- We're really excited about supply chains at GRA
and we're really thrilled to be a part
of the SMART Conference for three reasons.
I think the first is being in supply chain,
we all feel like we have a purpose,
whether it's delivering that customer experience,
whether it's improving productivity or reducing waste,
and that could be for our organisation,
but it also can be for the industry that we're in
and then more broadly, the economy.
What we're going to talk through today is,
supply chain transformation and it's a great example
of taking an idea through the business case development
that is purpose-fit for an organisation
and then taking that all the way through to execution
and benefits realisation.
So with me, we have Brad Hurst,
who's the regional supply chain director of Allnex
and GRA's Sydney partner, James Allt-Graham.
What we're going to go through is,
I'll give you a bit of a background on Nuplex,
what the organisation is and what its products are
just to give us a bit of a feel for the landscape
and some of the challenges.
Brad's going to take us through the business case
and how we took it through to the benefits realisation stage
and then James is going to present a bit of a reflection
on some critical success factors.
The beauty of SMART and these types of forums
is not necessarily that the answers are there
because I think in today's world
information's pretty accessible.
What we see the value in these types of events is,
or where we see the value in these types of events is,
how do we apply these lessons
into our organisation or industry.
So we're trying to make it as tangible as possible
for you all to take something away
and that's why we've got the Q&A at the end.
So feel free to ask us any questions there.
Just a bit of background on Nuplex
and where we were engaged in their history.
Nuplex is a complex manufacturing environment
that specialises in chemicals, manufacturing,
so the coating resins, if you've ever driven a car,
owned a home, or ridden in a boat,
you've probably been touched by Nuplex in some way.
Their key customers are the paint manufacturers, for example,
like the Dulux, the Valspars of the world.
In terms of the business,
it's gone through significant growth and transformations
in its own right.
Where we were engaged was about 2014
and what Nuplex was trying to do at this stage was
expand in to the emerging markets of Asia Pacific
and the strategy of operational excellence
was driving that initiative.
So the supply chain transformation
that we're going to speak of today was really trying
to set up the ANZ supply chain
as the centre of excellence to be rolled out globally.
Nuplex's competitive advantage,
and it's an interesting point,
it wasn't in supply chain necessarily,
it was in its product excellence
and the focus of the organisation culturally
and from a strategic point of view, historically,
was based on its talent pool in the chemistry space.
So its RND department and those resource centres
were driving the products forward in the supply chain.
When we look at supply chain innovation, though,
more broadly, every industry goes through
a different maturity curve, but it's a great to recognise
that despite the industry, the maturity tends to go
from viewing the supply chain as a cost centre
and then towards a competitive advantage.
And even that competitive advantage makes a transition
from a cost-focused competitive advantage
towards a customer-centric competitive advantage.
So if we take the first supply chain innovations
as Taylorism or the Ford manufacturing assembly line,
these were inwardly focused innovations
where we would start to monitor the internal operations
of our organisation,
and then as we start to move to the right of that curve,
it's starting to become more extrinsically focused.
So if we take the FMCG industry in Australia,
driven by the high-pressure environment
that is brought on by Woollies and Coles,
we have to lift the standard
and they've shown great competitive advantage
in the planning and optimisation space.
The reason that I wanted to touch on this is,
for every industry, there's lessons to learn
for other industries.
So if we take the Nuplex example,
there's elements of this that we picked up on
for this transformation programme,
so elements like MRP, DRP, the transport load consolidation,
integrated business planning, demand-driven supply chains,
and also the RFID track and trace.
It all comes back to the customer, though,
so what we're always trying to achieve
is meeting the customer expectations, and in today's world,
customer expectations are constantly increasing.
So how do we start to manage that experience
for the customer and how do we deliver
on that customer expectation?
And we know that if we over-deliver,
we might get some benefit,
but what that means for our supply chain often
is there's inconsistency in other areas
or the business units and the impact of this is,
we under-deliver in other areas
and we're not as reliable as we'd want to be.
The experience for the customer in those instances
is often greater at an absolute level
than the positive experience
that we've provided them elsewhere.
So a real linchpin that we want to focus on today
is that sustainable competitive advantage
through customer experience.
