What’s the best process to manage growth for manufacturing companies?

What’s the best process to manage growth for manufacturing companies?

What’s the best process to manage growth for manufacturing companies?

For growing manufacturing companies, the most important strategic questions are around how to allocate resources, optimize the use of their assets and where to invest in advance of demand to support growth. This is an important question for all companies, but it’s especially critical when you have invested a significant amount of money in high-dollar facilities and equipment along with people who have specialized skills that take time to develop. With a relatively fixed capacity in the near term, decisions need to be made on what products to make and how best to sequence the work to maximize the use of limited resources to meet the demand for products that will be delivered months—if not years—in the future.

One widely used and proven approach to address this is Sales, Inventory and Operations Planning (SIOP) or Sales & Operations (S&OP) Planning. The two processes are one in the same, but inventory is sometimes called out because of its importance to buffer supply and demand variation and the importance of managing inventory levels due to its impact on cash flow. SIOP is a type of management operating system that focuses on aligning all aspects of the business to one future plan that allows teams to orchestrate and align daily activities.

Prior to incorporating SIOP, many businesses faced challenges that included sales teams being unsure of what to sell because they didn’t know what products would be available; operations teams making their best guess on what to make, often prioritizing operational efficiencies and historical run rates to make those decisions; and financial leaders setting targets based on past deliveries and a relatively arbitrary challenge to grow by a certain percent. As the saying goes, if you’re doing what you’ve always done, you should expect to get the same results—and that is not what a growing company is looking for. Companies that have relatively stable demand, shorter product lead times, and modest growth can sometimes get by this way, but for a company with double-digit growth expectations, the lack of orchestrated planning can mean lost sales, unhappy customers and a lot of the wrong parts on the shelf.
As I’ve seen with high-functioning SIOP processes at large manufacturers such as Honeywell, and deployed them at services and distribution businesses at Boeing, there are solutions that can turn those growth challenges into competitive differentiators, and a robust SIOP process is at the heart of it.

The starting point is extending the business planning horizon beyond the lead time needed to manufacture products and add capacity through investment decisions such as bringing on new people or purchasing equipment. This is typically 18-24 months in the future but can vary depending on the type of business. Extending the planning horizon allows sales and marketing to build campaign strategies, operations to scale capacity by addressing bottlenecks, and supply chain to effectively source and procure parts at the best cost. The challenge then becomes how to forecast demand that far out with all the variability and uncertainty that comes into play around changing market conditions and customer buying patterns, new competitors and any socio-economic business cycles that may impact your business. This is where advances in data analysis along with cross-functional collaboration become critical.

A term used by many supply chain professionals that encompasses this process is Collaborative Planning, Forecasting and Replenishment (CPFR). CPFR or a similar process is the first building block for SIOP. The process starts by mining sales data by product, customer, region and other relevant factors, and then analyzing to identify trends, applying market indicators that may be impacting future demand for your products and comparing with other competitive or complementary products to understand any correlations. There are systems and tools that can help with this along with forecasting techniques that allow for scenario planning that incorporate different future possibilities. Once product level scenarios are laid out, there’s typically a weekly or monthly meeting that brings together the sales and marketing team, customer service, and anyone on the front lines who can bring market, customer and competitive insights to the conversation to debate and agree upon a consensus forecast to plan to. Although the planning horizon may be 18-24 months, there are typically planning windows where different levels of decisions are made. For example, decisions to add capacity may be 12-18 months out while the specific product manufacturing schedules may be locked in during a 4- to 6-week window to allow for more flexibility beyond that.

The one thing we know about that forecast is that it will be wrong. But by setting a long-term plan that everyone can work to, you establish a baseline to get better over time by addressing forecast errors, understanding how different variables impact your numbers and getting everyone aligned on the product mix so your team can work efficiently on one plan. Sales and marketing can sell what’s planned, operations can build what’s planned, supply chain can buy the right material and the finance team can model cash and forecast financial results.

