A leading global infant health company challenged its principal supplier to find new ways of working together synergistically to deliver financial benefits exceeding 3% of COGS. Utilising the principles of dynamic alignment, five priority workstreams were identified and joint working teams identified improved ways for the two organisations to work together.
Demand forecast accuracy was improved, planning processes were aligned and stabilised, improved SKU management practices were adopted and order lead times reduced. With the adoption of multi-function governance structures combined with transparent reporting, the relationship between the two organisations moved from one of a tactical nature focused primarily on operational issues, to a strategic relationship with aligned business paths and high operational efficiencies.
A New Zealand-based manufacturing company sourced specific electronic components from multiple Asian vendors. Whilst multiple origin sourcing provided seemingly competitive price tension, it came at a cost to order lead times, working capital and the ability of the organisation to respond quickly to changing market conditions. A sourcing strategy was developed, incorporating a reliable and reputable Asian supplier along with a more expensive but local OEM for low volume/rapid response orders.
As part of the strategy, a Product Life Cycle management process was introduced. Preferred Supplier Agreements formalised the ‘ways of working’ across the organisational boundaries.
Benefits to the manufacturing company included:
The manufacturer became a ‘Top 5’ account for the OEMs, and with the surety of the formal collaboration processes that were implemented, the OEMs were able to take advantage of their own procurement opportunities, as well as smooth their production plan when gaps arose in their manufacturing schedules.
An increasing awareness that customers were dissatisfied with the increasing level of damaged product being received in their warehouses led to a manufacturing exporter undertaking a major review of their packing operations and supply chain. The review focused on raising the awareness of the issues at the machine/operator/packing line level in the manufacturing operations and getting these operators to adopt sustainable change practices. Within the ‘leading and managing change’ environment, the focus of the review was extended not only to cover the packing operations, but also the logistics, warehouse and shipping container loading practices. Packaging materials were also reviewed to ensure they could withstand the rigours of an efficient export supply chain.
The results of the initiative were significant - greater than a 10-fold decrease in product defects off the packing lines, and a 3-fold reduction in the damage rates reported by customers. These results were achieved across multiple packing sites without the need for significant capital expenditure.
This focus on product out-turn also supported an improvement in the stability of finished goods stored in the warehouses. Through reduction or elimination of some of the manufacturing and packing-related issues, eg excessive air in product, palletised product was more stable when block-stacked in the warehouse. Adoption of in-bound checks for product and product stability, as well as product out-turn criteria (determined by the operators themselves) resulted in faster communication from the warehouse to the packing line when product was beginning to deviate from agreed standards. There was also a significant mitigation of health and safety risks across the supply chain (including at customer receipt) due to the increased stability of the product.
The commodity boom of 2007/2008 resulted in a shortage of commodity supplies satisfy global demand. Commodity process soured, as did customers expectations of suppliers and their deliver performance. Global demand for dairy products resulted in an increasing need for commodities ex USA and South America, two regions that historically only featured occasionally on the global trading scene. This increased demand and service expectations stretched the existing supply chains and customers were often faced with lengthy delays before receiving their goods. A review of the supply chain in 2008/2009 resulted in new processes and infrastructure being deployed in USA. Delivery performance moved from 25-40% DIFOT in 2008 to consistently greater than 95% DIFOT within 12 months of implementation.
A food processing company historically had more processing capacity than demand. However, when an unexpected large new customer was secured, the company faced a constrained supply position which impacted across all of the functions, as they were unable to manage competing priorities.
Value Chain Connections facilitated a series of structured idea generation workshops, developing an A3 Business Plan with 5 high priority initiatives. A3 Action Plans, incl risk assessments, were developed for each of the priorities.
A structured S&OP process was introduced to help manage competing priorities. Segmentation principles identified those customers and products that delivered the majority of the revenue and value. Analysis showed that 10% of customers accounted for 75% of sales; similarly 25% of the products accounted for 80% of the sales. The S&OP cycle focused on protecting and growing the value. NPD processes were also realigned to focus on these priority customers and their product portfolio. Having identified the priority customers and products, a procurement strategy was developed and inventory management processes redefined to ensure the priority products were available as required.