Industry
Manufacturing
Future-Ready Manufacturing: Partnering in your journey to a sustainable manufacturing enterprise
Highlights
- The focus on warehouses, workforce, and regulations is set to increase as companies relook at their sales and operations in an increasingly complex business environment.
- While sales plan and production capacity are part of routine sales and operations planning (S&OP) activities, the new focal points such as warehouses and workforce are expected to make manufacturing businesses more agile.
- Manufacturing firms should plan early to include these new areas of focus within the S&OP cycle for a stable and effective planning approach.
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Thriving in VUCA
We live in a world, which is witnessing volatility, uncertainty, complexity, and ambiguity (VUCA) on a continuous basis.
It is therefore imperative for businesses to rethink their processes, particularly the ones that have a bearing on customer engagement. Inputs related to sales plan, production capacity, material planning, and logistics are part of routine sales and operations planning (S&OP) activities. Irrespective of the industry, be it chemical, automotive, or FMCG, most of the companies’ S&OP framework covers these aspects in detail.
We discuss a few other areas of S&OP such as warehousing, workforce and HR, finance, and regulations which have started gaining importance. Evaluating their real impact on the business will go a long way in ensuring a stable and effective planning approach.
Ensuring operational agility
S&OP has expanded to improve business clarity for stakeholders and consumers.
It has evolved from the days of standalone material resource planning (MRP) to MRP I, MRP II, and now, the integrated planning approach. Adopting the newer aspects in the S&OP process will make a business more agile and focused. In the chemical industry, for example, most of the key input materials are linked to the commodities basket such as crude oil and its derivatives. Most of these are again tracked against indices, which off late have been relatively volatile.
Under-recoveries in crude oil derivatives can impact supply chain efficiencies negatively. Through innovative warehousing options like modular bulk warehousing, pre-mix or pre-blends of oil derivatives, and portable blending sub-unit within warehouses, companies can drive faster cost recoveries and inventory optimization.
New focal points
It is imperative for manufacturers to understand how these factors will play out in the future.
Warehousing: While sales and production planning covers all the requirements for the forecast period, the need for warehousing – when accounted for at the beginning of planning cycle – goes a long way in debottlenecking key operational areas such as:
- Improving the replenishment cycle.
- Identifying cross-country or regional movement opportunities.
- Ensuring better space and asset utilization.
- Optimizing warehousing cost either by combining services or exiting low and poorly utilized assets.
Warehouses, which play the role of low-scale blending setups, can help in last-mile differentiation by demand sensing and fulfillment at short intervals leading to superior delivery performance and reduction in product obsolescence.
Workforce and HR: The production team and sometimes the logistics team get hit by lack of key human resources at the start of the production cycle. This problem can be solved if workforce requirements are shared and made available as part of the S&OP cycle itself. This addresses the concerns around:
- Visibility of on-boarding cycle for new recruits.
- Key skills where the company may need to insource or outsource.
- People with important skill sets to avoid and minimize business loss.
In the chemical industry, for example, technology advancements such as remote monitoring, control, and correction have been in place for many years to reduce errors that lead to product loss (incorrect dosing, wrong blending), structural degradation (gauge failure, valve damage), and financial losses. With a focused S&OP process, key talents can be identified to play a more proactive and de-risking role there. Shop floor talents, who can react faster to change-over requirements and are receptive to change-in process and formulation, can be groomed to mid-level managerial roles with proper career guidance.
Finance: Manufacturers should focus on improving the visibility of key finance areas such as working capital allocation and asset turnover. Those are key to ensuring consistent business orders, which include better margins, better value, and volumes are executed on a regular basis. Laggard-type orders, orders which usually enter the planning cycle after defined cut-off dates regularly, are held up on the other hand for accountability with the concerned team and removed from the funnel thus releasing useful capacity and resources.
That helps the finance team to go for quick-win opportunities with focused S&OP actions by driving pricing flexibility for key end products. This can be done by using favourable positions such as drop in crude oil prices, distress sales-driven input feedstock availability from key vendors, and product mix-driven additional production resource availability.
For example, companies can buy input materials – either in bulk or in contracts for fixed period – based on forecast plan for 6 months. This can help make alternate pre-blend grades with approved formulation inputs, to generate operational flexibility for key process during peak production periods.
Regulations: Regulatory and legal changes play a critical role in how the plan captures these changes and in what frequency and manner. The reasons are:
- To minimize rework of the orders at the production, logistics, commercial or finance level.
- To ensure that business is in sync with changes and all the relevant stakeholders are aligned.
- To present an opportunity to raise concerns or red flags so that such business impact can be quantified appropriately for corrective action.
To minimize any impact on the brand or corporate entity, that the business represents.
Future planning
Planning functions should ensure these additional but critical factors are shared at the start of each S&OP cycle.
It would also need the nod from the concerned functional and business heads. This would ensure that the exercise has ownership across the business. Workspace availability for expanding product portfolio continues to be challenging for auto ancillary workers. Using this expanded S&OP model, automakers can opt for short-term lease of warehouses that can mitigate space availability issues and improve operational efficiencies.
Steps can also be taken to standardize these inputs as part of the ISO Business Manuals of each function. Effectiveness of such inputs can be taken up for review once every quarter in the ISO systems driven management review meeting.
