Apics Magazine January February 2015

APICS MAGAZINE
Service beyond expectations

Accelerated value stream mapping
Sponsoring S&OP success
THE MESSAGE OF LEAN/SPONSORING S&OP
Catching
Leans Drift
JANUARY/FEBRUARY 2015
January/February 2015 | Vol 25, Num 1
The essential message of

time-based competition
FIND
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Collocated with ProMat 2015
Congratulations
to the
APICS
Corporate Awards of Excellence Winners

APICS honors GE Oil & Gas Turbomachinery Solutions Division and
BASF for excellence in supply chain and operations management.
Excellence in Innovation Award

GE Oil & Gas Turbomachinery
Solutions Division
Excellence in Education Award

BASF
For more information about the APICS Corporate Awards of Excellence,

visit apics.org/awards.
FEATURES
January/February 2015, Volume 25, Number 1
30
36
40
44
Delivering Delight
The APICS Interview
Todays businesses are adopting ways to
bake in loyalty.
Tiny Triumphs,
Breakthrough Results
By Terence T. Burton
Value stream mapping becomes a formula
for improvement.
COVER STORY
Catching Leans Drift

By Richard Schonberger
Messages about production effectiveness
never get old.
Directing Success
By Eric J. Tinker
S&OP executive sponsors and their teams
can benefit from these 10 cues.
APICS magazine (ISSN 1056-0017) is published bimonthly by APICS, 8430 West Bryn Mawr Ave., Suite 1000,
Chicago, IL 60631-3439. Phone: (773) 867-1777. Canada Post International Publications Mail (Canadian
Distribution) Sales Agreement No. 571423. Periodicals postage paid at Chicago, IL, and additional mailing offices.
Subscriptions: $65 per year U.S., $77 Canada/Mexico, $93 elsewhere. Copyright 2015 by APICS. All rights reserved.
Printed in the United States of America. POSTMASTER: Send address changes to:
APICS, 8430 West Bryn Mawr Ave., Suite 1000, Chicago, IL 60631-3439.
January/February 2015
DEPARTMENTS
page 22
Companies now must successfully
apply real-time information
across their global footprints.
page 19
page 23
Editorial Staff and Board of Directors
From the CEO
From the Editor
2015 APICS Board of Directors
10
APICS Report
11
Corporate Spotlight
14
Membership Matters
15
Ask APICS
16
Industry Tools
18
Sales and Operations Planning
19
Building Blocks
20
Enterprise Insights
21
Executive View
22
Working Green
23
Lean Culture
24
Management Perspective
25
Relevant Research
28
Book Review
48
Lessons Learned
RESOURCES
35 Index
35
Product Showcase
apics.org/magazine
EDITORIAL STAFF AND BOARD OF DIRECTORS
EDITORIAL
Editor in Chief
Jennifer Proctor
APICS BOARD OF DIRECTORS

Chair of the Board
Alan G. Dunn, CPIM
Senior Manager of Publications

Karen Huelsman
Chair-Elect
William E. Bickert
Managing Editor
Elizabeth Rennie
Treasurer-Secretary
Steven Georgevitch
Staff Editor
Christopher Jablonski
Directors
Keith Connolly
Sonia Daviaud
Erica Dickson, CPIM, CSCP
Bhaskar Majee, CSCP
Steven Melnyk, PhD
Clark Ponthier, CPIM
Colin M. Seftel, CFPIM, CSCP
Peter Vanderminden
Ginny Youngblood, CSCP, CPIM
DESIGN
Bates Creative
ADVERTISING
Tom Lasch
tlasch@larichadv.com
(440) 247-1060
EDITORIAL ADVISORY BOARD
Richard E. Crandall, PhD, CFPIM, CIRM, CSCP
Appalachian State University
Philip E. Quigley, CFPIM, PMP
Chapman University
California State University at Fullerton
Randall Schaefer, CPIM
Randall Schaefer Consulting
Publication in APICS magazine does not constitute an endorsement of

any product, service, or material referred to, nor does publication of an
advertisement represent an endorsement by APICS or the magazine.
All articles represent the viewpoints of the authors and are not
necessarily those of the magazine or the publisher. Letters to the
editor will be published at the discretion of the editor.
Canada Post International Publications Mail Product (Canadian
Distribution) Sales Agreement No. 1220055
Subscriptions: APICS magazine is circulated to all members of APICS
as part of their membership fee. For all others, the subscription rate is
$65 annually ($77 in Canada and Mexico, $93 for other international or
overseas delivery). To subscribe, call APICS customer service at
(800) 444-2742 or (773) 867-1777.
Single copies within the US are $8, outside the US, $12 (payable in
US currency). Contact APICS Customer Service, (800) 444-2742 or
(773) 867-1777 to order.
Printed in the United States of America
Board Member Guest

Lars Magnusson, 2015 APICS Supply Chain
Council President
APICS CORPORATE
Chief Executive Officer
Abe Eshkenazi, CSCP, CPA, CAE
Magazine Contact
editorial@apics.org
apics.org/magazine
APICS
8430 West Bryn Mawr Avenue
Suite 1000
Chicago, IL 60631-3439
Phone: 1-800-444-2742 or +1-773-867-1777
Fax: +1-773-409-5576
editorial@apics.org
apics.org
Advance
your career with APICS certifications
CPIM
CSCP
APICS Certified in Production and Inventory Management
APICS Certified Supply Chain Professional
These credentials demonstrate to your peers, employers, and

clients that you are a dedicated supply chain professional.
Learn more at:
apics.org/careers-education-professional-development/
certification.
FROM THE CEO
industry-related information news to keep

you up-to-date. The APICS Dictionary has
set the standard for industry terminology
for more than 50 years and remains an
invaluable resource for professionals in the
field. And the APICS research department
constantly works to keep you at the forefront of current industry knowledge.
Inspiring
Organizations
and Their People
ith January and the dawn of a new year upon us, its a
good opportunity to pause, reflect, and look forward
to whats ahead. Here at APICS, 2014 was a year of
changes. Most prominently, APICS merged with the Supply Chain
Council (SCC) to form the APICS Supply Chain Council, the educational and research arm of APICS. A lot of work has gone into
the integration, and we continue to collaborate with the APICS
and APICS SCC boards of directors, as well as staff on both sides,
to foster supply chain excellence in professionals, students, and the
organizations they serve.
To that end, I would like to take some time to highlight the many
ways that APICS serves the supply chain and operations management
communities. APICS connects you to a global community of supply
chain and operations management professionals via conferences,
seminars, professional development meetings, and online groups that
provide ample networking and thought leadership opportunities.
Further, if youre a student, you can take advantage of free student
membership and access a wealth of student resources and activities.
Students have unrivaled access to career path information and advice
through webinars, white papers, and mentorships.
Key to boosting individual professional development are our
industry-leading certifications, specifically the APICS Certified
in Production and Inventory Management (CPIM) and Certified
Supply Chain Professional (CSCP) programs. Earning your CPIM
or CSCP designation is one of the most important steps you can
take in your career as a supply chain and operations management
professionalAPICS research demonstrates that certified individuals earn 1421 percent more than their non-certified counterparts.
Finally, our publicationsincluding the APICS magazine you have
in your hands or on your computerdeliver timely and relevant
The one and the many

Consider also how APICS advances organizations. The merger between APICS and the
SCC represents a way to increase our value
to corporations and expand our role from
the professional and managerial spheres
all the way to the C-suite. For companies
looking to enhance their value proposition,
APICS and the APICS SCC together deliver
supply chain design and implementation,
workforce development, and ongoing professional development for staff.
On the professional development side,
the Supply Chain Operations Reference
(SCOR) model is a process reference
framework and diagnostic tool that has
emerged as the cross-industry standard.
Consider a recent case study at Ingersoll
Rand of an implementation of SCOR and
APICS principles. The initiative brought a
common language to Ingersoll Rand workers; developed talent through education and
certification with more than 200 engaged
employees; and resulted in a delivery
improvement of 86 percent, a 10 percent
gain in inventory turns, a $125 million
boost to cash assets from the higher turns,
and an overall cost savings of $5.5 million
over three years.
This success story is just one of many
now occurring at organizations around the
world. We are excited about many opportunities on the horizon for APICS and the
APICS SCC to transform organizations and
professionals alike. To stay abreast of the
latest developments, continue to read the
pages of APICS magazine and our website
at apics.org.
Abe Eshkenazi, CSCP, CPA, CAE

Chief Executive Officer
FROM THE EDITOR
Disney speak) were wet and joking about

the rain. But, heres the thing: They were
still helpful. They were still courteous.
And they were still working hard to keep
the customer experience as pleasant as
possible. Instead of ruining our vacation,
the rainy day just added to our adventure.
Experiences
Beyond
Expectations
y family and I just got back from an epic trip to Disney

World. (Arent all Disney experiences epic, at least for the
wallet?) Three of the parks, in four days, with two adults,
and children ages 10 and 2.
We spun in tea cups, drove rocket ships, and screamed our way
through Space Mountainand that was just the first day. While the
Magic Kingdom is magical, the Animal Kingdom transported us
to other continents. On a safari, we saw giraffes, lions, an anteater,
Ankole longhorn cattle, and more. Lastly, in Hollywood Studios, we
saw a truly exhilarating stunt show, complete with explosions; blasted
to another galaxy on a Star Wars Star Tour; and visited with Goofy.
Pictures are good, memories are better
For the most part, the weather was lovely. However, on our last day,
the skies opened up, and the rain poured down. No need for Splash
Mountain because Mother Nature drenched us on her own. We had
planned for this contingency, and all of us had rain gear. Well, all of
us except my toddler. He needed something fast. His sun hat wasnt
keeping any part of him dry. I saw swarms of peoplemen, women,
and childrenin Disney rain ponchos. I had to find one.
I turned to a nearby kiosk, and the salesperson offered me the child
size. How much? $8. What could I do? To continue our magical day,
I had to fork over the eight bucks for a square piece of plastic smaller
than a shower curtain and not quite as sturdy. Clearly, I wasnt the
only one caught unprepared because I saw entire families wearing the
ponchos. Thats $8 times four, five, even six. But, true to its reputation, Disney was ready with an ample supply of plastic squares.
By the time we got to the parking lot, the rain felt like a monsoon. It didnt matter that we had rain coats, umbrellas, or an $8
poncho. We were soaked. Even the staff (called cast members in
Good for business

Of course, its not just good luck that made
our trip to Disney World enjoyable. The
company has a world-famous customer-centric philosophy. But, amusement
parks arent the only businesses that can
adopt this guiding principle. In Delivering
Delight, APICS magazine Managing
Editor Elizabeth Rennie talks to Robert G.
Thompson, an author and customer relationship expert. Thompson advises businesses to go beyond the idea of providing
the promised service or product. Instead,
great businesses provide more than what
is expected. In my research, I found that
constantly innovating to improve solutions
is one of the top characteristics of top-performing firms, Thompson says.
Further, Thompsons research points
to experiences as the best way to amaze
customers. He says that net promoter
scores, customer satisfaction scores, and
new customer effort scores can all be used
effectively, but the real measure of a company is how it reacts to customer feedback.
Its time for companies to put customers first. How can you make that happen?
Jennifer Proctor
Editor in Chief
apics.org/magazine
APICS Introduces the

2015 Board of Directors
APICS is pleased to present the 2015 APICS Board of Directors.
These dedicated volunteers bring diverse points of view to
the leadership body and their varied perspectives will drive the
strategic direction of APICS in the coming year.
Alan G. Dunn, CPIM
GDI Consulting and Training

Company
Chair
William E. Bickert
Steven Georgevitch
Chair-Elect
Treasurer-Secretary
NAVSUP Global Logistics
Boeing
2015 APICS Board of Directors
Keith Connolly
AT&T
Sonia Daviaud
Decision Value
Erica Dickson, CPIM, CSCP

Intel
Bhaskar Majee, CSCP

General Electric Company
Steven Melnyk, PhD

Michigan State University
Clark Ponthier, CPIM

Ingersoll Rand
Colin M. Seftel, CFPIM, CSCP

PSQ
Peter Vanderminden
Microsoft Corporation
Ginny Youngblood,
PhD, CPIM, CSCP, SCOR-P
DuPont
2015 APICS Supply Chain Council Board of Directors

The APICS Supply Chain Council is dedicated to advancing supply chains through research,
benchmarking and publications.
Lars Magnusson
President
Shari Ruelas, CPIM, CSCP

Vice President
Michael Wasson, CSCP

Secretary-Treasurer
Barbara Flynn
William Bickert
Katie Fowler
Ex-Officio
Antonio Galvao, CSCP
Douglas Kent, SCOR-P
William Rocky Newman, PhD, SCOR-S
Guest board member
Marco Ugarte, PhD, CPIM, CSCP

Ray Ernenwein
apics.org/magazine
APICS REPORT
Start Off 2015

with New Skills
et 2015 be the year that you meet your career goals. Plan your
professional development now to take advantage of all that
APICS has to offer. Earn an APICS certification or certificate,
attend an APICS conference, or take a professional development
course to stay current on the latest topics and trends in supply chain
and operations management.
APICS CSCPthe world-recognized supply chain certification.
Did you know that APICS Certified Supply Chain Professional
(CSCP) designees earn 21 percent more on average than their
professional counterparts? Learn more at apics.org/cscp.
APICS CPIMthe industry standard for more than 40 years. The
APICS Certified in Production and Inventory Management (CPIM)
program enables you to advance production and inventory activities
within your companys global operations. Learn more and try the
free CPIM demo at apics.org/cpim.
Register for certification preparation courses. APICS offers
member discounts on exams and materials. To learn more, visit
apics.org/courses; to find a course near you, visit apics.org/finder.
APICS Risk Management Education Certificate
Expand your supply chain risk management expertise by earning
the APICS Risk Management Education Certificate. This credential
demonstrates your commitment to protecting your employer from
supply chain risk and your ability to balance rewards and risks in
the decision-making process. Learn more at apics.org/risk.
APICS S&OP Education Certificate
Prepare yourself to collaboratively participate in the sales and
operations planning (S&OP) process. By earning this certificate,
you demonstrate your commitment to and understanding of the
principles and functions of S&OP. Learn more at apics.org/sop.
Easier registration for APICS exams in North America
APICS has simplified the North American exam registration
process. Candidates are no longer required to create an account
on the Pearson Vue website to schedule, cancel, or reschedule
testing appointments. Upon purchasing an Authorization to Test,
candidates will be redirected to the Pearson Vue scheduling page.
People who do not schedule immediately or who later wish to
make changes to their previously scheduled appointments can
do so by logging into their APICS accounts and clicking the link
to the Pearson Vue scheduling page located on the My APICS
10
Certifications tab. The certification team

plans to initiate a similar, single-sign-on
project with Prometric, the test provider
outside of North America, later this year.
APICS 2015 global conferences
Attend an APICS conference to learn and
participate in world-class education, best
practices, and thought leadership. In addition to unmatched learning opportunities,
attendees earn professional development
points toward maintenance of APICS certifications. Learn more about conferences at
apics.org/events.
APICS 2015 So Paulo
March 1213, So Paulo, Brazil
APICS 2015 Shanghai
April 1617, Shanghai, China
Best of the Best S&OP Conference 2015
June 1819, Chicago, Illinois
APICS 2015
October 57, Las Vegas, Nevada
APICS 2015 seminars
APICS will offer a series of one-day seminars in 2015 to bring the APICS body of
knowledge to businesses worldwide. Find a
seminar near you at apics.org/events.
Principles of S&OP So Paulo
March 11, So Paulo, Brazil
Principles of S&OP Shanghai
April 15, Shanghai, China
2015 SCOR training
Supply Chain Operations Reference (SCOR)
training is designed to help companies
implement the SCOR model. To learn
more and find out where education is
offered, visit apics.org/events. APICS members are eligible for a 50 percent discount by
entering the promo code: APICSMBR.
Elizabeth Rennie
Excellence in
OrganizationWide Education
BASF applies APICS tools and teaching for
winning results
ASF is a global chemical company with more than 112,000

employees serving customers and partners in nearly every
country in the world. Offerings include plastics, performance
products, crop protection solutions, oil and gas, and more. Through
science and innovation, BASFs objective is to enable its customers to
meet societys current and future needs. This is realized by balancing
economic success, social responsibility, and environmental protection.
Chemical technicians carry out an inspection at a BASF hydrogen plant.
Recently, many of the companys key goals have been supported by

