All too often, manufacturers run into situations that appear to offer no good outcomes.

Take this example.  A new customer is promised by the manufacturer’s sales team that they will receive a product delivery on a certain date. All seems well as a new customer places its first order!

However, the sales team is unaware that the inventory was promised to another customer already. And even more troubling, the product itself is not scheduled for additional production.

The dollar signs begin to add up in your head as you read this. Of course, all the while the manufacturing schedule is going on as usual, with a different product scheduled for production, and yet another third product on the schedule next. The manufacturing schedule will go haywire when production is halted to try to meet the new customer’s order in time.

All this before we even factor in the problems that arise from the finance area of the company, which has cash projected based on the original manufacturing dates.

Bottom line: No good outcome.

Why do these things occur? The manufacturer’s various teams – from sales to finance to production -- most likely communicate critical information via hallway meetings, sticky notes, email, and other methods that are unreliable at best and don’t always get communicated to all of the important stakeholders. The communication and planning needed for a successful income may seem impossible.

However, a manufacturer of any size can avoid this situation with the use of sales and operations planning. S&OP allows a manufacturing company to collaborate across the entire organization. There are many benefits to establishing an S&OP process, including better demand planning, fewer forecast errors, gross profit margin increases, and better order fill rates.

This new white paper from Tompkins International presents a strong case for utilizing S&OP in a manufacturing company, as well as the benefits and how to implement it.

http://www.tompkinsinc.com/publications/monograph/sales-operations-planning-manufacturing/

Manufacturing companies don’t have to rely on the sticky-note method of communication and planning. S&OP is the best solution for working together to gain better customer service and create long-term value for the organization.

More Resources

Industrial & Equipment

'SIOP' Enters Our Lexicon

 

Photo Credit: Augapfel 

Once again, I turn my blog over to Bruce Tompkins, my brother and the Executive Director of Tompkins Supply Chain Consortium. With St. Patrick’s Day coming up in a few weeks, he’s been thinking green. But he tells me it’s a different kind of green.

My initial intent here was to do some research and identify just a few top performance indicators that signify how “green” an operation is – four or five at the most.

With my previous work in sustainability, I thought I could easily create this short list. What I didn’t realize was that my research would lead to a couple of websites where everything environmental would be located and performance indicators would be abundant.

I found many, many resources that have lots of detailed information and a wide range of performance indicators.

One of the key points I learned is that measuring environmental performance requires a look at all different areas of an organization – materials, energy, water, emissions, effluents and waste, products and services and many other topics.

So I decided to identify a Top 10 list of environmental performance indicators.

This was a long way from where my original vision started, but I hope it provides you with some metric areas to think about when reviewing sustainability in your company.

My top 10 sustainability indicators are:

1. Percentage of materials used that are recycled input materials
2. Direct energy consumption by primary energy sources per unit of output
3. Energy saved due to conservation and efficiency improvements
4. Percentage of water recycled and reused
5. Total direct and indirect greenhouse gas emissions by weight
6. Emissions of ozone-depleting substances by weight
7. Nitric oxide (NO), sulfuric oxide (SO), and other significant air emissions by type and weight
8. Total water discharged by quality and destination
9. Total weight of waste by type and disposal method
10. Percentage of products sold and their packaging materials that are reclaimed by category 

If your organization can honestly say that you are measuring performance in each of the areas identified in the Top 10, then you are well ahead of the pack.

I’ll also bet you have a thing or two that you could add to this list. If you do, please leave a comment, and we can make this a running list on how to be greener in your operations.

Bruce Tompkins

Resources

Supply Chain Sustainability Excellence Center

Tompkins International Partner, American Energy

Waste and Recycling Sustainability: Ideas for Reducing Your Company's Impact on the Environment, a Supply Chain Consortium Report

As a friend of mine recently quipped, “This process allows your customers to do the talking and your inventory to do the walking.” She was referring to demand-driven supply chains (DDSCs).

This is not a fad. DDSC is a transformational strategy because it changes the way organizations think about the marketplace – replenishment, promotion management, markdowns, and so on, for the end-to-end supply chain. Demand-driven supply chains offer a way to get ahead of the competition by reducing inventory, satisfying customers, and taking care of your organization’s bottom line.

