which caused HR and Operations to hire and fire temps continually (and sometimes full-time resources). Overtime wasn’t used as a rule of thumb and was seen as costly by management, In fact, it was the only client we’ve ever worked with that didn’t use at least some percentage of overtime on a continual basis. And, of course, R&D created new products and had no idea about the volume and the impact on capacity and staffing. In essence, no one was on the same page!

We created a demand plan based on historical forecasts with sales input, confirmed the capacity and staffing levels required to meet that forecast and determined that if we level loaded the forecast over a quarter, we could create a win-win: improved service during the sales spikes with improved margins (lower temp turnover, improved efficiencies etc.). But it didn’t matter if we didn’t align the team. That was the 80/20 to creating success (and is ALWAYS the hardest part). Fast-forward 3-6 months down-the-road: We shortened service dips from the sales spikes, increased the service levels and reduced costs.

These types of client results are commonplace with alignment no matter your position in the supply chain or the world. Have you considered whether your teams are saying they are aligned or whether they are truly using the same playbook? It often will make the difference between a happy customer and a disgruntled one (which isn’t something anyone wants in today’s on-line era), let alone the profit impacts. If you are interested in an alignment assessment, please contact us.

 

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Let’s Manage Inventory for Our Customers

May 16th, 2019

inventory managementAmazon is propelling this age-old topic into a new realm. Since the CEO of the Ontario Airport Authority used the phrase “last mile” has become “last minute” on a panel I facilitated last year, I have shamelessly reapplied his brillant quote.

If customers don’t even know what they want, how can we? Interestingly, we have found that many customers, even the seemingly most confused and  volatile ones, have a pattern to their demand. If we take a holistic view of their demand and inventory planning processes from beginning to end and from high level to the minute detail, solutions emerge.     

One strategy that has proven quite effective is to “remove the middleman”, the customer himself. Instead, with access to demand information direct from the customers’ customer or end user, you can not only manage the extended supply chain inventory better for a happier customer but you also can improve margins, efficiencies and cash flow to boot.

In consumer products circles, this strategy often termed, vendor managed inventory is usually dictated by the “big guys”.  In aerospace, it is also expected but termed differently, customer based ordering, min max and other names. It is also common in healthcare as we won “supplier of the year” for two years in a row because of what we accomplished with VMI for Cardinal Healthcare when I was VP of Operations at PaperPak. We decided to make it a strategy for key customers at PaperPak, even though Cardinal is the only one who requested it. Should you consider a strategy like this to get ahead of your customers’ demand?  It is just another aspect in creating a resilient supply chain. Check out our series on the topic.

 



Wildly Successful Exit Plans

December 12th, 2016

supply chain

Since I lead a group of top notch trusted advisors, I hear quite a bit about exit plans gone awry. Unfortunately, most business owners do not plan to exit the business far enough in advance. Of course, you can still exit; however, you will not get as strong a multiple for your sales price. On the other hand, I was fortunate to hear one of the rare stories of a business owner who achieved a wildly successful exit where he received double the industry norm.

He started planning for his exit 15 years ahead of time. Of course, this was one of the keys to success. Far more can be accomplished with this sort of lead time — and, as a side benefit, being ready and/or waiting for the “right” timing isn’t such a big deal in this case. He put together a plan and stuck with it. Not rocket science but wildly successful. He also paid top dollar for the best people — both employees and advisors. Have you taken stock on your exit plans (whether from the business, for your career etc.)?

plan ahead

One tip to implement this week:

As it apparent by reviewing this successful case study, it isn’t something that will be done in a week — or a year. However, you can get started this week. His first step was to figure out his end goal. Set aside time to determine your end goal for your company, your department, your career or whatever you’d like to address. Gain feedback from your trusted advisors and sources but think about YOUR goal — not someone else’s goal.

Next start thinking about the plan. His plan was not overly complex. He picked a FEW strategies to accomplish his exit plan. You can do the same — and you might be surprised as to what can be accomplished in a week. Your plan will take longer than a week but if you figure out your goal, there is no reason to wait. Get a jump on the next step.

Looking for more ideas to keep your supply chain connected? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”

 



Lean or No Lean, a Demand Plan is a MUST

June 16th, 2016
demand plan

Demand planning delivers such useful information on client demand that even Lean devotees will find data on longer-term forecasts, seasonal products and trending patterns useful.

Whether you are on the Lean journey or not, you need a demand plan! Prior to forming LMA Consulting Group, I was a VP of Operations and Supply Chain for a mid-market manufacturer. Our Board hired a lean consultant who insisted we had to be purists – there is no in-between. If we were to embrace lean (and, who wouldn’t want to be lean, after all?), there are some lean purists who say “no need for a demand plan”. Somehow, this is what was adopted as gospel at my company; however, it was NOT accurate — assuming you wanted to service customers. From this frustrating experience along with several others in working with clients, it is apparent that the demand plan is not dead!

If we take it back to the basics, I have to wonder why anyone would ever think they didn’t need a demand plan. In essence, it is like saying you don’t need to know what you’re likely to sell, use, and transfer to other facilities.  Why wouldn’t we want to understand this information? Well, the lean purists would say kanbans are connected directly to customer demand and pulls it through. Certainly that is a successful way of planning in many organizations and for “A” products especially those with those with relatively even demand.  However, it doesn’t mean you wouldn’t want a good feel for your demand. It is always helpful to provide longer-term forecasts to suppliers and to use internally for staffing, skills building, etc.

And, when it comes to B and C items, seasonal items and other trending patterns, understanding the demand plan isn’t a “nice-to-have”; it is critical to success. We estimate that at least 80% of our clients can gain significant bottom line results from focusing a bit more attention on the demand plan.  If you are interested in discussing further, contact us.

 

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