apics magazine january february 2015

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Service beyond expectations

Accelerated value stream mapping

Sponsoring S&OP success

Catching Leans Drift

The essential message of time-based competition

Catching Leans Drift

McCormick Place South | Chicago, IllinoisMarch 23-26, 2015 | ProMatShow.com

At ProMat, you can: Discover the latest innovations from more than 800 solution providers.

Learn about new ideas driving productivity in more than 100 educational sessions.

Build strong business partnerships with suppliers. Network with your peers.

When you need to maximize eciency targets, streamline your operations, speed time to market and cut costs, start by exploring whats next at ProMat 2015.

ATTENDANCE IS FREE. REGISTER AT PROMATSHOW.COM

See the latest manufacturing and supply chain solutions in action, in person. All in one place. ProMat.

FINDWHATSNEXT

Collocated with ProMat 2015

ProMat Keynotes

TRANSFORMING YOUR MANUFACTURING BUSINESS FOR THE NEW DIGITAL AGE Renee Niemi, Director of the Android and Chrome Global Business, Google for Work

CONSCIOUS CAPITALISM: BLUEPRINT FOR A NEW SYSTEM FOR DOING BUSINESS John Mackey, Co-Founder & CEO, Whole Foods Market

WHATS NEXT THE FUTURE OF TECHNOLOGY Steve Wozniak Co-Founder of Apple & Founder, Chairman & CEO of Wheels of Zeus

McCormick Place South | Chicago, IllinoisMarch 23-26, 2015 | ProMatShow.com

At ProMat, you can: Discover the latest innovations from more than 800 solution providers.

Learn about new ideas driving productivity in more than 100 educational sessions.

Build strong business partnerships with suppliers. Network with your peers.

When you need to maximize eciency targets, streamline your operations, speed time to market and cut costs, start by exploring whats next at ProMat 2015.

ATTENDANCE IS FREE. REGISTER AT PROMATSHOW.COM

See the latest manufacturing and supply chain solutions in action, in person. All in one place. ProMat.

FINDWHATSNEXT

Collocated with ProMat 2015

ProMat Keynotes

TRANSFORMING YOUR MANUFACTURING BUSINESS FOR THE NEW DIGITAL AGE Renee Niemi, Director of the Android and Chrome Global Business, Google for Work

CONSCIOUS CAPITALISM: BLUEPRINT FOR A NEW SYSTEM FOR DOING BUSINESS John Mackey, Co-Founder & CEO, Whole Foods Market

WHATS NEXT THE FUTURE OF TECHNOLOGY Steve Wozniak Co-Founder of Apple & Founder, Chairman & CEO of Wheels of Zeus

APICS honors GE Oil & Gas Turbomachinery Solutions Division and BASF for excellence in supply chain and operations management.

Corporate Awards of Excellence Winners

For more information about the APICS Corporate Awards of Excellence, visit apics.org/awards.

to the APICSCongratulations

Excellence in Education Award BASF

Excellence in Innovation Award GE Oil & Gas Turbomachinery Solutions Division

2 January/February 2015

FEATURES

APICS magazine (ISSN 1056-0017) is published bimonthly by APICS, 8430 West Bryn Mawr Ave., Suite 1000, Chicago, IL 60631-3439. Phone: (773) 867-1777. Canada Post International Publications Mail (Canadian Distribution) Sales Agreement No. 571423. Periodicals postage paid at Chicago, IL, and additional mailing offices. Subscriptions: $65 per year U.S., $77 Canada/Mexico, $93 elsewhere. Copyright 2015 by APICS. All rights reserved. Printed in the United States of America. POSTMASTER: Send address changes to: APICS, 8430 West Bryn Mawr Ave., Suite 1000, Chicago, IL 60631-3439.

January/February 2015, Volume 25, Number 1

Delivering DelightThe APICS Interview

Todays businesses are adopting ways to bake in loyalty.

Directing SuccessBy Eric J. Tinker

S&OP executive sponsors and their teams can benefit from these 10 cues.

30

44

40

36 Tiny Triumphs, Breakthrough ResultsBy Terence T. Burton Value stream mapping becomes a formula for improvement.

COVER STORY

Catching Leans Drift By Richard Schonberger

Messages about production effectiveness never get old.

apics.org/magazine 3

DEPARTMENTS

Companies now must successfully apply real-time information

across their global footprints.page 19

4 Editorial Staff and Board of Directors

6 From the CEO

7 From the Editor

8 2015 APICS Board of Directors

10 APICS Report

11 Corporate Spotlight

14 Membership Matters

15 Ask APICS

16 Industry Tools

18 Sales and Operations Planning

19 Building Blocks

20 Enterprise Insights

21 Executive View

22 Working Green

23 Lean Culture

24 Management Perspective

25 Relevant Research

28 Book Review

48 Lessons Learned

RESOURCES

35 Index

35 Product Showcase

page 23

page 22


EDITORIAL STAFF AND BOARD OF DIRECTORS

EDITORIALEditor in ChiefJennifer Proctor

Senior Manager of Publications Karen Huelsman

Managing EditorElizabeth Rennie

Staff EditorChristopher Jablonski

DESIGNBates Creative

ADVERTISINGTom Lasch [email protected] (440) 247-1060

EDITORIAL ADVISORY BOARDRichard E. Crandall, PhD, CFPIM, CIRM, CSCPAppalachian State University

Philip E. Quigley, CFPIM, PMPChapman UniversityCalifornia State University at Fullerton

Randall Schaefer, CPIMRandall Schaefer Consulting

Publication in APICS magazine does not constitute an endorsement of any product, service, or material referred to, nor does publication of an advertisement represent an endorsement by APICS or the magazine. All articles represent the viewpoints of the authors and are not necessarily those of the magazine or the publisher. Letters to the editor will be published at the discretion of the editor.

Canada Post International Publications Mail Product (Canadian Distribution) Sales Agreement No. 1220055

Subscriptions: APICS magazine is circulated to all members of APICS as part of their membership fee. For all others, the subscription rate is $65 annually ($77 in Canada and Mexico, $93 for other international or overseas delivery). To subscribe, call APICS customer service at (800) 444-2742 or (773) 867-1777.

Single copies within the US are $8, outside the US, $12 (payable in US currency). Contact APICS Customer Service, (800) 444-2742 or (773) 867-1777 to order.

Printed in the United States of America

APICS BOARD OF DIRECTORSChair of the BoardAlan G. Dunn, CPIM

Chair-ElectWilliam E. Bickert

Treasurer-SecretarySteven Georgevitch

DirectorsKeith ConnollySonia DaviaudErica Dickson, CPIM, CSCPBhaskar Majee, CSCPSteven Melnyk, PhDClark Ponthier, CPIMColin M. Seftel, CFPIM, CSCPPeter VandermindenGinny Youngblood, CSCP, CPIM

Board Member GuestLars Magnusson, 2015 APICS Supply Chain Council President

APICS CORPORATEChief Executive OfficerAbe Eshkenazi, CSCP, CPA, CAE

Magazine [email protected]/magazine

APICS8430 West Bryn Mawr AvenueSuite 1000Chicago, IL 60631-3439Phone: 1-800-444-2742 or +1-773-867-1777Fax: [email protected]

Advance your career with APICS certifications

APICS Certified Supply Chain ProfessionalCSCPThese credentials demonstrate to your peers, employers, and clients that you are a dedicated supply chain professional.

Learn more at: apics.org/careers-education-professional-development/certification.

APICS Certified in Production and Inventory Management

CPIM

Advance your career with APICS certifications

APICS Certified Supply Chain ProfessionalCSCPThese credentials demonstrate to your peers, employers, and clients that you are a dedicated supply chain professional.

Learn more at: apics.org/careers-education-professional-development/certification.

APICS Certified in Production and Inventory Management

CPIM


FROM THE CEO

Inspiring Organizationsand Their People

Abe Eshkenazi, CSCP, CPA, CAEChief Executive Officer

W ith January and the dawn of a new year upon us, its a good opportunity to pause, reflect, and look forward to whats ahead. Here at APICS, 2014 was a year of changes. Most prominently, APICS merged with the Supply Chain Council (SCC) to form the APICS Supply Chain Council, the edu-cational and research arm of APICS. A lot of work has gone into the integration, and we continue to collaborate with the APICS and APICS SCC boards of directors, as well as staff on both sides, to foster supply chain excellence in professionals, students, and the organizations they serve.