APICS educationculminating in BASFs selection as the 2014 APICS
Corporate Award of Excellence in Education winner. APICS is the
foundation of the overall supply chain learning solutions program,
says Alan Milliken, CFPIM, CSCP, global APICS coordinator for the
BASF Group. We used APICS education to prepare BASF employees
worldwide who work in supply chain management in order to ensure
that best practices are implemented throughout the organization, to
share knowledge, and to create a sustainable competitive advantage.
The voyage
BASF has been an APICS corporate partner in North America since
the late 1980s. In the fourth quarter of 2011, the company began
implementing APICS offerings globally. Since then, BASF has invested
substantially in APICS education: specifically, about 100 in-house
APICS classes with 1,500 students participating who represent 25
CORPORATE SPOTLIGHT
countries. The company sponsors APICS

memberships, seminars, certification review
classes, chapter meetings, and exams.
More than 400 BASF employees from
all supply chain-related functions have
participated in the Basics of Supply Chain
Management course since the global program began. This includes employees from
finance, purchasing, customer service, information technology, and manufacturing.
The principles, tools, and techniques are
recognized best practices, and the course
ensures a common understanding of terminology and basic processes, Milliken says.
But knowledge and understanding in your
assigned area are not enough; APICS education helps people prepare to consider the
bigger picture and collaborate with other
functions to achieve the best overall results.
For example, he says employees understand the need to balance service, costs, and
inventory objectives across functions. Both
cross-functional teamwork and communication have improved as a result of the
global education program.
BASF also stresses application of the
APICS body of knowledge on the job. For
instance, the company uses real-life SAP
screen prints to teach students what a
schedule looks like in the software program,
how planning factors are stored and used
by the tool, and so on. Additionally, guest
lecturers from the supply chain community augment learning by demonstrating
to students the SAP-enabled process while
relating it to the APICS body of knowledge.
Proven professional success
For employees holding key roles in supply
chain managementprocess experts, educators, and plannersBASF recommends the
APICS Certified in Production and Inventory
Management (CPIM) designation. Education
is delivered by 13 internal APICS instructors
in cooperation with APICS affiliates and
supported by four regional coordinators and
four country coordinators. Most instructors
exceed our minimum requirements, and
all have taken the APICS Train the Trainer
course, Milliken says.
There are two key performance indicators
used to measure success and take action:
certification exam performance and
apics.org/magazine
11
CORPORATE SPOTLIGHT
BASFs People Find Meaningful Benefits

The benefit of the APICS body of knowledge is that I now better
understand our business objectives, and I advise key stakeholders
regarding what is the best level of inventory for our organization.
Suyoung Kwon, CPIM, production and inventory planner
APICS education ensures our employees know the latest terms
and concepts in supply chain management and how to apply
better practices to improve our supply chain performance. My
business units have benefited from participating in the APICS
education and certification programs.
Dirk Hopmann, vice president global supply chain strategy
At the APICS Strategic Management of Resources workshop, I
learned about meaningful vendor-supplier relationships through
multiple points of contact and close collaboration. Through this,
I was able to integrate our distributor into the customer service
team operations. We enabled the distributor to access and manage
information by including them in relevant email distribution lists
and granting them access to SAP and documentation libraries.
Helena Prinz, CPIM, regional demand management
APICS provides all residents of the global BASF village with the
same language. This has narrowed the distance between members
of the supply chain community. I am much more comfortable when
I discuss supply chain with colleagues because we are now all
using the same language from the APICS body of knowledge.
Helena Lim, CPIM, CSCP, supply chain operational design
certifications achieved. Since the global effort began, approximately

70 people have achieved their CPIM designations, and another 200
are working toward the goal. In all, BASF employees have passed
more than 650 APICS certification exams. APICS certification is
a key consideration when reviewing potential job candidates for
supply chain roles, Milliken says.
Likewise, the APICS Certified Supply Chain Professional (CSCP)
designation is encouraged for both managers in functions related to
supply chain and those who already have earned a CPIM designation. CSCPs focus on the global enterprise and the extended
supply chain make it an excellent fit for BASF Group, Milliken
says, adding that more than 140 employees have participated in the
global classes, of which 35 chose to seek certification. Furthermore,
he notes that approximately 80 percent of those participating in the
CSCP program are in leadership positions and use the knowledge
and skills gained to improve supply chain performance at BASF.
By achieving certification, an employee demonstrates his or
her commitment to lifelong learning and building the best team in
supply chain management Milliken says. Certification assures that
the employee understands integrated supply chain management and
is prepared to contribute to improvements.
Challenges and lessons learned
Milliken notes that, by design, APICS education addresses a large variety of business environments and manufacturing strategies. Meanwhile,
many of BASFs participants are focused on one specific segment of
industry. This presents a challenge, as employees must understand
which tools and techniques to apply to their particular environment,
12
he says. Misapplication of supply chain

knowledge can lead to loss of confidence in
operations and less support for the education.
BASF was able to minimize the impact of
this issue by highlighting the principles, tools,
and techniques that are most applicable to
the chemical industry while emphasizing the
benefits of the broader body of knowledge.
Another limiting factor with any body of
knowledge is ease of accessibility. To address
this challenge, BASF has developed a supply
chain Book of Knowledge, which includes
many of the principles, tools, and techniques
taught by APICS. The book is available on the
company intranets Supply Chain Academy.
Sales and operations planning (S&OP),
demand planning, production scheduling,
material requirements planning (MRP), and
other core supply chain processes are included.
In addition, the BASF knowledge database
contains hyperlinks to relevant APICS websites.
BASF took action to ensure that the APICS
body of knowledge is readily available for integration into our daily operations, Milliken says.
Superior outcomes
BASF is focused on both improved performance and increased integration of supply
chain planning and execution processes.
Significant investments have been made in
both process improvements and advanced
software for demand forecasting, S&OP,
production scheduling, and MRPand the
APICS education program has been essential.
For example, Milliken says plant schedulers
who have earned their CPIM and are mature
in their knowledge of integrated supply
chain management have more quickly and
effectively implemented improved practices
enabled by advanced software.
APICS education also helped BASF
share knowledge and expertise during the
companys recent acquisition of three businesses. APICS tools were used to prepare
employees for supply chain management
at BASF using SAP. Specifically, the Basics
of Supply Chain Management course was
a mandatory part of orientation and early
training, and new employees in key supply
chain roles were directed to seek their CPIM
designations. These endeavors resulted in
more efficient and effective mergers and
continued high service levels.
Elizabeth Rennie
BASF employees produce components for the automotive and

construction industry.
Lastly, APICS education was successfully used to prepare for the

implementation of SAPs advanced planning and scheduling tool and
to enhance use of the technology after implementation. This system
was selected for key processes such as demand planning, S&OP, and
production scheduling. APICS education enabled BASF employees
to understand the relevant tools, techniques,

and definitions and how to apply them in
their particular business environments.
Milliken adds that APICS tools helped
employees understand how to select
resources and configure capacity planning
in a given production scenario, know the
difference between an aggregate production
plan and a detailed production schedule,
and many other key questions. He adds that
the migration to the new technology was
accomplished without any major business
disruptions or customer service failures.
The harmonization of supply chain
terminology and definitions globally is a
very important APICS benefit, Milliken
says. In order to standardize processes and
work cross-functionally and cross-regionally
to improve supply chain management, you
need one glossary and dictionary. APICS
education is a key enabler of BASFs sustainable supply chain improvement.
Elizabeth Rennie is
managing editor for
APICS magazine. She
may be contacted at
editorial@apics.org.
THE MORE THINGS CHANGE,

THE MORE YOU SUCCEED.
WITH AGILE ERP.
Today, only companies that can adapt to rapid changes in the business environment
will succeed. Whether you are managing uctuations in your supply chain, handling
new customer demands or reducing time to market, you need ERP with the agility
to keep pace. One that will recongure and adapt to new products, services and
business processes. So your business can be as agile as your thinking.
IFS FOR AGILE BUSINESS
www.youragilesuccess.com
apics.org/magazine
13
MEMBERSHIP MATTERS
Extraordinary
Supply Chain
Partners
Brett Horacek, CPIM,
CSCP
Supply Chain
Management Supervisor
Hospira
APICS education inspires beneficial

relationships
rett Horacek, CPIM, CSCP, is the supply chain management

supervisor for Hospira, a global manufacturer of injectable
pharmaceuticals and infusion technologies. He first was
hired about 14 years ago as senior manufacturing supervisor. Later,
he took a role focused on advancing supply chain processes. He says
he managed change by supporting continued growth of a startup
facility to meet new product development and commercial manufacturing demands. This included direct responsibility for supplier
relationship management, logistics, warehousing, inventory control,
order fulfillment, returns, and imports and exportsas well as serving self-directed team functions for planning and metric creation
and reporting.
The timing of my joining APICS coincided with my role
changeover to supply chain manager within the company, he says.
I wanted to attend some of the classes being offered within the
[APICS Certified in Production and Inventory Management] CPIM
module. I also knew APICS membership would help to serve as a
networking tool for me in my new role.
Supplier development
As a supply chain manager at Hospira, Horacek sometimes must
extend partnerships with vendors beyond the ordinary. He says a
very important application of his APICS knowledge is evidenced
in one such strategy that he developed with a precious metals
recovery service.
Elizabeth Rennie is
managing editor for
APICS magazine. She
may be contacted at
editorial@apics.org.
We encourage you
to share your APICS
stories. Visit apics.org/
membershipmatters.
14
In order to achieve certain levels of

business success, both vendor and
customer must open up and be honest
about exactly what needs to be done
for each to come out ahead.
The APICS [Certified Supply Chain Professional] (CSCP)
program teaches us that, in order to achieve certain levels of
business success, both vendor and customer must open up and be
honest about exactly what needs to be done for each to come out
ahead, Horacek says, adding that his CSCP education was essential
Elizabeth Rennie
to creating an extraordinary relationship

with this recovery supplier.
Some of the drugs Hospira makes are
derived from raw materials that contain
precious metals, such as palladium and platinum. Inherent in the production process is
the generation of side streams that are not
part of the end drug product. Recognizing
the waste in this system, Horacek devised
a plan to recoup the precious metals by
collecting the streams that were deemed
valuable and sending them out for recovery.
The very economic viability to make
these certain drugs depends on the ability to
recover the precious metals from these side
streams. Otherwise, it would be difficult to
remain competitive in the market due to a
higher [cost of goods sold], he says.
Horacek applied his APICS knowledge
to assess several suppliers on the recovery
yields they could deliver. He eventually
identified one provider that offered not only
high recovery yields for Hospiras precious
metal streams, but also excellent customer
service. He says the relationship between
his company and the recovery vendor soon
became a true strategic partnership.
They have made many special concessionsfrom how quickly they process our
material to even flying to a site to partner
with us and creating a fault analysis within
our processes to help us recover additional
precious metals we had previously overlooked, Horacek says. It is a win-win
partnership that remains intact to this day.
Horacek also finds value in the CPIM
program education. Early on in my role
in supply chain management, I [applied]
my knowledge from the CPIM program to
create capacity planning models to help me
understand where our rate-limiting process
steps were, he says. This also helped me
develop more robust and predictable production schedules.
He adds that obtaining his certifications has greatly broadened his supply
chain management understanding and his
capacity to function on both the tactical
and strategic levels. I have benefited from
taking the certification classes, Horacek
says. The information and insight provided
by APICS instructors is truly invaluable in
todays complex, global realm of business.
ASK APICS
Jonathan Thatcher, CSCP, CAE
Complications
and Complexities
Evaluating the intricacy and opportunity in
supplier relationships
Reader S.J. writes, Our supply chain objectives include building
stronger partnerships with vendors. We already have good working
relationships with these companies, and we have set aside time for
ongoing supplier management. Realistically, though, what benefits
can we expect if we put even more effort into such objectives?
et me answer your question by discussing the fairly new field

of supply chain complexity theory. Complexity theory assists
the study of human and organic systems in areas such as
traffic and crowd management; organizational behavior; economics;
computing; and, more recently, supply chain management.
From the perspective of complexity theory, a supply chain is a
system of relationships that are both complicated and complex.
Complicated systems are made up of components that have fixed
associations. Imagine a jet engine or a mechanical wristwatch:
No matter how many pieces they have, no element can change its
dependency on, or correlation behavior with, any other. These
things are immovable. Therefore, when in good working order, the
systems function precisely as we expect them to.
Trust and confidence flow along a supply

chain, just like products and information.
Complex systems are different. They contain components that can
change their dependency or relationship behavior with other parts.
Anything comprised of people is therefore, by definition, complex.
Now, a supply chain is made of assetssuch as factories, warehouses, and portsand people. And because of this, the supply
chain itself has the potential for producing unexpected outcomes
or behaviors.
Assets and advantage
Suppose you believe you have a good relationship with a supplier
because you are its biggest client. What happens if that supplier
gains an even larger customer? This may change the way decisions
are made about your business. Supplier dependency can alter
long-term risk management, joint investments, or future capital
spending. In the short-term, the intensity of relationship management or information sharing also may require modification. In
time, these issues can lead to unexpected supply chain behaviors,
such as rising inventory, reduced synchronization, or a greater risk
of bullwhips.
However, its important to note that

