Newell Rubbermaid Optimizes S&OP
Newell Rubbermaid’s Sales and Operations Planning (S&OP) process has been the subject of an intensive improvement effort over the past two years. An initiative launched in 2008 generated 30 percent more cash for a total of $603 million in 2009 despite one of the most challenging business environments in a generation. As an enterprise-wide initiative, Newell Rubbermaid executives Andrew Downard, director of Supply Chain; Bill Hess, vice president of Supply Chain; Steve Sigrist, vice president, Customer-Facing Supply Chain; and Tracey Grimshaw, vice president, Global Organizational Development, all took part in the development and implementation. Here, they team together again to tell us about the S&OP project that fostered tremendous change and improvement across the entire organization.
CGT: Newell Rubbermaid identified some business performance issues in 2007. Why did you settle on an S&OP initiative as a way to fix problem areas?
Downard: Early in 2008, we found that inventory growth was outpacing sales, inventory turns were declining, forecast accuracy was well below best-in-class levels, and working capital as a percentage of sales needed to improve. It was clear there was potential for improvement. We saw S&OP as a great way to address all of these different areas of opportunity at a root cause level.
Grimshaw: One of the reasons S&OP took off quickly was that it was set up under the umbrella of a larger “One Newell Rubbermaid” transformation plan. Culturally, a lot of work was being done to make sure all of our regions and businesses were aligned to the same values and goals. We’ve been able to take advantage of the success of that larger plan, and at the same time, reinforce and accelerate it through S&OP.
CGT: Was an S&OP process in place before this change initiative?
Downard: At Newell Rubbermaid we typically define S&OP in two ways. Internally, we talk about a process to balance supply and demand with the intention of raising service levels while lowering inventory. This is easy to say, yet hard to do. Externally, it’s about providing service to the customer. S&OP helps us get the right products in the right place at the right time.
Hess: In 2007, some of our 13 global business units were performing strongly with robust S&OP processes already in place. At others, the process was informal and ripe for improvement. The problem wasn’t that we didn’t have a process, but rather that we had many different processes. We wanted to optimize globally, but it’s tough to optimize before you standardize.
CGT: Newell Rubbermaid opted to execute the transformation internally. Did you tailor an existing S&OP model to fit your unique business needs?
Hess: When we started planning the initiative, Wallace and Stahl’s five-step S&OP model quickly stuck out as the best practice across multiple industries. It’s clear, simple and powerful. Plus, a few of our business units had already adopted their practices. That being said, there was a lot of work to do to take the generic Wallace and Stahl method and figure out how to best apply it at Newell Rubbermaid.
Downard: Newell Rubbermaid is big enough that somewhere in the world, we have someone who is good at just about everything. A big part of our job is matching up that internal expertise with areas of opportunity. So to us, it didn’t make sense to look outside for help. Instead, we “deputized” about 40 people across the organization as “S&OP Leads” for their business area. This group literally wrote the book on S&OP for Newell Rubbermaid. Identifying and recruiting those internal S&OP leads turned out to be one of the best decisions we made. Not only did they work hard to define the process, but they’ve been on the frontlines of the effort, implementing and improving ever since.
Sigrist: The basic S&OP process is simple, and there are plenty of books and papers to help you understand the discipline without tapping specialized vendors. Past that, it is all about understanding how to make the change happen in your organization. We have a great organizational development team at Newell Rubbermaid that drove S&OP from a change management perspective, so we didn’t feel the need to go outside for that either. (See “Embracing Change” sidebar on Page 10.)
CGT: The S&OP project was executed in the midst of a global SAP implementation. How do the process and IT systems support and/or enable each other?
Hess: Because we were in the middle of a multi-year SAP implementation, we knew from the start that our S&OP process had to be system independent. That being said, SAP is a huge enabler for S&OP and for our supply chain in general. It’s like rocket fuel for the process. For S&OP to be useful you must have detailed, accurate and timely information. Well-developed, common systems are definitely an accelerator for S&OP. It’s possible to have one without the other, but they are definitely most powerful when paired together.
Sigrist: Additionally, we are working with technology partners for our demand signal repository, customer data signal analytics tools, as well as tools to capture and streamline reporting of supply chain performance results. These technology solutions all contribute to the inputs and review of our S&OP processes.
CGT: What processes touched by the S&OP project have been most improved so far and how?