To that end, I would like to take some time to highlight the many ways that APICS serves the supply chain and operations management communities. APICS connects you to a global community of supply chain and operations management professionals via conferences, seminars, professional development meetings, and online groups that provide ample networking and thought leadership opportunities. Further, if youre a student, you can take advantage of free student membership and access a wealth of student resources and activities. Students have unrivaled access to career path information and advice through webinars, white papers, and mentorships.

Key to boosting individual professional development are our industry-leading certifications, specifically the APICS Certified in Production and Inventory Management (CPIM) and Certified Supply Chain Professional (CSCP) programs. Earning your CPIM or CSCP designation is one of the most important steps you can take in your career as a supply chain and operations management professionalAPICS research demonstrates that certified individu-als earn 1421 percent more than their non-certified counterparts.

Finally, our publicationsincluding the APICS magazine you have in your hands or on your computerdeliver timely and relevant

industry-related information news to keep you up-to-date. The APICS Dictionary has set the standard for industry terminology for more than 50 years and remains an invaluable resource for professionals in the field. And the APICS research department constantly works to keep you at the fore-front of current industry knowledge.

The one and the manyConsider also how APICS advances organi-zations. The merger between APICS and the SCC represents a way to increase our value to corporations and expand our role from the professional and managerial spheres all the way to the C-suite. For companies looking to enhance their value proposition, APICS and the APICS SCC together deliver supply chain design and implementation, workforce development, and ongoing pro-fessional development for staff.

On the professional development side, the Supply Chain Operations Reference (SCOR) model is a process reference framework and diagnostic tool that has emerged as the cross-industry standard. Consider a recent case study at Ingersoll Rand of an implementation of SCOR and APICS principles. The initiative brought a common language to Ingersoll Rand work-ers; developed talent through education and certification with more than 200 engaged employees; and resulted in a delivery improvement of 86 percent, a 10 percent gain in inventory turns, a $125 million boost to cash assets from the higher turns, and an overall cost savings of $5.5 million over three years.

This success story is just one of many now occurring at organizations around the world. We are excited about many oppor-tunities on the horizon for APICS and the APICS SCC to transform organizations and professionals alike. To stay abreast of the latest developments, continue to read the pages of APICS magazine and our website at apics.org.


FROM THE EDITORFROM THE EDITOR

Jennifer ProctorEditor in Chief

My family and I just got back from an epic trip to Disney World. (Arent all Disney experiences epic, at least for the wallet?) Three of the parks, in four days, with two adults, and children ages 10 and 2.

We spun in tea cups, drove rocket ships, and screamed our way through Space Mountainand that was just the first day. While the Magic Kingdom is magical, the Animal Kingdom transported us to other continents. On a safari, we saw giraffes, lions, an anteater, Ankole longhorn cattle, and more. Lastly, in Hollywood Studios, we saw a truly exhilarating stunt show, complete with explosions; blasted to another galaxy on a Star Wars Star Tour; and visited with Goofy.

Pictures are good, memories are betterFor the most part, the weather was lovely. However, on our last day, the skies opened up, and the rain poured down. No need for Splash Mountain because Mother Nature drenched us on her own. We had planned for this contingency, and all of us had rain gear. Well, all of us except my toddler. He needed something fast. His sun hat wasnt keeping any part of him dry. I saw swarms of peoplemen, women, and childrenin Disney rain ponchos. I had to find one.

I turned to a nearby kiosk, and the salesperson offered me the child size. How much? $8. What could I do? To continue our magical day, I had to fork over the eight bucks for a square piece of plastic smaller than a shower curtain and not quite as sturdy. Clearly, I wasnt the only one caught unprepared because I saw entire families wearing the ponchos. Thats $8 times four, five, even six. But, true to its reputa-tion, Disney was ready with an ample supply of plastic squares.

By the time we got to the parking lot, the rain felt like a mon-soon. It didnt matter that we had rain coats, umbrellas, or an $8 poncho. We were soaked. Even the staff (called cast members in

Experiences Beyond Expectations

Disney speak) were wet and joking about the rain. But, heres the thing: They were still helpful. They were still courteous. And they were still working hard to keep the customer experience as pleasant as possible. Instead of ruining our vacation, the rainy day just added to our adventure.

Good for businessOf course, its not just good luck that made our trip to Disney World enjoyable. The company has a world-famous custom-er-centric philosophy. But, amusement parks arent the only businesses that can adopt this guiding principle. In Delivering Delight, APICS magazine Managing Editor Elizabeth Rennie talks to Robert G. Thompson, an author and customer rela-tionship expert. Thompson advises busi-nesses to go beyond the idea of providing the promised service or product. Instead, great businesses provide more than what is expected. In my research, I found that constantly innovating to improve solutions is one of the top characteristics of top-per-forming firms, Thompson says.

Further, Thompsons research points to experiences as the best way to amaze customers. He says that net promoter scores, customer satisfaction scores, and new customer effort scores can all be used effectively, but the real measure of a com-pany is how it reacts to customer feedback.

Its time for companies to put custom-ers first. How can you make that happen?


William E. BickertNAVSUP Global LogisticsChair-Elect

APICS is pleased to present the 2015 APICS Board of Directors. These dedicated volunteers bring diverse points of view to the leadership body and their varied perspectives will drive the strategic direction of APICS in the coming year.

APICS Introduces the 2015 Board of Directors

Steven GeorgevitchBoeingTreasurer-Secretary

Alan G. Dunn, CPIMGDI Consulting and Training Company Chair


2015 APICS Board of Directors

Keith Connolly AT&T

2015 APICS Supply Chain Council Board of DirectorsThe APICS Supply Chain Council is dedicated to advancing supply chains through research, benchmarking and publications.

Clark Ponthier, CPIMIngersoll Rand

Erica Dickson, CPIM, CSCPIntel

Bhaskar Majee, CSCPGeneral Electric Company

Steven Melnyk, PhDMichigan State University

Peter VandermindenMicrosoft Corporation

Colin M. Seftel, CFPIM, CSCPPSQ

Ginny Youngblood, PhD, CPIM, CSCP, SCOR-PDuPont

Sonia Daviaud Decision Value

Lars MagnussonPresident

Shari Ruelas, CPIM, CSCPVice President

Michael Wasson, CSCPSecretary-Treasurer

William BickertEx-Officio

Douglas Kent, SCOR-P Guest board member

Barbara Flynn

Katie Fowler

Antonio Galvao, CSCP

William Rocky Newman, PhD, SCOR-S

Marco Ugarte, PhD, CPIM, CSCP

Ray Ernenwein


APICS REPORT

Start Off 2015 with New Skills

Let 2015 be the year that you meet your career goals. Plan your professional development now to take advantage of all that APICS has to offer. Earn an APICS certification or certificate, attend an APICS conference, or take a professional development course to stay current on the latest topics and trends in supply chain and operations management.

APICS CSCPthe world-recognized supply chain certification. Did you know that APICS Certified Supply Chain Professional (CSCP) designees earn 21 percent more on average than their professional counterparts? Learn more at apics.org/cscp.

APICS CPIMthe industry standard for more than 40 years. The APICS Certified in Production and Inventory Management (CPIM) program enables you to advance production and inventory activities within your companys global operations. Learn more and try the free CPIM demo at apics.org/cpim.

Register for certification preparation courses. APICS offers member discounts on exams and materials. To learn more, visit apics.org/courses; to find a course near you, visit apics.org/finder.

APICS Risk Management Education CertificateExpand your supply chain risk management expertise by earning the APICS Risk Management Education Certificate. This credential demonstrates your commitment to protecting your employer from supply chain risk and your ability to balance rewards and risks in the decision-making process. Learn more at apics.org/risk.

APICS S&OP Education CertificatePrepare yourself to collaboratively participate in the sales and operations planning (S&OP) process. By earning this certificate, you demonstrate your commitment to and understanding of the principles and functions of S&OP. Learn more at apics.org/sop.

Easier registration for APICS exams in North America APICS has simplified the North American exam registration process. Candidates are no longer required to create an account on the Pearson Vue website to schedule, cancel, or reschedule testing appointments. Upon purchasing an Authorization to Test, candidates will be redirected to the Pearson Vue scheduling page. People who do not schedule immediately or who later wish to make changes to their previously scheduled appointments can do so by logging into their APICS accounts and clicking the link to the Pearson Vue scheduling page located on the My APICS

Certifications tab. The certification team plans to initiate a similar, single-sign-on project with Prometric, the test provider outside of North America, later this year.

APICS 2015 global conferencesAttend an APICS conference to learn and participate in world-class education, best practices, and thought leadership. In addi-tion to unmatched learning opportunities, attendees earn professional development points toward maintenance of APICS certi-fications. Learn more about conferences at apics.org/events.

