As improvements from the Customer Satisfaction Initiative began hitting the bottom line, it became obvious that something special was happening. The Board of Directors requested a presentation explaining how the results were being delivered. Susan tasked Sam Elliott, Senior VP Supply Chain, to pull together the summary, and a formal proposal for applying improvement methodologies to the other divisions. Andrew Jones, CFO, predicted Amalgamated’s stock rating would increase at least one level if the other divisions improved as much as Cosmetics Products. Bill Crawford, Senior VP Marketing, noted that Cosmetics Products’ improvement percentages were calculated against a very low baseline, but that didn’t change Andrew’s prediction.

After six weeks of meetings, data collection and analysis, and discussions with Roxanne and CPD executives, Sam was prepared to report to Susan and the Board.

“Susan and members of the Board, never in my career have I observed a transformation similar to what is happening in Cosmetics Products. What those folks are doing is mind-boggling, at least for an old-timer like me. I’ve asked Greg to review for us in detail how he and his team are now conducting strategic planning as an example of the changes delivering the impressive results. I can tell you, from what I saw, it makes the strategic planning process in the other Divisions look elementary by comparison. Over to you, Greg.”

“Thanks, Sam, for that very kind introduction. I want to reinforce what I told you last week. What you saw was true team effort touching all fundamental business processes, not just strategic planning. What we’ve done with strategic planning is nothing compared with how we’ve changed our approach to managing and leading people.” Greg continued his description of the changes made and the outcomes of those changes, providing detail in response to questions from Board members, who listened intently to Greg’s presentation. Bill Crawford, Senior VP Sales and Marketing, offered unsolicited support.

“I’ve been hearing great things from Alexandra, Greg’s Sales and Marketing VP, about what’s going on. She often overwhelmed me with her enthusiasm, to the point that I’m afraid I tuned her out from time to time. Now I wish I’d paid more attention. Believe me; I have a long list of questions for her at our next one-to-one meeting.”

After more discussion, the Board asked Susan to have all divisions begin a Class A journey following the Proven Path and using Effective Management’s expertise and coaching. Greg agreed to let Peter Bertrand, his highly regarded Program Manager, and David, his Supply Chain VP, spend a few days with each division’s Leadership Team explaining what they had learned about governance of the Class A work and how each division might organize for its first initiative.

Following the board meeting, Susan’s Executive Team began discussing in detail how it would support rollout of the work into other divisions. The President of Food Products, Ian MacGregor, said that the Customer Service Initiative was unnecessary since Food Products regularly hit 95 percent. Susan immediately stopped that conversation.

“I now know enough about the other divisions to know, Ian, that your act is not together! Greg credits that initiative for building the foundation for later progress.”

Roger added, “I agree. I’m also running at 95 percent customer service in Home Products more months of the year than not, but I can assure you we’re not achieving those results as cost effectively or sustainably as Cosmetics Products. I’m looking for a lot more than simply on-time delivery.”

Susan acknowledged Roger’s enthusiasm and designated the Home Products division to be the first to follow Cosmetics Products. She added that, based on what she knew of each division, the others would need to invest more time to understand what was required before launching the work. Over the next hour, Susan’s Executive Team debated the order of implementation. She repeatedly emphasized that time is money as she observed division presidents jockeying to start the work later. The dance being performed was disappointing; she wondered whether she should change some of the players on her Executive Team. Eventually they agreed on the sequence and timing for beginning the work in each division. Susan closed the meeting by approving the plan for all divisions to follow in the footsteps of Cosmetics Products. They all understood they would have to develop and present their business case and organization plan for the work, but there was no doubt of the outcome.

Susan was intrigued by Greg’s approach to strategic planning and asked for a more detailed presentation of his methodology. After thinking for a few seconds, Greg suggested Roxanne make the presentation with him since her input was so important to the transformational changes in Cosmetics Products.

