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Building a Lean Supply Chain Blending Lean Pull with Planning Excellence


Building a Lean Supply Chain. Blending Lean Pull with Planning Excellence ... Sonoco Products has blended the use of forecast based supply chain practices ... – PowerPoint PPT presentation

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Title: Building a Lean Supply Chain Blending Lean Pull with Planning Excellence

Building 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
  • The intent of this discussion is to share our
    approach to improving a critical business
    process the supply chain
  • Sonoco Products has been a traditionally
    organized manufacturing company functions
    organized under a general manager with PL
  • Lean and Six Sigma have been viewed as a set of
    tools helpful in taking out cost
  • The supply chain was viewed like any other
    function a set of practices to be employed in
    support of making product and a cost to be reduced

Our Journey began with the realization by
leadership that our supply chains were not
capable of delivering the performance desired
Eleven Decades of Packaging Leadership
  • Founded 1899 in Hartsville, S.C.
  • Diversified provider of consumer and industrial
    packaging and services
  • 4.1 billion in sales
  • 300 plants in 35 countries, 17,500 employees
  • Products sold in 85 countries

Global Consumer Packaging and Services
GroupBusiness Segments
Consumer Packaging
Packaging Services
Rigid Paper
Service Centers
Flexible Packaging
Rigid Plastic
Ends and Closures
Global Industrial Products GroupBusiness Segments
Tubes and Cores/Paper
Global Paper
Protective Packaging
Global Tubes and Cores
Wire and Cable Reels
Sonocos Customers
Lean Six Sigma Experience
  • Sonoco launched lean six sigma in 1997 with over
    1200 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

How to create more capable supply chains
  • Conflicts between disciplined planning agile
  • 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.

What makes a lean supply chain lean?
  • Low Inventory
  • Synchronized Flows Information, Materials,
  • 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

But how achieve this objective with different
businesses and types of supply chains was not
immediately apparent
Consumer Packaging- Supply Chain
Industrial Products- Supply Chain
Conversion Step
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
Define the Pain
  • 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
  • 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

Measure Analyze
  • Set Cash Gap as a corporate measure and priority
    in 2006
  • Corporate teams to drive components (AP, AR,
  • Selected Perfect Order as the corporate customer
    experience metric in 2007
  • Put metric in place in 2007, began reporting in
  • Developed a baseline based on 2Q08 and set
    improvement objectives
  • Supply Chain Cost Metric
  • (in development)

2005 Cash Gap Benchmark (CFO Magazine REL
Measure Analyze
  • Began using a hierarchy of metrics to work on the

Source- AMR Research
  • Initial work on Cash Gap- addressed the pain with
  • Ongoing Aged/ Aging Inventory managing process
  • Monthly working capital reviews with the business
  • Performance management with working capital/
    inventory management objectives
  • Performance data reported and shared down to the
    plant/execution level
  • Initial work on Perfect Order- connected the work
    to Customer impact
  • Repeatable measurement process
  • Root cause analysis of misses
  • Visible reporting vs improvement targets

Improve- addressed process capability 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
  • Div 2 is developing improved demand forecasting
    for internal divisions
  • Div 3 is driving MRP
  • Div 4 is driving Distribution asset optimization

Improve- 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
  • MAPE on raw material demand averages 5-10
  • Paper manufacturing
  • Runs integration process through monthly SOP
  • Integrates input from 3 internal divisions and
    external sales
  • Operates a forecast based push process for asset
  • Each mill tracked weekly on Perfect Order
  • ABC categorization for inventory strategy lead
    time promise

Improve- 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
  • Once the supply chain to supply chain discussions
    began, agreements to openly share information
    were easy
  • Worked together to design and map information
  • 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

Improve- 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
  • Challenge is to improve flow through the facility
    and streamline consistent with service needs of
  • 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
Improve 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 2Q08

2008 thru Oct
Cash Gap Days
Sonoco vs competition in 2008 Cash Gap Performance
Control- 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
  • Accelerate improvements through implementation of
    a Sonoco Performance System to standardize
    metrics and work
  • Planning to launch pilots in mid 2009
  • Partnership with Milliken

Key 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

Any Questions?