Shatsunck Safety makes fire suppression systems for a variety of commercial and industrial buildings around the world, designing, making, installing and servicing systems tailored to each environment (e.g., clean rooms, information technology centers, laboratories, communications hubs). Our complex products and specifications for them change frequently due to customer requirements, location codes and regulations, and builders and engineering firms (which may or may not be our direct customer).
As our business has grown — Shatsunck is 20 years old — the challenge for planning our business has grown. Steadily Shatsunck has moved beyond its original customer base into new markets and new geographies. And we have subsequently grown our supply base as well, frequently relying on outsourcing to expand our capabilities for new locations, especially overseas customers.
The lessons we learned two decades ago and the models we developed for planning of product development, supply chain coordination, financial management, and cash flow don’t necessarily transcend now across all our business and to our outsource providers. So invariably we under/overforecast inventories, frustrate suppliers and outsourcers, don’t read market signs fast enough and miss potential business, and increasingly scramble to make customers reasonably happy and retain their business. Simply, our planning is no longer working like it used to.
We want a new, better way to plan. Shatsunck wants to react more efficiently to signs from our various markets and distribution channels, provide clear signals back to our supply base and outsourcers so they and production can act on agree-to what-if scenarios, and, most importantly, satisfy customers — and in doing so sell and profit more than we ever had.
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
By Nirmal Hasan and Tim Burks
Shatsunck Safety, like many companies, faces challenges responding to the new rules of engagement in today’s globalized and outsourced economy. Companies are under relentless pressure to create and deliver products with the highest quality at the lowest cost — and at a faster pace than ever before. Strategies and processes that may have worked well in the past are no longer effective, and short-term fixes do not produce results.
Clearly, Shatsunck’s planning processes need to be redesigned. However, before embarking on a change program, Shatsunck should consider its entire supply chain, from one end to the other. Many companies in this situation change their planning processes without first ensuring that their end-to-end, supply chain operating models are clearly defined and aligned with their overall business strategies. These companies waste significant time and money implementing changes that bring little or no benefits. Meanwhile, they overlook larger issues with their operating models and fail to address misalignment between planning and execution.
A company’s supply chain operating model completely defines the architecture of its supply chain and operations at a high level. Key elements include:
- Sourcing strategy (number of suppliers, key partnerships, geographic spread, etc.),
- Manufacturing strategy (make vs. buy, push vs. pull, outsourced manufacturer partnerships, physical network of facilities, product flow through the supply chain, etc.),
- Inventory strategy (locations, safety stock policies, service levels, vendor-managed inventory, etc.),
- Distribution strategy (logistics for various markets, direct vs. indirect channels, postponement, etc.),
- Key performance measures (executive-level metrics and execution-focused metrics), and
- Organizational structure (with roles and responsibilities for functional groups and individual contributors).
To realize the benefits of a competitive supply chain, Shatsunck should first rationalize its current supply chain operating model and ensure its appropriateness. If it falls short, we would recommend that Shatsunck develop a new supply chain operating model that meets its current and future needs for the next five to seven years. This model will serve as the framework for identifying and implementing the right planning capabilities, processes, and systems.
Based on our clients’ experiences, the following considerations are essential when defining and deploying planning capabilities:
- Consensus demand planning: With diverse markets and customers — and complex products — no one organization or department can have complete knowledge of all demand drivers. That said, consensus demand planning provides an excellent vehicle to allow marketing, sales, and operations to share information and quickly develop a more accurate “one number” forecast. Further, collaborative forecasting and planning with key channel partners and customers/partners (i.e., engineering firms or builders) provides better visibility to demand. This, in turn, enables a faster response.
- Supply planning: Fostering collaborative relationships with suppliers and outsourced manufacturers reduces planning complexity and facilitates the rapid flow of information throughout the supply chain. Similarly, adopting a planning model that tracks only high-level metrics, such as the supply response from manufacturing facilities, keeps processes flexible enough to respond to changing demand and supply conditions. Incorporating “what-if” analysis capabilities into the processes and tools is critical to rapid decision making as well.
- Executive sales and operations planning: Having a sales and operations planning process provides greater visibility to executives, and ultimately better control over the entire business. A well-designed process allows sales, marketing, and operations to review and rationalize revenue, demand, and supply plans, and collaboratively make adjustments in a timely manner.
- IT solutions: Finding the right balance between business capability requirements and total cost of ownership is essential. Businesses that leverage existing investments such as ERP to enable foundational capabilities (those required to conduct day-to-day operations) and consider additional investments in new, best-of-breed solutions for strategic capabilities (those that enable competitive differentiation) get better results. Implementing a deployment roadmap that enables new planning capabilities every six to nine months ensures continued organizational support and successful adoption of processes and systems.