To prove my point about demand-driven, let me share an article with you that I read a couple weeks ago in Supermarket News, POS Drives Replenishment in Food Lion Test.

To summarize, Food Lion is working with is vendors, such as PepsiCo, to “replenish its distribution centers (DCs) and stores by offering them visibility into current and expected consumer demand as reflected by store-level inventory and sales.”

According to the article, “the results of the pilot were ‘staggering.’ Food Lion’s DC inventory was reduced between 12% and 27%, DC out-of-stocks were cut between 21% and 77% and store out-of-stocks were trimmed by 20%.”

Wow, the numbers speak for themselves. Why keep your capital held up in inventory?

It may require some upfront expenses to get your supply chain operating with demand-driven processes, but in the end you will see fewer headaches and higher profitability, along with better visibility for your end-to-end supply chain.

If you would like to get a fundamental grasp on demand-driven, download this new paper, Demand-Driven Supply Chains: Getting It Right For True Value.

Need further evidence? Look at the success of Apple, P&G, Amazon, Cisco Systems, and IBM – all have begun to recognize the opportunity that DDSC provides.

They have changed their operations strategies to focus heavily on demand-driven opportunities and transformed their processes, people, and technologies to execute in superior ways.

Is your supply chain demand-driven? If so, what benefits are you seeing? If you are moving in that direction, what tips can you offer other companies?

Go!Go!Go!

Jim

Resources

Demand-Driven Supply Chains: Getting It Right For True Value                               

Principles and Benefits of Demand-Driven Supply Chains

Photo Credit: jimmyharris

You’ve seen the opinions of Chris Ferrell, transportation expert and Director of the Tompkins Supply Chain Consortium, several times on this blog. Today, he shares his insight into how issues past, present and future affect the ever-evolving transportation industry.

-- Jim 

Now that the Federal Motor Carrier Safety Administration (FMCSA) has made an announcement on its highly-anticipated Hours of Service (HOS) rule, one of the major points of uncertainty within the transportation industry has been removed. 

Whether or not the HOS decision was good is largely a matter of perspective.

From the carrier/shipper point of view, it is fair to say that while the new law is more restrictive than the current regulation, the final product isn’t nearly as limiting as what was originally proposed. The regulation officially hits the books this month, but it will not be subject to compliance until July 2013.

I’m not sure “it could have been worse” really counts as a victory for shippers and carriers. It does represent the elimination of a substantial amount of uncertainty which, in this economy, is enough to restrain investment in both capital equipment and long-term relationships.

So, with that significant hurdle crossed, what’s the next big item to watch for?

While professionals within the transportation industry may make strong, valid cases for driver shortage or equipment age, I believe the statistic to really watch will be fuel.

There is ample evidence to support the argument that when gasoline prices cross the $4.00 barrier, consumers begin to substantially scale back on other expenditures. And while the current national average has been hovering around $3.40 to $3.50, this has been largely due to weakened global demand during a prolonged and tepid economic recovery.

The other potential uncertainty with fuel is on the supply side of the Middle East. For more insight on this, refer to the excellent and succinct analysis of Logistics Management’s Derik Andreoli.

What does the future hold? Well, for one, the civil unrest which occurred during the Arab Spring of 2011 could once again wreak havoc on oil prices in 2012. When the events first occurred, average gas prices briefly spiked above the $4.00 barrier in May before President Obama tapped into the nation’s strategic oil reserves for the sole purpose of keeping the fledgling economic recovery on track.

Now, with Iran rattling sabers, Libya still picking up the pieces from a regime change, lingering unrest in Egypt, accelerated protests in Syria, and Iraq preparing for life without the presence of the U.S. Military, there is a lot of uncertainty that will need favorable outcomes to avoid any kind of supply disruption.

And beginning at a $3.40 price point, if the economy really starts to heat up, or if there is even a small problem in one of a number of OPEC nations, there is not a lot of room between current prices and the point at which consumers are compelled to divert all of their discretionary spending to fuel – a sort of self-imposed governor on the economic engine.