unexpected supply chain behaviors are not
always bad. When partner relationships are
strong, faster performance, falling costs, and
greater information sharing can be both
surprising and highly beneficial. Over time,
this becomes another valuable assetgoodwill.
Goodwill is difficult to measure, but
very valuable.
The worth of goodwill becomes clear
when partners maintain the state of a beneficial relationship even in the face of errors
or problems. Akin to being able to withdraw cash for an expense, goodwill serves
as an asset to keep relationships steady in
difficult times. Goodwill justifies defending
a positive relationship in the belief that difficulties will be temporary and that a return
to former times is better than diluting the
association in the face of difficulties.
Best of all, when plenty of goodwill
exists, a company develops a positive
reputation, which attracts new partners.
The result is a supply chain whose partners
share similar values, strategies, cultures,
and service levels. This, in turn, becomes
competitive advantage.
Important considerations
Establishing long-term partnerships with
the best suppliers could mean deliberately
making decisions and undertaking joint
activities that build trust and confidenceand,
over time, goodwill. However, there is a
risk. Such a supply chain may be overly
comfortable and predictable. Taken too
far, it becomes insular and unresponsive to
outside conditions.
Trust and confidence flow along a supply
chain, just like products and information.
Each time we extend our faith, relationship
behaviors and dependencies change and,
likely, improve.
My answer just scratches the surface of
supply chain complexity theory. Please let
me know if this is a topic of interest to you,
and I will share more details. In addition, a
number of organizations study complexity
theory that you may like to review, including the Santa Fe Institute (www.santafe.edu/
network) and the LSE Complexity Group
(www.lse.ac.uk/researchandexpertise/units/
complexity). Good luck in your endeavor.
Jonathan Thatcher,
CSCP, CAE, is director
of research for APICS.
He may be contacted
at askapics@apics.org.
Send APICS your supply
chain or operations
management questions
at askapics@apics.org.
apics.org/magazine
15
INDUSTRY TOOLS
Automation
ATI Industrial Automation unveils the
Wireless F/T, a small transmitter that
streams data simultaneously from up to six
transducers. The handheld device streams
wirelessly to the users host device for data
collection, real-time motion control, and
user-defined signal processing. The product
comes in two configurationsone that
supports up to six transducers, and one that
supports up to three transducers. Its range
in an office environment is 98 feet, with a
maximum range of 328 feet in an unobstructed environment. Battery life is approximately one hour at maximum capacity.
Power options include a removable battery
that can be charged internally or externally
with a micro USB connector. [ 1 ]
[1]
Dematic introduces RapidStore ML, a

mini-load automated storage and retrieval
system for handling totes and cartons. It is
a high-density, compact-load staging and
sequencing solution for reserve storage,
goods-to-person order fulfillment, automatic pick-face replenishment, palletizing,
and order consolidation applications.
The system has kitting, work-in-process
buffers, and materials storage applications. The all-aluminum, lightweight mast
construction combined with advanced
horizontal-vertical belt drives or optional
wheel drive enables high acceleration and
deceleration and high-velocity transport
speeds. The solution is equipped with a
telescopic extractor or table load-handling
device that stores single, double, or triple
deep in a rack structure. [ 2 ]
[2]
Enterprise
IFS has made available IFS-in-a-Box,
a hardware-based enterprise resources
planning solution combined with Oracles
database, middleware, and hardware
technologies. The solution is optimized,
pre-configured, pre-installed, and ready to
run. Customers can implement the system
into their existing server racks and configure
setup using one of the supplied templates.
The solution is pre-configured for companies
wanting to scale up capacity and for users
of IFS applications. The product also caters
to organizations creating high-availability
[3]
[4]
16
technology environments and offers a way to

set up fail-over environments. [ 3 ]
Rockwell Automation launches the Rockwell
Software PharmaSuite 6.0 manufacturing
execution system to help streamline crucial
activities into production and packaging
processes. The building-block library in
PharmaSuites recipe designer enables programmers to reuse and maintain modeled
inter-process communication checks across
multiple recipes. Escalation management
utilities help monitor, control, and log the
timely execution of production checks
through an escalating series of documented
alerts. The software also incorporates new
workflow integration capabilities, enabling
executed work-flow information to be
appended and tracked as part of the electronic batch record. [ 4 ]
Logistics
Kewill has acquired IBMs Sterling
Transportation Management System
(TMS), a software as-a-solution-based
multimodal software product. IBM Sterling
TMS will be rebranded as Kewill Transport
and will become part of the Kewill MOVE
transportation management platform. The
acquisition will extend Kewills transportation management capabilities. IBMs team
will add valuable domain and industry
knowledge and further strengthen Kewills
global multimodal domain expertise.
LLamasoft is partnering with CLX
Logistics to offer European truckload,
global ocean, and global parcel data to
customers for use in strategic supply chain
design. CLX Logistics has provided dedicated transportation benchmark services
for more than 10 years. The benchmarking service will be available to LLamasoft
customers through a referral agreement.
The partnership will provide LLamasoft
customers with an additional resource from
which to draw global reference data for use
in supply chain modeling.
Process control
Zontec has released Synergy 2000 version
10.0, a statistical process control software
suite. Features include added security,
Featuring the latest products, services, and announcements from supply chain and operations management companies
the ability to validate samples using an

electronic signature or user name, a
screen display option that enables users to
view the most recent samples of all data
tables in the active data bank, a multiaxis overlay chart, and more. The latest
version adds a modified auto note feature,
identification values in automatic email
notifications, enhanced graphics, prompt
spec warnings, and more.
Radio frequency identification
SMARTRAC has released the On Metal Tag,
a thin ultra-high frequency identification
tag for metallic objects and surfaces, as
well as non-metal objects with adherence
challenges. The printable tags are compatible with standard radio frequency identification (RFID) printers and have a range
of up to 3.5 meters. The tags thin, soft,
flexible structure is suitable for curved and
flat surfaces alike, including industrial steel
pallets, automotive parts, and water and
paint pails. [ 5 ]
Retail
Eversight and Periscope are partnering to
deliver Offer Innovation, a set of software
and service solutions that enable retailers
and consumer goods manufacturers to
advance in-store promotions. Via the solution, the most effective offers and incentives
can be discovered through micro-testing
with real shoppers. Periscope, a McKinsey
Solutions subsidiary, will become
Eversights sole preferred support services
partner; meanwhile, Eversight will become
Periscopes sole preferred promotion offer
innovation partner.
Shop floor
ACS Motion Control is offering the
SPiiPlusEC, a motion controller and
EtherCAT network controller. The device
features a powerful processor and two
ports that support ring topology. The
high-performance controller and network
manager delivers multi-axis and scalable
distributed control for motion-centric
applications that require higher-profile
generation, fast EtherCAT cycle rates, and
network redundancy to enhance reliability
and machine uptime. The system controls
up to 64 synchronized axes and up to a 5

kilohertz rate of profile generation and
EtherCAT cycle. [ 6 ]
Altium Limited releases Altium Designer
15, a professional printed circuit board
and electronic system level design software
utility. The suite includes enhancements for
designing high-speed printed circuit boards
with support for fabrication output standards. A pin pairs feature enables accurate
length and phase tuning across termination
components and length, phase, and delay
tuning traversing an entire signal path.
[5]
Stafford Manufacturing has made available

a line of weather-resistant shaft collars for
outdoor use, including truck racks, structural
components for communications, utility
equipment, and solar arrays. The shaft collars
feature a wide range of one- and two-piece
hinged and flange-mount designs made
from plastic, aluminum, and paintable and
stainless steel. The collars are suitable for
holding, locating, stopping, and mounting
objects outdoors. They can be modified with
mounting holes, knurls, and other secondary
options to meet original equipment
manufacturing design specifications. [ 7 ]
[6]
Warehousing
Combi Packaging Systems is offering
the TBS 100 H case sealer. The product
securely seals both the top and bottom
of regular slotted and half-slotted cases
with adhesive tape. It is available as both
a semi-automatic or fully automatic case
sealer using 3M Accuglide tape heads. The
sealer features a heavy-duty tubular steel
frame and offers increased security and
protection for cases. [ 8 ]
[7]
[8]
Send media releases to editorial@apics.org.
High-resolution, color photographs are encouraged.
apics.org/magazine
17
SALES & OPERATIONS PLANNING
Whats Your
Problem?
Solve it with S&OP to create a
powerful process
Editors note: APICS magazine welcomes Peter Murray, CIRM,
as a guest author for the Sales and Operations Planning
(S&OP) department.
ll too often, S&OP processes falter and stall, resulting

in a loss of stakeholder engagement. Some professionals respond to such situations with new efforts to do
S&OP again or differently with new people, a new model, outside
help, or even the same people just in different roles. But keeping
S&OP worthwhile comes down to stakeholders seeing S&OP and
its related processes as the main collaborative initiative to solve
problems. Its therefore essential to frequently step back and ask the
team, Are we solving problems with S&OP? If the answer is yes,
then the next step is to build capability and performance; if no, its
time to figure out why and turn that no into a yes.
There are so many reasons S&OP fails to solve problems: inability
to agree; reliance on other, more established tools for strategy, product, supply planning, and finance; failing to support decisions; stakeholders changing job roles; and many more. Behind all these causes is
the reality that S&OP is not seen as the place to solve problems. After
all, if another initiative became more important or took attention
away, its because people saw that as the better solution.
Peter Murray, CIRM,

is a consultant and
practitioner for sales
and operations planning,
demand planning, and
supply chain management. He also served
on the APICS board of
directors for two years,
helped develop the
APICS Certified Supply
Chain Professional
program, and is an
active volunteer with
the APICS Supply
Chain Council and the
Institute of Business
Forecasting.
To comment on this
article, send a message
to feedback@apics.org.
18
Participants should walk out of the

meetings feeling that their time was
well spent.
Properly positioning S&OP as a sustainable, problem-solving
method that continuously heightens efficiency begins with determining the following. First, figure out what problems will be solved.
Likely answers include: the timely approval of supply and demand
plans, the identification of risk and opportunity, synchronizing
financial and operating plans, agreeing on business drivers, achieving a commitment to communicate on the execution of one set of
plans, and the like.
Next, identify if there are any steps, formal or informal, where
problems are addressed outside the S&OP process. During the
course of the month, if an issue arises within the scope of S&OP,
does the team use S&OP to address it? Are new processes or
technologies being discussed or promoted that actually fit within
the S&OP space? The answers to these questions should reveal
Peter Murray, CIRM
that team members clearly understand

that the S&OP process is the correct place
to solve problems.
Third, determine if S&OP meetings
include open discussions where people
set aside role and function in order to get
things done. Participants should walk out
of the meetings feeling that their time was
well spent.
Strategies and solutions
Making S&OP a successful problem-solving
tool can be done. Begin by coming up
with or updating the core principals of the
process. There are many great references in
the APICS body of knowledge, the basic
takeaways of which include the following:
S&OP is owned and directed by the senior
leaders of product, demand, supply, and
finance, as well as the executive leadership.
S&OP is a business planning and
execution process.
The reasons why numbers are presented is
as important as the numbers themselves.
S&OP is a decision-making process.
Perfection is not required, only a focus
on improving.
S&OP is the only tool for approving the
final set of plans to run the business.
Also, look at the flow of the meetings, and
ask the following questions:
Is there adequate decision support via key
performance indicators to flag issues?
Is there an agreed-upon approach to decisions, including supporting analysis?
Do people participate actively?
Do facilitators frame key issues and decisions, or just leave them on a page
to be read?
Do facilitators brief functional leaders
prior to the executive S&OP meeting?
Are decisions from previous
meetings tracked?
Is there a feedback process involving all
participants that assesses the value of each
S&OP step as it occurs?
This evaluation will reveal key areas for
improvement and help reinforce the focus on
problem solving. Ultimately, it will be possible to create a successful plan for making
S&OP efficient and effective.
John P. Collins, CFPIM, CSCP, and Eric P. Jack, PhD, CFPIM, CSCP
BUILDING BLOCKS
example, to be competitive in the world

marketplace, companies now must successfully apply real-time information across
their global footprints by using the enormous data inputs on customers, suppliers,
capacity disruptions, and inventory availability. Companies such as Apple and Zara
have benefited greatly by leveraging their
supply chain visibility based on the availability of this information. Perhaps more
importantly, with the advancement of social
media, businesses are going far beyond
one-way conversations with customers and
suppliers when creating their forecasts.
Through social media,

global conversations are
happening constantlyand
significantly transforming
the field of supply chain and
operations management.
Reshaping an
Industry
Tectonic shifts in supply chain and
operations management
Photo: Thinkstock/blackdovfx
re we supply chain and operations management professionals experiencing a tectonic shift in how we execute our
responsibilities? Will our approach to tackling challenges
soon become obsolete?
Technological advances are having a huge effect on a variety
of industry roles; specifically, inventory, production, project, and
supply chain management. For example, project management
has evolved from the days of hand-drawn Gantt charts to todays
optimized software. In addition, new solutionsincluding online
collaboration tools and distributed teamsnow make it easier for
project managers to connect customers and employees from around
the globe. Likewise, resource management has been enhanced by the
availability of large amounts of data on changing customer requirements, capacity use, task tracking, and time management. Even the
role of the controller has been affected by data availability for more
informed business analytics.
Two other factors are further intensifying this industry transformationglobalization and social media communications. For
Through social media, global conversations are happening constantlyand

significantly transforming the field of
supply chain and operations management.
Interestingly, the effective management
of resources and supply chain coordination have become both easier and more
difficult. They are easier in the sense that
resource management tools now are readily
available and because supply chain visibility can be managed in real time. However,
these new processes are more difficult if
managers are not prepared to embrace
the new tools for interpreting and making
decisions. Likewise, for supply chain and
operations managers to remain effective,
they must learn how to lead distributed
teams and use online collaboration tools
more efficiently.
Any organization that resists change
whether related to serving the customer,
making product, organizing human
resources, or managing projectssoon
will be exposed by market forces. Todays
new technologies, ways of thinking, and
industry experiences are very quickly
making the way we have always done it a
thing of the past.
John P. Collins, CFPIM,