Downard: S&OP really lies at the heart of the business. The moment you touch it, the ripples start spreading everywhere — demand planning, business forecasting, capacity management, supply planning, budgeting, business reviews, organizational structures, you name it. In some cases, like demand planning and forecasting, we saw immediate benefits from improving S&OP. In other cases, like inventory optimization, S&OP has provided a solid foundation, but we still have plenty of work to do. We had to start somewhere, and having a strong S&OP process provides a great foundation to improve all of the other processes it touches
It’s difficult to point to a particular numerical result and say, “that was entirely due to S&OP.” The business has pulled a lot of levers to make improvements over the past few years and there are a lot of people working hard across Newell Rubbermaid to make it all happen. Still, we’ve definitely seen what we hoped for from S&OP. Since we started the initiative, inventories are down significantly while service levels are up — it’s pretty amazing to be able to do both of those things at once. Forecast accuracy is steadily rising, which in turn helps us get our supply picture right and keep our customers happy. Inventory has to grow along with sales to some extent, but we’re now seeing it growing at less than half the rate of sales growth. That’s a very different trend than we saw three to four years ago.
Grimshaw: Another benefit is the community of practice that has developed within Newell Rubbermaid around S&OP. We now share and collaborate in this area extremely well. There is a constant flow of ideas and opinions across businesses and regions. The basic process helps us get better as a company, but the community helps us get better much faster. This hasn’t happened by accident. We’ve worked steadily and directly on developing the community, and it’s really paying off in some exciting ways.
CGT: As of 2010, almost every Newell Rubbermaid entity has achieved compliance with the S&OP model. Where do you go from here?
Downard: Having nearly achieved compliance, we’re now putting our focus on extracting further tangible value from the process. In addition, we are finally ready to go beyond the basics with S&OP. In particular, we’re implementing some advanced tools and techniques to help us take forecasting and inventory optimization to the next level. We are excited about that work and feel there are some real game changers coming down the pipe. We’re also starting to put a lot more energy around customer-facing programs, like point-of-sale data utilization and CPFR.
BIG BENEFITS
On average, Newell Rubbermaid businesses achieved the following performance and productivity gains over the first 18 months of the S&OP initiative:
• Total inventory down 20 percent
• Total excess and obsolete inventory down 22 percent
• Inventory turns up 26 percent
• Inventory days on hand down 20 percent
• Forecast accuracy up 10 percent
• Perfect order up 2 percent
• SKU count down 18 percent
EMBRACING CHANGE
Tracey Grimshaw, vice president of Global Organizational Development, details key elements of the comprehensive change management strategy designed specifically for the S&OP initiative. By the end of 2009, significant progress had been made in all areas. By 2010, Newell Rubbermaid had achieved near full compliance, a major milestone.
CGT: Newell Rubbermaid identified some business performance issues in 2007. Why did you settle on an S&OP initiative as a way to fix problem areas?
Downard: Early in 2008, we found that inventory growth was outpacing sales, inventory turns were declining, forecast accuracy was well below best-in-class levels, and working capital as a percentage of sales needed to improve. It was clear there was potential for improvement. We saw S&OP as a great way to address all of these different areas of opportunity at a root cause level.
Grimshaw: One of the reasons S&OP took off quickly was that it was set up under the umbrella of a larger “One Newell Rubbermaid” transformation plan. Culturally, a lot of work was being done to make sure all of our regions and businesses were aligned to the same values and goals. We’ve been able to take advantage of the success of that larger plan, and at the same time, reinforce and accelerate it through S&OP.
CGT: Was an S&OP process in place before this change initiative?
Downard: At Newell Rubbermaid we typically define S&OP in two ways. Internally, we talk about a process to balance supply and demand with the intention of raising service levels while lowering inventory. This is easy to say, yet hard to do. Externally, it’s about providing service to the customer. S&OP helps us get the right products in the right place at the right time.
Hess: In 2007, some of our 13 global business units were performing strongly with robust S&OP processes already in place. At others, the process was informal and ripe for improvement. The problem wasn’t that we didn’t have a process, but rather that we had many different processes. We wanted to optimize globally, but it’s tough to optimize before you standardize.
CGT: Newell Rubbermaid opted to execute the transformation internally. Did you tailor an existing S&OP model to fit your unique business needs?
Hess: When we started planning the initiative, Wallace and Stahl’s five-step S&OP model quickly stuck out as the best practice across multiple industries. It’s clear, simple and powerful. Plus, a few of our business units had already adopted their practices. That being said, there was a lot of work to do to take the generic Wallace and Stahl method and figure out how to best apply it at Newell Rubbermaid.
Downard: Newell Rubbermaid is big enough that somewhere in the world, we have someone who is good at just about everything. A big part of our job is matching up that internal expertise with areas of opportunity. So to us, it didn’t make sense to look outside for help. Instead, we “deputized” about 40 people across the organization as “S&OP Leads” for their business area. This group literally wrote the book on S&OP for Newell Rubbermaid. Identifying and recruiting those internal S&OP leads turned out to be one of the best decisions we made. Not only did they work hard to define the process, but they’ve been on the frontlines of the effort, implementing and improving ever since.