So pay attention to your price at the pump, knowing that the ramifications of fuel reach far beyond your pocket book or the transportation industry and into every corner of the economic recovery.

Also, let us know what you think will have the greatest impact on transportation in the next eight months – fuel, regulations, other?

- Chris Ferrell
 

More Resources

Transportation Report Reveals Industry Insights into Volume, Capacity and Pricing

Transportation Cost Reduction

The 12 Best Practices of Freight Bidding

Celebrations recently came to a close for the Chinese New Year. The Year of the Dragon has begun, making it a good time to reflect on what’s ahead for the country.

In China, 2012 will be a year of keeping economic growth steady, as well as employment. Trade is expected to continue to soften, just as it did in 2011. Western companies should anticipate some level of currency fluctuation as well.

Change in the political scene is also likely in China, as the country transitions later this year to new leadership when both the president and the premier step down from their party posts. Various policies in business taxation, intended to stimulate growth in some areas, will occur in 2012.

But what do these expectations mean in terms of profitable growth strategies for Western companies looking to move operations into China?

Michael Zakkour, who writes the China Business Blog and Podcast and is a Principal at Technomic Asia (a Tompkins International company), posted in his blog that China needs to continue to be the main focus of strategy for profitable growth.

Zakkour noted that one major adjustment to strategy for Western companies moving into China is the increased need to send the “A” game to the country. A typical move for Western companies is to try innovation and ideas in their home markets, then move them later into China as an afterthought. This includes people, processes and technology.

 To be competitive, Western companies must move the innovative people, processes and technology into China at the same time as markets in the West, or even as the first market entry point.

For more tips on market entry into China, see Zakkour’s entire post at http://www.technomicasia.com/blog/2012/02/08/top-8-trends-in-china-for-2012/

Is your company in China? If so, what are you seeing now and what changes do you expect throughout the year?  Be glad to compare notes.

Go!Go!Go!

Jim

More Resources 

Asia Supply Chain Excellence

Asia Supply Chain Excellence Report - January 2012

Photo Credit: L2F1 

A few months ago, we wrote that “2012 will be a return to full speed ahead for M&A.” Our Strategies to Transform Your Supply Chains in 2012 article noted that M&A growth is expected to be robust.

But at this point, deal activity is slow out of the gate. The Financial Times reports that “deal making has had its slowest start to a year for nearly a decade, as companies’ appetite for M&A remains suppressed by the uncertain outlook for the global economy.”  There is, however, a big caveat here – as the article later points out that company leaders are realizing that M&A needs to drive growth. 

So as cash flow becomes available, organic growth slows and boards demand growth, we still expect a peak in M&A activity this year. Will it surpass 2011? Possibly not, but the focus will still be on profitable growth.

And if you want to succeed in M&A for value creation in the upcoming year, there are two essential requirements: speed and due diligence.

1) Speed – As supply chain leaders, we want to capture maximum value from an acquisition and set the pace for results. Stakeholders, the marketplace, and competition all watch this speed of acquisition and will value the acquisition based on the speed at which results are achieved.

2) Due diligence – When engaging in M&A activity, there is no give-and-take between creating it quickly and doing it right. To do right simply means to pursue the three M&A due diligence processes: commercial due diligence, culture due diligence, and supply chain due diligence. All three provide opportunities for revenue growth, cost reduction and risk mitigation.

There are also four very important strategies for creating value in M&A activity: business strategy, acquisition strategy, supply chain strategy and operational strategy. Our new white paper, Laying the Foundation for Successful M&A - A Supply Chain View covers the four strategies in more detail.

It appears that M&A this year will be more about driving growth and creating value than in previous years, and taking a supply chain view is the way to go.

What do you predict for M&A in the coming months? How do you see the supply chain fitting into the picture?

GoGoGo!
Jim

Resources

Mergers & Acquisitions Can Be Risky Business Without Supply Chain Due Diligence

Acquisition success thrives on supply chain integration

Mergers and Acquisitions in the Service Supply Chain Industry