CSCP, is president of
Sustainable Solutions.
He may be contacted at
jcollins@ssi-spm.com.
Eric P. Jack, PhD, CFPIM,
CSCP, is dean of the
School of Business
at the University of
Alabama-Birmingham.
ejack@uab.edu.
To comment on this
apics.org/magazine
19
ENTERPRISE INSIGHTS
Whats in
a Name?
Planning is the essential ingredient
ver the last several decades, there have been continuous

strident voices in the marketplace declaring that material
requirements planning (MRP) and enterprise resources
planning (ERP) pursuits are worthless, antiquated, and obsolete.
Mostly, these self-styled authorities are promoting something else
that purports to replace traditional methodologies. Ironically, many
of the latest and greatest offerings are in truth information systems built around an MRP core (in other words, ERP as we know it)
with some kind of twist that fixes traditional ERPs shortcomings.
To comment on this
20
Theres no denying that MRP and ERP were developed to meet

the needs of a manufacturing environment that differs vastly from
todays world. Product life cycles are shorter now, there is more variety in the marketplace (lower volume for individual products), customer expectations are ever increasing, global markets have replaced
local competition, lean manufacturing is common, and technology
provides unprecedented visibility and connectivityto name just a
few significant shifts in the world of manufacturing since the 1960s.
Given all of these changes, how is it possible that software functionality first designed over a half-century ago remains in widespread use and
offers real benefits? Because manufacturers still have to acquire materials and components, add value through the application of employee
and equipment time, and sell and distribute the fruits of their labors.
MRP with its associated supporting applications (inventory control, planning and scheduling, customer service, purchasing, and the
like) models the plant and its operations. And
those fundamental activities and concerns
remain, despite the changes in environment
and demands.
Truth be told, MRP and ERP are not
perfect, and many of the new ideas and
applications add value to todays ERP and
make it a better tool for managing challenges. Most modern ERP systems support
kanban replenishment, for example, and
have planning algorithms for level (flow
production) scheduling that were absent in
earlier incarnations of the methodology.
Technological evolution
I suppose, from a marketing perspective,
it is much more effective to tout something new and different rather than just
an evolutionary extension of an existing
product. But its confusing and misleading
to promote something as a replacement for
existing solution when it is inherently that
same technology, evolved.
If I put on my curmudgeon hat, I could
take exception to the term ERP itself. MRP is
clearplanning material requirements is precisely what it does. The broader application
set we first knew as manufacturing resources
planning (MRP II) is a less-definitive term.
MRP II and its successor, ERP, (really the
same animal, but with a new name) emphasize planning and only planning. And this is,
indeed, at the core of MRP II and ERP, but
theres so much more. Perhaps the newer
term manufacturing operations management (MOM) is better, although some might
object to the absence of the word planning.
Besides, it seems that MOM is being defined
and used more as a replacement for manufacturing execution systems than for ERP or a
combination of both.
The message here is that we cannot
be distracted by the labels and acronyms
being introduced and replaced as systems
and software vendors continually search to
distinguish individual products from the
competition and gain the attention of buyers. The planning tools manufacturers need
are evolving and advancing, but the basics
remain the same.
Photo: Thinkstock/cloudnumber9
Dave Turbide, CFPIM,

CIRM, CSCP, CMfgE, is a
New Hampshire-based
independent consultant
and writer, as well as
an APICS instructor
and Fresh Connection
trainer. He has authored
six books, published
hundreds of articles,
and is president of the
APICS Granite State
chapter. Turbide may
be contacted at
dave@daveturbide.com.
Manufacturers still have to acquire

materials and components, add value
through the application of employee
and equipment time, and sell and
distribute the fruits of their labors.
Dave Turbide, CFPIM, CIRM, CSCP, CMfgE
Gary A. Smith, CFPIM, CSCP
Dont Forget
Procurement
Why these professionals must be an integral
part of the planning process
upply chain and operations management professionals

know that successful supply chains are those that effectively
balance demand and supply. Demand drives the equation
because, without it, supply becomes irrelevant and of no value.
Depending on the type of business environment, demand can come
from various sources. In a push (make-to-stock) environment, it
usually is derived from sales forecasts; in a pull systemmake to
order, assemble to order, or engineer to orderdemand comes from
actual sales.
Demand is the driver, but the involvement

of procurement professionals is vital to an
effective supply chain.
To reduce demand uncertainty, professionals forecast sales, purchases, production, and even financial data through the annual budgeting process. However, organizations can get into trouble along
the way if individual departments develop their own forecasts or if
forecasts are not updated and shared regularly. For example, say the
sales department notices a shift in demand and adjusts its forecast
to reflect that change. If this is not communicated to manufacturing
and procurement on a timely basis, the result is an unwanted and
unplanned increase or decrease in finished goods inventory. The
ramifications of this disconnect can cause lost sales, markdowns,
and even production shutdowns and layoffs.
Sales and operations planning (S&OP) can help achieve a better
balance for both current and new products at both the aggregate
and detail levels. Although S&OPs origins are in manufacturing, the
process has proven successful in retail and service organizations, as
well. (As a supply chain professional working in the public sector,
I prefer to call it demand and operations planning; however, for
purposes of clarity, I will yield to my private sector brethren.)
Unfortunately, people often see S&OP functions as customerfocused and thus concentrate S&OP team efforts forward from the
factory to distribution and ultimately the customer. Because major
suppliers are not included in the process, key opportunities to balance demand across the entire supply chain can be missed. Likewise,
failing to give suppliers information on future demand makes them
less able to react quickly to sudden purchase changes.
Integrating suppliers into the S&OP process can help avoid
problems obtaining up-to-the-minute partner data and enable these
providers to meet rigid time frames in the monthly S&OP cycle.
EXECUTIVE VIEW
Doing so also can make it easier to manage procurement risk, which is critical to
the demand-supply balance, as lead times
expand to take advantage of global procurement opportunities.
Procurement managers spend countless
hours analyzing spend; finding ways to
reduce lead time; and optimizing order size
and sourcing strategies to increase sales,
improve agility to changing market conditions, and reduce risk. In addition, these
professionals often go beyond purchasing
material to actually forecasting it, establishing inventory maximums, and managing
inventory accuracy. They know raw materials orders must be placed in advance of
production and arrive on a timely basis
neither too early to incur unnecessary carrying costs nor too late to cause production
disruptions or lost sales. All of these actions
play a pivotal role in the S&OP process.
As stated previously, demand is the
driver, but the involvement of procurement professionals is vital to an effective
supply chain. Their inclusion and willing
participation are critical to achieving that
ever-elusive balance of demand and supply.
With all departments working from the
same S&OP schedule, when sales forecasts
change, procurement has a better chance
to adjust raw material order quantities and
avoid unnecessary inventory buildup and
potential write-offs.
Furthermore, because sales, production, and raw material purchases directly
affect financials, the budgeting process can
be significantly enhanced. By partnering
with other S&OP process team members,
procurement professionals become major
players in communicating across the organization, adding visibility and removing
barriers that impede success.
Gary A. Smith, CFPIM,

CSCP, is vice president
of the division of supply
logistics for New York
City Transit. He may
be contacted at gary.
smith@nyct.com.
To comment on this
apics.org/magazine
21
WORKING GREEN
Antonio Galvao, CSCP
Nestl collaborated with GEA Filtration

and Veolia Water, a French waste-water
treatment company, to develop a system
that extracts 70 percent of purified water
from the volume of fresh milk used in production. The plant then uses the extracted
water for its operational processes. In a
second phase, another 50 percent of water
is recovered and treated for non-potable
use. While this currently is thought to be
the only zero-water plant in the world,
others are preparing to follow suit. Clearly,
it makes good business sense to do so.
A Crystal
Clear Message
Its all about the water
To comment on this
22
Waste is the real enemy,

and it needs to be fought.
Right after his work in South Africa,
he began consulting with a soft drink
manufacturer and learning about the
bottled water industry. That led to his
2002 formation of Ethos Water, which
funds water projects with every consumer
purchase. Thums objective was to leverage
his knowledge of the luxury bottled water
industry to address the problems he had
witnessed among people at the other end
of the economic spectrum. He succeeded
in 2007 when Starbucks purchased Ethos
Water, giving the business access to more
than 7,000 distribution points and achieving
the necessary volume to deliver results.
Whether you are a visionary entrepreneur or a focused supply chain and operations management professional looking for
waste-reduction opportunities and efficiency
improvements, these examples should inspire
you. Everyone and every businesses needs
clean, safe, and affordable freshwater to thrive.
Photo: Thinkstock/Hyrma
Antonio Galvao, CSCP,

is vice president, global
supply chain, at Sealed
Air. He may be contacted
at antonio.galvao@
sealedair.com.
reshwater has been in the spotlight quite a bit recently. From

scientific magazines to seminars across the globe, freshwaters
importance is being reinforced with a special focus on the
dangers of failing to protect this most precious resource. As this
department has noted many times, governments and corporations
must develop and implement strategies to ensure availability of
freshwater to all people and every business.
Water cannot be treated as an inexhaustible store. Take, for example, recent events in Brazila nation that accounts for 10 percent of
the planets freshwater supply. A prolonged drought in So Paulo, the
countrys largest state, depleted freshwater reserves. Nearly two-thirds of
households saw their water use restrictedmost for as much as six hours
a day during a 30-day period. Unsurprisingly, this shortage became
the subject of serious debate during last years presidential campaign.
While the drought was the direct result of climatological factors, the underlying issue is that freshwater management is being
neglected. Throughout Brazil, 40 percent of captured rainfall is lost
due to poorly maintained pipelines. As is so often the case, waste is
the real enemy, and it needs to be fought.
Some are waging the battle successfully. Nestl, the worlds largest
food company, is making great strides in fulfilling its commitment to
achieve water efficiency across its operations. The organizations milk
plant in Lagos de Moreno, Mexico, is the first of its kind to eliminate
reliance on external water sources. This factory does not take one
drop of water out of the ground for the system to be operational,
Nestl CEO Paul Bulcke told the Financial Times. Nestls achievement at this plant is significant, as the amount of water required
for daily powdered milk production is about the same as filling an
Olympic-size swimming pooland equal to the daily water consumption of 6,400 people.
Realizing the vision

Those who attended the APICS 2014 conference in New Orleans had the chance to hear
a general session presentation from social
entrepreneur and business executive Peter
Thum, in which he related how his work
experience in South Africa inspired him to
take action. He said he saw hundreds of people who didnt have access to clean drinking
water or proper sanitation. In fact, more than
2 million people around the world die each
year from illnesses related to unsafe water.
LEAN CULTURE
Ron Crabtree, CIRM, CSCP, MLSSBB
overlap. Following are additional insights

on this concept.
Technical
For someone to be effective at leading
and facilitating complex change, that
individual must come to the party with
solid technical skills that demonstrate
mastery of the foundations of operations.
Employees will generally be reluctant to
be led into an area of new thinking if the
facilitator does not know what success
looks like and is not adroit in the jargon.
Without these attributes, the facilitator
will be neither credible nor effective.
Expert Agents
of Change
The essential qualities of world-class
master facilitators
mprovement programs of all kinds increasingly require

leaders who are experts at engaging people. Indeed, soft
skills are being correctly recognized as part of the secret
sauce of success.
We hear it all the time: The majority of organizations that
embark on a major change effort fail to get the results executives hoped to achieve. This is not the result of anyones inability to learn the new system; rather, its because people were not
inspired and motivated to change. Hence, the need for master
facilitator skills. Leaders must be able to persuade employees
to adopt new, bigger than themselves objectives; facilitate in
difficult situations; and motivate others to embrace new ways
of thinking.
Photo: Thinkstock/BananaStock
An effective leader knows that change

can be painful and thus is careful to
ease the way to moments of insight.
These masters also must have technical and organizational
skills, as well as the personal talent to drive change. A useful
mental construct of this theory is a Venn diagram of three overlapping circles with technical, organizational, and personal
written inside. The best change leaders live where the circles
Organizational
Every significant change or improvement
initiative has a key common theme:
People will need to learn how to do
things differently. This is where a solid
understanding of adult learning modalities is required. The master facilitator
must be able to help people rapidly
and in a sticky fashion embrace new
and often uncomfortable ideas, ways of
thinking, methods, and behaviors. An
effective leader knows that change can
be painful and thus is careful to ease the
way to moments of insight. The goal is a
process that provides repetitive iterations
in order to cement new ways of thinking.
To achieve this objective, its necessary
to be adept in the areas of organizational
change management, motivation and
empowerment, building and sustaining
high-performing teams, group dynamics,
and key aspects of adult learning modalities. The ability to accurately assess organizational readiness and to understand how
to drive change are critical. Finally, there
are two subtle, but vital, elements of this:
properly evaluating how much agreement
exists about both the need for change and
about how to change. Much of the work
involves just getting those things settled.
Personal
There is an ever-changing list of key
personal skills that world-class change
agents possess, which deserves attention.
In the next Lean Culture, I will elaborate on this third circle of essential skills.
Ron Crabtree, CIRM,

CSCP, MLSSBB, is
chief executive officer
of MetaOps and has
authored or coauthored five books on
operational excellence.
He also hosts online
radio shows, teaches,
presents, consults,
and coauthors an
online magazine at
MetaOpsMagazine.
com. Crabtree may be
contacted at rcrabtree@
metaops.com.
To comment on this
apics.org/magazine
23
MANAGEMENT PERSPECTIVE
Professional
Purpose
Association with peers offers
real-life education
To comment on this
24
Coulter), and saw in person its just-intime implementation. Together, we APICS

affiliates were helping each other learn,
apply new ideas, and growing our careers
and companies.
I thought about this and asked myself what
it means for todays association, chapters, and
members. The answer is simple: People learn
best from each other. APICS members know
this, and we appreciate it. Thus, we must continue working together in order to effectively
adapt, change, grow, and add value. APICS
and similar societies are pillars of the learning
process, and affiliates of all kinds must help
others through this powerful forum for solving problems and identifying and exploiting
opportunities for improvement.
For many years, the APICS Orange
County chapter offered open discussion
time at the beginning of meetings. Members
could talk about issues they were encountering, and participants did a quick outline
of the situation on a whiteboard. The
discussions were spirited, often continuing
during dinner and afterward.
People learn best from

each other.
Today, brainstorming with fellow
supply chain and operations management
professionals is even easier, with many
chapters sponsoring discussion boards
on social media. But its still important to
support problem-solving during in-person
gatherings. Could you sponsor a Saturday
morning brainstorming event or six sigma
blitz? Perhaps your chapter could sponsor
a webinar? The key is holding an event that
involves real-world problems and not just
an expert giving a lecture. Members must
talk, share, and even argue in order to get
the ideas flowing. In this way, we can ensure
that we as professionals continue to learn,
grow, contribute to our organizations, and
have a little fun along the way.
Photo: Thinkstock/shironosov
Philip E. Quigley, CFPIM,

