Last week I had the opportunity to be the master of ceremonies for the 2011 OpsInsight Leadership Forum, which was produced by Halcyon Business Advisors.  The conference provided a great line-up of speakers including AT&T, Aberdeen Group, Accenture, Cardinal Logistics, CCI, IBM, The Shingo Prize, McDonalds’s Corporation, Vecco International and Wal-Mart.  The executive level attendees represented a diverse group of industries with many different challenges.

In my conference opening, I observed that the continual challenges facing productions and operations management, namely more demanding customers, complex, globally stretched supply chains, rising labor costs and dramatic increases in disruption and risk events can each significantly impact the ability of any organization to compete.  My challenge to the attendees was to reflect on the fact that now more than ever before, capabilities for flexibility, agility and transformation are no longer optional for operations management, yet each brings its own unique challenges.

Many of the conference speakers reflected on these challenges and what was really interesting was that many speakers reinforced that technology and tools are not the real challenge but rather changing business and organizational culture tend to be most difficult for many operational focused teams.  The reasons are many.  Operations teams sometimes do not get the visibility or sensitivity that other business functions may garner.  Leadership and business structure also plays an important factor.

Some takeaways I noted from our speakers were:

• Operational excellence must be baked into the fabric of corporate culture and that begins with the leadership of top management.
• Supply chain and operational leaders need to be able to balance many different aspects of business process capability that include being adept at operational results linked to business strategy, standardization, consistency and tools.
• Little things can make a big difference.
• Leaders must see and acknowledge reality.

I attended one think tank session that brought home many if not all of these concepts.  The session was facilitated by Thomas M. Feeney, the President and CEO of SafeliteGroup with headquarters in Columbus Ohio.  For readers unfamiliar, Safelite Auto Glass is one of the leading providers of automobile glass repair and replacement in the U.S. with over 4 million customers.

It is not often that this author encounters what I would describe as a dynamic and inspirational CEO, and Mr. Feeney certainly filled those requirements in his beliefs, communication and articulation of leadership principles. How many CEO’s are you aware of who can sit down with a total group of strangers, without a script, and completely articulate the fabric and culture of the company, and field all questions related to that culture?

First and foremost, Feeney reinforced that changing culture starts at the top, and that any organization needs to motivate change from the basis of how people are hired and rewarded in their day-to-day jobs.  Safelite’s philosophy is to hire for social skills first, by seeking out people who are empathetic and helpful by nature.  Safelite’s people are measured on how they go the extra mile to resolve customer needs and Mr. Feeney personally contacts and praises employees when they go to extraordinary means to satisfy customers.  Safelite further believes that customers want to speak to real people, and thus all customer center calls are automated but rather answered by a live person in an average response time of 11 seconds. How refreshing is that! An Executive Services group, an elite team of 40 employees was also formed to proactively resolve more challenging service issues.

Safelite teams also embrace business social media techniques as a means for further reach out with customers, including the leveraged use of Facebook and Twitter, with proactive two-way communication with potential dis-satisfied customers. Feeney noted that he himself has contacted disgruntled or praising customers by use of his own social media accounts, and has fostered a culture that embraces these tools while including appropriate safeguards. He characterized social media as another means of customer reach and opportunity to effect a more positive customer engagement, even with a potential non-conforming service experience.

The results for Safelite have been extraordinary with customer loyalty metrics that outpace many well-known brands.  The company constantly measures its Net Promoter Score (NPS) and how that score impacts increased revenue and customer referrals.  Employees are constantly made aware of the NPS score and how their individual contributions affect the score.  As a result, in the last two years, Safelite’s revenues have increased 27 percent along with corresponding profits.

Safelite provided a great story and a superior demonstration of how corporate culture can impact operations excellence and how a CEO can be proud to speak and celebrate this excellence.

