Enterprise Sales and Operations Planning: Synchronizing Demand, Supply and Resources for Peak Performance
280
Enterprise Sales and Operations Planning: Synchronizing Demand, Supply and Resources for Peak Performance
280eBook
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Overview
Product Details
| ISBN-13: | 9781604277081 |
|---|---|
| Publisher: | Ross, J. Publishing, Incorporated |
| Publication date: | 10/01/2002 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 280 |
| File size: | 6 MB |
About the Author
Read an Excerpt
CHAPTER 1
OUT OF CONTROL
It's 3:24 a.m., and Mark Ryan is wide awake. That darn digital clock. It glows brightly in the dark and displays the time to the nearest minute.
Since Mark's laser surgery, he no longer has to put on glasses to see the clock in the middle of the night. He wonders how he lived without this technology.
It is not surprising that Mark is having another sleepless night. Ever since his promotion nine months ago to general manager of Universal Products, a division of Global Products and Services, Inc., Mark feels like he is in over his head. He has never failed at anything that he seriously attempted, but he is failing now.
Universal Products makes a wide range of products. Some are made to stock for quick delivery to customers, some are made to order with a wide range of options, and others are engineered specifically for individual customers. The division has been under significant pressure from its customers to improve on-time delivery and to shorten delivery lead times. Key customers are also pressuring Universal Products for lower prices, and the competition is nipping at the division's heels for every major account. Most troubling to Mark is that the division has not been hitting its sales and profit budgets for the year.
Of course, the customers and the competition are not really to blame. We haven't been helping ourselves, Mark observes as he rearranges the pillow in hopes of catching at least a few more winks before sunrise. Since he took over as general manager, customer lead times have actually gotten longer. And, as customers continually point out, the division is extremely unreliable when it comes to meeting promised ship dates. To make matters worse, manufacturing costs are higher than plan.
If only we could hit the numbers, Mark says to himself. Although everyone tells him they will hit their numbers, that has rarely happened.
No matter how hard he tries, Mark can't seem to get the division on track, and he knows that things have actually gotten worse since he took over. Now he dreads reading his e-mail in the morning. Yesterday, he had twenty-seven new messages from customers, members of his staff, suppliers, and yes, corporate management. And none of the e-mails were positive.
The most upsetting e-mail was from Jack Baxter, president of Global Products and Services, Inc. and Mark's boss. Jack hired Mark into the corporation fifteen years ago, and Mark has been working for Jack through his promotions and division moves.
Mark has never let Jack down, but he knows that Jack is starting to question his ability to lead the division. He overheard Jack on the phone during his last visit to Colorado, and he used the phrase "the Peter Principle." Lord knows what phrases Jack uses when I am out of earshot, Mark says to himself.
All Mark knows for sure as he tosses and turns in bed is that he is running out of time. "I have to get this division improving or I am gone. I feel like I have been given a chance at bat and already have two strikes against me. The rule is three strikes and you're out!" Mark says as he punches the pillow one more time.
* * *
Despite lack of sleep, Mark is looking forward to the new day. He likes the sunrise and pulls open the curtains to see it emerge over the mountainscape. It is quiet. The early birds have not yet begun their singing, but Mark knows that in a few minutes, the air will be full of the sounds of the morning.
While watching the sun come up, Mark feels happy to be living in the Denver area. He likes living within walking distance from work, even though he doesn't actually walk to work as often as he could. Living less than two miles from work beats the seventy-five-minute commute he put up with before moving to the eastern slope of the Rockies.
His only regret is that he won't be able to move his family until after the school year. His son, Chad, graduates this year, and there was no way he would consent to being uprooted from his classmates, friends, and studies. As always, Mark's wife, Cheryl, has not complained about the sacrifices required by another corporate move, especially being apart from Mark. She is anxious to move to Colorado. She much prefers to be in the mountains with the clean, dry air.
The whole family enjoys the majesty of the mountain peaks, the smell of pine, and the mountain wildflowers, but for Cheryl, mountain living is a passion. When she was a college student, she worked summers in the high country in Yosemite. Living in the flat, humid East Coast has not been easy for her. While they enjoyed the past six years on the eastern seaboard, Cheryl would point out from time to time that "it's still not the West!"
It will only be a few more months now before we are all here as a family, assuming I am still here, Mark says to himself.
Even though it is going to be a sunny day, Mark knows that the temperature is not expected to rise above freezing. That is a good excuse to drive to work.
As he pulls into the parking lot, Mark sees that Ray Guy, the final assembly manager, is already at work. Mark knows he has really been putting the pressure on him. He told Ray yesterday, and the week before, and the week before, "If we don't get shipments up, we won't even hit last year's numbers, much less the 15 percent growth I promised to deliver when we did the annual plan!" If I can only hit and exceed last year's numbers, Jack will give me a shot at another year, Mark thinks. But the prospects do not look good.