APICS 2015 So PauloMarch 1213, So Paulo, Brazil

APICS 2015 ShanghaiApril 1617, Shanghai, China

Best of the Best S&OP Conference 2015June 1819, Chicago, Illinois

APICS 2015October 57, Las Vegas, Nevada

APICS 2015 seminarsAPICS will offer a series of one-day sem-inars in 2015 to bring the APICS body of knowledge to businesses worldwide. Find a seminar near you at apics.org/events.

Principles of S&OP So PauloMarch 11, So Paulo, Brazil

Principles of S&OP ShanghaiApril 15, Shanghai, China

2015 SCOR training Supply Chain Operations Reference (SCOR) training is designed to help companies implement the SCOR model. To learn more and find out where education is offered, visit apics.org/events. APICS mem-bers are eligible for a 50 percent discount by entering the promo code: APICSMBR.


Elizabeth Rennie CORPORATE SPOTLIGHT

B ASF is a global chemical company with more than 112,000 employees serving customers and partners in nearly every country in the world. Offerings include plastics, performance products, crop protection solutions, oil and gas, and more. Through science and innovation, BASFs objective is to enable its customers to meet societys current and future needs. This is realized by balancing economic success, social responsibility, and environmental protection.

Recently, many of the companys key goals have been supported by APICS educationculminating in BASFs selection as the 2014 APICS Corporate Award of Excellence in Education winner. APICS is the foundation of the overall supply chain learning solutions program, says Alan Milliken, CFPIM, CSCP, global APICS coordinator for the BASF Group. We used APICS education to prepare BASF employees worldwide who work in supply chain management in order to ensure that best practices are implemented throughout the organization, to share knowledge, and to create a sustainable competitive advantage.

The voyageBASF has been an APICS corporate partner in North America since the late 1980s. In the fourth quarter of 2011, the company began implementing APICS offerings globally. Since then, BASF has invested substantially in APICS education: specifically, about 100 in-house APICS classes with 1,500 students participating who represent 25

countries. The company sponsors APICS memberships, seminars, certification review classes, chapter meetings, and exams.

More than 400 BASF employees from all supply chain-related functions have participated in the Basics of Supply Chain Management course since the global pro-gram began. This includes employees from finance, purchasing, customer service, infor-mation technology, and manufacturing.

The principles, tools, and techniques are recognized best practices, and the course ensures a common understanding of termi-nology and basic processes, Milliken says. But knowledge and understanding in your assigned area are not enough; APICS edu-cation helps people prepare to consider the bigger picture and collaborate with other functions to achieve the best overall results.

For example, he says employees under-stand the need to balance service, costs, and inventory objectives across functions. Both cross-functional teamwork and commu-nication have improved as a result of the global education program.

BASF also stresses application of the APICS body of knowledge on the job. For instance, the company uses real-life SAP screen prints to teach students what a schedule looks like in the software program, how planning factors are stored and used by the tool, and so on. Additionally, guest lecturers from the supply chain commu-nity augment learning by demonstrating to students the SAP-enabled process while relating it to the APICS body of knowledge.

Proven professional successFor employees holding key roles in supply chain managementprocess experts, educa-tors, and plannersBASF recommends the APICS Certified in Production and Inventory Management (CPIM) designation. Education is delivered by 13 internal APICS instructors in cooperation with APICS affiliates and supported by four regional coordinators and four country coordinators. Most instructors exceed our minimum requirements, and all have taken the APICS Train the Trainer course, Milliken says.

There are two key performance indicators used to measure success and take action: certification exam performance and

Excellence in Organization-Wide EducationBASF applies APICS tools and teaching for winning results

Chemical technicians carry out an inspection at a BASF hydrogen plant.


certifications achieved. Since the global effort began, approximately 70 people have achieved their CPIM designations, and another 200 are working toward the goal. In all, BASF employees have passed more than 650 APICS certification exams. APICS certification is a key consideration when reviewing potential job candidates for supply chain roles, Milliken says.

Likewise, the APICS Certified Supply Chain Professional (CSCP) designation is encouraged for both managers in functions related to supply chain and those who already have earned a CPIM desig-nation. CSCPs focus on the global enterprise and the extended supply chain make it an excellent fit for BASF Group, Milliken says, adding that more than 140 employees have participated in the global classes, of which 35 chose to seek certification. Furthermore, he notes that approximately 80 percent of those participating in the CSCP program are in leadership positions and use the knowledge and skills gained to improve supply chain performance at BASF.

By achieving certification, an employee demonstrates his or her commitment to lifelong learning and building the best team in supply chain management Milliken says. Certification assures that the employee understands integrated supply chain management and is prepared to contribute to improvements.

Challenges and lessons learnedMilliken notes that, by design, APICS education addresses a large vari-ety of business environments and manufacturing strategies. Meanwhile, many of BASFs participants are focused on one specific segment of industry. This presents a challenge, as employees must understand which tools and techniques to apply to their particular environment,

he says. Misapplication of supply chain knowledge can lead to loss of confidence in operations and less support for the education.

BASF was able to minimize the impact of this issue by highlighting the principles, tools, and techniques that are most applicable to the chemical industry while emphasizing the benefits of the broader body of knowledge.

Another limiting factor with any body of knowledge is ease of accessibility. To address this challenge, BASF has developed a supply chain Book of Knowledge, which includes many of the principles, tools, and techniques taught by APICS. The book is available on the company intranets Supply Chain Academy. Sales and operations planning (S&OP), demand planning, production scheduling, material requirements planning (MRP), and other core supply chain processes are included. In addition, the BASF knowledge database contains hyperlinks to relevant APICS websites. BASF took action to ensure that the APICS body of knowledge is readily available for inte-gration into our daily operations, Milliken says.

Superior outcomesBASF is focused on both improved perfor-mance and increased integration of supply chain planning and execution processes. Significant investments have been made in both process improvements and advanced software for demand forecasting, S&OP, production scheduling, and MRPand the APICS education program has been essential. For example, Milliken says plant schedulers who have earned their CPIM and are mature in their knowledge of integrated supply chain management have more quickly and effectively implemented improved practices enabled by advanced software.

APICS education also helped BASF share knowledge and expertise during the companys recent acquisition of three busi-nesses. APICS tools were used to prepare employees for supply chain management at BASF using SAP. Specifically, the Basics of Supply Chain Management course was a mandatory part of orientation and early training, and new employees in key supply chain roles were directed to seek their CPIM designations. These endeavors resulted in more efficient and effective mergers and continued high service levels.

BASFs People Find Meaningful Benefits The benefit of the APICS body of knowledge is that I now better understand our business objectives, and I advise key stakeholders regarding what is the best level of inventory for our organization. Suyoung Kwon, CPIM, production and inventory planner

APICS education ensures our employees know the latest terms and concepts in supply chain management and how to apply better practices to improve our supply chain performance. My business units have benefited from participating in the APICS education and certification programs. Dirk Hopmann, vice president global supply chain strategy

At the APICS Strategic Management of Resources workshop, I learned about meaningful vendor-supplier relationships through multiple points of contact and close collaboration. Through this, I was able to integrate our distributor into the customer service team operations. We enabled the distributor to access and manage information by including them in relevant email distribution lists and granting them access to SAP and documentation libraries. Helena Prinz, CPIM, regional demand management

APICS provides all residents of the global BASF village with the same language. This has narrowed the distance between members of the supply chain community. I am much more comfortable when I discuss supply chain with colleagues because we are now all using the same language from the APICS body of knowledge. Helena Lim, CPIM, CSCP, supply chain operational design

CORPORATE SPOTLIGHT


Lastly, APICS education was successfully used to prepare for the implementation of SAPs advanced planning and scheduling tool and to enhance use of the technology after implementation. This system was selected for key processes such as demand planning, S&OP, and production scheduling. APICS education enabled BASF employees

BASF employees produce components for the automotive and construction industry.

to understand the relevant tools, techniques, and definitions and how to apply them in their particular business environments.

Milliken adds that APICS tools helped employees understand how to select resources and configure capacity planning in a given production scenario, know the difference between an aggregate production plan and a detailed production schedule, and many other key questions. He adds that the migration to the new technology was accomplished without any major business disruptions or customer service failures.

The harmonization of supply chain terminology and definitions globally is a very important APICS benefit, Milliken says. In order to standardize processes and work cross-functionally and cross-regionally to improve supply chain management, you need one glossary and dictionary. APICS education is a key enabler of BASFs sus-tainable supply chain improvement.

Elizabeth Rennie is managing editor for

APICS magazine. She may be contacted at [email protected].