So how do you set up a customer value proposition
to deliver customer value consistently?
And Brad will touch on this but the key inside
out of this organisation was reliability was the focus
not necessarily the responsiveness element.
So what we look to do out of this was operationalize
a customer value proposition.
So customer value propositions
can be quite a philosophical discussion,
but how do we then systematise
that customer value proposition, build it into our process?
So if we have availability targets,
how are we building in those availability targets
into our systems or a targeted process
to drive then a service-level outcome
for particularly inventory levels or customers?
Exactly the same in terms of responsiveness.
If we have a responsiveness target to our customers,
how do we then design our network
to then leverage that responsiveness
and execute to that responsiveness target?
To deliver to a customer value proposition, though,
you need to have a supply chain to meet that target,
but unfortunately, in this instance,
we're walking into a culture where a supply chain
wasn't a competitive advantage as we mentioned,
so we had to introduce a supply chain structure
that was going to drive this initiative forward.
So the management team recognised this
and they recognised that production and commercial
had embedded within them the supply chain elements.
We were then to culturally
and through the organisational structure
bring those elements into the supply chain
so we can put in place the accountability layers
to then drive ownership around inventory and service level.
And with every supply chain structure,
we need a good leader
and that's probably a good a hand over as any
to introduce you to Brad Hurst
who led the supply chain transformation programme.
- I'll try and put a bit of a client perspective
on our transformation programme.
Effectively, all of these transformations start somewhere,
there's always a catalyst for a transformation,
and for us it was a customer survey that we ran
in February, 2014.
The results from that survey, customers pretty much told us
that the things they value most are reliability of supply,
delivery on time, quality, and productive communication.
Interestingly, price was a bit further down the list.
They also told us that we weren't too brilliant at that,
but interestingly, they told us that our competitors
weren't very good at it either.
So what we saw out of that was an opportunity
to drive competitive advantage.
So between February and towards the end of 2014
we tried a number of technical initiatives.
We tried S&OP, we got that wrong,
because we didn't really understand how to do it properly.
We tried a number of transformed initiatives
which were really more reactive than planned.
And then finally, I actually joined the company
in September 2014 and the first thing I did was,
as Shanaka mentioned earlier,
is reshape the supply chain team
into an end-to-end function.
So I took people out of commercial and production
and put them into supply chain.
And I actually engaged GRA to perform a diagnostic
on our business and look at our supply chain in particular.
And so that was done in two phases.
We developed the business case in phase one
and then we implemented it in the second phase.
So that diagnostic, we actually looked at a number
of different frames of reference, we looked at our own costs
from a bottom up perspective.
We looked at external industry benchmarks
in chemical manufacturing and other manufacturers,
and we also had quite a large, rich database inside GRA
for the transformation programmes
that they'd performed before.
So we all used all of that to build a business case
and then I had to present that to our CEO
and ultimately to the board.
It was based on optimising inventory, transport,
and warehouse but also putting in a proper planning regime.
It was actually a large scale transformation programme,
it wasn't actually just a project,
it's important to understand that it was
a cross-functional business transformation programme
right across the whole business.
It actually involved people from supply chain, finance,
commercial manufacturing, IT,
lots of was cross-functional teams.
We developed a view on where we wanted to be.
Obviously, understanding where we were currently,
we had a very detailed programme of works
which had obviously qualitative
and quantitative benefits outlined.
It was fully costed and we had
quite a detailed risk management programme associated with it.
And at the end of our future state, if you like,
where we wanted to be was demand-driven,
time-phased, and integrated.
Now, they're all interesting buzzwords,
but what does that really mean for us?
We invested in a,
well, we implemented quite a strict demand planning process
and to aid us in that,
we actually invested in a forecasting tool,
it's a tool called DSX from Demand Solutions.
It has 26 algorithms inside it
and it actually fits the forecast to historical sales
and you update that every month.
To be time-phased we put in a very formal
supply planning process, and believe it or not,
we actually had MRP capability inside our own ERP system
which we hadn't switched on.
So, we switched that on, as well,
and then link that to the forecast.
And to be integrated, we set up a formal S&OP process,
which was managed every month and cross functional.
