Change Management what we learned about implementing .Sonoco Products Company keith.holliday@

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    Keith Holliday, CSCP - Director Corporate Supply Chain & Logistics

    Sonoco Products Company

    keith.holliday@sonoco.com

    Change Management what we learned about

    implementing an S&OP Process

    IBF-APICS Best of the Best S&OP Conference

    June 15, 2012

    Eleven Decades of Packaging Leadership

    Founded 1899 in Hartsville, S.C.

    Diversified provider of consumer and industrial

    packaging and services

    $4.5 billion in sales 340+ operations in 35

    countries

    19,000 employees Products sold in 85

    countries

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    Global

    Plastics

    Industrial

    Converted Products

    Primary

    Materials

    Global

    Services

    Global

    Flexibles Global Rigid Paper

    and Closures

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    New Addition to the Sonoco Family

    FY 2011E Revenue(1): $214mm FY 2011E Revenue(1): $111mm FY 2011E Revenue(1): $117mm

    Descr

    iption

    Manufacturer of highly engineered molded

    foam applications and custom packaging

    solutions

    Acquired Createc on Dec. 31, 2010, a direct

    competitor with expertise in protective

    packaging (e.g. appliances, electronics) as

    well as automotive and component parts (e.g.

    rear bumpers, side panels)

    15 plants, 970 employees

    Leader in protective temperature-assured

    packaging, providing manufacturers with

    solutions that maintain specified temperature

    ranges during transport to end user

    Acquired GreenboxTM, a sustainable thermal

    management system in June 2010; and

    licenses patented PureTempTM phase change

    materials.

    8 plants, 480 employees

    Market leader in consumer retail protective

    packaging

    Total solution provider with capabilities,

    including design, sealing machines and

    tooling, and both plastic and printed

    packaging materials.

    7 plants, 780 employees

    Produ

    cts

    5

    Sonocos Changing Mix of Business

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    Sonoco serves many familiar companies

    S&OP Launch in 2007 Goal was a Lean

    Supply Chain

    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

    How to achieve this objective with different

    businesses and types of supply chains ???

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    Consumer Packaging- Supply Chain

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    Customer Sonoco

    Paper must have Forward, Demand Based planning for Operational Efficiency

    Conversion must build to order with short lead times and high service levels

    Industrial Products- Supply Chain

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    Paper

    Manufacturing

    Converting

    Tubes & Cores

    Composite Cans

    http://www.sonoco.com/sonoco/Products/Paper+mill+cores+and+accessories/ipd_pulp_and_nonwoven_cores.htmhttp://www.sonoco.com/sonoco/Products/Paper/pap_recovered_paper.htm

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    How to create more capable supply chains

    Conflicts between disciplined planning & agile response

    o traditional production to a forecast with set lead time agreements with customers (and suppliers) and

    o 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

    o collaborative demand management,

    o sales & operations planning (S&OP)

    o lean transformation and cash/ cost optimization.

    Change Management Elements Required

    Active Leadership Sponsorship o S&OP must deliver important business results

    External Expertise o dont know what you dont know

    Capable People o People used to working in silos

    o Now must work cross functionally

    Good Data o It all starts with a demand picture

    o Data must be displayed/ presented clearly

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    Leadership Sponsorship

    Aimed at Important Business Objectives- address the pain o Working Capital- addressed reduction in free cash flow- every

    leader has WC Objectives

    o Productivity- Diminishing returns from traditional cost improvement

    so supply chain optimization was key improvement target

    o Perfect Order- Customers do not see Sonoco service levels as

    differentiating, started measuring in 2007

    Paper selected as the initial division to implement S&OP o Progressive GM that saw the value

    o Paper is traditional push process that would benefit

    o Paper is high impact division supplies 3 other Sonoco divisions as

    well as external customers

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    Basic Disciplines across Sonoco