PMP, is senior project
manager at Ingram
Micro and an adjunct
professor in the department of management
at California State
University at Fullerton.
pquigley@fullerton.edu.
ecently, I taught an exam review session in Orange County,

California, with my colleague George Meier. He had built
an impressive review deck (more than 250 slides), and
I was a little nervous. People at review sessions, especially on
Saturday afternoons, are usually in a lets get out of here mood.
But my assumption was unfounded. Meiers presentation was
question-based, humorous, and fast-moving. The audience was
kept interested by the pace, the material, and his presentation
skills. I walked out impressed and, more importantly, wondering how I could improve my review sessions at California State
University at Fullerton. As I pondered, I realized I was enjoying
the adventure of learning again.
When I first joined APICS in the 1970s, it was a dynamic time.
Manufacturing resources planning and enterprise resources
planning were new, and talk was starting of zero inventories, total
quality management, and just in time. APICS was publishing case
studies in these areas, and I recall one on new product introduction and imaginary bills of material. I had some questions on the
information I read, so I tracked down the people involved. I called
them and ended up spending 90 minutes learning their processes
and what problems they encountered. After the discussion, I promised to share with them something we were working on to improve
capacity planning and releasing blanket orders to vendors.
Later, through the APICS Orange County chapter, I met the
materials director at Beckman Instruments (now Beckman
Philip E. Quigley, CFPIM, PMP
Corporate
Customs
Defining organizational culture and
exploring why its difficult to change
Photo: Thinkstock/DenisDubrovin
hy do organizations find it difficult to implement new ideas

and technologies into everyday operations? The initial cost
is one impediment; however, there frequently is a hidden
resistance to change in the dominant culture of an organization.
Organizational culture is the belief system shared by members
of a group. It is most noticeable in religious organizations and
special interest groups, but the concept also applies to businesses
and nonprofit organizations. For example, Southwest Airlines has
a reputation as a fun airline; some Silicon Valley high-tech firms
pride themselves on the image of being a laid-back group. A
companys public image might reflect the underlying culture, but
culture also might not be easy to see.
Following are a few of the ways that organizational culture
affects how companies operate.
Organizational culture gives the organization an identity.
Consumers often decide whether to buy based on their perception
of a companys culture. For example, Patagonia is seen as respecting
the environment, Whole Foods is associated with organic products,
and Edward Jones is viewed as an honest investment firm.
Organizational culture helps employees make sense of things.
It would be impossible, even demotivating, to reduce all activities to
formal procedure. Over time, employees begin to understand how
to respond to different situations because it is how we do things.
Organizational culture enables employees to be committed to
the company. When employees like the environment they work
in, they tend to stay. When they are uncomfortable, they leave or
become disgruntled.
RELEVANT RESEARCH
Organizational culture helps create stability. A positive culture enables a company

to survive during difficult times. Nordstrom,
founded in 1901, has prospered over the
years while many retailers experienced
turmoil by providing excellent customer
service, a foundation of its organizational
culture (Crandall and Crandall 2014).
Components of organizational culture
include values and artifacts. The values of
a company often come from its founder.
While most companies have mission and
value statements, these do not always
reflect the underlying values present in the
organizations culture.
Artifacts reflect, at least to some extent,
the culture of the organization (Crandall
and Crandall 2014). Culture is made more
tangible through stories, language, symbols,
ceremonies, rituals, reward systems, and
physical surroundings, to name a few.
Language conveys an image of the underlying
culture; examples include geek talk and
derivative trading. Symbols might be
regalia for academics, ceremonies include
Oscar awards, and rituals could be parties
for retiring employees. Reward systems may
be monetary, symbolic, or both. Physical
surroundings could be stark or plush, inviting
or cold, or functional or disorganized.
Areas of culture
Various groups represent or reflect a companys culture. These include:
Organization. The intended culture for
the entire organization can be found in
the vision, mission, and value statements.
The dictates of the companys founder
might be the basis for these.
Employees. Non-managerial employees
carry hidden beliefs that often transfer into
visible areas such as customer service.
Management. This group can be seen as
separate from non-managerial employees
and carrying their own belief systems.
Consumers. While customers may not be
part of an organizations culture, they often
mirror what they believe the culture to be
and embody the companys preferences.
When the areas of culture are in sync, the
company usually is successful. But, when
cultural areas are not aligned, the results can
be uncertain and, in some cases, disastrous.
Richard E. Crandall,
PhD, CFPIM, CIRM,
CSCP, is a professor
at Appalachian State
University in Boone,
North Carolina. He
may be contacted at
crandllre@appstate.edu.
apics.org/magazine
25
RELEVANT RESEARCH
J.C. Penney is a notable example of a company that has experienced it

all. In the early days, under Penneys leadership, it was successful. Recent
years have been more problematic. During one recent CEOs tenure,
management tried to instill a new culture, employees were hesitant or
uncertain, and consumers were disillusioned. The company has indicated it wants to return to its roots; however, its future is still in question.
Types of cultures
Following are some of the different ways organizational cultures
can be classified.
Adhocracy. This culture strives for a spirit of entrepreneurship,
innovation, and risk taking. It develops new products and is externally
focused. Employees who do well are flexible, creative, and adaptable.
Market. Similarly to an adhocracy, the culture is externally
focused and competitive; the company wants to lead in its industry. Employees who do well are achievement-oriented.
Clan. This culture is more like an extended family and emphasizes harmonious relationships among members, mentoring of
new employees, and teamwork. Internally focused, it seeks to run
well as a cohesive unit. Employees who do well are part of the team
and seek the good of the company.
Hierarchy. This type of culture thrives on rules, policies, procedures, and order. Internally focused, the operation does better in a
slow-changing environment. Employees like order, efficiency, and
When cultural areas are not aligned, the

results can be uncertain and, in some
cases, disastrous.
predictability (Crandall and Crandall 2014, Quinn and Rohrbaugh
1981, Deshpand et al. 1993, and Petrock 1996).
Drivers of change
What causes organizations to change? The emergence of a strong
leader is one source of cultural change. The following drivers also
prompt shifts in thinking.
Technology. The internet and related products and systems
have enabled Amazon to become a major online retailer, forcing
conventional retailers to change or face destruction.
Public pressure. Walmart faces pressure to change the way it
treats its employees and to become a more sustainable company.
McDonalds wants to update its image, adding salads and
lower-calorie items to its menu.
Economic opportunity. General Electric is moving from a
consumer-oriented business to an industrial products company to
better position itself in the market.
New technologies and a desire to appeal to younger generations
means that companies must become innovators and change if they are
to be relevant in todays marketplace. Organizational culture must also
change if the transition is to be successful (Crandall and Crandall 2014).
Following are a few examples of how some long-held practices
are shifting:
26
From a make and sell mentality

to sense and respond awareness.
Manufacturers long operated by developing products first and then figuring
out how to sell them. Now, the trend is to
look at manufacturing as seeing a need
and filling it (Haeckel 1999).
From buying at physical stores to
buying online. Consumers increasingly
buy things online. As a result, retailers are
moving toward omnichannel capabilities.
From mass production to mass customization. Consumer demand for product variety
and customization are driving the development of new technologies and processes.
From profit as the primary objective to
triple-bottom-line goals. Rather than
just focusing on profit and return, the triple bottom line of economic, societal, and
environmental goals is becoming more
important in planning and operation.
From vertical integration to virtual integration. Henry Fords River Rouge plant
represented the ultimate in vertical integration. This approach largely has been replaced
as companies adopt global, extended supply
chains to produce goods and services.
Barriers
Machiavelli (1513) wrote, Whenever
his enemies have the ability to attack the
innovator, they do so with the passion of
partisans. There are indeed many ways
and reasons that change or innovation is
met with resistance at organizations.
Rogers (2003) writes that adopting new
ideas, even those with obvious advantages,
is difficult and may require many years
before fully accepted. A challenge for many
organizations is to speed up this process.
Klein (2013) describes two barriers to
gaining insight within an organization. The
first is the predictability trap. A company
spends time planning a project, assigning
roles to employees, and justifying the use
of resources. Then, someone suggests a
potential improvement that would require
even more planning, time, and resources.
The change is postponed, or even forgotten,
and the improvement is lost.
The second barrier is the perfection trap.
Changes introduce errors and slow the pursuit of perfection. In well-ordered situations,
with clear goals and stable conditions, the pursuit of perfection makes
sensebut less so when an organization faces complex and chaotic
conditions and demands from competitors and consumers.
Aguirre and Alpern (2014) suggest that the costs when change efforts
go wrong are high and include not only financial expense, but also confusion, lost opportunity, wasted resources, and diminished morale.
Successes
The good news is that cultures can be changed, but it is often a
slow process. Consider the following steps when attempting to
adopt a shift in organizational culture.
1. State what you want the culture to be. Go beyond the vision and
mission statements to reinforce and activate desired changes.
2. Promote an ethical culture. While this may be obvious, it is
necessary to ensure that the practices within a company live
up to the stated goals.
3. Hire the kind of people you want to perpetuate your desired
culture. Not everyone will take to change; find employees
who buy into the intended culture.
4. Take care of your employees, and they will take care of your
customers. When employees are unhappy, it often shows in
their customer relationships.
5. Implement the proposed strategy. It is impossible to achieve
the desired culture if the strategies selected by managers and
employees dont mesh.
6. Change the artifacts. The physical environment is important
to employees. Pictures, signs, layouts, food courts, and office
areas all should reflect the desired culture.
7. Tell stories. We all like to hear stories that help us understand
what is expected of us and how we will benefit.
8. Recognize employees with formal structures. A reward system
should be fair and transparent (Crandall and Crandall 2014).
The following recent success stories demonstrate that organizational change is possible and that a company can thrive.
When Tim Cook took over as CEO of Apple, many wondered if
he could ever replace Steve Jobs. However, many credit Cook with
converting a company of specialized groups working in silo environments into a smooth-running, integrated organization. While
Cook does not exhibit the high profile of Jobs, he is well respected
by those who understand the difficult changes he has orchestrated
(Stone and Satariano 2014).
In the automobile industry, all of the big three American manufacturers have gone through organizational culture change. Ford
brought in Alan Mulally from Boeing to revive an ailing company.
General Motors needed help from outside CEOs to recover. Chrysler
has benefited since it was acquired by Fiat. All of these companies
recognized that business as usual was no longer good enough.
Another company in the midst of a culture transition is HewlettPackard (HP). After years of successful management by its founders,
HP entered a period of turmoil, operating under six different CEOs
from 1999 until today. Each tried to introduce a new way of doing
things, and each encountered resistance from long-time employees
and the culture developed in the early days. Today, Meg Whitman,
CEO since September, 2011, appears to have

settled the company down to the point it is
expected to survive (Crandall and Crandall
2014). Additionally, HP recently announced
its intention to spin off older product lines
from newer technology services in what
could be a recognition of the need to give
each culture the best chance of success.
In almost every successful case study of
a major change implementation, people are
the biggest obstacles or supporters of the
program. Just as with moving to a foreign
country, people will enjoy the experience
more if they can adapt to cultural change.
References
1.
guirre, DeAnne, and Micah Alpern. 2014.

A
10 Guiding Principles for Leading Change
Management. IndustryWeek October 10, 2014.
2. Crandall, Richard E., and William Rick
Crandall. 2014. Vanishing Boundaries:
How Blending Manufacturing and Services
Creates Customer Value. Boca Raton,
Florida: CRC Press.
3. Deshpand, R., J. Farley, and F. Webster Jr.
1993. Corporate culture, customer orientation, and innovativeness in Japanese
firms: A quadrant analysis. Journal of
Marketing 57 (1): 23.
4. Haeckel, Stephan H. 1999. Adaptive
Enterprise: Creating and Leading Senseand-Respond Organizations. Boston:
Harvard Business School Press.
5. Klein, Gary. 2013. Seeing What Others
Dont: The Remarkable Ways We Gain
Insights. New York: Public Affairs.
6. Machiavelli, Niccol. 1513. The Prince,
translated by George Bull in 1961.
Baltimore: Penguin Books.
7. Petrock, F. 1996. A quadrant of organizational cultures. Management Decision
(34) 5: 37.
8. Quinn, R., and J. Rohrbaugh, 1981. A
competing values approach to organizational effectiveness. Public Productivity
Review 5 (2).
9. Rogers, Everett M. 2003. Diffusion of
Innovations, fifth edition. New York: Free Press.
10. Stone, Brad, and Adam Satariano. 2014.
Tim Cooks Reboot: The new products and
Apple Pay are only half the story. Bloomberg
Businessweek September 22: 6471.
To comment on this
apics.org/magazine
27
BOOK REVIEW
Ever More Elaborate