Now back to inventory. Inventory comes into play to help buffer demand uncertainty that we know is there and keep that uncertainty from disrupting operations and supply chain.

Although inventory does tie up assets, it can be managed to optimize flow, increase resource utilization, and allow for strategic sourcing of material to lower costs. With the right inventory buffers in place and visibility across the organization, you can optimize your business to run much more efficiently with the results showing through fewer material shortages, improved on-time delivery, higher equipment utilization, and increased sales because you have the right products there to fulfill it. A common issue I see at companies that don’t run SIOP is plenty of inventory on the shelf, but all the wrong parts, which ties up cash and doesn’t allow for investment in the right parts.

The second core building block of SIOP is the operations plan. Operations teams often manage complex product flows that tie together buying material, manufacturing components and assembling end items for sale in a multi-step process that takes weeks or months to complete. There are many ways to optimize this process incorporating lean manufacturing techniques that include minimizing machine setup and changeover where different parts run across the same equipment, minimizing travel distance by optimizing facility layouts and assuring first-time quality with no rework cycles along with many other approaches. Many improvements can be identified and managed with key metrics in place to monitor processes, encourage daily collaboration across teams and promote consistent communication. However, everything starts with a long-term plan and knowing which products to make.

The heart of SIOP is the monthly or sometimes weekly collaboration between sales and operations to review the forecast, discuss different sales scenarios, identify potential operational bottlenecks and then agree to a plan that allows everyone to align by incorporating the best information available. This becomes an iterative process that runs each month and allows teams to continuously learn, refine how they work together to meet the needs of a growing business and communicate through a systemic process to address issues and opportunities that come up.

The final building block, the finance plan, may be the most important for growing companies. The biggest challenge I’ve seen leading through multiple cycles of boom and bust in aerospace over the last two decades is the inability or unwillingness for manufacturers to invest ahead of demand to support growth. There’s a good reason for this since making the wrong decision for a company that may already have financial challenges can be detrimental.
But the companies that are ultimately successful during growth cycles—capturing market share, driving financial performance and delighting customers—are the ones that make the right bets and are there to meet the needs of the growing market. And although luck can sometimes play a part, the process behind those companies most of the time is SIOP. It allows them to manage costs and assets more efficiently, provides the funding and cash flow for growth, gives the finance team more confidence to make the decision to invest, and enables the sales and marketing teams to build a more strategic relationship with customers by talking more about where they’re going rather than where they’ve been.

The case for SIOP or a similar process is strong, with proven results and many systems and tools that can help make it easier to deploy today. So why don’t more companies use it? The biggest reason that comes up continuously is that it requires change across many functions, and change is hard. It requires the sales team to look further out into the future and make estimates based on the unknown rather than selling what’s in front of them today; it requires the operations team to manage to a longer term, more dynamic plan that could require them to shift resources and continuously innovate and improve to lower lead times and cost; it requires the entire organization to share data more transparently; and it requires a commitment from everyone to one plan. 

It takes time, going head-first into difficult conversations about trade-offs and redefining processes, but in the end it’s by far the most effective way I’ve seen companies align to support growth. And the rewards for everyone include the increasing opportunities that a growing company provides, a clearer understanding of how everyone contributes to a common goal, and a culture of continuous improvement that empowers decisions and actions across many teams that now know the plan.

Image credits: Unsplash.com

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Key Messages That Help Leaders Break Down Barriers

Key Messages That Help Leaders Break Down Barriers

Key Messages That Help Leaders Break Down Barriers

I’m currently working on my first book that will be published by McGraw Hill in 2021. It has me thinking about my experience as a leader, as well as those leaders who have impacted my life and career. We all recall at least one leader in our career–either because they served as an inspirational force that propelled us to where we are today, or because they were the source of aggravation and demoralization that still haunts us. I don’t believe any leader starts out to be the latter, but nonetheless at some point in time everyone can attest to experiencing that type of leadership.