Elizabeth Rennie

THE MORE THINGS CHANGE, THE MORE YOU SUCCEED.

WITH AGILE ERP.Today, only companies that can adapt to rapid changes in the business environment will succeed. Whether you are managing uctuations in your supply chain, handling new customer demands or reducing time to market, you need ERP with the agility to keep pace. One that will recon gure and adapt to new products, services and business processes. So your business can be as agile as your thinking.

IFS FOR AGILE BUSINESS www.youragilesuccess.com


Elizabeth Rennie is managing editor for APICS magazine. She may be contacted at [email protected].

We encourage you to share your APICS stories. Visit apics.org/membershipmatters.

Extraordinary Supply Chain PartnersAPICS education inspires beneficial relationships

B rett Horacek, CPIM, CSCP, is the supply chain management supervisor for Hospira, a global manufacturer of injectable pharmaceuticals and infusion technologies. He first was hired about 14 years ago as senior manufacturing supervisor. Later, he took a role focused on advancing supply chain processes. He says he managed change by supporting continued growth of a startup facility to meet new product development and commercial manu-facturing demands. This included direct responsibility for supplier relationship management, logistics, warehousing, inventory control, order fulfillment, returns, and imports and exportsas well as serv-ing self-directed team functions for planning and metric creation and reporting.

The timing of my joining APICS coincided with my role changeover to supply chain manager within the company, he says. I wanted to attend some of the classes being offered within the [APICS Certified in Production and Inventory Management] CPIM module. I also knew APICS membership would help to serve as a networking tool for me in my new role.

Supplier development As a supply chain manager at Hospira, Horacek sometimes must extend partnerships with vendors beyond the ordinary. He says a very important application of his APICS knowledge is evidenced in one such strategy that he developed with a precious metals recovery service.

The APICS [Certified Supply Chain Professional] (CSCP) program teaches us that, in order to achieve certain levels of business success, both vendor and customer must open up and be honest about exactly what needs to be done for each to come out ahead, Horacek says, adding that his CSCP education was essential

to creating an extraordinary relationship with this recovery supplier.

Some of the drugs Hospira makes are derived from raw materials that contain precious metals, such as palladium and plat-inum. Inherent in the production process is the generation of side streams that are not part of the end drug product. Recognizing the waste in this system, Horacek devised a plan to recoup the precious metals by collecting the streams that were deemed valuable and sending them out for recovery.

The very economic viability to make these certain drugs depends on the ability to recover the precious metals from these side streams. Otherwise, it would be difficult to remain competitive in the market due to a higher [cost of goods sold], he says.

Horacek applied his APICS knowledge to assess several suppliers on the recovery yields they could deliver. He eventually identified one provider that offered not only high recovery yields for Hospiras precious metal streams, but also excellent customer service. He says the relationship between his company and the recovery vendor soon became a true strategic partnership.

They have made many special conces-sionsfrom how quickly they process our material to even flying to a site to partner with us and creating a fault analysis within our processes to help us recover additional precious metals we had previously over-looked, Horacek says. It is a win-win partnership that remains intact to this day.

Horacek also finds value in the CPIM program education. Early on in my role in supply chain management, I [applied] my knowledge from the CPIM program to create capacity planning models to help me understand where our rate-limiting process steps were, he says. This also helped me develop more robust and predictable pro-duction schedules.

He adds that obtaining his certifica-tions has greatly broadened his supply chain management understanding and his capacity to function on both the tactical and strategic levels. I have benefited from taking the certification classes, Horacek says. The information and insight provided by APICS instructors is truly invaluable in todays complex, global realm of business.

MEMBERSHIP MATTERS

In order to achieve certain levels of business success, both vendor and customer must open up and be honest about exactly what needs to be done for each to come out ahead.

Elizabeth Rennie

Brett Horacek, CPIM, CSCP Supply Chain Management SupervisorHospira


Jonathan Thatcher, CSCP, CAE, is director of research for APICS. He may be contacted

at [email protected].

Send APICS your supply chain or operations

management questions at [email protected].

Complications and ComplexitiesEvaluating the intricacy and opportunity in supplier relationships

Reader S.J. writes, Our supply chain objectives include building stronger partnerships with vendors. We already have good working relationships with these companies, and we have set aside time for ongoing supplier management. Realistically, though, what benefits can we expect if we put even more effort into such objectives?

L et me answer your question by discussing the fairly new field of supply chain complexity theory. Complexity theory assists the study of human and organic systems in areas such as traffic and crowd management; organizational behavior; economics; computing; and, more recently, supply chain management.

From the perspective of complexity theory, a supply chain is a system of relationships that are both complicated and complex. Complicated systems are made up of components that have fixed associations. Imagine a jet engine or a mechanical wristwatch: No matter how many pieces they have, no element can change its dependency on, or correlation behavior with, any other. These things are immovable. Therefore, when in good working order, the systems function precisely as we expect them to.

Complex systems are different. They contain components that can change their dependency or relationship behavior with other parts. Anything comprised of people is therefore, by definition, complex.

Now, a supply chain is made of assetssuch as factories, ware-houses, and portsand people. And because of this, the supply chain itself has the potential for producing unexpected outcomes or behaviors.

Assets and advantageSuppose you believe you have a good relationship with a supplier because you are its biggest client. What happens if that supplier gains an even larger customer? This may change the way decisions are made about your business. Supplier dependency can alter long-term risk management, joint investments, or future capital spending. In the short-term, the intensity of relationship manage-ment or information sharing also may require modification. In time, these issues can lead to unexpected supply chain behaviors, such as rising inventory, reduced synchronization, or a greater risk of bullwhips.

However, its important to note that unexpected supply chain behaviors are not always bad. When partner relationships are strong, faster performance, falling costs, and greater information sharing can be both surprising and highly beneficial. Over time, this becomes another valuable assetgoodwill. Goodwill is difficult to measure, but very valuable.

The worth of goodwill becomes clear when partners maintain the state of a bene-ficial relationship even in the face of errors or problems. Akin to being able to with-draw cash for an expense, goodwill serves as an asset to keep relationships steady in difficult times. Goodwill justifies defending a positive relationship in the belief that dif-ficulties will be temporary and that a return to former times is better than diluting the association in the face of difficulties.

Best of all, when plenty of goodwill exists, a company develops a positive reputation, which attracts new partners. The result is a supply chain whose partners share similar values, strategies, cultures, and service levels. This, in turn, becomes competitive advantage.

Important considerationsEstablishing long-term partnerships with the best suppliers could mean deliberately making decisions and undertaking joint activities that build trust and confidenceand, over time, goodwill. However, there is a risk. Such a supply chain may be overly comfortable and predictable. Taken too far, it becomes insular and unresponsive to outside conditions.

Trust and confidence flow along a supply chain, just like products and information. Each time we extend our faith, relationship behaviors and dependencies change and, likely, improve.

My answer just scratches the surface of supply chain complexity theory. Please let me know if this is a topic of interest to you, and I will share more details. In addition, a number of organizations study complexity theory that you may like to review, includ-ing the Santa Fe Institute (www.santafe.edu/network) and the LSE Complexity Group (www.lse.ac.uk/researchandexpertise/units/complexity). Good luck in your endeavor.

ASK APICS

Trust and confidence flow along a supply chain, just like products and information.

