Change Management what we learned about implementing … · Sonoco Products Company keith.holliday@sonoco.com Change Management – what we learned about implementing an S&OP Process

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Keith Holliday, CSCP - Director Corporate Supply Chain & Logistics

Sonoco Products Company

keith.holliday@sonoco.com

Change Management what we learned about

implementing an S&OP Process

IBF-APICS Best of the Best S&OP Conference

June 15, 2012

Eleven Decades of Packaging Leadership

Founded 1899 in Hartsville, S.C.

Diversified provider of consumer and industrial

packaging and services

$4.5 billion in sales 340+ operations in 35

countries

19,000 employees Products sold in 85

countries

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Global

Plastics

Industrial

Converted Products

Primary

Materials

Global

Services

Global

Flexibles Global Rigid Paper

and Closures

3

New Addition to the Sonoco Family

FY 2011E Revenue(1): $214mm FY 2011E Revenue(1): $111mm FY 2011E Revenue(1): $117mm

Descr

iption

Manufacturer of highly engineered molded

foam applications and custom packaging

solutions

Acquired Createc on Dec. 31, 2010, a direct

competitor with expertise in protective

packaging (e.g. appliances, electronics) as

well as automotive and component parts (e.g.

rear bumpers, side panels)

15 plants, 970 employees

Leader in protective temperature-assured

packaging, providing manufacturers with

solutions that maintain specified temperature

ranges during transport to end user

Acquired GreenboxTM, a sustainable thermal

management system in June 2010; and

licenses patented PureTempTM phase change

materials.

8 plants, 480 employees

Market leader in consumer retail protective

packaging

Total solution provider with capabilities,

including design, sealing machines and

tooling, and both plastic and printed

packaging materials.

7 plants, 780 employees

Produ

cts

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Sonocos Changing Mix of Business

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4

Sonoco serves many familiar companies

S&OP Launch in 2007 Goal was a Lean

Supply Chain

Low Inventory Synchronized Flows Information, Materials, Dollars Optimized logistics full truckload, on time and in full Perfect quality, perfect transactions Demand pull from the customer back an optimized value stream from the customer through our

supply chain and into our suppliers supply chains

How to achieve this objective with different

businesses and types of supply chains ???

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Consumer Packaging- Supply Chain

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Customer Sonoco

Paper must have Forward, Demand Based planning for Operational Efficiency

Conversion must build to order with short lead times and high service levels

Industrial Products- Supply Chain

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Paper

Manufacturing

Converting

Tubes & Cores

Composite Cans

http://www.sonoco.com/sonoco/Products/Paper+mill+cores+and+accessories/ipd_pulp_and_nonwoven_cores.htmhttp://www.sonoco.com/sonoco/Products/Paper/pap_recovered_paper.htm

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How to create more capable supply chains

Conflicts between disciplined planning & agile response

o traditional production to a forecast with set lead time agreements with customers (and suppliers) and

o demand driven pull, short lead time processes emphasized in lean supply chains

Sonoco Products has blended the use of forecast based supply chain practices with demand pull processes to create agile supply chains

o collaborative demand management,

o sales & operations planning (S&OP)

o lean transformation and cash/ cost optimization.

Change Management Elements Required

Active Leadership Sponsorship o S&OP must deliver important business results

External Expertise o dont know what you dont know

Capable People o People used to working in silos

o Now must work cross functionally

Good Data o It all starts with a demand picture

o Data must be displayed/ presented clearly

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Leadership Sponsorship

Aimed at Important Business Objectives- address the pain o Working Capital- addressed reduction in free cash flow- every

leader has WC Objectives

o Productivity- Diminishing returns from traditional cost improvement

so supply chain optimization was key improvement target

o Perfect Order- Customers do not see Sonoco service levels as

differentiating, started measuring in 2007

Paper selected as the initial division to implement S&OP o Progressive GM that saw the value

o Paper is traditional push process that would benefit

o Paper is high impact division supplies 3 other Sonoco divisions as

well as external customers

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Basic Disciplines across Sonoco