- Metrics: Defining metrics relevant to the ultimate goals of customer satisfaction and profitability is essential. Metrics must encourage the right organizational behavior and incorporate both accountability and corrective actions. Often it makes sense to begin manually tracking simpler versions of these metrics. Then, as new planning processes are adopted and automated, they can be made more comprehensive.
Shatsunck’s success over 20 years clearly speaks to the quality of its products and services. By adopting an end-to-end approach to its operations, Shatsunck can devise a better way to plan, which will allow it to grow its business and satisfy customers.
Nirmal Hasan and Tim Burks are principals at management consultancy PRTM (www.prtm.com), Nirmal has over 12 years of experience in operations strategy execution, supply chain management, and planning solutions implementation. His work spans a variety of industries including IDM and fabless semiconductors, consumer electronics, and electronic equipment. Nirmal can be reached at nhasan@prtm.com. Tim has 20 years of experience addressing supply chain management issues across a variety of industries including aerospace, computer hardware and software, security, semiconductor, and telecommunications. During this time, he has led numerous IT-enabled reengineering projects, often involving ERP, APS, and PLM systems. Tim can be reached at tburks@prtm.com.
By Trevor Miles
It used to be that to excel at manufacturing you had to be able to build a solid plan and then execute it well. Not surprisingly, the solutions mirrored this reality as supply chain planning and supply chain execution solutions arose to meet this need. Today, the emphasis has shifted, as Shatsunck Safety is experiencing. The incredible pace of change that Shatsunck and most companies face combined with increasingly complex supply chains has shifted. To succeed today, you not only have to be able to plan, but you must be able to monitor exceptions to that plan and develop rapid course corrections to respond to them in a profitable way.
Traditional supply chain planning solutions (commonly referred to as advanced planning systems or APS) are built around optimization models and techniques. Their goal is to take a set of assumptions and inputs and calculate the optimal plan mathematically. For years the supply chain profession has held the belief that optimization is the answer. Over the years it has become clear that optimization can provide direction but not the ultimate answer.
APS solutions model business reality through some level of abstraction and data aggregation instead of creating an exact representation. Without accurate representation of the business, it is not possible to generate an optimum. One may get close, but a small change in the assumptions or model can have a big effect on the results, especially at the detail level. Yet the level of information required to model the business accurately is massive. More importantly, it also changes constantly. Not only does the physical structure of the supply chain change — suppliers, parts, locations, customers — but the business rules and objectives change as well.
The solution is to provide “enough” detail in the model that an optimization engine can get into the region of the optimum and then enable all staff to evaluate the results in a collaborative manner in order to provide the human judgment and compromise necessary to adapt to the latest business conditions. This is a lot more efficient than trying to capture and modify constantly the business rules used to guide the optimization.
To take the paradigm of human judgment further, the speed of business has increased dramatically over the past two decades, when many of the APS solutions were designed and constructed. At that time it was sufficient to run an APS engine once a month or once a week. Coupled with the knowledge that the optimization does not provide an exact answer (nor is the forecast 100% accurate), this leads to the requirement for a system in which people can create scenarios in a rapid and effective manner in order to evaluate the organization’s response to reality. Human judgment and compromise is used to select the “best” option among the scenarios.
This need to tap human judgment is, at its heart, a recognition that there are an increasing number of decisions, high in both complexity and potential impact to the business, that need to be made quickly every day. This drives a need to collaborate rapidly with the right people across the supply network to define, evaluate, and select the right corrective action. Today your supply chain professionals require tools built for this need — tools that empower these ad hoc teams with supply chain visibility, scenario modeling, and objective-based scoring of various action alternatives to ensure that actions are aligned with Shatsunck’s corporate goals.
At the core of solving Shatsunck Safety planning needs is a need to understand the dynamics that exist today and to build processes, supported by the right tools, to do integrated demand-supply planning, proactive monitoring, and collaborative response to ensure profitable action in the face of unplanned events.
Trevor Miles is director of product marketing at Kinaxis (www.kinaxis.com), and is responsible for identifying market trends and translating these into high-level functional requirements for the company and opportunities for value capture by Kinaxis customers and prospects. Prior to joining Kinaxis, Trevor worked for i2 Technologies where he held a number of sales and marketing roles and worked with global industry leaders such as Continental, Volkswagen, Nokia, and Thomson. Previous to i2, Trevor worked for Coopers & Lybrand performing several studies in supply chain reengineering for companies such a Levi’s, Burmah Oil, TNT Logistics, AGA Gas, and Schneider Electric. Trevor can be reached a tmiles@kinaxis.com.
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