Jonathan Thatcher, CSCP, CAE


INDUSTRY TOOLS

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AutomationATI Industrial Automation unveils the Wireless F/T, a small transmitter that streams data simultaneously from up to six transducers. The handheld device streams wirelessly to the users host device for data collection, real-time motion control, and user-defined signal processing. The product comes in two configurationsone that supports up to six transducers, and one that supports up to three transducers. Its range in an office environment is 98 feet, with a maximum range of 328 feet in an unob-structed environment. Battery life is approx-imately one hour at maximum capacity. Power options include a removable battery that can be charged internally or externally with a micro USB connector. [ 1 ]

Dematic introduces RapidStore ML, a mini-load automated storage and retrieval system for handling totes and cartons. It is a high-density, compact-load staging and sequencing solution for reserve storage, goods-to-person order fulfillment, auto-matic pick-face replenishment, palletizing, and order consolidation applications. The system has kitting, work-in-process buffers, and materials storage applica-tions. The all-aluminum, lightweight mast construction combined with advanced horizontal-vertical belt drives or optional wheel drive enables high acceleration and deceleration and high-velocity transport speeds. The solution is equipped with a telescopic extractor or table load-handling device that stores single, double, or triple deep in a rack structure. [ 2 ]

EnterpriseIFS has made available IFS-in-a-Box, a hardware-based enterprise resources planning solution combined with Oracles database, middleware, and hardware technologies. The solution is optimized, pre-configured, pre-installed, and ready to run. Customers can implement the system into their existing server racks and configure setup using one of the supplied templates. The solution is pre-configured for companies wanting to scale up capacity and for users of IFS applications. The product also caters to organizations creating high-availability

technology environments and offers a way to set up fail-over environments. [ 3 ]

Rockwell Automation launches the Rockwell Software PharmaSuite 6.0 manufacturing execution system to help streamline crucial activities into production and packaging processes. The building-block library in PharmaSuites recipe designer enables pro-grammers to reuse and maintain modeled inter-process communication checks across multiple recipes. Escalation management utilities help monitor, control, and log the timely execution of production checks through an escalating series of documented alerts. The software also incorporates new workflow integration capabilities, enabling executed work-flow information to be appended and tracked as part of the elec-tronic batch record. [ 4 ]

LogisticsKewill has acquired IBMs Sterling Transportation Management System (TMS), a software as-a-solution-based multimodal software product. IBM Sterling TMS will be rebranded as Kewill Transport and will become part of the Kewill MOVE transportation management platform. The acquisition will extend Kewills transporta-tion management capabilities. IBMs team will add valuable domain and industry knowledge and further strengthen Kewills global multimodal domain expertise.

LLamasoft is partnering with CLX Logistics to offer European truckload, global ocean, and global parcel data to customers for use in strategic supply chain design. CLX Logistics has provided dedi-cated transportation benchmark services for more than 10 years. The benchmark-ing service will be available to LLamasoft customers through a referral agreement. The partnership will provide LLamasoft customers with an additional resource from which to draw global reference data for use in supply chain modeling.

Process controlZontec has released Synergy 2000 version 10.0, a statistical process control software suite. Features include added security,


Send media releases to [email protected]. High-resolution, color photographs are encouraged.

Featuring the latest products, services, and announcements from supply chain and operations management companies

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the ability to validate samples using an electronic signature or user name, a screen display option that enables users to view the most recent samples of all data tables in the active data bank, a multi-axis overlay chart, and more. The latest version adds a modified auto note feature, identification values in automatic email notifications, enhanced graphics, prompt spec warnings, and more.

Radio frequency identificationSMARTRAC has released the On Metal Tag, a thin ultra-high frequency identification tag for metallic objects and surfaces, as well as non-metal objects with adherence challenges. The printable tags are compat-ible with standard radio frequency identi-fication (RFID) printers and have a range of up to 3.5 meters. The tags thin, soft, flexible structure is suitable for curved and flat surfaces alike, including industrial steel pallets, automotive parts, and water and paint pails. [ 5 ]

RetailEversight and Periscope are partnering to deliver Offer Innovation, a set of software and service solutions that enable retailers and consumer goods manufacturers to advance in-store promotions. Via the solu-tion, the most effective offers and incentives can be discovered through micro-testing with real shoppers. Periscope, a McKinsey Solutions subsidiary, will become Eversights sole preferred support services partner; meanwhile, Eversight will become Periscopes sole preferred promotion offer innovation partner.

Shop floorACS Motion Control is offering the SPiiPlusEC, a motion controller and EtherCAT network controller. The device features a powerful processor and two ports that support ring topology. The high-performance controller and network manager delivers multi-axis and scalable distributed control for motion-centric applications that require higher-profile generation, fast EtherCAT cycle rates, and network redundancy to enhance reliability and machine uptime. The system controls

up to 64 synchronized axes and up to a 5 kilohertz rate of profile generation and EtherCAT cycle. [ 6 ]

Altium Limited releases Altium Designer 15, a professional printed circuit board and electronic system level design software utility. The suite includes enhancements for designing high-speed printed circuit boards with support for fabrication output stan-dards. A pin pairs feature enables accurate length and phase tuning across termination components and length, phase, and delay tuning traversing an entire signal path.

Stafford Manufacturing has made available a line of weather-resistant shaft collars for outdoor use, including truck racks, structural components for communications, utility equipment, and solar arrays. The shaft collars feature a wide range of one- and two-piece hinged and flange-mount designs made from plastic, aluminum, and paintable and stainless steel. The collars are suitable for holding, locating, stopping, and mounting objects outdoors. They can be modified with mounting holes, knurls, and other secondary options to meet original equipment manufacturing design specifications. [ 7 ]

WarehousingCombi Packaging Systems is offering the TBS 100 H case sealer. The product securely seals both the top and bottom of regular slotted and half-slotted cases with adhesive tape. It is available as both a semi-automatic or fully automatic case sealer using 3M Accuglide tape heads. The sealer features a heavy-duty tubular steel frame and offers increased security and protection for cases. [ 8 ]


Whats Your Problem?Solve it with S&OP to create a powerful process

SALES & OPERATIONS PLANNING Peter Murray, CIRM

Peter Murray, CIRM, is a consultant and practitioner for sales and operations planning, demand planning, and supply chain manage-ment. He also served on the APICS board of directors for two years, helped develop the APICS Certified Supply Chain Professional program, and is an active volunteer with the APICS Supply Chain Council and the Institute of Business Forecasting.

To comment on this article, send a message to [email protected].

Editors note: APICS magazine welcomes Peter Murray, CIRM, as a guest author for the Sales and Operations Planning (S&OP) department.

A ll too often, S&OP processes falter and stall, resulting in a loss of stakeholder engagement. Some profession-als respond to such situations with new efforts to do S&OP again or differently with new people, a new model, outside help, or even the same people just in different roles. But keeping S&OP worthwhile comes down to stakeholders seeing S&OP and its related processes as the main collaborative initiative to solve problems. Its therefore essential to frequently step back and ask the team, Are we solving problems with S&OP? If the answer is yes, then the next step is to build capability and performance; if no, its time to figure out why and turn that no into a yes.

There are so many reasons S&OP fails to solve problems: inability to agree; reliance on other, more established tools for strategy, prod-uct, supply planning, and finance; failing to support decisions; stake-holders changing job roles; and many more. Behind all these causes is the reality that S&OP is not seen as the place to solve problems. After all, if another initiative became more important or took attention away, its because people saw that as the better solution.

Properly positioning S&OP as a sustainable, problem-solving method that continuously heightens efficiency begins with deter-mining the following. First, figure out what problems will be solved. Likely answers include: the timely approval of supply and demand plans, the identification of risk and opportunity, synchronizing financial and operating plans, agreeing on business drivers, achiev-ing a commitment to communicate on the execution of one set of plans, and the like.

Next, identify if there are any steps, formal or informal, where problems are addressed outside the S&OP process. During the course of the month, if an issue arises within the scope of S&OP, does the team use S&OP to address it? Are new processes or technologies being discussed or promoted that actually fit within the S&OP space? The answers to these questions should reveal

Participants should walk out of the meetings feeling that their time was well spent.

that team members clearly understand that the S&OP process is the correct place to solve problems.

Third, determine if S&OP meetings include open discussions where people set aside role and function in order to get things done. Participants should walk out of the meetings feeling that their time was well spent.

Strategies and solutionsMaking S&OP a successful problem-solving tool can be done. Begin by coming up with or updating the core principals of the process. There are many great references in the APICS body of knowledge, the basic takeaways of which include the following: S&OP is owned and directed by the senior

leaders of product, demand, supply, and finance, as well as the executive leadership.

S&OP is a business planning and execution process.

The reasons why numbers are presented is as important as the numbers themselves.

S&OP is a decision-making process. Perfection is not required, only a focus

on improving. S&OP is the only tool for approving the

final set of plans to run the business.Also, look at the flow of the meetings, and

ask the following questions: Is there adequate decision support via key

performance indicators to flag issues? Is there an agreed-upon approach to deci-

sions, including supporting analysis? Do people participate actively? Do facilitators frame key issues and deci-

sions, or just leave them on a page to be read?

Do facilitators brief functional leaders prior to the executive S&OP meeting?

Are decisions from previous meetings tracked?

Is there a feedback process involving all participants that assesses the value of each S&OP step as it occurs?This evaluation will reveal key areas for

improvement and help reinforce the focus on problem solving. Ultimately, it will be pos-sible to create a successful plan for making S&OP efficient and effective.


Reshaping an IndustryTectonic shifts in supply chain and operations management

BUILDING BLOCKSJohn P. Collins, CFPIM, CSCP, and Eric P. Jack, PhD, CFPIM, CSCP

John P. Collins, CFPIM, CSCP, is president of

Sustainable Solutions. He may be contacted at

[email protected].