Today’s business world moves at a much higher cadence of change, with higher stakes.  It is often operations management that provides the means to delight customers, respond to ever changing product demand or overcome extraordinary events.  Now more than ever, operations has a broader role to play, beyond any four walls of a production or service facility.  Operations is the business, and must have the capabilities of agility, flexibility and transformation.

What is your view?

Are operational teams valued for the contribution they provide?

Are metrics and performance criteria designed to reinforce the traits described?

Bob Ferrari

We continue with Supply Chain Matters commentary relative to the current announcements of Q1 related revenues and earnings by reflecting on the page one headline article in last Thursday’s published Wall Street Journal, World Revs Up U.S. Profits. (paid subscription required) It again reinforces how the sustaining growth in the emerging economies has fueled a new boom in U.S. manufacturing output, and consequent revenues and profits. In the article, the chief U.S. economist for Deutsche Bank noted: “Manufacturing has been growing gangbusters.”

This new boom is being fueled by stronger sales related to the building of new infrastructure in emerging markets, which includes heavy duty trucks, building, farming and mining equipment. Also noted is a quote from an economist at PNC Financial Services Inc. stating: “The economy would be limping along, at best, without the strong manufacturing sector…”   Large global manufacturers such as Caterpillar, Eaton Corp., Honeywell International and United Technologies are each cited as example companies that are benefitting from booming sales outside of the U.S.

However, as in all aspects of this ‘new-normal’ of business recovery, there are many caution signs that could derail the current boom. Growing unrest in the Middle East, the rapid rise in energy and other key commodity products, the growing threat of inflation will all test the resiliency of this U.S. manufacturing boom. The recent earthquake that occurred in Japan has driven home the critical aspects of product sourcing risks. The crisis itself could provide either positive or negative consequences for U.S. manufacturers.

On Thursday and Friday of this week, this author is pleased to be designated as the master of ceremonies for the 2011 OpsInsight Leadership Forum being held at the Hyatt Harborside in Boston.  The conference program features a great line-up of speakers including eight different keynote speakers addressing many operations leadership topics.  Fourteen other speakers will address various topics related to product innovation, lean methods, business process best practices, management and operational leadership.

In the conference opening address, I will be touching upon where we are as operations  and supply chain executives in this ‘new normal’ of ups and downs and how important a role operations management will play in innovation and future growth for manufacturers.

I’m looking forward to the program and hope to run into some of our readers.

If you desire more information on the conference, you can click on the conference icon located on the right-hand panel of this blog.

U.S. manufacturing is on the rise but uncertainty and risk remain for the coming months.

Is your organization prepared?

Bob Ferrari

This is our fifth Supply Chain Matters commentary regarding the SAP Insider sponsored Logistics and Supply Chain Management conference being held in Orlando this week. Readers can review each of our previous commentaries at the following links:

One

Two

Three

Four

As the conference comes to a close, I will touch upon some summary impressions I’ve gathered from this conference.  Readers are certainly welcomed to share any of their own impressions on the comments section associated with this posting.

I’ll begin with some observations of SAP activities and direction within the logistics and supply chain management area.  It was good to note that SAP has finally acknowledged that technology needs to come in smaller, more manageable increments that can both be implemented in rather reasonable periods and deliver overall value in a more timely manner.  A previous marketing and deployment focus on end-to-end process management, such as collaborative demand and supply planning, logistics and fulfillment management was the initial SAP focus, but that is defaulting to the new Rapid Deployment Solutions (RDS) programs that are now beginning to rollout in the SCM area.

Many of the SAP speakers touched upon RDS in their presentations, but not with a lot of emphasis and conviction.  Other than the Howells/Peterson keynote, there was no overarching presentation outlining the full compliment of RDS offerings for SCM.  Richard Howells and SAP Analyst Relations did clarify the following:

The S&OP RDS (Level One) was made available at the end of 2010

Customer Collaboration (SAP SNC) and Warehouse Management will be delivered at the end of this month.

Several other RDS offerings related to Demand Planning, Global ATP, Supplier Collaboration, Transportation Management Event Management and Service Parts Planning will be delivered in the second half of 2011.