Two weeks later, Greg and Roxanne presented the new Strategic Planning approach to Susan’s Executive Team. They titled the presentation, “From Vision to Value.” The context of the new process was total integration of the business. They used a simple two-foot long balloon to make a point. When one of the Senior VPs was asked to squeeze the balloon in one place, it popped out in another, demonstrating the integration inside. When six of them put their hands around the balloon and squeezed all at the same time, the balloon became dangerously thinner in the spaces between the hands and, under such pressure, burst. Greg pointed out that this was an analogy of what happens to a business when its leaders don’t align their thinking and planning. People may be working as hard as they can, but to change the results, the leaders have to change the processes, (start with a different balloon). At that point, Greg introduced the Executive Team to the Integrated Business Model and Integrated Business Management. Roxanne picked up the presentation smoothly. It was impossible to ignore this duo. Roxanne had provided the Executive Team an introduction to Business Excellence just after Cosmetics Products held the kick-off of its first Initiative. But they were paying much closer attention this time.

The Executive Team began its journey by implementing the Integrated Business Model [see Figure 6.1] and the Integrated Business Management process [see Figure 6.2] under Roxanne’s tutelage, with occasional coaching from Greg. They found the Integrated Business Management process to be the most effective and logical mechanism for managing the business that anyone on the team had ever encountered. As happened with the Cosmetics Products Leadership Team, Susan’s Executive Team transformed from a functional committee with turf protection interests to a true Executive Team with a primary focus on the success of its customers. Building on Greg’s experience with strategic planning, and with Roxanne and Greg’s guidance, they redesigned Amalgamated’s strategic planning process. Their revised vision, mission, and strategic objectives served the corporation well as each division implemented the Integrated Business Management process.

Greg arranged for Dan to provide education and engage the Executive Team in Managing and Leading People best practices. Keely Horton, Senior VP of Human Resources, was ecstatic that the team was finally receptive to many of the Human Resource and organization development innovations that had fallen on deaf ears despite her best efforts. Now Dan was getting their attention, understanding, and commitment. Keely didn’t care how the message finally got through, but acknowledged that her mistake in the past was a failure to link the concepts to bottom-line benefits, and an inability to convince her peers that their people were their only strategic advantage in the future. Products, manufacturing processes, and marketing techniques can be duplicated in short order, but the innovative capability of a high-performance, self-directed workforce applying Class A concepts and principles cannot be duplicated. Developing that culture is worth significant, focused investment in education and training. The training they had been doing just for the sake of training was providing little return on investment and no competitive advantage.

Greg still felt heady from Cosmetics Products achievements and from the affirmation of both the Operating Committee and the Board. But he no longer was tempted to become complacent. He’d already tasked Alexandra, David, Zachary, Gabriella, and Peter to brief him on the gaps that needed to be closed to achieve a full Class A Business Excellence award, the first that would be awarded in their industry.

Alexandra met with Roxanne and determined that the team appointed by Greg should schedule a two-day workshop to design the next steps. Roxanne was not available in the time frame Alexandra wanted since she had just engaged a new client, but agreed to have Dan lead the workshop. She knew the approaches and messages of all her colleagues were consistent. Following the workshop, Alexandra and the other executives presented their proposal to Greg.

Alexandra began. “Greg, Dan reminded us that the first step was to know exactly where we are today and determine what is missing—the gap. We created a pretty extensive chart that covered the wall of the conference room showing all the excellence definitions across the top and, below each, what we’ve already achieved through each milestone. We used a color code to indicate the current score of each, based on the process owners’ latest quarterly self-assessment scores. It was rewarding to see the continued progress toward our objective of 100 percent performance on every measure.” Anticipating a comment from Greg, she quickly added, “I know that required minimum performance levels are 99.5 percent, Greg, but our goal has to be 100 percent, knowing things happen and we’ll miss now and then. We’ve become intolerant of preventable failures. Take Inventory Record Accuracy, as just one example. We brought accuracy up to 95 percent sustained performance as part of the Capable Milestone. Today, given further improvements in ownership, process, technology, and transactions, we’re up to 99.6 percent over the past 3 months. We want to understand what’s causing that 0.4 percent accuracy loss, and then eliminate the causes. We’re using the same continuous improvement approach for all the measures.

“When we examined progress through the Customer Service and Customer Satisfaction Initiatives and added in the improvements since then, we concluded we’re not that far away from Class A. A few scores are at 3.5, but most at 4.0, and a significant number are already at 4.5. To be certain about that, we reviewed some of those scores with Dan and found that we’re pretty well calibrated. Nevertheless, as Dan pointed out, looking at what’s required for the final surge to Class A, we still have some remaining definitions that will take a good deal of work.