Eric P. Jack, PhD, CFPIM, CSCP, is dean of the

School of Business at the University of

Alabama-Birmingham. He may be contacted at

[email protected].


A re we supply chain and operations management profes-sionals experiencing a tectonic shift in how we execute our responsibilities? Will our approach to tackling challenges soon become obsolete?

Technological advances are having a huge effect on a variety of industry roles; specifically, inventory, production, project, and supply chain management. For example, project management has evolved from the days of hand-drawn Gantt charts to todays optimized software. In addition, new solutionsincluding online collaboration tools and distributed teamsnow make it easier for project managers to connect customers and employees from around the globe. Likewise, resource management has been enhanced by the availability of large amounts of data on changing customer require-ments, capacity use, task tracking, and time management. Even the role of the controller has been affected by data availability for more informed business analytics.

Two other factors are further intensifying this industry trans-formationglobalization and social media communications. For

example, to be competitive in the world marketplace, companies now must success-fully apply real-time information across their global footprints by using the enor-mous data inputs on customers, suppliers, capacity disruptions, and inventory avail-ability. Companies such as Apple and Zara have benefited greatly by leveraging their supply chain visibility based on the avail-ability of this information. Perhaps more importantly, with the advancement of social media, businesses are going far beyond one-way conversations with customers and suppliers when creating their forecasts.

Through social media, global conver-sations are happening constantlyand significantly transforming the field of supply chain and operations management. Interestingly, the effective management of resources and supply chain coordina-tion have become both easier and more difficult. They are easier in the sense that resource management tools now are readily available and because supply chain visibil-ity can be managed in real time. However, these new processes are more difficult if managers are not prepared to embrace the new tools for interpreting and making decisions. Likewise, for supply chain and operations managers to remain effective, they must learn how to lead distributed teams and use online collaboration tools more efficiently.

Any organization that resists changewhether related to serving the customer, making product, organizing human resources, or managing projectssoon will be exposed by market forces. Todays new technologies, ways of thinking, and industry experiences are very quickly making the way we have always done it a thing of the past.

Through social media, global conversations are happening constantlyand significantly transforming the field of supply chain and operations management.

Photo: Thinkstock/blackdovfx


Whats in a Name?Planning is the essential ingredient

ENTERPRISE INSIGHTS Dave Turbide, CFPIM, CIRM, CSCP, CMfgE

Dave Turbide, CFPIM, CIRM, CSCP, CMfgE, is a New Hampshire-based independent consultant and writer, as well as an APICS instructor and Fresh Connection trainer. He has authored six books, published hundreds of articles, and is president of the APICS Granite State chapter. Turbide may be contacted at [email protected].


O ver the last several decades, there have been continuous strident voices in the marketplace declaring that material requirements planning (MRP) and enterprise resources planning (ERP) pursuits are worthless, antiquated, and obsolete. Mostly, these self-styled authorities are promoting something else that purports to replace traditional methodologies. Ironically, many of the latest and greatest offerings are in truth information sys-tems built around an MRP core (in other words, ERP as we know it) with some kind of twist that fixes traditional ERPs shortcomings.

Theres no denying that MRP and ERP were developed to meet the needs of a manufacturing environment that differs vastly from todays world. Product life cycles are shorter now, there is more vari-ety in the marketplace (lower volume for individual products), cus-tomer expectations are ever increasing, global markets have replaced local competition, lean manufacturing is common, and technology provides unprecedented visibility and connectivityto name just a few significant shifts in the world of manufacturing since the 1960s.

Given all of these changes, how is it possible that software functional-ity first designed over a half-century ago remains in widespread use and offers real benefits? Because manufacturers still have to acquire materi-als and components, add value through the application of employee and equipment time, and sell and distribute the fruits of their labors.

MRP with its associated supporting applica-tions (inventory control, planning and sched-uling, customer service, purchasing, and the like) models the plant and its operations. And those fundamental activities and concerns remain, despite the changes in environment and demands.

Truth be told, MRP and ERP are not perfect, and many of the new ideas and applications add value to todays ERP and make it a better tool for managing chal-lenges. Most modern ERP systems support kanban replenishment, for example, and have planning algorithms for level (flow production) scheduling that were absent in earlier incarnations of the methodology.

Technological evolutionI suppose, from a marketing perspective, it is much more effective to tout some-thing new and different rather than just an evolutionary extension of an existing product. But its confusing and misleading to promote something as a replacement for existing solution when it is inherently that same technology, evolved.

If I put on my curmudgeon hat, I could take exception to the term ERP itself. MRP is clearplanning material requirements is pre-cisely what it does. The broader application set we first knew as manufacturing resources planning (MRP II) is a less-definitive term. MRP II and its successor, ERP, (really the same animal, but with a new name) empha-size planning and only planning. And this is, indeed, at the core of MRP II and ERP, but theres so much more. Perhaps the newer term manufacturing operations manage-ment (MOM) is better, although some might object to the absence of the word planning. Besides, it seems that MOM is being defined and used more as a replacement for manufac-turing execution systems than for ERP or a combination of both.

The message here is that we cannot be distracted by the labels and acronyms being introduced and replaced as systems and software vendors continually search to distinguish individual products from the competition and gain the attention of buy-ers. The planning tools manufacturers need are evolving and advancing, but the basics remain the same.

Manufacturers still have to acquire materials and components, add value through the application of employee and equipment time, and sell and distribute the fruits of their labors.

Photo: Thinkstock/cloudnumber9


Dont Forget ProcurementWhy these professionals must be an integral part of the planning process

EXECUTIVE VIEWGary A. Smith, CFPIM, CSCP

Supply chain and operations management professionals know that successful supply chains are those that effectively balance demand and supply. Demand drives the equation because, without it, supply becomes irrelevant and of no value. Depending on the type of business environment, demand can come from various sources. In a push (make-to-stock) environment, it usually is derived from sales forecasts; in a pull systemmake to order, assemble to order, or engineer to orderdemand comes from actual sales.

To reduce demand uncertainty, professionals forecast sales, pur-chases, production, and even financial data through the annual bud-geting process. However, organizations can get into trouble along the way if individual departments develop their own forecasts or if forecasts are not updated and shared regularly. For example, say the sales department notices a shift in demand and adjusts its forecast to reflect that change. If this is not communicated to manufacturing and procurement on a timely basis, the result is an unwanted and unplanned increase or decrease in finished goods inventory. The ramifications of this disconnect can cause lost sales, markdowns, and even production shutdowns and layoffs.

Sales and operations planning (S&OP) can help achieve a better balance for both current and new products at both the aggregate and detail levels. Although S&OPs origins are in manufacturing, the process has proven successful in retail and service organizations, as well. (As a supply chain professional working in the public sector, I prefer to call it demand and operations planning; however, for purposes of clarity, I will yield to my private sector brethren.)

Unfortunately, people often see S&OP functions as customer- focused and thus concentrate S&OP team efforts forward from the factory to distribution and ultimately the customer. Because major suppliers are not included in the process, key opportunities to bal-ance demand across the entire supply chain can be missed. Likewise, failing to give suppliers information on future demand makes them less able to react quickly to sudden purchase changes.

Integrating suppliers into the S&OP process can help avoid problems obtaining up-to-the-minute partner data and enable these providers to meet rigid time frames in the monthly S&OP cycle.

Doing so also can make it easier to man-age procurement risk, which is critical to the demand-supply balance, as lead times expand to take advantage of global procure-ment opportunities.

Procurement managers spend countless hours analyzing spend; finding ways to reduce lead time; and optimizing order size and sourcing strategies to increase sales, improve agility to changing market con-ditions, and reduce risk. In addition, these professionals often go beyond purchasing material to actually forecasting it, establish-ing inventory maximums, and managing inventory accuracy. They know raw mate-rials orders must be placed in advance of production and arrive on a timely basisneither too early to incur unnecessary car-rying costs nor too late to cause production disruptions or lost sales. All of these actions play a pivotal role in the S&OP process.

As stated previously, demand is the driver, but the involvement of procure-ment professionals is vital to an effective supply chain. Their inclusion and willing participation are critical to achieving that ever-elusive balance of demand and supply. With all departments working from the same S&OP schedule, when sales forecasts change, procurement has a better chance to adjust raw material order quantities and avoid unnecessary inventory buildup and potential write-offs.

Furthermore, because sales, produc-tion, and raw material purchases directly affect financials, the budgeting process can be significantly enhanced. By partnering with other S&OP process team members, procurement professionals become major players in communicating across the orga-nization, adding visibility and removing barriers that impede success.