The programme itself, as I said earlier,
it was really based on inventory reduction,
transport savings, and warehouse savings,
so you can see there all the various areas we targeted,
but I guess more importantly,
we set up a quick wins programme right from the beginning.
So that actually established credibility
and it put money on the bottom line, which we actually,
we work with the finance team to be able to show in the P&L
where we were getting these savings.
And the minute we started doing that we had the credibility
and people started to believe in what we're doing.
And the bottom right-hand side of the slide there
is an extract from our annual report,
so you can see the dot point on the bottom
actually mentions the transformation programme
and its contribution to the overall strategy
the business of operational excellence.
So it had quite high visibility and it was actually
even mentioned in the public markets.
So the programme itself, really it had six key streams,
there was a number of foundation activities
in the first stream that we had to pull together
to mobilise it.
There's a demand planning stream, an MRP stream,
a transport stream, a warehouse stream,
and the S&OP stream at the end.
You can see there that the,
that's a really high-level look at the programme at works,
but it went for 18 months and I think in the end
it was about 1,000 lines long from memory
and it was quite a big beast to manage.
But there was a number of interdependencies
between the various streams.
For example, you couldn't turn MRP on
until you had the forecast running
at a pretty good degree of accuracy.
But the key elements of the programme was,
we had a sophisticated SKUL-based forecast
so that's skewed by location,
and then we had inventory levels set to achieve
the customer service levels that we wanted
and then, as I said, earlier, we had the S&OP process,
which was really cross-functional
and it was like one source of the truth
and it was operationalizing the whole strategy.
We had our manufacturing procurement activities aligned
and then we had our physical distribution activities
more planned and more efficient.
The programme actually paid for itself within 18 months.
So I think we had the MPV of the programme,
we sort of built it up very conservatively
and we'd already hit year-three benefits
at the end of year one,
and that was all through really driving
the quick wins programme in transport and warehouse.
We lifted our service levels by about 3% to 4%.
We actually won Supplier of the Year
from one of our biggest customers in 2016.
We delivered a number of significant operating savings
and we actually dropped their working capital significantly,
and that was mainly through focusing on slow-moving stock
and off stock.
We actually went from having
no real clear supply chain strategy
to having one that was really linked
to the business strategy of operational excellence.
And we actually developed the customer value proposition,
which was all about segmenting our inventory
and our customers,
coming up with the right stocking strategies,
whether you have made-to-stock, made-to-order,
What are the lead times associated with that,
what are the cut-off times?
And we actually became really customer focused,
we developed policies and our processes
were a bit disjointed so we had formal processes
and policies that were adhered to.
Anyone can write a policy,
but to actually deploy the policy is what it's all about,
so we did all that.
We took our culture from being reactive and expediting
to more planned and considered.
Our customers, we actually really made our customers
understand that we won't just do anything for you
at any cost.
If you want that urgent delivery, then it's going to cost,
and we actually changed the whole proposition
to the customer.
We took our products from being quite a long list
for the very long tail
to having significant range management
reduce the range significantly.
We did that through having the right stocking strategies.
And obviously the people,
which is really the most important part,
we took them from not really having a good understanding
or grasp of best practise supply chain
to being supply chain professionals.
And probably the last thing I'd like to say is,
the streams of work are really just the tip of the iceberg
so you demand planning your MRP, transport,
warehousing, and S&OP, but the real work goes on below.
So there's a lot of work that goes into diagnosing
your problems, developing the business case,
and I think probably the one that's the most underestimated
is the organisational change management.
Actually having to engage people,
so we actually set up a stakeholder mapping exercise
where we worked out who was going to be with us,
who was going to be against us,
what strategies we have to employ to get them on board.
We set up change champions to report back,
and that was quite, I think we underestimated that.
And probably also on the foundations piece,
we underestimated the work involved
with the customer value proposition.
Just how long would take to get the sales teams on board
to grasp that you can't have everything in stock
and you can't have 100% DIFOT
and you've got to actually set your range properly.
- this is a fabulous programme to be involved in
and Brad's just taken you through some of the benefits
and so it really was a delight.
But I thought it was worth sharing some of the things
that worked well and certainly if you're looking
at programmes, some ideas to take on board.
Probably I just wanted to underscore, though,
the scale of this was really significant.