In the book, I talk about 7 key messages that help leaders break down barriers that prevent them from being aspirational. Here are few to consider:

Personal Awareness & Authenticity

Share your process. It is important for your team to understand the personal values and beliefs that shape how you lead. If there is transparency in your leadership, it will foster the same from your people. It will also help you have a better understanding of their thought process, how they work and how to help them be more effective and efficient.

If there is transparency in your leadership, it will foster the same from your people. In addition, if you expect others to learn new technologies, adapt to changing customers’ needs and innovate how work gets done, then you have to demonstrate your willingness to learn as well.

Continuous Learning

Demonstrate the importance of continuous learning. This could include participating in certification programs to gain more knowledge about your industry or a workshop on leadership skills that help you become more connected with your team. More importantly, it is spending time learning from your employees who are the experts at what they do. Join them in the warehouse, on the sales floor or in the field. Invite them to educate you on what is happening in the company. In addition, if you expect others to learn new technologies, adapt to changing customers’ needs and innovate how work gets done, then you have to demonstrate your willingness to learn as well.

Mindfulness

Be present with your people in the moment. Listen, empathize and relate to those you lead, while also demonstrating vulnerability so that they can relate to you. The more that you are tuned into their needs, desires and aspirations, you are better able to help them achieve success personally and professionally, a win-win for your company.

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5 Reasons Every Business Should Think Like a B Corp

5 Reasons Every Business Should Think Like a B Corp

5 Reasons Every Business Should Think Like a B Corp

A Purpose-Driven Business Model Is the Way of the Future

According to Certified B Corporation, B Corps (B for Benefit) “are businesses that meet the highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose.” Businesses are assessed in the B Lab, based on how they impact every person–on a social and environmental level–by their operations and not just their shareholders.

Increasingly, companies are recognizing the value of being driven by both mission and profit. In the article “The B Corp Movement Goes Big” of the Fall 2020 Stanford SOCIAL INNOVATION Review, it is stated that “more than 3,000 companies across 71 countries have been certified as B Corps.” Take TOMS, for example–an essential component of their business model is to donate a pair of shoes to a needy child, for every one sold. They have expanded that to include eyeglasses, too.

This model has been so successful–for their profit margins as well as their give-back mission–that their BOGO (Buy One Give One) model has been adopted by other companies including Bixbee (backpacks) and Bombas (socks). We too are considering a similar model to help more underserved and underrepresented entrepreneurs access our SUMMi7 Business Scaling Method course.

It’s this type of purpose-driven philosophy that is at the core of a B Corp.

Increasingly, companies are recognizing the value of being driven by both mission and profit. Becoming a B Corp is a good way a company can hold itself accountable and committed to making an impact.

Becoming a B Corp is a good way a company can hold itself accountable and committed to making an impact. If you are considering achieving B Corp status, there are definitely some benefits, from potential cost savings to encouraged social responsibility. But, even if B Corp status isn’t your goal, here are 5 reasons you should think like a B Corp:

Customers Expect It

With many options to choose from and as purpose-driven companies become the norm, more and more people will choose products (and companies) that are sustainable, add purpose and value, and are inclusive in their mission.

Employees Seek It

In an attempt to align themselves with companies that share their values, employees desire to work for companies with purpose, who create a positive contribution to society. This can also foster morale within the ranks.

Communities Need It

B Corps help companies focus on local impact and community engagement. When companies make a commitment to be purpose-driven, the impact extends beyond shareholders to the entire community that reep the rewards of a socially or environmentally conscious company.

Create Longevity

In making decisions and growing your company based on a purpose-driven philosophy, it will help to balance short-term pressure with long-term outcomes.

Increase Innovation

When you foster a culture of transparency and employee development, encourage engagement and incorporate customer feedback into your business processes and decision making, you will create a more innovative environment.

To learn more about B Corps, visit bcorporation.net.

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To Inspire, You Have To Believe

To Inspire, You Have To Believe

To Inspire, You Have To Believe

As a leader, your role is to create an environment where your team can be their best.