Demand is the driver, but the involvement of procurement professionals is vital to an effective supply chain.

Gary A. Smith, CFPIM, CSCP, is vice president

of the division of supply logistics for New York

City Transit. He may be contacted at gary.

[email protected].



Photo: Thinkstock/Hyrm

a

WORKING GREEN Antonio Galvao, CSCP

A Crystal Clear MessageIts all about the water

F reshwater has been in the spotlight quite a bit recently. From scientific magazines to seminars across the globe, freshwaters importance is being reinforced with a special focus on the dangers of failing to protect this most precious resource. As this department has noted many times, governments and corporations must develop and implement strategies to ensure availability of freshwater to all people and every business.

Water cannot be treated as an inexhaustible store. Take, for exam-ple, recent events in Brazila nation that accounts for 10 percent of the planets freshwater supply. A prolonged drought in So Paulo, the countrys largest state, depleted freshwater reserves. Nearly two-thirds of households saw their water use restrictedmost for as much as six hours a day during a 30-day period. Unsurprisingly, this shortage became the subject of serious debate during last years presidential campaign.

While the drought was the direct result of climatological fac-tors, the underlying issue is that freshwater management is being neglected. Throughout Brazil, 40 percent of captured rainfall is lost due to poorly maintained pipelines. As is so often the case, waste is the real enemy, and it needs to be fought.

Some are waging the battle successfully. Nestl, the worlds largest food company, is making great strides in fulfilling its commitment to achieve water efficiency across its operations. The organizations milk plant in Lagos de Moreno, Mexico, is the first of its kind to eliminate reliance on external water sources. This factory does not take one drop of water out of the ground for the system to be operational, Nestl CEO Paul Bulcke told the Financial Times. Nestls achieve-ment at this plant is significant, as the amount of water required for daily powdered milk production is about the same as filling an Olympic-size swimming pooland equal to the daily water con-sumption of 6,400 people.

Nestl collaborated with GEA Filtration and Veolia Water, a French waste-water treatment company, to develop a system that extracts 70 percent of purified water from the volume of fresh milk used in pro-duction. The plant then uses the extracted water for its operational processes. In a second phase, another 50 percent of water is recovered and treated for non-potable use. While this currently is thought to be the only zero-water plant in the world, others are preparing to follow suit. Clearly, it makes good business sense to do so.

Realizing the visionThose who attended the APICS 2014 confer-ence in New Orleans had the chance to hear a general session presentation from social entrepreneur and business executive Peter Thum, in which he related how his work experience in South Africa inspired him to take action. He said he saw hundreds of peo-ple who didnt have access to clean drinking water or proper sanitation. In fact, more than 2 million people around the world die each year from illnesses related to unsafe water.

Right after his work in South Africa, he began consulting with a soft drink manufacturer and learning about the bottled water industry. That led to his 2002 formation of Ethos Water, which funds water projects with every consumer purchase. Thums objective was to leverage his knowledge of the luxury bottled water industry to address the problems he had witnessed among people at the other end of the economic spectrum. He succeeded in 2007 when Starbucks purchased Ethos Water, giving the business access to more than 7,000 distribution points and achieving the necessary volume to deliver results.

Whether you are a visionary entrepre-neur or a focused supply chain and opera-tions management professional looking for waste-reduction opportunities and efficiency improvements, these examples should inspire you. Everyone and every businesses needs clean, safe, and affordable freshwater to thrive.

Waste is the real enemy, and it needs to be fought.

Antonio Galvao, CSCP, is vice president, global supply chain, at Sealed Air. He may be contacted at [email protected].



Photo: Thinkstock/BananaStock

LEAN CULTURE

Ron Crabtree, CIRM, CSCP, MLSSBB, is

chief executive officer of MetaOps and has

authored or coau-thored five books on

operational excellence. He also hosts online

radio shows, teaches, presents, consults,

and coauthors an online magazine at MetaOpsMagazine.

com. Crabtree may be contacted at rcrabtree@

metaops.com.


Ron Crabtree, CIRM, CSCP, MLSSBB

Improvement programs of all kinds increasingly require leaders who are experts at engaging people. Indeed, soft skills are being correctly recognized as part of the secret sauce of success.

We hear it all the time: The majority of organizations that embark on a major change effort fail to get the results execu-tives hoped to achieve. This is not the result of anyones inabil-ity to learn the new system; rather, its because people were not inspired and motivated to change. Hence, the need for master facilitator skills. Leaders must be able to persuade employees to adopt new, bigger than themselves objectives; facilitate in difficult situations; and motivate others to embrace new ways of thinking.

These masters also must have technical and organizational skills, as well as the personal talent to drive change. A useful mental construct of this theory is a Venn diagram of three over-lapping circles with technical, organizational, and personal written inside. The best change leaders live where the circles

Expert Agents of ChangeThe essential qualities of world-class master facilitators

overlap. Following are additional insights on this concept.

Technical For someone to be effective at leading and facilitating complex change, that individual must come to the party with solid technical skills that demonstrate mastery of the foundations of operations. Employees will generally be reluctant to be led into an area of new thinking if the facilitator does not know what success looks like and is not adroit in the jargon. Without these attributes, the facilitator will be neither credible nor effective.

Organizational Every significant change or improvement initiative has a key common theme: People will need to learn how to do things differently. This is where a solid understanding of adult learning modal-ities is required. The master facilitator must be able to help people rapidly and in a sticky fashion embrace new and often uncomfortable ideas, ways of thinking, methods, and behaviors. An effective leader knows that change can be painful and thus is careful to ease the way to moments of insight. The goal is a process that provides repetitive iterations in order to cement new ways of thinking.

To achieve this objective, its necessary to be adept in the areas of organizational change management, motivation and empowerment, building and sustaining high-performing teams, group dynamics, and key aspects of adult learning modali-ties. The ability to accurately assess organi-zational readiness and to understand how to drive change are critical. Finally, there are two subtle, but vital, elements of this: properly evaluating how much agreement exists about both the need for change and about how to change. Much of the work involves just getting those things settled.

Personal There is an ever-changing list of key personal skills that world-class change agents possess, which deserves attention. In the next Lean Culture, I will elabo-rate on this third circle of essential skills.

An effective leader knows that change can be painful and thus is careful to ease the way to moments of insight.


Professional PurposeAssociation with peers offers real-life education

MANAGEMENT PERSPECTIVE Philip E. Quigley, CFPIM, PMP

Philip E. Quigley, CFPIM, PMP, is senior project manager at Ingram Micro and an adjunct professor in the depart-ment of management at California State University at Fullerton. He may be contacted at [email protected].


R ecently, I taught an exam review session in Orange County, California, with my colleague George Meier. He had built an impressive review deck (more than 250 slides), and I was a little nervous. People at review sessions, especially on Saturday afternoons, are usually in a lets get out of here mood. But my assumption was unfounded. Meiers presentation was question-based, humorous, and fast-moving. The audience was kept interested by the pace, the material, and his presentation skills. I walked out impressed and, more importantly, wonder-ing how I could improve my review sessions at California State University at Fullerton. As I pondered, I realized I was enjoying the adventure of learning again.

When I first joined APICS in the 1970s, it was a dynamic time. Manufacturing resources planning and enterprise resources planning were new, and talk was starting of zero inventories, total quality management, and just in time. APICS was publishing case studies in these areas, and I recall one on new product introduc-tion and imaginary bills of material. I had some questions on the information I read, so I tracked down the people involved. I called them and ended up spending 90 minutes learning their processes and what problems they encountered. After the discussion, I prom-ised to share with them something we were working on to improve capacity planning and releasing blanket orders to vendors.

Later, through the APICS Orange County chapter, I met the materials director at Beckman Instruments (now Beckman

Coulter), and saw in person its just-in-time implementation. Together, we APICS affiliates were helping each other learn, apply new ideas, and growing our careers and companies.

I thought about this and asked myself what it means for todays association, chapters, and members. The answer is simple: People learn best from each other. APICS members know this, and we appreciate it. Thus, we must con-tinue working together in order to effectively adapt, change, grow, and add value. APICS and similar societies are pillars of the learning process, and affiliates of all kinds must help others through this powerful forum for solv-ing problems and identifying and exploiting opportunities for improvement.

For many years, the APICS Orange County chapter offered open discussion time at the beginning of meetings. Members could talk about issues they were encoun-tering, and participants did a quick outline of the situation on a whiteboard. The discussions were spirited, often continuing during dinner and afterward.

