Title: Building a Lean Supply Chain Blending Lean Pull with Planning Excellence
1Building a Lean Supply Chain Blending Lean
Pull with Planning Excellence
- WCBF Lean Six Sigma Summitt
- June 25, 2009
Keith Holliday- Director Corporate Supply Chain
Operating Excellence Sonoco Products
Company keith.holliday_at_sonoco.com
2How to create more agile supply chains
- Conflicts between disciplined planning agile
response - traditional production to a forecast with set
lead time agreements with customers (and
suppliers) and - 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 - collaborative demand management,
- sales operations planning (SOP)
- lean transformation and cash/ cost optimization.
3Sonoco 100 Years of Packaging
- Sonoco Southern Novelty Company
- Founded in Hartsville, South Carolina in 1899
- First product cone-shaped paper yarn carrier
used for winding and transporting yarn - Today, Sonoco is a 4Bn global manufacturer of
industrial and consumer packaging products
(Fortune 550) - 335 operations in 35 countries
- 18,600 employees
4Business Segments
Consumer Packaging
Tubes and Cores/Paper
Global Engineered Carriers
Global Paper
Plastic Containers
Global Composite Cans
Other
Flexible Packaging
Metal Plastic Closures
Protective Packaging
Molded Plastics
Services
Service Centers, Graphics Management and P-O-P
Displays
5Sonocos Customers
6Lean Six Sigma Experience
- Sonoco launched lean six sigma in 1997 with over
1100 people trained as project leaders to date - Current results are on track to achieve 100MM in
productivity improvements each year - Productivity improvements are becoming
increasingly difficult to sustain at this rate - Improvements now coming more and more in end to
end process improvement from the customer back
7What makes a lean supply chain lean?
- 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
The rest of the presentation is an example of how
we worked with one customer to build a
collaborative, integrated supply chain process
8Consumer Packaging- Supply Chain
Customer
Sonoco
9Industrial Products- Supply Chain
Conversion Step
Paper
Conversion must build to order with short lead
times and high service levels
Paper must have Forward Looking, Demand Based
planning to get ready for conversion and maintain
operational efficiency
10Define- the problem when we started
- Cash performance had declined
- No measure of customer experience, but
- Surveys showed that we had no competitive
advantage in our markets - Consumer-
- CPG companies demanding 95-98 fill rates
- Increasing interest in supplier managed/ owner
inventories - No visibility to real demand reactive response
to order patterns - Industrial-
- Pressure on margins, cash
- Reliability important, often achieved with
expedites/ schedule breaks - Finger Pointing between internal supply divisions
11Measure Analyze
- Set Cash Gap as a corporate measure and priority
in 2006 - Corporate teams to drive components (AP, AR,
Inventory) - Selected Perfect Order as the corporate customer
experience metric in 2007 - Put metric in place in 2007, began reporting in
2008 - Developed a baseline based on 2Q08 and set
improvement objectives - Supply Chain Cost Metric
- (in development)
2005 Cash Gap Benchmark (CFO Magazine REL
Hackett)
12Measure Analyze
- Began using a hierarchy of metrics to work on the
inputs
Source- AMR Research
13Improve
- First work on cash gap- put foundational
disciplines in place - Ongoing Aged/ Aging Inventory managing process
- Monthly working capital reviews with the business
teams - Performance management with working capital/
inventory management objectives - Performance data reported and shared down to the
plant/execution level - First work on Perfect Order
- Repeatable measurement process
- Root cause analysis of misses
- Visible reporting vs improvement targets
14Improve- Developed process capability
improvements to sustain the results and continue
to improve over time
- Top few common areas
- Demand Forecasting/ SOP
- MRP/ Mfg Optimization/ Inventory Management
- Sourcing/ Logistics/ Perfect Order
- Distribution asset optimization
- Each Division has mapped their own set of supply
chain priorities - Divisions are piloting different areas based on
their business priorities - Div 1 is piloting SOP and Demand Management
systems - Div 2 is developing improved demand forecasting
for internal divisions - Div 3 is driving MRP
- Div 4 is driving Distribution asset optimization
15Improve- example paper based supply chain
- Conversion division focused on lean flow
- Many Customers, short 2-3 day order fulfillment
lead time - Inventories concentrated on raw materials with
primarily make to order FG - Postponement strategy with many small facilities
close to customer - Forecast effort is on raw materials to prepare
supplier - MAPE on raw material demand averages 5-10
- Paper manufacturing
- Runs integration process through monthly SOP
cycle - Integrates input from 3 internal divisions and
external sales - Operates a forecast based push process for asset
optimization - Each mill tracked weekly on Perfect Order
performance - ABC categorization for inventory strategy lead
time promise
16Improve- example consumer supply chain
- First step- talk to customer
- Commercial organizations in both companies were
reluctant to let the supply chains talk directly - Critical to take commercial terms out of the
discussion - Once the supply chain to supply chain discussions
began, agreements to openly share information
were easy - Worked together to design and map information
flows - Defined what information was available and could
be shared in a format meaningful to the process - Agreed to openly share problems so that they
could be resolved quickly and agreements reached
on corrective actions - Dedicated capable people to the process
- Process Goals were set and improvement driven
using a combination of Lean and Supply Chain
planning disciplines - Activities driven from DEMAND (i.e. actual
production schedule ) procurement to shipping - Standardized how information is shared and
processed across the supply chain - Streamlined internal and external communications
- Established time fences for planning purposes
17Improve- example service supply chain
- Designed to serve a particular customer or small
set of customers - Integration and communication are already
inherent in the design - Close physical proximity facilitative close
coordination - Challenge is to improve flow through the facility
and streamline consistent with service needs of
customer - Tight focus on lean in the context of the
customer forecast - Ability to staff up or down to meet changes-
variable workforce - Value stream mapping- phased improvement plan
100 Service Level Is expected
18Improve Control- so how are we doing?
Perfect Order
- Cash Gap improved 15 days (3 month moving
average) between Dec05 and Oct08 - As the recession hit, cash emphasis continued to
drive inventory down and sustain gains in AR AP
Now 90
-15 Days
- Perfect Order (On time ) (in full )
(Perfect Condition ) (Invoice Accuracy ) - Baseline is 2Q09
2008 thru Oct
Cash Gap Days
19Sonoco vs competition in 2008 Cash Gap Performance
20Control- What is next?
- Each division receives a monthly stoplight chart
for their cash gap and perfect order performance - Each division continues to drive their supply
chain process capability improvements per their
roadmap - Accelerate improvements through implementation of
a Sonoco Performance System to standardize
metrics and work - Planning to launch pilots in mid 2009
- Partnership with Milliken
21Key Takeaways
- Lean pull systems are most effective in
combination with data driven, disciplined supply
chain practices - Demand Management is critical to prepare to meet
customer requirements - Best accomplished with collaborative planning
and real demand visibility - SOP provides the cross functional process to
make decisions based on the best demand
information available - Lean pull systems provide the response capability
to deal with the remaining error - Performance Management Systems are the logical
next step to standardize process and reproduce
the gains across an enterprise
22Any Questions?