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WORDS FROM WALLACE - OCTOBER 06
S&OP AND LEAN MANUFACTURING -
CAN THEY WORK TOGETHER?
Lean Manufacturing is a superb tool, and many companies use it to great advantage. The power within Lean leads many people to become very
enthusiastic about it; they become zealous in promoting its benefits. They're sometimes referred to as "lean zealots."
However, some of the zealots go a bit too far; they can't see the benefits in anything else. The mindset: "You don't need to do any of that other
stuff; all you need is Lean." And therein lies a problem.
Many companies using Lean have made great progress. But they could be even better - in some cases much better - if they were to couple the power of
Lean with the power of Executive
S&OP.
How so? Well, it gets back to the basis for Lean Manufacturing: the Toyota Production System. Many Lean users got their training and their consulting
support from people who either worked at Toyota or who were trained by ex-Toyota employees. As a result, the Lean processes in those companies are
very similar to how Toyota does it.
So what's wrong with that? After all, isn't Toyota one of the best manufacturing companies in the world? Yes, it certainly is. But - and forgive me
if this sounds sacrilegious - Toyota is not totally Lean.
Yes, they're extremely Lean up to the point where the cars and trucks roll off the assembly line. However, at that point, pull gives way to
push. Toyota pushes vehicles into a finished goods inventory estimated conservatively to be around $3 - 4 billion. This inventory -
on the dealers'
lots - serves as a huge shock absorber, insulating Toyota manufacturing from the ups and down of demand in the marketplace.
Many companies are not that fortunate, but rather are more tightly linked to their markets. They don't ship to a group of happy, contented Toyota
dealers but rather to companies such as Wal-Mart, Boeing, Chrysler, Home Depot, Microsoft and the like -- who have a reputation for being demanding
and wanting their
stuff quickly. And some of the products involved are highly seasonal, making things even more challenging.
Companies such as these, and there are thousands of them, need the very best process they can get to
identify shifts in demand quickly and to realign production volumes with those shifts. That "very best process" is Executive S&OP.
Lean Manufacturing thrives on linearity of demand. When demand is not linear, Lean needs help. For that reason, more and more Lean users are turning
to Executive S&OP - even though it was not invented as a part of the Toyota Production System.
For more on this, see our one-pager: Lean
Manufacturing and S&OP: You Need 'Em Both. and a few pages from Sales & Operations Planning: The Executive's Guide. It may help some of the lean zealots in your company
see the need for Executive S&OP.
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In conjunction with the Institute of Business Forecasting, Bob Stahl
and I are presenting a two-day session
on
Executive S&OP. The
two-day format
gives us ample time to cover S&OP from soup to nuts, so to speak.
We'll be talking about high level issues such as the participants in
the Executive
meeting, nitty gritty topics such as how to display the S&OP
spreadsheet information, and lots of other items in between.
You may want to consider attending or sending others from your company if:
- You're considering Executive S&OP but want input on how best to get started.
- You've been having difficulty "selling" S&OP to your executives.
- You feel that your Executive S&OP process is broken and want to know how to fix it.
- You have some new people on board who need initial education on Executive S&OP.
- You're aware that S&OP is changing and becoming more powerful, and you feel the need for refresher education.
Workshop Learnings include:
- Learn what authentic Executive S&OP is and how it works
- Understand the relationship between Executive S&OP and the other
parts of Sales & Operations Planning, such as:
Demand Planning
Master Scheduling
Plant and Supplier Scheduling
Distribution Replenishment
- Learn how to assess gaps between your company's current performance
and how Executive S&OP is used by "best practice" companies
- Develop a roadmap for going forward, particularly how to engage the
executive group regarding the critical area of hands-on participation
in the S&OP process
- Understand the criteria for selecting product families, units of
measure, and target values for customer service, inventory levels, and
order backlogs
- Learn how the results of monthly S&OP sessions drive day-to-day activities
in Sales, Purchasing, Production, and Distribution, as well as current
financial realities and future plans
- Discover how Sales & Operations Planning enhances teamwork among
executive and management teams
Click here to: View workshop details
Click here: to Download our Executive S&OP flyer for
full schedule
Click here: to Register on-line
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Becoming Demand Driven
A prerequisite for becoming customer demand driven is to do effective planning before you get the customer order. Create the
conditions so you can respond quickly to customer orders, often after the orders are received but before the product is finished. This process is
called Postponement and it involves having the right capacity and
materials available when a customer order arrives.
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Two key processes make Postponement possible: Executive S&OP and Lean Manufacturing. Lean enables a company to make products quickly and make them
right the first time. Executive S&OP provides a "window into the future" so that demand shifts can be seen early, in time to make supply
side changes effectively and economically.
This is an excellent example of the blending of two very different processes, with the result that the whole is greater than the sum of the parts.
Our book Building to Customer
Demand covers Postponement in detail. You may have high-payback opportunities for Postponement in your
company.
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