What Executives Need to Know about Total Cost Management and Cross Functional Integration Moderator:...
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- Slide 1
- What Executives Need to Know about Total Cost Management and
Cross Functional Integration Moderator: Robert Martichenko Founder
and CEO LeanCor Supply Chain Group Panelists: Jill Broschard Vice
President, Americas Supply Chain Solutions The Hershey Company Ryan
Hanson Senior Director Domestic Transportation Target Tonya Jackson
Vice President, Global Supply Chain Operations Lexmark
International Adam Michaels Head of NA Integrated Business Planning
Mondelez International
- Slide 2
- Supply Chain Excellence The Hypothesis As supply chain
professionals, we have done an excellent job in eliminating supply
chain waste that is within our span of control. Supply chain waste
and opportunities for increased operational excellence still exist
as a result of business decisions being make outside of the order
fulfillment process. These cross functional processes include
product development, sales, marketing and merchandizing and overall
business strategy. Our goal as supply chain professionals is to
identify these cross functional drivers of waste, and to develop
and execute operational plans that create an integrated approach to
managing the supply chain. If we can accomplish this, the results
will be reduced lead times, improved working capital position,
reduced operating costs and increased sales.
- Slide 3
- The Eight Wastes WASTE THEME Defects (Correction) Waste that is
created when we are doing things over because they were not done
right the first time. Overproduction The king of waste. Many of all
the other wastes are created when we produce more than the market
demands. Lean focuses on building to takt time which means the beat
of the customer in order to avoid overproduction. Waiting All waste
that exists because we are waiting for material, people, upstream
processes, customer orders and all other dynamics that result in
waiting time before we can perform our work. Not Engaging Employees
(Knowledge) Waste is created when we fail to engage our team
members, fail to share best practices and fail to work
collaboratively. Transportation Transportation in excess of what is
required if inventory and flow exist in the network. This includes
underutilized equipment, interplant shuttles, trailer demurrage and
other transportation wastes. Inventory Waste created by carrying
inventory in excess of what is required to service the customer.
This is caused by overproduction, forecasting errors, long lead
time and batch thinking based on economies of scale paradigms.
Motion All motion that does not add value to the product or process
walking around, searching for materials or tools. Excessive
Processing The waste that is created when we do more than is
required to meet customer needs.
- Slide 4
- The Challenge & The Goal
- Slide 5
- Integrated Business Planning: The Trojan Horse for Building
Business Capabilities Adam L. Michaels Head of North American
Integrated Business Planning
- Slide 6
- Significant number of SKUs, formats and formulas Fragmented
supplier base Sub-scale plants with low efficiency assets 1990 2000
2010 Acquisitions drove supply chain complexity
- Slide 7
- Game Changer building capabilities by changing our behaviors
1.Portfolio Management (PMR): reach consensus on sufficiency &
performance; make decisions, optimize resources 2.Demand Review
(DR): reach consensus on unconstrained, unbiased, time-phased
demand plan; risks & opps to plans 3.Supply Review (SR): how we
plan to meet demand & address capacity gaps; ensure critical
resources are available 4.Integrated Reconciliation (IR): quantify
financial implications of the portfolio; make required trade-offs
across portfolios 5.Mgmt Business Review (MBR): Approve the call;
engage the Category and Regional leadership teams for decisions or
direction Integrated Business Planning (IBP) is a decision- driven,
exception-based process, executed monthly The Category Presidents
own and lead the IBP Process, with each IBP Review Step having an
executive champion and process leader The idea is to move beyond
this quarter, extending the horizon to 24 months We measure IBP
progress and outcomes by one, uniform set of measures, x-country