I’ve often thought about how I can be an inspirational leader. So I started to pay attention to what inspires me in other leaders. I came to the conclusion that there are two things that inspire me; leaders that have an unwavering belief in their cause and leaders that believe in me, even when I may not believe in myself. We all have different things that inspire us, but if this resonates with you, then it’s something that you can develop by building a deeper understanding of your own beliefs, and being willing to evolve those with new insights. As you take on a new project, study it until you understand the purpose of the project, recognize the positive impact it could make and believe in what you are doing. To inspire others in this way, you have to first believe in what you’re doing so much that it inspires them to want to believe. You can’t force inspiration on to someone, but you can create an environment that allows even the smallest spark in them to ignite. An excerpt from Marianne Williamson’s 1992 best-selling book, “A Return To Love” is a statement to this:

And as we let our own light shine, we unconsciously give other people permission to do the same.

Excerpt from Marianne Williamson’s “A Return to Love” (1992).

To get there, study your cause, understand the potential role your business or team can play, and then connect with others where they are to include everyone’s perspective in the conversation. Including everyone in the discussion, incorporating their ideas and developing a plan of action together, solidifies a shared purpose that everyone can connect to. Lead by example and demonstrate commitment, showing that you’re willing to make personal sacrifices—team success over personal accomplishments, doing the work that needs to be done and demonstrating the humility to stumble, but then learn from that and pick yourself back up. To inspire your team, you have to get to know them, trust that they want to do their best and appreciate that there’s more than one way to get to a goal. As a leader, your role is to create an environment where your team can be their best, then show them consistently that you believe in them.

Other ways to use inspirational leadership to show your team you believe in them, include:

Roll up your sleeves

Be willing to roll up your sleeves to do any job needed because all jobs matter.

Actively Listen

Listen actively because you truly appreciate their perspective and know that incorporating what people say does influence your thinking and will help you make better decisions and be a better company.

Be Transparent

Be transparent because empowering people with information will help align everyone, cut down on information gaps that can lead to mistrust and perceived hidden agendas, and allow everyone to be part of the journey. Invest in people and expect that of your leaders. Prove it by investing the most precious resource of time and creating space for personal growth.

Photo by Xan Griffin

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3 Keys To Immersive Leadership

3 Keys To Immersive Leadership

3 Keys To Immersive Leadership

A belief in a cause and a committed team are inspirational components of immersive leadership.

Immersive, by definition, is “to involve or engage deeply.” In the same context, immersive leadership is an approach that focuses on maintaining strong connections to your team as you grow your company. As a company grows, the ability to scale those connections with the team becomes more difficult.

Although you may need to develop a hierarchical structure to organize work, establish repeatable processes and define decision making protocols, you don’t need to develop a hierarchical style of leadership that creates an “us” versus “them” culture—the language of many legacy companies, between employees and management.

Traditional hierarchies and matrix organizations have evolved to address this and can be effective with incremental growth and relatively stable business models and markets.

You don’t need to develop a hierarchical style of leadership that creates an “us” versus “them” culture—the language of many legacy companies, between employees and management.

However, the speed and availability of information have made other approaches possibly more effective. If you can harness that information and maintain alignment to a common purpose through extreme transparency, involving trust and empowerment, then you can create a level of agility and connected workforce that can continuously outpace the market and adapt to changing conditions.

A belief in a cause and a committed team are inspirational components of immersive leadership. As your company scales, it can help maintain the same leadership fundamentals that create the spark for inspiration and engagement among your team.

As you practice immersive leadership, here are some recommendations for maintaining trust, consistency and authenticity:

1.

Understand your leadership style, belief system and personal inspiration to help build authentic connections with others.

2.

Exhibit vulnerability to create an environment where leaders are approachable and any issues can be raised and addressed early.

3.

Communicate coherently with an overall strategy, purpose-driven values and clarity on how time and money are prioritized. As Emma Walmsley, CEO of GlaxoSmithKline stated, “Until you put the money where you say your strategy is, it’s not your strategy.”

Photo by Charlie Hammond

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