We were dealing with very large manufacturing sites
across Australia and New Zealand,
we had four major business units,
all are run quite differently.
We also have very significant
international supply connectivity
and one of the key innovations that Nuplex was driving
was really to try and source
some of the commoditized products offshore
and do more of the high-end customised manufacturing
domestically, so needing to fit in with that strategy.
So certainly a lot in terms of the scale.
Anyone who's been involved in any systems project
knows as soon as you got systems integration,
there's some risk.
The change management piece that Brad highlighted,
we are very aware of, but I think obviously
we could have focused further there.
There's a lot of change fatigue within the business.
Like a lot of industrials, there's constant change
and there's certainly some concerns there.
And then in terms of the complexity, again,
probably familiar to many in the room,
a very highly-customized ERP system
that we needed to work with.
In terms of tying down the new processes,
the old processes weren't well defined
and they were different across those different parts
of the business, so not clear starting points.
And also, as Brad highlighted,
in terms of the customer offer,
very highly customised offers that we need
to be clear on and support.
So there was certainly an element of complexity risk
that we needed to deal with across the project.
And I think by managing some of those elements,
we really were able to deliver the outcomes
that Brad articulated.
In terms of those things that worked well,
the first was really around understanding the need
and the diagnostic was a fabulous way
of getting the executives and everyone on one page.
It also tied the project team to the outcome,
so having to present the boards and things like that
certainly focuses your mind on making sure
you can deliver it,
but it was a really important process for us
in terms of getting everyone on one page
and understanding what could be.
Directly related to that was really getting
executive buy-in, and as Brad mentioned,
they'd been some other initiatives tried in the past
within the business and we went from a situation of,
maybe we could continue and do nothing
to that customer survey saying you need to change,
and so once we had the executives on board,
that the programme was possible,
they were really supportive of what we needed to do
and we had a sky hook, which was the overall strategy
of operational excellence so the supply chain transformation
could be a real key enabler of that.
So we had good engagement from the executive team
to push through.
That became important, there was the usual restructures
and organisational changes that we had to navigate
over that 18-month period.
The other thing Nuplex recognised was that they needed
a range of partners to support them in the transformation.
So Brad went for a best-of-breed approach
we were involved, obviously, in the overall consulting,
but there were specific change consultants who were engaged,
we had a external project manager who was also engaged.
So really trying to tap into expertise to drive the programme
and making sure that people were bringing
deep subject knowledge to the project.
The other element of choosing the right partners,
though, was internally.
We had to be very closely aligned with IT.
We needed a close finance partner, et cetera.
So making sure those linkages were really clear
and those were really important to us,
especially when you run into the usual challenges,
especially around the systems implementation.
The project governance was very well articulated
from the start, in terms of having the steering committee
in place, as well as that external project manager
overseeing the project plan and risks.
That really enabled us to elevate issues as they occurred,
and as I mentioned earlier, we had good support
from the executive to really help resolve
some of those issues.
Probably a point of difference to some other programmes
I've seen and been involved in where this piece
really did work particularly well,
so it's a good model, I think, that was utilised.
Another point which I think works really well
is we really needed the programme to stick within the business
and so what we needed is say
for the demand planning work stream
as we identified one of the key people within the business
who we saw as a high performer
to lead that work stream and to own the outcome.
So that made it led by Nuplex people,
owned by Nuplex people,
and supported by whether it was external consultants
or internal partners to help deliver the outcome.
But that worked really well
because that meant they were designing for the future
and that level of ownership was there.
Then all the rest of us were really there to support
those people in driving the implementation.
When you talk often at the end of a project
about how do you transition to BAU
and that can be a bit of a sticking point.
This worked really seamlessly
because it was the day job of many of the stream leads
to actually be accountable for the areas
that they had within the transformation programme.
The change management, Brad mentioned,
we did know we were coming into a significant challenge,
but certainly we had to resource this up as we went along.
So, we had a vision as to where we wanted to go
but really we had to iterate that vision and be able
to communicate it in a number of different ways.
So initially, we started with sort of top-down communication
and engagement, but what we found as we went on
was it was much more effective to have a large amount of,
if you like, bottom-up fed change management.