& x-category Five Steps of IBP
- Slide 8
- Before IBP With IBP Horizon Roles and Responsibilities
Behaviors Meeting Focus Current year, current quarter Rolling 24
months Inconsistent Ownership, Roles and Responsibilities leading
to Attendee Overload in meetings Clear Roles and Responsibilities
with Process Champions and Process Leads Principles not formally
established Some good Mondelez values shown Fostering Mondelez
values: Making decisions Act like owners Tell it like it is Review
meetings with limited decision making Decision making; credible
plans, resolving issues, exploit opps, aligning w/ strategy
Business Process Inconsistent mgmt processes across categories
& countries IBP will be the way we run the Business We are
embarking on new ways of working, across the end to end
business
- Slide 9
- Our journey is just beginning; but this is now the way we run
our business More robust conversations during the meetings Better
understanding of the full business and broader business discussions
Better visibility We are talking about the right issues We improve
every cycle Consistency across brands We are speaking the same
language We are working cross functionally
- Slide 10
- IBP start-up is all about changing behaviors & building
capabilities Initiation Develop a common understanding of what IBP
is and what it means to the success of the company (decision
statement, executive summaries, etc.) Train leaders on the IBP
process and objectives, and set expectations about their
collaborative participation 200+ co-developers!!! Identification
Determine change impacts of the process start-up based on the
current state diagnostic and recos; develop plans to address
impacts via leadership Onboard and engage leaders to take on their
roles in the process #1 cause of failure is senior management
change Integration Share successes of improved collaboration and
visibility in monthly planning cycles; e.g. IBP Ambassadors/ Cycle
Celebrities Stay connected to opportunities for improved
effectiveness across the entire business work IBP into our
performance management and metrics
- Slide 11
- Slide 12
- Shared Services Overview Tonya Jackson VP, Global Supply Chain
Operations
- Slide 13
- BUSINESS CHALLENGE: Legacy Operations Infrastructure Lexmark
has undergone strategic business transformation and we needed to
transform Lexmarks back office and customer management
infrastructure Multiple Divisional Organizations Strong Regional
Organizations, Subsidiary Model High Cost Sites Distributed IT
Decentralized Back Office, Multiple Systems and Instances,
Customized O2C, Disparity of Processes & Data Cumbersome and
Expensive to Implement Changes and New Business Needs
- Slide 14
- TRANSFORMATION: Lexmark Shared Service Structure Lexmark
adopted a Shared Service Model, centralizing, off-shoring and
near-shoring the majority of its operations support functions. LA
Regional SSC Buenos Aires/Montevideo Numerous Process Improvements
Service Delivery Customer Order Management Order entry cycle time
reduction Sales & Marketing Operations Finance Technical
Support Accounting Procurement Regional sourcing leadership Mfg
& Quality Control Engineering support in region Support +20
Countries Spanish, Portuguese Global & NA,AP SSC Cebu,
Philippines Support +10 English Countries WW Non-language dependent
processes Europe Regional SSC Budapest Support +30 Countries +10
Languages Global Mfg Operations Shenzen Planning Alignment with
regional customers and suppliers Global HQ Lexington
- Slide 15
- RESULTS: Process and Cost Improvement G&A Cost Down
Dramatically >25% Office Square Footage Down 40% Acquisition
Back-Office Integration SIMPLIFIED Order to cash 95% in SSC
Planning, Procurement 75% in SSC Process Transition Progress
Productivity Labor Savings 40% Reduced time to process orders 65%
Order accuracy >99.6% Benchmarking and External Recognition 2014
Best Global In-house Shared Service Center
- Slide 16
- LEARNING: Key Success Factors Establishing Shared Service
Center approach requires: SELECTING LOCATIONS & FACILITIES
RECRUITING TALENT DEVELOPMENT INFORMATION TECHNOLOGY CHANGES AND
MORE Approach focused on Business Process Optimizatio n not
business process outsourcing Centralize Processes Standardize
Offshore / Near-shore Automate (ECM,BPM) Improve Processes
Engagement that allows the legacy locations to enable change
