For months I have been telling the executive staff, employees, and suppliers of CortConnect that business will get better. Some of that was probably me convincing myself, hoping that our markets for computer networking gear and peripherals will go up. But my comments were also an alert to everyone that they'd better be ready with plans in place — if not in motion — to capture business when it emerges. So why, today, am I still concerned that our efforts to ramp up for growing business are too slow, too little, and in some areas non-existent:
- Production: We did a decent job of gradually downsizing production capacities, staff (through attrition), and inventories, which has saved our margins as times worsened. But even with a slight upswing beginning, we're running into overtime and expediting, and our quality and delivery errors are rising. Why is growing production capacity, staff, and inventory so difficult?
- Sales: Like production, CortConnect is operating with a downsized sales staff. And I see the smaller group now getting fat on the sales upswing (more dollars shared by fewer salespersons) and unable to contact all the sales leads we're getting. We need a plan to expand our sales efforts quickly.
- Suppliers: Our suppliers are hungry for business and recognize the opportunities popping up, but they're having the same trouble as we are in committing their systems and processes to growth. They see us muddling about without a clear "go" signal, and so are reluctant to increase their capacity.
- Company workforce: Because we've been so tightly staffed, everyone is focused on their own work at hand. They don't have the time to look up or forward nor do they necessarily worry about it. Walking the shop floor and offices, I hear, "I'm already overloaded with what I've got." It's affecting everyone — sales staff, production staff, administrators — and, worse, no one even thinks about improving how they work anymore (i.e., "I just need to get this done now, I'll worry about a better solution later.").
How can I get CortConnect to break out of this holding pattern before we see all the new business take off without us and our reputation tarnished?
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
By Bob Ferrari
It is well advised for companies to have business processes prepared to respond to quick changes in markets when a recovery begins to occur. This is especially important since companies have had to dramatically cut back on cost and staffing in order to navigate through the severe recession impacting many industries. The situations described by CortConnect in production, sales, supplier, and overall workforce response are all symptomatic of an organization that has been operating with bare essentials, or has not had the opportunity to deploy broad demand-sensing and supply-response capabilities.
It is therefore absolutely necessary that businesses have processes and plans in place to be able to quickly ramp up existing business, or have the ability to respond to new opportunities that may develop in their respective markets. I advise companies like CortConnect to work on three broad and important capabilities:
- Strong demand-sensing capability to be able to pick up on the early signs of customer demand, as well as the flexibility in sales and supply chain processes to respond to whatever variations of demand that the market will provide. This would more than likely include a means to provide in-house production and key suppliers adequate visibility to short- and long-term demand information. It should also incorporate the capability for supporting supply information to be shared across the extended supply chain. An important key for this capability is to designate someone or some group responsible for gathering, maintaining, and disseminating this information on a timely basis.
- Existence of a robust supply chain business intelligence and analytics capability that can uncover any potential problems in staffing, capacity, inventory deployment, or order fulfillment capability that can be addressed before it turns into a major problem, as well as providing an overall means to measure ongoing business metric performance.
- Investing in existing staff with broader training in the business-process capabilities mentioned above, as well as potentially augmenting currently overloaded staff with select consulting resources who can lay the groundwork for change.
The severity of the current recession has forced many companies to deeply cut staff, capacity, and inventory. Review of any IndustryWeek articles involving manufacturing, unemployment, and inventory indices provides ample evidence of these trends. It should be no surprise, then, that the smallest increases in demand can trigger a slow or painful response. The key, I believe, is building broad sense and respond capabilities that can allow organizations the agility and flexibility to be able to respond to either an increase or decrease in business in a much faster and more efficient means.
In your case at CortConnect, an inability of the current sales teams to quickly follow up on sales leads because of staffing is a first sign of increasing demand. Augment this situation as soon as possible. Augmenting the sales team, temporary or permanent, would be an advisable initial step.
Growing production and supplier capability can be best facilitated by the timely communicating of existing and future demand needs to a cross-functional sales and operations planning (S&OP) team, consisting of sales, marketing, product management, operations, and logistics, which can align existing and future resource needs of capacity, production, and inventory. There is also a need to be able to communicate the S&OP plan and resource commitments up and down the supply chain. The good news is that information technology capability that can both provide two-way communication of planning and transactional information, as well as business intelligence, is available from many ERP or best-of-breed technology vendors today. Implementation times are much timelier, in some cases less than six months.
Relieving the burden on CortConnect's existing workforce can come from working smarter rather than harder. The ability to be able to quickly retrieve information and business intelligence, perform ad-hoc or what-if business planning, or bring in temporary assistance when required can all help in relieving the burden. Employees will rise to the challenge, given the right tools and information. Many companies have been dramatically cutting back in consulting and project management services, but skills augmentation is an area where such activity can add dividends.