Proven tools for managing todays highly intricate supply networks
Managing Complexity
By George Rzevski and Petr Skobelev | Published in 2014 | 216 pages
Managing Complexitys aim is to help businesses cope with the rapidly increasing challenges of
the internet-based global market. The authors assert that companies too often cling to previously
successful practices or concepts, seemingly ignorant of the fact that the world is evolving. Rzevski
and Skobelev contend that a new method of problem-solving is required: complexity thinking.
Fortunately, the authors have spent 20 years tackling problems that are immune to conventional thinking and solutions. During that time, they developed an original method for
managing complexity and designing systems capable of reacting quickly and positively to
change: multi-agent technology.
In the first section of the book, the authors discuss the fundamentals of complex systems
and multi-agent technologywhich the authors define as the key software tools for managing complexity. They have used such solutions to design and build complex adaptive software and business processes. Indeed, their own multi-agent software is specifically intended
to conduct adaptive allocation of resources, even when the resource demand or availability
changes during the allocation process. Subsequently, the book provides a number of original
solutions to help business leaders construct their own complex adaptive software.
The strength and merit of the authors method is brought to bear in the second section.
Here, they detail a wide variety of unique case studies in which they effectively employed
their technique to solve problems for clients. For instance, the adaptive scheduler that
Rzevski and Skobelev generated for a large fleet of oil tankers resulted in considerable
savings and a return on investment in less than six months via the reduction of idle runs per
tanker. Similarly, the authors multi-agent adaptive supply chain scheduler created for Lego
resulted in a 24 percent reduction of lost sales, 20 percent increase in service level, and 25
percent increase in profitability in the first year.
In short, this book provides clear strategies for saving time, money, and resources. Anyone
looking to foster solvency and sustainability in the long-term should read it.
Lean Retail & Wholesale
By Paul A. Myerson | Published in 2014 | 320 pages
Historically, lean has been a tool for manufacturers. Few retailers or wholesalers apply lean
conceptsand, of those that have, most of the implementations are piecemeal and fail to
foster the kind of lean organizational culture required for long-term success.
In Lean Retail & Wholesale, Myerson aims to rectify this by giving retail and wholesale
professionals the necessary tools, techniques, and real-world examples to help them succeed.
He illustrates how to foster and extend a holistic lean methodology in order to reduce costs,
boost service, and increase profitability.
The book details how to get started using lean principles, maintain and advance
initiatives, measure success, and plan for the future. Retail strategyincluding sales and
marketing, location, human resources, information technology, supply chain, and customer
relationsis discussed in-depth. The author also writes on merchandise management, with
a focus on complex issues such as forecasting and inventory planning.
While these topics are important, the chapters dedicated to store operations and distribution are perhaps the most critical, as these areas represent the greatest source of waste and,
28
Karl M. Kapp, EdD, CFPIM, CIRM
therefore, the greatest potential to apply lean principles. For instance, Myerson discusses the
topic of employee management with an example from the Hard Rock Caf, which excels by
prioritizing a culture of acceptance and individuality. Additionally, he notes that the theme
restaurant chain promotes from within and offers award-winning training.
With regard to distribution, the book notes that warehousing is a good place to start
applying lean. Specifically, cutting waste with labeling and zoning racks or bar coding cases
is a significant opportunity.
Finally, the appendix offers several useful case studies that demonstrate how others have
successfully implemented lean. These examples help highlight the lessons in the book and
make the authors points even more beneficial. Overall, Lean Retail & Wholesale is a highly
insightful and succinct guide to lean application and a valuable resource for any retailer or
wholesaler seeking a competitive edge.
Supply Chain Risk
By John Manners-Bell | Published in 2014 | 264 pages
Natural and man-made catastrophes have become increasingly common, so its no wonder
that the topic of supply chain risk has been driven onto the agenda of all multinational
corporations. That recent disasters such as the Japanese tsunami and Thai floods could halt
production and cause shortages as far away as the United States and Europe is indicative of
the fragility of global supply chains.
Supply Chain Risk could not be timelier. It argues that companies have been so focused
on minimizing inventory costs and improving bottom lines that many leaders overlook the
resultant supply chain exposure to new or evolving threats. Furthermore, businesses are
suffering from the loss of safety stock that once served as a buffer against such issues.
Manners-Bell also contends that organizations have transformed measureable internal
risks into more difficult-to-measure external ones. He asserts that companies must balance
and learn to identify and contend with the variety of threats. The book first demonstrates
how to mitigate external risks by engineering resilience into the supply chain. One element
of this is gaining supply chain visibility upstream and down. Supply chain and operations
management professionals must know not only their first tier suppliers, but also tiers 2 and
3. Achieving this level of visibility requires auditing, collaboration, and the creation of an
environment in which suppliers are encouraged to audit their own suppliers. The other key
component to supply chain resilience is agilityensuring that all parties in the network are
capable of rapid response to disruption.
The book goes on to examine how supply chain risk varies depending on sector and why
some industries are more resilient than others. For example, Manners-Bell notes that the
automotive industry is particularly vulnerable to industrial and transport disputes because
of its centralized, lean nature and high levels of trade unionization. For their part, high-tech
companies often perform worse in localized disasters because of their tendency to cluster in
certain geographical areas.
Lastly, Supply Chain Risk identifies the five main categories of external riskeconomic,
environmental, security, societal, and technologicalwith a chapter dedicated to each.
These sections examine potential impacts and present strategies for mitigation, all of which
are bolstered by case studies, best practices, and past mistakes drawn from a host of major
corporations. It is a very thorough and useful book that will benefit anyone dealing with
supply chain risk.
Karl M. Kapp, EdD,

CFPIM, CIRM, a professor at Bloomsburg
University, is author of
Gadgets, Games, and
Gizmos for Learning
and coauthor of
Integrated Learning
for ERP Success. He
may be contacted at
kkapp@bloomu.edu.
To comment on this
apics.org/magazine
29
The APICS Interview
DELIVERING
DELIGHT
Find your customer loyalty sweet spot
Editors note: APICS magazine Managing Editor Elizabeth Rennie recently read Hooked on
Customers: The Five Habits of Legendary Customer-Centric Companies and then had the opportunity to interview author Robert G. Thompson. Here, they discuss his strategies, lessons, and
real-world examples on creating loyalty and delighting customers and partners.
Photo: Thinkstock/zzayko
Rennie: I think its important first to note

that Hooked on Customers doesnt just discuss customer experience; rather, its really
about how to execute a business plan by better
understanding your customers. Can you please
explain that concept?
Rennie: A customer-centric business aims to

create value for customers and thus bring about
loyalty and profitability. Why is it important to
be customer-centric as opposed to simply providing a promised product or service without
any hassle or malfunction?
Thompson: The heart of customer-centric

business management is understanding what
customers care aboutin other words, what
makes them loyaland then delivering on that
better than your competitors. Customer experiences are a very important loyalty driver, but
theyre not the only thing that matters. The quality of the solutionthe product or service that
the customer will useand pricing also matter.
Customers can be consumers or intermediate
businesses that sell to the ultimate consumer.
Thompson: Providing what you promise is a

good start. Its a foundation for customer-centric
businesses. But leaders go beyond to provide
more than whats expected. In my research, I
found that constantly innovating to improve
solutions is one of the top characteristics of
top-performing firms. My favorite example of
this is Intuit. Cofounder Scott Cook developed
the Design for Delight initiative about five years
ago to make innovation a part of the companys
DNA. (See sidebar.)
apics.org/magazine
31
While its not possible to exceed

customer expectations on every
interaction, leading companies
have a culture of doing a bit more
when they can. Robert G. Thompson, author of
Hooked on Customers
Rennie: You discuss five customer-centric

habits: listen, think, empower, create, and
delight. Where do you think most organizations fall down? How can a business
succeed at all five habits?
32
Thompson: If you want to motivate

customers to be loyal, you have to know
how they think and feel. Intentions are all
well and good, but, as a former customer
once told me, Perception is reality.
Customers perceptions are their only
reality, and they will act based on that.
Rennie: You write that there is no one
ultimate question to effectively measure
customer loyalty, but that each company
must figure out the right metrics for its own
particular business. What tips do you have
for professionals working toward that goal?
Thompson: In my latest research, I found
no meaningful difference in business
performance based on the usage of one
metric or another. The net promoter
score, the customer satisfaction score, and
the newer customer effort score can all
be used effectively. A much more critical difference is in how fully a company
strives to close the loop between customer
feedback and action.
That said, I do advise companiesespecially
large, complex enterprisesto do their own
Photo: Thinkstock/artlensfoto; Thinkstock/kjekol
Thompson: Ive found the biggest gaps

exist between the leaders and the laggards
in creating and delighting. Create is
all about innovationbringing new or
improved solutions to your customers
and going beyond just fixing problems.
Delight means exceeding expectations.
While its not possible to exceed customer
expectations on every interaction, leading companies have a culture of doing
a bit more when they can. Put another
way, leading companies are not satisfied
with just having satisfied customers. My
latest study is Customer-Centric Business
Management, which was released in
November. It found that 56 percent [of
company leaders] said that experiences are
the best opportunity to delight customers.
Another interesting finding was about the
role of management in supporting the five
habits. I found that the concept of leaders
setting a good example was far more
important than measurements and rewards.
The implication of this is clear: Leaders who
want their organizations to be customercentric need to walk the talk themselves.
Rennie: You write that understanding

customer perceptions is a core behavior
of customer-centric businesses. Please
elaborate on this.
loyalty research in order to identify key drivers. Then theyll

know what questions and metrics really matter.
Rennie: When discussing employee engagement, you make two
interesting points: First, employee efforts that are not aligned
with creating customer value are wasted energy. Second,
employee engagement and business performance have a reciprocal relationship. Can you please tell our readers more about this
and share your thoughts on successful engagement strategies?
Thompson: Most of the studies of employee engagement are
based on correlation. So many leap to the conclusion that increasing
employee engagementcommitment to the job and companywill
automatically cause improved business performance. It may, but if
and only if the job the employee is doing is creating value for the
customers, the company, or both. As it turns out, its also true that
better-performing companies have the resources to invest in a better
environment for employees. Some longitudinal studies referenced in
my book show these two-way predictive relationships.
Intuits Design for Delight Initiative
Photo: Thinkstock/seregam
Financial and tax preparation software firm Intuit encourages

employees to tap into their own passions in order to delight customers and advance the business. The following are some of the
elements of Intuits innovation culture that give everyone the power
to innovate and the resources to be successful.
Employees are given unstructured time to tap into their passion
to drive growth. According to Our Innovation Culture, an article
on the Intuit website, the idea is to give great people with great
ideas the time and freedom to pursue them. Specifically, employees can spend up to 10 percent of their time on unstructured projects that theyre passionate about. They even can aggregate their
unstructured time into contiguous blocks. Employees enjoy the
autonomy, mastery of new achievements, and having a purpose
toward something larger than themselves. Intuits unstructured
projects include finding creative ways to solve important customer
problems, developing a healthier work environment, and engaging
in professional development programs.
Another Design for Delight initiative at Intuit is innovation
catalystsa network of internal innovation mentors. This community of employees facilitates and coaches teams and individuals
across the organization to use Design for Delight principles and
tools for innovation. The article explains, Employees are trained
as innovation catalysts and then spend up to 10 percent of
their time coaching, mentoring, and inspiring employees outside

of their team. Anyone at Intuit can ask an innovation catalyst
for coaching help for their regular roles and responsibilities or
for their unstructured time projects. The catalysts help people
reframe challenges, experiment faster, and learn more efficiently.
Horizon planning is another great example. It is a key set of principles Intuit uses to balance short- and long-term investments. The
horizon-planning portfolio is divided into three stages:
Horizon 1 offerings aspire to deliver delightful shareholder results
in the form of top- and bottom-line growth while continuing to
innovate and create efficiencies that are reinvested to accelerate
customer and revenue growth.
In Horizon 2, employees aim to achieve delightful market results
gaining market share and advancing customer and revenue
growth much faster than the companys average.
Horizon 3 involves delightful love metrics. These validate that
the team has found an important problem and created an offering
that delightfully solves it. Love metrics include delivering a
measurable customer benefit, gaining active use, and positive
word-of-mouth, according to the article. By setting the right
expectations of our offerings and the people who lead them, weve
been able to nurture a culture of innovation while still delivering
the bottom-line results needed to fuel the company.
apics.org/magazine
33
Rennie: You write that not all value is

valuable. Price, function, and experience
all play a role. What tools should companies use to figure out where customers
place the most valueand thus what to
focus on most?
Thompson: Loyalty researchers can identify the key drivers that cause customers
to be loyal in their behaviorfor example,
by continuing to do businessand their
attitude, or willingness to advocate for the
company. However, what customers say
they want is not always consistent with
how they behave. Thats why I think analyzing behaviors and use of data analytics
can provide deeper insight into what is
really moving customers.
Rennie: In your experience, what drives
the most loyalty and delight? Does it vary
from industry to industry?
Thompson: Sorry, there are no simple
answers here. In broad terms, my research
finds that companies and their customers
weigh the solutionthe product or service
about equally with their experiencetheir
interactions. Each get about a 37 percent
importance [rating] as loyalty drivers But
loyalty drivers vary by industry and by situation. In some cases, the product still reigns
supreme; in others, its all about the experience. And price still mattersa bit more to
customers than business leaders would like.
The big trend the past few years has been to
increase emphasis on the customer experience as a point of differentiation.
drivers is confidential, they have spoken

publicly that ease of doing business has
become a key driver in the past couple of
years. As a result, Cisco worked to improve
it across their business units.
Rennie: Does every businessor, in the
case of APICS magazine readers, every key
customer-partner relationshipneed a
chief customer officer?
to result in merely satisfied customers,

and many studies have shown that theyll
still leave if a better deal comes along. But
focusing on delight creates a stronger,
emotionally based reason for customers
to stick around and tell their friends.
To comment on this article, send a message to
feedback@apics.org.
Thompson: By that specific name? No.

But having that function? Yes, absolutely.
In mature, customer-centric firms, the
CEO often takes that role. In my latest study,
fewer than 10 percent of respondents said
their company had a chief customer officer;
but 60 percent thought their company could
benefit from having someone in that job.
Rennie: You say companies need to work
on two fronts continuously: systematically
root out the causes of customer pain, and
figure out how to truly delight customers.
Why are these objectives so important?
Thompson: Curing pain will cut attrition, and this is something most every
company can benefit from. Lost customers
dont have to be replaced with an expensive marketing campaign. But this tends
Rennie: Can you give me an example of

how a real-world company finds these
loyalty drivers?
Thompson: Finding loyalty drivers is
something fairly common with larger brands.
Cisco has been doing this for many years
as part of its program to improve customer
satisfaction. While their specific list of
Photo: Thinkstock/Kuzmik_A; Thinkstock/shutswis; iStock/Joe_Potato
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36
Tiny Triumphs,
Breakthrough
Results
Discovering the bond between continuous improvement and
accelerated value stream mapping
By Terence T. Burton
ow much real value exists in your value stream

mapping process? Despite its general simplicity and many benefits, organizations often
fail to use value stream mapping to its full potential.
Initiatives begin without clear objectives in mind, and
the practice of producing an enormous, all-encompassing
value stream map takes the place of the true goals: continuous improvement and problem solving.
Because the basic mechanics of traditional value
stream mapping are fairly straightforward (see sidebar),
companies set out to map the entire organization as a
cure for all of their operational inefficiencies. Leaders
believe that, by following the mechanics and chanting
the mantras, positive results eventually will occur. But
improvement just isnt that easy. To be successful and
advance continuously, deliberate action and intervention above and beyond process documentation are
required. Businesses stuck in this state need to put down
the keys, rethink the journey, and recognize the need to
shift toward a better place.
Similarly, there are too many company leaders focusing
on the sheer, rigid vanilla mechanics of value stream
mapping, with limited business process knowledge
and dependencies. There are macro and micro maps;
standard, one-size-fits-all methods and symbols; and an
endless collection of irrelevant, static descriptive data.
But while the customary mapping process is primarily
attribute- and snapshot-based, its value comes from time;
resources; and repeatable, validated successes.
Also, its been proven time and again that using only
one improvement tool severely limits the chances of
success. No single-point initiativelean, six sigma,

the five Ss, or value stream mappingleads to true
continuous improvement and identification of key
issues that need to be addressed. An appropriately
blended and tailored approach to improvement
always achieves quicker and higher-value results. As
such, value stream mapping works best as a living
diagnostic and corrective-action process.
Perhaps most notably, conventional mapping methods
have a short shelf life of usefulness because they deal with
a static picture of the process at a single point in time and
space. This does not happen 100 percent of the time, and
several organizations have generated successes, but there is
a better way to improve how we improveand that is with a
more accelerated, targeted, and integrated approach.
Understanding accelerated mapping
Rather than beginning the value stream mapping
process with the objective of charting the organizations
entire universe, much faster and higher-value creation
can be achieved with a more focused building-blocks
approach. The objective is many smaller hits in the
right process pain points that achieve meaningful progress. This method aligns limited improvement resources
to the greatest-impact improvement opportunities and
promotes a more robust approach.
Treating mapping as a single, lengthy task usually
ends up as a wasteful fishing expedition. The objective should not be to issue a vague directive to create
a map and see where the problem areas lie; rather,
the goal should be to improve problem areas that are
apics.org/magazine
37
well-recognized by the people who work within the process every day. The ability to put to use their knowledge
and experiences makes it possible to validate opportunities with facts. Then, team members can develop detailed
segments based on the highest-impact opportunities. The
size of the segment is relative to the interconnectivity of
the process segment under investigationthink of them
as manageable chunks for rapid advancement.
A mega-documentation exercise of every activity in
the entire organization never will yield the same benefits
as diving deep into the various segments to understand
the factors that really make the overall process tick. Over
a relatively short period, however, the process segments
can be pieced together to view a much more accurate,
larger picture of the organization. Similarly, a broader
value stream mapping process eventually evolves from
the smaller elements. The map becomes a reference to
architect, reengineer, or improve enterprise-wide business
processes. As previously stated, this requires the integration of value stream mapping with other improvement
methodologies and toolsand, at a basic level, the integration of lean thinking to eliminate waste, as well as the
simplest six sigma problem-solving analytics.
Value Stream
Mapping Defined
The APICS Dictionary defines a value stream
as the processes of creating, producing, and
delivering a good or service to the market.
For a good, the value stream encompasses
the raw material supplied, the manufacture
and assembly of the good, and the distribution network. For a service, the value stream
consists of suppliers, support personnel and
technology, the service producer, and the
distribution channel. The value stream may be
controlled by a single business or a network
of several businesses.
The map itself typically is a graph that displays the sequence of operations needed to
produce and deliver that product or service.
The act of value stream mapping involves
drawing the current production process and
then attempting to construct the most effective production plan.
38
The road to results