Defined Stakeholders / Global Process Owners C-Level &
Management Support SSC Management Talented Employees
- Slide 17
- Slide 18
- Minis Line Launch: Supply Chain and Commercial Partnership For
Product Innovation Jill Broschard VP, Americas Supply Chain
Solutions
- Slide 19
- Hershey is global company with +80 brands 19 Mexico India $7.4
billion net sales in 2014 ~ 13,000 employees around the world
Products available in over 80+ countries 23 manufacturing plants in
7 countries 70+ strategic partners globally
- Slide 20
- BUSINESS CHALLENGE: Meet growing consumer need with Hershey
brands Objective: Get to market quickly with minimal investment AND
meet consumer expectations Consumer preference, price point,
innovative Feasibility, capital, cost, speed to market
CommercialSupply Chain Hand-to-Mouth was an important occasion and
an expanding segment (+8%) Hershey was under-indexed for this
occasion Where to play Leading Options
- Slide 21
- FORK IN THE ROAD: REESES & KIT KAT Iterative process &
common goal Consumer feedback (piece size/shape, texture, flavor)
Manufacturing capabilities Challenge Could not manufacture the
desired consumer size with current technology Reeses needed to
deliver flavor & texture consistent with larger formats KitKat
technically most challenginghad 14 months from capital funding to
delivery to customers Novel & adapting thinking Evaluate
non-traditional manufacturing methods Extend collaboration with
equipment design partner Developing break-through technical
solution of Kit-Kat minis
- Slide 22
- RESULTS: Marketplace and Financial Success Annual Sales
Delivered Reese 60% above Plan Kit Kat 26% above Plan Fillrate
>99.6% #5 Most Memorable New Product Launch of 2011 USA Today
ranked MINIS as the About.com rated MINIS as the Most Memorable
Product Launch of 2011 Kit Kat Minis 2013 Retailer Choice Award
Best new product by NCA Biggest launch in confection category in
2013 First Delivery to Customer Adherence Met launch date
- Slide 23
- LEARNING: Key Success Factors Shared Leadership Solving
Together Alignment & accountability Marketing & Supply
Chain on major commercial deliverables Flexibility & Speed was
the expectation and new normal Transparent and Iterative process
around capabilities and consumer needs Core cross-functional team
from concept to execution (limited personnel changes) Strong
thought leadership with a selected external partner Early
contingency plans to handle potential growth Communication across
functional team was critical for success
- Slide 24
- Slide 25
- Inbound Freight Flow Leveling Ryan Hanson Senior Director,
Domestic Transportation. The focus of your supply chain (and
overall business) planning is primarily centered on Closing the
current quarter The current calendar year you are in 12 to 18
months out 24 months+ out
- Slide 26
- Problem Statement: MP Operations and Transportation were not
working together to remove waste and drive in- stocks. Storage
Dept. - Sterilite 274Analyst ordered 274 Truckloads to be picked up
in a 2-day window without notice to Transportation
- Slide 27
- Targets Distribution Network
- Slide 28
- Impact (high cost, high workload, low in-stocks & potential
lost sales) We scrambled and picked up all 274 loads in 7 days.
135% cost to normal Frustrated teams (both Trans and MP) Loss of
trust of MP team of Transportation Frustrated carriers
- Slide 29
- Solution(s): Educated new MP director Aligned goals (drive
sales at lowest cost / repeatable processes) Re-trained entire MP
department Annual planning/forecasting for this product Load plans
for 15+ loads Rolled out to all other MP departments Next steps:
Monitor Review data for smaller examples (i.e. Advanced loads into
consoles) Build into MP analyst training and review wins/opps
routinely to build habit strength.
- Slide 30
- Slide 31
- Slide 32
- Jill Broschard, VP, Americas Supply Chain Solutions The Hershey
Company Ryan Hanson, Senior Director Domestic Transportation Target
Tonya Jackson, VP, Global Supply Chain Operations, Lexmark
International Robert Martichenko, Founder and CEO LeanCor Supply
Chain Group Adam Michaels, Head of NA Integrated Business Planning,
Mondelez International
- Slide 33
- a.Thought it was great b.Very Satisfied c.Slightly satisfied
d.Dissatisfied How satisfied were you with this session?