Some further observations:

The legacy of the rollout of Transportation Management continues, and hopefully, Release 8 will be the charm.  This has turned out to be the most frustrated area for SAP supply chain execution support, and hopefully Release 8.0 will be the charm.  Judging from the names I heard as part of the customer advisory council, the voice of the customer was not lacking.

I noticed at least two or three different versions of SAP Business Objects software being utilized in demos by SAP presenters.  The same for multiple user interfaces across some SCM related applications.  It might be wise to have a consistency in look and feel.

The best user-oriented presentation that I observed was the presentation on implementation of supply chain performance management at Coca Cola, which was ably delivered by John Chiang.  What impressed me was that Coke insisted on adopting standard, out-of-the box technology for implementing SAP Performance Management, and managed to do so within the existing SAP Business Warehouse environment, which also leveraged exiting IT infrastructure. Coke also adopted standard SCOR metrics and KPI methodologies which helped to springboard adoption. Also noted was that with 12 years of experience with SAP technologies, Coke was pleasantly surprised that this application worked right out-of-the-box.

Regarding end-user experience presentations, I was a bit disappointed that there were fewer in this year’s U.S. conference, but that may be a reflection of the current economy where SCM and IT professionals are rather busy.  Past Insider SCM conferences provided a balance between SAP represented and user-represented talks. I trust that will be adjusted for next year.  I noted a lot of attendance and participation in the various informal breakout sessions organized around common SAP technology topics.  The two that I sat in on were lively, interactive and informative.  I’ve noticed a trend in many conferences of late where peer learning and interactive exchange is gaining more interest and attraction for conference attendees, and this was yet reinforcement.

A tip of the hat to all of the SAP Insider staff who provided outstanding on-site services and assistance to a well-attended conference.  There were guides everywhere eager to help 1700 attendees find sessions and other venues or assist with needs. While Disney food is not what one would classify as ‘gourmet’, the on-site service was exemplary and friendly.

A final thought.  Supply Chain Matters has penned many commentaries related to the increased challenges being faced by supply chain and IT functions, and that is especially pertinent for the SAP-oriented community.  In our view, it is rather important to stay abreast of SAP direction in SCM technology and service offerings, since there are now a lot of moving parts.  The good news is that SAP is responding to needs in SCM, but the clarity is for customers to seek out.

Bob Ferrari

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Readers of this blog are probably aware that one of the features of Supply Chain Matters commentaries is to follow certain supply chain transformation efforts involving specific manufacturers or retailers.  Our goal has always been to tie existing news and developments with some form of context, whether crisis, transformational or renewal related.  In essence, we enjoy connecting some of the dots for our readers. One ongoing story involves Home Depot and its efforts to overcome supply chain fulfillment capabilities gaps with its prime rival, Lowes.

Our initial commentary was in early 2010, Can Home Depot Close Its Supply Chain Gap?, and was followed by a subsequent commentary in September 2010, Home Depot Making Progress in Closing the Supply Chain Gap. The essence of these ongoing initiatives from Home Depot were an avoidance of a previous ‘big IT’ approach in favor of concerted investments in specific supply chain related process enablement capabilities.  During the bulk of last year, the Depot embarked on a $250 million investment in improved supply chain capabilities on both supply chain operations and planning. There was a rather large effort to shift inventory replenishment strategies toward more centralized planning, which included the majority of inbound inventory activity moving through 19 regionalized flow-through deployment centers. This freed-up store personnel in inventory management needs, and more toward serving customers. Additional investments were made in inventory optimization, supply chain network design and inventory forecasting technology which were all part of a three year effort focused on supply chain transformation.

Now that Q4 and full year 2010 operating results have been reported, it appears that Home Depot’s investments are starting to make a noticeable difference.  During the Q4 briefing call with analysts, Home Depot CEO Frank Blake specifically cited Mark Holifield and his supply chain team as meriting particular recognition.  Noted were double-digit improvements in power snow equipment, chemicals and snow tool sales categories, along with a 32 reduction in clearance inventory.