Today, brainstorming with fellow supply chain and operations management professionals is even easier, with many chapters sponsoring discussion boards on social media. But its still important to support problem-solving during in-person gatherings. Could you sponsor a Saturday morning brainstorming event or six sigma blitz? Perhaps your chapter could sponsor a webinar? The key is holding an event that involves real-world problems and not just an expert giving a lecture. Members must talk, share, and even argue in order to get the ideas flowing. In this way, we can ensure that we as professionals continue to learn, grow, contribute to our organizations, and have a little fun along the way.

People learn best from each other.

Photo: Thinkstock/shironosov


RELEVANT RESEARCHRichard E. Crandall, PhD, CFPIM, CIRM, CSCP

Corporate CustomsDefining organizational culture and exploring why its difficult to change

Why do organizations find it difficult to implement new ideas and technologies into everyday operations? The initial cost is one impediment; however, there frequently is a hidden resistance to change in the dominant culture of an organization.

Organizational culture is the belief system shared by members of a group. It is most noticeable in religious organizations and special interest groups, but the concept also applies to businesses and nonprofit organizations. For example, Southwest Airlines has a reputation as a fun airline; some Silicon Valley high-tech firms pride themselves on the image of being a laid-back group. A companys public image might reflect the underlying culture, but culture also might not be easy to see.

Following are a few of the ways that organizational culture affects how companies operate.

Organizational culture gives the organization an identity. Consumers often decide whether to buy based on their perception of a companys culture. For example, Patagonia is seen as respecting the environment, Whole Foods is associated with organic products, and Edward Jones is viewed as an honest investment firm.

Organizational culture helps employees make sense of things. It would be impossible, even demotivating, to reduce all activities to formal procedure. Over time, employees begin to understand how to respond to different situations because it is how we do things.

Organizational culture enables employees to be committed to the company. When employees like the environment they work in, they tend to stay. When they are uncomfortable, they leave or become disgruntled.

Organizational culture helps create sta-bility. A positive culture enables a company to survive during difficult times. Nordstrom, founded in 1901, has prospered over the years while many retailers experienced turmoil by providing excellent customer service, a foundation of its organizational culture (Crandall and Crandall 2014).

Components of organizational culture include values and artifacts. The values of a company often come from its founder. While most companies have mission and value statements, these do not always reflect the underlying values present in the organizations culture.

Artifacts reflect, at least to some extent, the culture of the organization (Crandall and Crandall 2014). Culture is made more tangible through stories, language, symbols, ceremonies, rituals, reward systems, and physical surroundings, to name a few. Language conveys an image of the underlying culture; examples include geek talk and derivative trading. Symbols might be regalia for academics, ceremonies include Oscar awards, and rituals could be parties for retiring employees. Reward systems may be monetary, symbolic, or both. Physical surroundings could be stark or plush, inviting or cold, or functional or disorganized.

Areas of cultureVarious groups represent or reflect a com-panys culture. These include: Organization. The intended culture for

the entire organization can be found in the vision, mission, and value statements. The dictates of the companys founder might be the basis for these.

Employees. Non-managerial employees carry hidden beliefs that often transfer into visible areas such as customer service.

Management. This group can be seen as separate from non-managerial employees and carrying their own belief systems.

Consumers. While customers may not be part of an organizations culture, they often mirror what they believe the culture to be and embody the companys preferences.When the areas of culture are in sync, the company usually is successful. But, when cultural areas are not aligned, the results can be uncertain and, in some cases, disastrous.

Richard E. Crandall, PhD, CFPIM, CIRM,

CSCP, is a professor at Appalachian State

University in Boone, North Carolina. He

may be contacted at [email protected].

Photo: Thinkstock/DenisD

ubrovin


RELEVANT RESEARCH

J.C. Penney is a notable example of a company that has experienced it all. In the early days, under Penneys leadership, it was successful. Recent years have been more problematic. During one recent CEOs tenure, management tried to instill a new culture, employees were hesitant or uncertain, and consumers were disillusioned. The company has indi-cated it wants to return to its roots; however, its future is still in question.

Types of culturesFollowing are some of the different ways organizational cultures can be classified.

Adhocracy. This culture strives for a spirit of entrepreneurship, innovation, and risk taking. It develops new products and is externally focused. Employees who do well are flexible, creative, and adaptable.

Market. Similarly to an adhocracy, the culture is externally focused and competitive; the company wants to lead in its indus-try. Employees who do well are achievement-oriented.

Clan. This culture is more like an extended family and empha-sizes harmonious relationships among members, mentoring of new employees, and teamwork. Internally focused, it seeks to run well as a cohesive unit. Employees who do well are part of the team and seek the good of the company.

Hierarchy. This type of culture thrives on rules, policies, proce-dures, and order. Internally focused, the operation does better in a slow-changing environment. Employees like order, efficiency, and

predictability (Crandall and Crandall 2014, Quinn and Rohrbaugh 1981, Deshpand et al. 1993, and Petrock 1996).

Drivers of changeWhat causes organizations to change? The emergence of a strong leader is one source of cultural change. The following drivers also prompt shifts in thinking.

Technology. The internet and related products and systems have enabled Amazon to become a major online retailer, forcing conventional retailers to change or face destruction.

Public pressure. Walmart faces pressure to change the way it treats its employees and to become a more sustainable company. McDonalds wants to update its image, adding salads and lower-calorie items to its menu.

Economic opportunity. General Electric is moving from a consumer-oriented business to an industrial products company to better position itself in the market.

New technologies and a desire to appeal to younger generations means that companies must become innovators and change if they are to be relevant in todays marketplace. Organizational culture must also change if the transition is to be successful (Crandall and Crandall 2014).

Following are a few examples of how some long-held practices are shifting:

From a make and sell mentality to sense and respond awareness. Manufacturers long operated by devel-oping products first and then figuring out how to sell them. Now, the trend is to look at manufacturing as seeing a need and filling it (Haeckel 1999).

From buying at physical stores to buying online. Consumers increasingly buy things online. As a result, retailers are moving toward omnichannel capabilities.

From mass production to mass customiza-tion. Consumer demand for product variety and customization are driving the develop-ment of new technologies and processes.

From profit as the primary objective to triple-bottom-line goals. Rather than just focusing on profit and return, the tri-ple bottom line of economic, societal, and environmental goals is becoming more important in planning and operation.

From vertical integration to virtual inte-gration. Henry Fords River Rouge plant represented the ultimate in vertical integra-tion. This approach largely has been replaced as companies adopt global, extended supply chains to produce goods and services.

BarriersMachiavelli (1513) wrote, Whenever his enemies have the ability to attack the innovator, they do so with the passion of partisans. There are indeed many ways and reasons that change or innovation is met with resistance at organizations.

Rogers (2003) writes that adopting new ideas, even those with obvious advantages, is difficult and may require many years before fully accepted. A challenge for many organizations is to speed up this process.

Klein (2013) describes two barriers to gaining insight within an organization. The first is the predictability trap. A company spends time planning a project, assigning roles to employees, and justifying the use of resources. Then, someone suggests a potential improvement that would require even more planning, time, and resources. The change is postponed, or even forgotten, and the improvement is lost.

The second barrier is the perfection trap. Changes introduce errors and slow the pur-suit of perfection. In well-ordered situations,

When cultural areas are not aligned, the results can be uncertain and, in some cases, disastrous.


Richard E. Crandall, PhD, CFPIM, CIRM, CSCP

with clear goals and stable conditions, the pursuit of perfection makes sensebut less so when an organization faces complex and chaotic conditions and demands from competitors and consumers.

Aguirre and Alpern (2014) suggest that the costs when change efforts go wrong are high and include not only financial expense, but also con-fusion, lost opportunity, wasted resources, and diminished morale.

SuccessesThe good news is that cultures can be changed, but it is often a slow process. Consider the following steps when attempting to adopt a shift in organizational culture.1. State what you want the culture to be. Go beyond the vision and

mission statements to reinforce and activate desired changes.2. Promote an ethical culture. While this may be obvious, it is

necessary to ensure that the practices within a company live up to the stated goals.

3. Hire the kind of people you want to perpetuate your desired culture. Not everyone will take to change; find employees who buy into the intended culture.

4. Take care of your employees, and they will take care of your customers. When employees are unhappy, it often shows in their customer relationships.

5. Implement the proposed strategy. It is impossible to achieve the desired culture if the strategies selected by managers and employees dont mesh.

6. Change the artifacts. The physical environment is important to employees. Pictures, signs, layouts, food courts, and office areas all should reflect the desired culture.

7. Tell stories. We all like to hear stories that help us understand what is expected o

apics magazine january february 2015

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