“We studied the pattern of checklist definitions that hadn’t been addressed to see if there might be a common denominator. In an inspired moment, Zachary spoke up.” And at this point, Alexandra projected a slide that contained only one word. “He said ‘Leadership’. As far as we’ve come already, it’s pretty obvious to me that our next Initiative should be called the ‘Leadership Initiative’.”

Zachary explained his rationale for his statement, which was very compelling. “At the end of the meeting, with Dan’s help, we agreed on two tailored milestones that would meet Effective Management’s standards for the Business Excellence Class A award. The first milestone is actually a combination of ‘Advanced Managing and Leading People’ and ‘Advanced Strategic Planning’; we’re simply calling it the ‘Strategy and People Milestone,’ which can be structured to cover all the remaining gaps, providing we continue to drive the scores upward on all other elements (the definitions and descriptions) of the milestones already completed.”

Greg interrupted, “Okay, I want a list right now of everyone who says I need to improve my leadership!” he said with a smile and acknowledged Zachary. “Thanks for the insight, Zach. Give me some additional details.”

Alexandra began outlining the details of the new Initiative. “The ‘Strategy and People Milestone’ involves closing all the remaining gaps in Chapters One and Two: Managing the Strategic Planning Process and Managing and Leading People. This milestone includes some elements that have already evolved naturally: for example, formal strategy deployment based on business priorities, and expressed as specific goals throughout the organization; formal evaluation and control techniques, such as diagnostics and reflection days; and feedback mechanisms. We’ve been doing these regularly. We’ve also enhanced our risk assessment processes, based on the Checklist best practices. With these improved Chapter One (Managing the Strategic Planning Process) procedures in place, the remaining work is driving it all to completion and excellence. The main emphasis of this tailored milestone, then, will be the gaps in Chapter Two (Managing and Leading People). Once again, some of the elements of that chapter, such as ‘Leadership’ and ‘People in Teams’ have already come a long way toward meeting the Checklist requirements. Empowerment is already the norm in Cosmetics Products.

“During the work we did on Managing Products and Services, we became aware of our weaknesses in understanding and managing core competencies and the related people implications. We’ve made a ton of progress in this area, but we still have more to do. We recognized very early the benefits of open two-way communications, but we still have some people who are reluctant to challenge managers and supervisors when their behaviors don’t reflect our values. We’re getting used to making organization changes in support of the maturity journey; there’s plenty of evidence of that, but we need to ensure we maintain our agility here. The Checklist, Zach tells me, has been helpful to him in seeing the gaps in Human Resources processes and culture, and in determining how to close them. We’re also well on the way to excellence with our Knowledge Management System [see Figure 17.2] and competency, again pushed by the Managing Product and Services work. The Knowledge Management System went live eight months ago and is already showing benefits in faster and more predictable product design and development; we plan to expand that technology into marketing and sales, and every other appropriate area, which means just about everywhere.

“A specific area that needs attention is our responsibilities to our community, society, and the world we live in. I’m proud of some of the things we’ve sponsored locally, but it’s been an informal effort with no specific strategy, resources or budget. I recently talked to the Chief Sustainability Officer of a major global company headquartered in Rochester, New York. She’s an executive with a strong personal interest in ensuring her company’s actions consider the perspective of disadvantaged groups and of the environment. We have no intention of recommending that position or organizational structure as yet, but we’re still studying and learning. We’ve become a learning organization, with growing pains at times, but being truly excellent means learning is a journey, not a day trip. So we may well be recommending a similar direction for us in the future.”

Alexandra suggested that she and Zachary be Co-Champions of the Strategy and People Milestone, with Glenn Miller, the Finance Director, as leader of the Strategic Planning Process. Greg agreed, and Alexandra continued the presentation.

“Integrated Business Management holds this milestone, and the second milestone which we’ll refer to later, together; it also ensures integration with the entire business. We need to continue bringing all parts of Integrated Business Management up to a minimum score of 4.5. We’ve covered every definition of Integrated Business Management (Chapter Four) already. About a third are at 4.5 or better. The rest are at 4.0. This process is the glue that holds everything together and integrates all the rest of our work. Now I’ll turn it over to David.”

