Designing a broad change management program & implementing new planning & control techniques helped increased on-time delivery by 41% and reduced inventory by 31%

Ensuring sustainable change at Smith's Industries

An effective Sales & Operations Planning process is essential for any business looking to gain control over its supply chain. Sales & Operations Planning is all about aligning internal business capabilities to reliably deliver customer service objectives at the optimum cost. The challenge in implementing an S&OP process is two-fold:

 - Designing the process and the appropriate models to support effective decision making
 - Managing and embedding change at the most senior level within an organisation

One company who has successfully undertaken this change is a subsidiary of Smiths Industries, a manufacturer of commercial and defence marine navigation systems. WCI consultants had undertaken a detailed analysis of the operations of the subsidiary: on-time delivery to customers was running at 56% on standard items; 19% of standard ‘stock’ items were unavailable, yet annual stock turns were a lowly 5.2. A broad change programme was designed to transform key business process, implement new planning & control techniques and introduce strategic sourcing partnerships. In order to condition and synchronise the supply chain and provide the business with a single achievable plan, an S&OP process was required.

The reason that S&OP is so essential is that it co-ordinates what often appear to be conflicting business objectives.

 - The business wants to maximise customer service through product availability 
 - At the same time the business wishes to minimise inventory holding
 - Sales require rapid response to customer demands, especially on service items
 - Engineering demand flexibility to introduce product changes and the latest possible time to freeze designs, particularly on special items
 - The supply chain functions, manufacturing and purchasing, want stable product specifications, firm & smooth demand and sufficient lead time to respond

Key challenges
The first challenge in implementing an effective S&OP process is optimising these technical constraints so that the whole business operates to a single plan in a consistent manner. The second and greater challenge is changing the behaviours of the senior executives who hold the potentially conflicting objectives and through whom the S&OP decisions are executed.

Solution
In order to address the behavioural issues it is necessary to design a change programme that recognises the three dimensions of individual’s acceptance or resistance to change: rational, political and emotional.

The change project at Smith’s was designed to encompass the three dimensions. The rational factor was addressed via the design of the S&OP process itself, the design of supporting processes and the business case supporting the programme. Engagement and buy-in from the senior team was assured by their involvement in a series of process design workshops, regular project reviews and through the pilot meetings as the S&OP was implemented. This is familiar and comfortable ground for senior executives and the most easily addressed of the three factors, it is also the easiest area in which to identify and counter resistance as the arguments rely upon logic and reason.

However, arguments are rarely about logic and reason but about politics and emotion. The political dimension of change was addressed by ensuring strong leadership from the Managing Director of the business. Not only did he act as the chief sponsor for the whole programme and chair the project steering group but he personally led the S&OP workstream. This visible leadership and commitment clearly demonstrated to the whole business the significance of the S&OP process and by demonstrating appropriate behaviour the MD sent a clear signal not only to his direct team of senior executives, but also to the whole business.

The final dimension of emotion is the hardest to address and can often underlie resistance that on the surface appears to be rational or political. To ensure the emotional engagement of individuals to implementing the change programme a series of factors were built into the plan. Stakeholders throughout the business were interviewed to understand their position with regard to the change. Those who were both positive and negative were proactively engaged to promote acceptance of the change. Involvement of staff throughout the business in designing the new processes not only addresses rational buy-in but also promotes emotional commitment through ownership of the proposed solution. Realisation of achievements and recognition for those involved and affected in the change are also powerful motivators that create emotional commitment.

Benefits
By designing a change programme that addressed all of the three factors, not only was the S&OP processes successfully implemented but the supply chain performance was transformed. Customer service on standard items increased from 56% on-time to 95% on-time whilst inventory was reduced by 31%. Most telling of all as to the effectiveness of the change is that towards the end of the project the incumbent Managing Director returned to a corporate role within Smiths. Under the new MD, who came from another division within Smiths, not only did the S&OP process continue but thrived as it had become part of the fabric of the business, an essential tool in providing sustainable business performance.