    Initial work on Cash Gap in 2005- addressed the pain with discipline o Ongoing Aged/ Aging Inventory managing process

    o Monthly working capital reviews with the business teams

    o Performance management with working capital/ inventory management

    objectives

    o Performance data reported and shared down to the plant/execution level

    Initial work on Perfect Order- connected the work to Customer impact

    o Repeatable measurement process

    o Root cause analysis of misses

    o Visible reporting vs improvement targets

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    Top few common areas

    o Demand Forecasting/ S&OP

    o MRP/ Mfg Optimization/ Inventory Management

    o Sourcing/ Logistics/ Perfect Order

    o Distribution asset optimization

    S&OP was part of the overall Supply Chain Effort - many

    projects were launched

    Each Division has mapped their own set of supply chain priorities Divisions are piloting different areas based on their business priorities

    o Div 1 is piloting S&OP and Demand Management systems o Div 2 is developing improved demand forecasting for internal divisions o Div 3 is driving MRP o Div 4 is driving Distribution asset optimization

    Forecasting

    and

    Demand

    Planning

    Order

    Management

    and

    Scheduling

    Manufacturing

    Execution

    Finished Goods

    Inventory

    Management

    Warehousing,

    Distribution,

    and Reverse

    Logistics

    Customer

    Forecasts/

    CPFR

    Forecasting

    Processes

    & Systems

    Forecast

    Accuracy

    Sales & Opns

    Planning

    Advanced

    Planning &

    Scheduling

    Capacity

    Management

    CSR Order

    Execution

    Process

    Business Rules

    Qty, Lead time

    Delivery Reqmts

    Materials

    Requirements

    Planning

    Sourcing

    Process

    Integration

    Supplier Mgmt &

    Integration

    Raw Matl

    Management

    Inventory

    Record

    Accuracy

    Inventory

    Management

    & Safety Stock

    Inventory & Svc

    Tradeoffs

    OTD/PerfOrder

    VMI/SMOI

    Consignment

    Process

    WH/Dist

    Asset Optimization

    Shipping

    Logistics &

    OTD Metrics

    Material Returns/

    Reverse Logistics

    Plan

    Metrics and Governance Inventory, Perfect Order, SCM Cost

    Organization, Systems, and Policies

    Supply Chain People Development

    Purchase,

    Receive,

    Store/Manage

    Raw Materials

    Source Make Deliver-Return

    Schedule

    Execution

    Master

    Scheduling

    Manufacturing

    Optimization

    Constraint

    ManagementTMS Data

    integrity

    Oliver Wight trained our leaders and process participants for each step in

    the 5 step process

    Supported the Process initially with spreadsheets and trend analysis in

    Minitab

    Displayed using a web based display tool

    Built support for and credibility for the process, then looked for a software

    tool to improve integration and

    analysis

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    System follows Process!

    External Expertise to install the Process

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    Data- Logility installed in 2009 to improve demand analysis capability (data removed)

    Data - Summary RCCP Regional Machine Loading

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    Data- Ability to see demand by Machine allows Sales to Shape Demand

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    80.0%

    82.0%

    84.0%

    86.0%

    88.0%

    90.0%

    92.0%

    94.0%

    96.0%

    98.0%

    100.0%

    102.0%

    104.0%

    106.0%

    Percent of Planned Capacity Load By Machine - Next 12 Months

    Div Avg Load 100% Line

    People Development

    Providing Local CSCP training to develop our supply chain people capability ~40 certified

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    Cash & Customer so how are we doing?

    Perfect Order = (On time %) * (in full %) * (Perfect Condition %) * (Invoice Accuracy %)

    As demand has filled plant capacity, perfect order performance has suffered and expedited freight has increased

    Cash Gap improved 14 days (full year average) between Dec05 and Mar10

    As the recession hit, cash emphasis continued to drive inventory down and sustain gains in AR & AP

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    Now ~92%

    S&OP Ongoing Success Factors

    Ongoing routine S&OP meetings Structured meeting agendas Establishing TRUST in the numbers and people from various

    departments

    o Cross-functional participation

    o Participants empowered to make decisions

    o Pre-work to support meeting inputs

    An unbiased baseline forecast to start the process