Sigrist: The basic S&OP process is simple, and there are plenty of books and papers to help you understand the discipline without tapping specialized vendors. Past that, it is all about understanding how to make the change happen in your organization. We have a great organizational development team at Newell Rubbermaid that drove S&OP from a change management perspective, so we didn’t feel the need to go outside for that either. (See “Embracing Change” sidebar on Page 10.)
CGT: The S&OP project was executed in the midst of a global SAP implementation. How do the process and IT systems support and/or enable each other?
Hess: Because we were in the middle of a multi-year SAP implementation, we knew from the start that our S&OP process had to be system independent. That being said, SAP is a huge enabler for S&OP and for our supply chain in general. It’s like rocket fuel for the process. For S&OP to be useful you must have detailed, accurate and timely information. Well-developed, common systems are definitely an accelerator for S&OP. It’s possible to have one without the other, but they are definitely most powerful when paired together.
Sigrist: Additionally, we are working with technology partners for our demand signal repository, customer data signal analytics tools, as well as tools to capture and streamline reporting of supply chain performance results. These technology solutions all contribute to the inputs and review of our S&OP processes.
CGT: What processes touched by the S&OP project have been most improved so far and how?
Downard: S&OP really lies at the heart of the business. The moment you touch it, the ripples start spreading everywhere — demand planning, business forecasting, capacity management, supply planning, budgeting, business reviews, organizational structures, you name it. In some cases, like demand planning and forecasting, we saw immediate benefits from improving S&OP. In other cases, like inventory optimization, S&OP has provided a solid foundation, but we still have plenty of work to do. We had to start somewhere, and having a strong S&OP process provides a great foundation to improve all of the other processes it touches
It’s difficult to point to a particular numerical result and say, “that was entirely due to S&OP.” The business has pulled a lot of levers to make improvements over the past few years and there are a lot of people working hard across Newell Rubbermaid to make it all happen. Still, we’ve definitely seen what we hoped for from S&OP. Since we started the initiative, inventories are down significantly while service levels are up — it’s pretty amazing to be able to do both of those things at once. Forecast accuracy is steadily rising, which in turn helps us get our supply picture right and keep our customers happy. Inventory has to grow along with sales to some extent, but we’re now seeing it growing at less than half the rate of sales growth. That’s a very different trend than we saw three to four years ago.
Grimshaw: Another benefit is the community of practice that has developed within Newell Rubbermaid around S&OP. We now share and collaborate in this area extremely well. There is a constant flow of ideas and opinions across businesses and regions. The basic process helps us get better as a company, but the community helps us get better much faster. This hasn’t happened by accident. We’ve worked steadily and directly on developing the community, and it’s really paying off in some exciting ways.
CGT: As of 2010, almost every Newell Rubbermaid entity has achieved compliance with the S&OP model. Where do you go from here?
Downard: Having nearly achieved compliance, we’re now putting our focus on extracting further tangible value from the process. In addition, we are finally ready to go beyond the basics with S&OP. In particular, we’re implementing some advanced tools and techniques to help us take forecasting and inventory optimization to the next level. We are excited about that work and feel there are some real game changers coming down the pipe. We’re also starting to put a lot more energy around customer-facing programs, like point-of-sale data utilization and CPFR.
BIG BENEFITS
On average, Newell Rubbermaid businesses achieved the following performance and productivity gains over the first 18 months of the S&OP initiative:
• Total inventory down 20 percent
• Total excess and obsolete inventory down 22 percent
• Inventory turns up 26 percent
• Inventory days on hand down 20 percent
• Forecast accuracy up 10 percent
• Perfect order up 2 percent
• SKU count down 18 percent
EMBRACING CHANGE
Tracey Grimshaw, vice president of Global Organizational Development, details key elements of the comprehensive change management strategy designed specifically for the S&OP initiative. By the end of 2009, significant progress had been made in all areas. By 2010, Newell Rubbermaid had achieved near full compliance, a major milestone.
- A Community of Practice was established to share learning and best practices among participants in the process and to build S&OP capabilities across the enterprise.
- A training program was developed and deployed to ensure everyone involved with the process had a solid understanding of the basics, fundamental S&OP roles, good meeting behavior and technical knowledge.
- Communications at every level of the organization were implemented to raise awareness, reinforce the importance of S&OP and maintain momentum across the enterprise. This communication touched all functions involved in S&OP.
- An S&OP Assessment was developed to measure every business unit worldwide against the process standard. Action plans were created to address gaps using a facilitated work-out process that involved members of the business unit. Execution of action plans was driven by a monthly check-in rhythm between annual assessments.
- An executive Steering Team enabled prioritization and leadership alignment.