In late February, the Wall Street Journal featured an article (paid subscription or sign-up account may be required) reflecting on Lowe’s operating results. The WSJ noted that while Lowe’s demonstrated respectable results, these results were not quite as good as those of Home Depot.  Noted specifically was that in the midst of severe winter conditions that occurred in the U.S. throughout Q4, Lowe’s had run out of key inventory while Home Depot was able to capitalize on strong sales of snow blowers, shovels and other storm-related needs  by more responsive inventory replenishment strategies. A quote from the WSJ notes: “The question is which retailer will win the latest round in their three –decade-long battle for customers, as consumers resume spending on projects once again.” Also included is a quote from Lowe’s CEO Robert Niblock: “The competition has certainly gotten better.”

This story is not by any means over, and both retailers will continue to leverage their supply chain fulfillment capabilities to secure the advantage in consumer sales and service needs. We at Supply Chain Matters have been unsuccessful in our efforts to secure a briefing with the Depot supply chain team, but we will continue to persist in our requests.

Lowe’s for its part, has begun to shed middle managers and hire more part-time weekend staff to better serve customers.  Home Depot has in its 2011 capital spending plans about $585 million slated for U.S. stores and supply chain improvements, along with $370 million for additional IT investments.

Having a CEO specifically praise the supply chain team is a significant accomplishment in any industry and supply Chain Matters once again extends an enthusiastic thumbs-up to the  Home Depot supply chain team.

The ongoing developments at Home Depot are yet another evidence point to why we purposely selected the name for this blog- supply chains do matter!

Bob Ferrari

This is a multi-part commentary to help supply chain and IT professionals evaluate the need and selection criteria for technology that will augment sales and operations planning processes. Teams will want to make the right decision to match the S&OP scalability needs of their particular business, andour goal in this series is to provide some helpful insights.

Let us first begin with some grounding.  What is a sales and operations planning process, often termed the S&OP process?  The Association for Operations Management (APICS) defines this process, in part: “the process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing and financial) into one integrated set of plans.” Many other consultants, including ourselves, quickly add that it can be the best mechanism for synchronizing supply chain cross-functional or cross-business decision making and for involving senior management in key operational decisions. The current rapid adoption and maturity of S&OP processes across multiple industry supply chains is the current testimonial to the acknowledged value of this process for business teams.

The next area of mixed opinion is whether an S&OP process can be implemented or effectively sustained without the support of dedicated technology.  Here is where consultants sometimes differ with contrasting views.  Certainly, the overall maturity of the process is a consideration since many organizations can get started utilizing automated spreadsheets as a technology tool. However, we at Supply Chain Matters have previously commented that in many of today’s industry supply chains technology augmentation is becoming ever more an important consideration when teams strive to move S&OP to the next iteration. We will briefly explain.

Many industry supply chains today are either highly outsourced for supply, or have key customers and markets spread globally. In industries such as fashion, high tech, consumer electronics and others, brand owners own little of the value chain and rely on a highly outsourced network of product design, component supply and contract manufacturing.  Industries such as aerospace and pharmaceutical are now experiencing explosive growth in both global markets and outsourced supply.

Another compelling trend is that the clock speed and volatility of business has increased rather dramatically.  The past global recession only added to the acceleration of this phenomenon, where markets can change rather quickly and dramatically in a short period of time.  Another consideration, as we often point out in this blog, is that disruptions to business and supply chain activities have also dramatically risen. These disruptions range from the day-to-day operational issues such as inventory shortages, quality snafus or product setbacks, to increased occurrences of disruption events brought about by natural disaster, global terrorism, or geopolitical events.  Sourcing, operational disruption or supply re-deployment decisions which were once considered singular exceptional events are now more tactical, and increasingly involve many aspects of S&OP.  Teams need to quickly assess what is going on, what are logical options, and where decisions or changes need to be executed.