Here is a simple overview of the process. First, note that
accelerated value stream mapping is a laser-targeted,
rapid-deployment, rapid-results process that maximizes
the organizations current knowledge and Pareto-based
thinking. Focus group sessions, pre-analytics, evaluation of customer and internal operating data, and other
diagnostic activities must take place before any specific
accelerated mapping activities begin.
Start by planning and calibrating opportunities. Create an
internal, cross-functional core team to help scrub findings
or provide additional direction about where to conduct
additional analysis. Meet with executives and focus group
members to discuss the current status of internal operations.
Prior to these meetings, ask participants to contribute performance data or other facts to substantiate their perspectives on process performance and detractors. During these
sessions, probe for the three-to-five issues that give employees insomnia, and discuss wish lists openly with participants.
Then, outline a macro charter. This is a document
that describes high-level improvement themes and presents evidence of opportunities for improvement from the
focus group meetings. At this point, the collected data,
facts, perceptions, opinions, root causes, and symptomatic
inputs must be verified, filtered, sorted out, prioritized,
and laser-targeted to specific improvement opportunities.
Perform additional analysis and put together the
improvement puzzle. The playbook-specific, assignable
opportunities should be developed and prioritized. These
elements include the problem statement, objectives and
scope, baseline performance, improvement goals, entitled
benefits, identification of the right team leader and members, milestones and expectations, and a first-30-day plan.
This activity is a complex blending of planning, structuring, and setting up improvements. The total benefits are
also aggregated in terms of timing and magnitude. These
activities are reviewed and endorsed by the executive team
and process owners.
Next, launch five-to-eight mission-critical, high-impact improvement initiatives across different segments
of the organization. This is the point where accelerated
value stream mapping kicks in. The first part is to develop
the SIPOC (supplier, input, process, output, customer)
diagram. It should include performance metrics, controls
to maintain quality and standardization, a list of things
that typically go wrong, and supporting data for the
process under investigation. Typically, it is 6-to-12 steps
and a maximum of one or two pages. Then, complete the
remainder of the template.
At this point, create an extended-dialogue cause-and-effect
diagram and brainstorm potential root causes of the problems within each step. Also consider related issues, such as
barriers, broader summary root causes, improvement ideas,
data needs, and the like. Validate root cause information

with hard data and analysis and eliminate anything that
does not stand the test of truth. Rank the remaining root
causes using frequency, severity, improvement impact, and
controllability. Look at the top 20 percent of the ranked
root causes and note the areas where they most often occur.
This identifies a key process or sub-process and isolates the
highest-influence detractors. It also is where the remaining
improvement efforts should be focused.
The execution step comes next. Here, its important to
analyze the problem process segment in detail, integrating
traditional mapping approaches with analytics such as
Pareto analysis, run charts, and a review of defects. Other
less-structured toolsmind mapping, affinity diagrams,
and worth factor analysisare equally beneficial. Develop,
quantify, and prioritize opportunities for improvement,
detailed implementation plans, and control plans.
Finally, transfer ownership and sustaining responsibility to the process owner, place results in the knowledge
database or reference directory, disband the team, and
repeat the process on another prioritized project. It is
the core teams responsibility to keep a list of assignable
initiatives and create the right implementation teams.
Terence T. Burton is president and chief executive officer

of The Center for Excellence in Operations, a management consulting firm with headquarters in Bedford, New
Hampshire, and offices in Munich, Germany. Burton has
been an active APICS member and participant at the local
and national level for more than 25 years. He may be contacted at burton@ceobreakthrough.com.
To comment on this article, send a message to feedback@apics.org.
Meaningful improvement
The textbook value stream mapping approach tends to
produce a diagram of the entire process, find issues to
correct, and then attempt to improve the whole. This
type of exercise uses static snapshot descriptive data and
includes very little analytics to pinpoint major detractors and stress-test proposed changes. Traditional mapping pushes employees to chase symptoms. Meanwhile,
accelerated value stream mapping enables workers to
really understand issues and their relative influence on
long-term process performance.
Register at apics.org/extralive.
APICS Extra Live: Accelerated Value Stream Mapping
Presented by:
Terence T. Burton
President & CEO

The Center for Excellence in Operations
Date:
Time:
February 5, 2015 1:00 p.m. Central
Attend this APICS Extra Live to gain deeper insight into the January/February
article Tiny Triumphs, Breakthrough Results. The author first will provide a basic
understanding of accelerated value stream mapping. Then, participants will learn how to
map and mine the key sources of poor processes
combine value stream mapping with other analytics to get the facts
implement quick improvements and sustain success.
apics.org/magazine
39
40
Catching
Leans Drift
THE ESSENTIAL MESSAGE OF TIME-BASED COMPETITION
BY RICHARD SCHONBERGER
t happens during so many major management initiatives: A set of core concepts

and methods attracts supporters until it
becomes a bandwagon. Professionals of
many stripes think, Thats for me! and climb
on board with their own songs and instruments.
Soon, the original melodies and tempos become
counterpoint to the new forms.
Take the case of lean. Originally known as
just-in-time (JIT) production, it thrived in
Japan in the 1960s and 1970s, then migrated
across the globe in the 1980s. As JIT gained
more believers, numerous books and articles
were written on the approach. These titles
discussed speed to market, cycle time, lead
time, quick response manufacturing, and
moreeach with its own specific point of
view. Though the concepts and methodologies echoed those of JIT, the label of choice
became lean.
Lean was welcomed by its target industrial
audience partly because the term sounded just
right and also because of the incessant quest to
find the answer to whats next? Lean was in,
while JIT was shop-wornso much so that, by
the next decade, the business press abandoned

its use in reference to production.
Lean has attracted many and diverse fans
who have embellished the principle to the point
that its core methodologies are obscured. Chief
among the changes is the very definition of the
word. To many writers, consultants, trainers,
implementers, and managers, lean no longer
refers to time-based competition. Nor is it
speed to market or lead and cycle time reduction. Rather, it has become attacking the seven
deadly wastes.
That pursuit is a valid and useful element
of lean. Waste elimination surely does offer
time-based results. However, the seven wastes
have two problems: First, they focus on
whats wrong. Second, waste reduction has
a low-level ring to it and often fails to plant
itself in the minds of executives as strategically important.
Time-based competition, on the other hand,
features whats right. At its heartand native
to both JIT and leanare focused factories,
plants-in-a-plant, and cells; quick setups and
changeovers; queue limitation via kanban; and a
apics.org/magazine
41
multi-skilled workforce. Not quite in the core category, but high up on

the list, are the usual suspects supply chain and operations management professionals think of when they consider lean: total productive
maintenance, the five Ss, and total quality management. (See sidebar.)
Real-life lean
When a business is considering lean manufacturingeither as
a new initiative or as reprised JITits necessary first for company decision makers to champion lean as a major initiative that
will involve large-scale training and complex implementation.
Enthusiastic leaders even may serve as the highest-echelon teacher
in an all-out train-the-trainer effort. Once the pursuit is going well,
its then time to refocus on the many critical issues always facing
busy executivessome of which likely have been neglected during
the lean run-up. This is when these leaders must back off from dutiful lean involvement and delegate its management down a level.
Once in the operations silo, people tend to forget the fact that
lean is inherently strategic and a matter of time-based competition. Suddenly, lean is promoted and defined as the elimination
of waste. As a result, the method has less and less connectivity to
the other important departments, such as finance, marketing, and
sales. Even worse, lean is pursued for internal efficiency rather
than customer-focused effectiveness and, as a result, has only
tenuous links to end customers.
Efficiency fares poorly when stacked up against effectiveness. For
example, think of how it feels when all the supermarket checkout
lanes are busy or too many staff people are off filling shelves instead
of cashiering and packaging our purchases. We want efficiency, but
demand flexibility: ready adaptation to our unpredictably up-anddown usage patterns. Otherwise, we take our business elsewhere.
In a factory setting, this might look like all operatives
producing, all machines carving and crunching, and equipment
and human resources keeping busy and using space wisely. Such
efficiency is a source of pride for those involved. Yes, theres
high-capacity use; but, theres also low-capacity availability. A
truly lean enterprisebuilt and run for lean effectiveness
requires methods for delivering a flexible, quick response. This
is aided by two of leans core practicescapability for fast setup
and changeover and having a multi-skilled workforce. These
competencies enable rapid switching among scheduled products
or orders.
Better than quick setup is no setup at all. That happens when
product designers have standardized parts and modularized subassemblies, which reduces active part numbers. Called design for
manufacturing and assembly (DFMA), this technique achieves lean
results even without the pursuit of lean in operations. In reducing
42
Waste reduction
has a low-level ring
to it and often fails
to plant itself in the
minds of executives
as strategically
important.
factory complexity, DFMA smooths and speeds flows in nearly all
aspects of production and support, including purchasing, process
planning, scheduling, and costing.
As for leans issue of low availability, part of what is required
here is a shift in the way lean is practiced in operations.
Competitive, customer-focused lean rejects full capacity use.
Surge capacity, redundant and idle (but at the ready) equipment,
a multiply-cross-trained workforce, and on-call backup
laborall of these and more are requisites of best-practice lean.
At the same time, inadequate lean metrics need an overhaul in
order to reach beyond production and out to customers. This
should include minimal backlogs, few back orders, and empty
warehouses in make-to-order production, but full retail shelves
in replenishment manufacturing.
C-level commitment
The heads of marketing and of finance must spearhead the lean
shift. For marketers, it should be an easy sell, as the primary
results are a quicker, more flexible customer response. Timebased marketing ships products directly (or near so) from
manufacturing and with a product mix closely linked to current
customer needs and use. Where the customer is a retailer, the

happy result is that chronically empty shelvesor unsold excess
shipped to outlet storesdisappear. The fact that this is not
the norm is in large part due to the downside of lean efficiency:
leveled and high-use production becoming out of sync with highly
unleveled customer demands.
Sales and marketing, in partnership with finance, also are needed
to sponsor systematic attacks on proliferating product portfolios
that gobble capacity, create production and purchasing complexity,
grow total inventory, extend customer lead times, and bleed money.
Finance professionals naturally are concerned with costly inventory
growthmuch of it from proliferation of both part numbers and
stockkeeping units (SKUs). Part of reducing the number of SKUs is
sorting out which products are money losers and not justified for
fixed-cost absorption.
Once sales, marketing, and finance become active advocates and
participants in time-based competition, senior executives may move
forward with lean as a basic, permanent strategy. One way of gauging C-level commitment is by looking for telltale words in annual
reportssix sigma, process improvement, JIT, Toyota Production
System, setup, changeover, kanban, quality, takt time, and more. The
absence of these terms indicates that department heads and senior
executives dont see the concepts as very importantand dont
think the board and the investment community will, either.
The answer
In order for a lean shift to take place, its essential to redefine and promote lean as time-based competition. That term should populate company walls and documents. All other lean terms should remain intact,
but be subordinate to the main themes of time and the customer.
To achieve this shift of terminology accompanied by a sea change
in lean practices requires a dedicated campaign. Initially, it should be
led by operations and then taken up jointly with sales, marketing, and
finance. The launch should begin by promoting the whys and hows of
tapping into leans large potential for dramatic competitive advantage. Each success should show up quickly and convincinglyfirst as
reductions of channel inventories and, before long, in winning more
customer orders and retaining good customers longer. Finally, success
appears as a sign of trouble for ones competitors.
Richard Schonberger is an independent researcher, author, and
speaker. He has written 15 books, including Best Practices in Lean Six
Sigma Process Improvement: A Deeper Look. Schonberger is a Shingo
Prize winner. He may be contacted at sainc17@centurylink.net.
Leans Big
Three Partners
Total productive maintenance (TPM), the five
Ss, and total quality management (TQM) may be
viewed as lean partners. With the core lean techniques acting to reduce lead times, these allies do
their work in the removal modethat is, removing
obstacles to lead time reduction. In other words,
the lean core adds good things; the big three
remove bad things.
TPM preventively reduces stoppages and
slowdowns stemming from faulty equipment
and facilities. In so doing, TPM blends with multiskillingthat is, the methodology upgrades and
expands facilities-oriented skills and responsibilities,
occasionally to where the company bestows
the title technician. At the same time, the
maintenance function is upgraded to overseer,
with responsibilities including facilitation, training,
and performing major maintenance. Routine
maintenance and housekeeping are transferred to
the operators.
Elemental in TPM are the five Ssaspects of
housekeeping that help make sure messes are
not a reason for delays and stoppages. The APICS
Dictionary explains that the five Ss include sort,
simplify, scrub, standardize, and sustain. They blend
well with quick setup, which includes removal of
time-wasting clutter in favor of a place for everything and everything in its place.
TQM features penetrating searches for root causes
of product nonconformities, many of which are
found in equipment and facilities. Where root
causes are unearthed, corrective actions follow.
Quality must be built into all processes and the
work of all people. Interestingly, the concept of
maintenance has undergone a mind-set change of
late: Under TPM, the run-until-it-breaks mentality
gave way to downtime elimination built into facilities and operator practices.
apics.org/magazine
43
44
MA
TAR
S
E
H
T
P
KE S& O
N
A
L
P
T
N
I
-P O
WITH A 10
BY ERIC J. TINKER
hether you are embarking on a sales