David began, “The second tailored milestone is the Supply Chain Milestone. This involves closing all the gaps in Chapter 3, Driving Business Improvement, and all the rest of the chapters: Managing Products and Services (Chapter 5), Managing Demand (Chapter 6), Managing the Supply Chain (Chapter 7), Managing Internal Supply (Chapter 8) and Managing External Sourcing (Chapter 9). As you can imagine just from the list of chapters included, this is the more resource-intensive milestone of the two, and the reason for our projected two-year time requirement. We are recommending that I be the Champion and Charlie Beck be the Leader. Of course, Peter will again fill the role of Initiative or Integration Leader.” Greg quickly agreed. David continued.

“We suggested you bring your Checklist books with you. It’s good to see they are pretty well worn by now. The Supply Chain Milestone includes the missing and underperforming definitions from the chapters I just mentioned. I’ll briefly go through the gaps, but with little detail. We’ll stay high level with the ‘Tactics’ and ‘Action’ for now. Those of us on the Leadership Team will be involved as coaches and mentors, but not as subject experts, just as with the other milestones, except when we were involved with actually leading the Integrated Business Management work. Here are the gaps presented, for convenience, chapter by chapter.

“In Chapter 3, Driving Business Improvement, we have significant gaps in about a third of the twenty-four definitions. We need to become even more responsive to customers through increasing flexibility and agility with shorter and shorter lead times, and with flexible lot quantities. Today, the customers want what they want, when they want it. We used to joke that was unreasonable; now we know it’s a reasonable expectation and that we need to meet it, but in a way that is economically sound. We have to get closer to a ‘now’ response which will affect all our physical logistics processes, especially in maintaining and reducing shipping costs. We’ll need to embrace supply chain integration techniques in redesigning our extended supply chain. And we’ll have to develop collaboration skills along all nodes in the supply chain network from one end to the other to capture the benefits of advanced supply chain planning. Our investment in the advanced planner, optimizer, and scheduler software is an essential enabler of this extended supply chain paradigm and improved responsiveness. The word ‘supply’ in advanced supply chain means the end-to-end network of supply points that enable delivery from the first node of the supply chain to the customer. We’ll need to involve more than just our own supply points. Demand and supply at this level are complementary aspects of the same objective—delivering to customer request as often as possible.

“We’ll need to embrace collaborative supply planning in which companies work together to make each other successful through leveraging supply chain capabilities from the supplier’s supplier all the way to the consumer. To be successful, integration and communication between companies in the supply chain must be absolute and as close to real time as possible. Information, transactions, and event data must be exchanged and processed at ultra high speed; so fast, in fact, that there’s no time for anyone to validate the data. It must be right first time, all the time. Further, this means that supporting systems must be flexible as data speeds through the software of every company along the supply chain, often on different platforms, with differing supply chain capabilities and flexibility. This is where our Advanced Planner Optimizer and Scheduler (APOS) software comes into play again. Fortunately we’ve kept it up to date with the latest releases. You also need to understand that when we speak of ‘supply chain network,’ we mean an end-to-end, demand-led model, not just manufacturing. In fact, it’s risky for the business to separate demand and supply, as you’ll see later.

We’ll begin at first with rapid, faster-than-a-planner, order committing and constraint management techniques along the supply chain. The APOS software includes integrated simulator, modeler, and optimizer functions to enable decision making in seconds. We’ll need to reconfigure our processes and organization routinely to enable us to adapt to any necessary change in marketplace requirements, or in adapting to changes prescribed by the company or the Board in their strategic objectives.

“We’ve already made significant progress in achieving failure-free processes in manufacturing; Six Sigma techniques have helped considerably. But now I’m talking about making similar progress in all processes and functional areas. As Alexandra mentioned, Knowledge Management is growing even more essential to our future. I’ll give you an example. To use our advanced planner, optimizer, and scheduler software effectively, we’ve coded planners’ and operators’ process expertise and knowledge into the system. That’s the only way we could ever have enabled ‘real time’ simulations, modeling, and constraint-based scheduling.