Within this ‘new normal’ of global based business today, there remains the four classic ‘levers’ for supply chain teams to manage supply chains.  They are:

• Improving the overall visibility to what is happening at all levels of the value-chain
• Increasing the speed and accuracy of decision-making concerning inventory, production, capacity and other decisions
• Fostering more agility, flexibility and alignment among supply chain business processes
• Being more innovative and adaptable to changing business conditions and needs

Supply chain teams who are considering whether technology augmentation is a requirement for their current or future S&OP process should context this need within the four levers noted above.  Are your value-chain activities outsourced and manifested by constantly changing product demand or supply situations?  Do you need to accelerate or improve decision-making across external trading partners, where product complexity, geographic distance or time constraints present challenges? Does the existing S&OP process need to be enhanced toward broader objectives and process participants?

Finally, there is a new consideration that should be evaluated when evaluating technology assistance.  In this new global and social-oriented era, more key data is unstructured in nature.  What we mean by unstructured is information presented in email exchanges, S&OP related teleconferences or in-person meetings.  Other key information can exist on the global web, such as long-term weather or climatic information, or information sourced in external trading partner sources.

If these conditions described above are your challenge, than we recommend you consider some form of advanced technology augmentation.  The good news in this area is that new developments in in-memory technology, cloud-computing and business intelligence tools have caused many software vendors to dedicate more development and applications specifically addressed to augmenting S&OP processes.

In our Part Two posting, we will outline some evaluation criteria that teams can utilize when evaluating the adoption of S&OP process related technology.

Bob Ferrari

©Copyright 2011, The Ferrari Consulting and Research Group and Supply Chain Matters Blog.

The following commentary can also be viewed and commented on the Supply Chain Expert Community web site.

On the Tech Broiler blog featured on ZD Net, Jason Perlow penned a perceptive commentary, Apple’s secret iPad advantage: The supply chain, which amplifies the critical importance of having integrated supply chain procurement, business process and business intelligence capabilities.

In his commentary, Jason reviews the current landscape of so-called competitive offerings to Apple’s iPad tablet computer, and concludes that no competitor can currently match the iPad in terms of functionality and price attractiveness, primarily because of Apple’s supply chain prowess.  He notes: “How is Apple able to do this where nobody can?  It has to do with buying up the entire supply chain and being able to leverage quantity 10 Million+ manufacturing orders in advance with its partners in China like FoxConn and with semiconductor component suppliers such as LG, Samsung and Phillips.”

Besides Supply Chain Matters, many other bloggers and industry analysts have cited the world class supply chain capabilities of Apple. It is important however to again note that Apple’s current differentiating capabilities are not just from one singular dimension, either product innovation, strategic sourcing, or any other, but the entire compendium of global supply chain capabilities.  That includes world class sales and operations planning, business intelligence and the ability to quickly re-synchronize the supply chain when extraordinary or unplanned events occur.  Think back to the many product launches where millions of Apple’s products were sold on the very first day or weekend, and where the supply chain was able to quickly respond with new supply in a matter of days. It is like the flight deck of an aircraft carrier where operations run continuously, everyone understands their role in either command, control or coordination, and where arrays of planning and intelligence information are constantly being synchronized.

In the midst of these commentaries, Apple is also working with Verizon Wireless on tomorrow’s public launch of the iPhone 4 on Verizon.  There is a lot of speculation as to whether Verizon will sell out in hours, but then again, Apple will surely respond with more phones. Yesterday and today,, the Wall Street Journal broke the news that Apple’s next generation iPad 2 is already in production, with a thinner, lighter and faster processor. Since Apple’s supply chain has initiated iPad 2production, a new launch date may be a matter of weeks, which strikes another blow to Apple’s competitive landscape..

The sun never sets for Apple’s supply chain teams, and as we often note, Apple is probably one of the best examples of why agile, integrated and global wide supply chain capabilities will always matter as a key differentiator for sales and bottom line profits.

Bob Ferrari