So we established the change network across the business
and as I mentioned, it's quite a diverse business.
And so those people were in the different sites,
in the different business units working with us
to help align people and drive change throughout.
And then that was supported
by a more detailed communication strategy.
Those pieces came together really nicely.
The other bit, though, that again, we really beefed up
on the way through was the training.
We were coming from a very inconsistent knowledge base
so really investing in that really helped
a lot of the changes stick,
and it also helped people understand
why we were trying to do what we were doing.
So those things, I guess, I'll just underscore
if you're looking at a programme,
especially in that sort of diversified space,
perhaps some areas not to overlook.
And then obviously celebrating milestones.
We had a number of those as we went along,
there's always the day when you flick the switch
and the new tool works, yay.
But making sure that we're able to celebrate those
as we did the rollout.
Brad was fantastic at pulling people together
and being able to find opportunities to celebrate.
Given that a lot of the time we're asking people
to do their day job plus, that was a really important part
of the programme and a really nice thing to do for our people
'cause the other thing, of course,
is we didn't want turnover of those key stuff
as we worked our way through.
So that worked well, people really like benefits trackers
and things like that.
It was fantastic to be able to show the results
hitting the bottom line, hitting customer service level
as we progressed through the programme.
And as always, throughout the programme,
there was the unexpected.
One of our pilot sites got sold off
through some M&A activity, we had a couple of restructures
that were done, and of course, Allnex did an acquisition
of the business as well.
The good news was that the fundamental economics
and the strategy behind what we were trying to do
was well understood and was robust.
So despite some of those changes rolling through
and a couple of moments of what do we do with this,
that overarching strategy really held us through
and enabled the programme to be implemented
rather than to have been distracted on the way through.
So needing to be adaptable, we all had a scope of work,
all of those sorts of good things, but, gee,
you have to flex when things change around you
and I think we had to do that a number of times
and it worked really well.
- It was deliberate because we didn't actually have
the forecasting process in place or the MRP switched on.
So it was difficult to run a monthly SOP process
where you would actually go through,
looking at your forecast accuracy, your forecast bias,
how does that transfer into your utilisation,
your capacity in your plants,
and then how do you make trade-off decisions
between the plants amongst the grid.
So really it was chicken and egg.
I think I mentioned in one of the slides,
we actually had an attempt in 2014,
somebody put in what they called a daily S&OP process,
would you believe, so.
We had to actually change the mindset of what S&OP was.
A daily S&OP meeting was really
just our crisis production meeting,
we can't make this today, so what are we going to do?
How do we move it around?
It was a combination of not being ready for S&OP
so it was deliberately the last stream,
and also changing perceptions around what it was.
Yeah, so we have a monthly cycle.
The first week, we do all the demand review,
so we've got three business units.
The forecast closes on the fifth working day
and then at the end of the first week we have,
we sign off on the forecast, which is as a step forecasting
the tool and then that's overridden by the sales teams
and then that gives the agreed forecast,
we have a demand review for all of those.
Second week, we have a supply review
across the three plants.
Third week, we have what we call a resale review,
because we do a lot of resale, as well,
and then we have the pre-SOP,
and then last week we have the exec review.
I think we glossed over it, but it was it was a huge part
and it was underestimated, to be honest,
so the actual master data piece.
So the whole programme was all around people,
process, system, and data.
Get the right people, build the right process around them,
and give them the right tools,
but when when I started, a lot of the data was wrong.
So we actually had to do super sessions,
we had to go back and clean up products
that had been given a new name,
or they've been transferred to a different plant,
so a lot of that work went on as we were feeding it
into the new demand planning tool.
So there's a lot of cleansing of data going on
and then we actually set up a master data ownership programme,
because it wasn't really owned by anyone,
and it was just a mess, to be honest.
But it still needs a fair bit of work to be perfect,
but it's come a long way from where it was.
It was a big element of the programme.
- In terms of the work streams that was embedded
in the foundational work stream,
'cause it sort of went across the whole programme,
as did the customer value proposition,
which was one of the other key work streams
in that foundational piece.
But getting ownership of the master data
really came with some of the organisational changes as well,
that needed to be put in place.
- Not a great deal, no, I mean, we have to sort of live
with what we've got, so to speak.