“The final gap concerns further developing our culture to promote and sustain innovation. Again we’ve learned from the work we did with the Capable Products and Services Milestone. We need to encourage and nurture innovation for products, for processes, for quality, and for improvements in everything we do. Even improvements in our culture and leadership are lucrative targets of opportunity for improvement.

“There are only seven remaining definitions we need to focus on, but they are major! Fortunately, we’re the team that can close those gaps!” They thanked David for his confidence in them, but could sense another heavy workload coming their way.

David continued, “Let’s turn to Chapter 5, Managing Products and Services. The only topic that hasn’t been assessed to date is Program Management. The good news about this one is that, as you all know through Peter Bertrand’s leadership in program management, we’ve become pretty darned good at it and can point to all our completed initiatives as evidence. Program Management will become useful in supporting phased-release product planning, further reducing our time to market I believe we have to formalize and document what we’ve learned about the topic and drive all the elements of the chapter to a minimum of 4.5.

“Chapter 6, Managing Demand, and Chapter 7, Managing the Supply Chain, are next. Building on our Advanced Internal Supply processes, this will look more like the familiar milestone format as we further integrate and upgrade supply and demand processes. You may remember that some years ago, we learned about Input/Output/Queue Control as a way to control work flow in the manufacturing process. We learned that typically the person doing that job required a good deal of shop floor experience. Now we’ll load all our process knowledge into the appropriate Knowledge Management System, in this case in our advanced planner, optimizer, and scheduler. We also said that we need to be extremely responsive in meeting customer orders. To that end, it becomes necessary to move responsibility for loading orders into the constrained manufacturing environment from the supply organization to the demand organization. With Lean and Quick Response/ Continuous Replenishment manufacturing, there will be very little inventory remaining with which to buffer demand fluctuations and mismatches with supply. The tracking mechanism is called ‘Linearity.’ The CEO of a major electronics corporation said he considered Linearity to be the most important measure after the financials. To support increased responsiveness, it’ll be possible to work with new, flexible time fences, flexible lead times, and flexible manufacturing and shipping order quantities. On the demand side, we’ll no longer refer to ‘abnormal demand’, but to ‘opportunity demand’. We will have the capability to run simulations to see how we can meet, not turn away such unforecast business economically using our new agility and flexibility.

“There will be new protocols and processes for win-win collaboration and data sharing up and down the extended supply chain, embedded in new, more appropriate trading partner Service Level Agreements. There will be more emphasis on the demand at any given supply point to govern the short-term, and to prepare line-side damper stocks to take out the inevitable ripples in demand-supply balance. Notice I said ‘ripples,’ not unmanaged swings.

“All this will be supported by driving internal supply and external sourcing best practices, as referenced in Chapters 8 and 9, up to scores of 4.5 at a minimum. And that’s about the extent of the additional improvement required.” David sat down to a stunned silence. Greg, swallowing hard at what he just heard, responded.

“Well, you just added several additional pages to the list of things I now know I don’t know! I didn’t even understand some of the things you just said.” Greg cleared his throat. “How long do you predict before we accomplish all this? It sounds at least as big as the mountain we just climbed.”

Peter responded. “Greg, we’ve done what we believe is a realistic evaluation, did some risk analysis, and put some contingency in the plan for unforeseen events. I believe David mentioned earlier that this work would take about two years. David and I both believe we can complete all the necessary work in something close to that since we have a solid foundation for the required improvements.”

After further discussion, Greg called for a summary of views around the table. All supported moving ahead. Greg declared that the only award he wanted now was the Class A Award to confirm that Cosmetics Products had achieved Business Excellence, all milestones, all chapters. For Greg, this was the next meaningful step. No more Class A Milestone awards.

Greg advised Susan of Cosmetics Products’ intent and received her full support. Greg’s Leadership Team initiated its communication network so that everyone in Cosmetics Products knew of the decision: the ‘why,’ the ‘what,’ and the ‘how’ of the Leadership Initiative.

Roxanne was advised of the decision to take the next step, and that the step was full Class A certification. She committed her organization to support this important decision. As usual, Greg requested Effective Management’s intense coaching in the beginning to challenge their thinking and get them going in the right direction. After that period, the support would again taper off to periodic visits for dealing with problems and conducting interim assessments.

