Supply Chain Alignment and Assessment at a Heating Equipment Manufacturer

• A heating equipment manufacturer created by a merger struggled with long lead times, low quality levels, and inconsistent order fulfillment.

• SCE used its Supply Chain Alignment and Assessment process to understand the current state of the company’s supply chain and its most substantial improvement opportunities.

• The company gained detailed, concrete, and prioritized supply chain improvement programs to help it deliver greater customer value and boost its differentiation.

 

Following the merger of two heating equipment manufacturers into one new organization, significant differences between the two original firms were creating a host of challenges. While one firm had been small and was focused on make-to-order operations, the other was large and emphasized high stock levels across an extensive range of products. The new company’s operations were based in the facilities of the smaller firm, which meant it would need to provide fast service for a broad range of products and customers with virtually no inventory and a minimal distribution network. This, combined with poor integration of customer service, quality assurance, and distribution processes, resulted in long lead times, low quality levels, and inconsistent order fulfillment, as well as inefficiency and high costs.

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Supply Chain Edge (SCE) used its Supply Chain Alignment and Assessment process to help the company address these challenges. At the heart of the process is a Web-based tool that gathers feedback from employees, suppliers, customers, and other key stakeholders on the importance and performance of 42 supply chain competencies.

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The assessment identified many shortcomings in the company’s supply chain, including supply chain processes and information systems, order fulfillment cycle time and efficiency, customer and supplier coordination, and several critical aspects of customer responsiveness. To gain additional details and insights, SCE conducted in-depth interviews with customers, suppliers, and employees. Several major themes emerged from these interviews: Order cycle, fulfillment and back-order management processes were perceived as worse than the competition; the company’s product portfolio was too large and complicated; and its communication was ineffective across the board.

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Based on these concrete insights, the SCE team developed a comprehensive plan to help the company get its supply chain operations up to speed—and do so in a way that would target the highest-priority areas first. One element of this plan focused on using revenue and margin contribution to segment the company’s products and markets, and adjust its supply chain strategy accordingly. This segmentation was instrumental to the second aspect of the plan, which would enable the company to deliver class-leading cycle time, order fulfillment integrity, and delivery accuracy for its top products and customers by revenue and margin. The third element of the initiative centered on improving the company’s demand and sales and operation (S&OP) planning processes, which would help it further improve customer service and its overall performance. Finally, SCE suggested several new organization and technology capabilities, including a centralized supply chain management organization.

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In sum, by working with Supply Chain Edge, the company has developed detailed, concrete improvement plans that reflect the priorities of its most important stakeholders, and that can help it generate greater customer value and market differentiation.