It's a chemical manufacturing business with reactors
that were built in the '60s.
So, a 10 tonne batch is a 10 tonne batch.
You got to live with that and manage what you don't sell
from the batch with the customer more than anything.
Prior to this programme, we actually had a another project,
which was all about right sizing our capacity.
So we had, if you like, too much capacity around Australia
and New Zealand, so we actually had to close
a number of plants
because volume did actually migrate to Asia.
So we did it at a holistic level,
but getting down to an individual plant,
there's obviously waste programmes going on and accuracy
like Six Sigma programmes and that going on in the business,
but we actually didn't really change too much
around the batch that we're making.
It was a huge challenge at the beginning,
but it's quite well understood now
after a two to three-year journey, to be honest,
so everybody understands, we had to explain that MRPs
all around having a master plant, a BOM, raw material,
lead time, so the obvious things that everyone
in the room knows, but if you're not someone
that's been a supply chain professional for many years
you don't know that from day one.
So a lot of people that were doing planning
were actually sitting in the sales
and marketing organisation or in the production organisation
so they got pulled out and were given very specific training
around all those concepts.
A lot of them were APICS/ASCI type concepts,
and I think GRA actually ran a supply chain basics programme
and then we did another enhanced programme
later on through journey.
That's a tough one.
Yeah, no, we had to change a couple of stream leads
in the process, which actually set us back,
but fortunately we recouped, we recouped the lost time.
So if you take a percentage, there might have been 20%
of people that we had to make some changes with
at the execution end, we were a bit inefficient
in our warehouses.
We're running a lot of overtime
and doing a lot of silly things.
So we had to make some changes there, as well,
but not a huge amount.
The majority of the people were trained up, upskilled.
So we actually did a training needs analysis,
then put a training programme in place,
and all those people are still there today,
some of them are in actually bigger roles.
That's a really good question,
that's probably the most important thing.
Fortunately, my boss, the president,
the ANZ president came out of a larger chemical organisation
where all these concepts have been running for 15, 20 years,
in fact, this stuff's been around since the '80s.
Unfortunately, kind of slipped past our company
in the early days,
but he came from a bigger organisation understood.
So I got his buy-in from day one,
then we did significant training across the,
what we call the Australian executive team,
which I'm a member of.
Then we sold it to our CEO, and then he was happy enough
to take it to the board.
There's a bit of luck
but also a lot of good management, as well.
Yeah, I think as I said earlier,
most of these programmes come from so kind of a catalyst
and I think the customer survey
was the come-to-Jesus moment, if you like.
We're not as good as we think we are.
I'd say probably the change management piece,
particularly trying to get this the CVP,
try and actually have one document
that had like here's our A-class, B-class, C-class customer,
how do we segment the inventory
what are the stocking strategies, what's the lead time?
With sales people just wanting everybody
to have whatever they want at any time.
And if I had my time again,
I think I said in one of the slides,
we did a big bang approach, we did all this together.
If I had more money and more time,
I would have done demand planning first
and then put the MRP on, and then done the,
instead of trying to bring it all together.
But we really underestimated how much time the CVP took
to get one written, and then have all the data right,
and then get the buy-in from the team.
- [Man] Was there a difference in the resonance
with the sales force as opposed to sales management?
Or they're both equally as difficult?
- Equally as difficult.
In all honesty, we needed the buy-in
from the management first and that's what delayed us a bit,
and then they had to push it through to the reps,
and then they got to push it through to the customers
so the whole process without the buy-in at the top
becomes a bit extended.
Oh, yeah, no, it was tough because people had to,
as James said, do their day job
and then a lot of them took on project roles.
So there's a lot of stress, there's a lot of late nights,
and we had to actually manage emotions quite a lot
for the number of people, but we got there in the end
and it actually looks, it's quite well-set up today
but there are moments through that whole process
where it was, gee, this is tough.
We were lucky enough to have the support from above.
We had a very good governance structure.
All the stream leads met every week,
we went through the project timeline
and we pretty much on that day, there's a line,
and if you're task went to the left,
you had to explain why they weren't to the right
We just went through all that and still tried to manage
people's emotions, but we had a couple of meltdowns,
to be honest.