And so their ‘change for the better’ culture based on people, learning, knowledge, and improvement, once again accelerated the pace of change.

As the Strategy and People Milestone of the Leadership Initiative got underway, Greg integrated formal progress reviews into the monthly Leadership Initiative Steering Committee meeting. Gabriella and Zachary formalized and expanded their quarterly industry benchmarking survey of Product and Regulatory business practices and results, while Alexandra and David provided quarterly survey results for the more detailed business processes and market performance.

Greg and Zachary wanted to see best practices in place for people processes and culture. Roxanne arranged for Greg and Zachary to make a return visit to Tender Care Pet Products in Kansas City, Missouri [see Chapter 7]. Shannon Stillwell was now CEO, and George Parker, Senior VP Human Resources. Roxanne informed Greg and Zach that Tender Care had achieved Class A standards on the management processes (generally Checklist Chapters 1-4), but were not as advanced as Cosmetics Products on product, demand, and supply processes. Their competitive priorities, and resulting sequence of milestones, had been very different from Cosmetics Products. But in the areas of business management and people, Tender Care was setting a standard worth examining.

Shannon began with a review of Tender Care’s culture and approach to strategic planning and business management. Seeing Tender Care’s strategic planning process in action allowed Greg to begin internalizing ideas for moving ahead.

He and Zachary were most interested in the discussion regarding people, and the management of health, safety, environment, and community relations. Tender Care was well ahead of them with a carefully and strategically structured approach. Sharon openly shared their many successes and also their failures that she valued as learning opportunities. Tender Care’s view of leadership was thought provoking and better developed than what Greg and Zach had developed for Cosmetics Products. Tender Care had some simple principles, such as “Treat all your people as if they were volunteers; that’ll improve your behaviors and build win-win relationships.” George displayed a chart showing Tender Care employee and management retention rates as best in class. Their Lost Time and Recordable Injury Rates showed a five-year decline and a period of five years, four months with no lost time injuries. They explained that safety was everyone’s responsibility and the number one priority. Greg had thought his 20-month stretch without lost time injury was impressive. He now recognized that the procedures he had to review and sign as he entered Tender Care’s headquarters were not just formalities. Greg had entered the lobby with a briefcase in one hand and his laptop in the other. After signing in, he was given a safety requirements card to review and sign. He tucked it into his coat pocket without a second thought. As he started walking toward the stairs to the second-floor meeting room, he was taken aback by a Tender Care employee insisting on carrying one of his bags and pointing at the handrail, saying “Please hold on to it as you go up the stairs.”

He mentioned the incident to Shannon and George. George responded that Tender Care people know that 70 percent of all staircase accidents are avoidable when people use handrails at home and at work. The employee, he explained, was doing what any Tender Care employee would have done seeing the potential for an accident. Greg realized that Cosmetics Products had more to do to make safety an integral part of its culture and in peoples’ lives at home and at work.

George then described Tender Care’s weekly housekeeping and safety audits in which managers and line operators toured all plant and office locations ensuring housekeeping and safety issues were identified and corrected immediately. He also referred to the “Friday Penance,” an insider’s term referring to a one-hour visit to the shop floor by each member of the plant leadership team every Friday afternoon to help operators clean up all work locations. It meant getting in touch with their real business by putting on protective gear and working alongside the shop floor personnel. During that hour, team leaders, not the executives, were in charge. George went on to explain the responsibilities of the team leaders, all experienced hourly employees. They owned their production processes, including quality, performance, and production results. They were responsible for meeting the schedule and for determining with the detail planning tool what, if any, overtime would be worked. George explained how team leaders evaluated team and individual performance using “360˚ Reviews,” including feedback from peers and those at both higher and lower hierarchical levels of the organization. Team leaders developed their teams, participated in interviewing and hiring managers new to the organization, and took corrective action when team or individual performance fell short of expectation. The role of the manager changed markedly to coach, mentor, and provider of resources. Zach knew that Cosmetics Products had started to move in that direction, and appreciated the culture change yet required to catch up with Tender Care.