What frustrates Mark is that much of the current situation is out of his control. Nobody told him that last year's numbers were achieved by giving special deals as incentives to customers to make their purchases last year instead of this year. And, of course, no one changed the sales budget to reflect the lower sales this year as a result of the early orders. Nobody also told him that the division was burdened with excess, old, and obsolete inventory that was the result of the accumulated sins of the four division general managers before him. And nobody told him that the executive "team" wasn't a team at all. Mark's first staff meeting almost ended in a fistfight!
When Jack approached Mark about becoming the general manager, he told Mark that he would be moving into a division "under control and poised for growth." On the surface, that appeared to be true.
Universal Products' plant and division headquarters are relatively new, attractive, and comfortable. The facility is designed for a combination of flow manufacturing and job shop production, which makes sense for manufacturing a mix of high-volume, medium-volume, and one-of-a-kind products. The division has a good reputation for solid technology and high quality.
In reality, Mark has found that nothing is as it seemed on the surface. Under control is actually under water, and poised for growth turns out to be poised for disaster.
Every day, Mark is confronted with a new set of surprises, and he doesn't like surprises. Even the pleasant surprises are a symptom of being out of control.
As he walks into the plant, Mark mumbles under his breath, "They said I should not have any problem with the organization. I just had to manage the growth. Right!" Mark has taken to entering the building each morning through the shipping and receiving area. He purposely walks through shipping and receiving and then the assembly area to observe where there may be problems. It is usually obvious. He can tell by where groups of assembly workers, supervisors, and a manager or two have gathered. There are two such groups this morning.
Mark doesn't stop to hear what they are talking about. He is anxious to put his briefcase in his office, pour a cup of coffee, and get started on a new tack. Today is the first day of his "company correction" sessions with key individuals in the division.
The purpose of these private, one-on-one sessions is to finally get to the bottom of the problems within the division. Mark has heard all sorts of complaints from managers, customers, and Jack and others in the corporate offices. He knows that complaints are generally symptoms of a deeper problem. He also knows that he must get to the cause of the problem and then implement the solution.
What baffles Mark in particular is that the division implemented many different operational improvement initiatives over the years. Those improvements seem to him to have resulted in higher costs and lower performance. Why? What is the key? What is the secret? What would the truly modern, yet experienced general manager do? Hell, what am I going to do? he asks himself as he sets his briefcase on his desk and trudges down the hall, coffee cup in hand, to the cafeteria.
* * *
Mark Ryan and Ray Guy, the final assembly manager, sit down for the first of Mark's one-onone interviews. Mark starts the conversation. "Thanks for coming in, Ray," he says. "I saw that you were here early again this morning. Is the final assembly area making any progress? I already had two e-mails and two phone calls regarding the Anderson job this morning. Are we getting close to shipping it?"
Ray's face reddens. He is noticeably upset. "Quite frankly, I don't know for sure," he replies. "Every time I think it is under control, something else happens. We would have had it out last week except that planning came in with that must-ship Lucas order last Wednesday. We had to stop work on the Anderson job, and we had to take some of the completed parts from the Anderson job to ship the Lucas order. If you would just get Susan Callahan in planning to clean up her act, we could make the shipments. Every day is a surprise. Every day I come in wondering what fire we will need to put out. We had the whole crew here on the weekend only to find that manufacturing didn't give us all the parts. Mark, give me the parts, and I will make the product and make shipments. Jim Simpson in manufacturing didn't have his people in here on Saturday even though he knew they owed us the parts. You keep preaching teamwork. Where is it? Working twelve-hour days and on weekends only to find I don't have what I need to build the orders is crazy."
Ray pauses for a moment, letting his fingers brush through his close-trimmed salt-and-pepper beard.
"I appreciate your comments," Mark says.
Ray holds up a hand to signal Mark to stop. "Mark, I'm not through," he says. "I'm glad you asked for this private session. My people are busting their butts. They work long, hard hours, and it's not just for the overtime. They want to feel good about their jobs. They want to feel like they have done what the company wants done, but all they ever hear is how they're screwing up. They know our on-time delivery to customers is in the low 80 percent range. They know seventeen out of every hundred orders are late or not filled completely. They also know costs are up due to all the overtime and that quality is suffering because of the pressure to ship late jobs. What they don't know is what you are doing to fix the problem. Planning is out of control, and Jim in manufacturing just doesn't deliver us the parts we need when we need them. Mark, I know that Susan in planning is your person of choice, but what has she done since she came on board? Things are worse now than before when Dave was here. When are you going to fix that, Mark? The problem is not me or my crew — it's the rest of the organization. They work for you."
Ray realizes he might have gone too far with his last points. He takes a deep breath and leans back in his chair. "I'm sorry to come on so strong. I'm just frustrated," he says. "By the way, how is your family? When are your wife and son going to move out here?" Stung by Ray's comments, Mark thinks a little cooling off is in order. "Thanks for asking. Cheryl and Chad will be moving here the end of May," he replies. "I sure am getting tired of only seeing Cheryl every other week, even if it is for a long weekend. And flying across the country is not much fun anymore."