Bob Ferrari is the Managing Director of the Ferrari Consulting Group (www.theferrarigroup.com) and supply chain technology consultant, executive, industry analyst, and published author with over 20 years of demonstrated experience and insights within supply chain business planning, process and information technology transformation. Bob is the primary author of the Internet blog Supply Chain Matters. Stephen can be reached at bob.ferrari@theferrarigroup.com
By John Sicard and Randy Littleson
CortConnect is struggling with the same challenge many manufacturers face right now. That is, for months the focus has been on downsizing production, taking costs out of the business, and trying to realign the business to shrinking demand. As the early signs of recovery start to appear, many companies are asking themselves when and how to reorient their thinking to growth so they are in a position to capitalize on growing demand. Most companies are understandably gun-shy, wanting to avoid a premature and/or too aggressive growth strategy given the painful downturn everyone has experienced.
Just like you saw during the downturn, you need to acknowledge that there's no way to accurately predict when or what the upturn will look like. This is important because it focuses your energies on being prepared for the realities as they unfold rather than putting all of your energies into trying to precisely predict an unpredictable future. With this mindset, CortConnect should focus its energies on the enabling capabilities you're going to need to plan for a recovery, sense how well you're doing relative to that plan, and then be able to respond to unplanned events.
To be better positioned to manage the upturn and improve your position for the long-term, CortConnect should focus on the following four enabling capabilities:
- Get your data: At the core of improving any supply chain management business process — from order promising to demand management to supplier collaboration — is a requirement to have sufficient supply chain visibility. This is both on the demand and supply sides of the business. Without accurate, detailed, and complete visibility into your business, CortConnect people aren't appropriately informed and can't make the right decisions. In today's fast-paced, global, and outsourced supply chains, this is truer than ever. And as CortConnect looks to sense a recovery, timely information in the right hands will be critical. CortConnect should prioritize the most important customers and suppliers and work to first establish visibility with them based on their impact to the business. When establishing these processes, define win-win scenarios that clearly articulate the business benefit to both parties possible through greater supply chain visibility.
- Establish a robust sense-and-respond surveillance system: As you start to gain greater visibility into your demand and supply situation, managing change will become a core issue. In a fast-paced business, there's a lot going on at any one point in time. And with increasing business volatility comes the growing risk that the assumptions that went into building your plans are no longer accurate. How quickly you can sense and respond to unplanned events can become a significant competitive differentiator. CortConnect needs to establish a comprehensive sense-and-respond surveillance system that can automatically identify risks that could materially impact business performance and proactively notify the right people of both the existence of the risk and provide them with tools to analyze the impact and take corrective action. Your staff needs to be able to define criteria pertinent to their jobs and have the system automatically watch for these conditions. Shortening the time between sensing and responding can result in winning new business and reducing margin-eroding cost surprises.
- Empower people to collaborate: Getting closer to both your biggest customers and your key suppliers is more important than ever. CortConnect needs to establish a corporate culture around greater collaboration. Gone are the days of siloed demand and supply organizations that simply handed things off from one department to another. Today's pace and volatility demand more collaborative relationships both inside and outside the company. Collaboration starts with leadership setting an example by defining win-win scenarios for both parties (you may even want to take concrete action by realigning your organization around customers or business segments, doing away with the traditional functional alignment). It's supported by technology that delivers to everyone a single version of the truth so that collaboration is based on a common set of facts. Given that much of this collaboration will be centered around developing and adjusting plans (demand plans, supply plans, etc.), teams need shared tools to simulate various action alternatives, discuss and comment on them, and then select the right course of action together based on the collective risk tradeoff and analysis.
- Merge supply chain planning and execution: The final step in realizing this more collaborative and responsive transformation for recovery and long-term growth is to merge supply chain planning and execution. Consistent with earlier suggestions about shortening decision-making latency, this "close the loop" step ensures that necessary course corrections to deal with market volatility can be put into action quickly. Again, the focus here is on reducing or eliminating latency. Like many of the other suggestions, this too can have organizational implications that CortConnect management needs to consider.
With these fundamental building blocks in place, a new and compelling best-practice bar will be established for sales and operations planning (S&OP), supplier collaboration, order promising, inventory management, and many more key supply chain processes. Since it's virtually impossible to predict with high precision what the future may hold, CortConnect should instead be implementing best practices that ensure that it's well armed to deal with whatever that future may be.
John Sicard is executive vice president,
development and service operations, for Kinaxis
(www.kinaxis.com). John oversees the
design and development of all Kinaxis software as well as those teams
responsible for its implementation and support. Through a strong team of
industry experienced consultants, integrators, educators, and a first-rate
deployment methodology, John's team is able to implement RapidResponse™
in a matter of weeks. John can be reached at jsicard@kinaxis.com
Randy Littleson is vice president of marketing with Kinaxis
(www.kinaxis.com), the
provider of an on-demand service that empowers multi-enterprise manufacturers
with the integrated demand-supply planning, monitoring, and collaborative
response capabilities required in today's complex and dynamic world. Randy can
be reached at rlittleson@kinaxis.com