Industry Case Studies, Specialty Chemicals

Specialty Chemicals: Re-engineering Operations Processes to Improve the Supply Chain

Background:
This specialty chemical producer needed to improve it's overall supply chain operations processes. The client recognized that had acknowledged it's supply chain management and operational execution several processes that inefficient and restricting both business performance as well as the ability to respond to growth opportunities. They knew that a comprehensive review of their supply chain operations was needed to determine the proper approach to correcting these problems.

Situation:
Formed as the result of a joint venture, the client's business processes and systems were never completely rationalized or aligned to properly support the new business's supply chain operations. The resulting processes were a mix of tools and process from both joint venture partners selected primarily based on the comfort level which individual personnel had with particular tools. On a point basis these tools and processes were generally effective, but when applied as an overall system, they actually inhibited effective supply chain management, planning, coordination, and execution.

These inefficiencies were clearly evident and demonstrated by the fact that the client was operating it's supply chain with significant protection throughout in the form of excess inventory, unnecessary collaboration for virtually all levels of decisions, and poor customer service in spite of extensive expediting. The supply chain management processes were basic and encouraged continual production rescheduling which resulted in poor production efficiencies and excessive overtime as well as unsynchronized inbound/outbound logistics. In summary, the situation was very stressful to the client personnel involved in the process, unresponsive to client requests, and laced throughout with unnecessary complexity, waste, and inefficiency. In spite of these internal issues, the client's business was growing and the client knew that unless these supply chain issues were corrected - and fast - that they would be unable to service the growth opportunities and would likely have trouble sustaining their current business volumes.

Solution:
The client engaged EnteGreat to review their supply chain operations and formulate a plan for correcting the situation in a structured manner that was suitable to the client's business and cultural situation. As such, EnteGreat applied it's Supply Chain Operations Vision & Strategy methodology to help the client understand it current situation, it's desired future state, and an appropriate migration plan to change their overall supply chain management business processes.

The project was performed using EnteGreat's standard Supply Chain Operations Vision & Strategy process, which included the following major activities:

1. Development of an as-is model (of the client's current supply chain operations), EnteGreat reviewed the existing supply chain operations environment based on evaluation of various operational documents, interviews with various supply chain operations stakeholders, as well as through the observation of various practices, including planning, scheduling, materials management, and order management at the client's facilities. From this information set, EnteGreat produced an overall As-Is model s representing key business processes within the existing client environment.
2. Identification of Disconnects
   As a byproduct of the As-Is modeling effort, EnteGreat captured and cataloged the disconnects, inefficiencies, and issues associated with the current supply chain environment. These items were categorized based on specific criteria including business impact, position within the client's supply chain operations, type of disconnect, etc. This data enabled EnteGreat to quantify issues and opportunities within the client's supply chain environment and establish priorities for the future state supply chain operations.
3. Formulation of Opportunities for Improvement
   By synthesizing the As-Is model and disconnects all of the information, EnteGreat established identified areas for improvement based on immediate need, business impact, return on working capital, industry best practices, industry benchmarks and metrics, and long-term strategic fit. These opportunity areas established the basis for specific initiatives that were investigated and refined in further detail.
4. Development of a To-Be Future State Model (of the Recommended Future State Supply Chain Operations) EnteGreat determined alternative solution concepts for the client's future supply chain operations and reviewed the solution alternative concepts with the client to develop a preferred supply chain operations recommendation. The desired future state supply chain operational environment was documented using a SCOR 1 model to define the specific functions, data flows, decision processes required to operate the client's future state supply chain.
5. Cross-Functional Working Session
   Alternatives for the areas of opportunity within the overall supply chain were presented and reviewed during a working session with the client to determine their fit with the strategic direction and organization objectives of the company. This session drove consensus understanding of the root cause issues, while reviewing the pros/cons of various alternative solution approaches to establish agreement on conceptual solution direction. Through this working session, the specific direction regarding the strategic elements of the client's future state supply chain operational environment and overall business priorities were as determined.
6. Creation of Functional Requirements Definition (FRD)
   EnteGreat created a document that described the operations and functions within the future state based on the To-Be SCOR model. The FRD document followed the SCOR model to describe document all of supply chain operational processes in significant detail beyond the SCOR model. The FRD document, along with the To-Be Model, established a blueprint for the client's future state supply chain operations.
7. Establish Business Benefits and Incremental Investment Payback
   EnteGreat reviewed the opportunities for improvement as well as the future state To-Be model to establish specific initiatives. These initiatives were then evaluated to determine their resource and timing requirements as well as the associated business impact / investment payback. Pre-requisites for the initiatives were also identified to assist in sequencing the initiatives as an overall program.
8. Devise an Appropriate Migration Plan - Roadmap
   EnteGreat developed a general plan outlining the activities necessary to properly implement the supply chain operations process. This plan delineated individual activities and projects addressing various initiatives related to the development of the recommended solution architecture. Based on the process, a migration plan was developed to facilitate transition to the final state, which incorporated the client's appetite for change while prioritizing investment opportunities in terms of business need and payback. This plan defined a roadmap of activities that would implement this procedure.
9. Final Project Recommendations Presentation
   The future state supply chain operations model and migration plan, including specific initiatives, were reviewed in detail with the client to fully explain the recommendation and address all client questions verify the goals of the project. This session enabled the client to build alignment between the migration plan and their strategic programs as well as to prioritize the resource requirement s necessary to achieve the necessary required changes.

Benefits:
The project enabled the client to establish an overarching strategy for transformation of their supply chain as well as a tactical execution plan in the form of several short -term initiatives that directly addressed high-impact area s to deliver short-term significant ROI. These initiatives focused primarily on process-centric opportunities including areas such as order management/customer support, logistics/transportation management, manufacturing operations, sales & operations planning to establish a reliable and efficient supply chain management process that could then be systematized. The initiatives were performed with a mix of client and EnteGreat personnel based on client resource availability and expertise.

Within the first four (4) months of starting the initiatives, the client had achieved very significant improvement in numerous critical supply chain and internal client-specific business performance metrics (such as inventory valuation, forecast accuracy, performance to plan, customer service, on-time deliveries, and production overtime). These benefits were apparent on many levels beyond just the business bottom line - the client workforce understood and was deeply engaged in the overall supply chain management process and working as an integrated cross-functional team to drive continuous improvement throughout the process. At that point, the client had achieved a much stronger overall supply chain operations process and was ready to begin incrementally systematizing the overall process - as prescribed in the overall supply chain operations transformation plan.