Mark decides to end the conversation. He does not think it will be any more fruitful. Ray obviously is frustrated and not in a frame of mind for problem solving. "Ray, thanks for your input," he says. "I appreciate your being open, honest, and frank. I will get back to you."
* * *
Susan Callahan, the planning manager, strides confidently into Mark's office. She is one of the new managers Mark brought on board to help solve Universal Products' problems. She is in charge of the planning organization, which was formerly called production and inventory control.
Mark and Susan chitchat easily about the Colorado weather, getting settled into their homes, and what they do with their free time now that they don't have long commutes to and from work. Then Mark decides to get down to business. "Susan, you know why we are having this session," he says. "The division is not performing, and the heat is on."
Not wanting to have a repeat of the Ray Guy conversation, Mark decides to set some boundaries. "I want your view of the situation," he says, "but first let me talk for a bit." He explains to Susan that he hired her six months ago with high expectations. The planning organization had been decimated as a result of one of the previous rightsizing initiatives, and the division was out of control.
"You assured me that you had solid experience and could build the planning organization into a truly professional team," Mark says. "I just finished getting an earful from Ray Guy, and he had nothing good to say about the planning organization. He, in essence, said that our plans are not coming together, are not in sync. What's happening?"
Susan bristles. She pushes her short black hair back and plants both feet on the floor. "Let me first say that I don't appreciate the cheap shots from Ray," she responds. "My planners are working very hard to produce valid plans and schedules. They are here early, and they stay late. As you know, all but one in my organization is certified by the American Production and Inventory Control Society, the professional organization. You know it as APICS. If the division is in trouble, it is not because of the planners. I have turned that organization from virtually nothing into a showcase group. The problem is that no one here builds to schedule. We create great schedules, but nobody follows them. Manufacturing is the worst. They make whatever they choose whenever they choose. Jim Simpson is from the old school, where the only things that count in manufacturing are productivity and efficiency. Everything is done for lower costs — unless, of course, somebody from Mahogany Row puts the pressure on him to make a particular shipment. Why, just last week you went straight to manufacturing and told them to stop what they were working on and finish the Lucas job. If my people give schedules to manufacturing and you tell manufacturing to ignore the schedules, what kind of message is that? No, Mark, the problem isn't with my planners. The problem is that no one will follow the schedules."
Susan has more to say. "And another thing. Purchasing is as bad if not worse than manufacturing. I think purchasing must tell its suppliers to deliver at their convenience. It amazes me how we can have so much inventory yet can't ship product because purchasing didn't get the parts from our suppliers. Give me that group, and I will turn it around in a hurry. I'd start by outlawing the three-martini lunch."
Mark knows he hit a nerve with Susan. She has high standards and is perceived as being a very thorough professional. He decides she needs reassurance, but first he needs some answers.
"You know I respect the work you have done, Susan," Mark says, "but if your plans are so good, why doesn't the organization follow them? It can't just be everybody else's fault. Where are you helping?"
Susan sighs. "Mark, I am glad you asked. Here's the situation. We put in place schedules that have valid dates and balance demand and supply. But then sales sells products not in the schedule for immediate delivery. The people in sales only know one word, and that word is yes. I know Sam Wente has been here a long time and has strong relationships with our customers, but someone has to represent the supply side of the business in negotiations. You know, Mark, anybody can get an order if all they ever have to say is yes. You want it when? No problem. You want a special feature made out of unobtainium? No problem. You want a discount? No problem. You want us to keep a three-month supply of inventory? No problem. People who only know how to say yes do not know how to sell. Anyway, these unplanned orders come in for immediate delivery and everyone in the company says yes. All the previous schedules immediately go out the window."
Mark cannot help chuckling. Susan always has a way with words. He will remember "unobtainium."
Susan is not finished, however. "And one more thing," she says. "We identified a capacity constraint in the testing area months ago, and you continue to say no to the capital equipment requisition needed to increase the capacity. Our schedules were based on getting the new equipment. So again, even you are causing us to miss schedules. Ray Guy tells me that every time he brings you the requisition, you ask for more justification. Mark, quite frankly, some of us think you are afraid to make the necessary decisions to get things done."
(Continues…)
Excerpted from "Enterprise Sales and Operations Planning"
by .
Copyright © 2003 J. Ross Publishing, Inc..
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Table of Contents
Foreword,
Preface,
Acknowledgments,
The Authors,
About Oliver Wight,
About APICS,
The Company and Players,
Chapter 1 Out of Control,
Chapter 2 A New Beginning,
Chapter 3 Facing Reality,
Chapter 4 Sales and Operations Planning Fundamentals,
Chapter 5 Sales and Operations Planning Review Meetings,
Chapter 6 Sales and Operations Planning Executive Meeting,
Chapter 7 Integrating Product Development and Initiatives,
Chapter 8 Demand Management Fundamentals,
Chapter 9 Demand Management Techniques,
Chapter 10 Commitment,
Chapter 11 Global Sales and Operations Planning,
Chapter 12 Epilogue,
Bibliography,