HOW WELL DO YOU KNOW YOUR CUSTOMERS NEEDS?

Do you get frequent emergency orders?

How does your customer really feel about your performance?

How do you feel about your customer?  (Please don't give me the “customer is always right” speech)

Are there opportunities for you both to save money and inventory?

Do you and the customer agree on the goals and objectives – do you know what they are?

Do you understand how your customer operates?

Do they understand your operations?

 

Seems simple right?  Well I’ve spent the last 14 years trying to perfect the best tool to drive this kind of discussion.  Some call it the SLEA (Site Level Executional Agreement) a tool meant to drive rich discussions for both the customer and the supplier, documenting all the actions that are efficient (or driving towards “no touch”).

 

In this document we begin with detailed segments:  Feedstock strategy, production and inventory philosophy, quality requirements and expectations, ramp up and down plans, planning lead times, communication expectations, business continuity plans, downtime schedules and broad spectrum contacts.  All of these segments help both parties understand each other's position and flushes forward any risks or outages to be detailed on an action plan summary.

 

This tool requires pre-work, coordination and generally lots of post work to ensure you can answer the above with confidence and drive sustainable improvements.  It also requires a multi-functional team internally and externally to drive the best results.  Post meetings generally summarize to the leadership the outcomes/finds, watch-outs and potential needs for alignment for cost, risk or inventory changes.

 

Being a good practioner of this type of communication document is generally enhanced by – industry knowledge, openness to hear the hard truth, and willingness to probe the “sacred cows”.  You have to be willing to challenge internally as well as externally.  Sometimes what you want is impossible or costs too much and people are apprehensive to put the moose on the table.

 

These types of meeting are generally driven with select relationships that fall into a few categories for me personally:  Large/Complex with Risk; Relationship/Reliability Issues; or a New Relationship.  Staffing and experience will really determine how many of these critical discussions you can have, as even with the well established relationships – inefficiencies will arise out of these meetings that will drive follow up work.

 

Action planning – so really critical to keep this a living document.  Too many times I’ve witnessed the massive amount of work and time to coordinate and execute the above discussions for them to fall into a computer file and not to be opened again.  This is a complete waste of time and effort – if you cannot follow up, don’t have the meetings.

 

Personnel changes – a huge opportunity of this kind of documentation – with the rapid change of personnel in most companies this process creates a historical roadmap of why and how things are done and also provides a great opportunity to be used as a training document for new members on either side of the supply chain.

 

Know when to say “when” – when you have achieved your desired goals and feel you have the optimization down – move on.  Ensure you have some maintenance communication and some results indicators to let you know if the process is failing, take your resources and begin to expand your horizons of new supply chains to optimize.  Many make a critical mistake of trying to do this process with “ALL” – your staffing and results will suffer if you attempt this strategy.  Tier your supply relationships and make a 5 year plan!

 

 

 

Synchronization - let's talk about materials and how they are effected from upstream choices...

Material, while usually the most expense part of your Total Manufactured cost, a huge contributor of your inventory totals and generally the longest leadtime in your end to end supply chain - so little is known or designed to ensure reliability and efficiency is guaranteed.

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Forecast vs Variation - always one of my favorite conversations and one that is least liked by my purchases agents, leadership or planning organizaitons.  Forecasts for most large companies of consumer goods underwent a transformation of their shoppers and their habits during the economic down turn.  Consumer came back, but not at the same size, venue or brand.  This has shook the foundation of my forecasting systems since the are heavily weighted to the past use.  This conversation is needed to discuss what I like to call "variation insurance"....how far above and below can the supplier meet my needs - most contacts state some mute 1.3 c:d ratio - what if my forecast goes 2-3x or fails to produce expected sales?  All critical discussions to have with your leadership - as options are expensive at times, but out of stock is worse.  Packaging used to be the critical area for these discussions (I would have my suppliers provide me with the top 10 over and under performing materials for discussion), but in today's chemical industry complexitities with acquisitions, choices slimming on available items and asset utilization - these chemical materials need a thorough discussion and review (oddly the smallest and most restricted materials are generally the most critical in a formula and at most risk with the lowest visibility)

Promotions - the sales force generally has booked these events with the customers months in advance, why is it generally a surprise for the supplier?   How do we communicate the sale, in forecast, as a stand alone conversation or a shake of the "crystal ball".  What happens when we oversell, is the supplier committed or is it additional costs, or not at all - what if you do not consume the forecasted amount - do you have to take it?  is there a restocking charge?  do you leave the supplier holding the bag (wait til negotiations come around again).

Changes in Formulation (you or the supplier) - do you meet with R&D to understrand what is happening in the near and distant future.  Researchers are not supply chain experts - we make a beautiful pair of knowledge when fused.  We can teach them about the industry as supplier experts, they can teach us about the changes they are thinking about.

Lead times to consider congestion - regionally and now especially with the port situation and customs requirements and governmental changes.  I mentioned some synchronization tools in an earlier blog on responsiveness you can reference.

All materials are NOT equal - especially in packaging, but also in terms of critically to your formula or brand equity (consumer noticeables).  I mentioned above the beauiful relationship between R&D and Material Managers - this is also true when it comes with criticality to the formula or equity.  Knowing which materials can be substituted in like or % of inclusion can be powerful.  Also knowing which materials are critical with no substitution is game changing during a crisis.

Purchasing Materials - what is going on with the supplier or the industry?  Knowing these things can allow yourself and planning (including leadership) smart decisions on buy ahead, price bracket improvements, or multiple supply sources.  Knowing where the heat map is gives you a step up on your competition.

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So when you think synchronization and end to end design - don't forget the impact of materials on your process and the supplier's ability to meet your vision - especially when looking for low cost options to save or inventory reductions to hit goals - understand the impact so you don't disappoint the customer!