and operations planning (S&OP)
project or have an established process,
it needs the support, guidance, and
visibility that comes with a designated
executive sponsor. This person is
chartered with making S&OP successfulor is on
the hot seat if things go awry.
First, understand the time commitment.
For a large organization, it should be in the
5-to-10-percent range; perhaps 10-to-20
percent for mid-market companies or those
with flatter organizational structures and more
hands-on leaders. Once the process is up and
running, the time commitment naturally will

decrease and should be viewed not as additive,
but as a reallocation of time and the way business is done.
Without strong sponsorship at the executive
level, S&OP wont be a true decision-making
process. Unfortunately, this continues to be
an issue for some businesses. Recent research
from S&OP consultancy Nexview shows that
these two elements are the primary S&OP
challenges for 15.3 percent of survey respondents. (See Figure 1.)
When considering who is best for the job,
keep in mind that the sponsor has the single
apics.org/magazine
45
greatest influence on the process. Its easy to jump right to the top and
choose the CEO orequally commonthe head of supply chain.
These are both excellent choices. However, the chief operations officer
(COO) is another great option. Just be careful to avoid S&OP being
viewed as an operations thing. Plus, the COO generally is already
on board. How about sales or marketing? Perhaps; and this will
certainly be a way to ensure engagement. But do those leaders have
enough background on the supply side? The chief information officer
(CIO) is a possibility. Information technology (IT) will of course be
required; but S&OP also cannot be seen as merely an IT project. More
and more chief finance officers (CFOs) are providing cross-functional
and operating leadership. These professionals can be excellent S&OP
sponsors and certainly will ensure support for the financial integration piece. In the end, the sponsor can be any executive, reallyas
long as this person possesses a solid cross-functional knowledge of
the business and the necessary influence.
Following are 10 specific points to help any S&OP executive sponsor or anyone providing upward coaching to the S&OP heavy hitters.
1. Develop the vision. This aligns your team and the broader
organization around what S&OP is, what it is not, and what it
needs to accomplish in order to support the business goals. Lead a
session with your team to define the vision; give them some license
with the wording, but make sure it accomplishes your goals. The
result can be a set of 6, 8, or 10 phrases that will help align the
team, enhance communications around the organization, and
manage expectations and scope. Include statements that highlight
the targets of quantitative measures or key performance indicators
that S&OP will affect.
Figure 2 shows a sample set of statements that articulate a vision
for S&OP. The example comes from a global chemical company
whose executives wanted to focus the team and company on initiatives taking place in several business units around the world. Note
that there are limited opportunities to make the needed impressions on stakeholders, and its important to strike with a direct,
but comprehensive, message.
2. Allocate resources. With scope and a timeline defined, the
sponsor now should coordinate resource allocation. This will be a
cross-functional effort, which includes resources the sponsor controls and peer-controlled resources. In this way, others are invested
in the projectsomething that will be critical for their participation
later. As with any initiative, the executive sponsor must be ready
to use precious resources immediately. Thus, the plan must be
well thought out to enable the team to hit the ground running. If
resources are scant, consider phasing your project in or conducting a
pilot program and advertising it as such.
During a recent implementation at a large energy exploration
and production company, a team was built around the S&OP
46
8.3% Executive sponsorship

7.0% Participation
15.3% Meeting effectiveness
4.5% IT support
7.6% Meeting content
17.8% S&OP design
14.0% S&OP understanding
12.1% KPI use and results
13.4% Underlying processes
Figure 1: Top S&OP challenges
component meetings. The design and team structure mirrored

that of the organization, which provided a natural migration from
project structure to embedding the new process and roles within
the organization.
3. Manage scope. As S&OP likely will be an educational process
for some, participants are sure to offer many new ideas and suggestions. Put good, but out-of-scope, ideas in a parking lot list to be
reviewed periodically. Unmanaged expectations and scope are sure
ways to lose your team and undermine the effort on any project.
The established vision should help in this regard.
4. Provide guidance. The sponsor should provide some input
on the design itselffor example, vision, meetings, reports,
information technology support, participants, alignment of
design to the organization structure, and definition of new or
changed rolesand also advise on roll-out strategy, training
needs, and change management. This goes back to the sponsor
selection discussion. The selected executive doesnt have to know
everything, but should have enough cross-functional expertise
and influence to provide guidance across a wide range of topics.
Sustainable S&OP depends on it.
5. Champion the peer group. One-on-one and public support
are essential. When issues arise related to resource support, data
or information technology issues, a rocky meeting, or something
THE OPENING S&OP REEL

S&OP is the aggregate and coordinated planning layer above the detailed planning processes.
All business units will participate in S&OP.
We will use a consistent process and set of tools across business units.
We have a viable and sustainable way to aggregate data at the product family level and can produce a rolling 18-month plan.
The S&OP process will be the key input into the budgeting process.
S&OP will help us stabilize organizational roles and define accountabilities.
We will reduce forecast error by 20 percent; reduce inventory by 15 percent; and improve on-time, in-full by 8 percent.
Figure 2: A sample vision
else that rattles a peer group member, the sponsor needs to jump in
and offer support to the project lead or team members.
6. Ensure the S&OP team makes decisions and runs the business.
During the design phase, make a list of typical and possible business
decisions that should be made through S&OP and communicate
that through training material and coaching sessions. Once S&OP is
implemented, some management team members likely will continue
to make decisions outside of the process, which threatens its long-term
success. This hopefully is because these team members are getting
used to the new way, as opposed to them undermining the project.
For instance, an oil and gas producer once had a very supportive S&OP sponsor and peer team. The leaders of each component
meeting helped tee up agenda items for the next cycle of meetings. This made it possible for the teams to sharpen their skills in
preparing business cases and improve how decisions were made
about wells to be drilled; production; capital investment; reserves;
contract commitments; and infrastructure required to get crude
oil, natural gas, and natural gas liquids to market outlets.
7. Demand results. The project should have been justified based
on moving some tangible metrics. Its important to take the time
to measure and demonstrate the results. With clear outcomes, it
will be difficult to dispute the time and resources invested.
At a global consumer products company, the business case for S&OP
was loosely associated with reducing obsolete inventory. But the metrics
were not visible or compelling enough. When this organization ran into
IT challenges, the affected components of its S&OP process morphed
into another project outside of the team. This caused delays and
inefficiencies. No one could point to the success or required sense of
urgency related to the metrics to keep the project whole.
8. Be visible and accountable. Executives succeed or fail based
on business results. Sponsoring S&OP is no different. Its necessary
to make it as visible as possibleand attract positive or negative

attention based on the outcomes. The sponsor has a great chance
to lead by example.
9. Celebrate success. Part of every change or improvement initiative is recognizing success. Everyone knows when
something goes wrong, so make sure that accomplishments
are equally communicated. The team needs and deserves
public credit for a job well done. Even in challenging situations, improvements can be found. Identify quick wins and
plan ahead for their immediate celebration when achieved.
Remember that the best celebrations are those based on movement of key performance indicators.
10. Visualize the next stage of maturity. Like any business
process, S&OP has several levels of maturity. Depending on the
starting point, it may not be advisable to go after market leader
status all in one bite. The vision, project expectations, and communications need to be tailored to the immediate phase. But do
have a growth path in mind.
After the implementation of these 10 steps, a periodic evaluation of the items is needed for targeted follow-up and continuous
improvement. Keeping in mind and actively managing these
points, the sponsor will be in a great position to ensure that S&OP
can coordinate effective decision making and execution of the
business strategy.
Eric J. Tinker is managing principal at Nexview Consulting, a training
and management consulting firm that specializes in S&OP and
supply chain performance improvement. He may be contacted at
ejt@nexviewconsulting.com.
apics.org/magazine
47
LESSONS LEARNED
Learning the
Hard Way
Why building the right tools demands
education and support
To comment on this
48
because they reinforce the powerful impact

software configuration has on day-to-day
operations. That knowledge makes their
bosses happy, too.
Regrettably, aha moments are outnumbered
by oh no moments. This occurs when students discover theres a better way to configure
a system and wish they had known about it
before launch. Oh no moments are painful
largely because resetting a certain option may
require rethinking the entire configuration.
There goes the post-implementation support
budget. And the unexpected expense pretty
much assures that any budget increase will
be woefully inadequate.
Training should not be a series of eurekas
and ughs. Executives intuitively know that
proper training before implementation
is mission critical. So, why do I still have
so many students registering for a class
afterward? Weve heard the excuses: Times
are tough. Who will do your job if youre
not here? Sorry, theres nothing left in the
training budget. Its always something.
Executives tend to judge tasks that they
dont perform themselves as being easier to
accomplish than they really are. Its important that leaders set realistic training budgets
based on the assumption that, because there
is so much to learn, users will not digest it
all the first time. Training users late or with
an inadequate budget is not worth the risk.
The costs include burned out personnel,
avoidable overtime, premium freight, and a
host of other circumstances that tend to put
executives in a bad position.
A word to wise top managers: All
software systems work nowadays. If you
are having problems, dont waste precious
time blaming the software. Show some
courage: Demand an adequate training
budget and realistic schedule up front,
and establish a continuing education budget that shows youre serious. You know
what is necessary for a successful software
implementationmake it happen.
Do you have an anecdote that teaches, enlightens, or amuses? Consider sharing it with the
readers of APICS magazine. Stories should be
approximately 700 words. Email submissions to
Lessons Learned editor Randall Schaefer at
randallschaefer@att.net.
Illustration by Terry Colon
Itzik Pripstein, CPIM,

is a senior principal
instructor at Oracle
Corporation. Prior
to that, he was an
information technology
director and project
manager in electronic
materials, aerospace,
automotive, and paint
manufacturing. He may
be contacted at itzik.
pripstein@oracle.com.
hen I began implementing enterprise resources planning

systems, I learned everything the hard way. Truly, I made
just about every mistake in the book. It would have been
so much better for my clients (and me) if I had project training
earlier in my career.
Luckily, the software company for which I worked began focusing on
manufacturers, so I joined APICS. I immediately began studying for my
Certified in Production and Inventory Management designation. Since
then, I have seen many software system implementations in many companies. Sadly, it seems most supply chain and operations management
executives prefer to learn as I did years agothe hard way.
Today, I am a software instructor. I demonstrate how tools and
solutions work, explain concepts, and answer questions. My learners
typically know their company issues well and are eager to learn. But
too many users sign up for training after their companies have already
gone live with the solution. If only they had come to class before
implementation! They could have avoided making uninformed
decisions about software settings, frustrating conference room pilots,
and well-intentioned consultants making configuration assumptions
based on an imperfect understanding of their businesses.
I live for the aha moments. They surface while Im explaining
a particular feature or pointing out the merits of flipping a switch
a certain way. A student will exclaim, Now I understand why the
system did what it did! Or, I cant wait to get back to the office
and fix things! Aha moments are significant learning opportunities
Itzik Pripstein, CPIM
APICS 2015 SO PAULO

Discover new, global perspectives to help address the many supply chain opportunities
that exist in todays complex world marketplace. APICS 2015 So Paulo is a learning
opportunity you cant afford to miss! Register today at apics.org/saopaulo.
1213 March 2015

So Paulo, Brazil
Hotel Pullman
SCOR TRAINING
Advance
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The Supply Chain Operations Reference (SCOR) is the industry standard

for supply chain managementa model that provides a unique framework
for defining and linking performance metrics, processes, best practices and
people into a unified structure. APICS members qualify for a 50% discount
on all SCOR training when they enter code APICSMBR.
Visit apics.org/SCOR-Training and learn how to interpret SCOR.

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APICS MAGAZINE

Service beyond expectations

THE MESSAGE OF LEAN/SPONSORING S&OP

January/February 2015 | Vol 25, Num 1

The essential message of

When you need to maximize efficiency targets, streamline

Corporate Awards of Excellence Winners

Excellence in Innovation Award

Excellence in Education Award

For more information about the APICS Corporate Awards of Excellence,

January/February 2015, Volume 25, Number 1

Catching Leans Drift

Editorial Staff and Board of Directors

From the CEO

From the Editor

2015 APICS Board of Directors

Sales and Operations Planning

EDITORIAL STAFF AND BOARD OF DIRECTORS

APICS BOARD OF DIRECTORS

Senior Manager of Publications

Publication in APICS magazine does not constitute an endorsement of

Board Member Guest

APICS Certified in Production and Inventory Management

APICS Certified Supply Chain Professional

These credentials demonstrate to your peers, employers, and

FROM THE CEO

industry-related information news to keep

The one and the many

Abe Eshkenazi, CSCP, CPA, CAE

FROM THE EDITOR

Disney speak) were wet and joking about

y family and I just got back from an epic trip to Disney

Good for business

APICS Introduces the

Alan G. Dunn, CPIM

GDI Consulting and Training

NAVSUP Global Logistics

2015 APICS Board of Directors

Erica Dickson, CPIM, CSCP

Bhaskar Majee, CSCP

Steven Melnyk, PhD

Clark Ponthier, CPIM

Colin M. Seftel, CFPIM, CSCP

2015 APICS Supply Chain Council Board of Directors

Shari Ruelas, CPIM, CSCP

Michael Wasson, CSCP

Antonio Galvao, CSCP

Douglas Kent, SCOR-P

William Rocky Newman, PhD, SCOR-S

Guest board member

Marco Ugarte, PhD, CPIM, CSCP

Start Off 2015

Certifications tab. The certification team

ASF is a global chemical company with more than 112,000

Chemical technicians carry out an inspection at a BASF hydrogen plant.

Recently, many of the companys key goals have been supported by

countries. The company sponsors APICS

BASFs People Find Meaningful Benefits

certifications achieved. Since the global effort began, approximately

he says. Misapplication of supply chain

BASF employees produce components for the automotive and

Lastly, APICS education was successfully used to prepare for the

to understand the relevant tools, techniques,

THE MORE THINGS CHANGE,

In order to achieve certain levels of

guirre, DeAnne, and Micah Alpern. 2014.

While its not possible to exceed