1
Keith Holliday, CSCP - Director Corporate Supply Chain & Logistics
Sonoco Products Company
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
2
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
5
Sonoco’s Changing Mix of Business
6
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 ???
5
Consumer Packaging- Supply Chain
9
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
10
Paper
Manufacturing
Converting
Tubes & Cores
Composite Cans
6
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 “don’t know what you don’t 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
12
7
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
13
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
8
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
16
System follows Process!
External Expertise to install the Process
9
Data- Logility installed in 2009 to improve demand analysis capability (data removed)
Data - Summary RCCP – Regional Machine Loading
10
Data- Ability to see demand by Machine allows Sales to Shape Demand
19
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
20
11
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
21
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