Initial work on Cash Gap in 2005- addressed the pain with discipline o Ongoing Aged/ Aging Inventory managing process

o Monthly working capital reviews with the business teams

o Performance management with working capital/ inventory management

objectives

o Performance data reported and shared down to the plant/execution level

Initial work on Perfect Order- connected the work to Customer impact

o Repeatable measurement process

o Root cause analysis of misses

o Visible reporting vs improvement targets

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Top few common areas

o Demand Forecasting/ S&OP

o MRP/ Mfg Optimization/ Inventory Management

o Sourcing/ Logistics/ Perfect Order

o Distribution asset optimization

S&OP was part of the overall Supply Chain Effort - many

projects were launched

Each Division has mapped their own set of supply chain priorities Divisions are piloting different areas based on their business priorities

o Div 1 is piloting S&OP and Demand Management systems o Div 2 is developing improved demand forecasting for internal divisions o Div 3 is driving MRP o Div 4 is driving Distribution asset optimization

Forecasting

and

Demand

Planning

Order

Management

and

Scheduling

Manufacturing

Execution

Finished Goods

Inventory

Management

Warehousing,

Distribution,

and Reverse

Logistics

Customer

Forecasts/

CPFR

Forecasting

Processes

& Systems

Forecast

Accuracy

Sales & Opns

Planning

Advanced

Planning &

Scheduling

Capacity

Management

CSR Order

Execution

Process

Business Rules

Qty, Lead time

Delivery Reqmts

Materials

Requirements

Planning

Sourcing

Process

Integration

Supplier Mgmt &

Integration

Raw Matl

Management

Inventory

Record

Accuracy

Inventory

Management

& Safety Stock

Inventory & Svc

Tradeoffs

OTD/PerfOrder

VMI/SMOI

Consignment

Process

WH/Dist

Asset Optimization

Shipping

Logistics &

OTD Metrics

Material Returns/

Reverse Logistics

Plan

Metrics and Governance Inventory, Perfect Order, SCM Cost

Organization, Systems, and Policies

Supply Chain People Development

Purchase,

Receive,

Store/Manage

Raw Materials

Source Make Deliver-Return

Schedule

Execution

Master

Scheduling

Manufacturing

Optimization

Constraint

ManagementTMS Data

integrity

Oliver Wight trained our leaders and process participants for each step in

the 5 step process

Supported the Process initially with spreadsheets and trend analysis in

Minitab

Displayed using a web based display tool

Built support for and credibility for the process, then looked for a software

tool to improve integration and

analysis

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System follows Process!

External Expertise to install the Process

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Data- Logility installed in 2009 to improve demand analysis capability (data removed)

Data - Summary RCCP Regional Machine Loading

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Data- Ability to see demand by Machine allows Sales to Shape Demand

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80.0%

82.0%

84.0%

86.0%

88.0%

90.0%

92.0%

94.0%

96.0%

98.0%

100.0%

102.0%

104.0%

106.0%

Percent of Planned Capacity Load By Machine - Next 12 Months

Div Avg Load 100% Line

People Development

Providing Local CSCP training to develop our supply chain people capability ~40 certified

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Cash & Customer so how are we doing?

Perfect Order = (On time %) * (in full %) * (Perfect Condition %) * (Invoice Accuracy %)

As demand has filled plant capacity, perfect order performance has suffered and expedited freight has increased

Cash Gap improved 14 days (full year average) between Dec05 and Mar10

As the recession hit, cash emphasis continued to drive inventory down and sustain gains in AR & AP

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Now ~92%

S&OP Ongoing Success Factors

Ongoing routine S&OP meetings Structured meeting agendas Establishing TRUST in the numbers and people from various

departments

o Cross-functional participation

o Participants empowered to make decisions

o Pre-work to support meeting inputs

An unbiased baseline forecast to start the process An unbiased, responsible organization to run a disciplined process Internal collaborative process leading to accountability/consensus Shared metrics across key business areas