Environmental concerns had driven many of Tender Care’s policies, procedures, and investment over the years. As Shannon said, “You must be extremely careful with animal scraps and process liquids.” Almost every by-product was sold or recycled. Water taken into the factory to support manufacturing processes was returned to the environment cleaner than when it entered. Liquid, solid, and gaseous emissions met or bettered all environmental standards. “Meat processing is, shall we say, aromatically unpleasant. Since we value good relationships with our neighbors, we use the latest technology to negate that aroma, and we survey our neighbors regularly to make sure they know that we care about them and the neighborhood. They tell us we’re doing a good job with emissions control.” Greg couldn’t keep himself from sniffing, and agreed that the air was clean. A later review of all emission records verified that Tender Care Pet Products beat all regulatory requirements by a fair margin.

As a corporate value, Tender Care held local management responsible for maintaining good community relations. Tender Care intended to be viewed as a good corporate citizen and encouraged its managers and employees to participate in community organizations, charities, and governance. Tender Care’s Voice of the Community executive coordinated civic and government activities and helped identify volunteer opportunities. Shannon coordinated Tender Care’s charitable contribution strategy herself. The examples continued until Greg and Zach had to run to catch the last flight back to Atlanta. Greg and Zach ended their day much wiser about the standards they would be expected to achieve. They thanked Shannon and George for their time and information. Shannon smiled, saying, “I hope you realize that this wasn’t a gift. Roxanne tells us you’re considerably ahead of us in other areas, particularly in your supply chain processes. Here’s the deal. I would like to send two of our supply chain experts to Atlanta to learn what you’ve accomplished in the areas of advanced planning and supply chain integration. Are you willing to host their visit?” Greg was delighted to return the favor, and suggested they contact David Simpson, VP Supply Chain, to make the arrangements.

Greg and Zach returned to Atlanta and began to synthesize what they learned into a presentation for the Leadership Team. The visit to Tender Care and subsequent education session kick-started the Leadership Initiative and brought Cosmetics Products to Class A standards in just 20 months, with one exception. They had not yet achieved upper quartile performance in their industry sector, the final piece of the picture required for full Class A Business Excellence.

Peter integrated all existing improvement opportunities into the Supply Chain Milestone template and identified the gaps that had to be closed. The milestone included several parallel elements managed by design teams and, as with previous milestones, integrated by the Initiative team.

The Supply, Demand, and Logistics team created to drive the division to full Class A required education on operating in an advanced extended supply chain environment. Tom tailored a two-day “Managing the Extended Supply Chain” course, building on the Advanced Supply Planning course. This was followed by a two-day workshop to optimize Cosmetics Products’ supply chain network nodes and identify required process and organization changes.

The team found that the Extended Supply Chain course completed the picture of the future by using advanced demand and supply operations and planning as a springboard for extended collaborative supply planning. The course was exhaustive and stretched the thinking of the participants. They began to use the term “Service Management,” recognizing that the entire company would have to become even more customer-centric [Figures 19.1 and 19.2].

To be totally customer-centric, supply chain network predictability would have to become an implicit characteristic. That meant implementing across the supply chain the characteristics of predictability. Tom listed them:

It also meant solving many extended supply chain issues [Figure 19.3].

“One of the issues to be resolved,” said Tom, “is how to plan the supply chain network as a whole, allowing for constraints, synchronizing all supply points along the supply chain, and meeting promises to customers, fast and cost effectively. Experience shows that collaboration and visibility along the extended supply chain is required, in a shared business plan model.

“You have to remember that the supply chain needs to be all things to all customers. By that, I mean the supply chain must meet the specific needs of each customer if it is to be truly customer-centric.

“The model and related supply option is determined by where and how you meet the customer. You have several basic choices:

“The choice, or choices, will depend mostly on how long the customer will wait for product, which is often determined by the responsiveness of your competitors. If customers expect your product in an amount of time (called ‘wait time’) less than your make or finish lead time, you will be forced into make-to-stock. Of course, if your value proposition is attractive enough, it is possible to change the customer’s expectations. Many will then wait for some useful lead time, so you can finish-to-order, and at the same time increase the number of options for the customer. This capability can also lead to implementing a Configurator at order entry in conversation with the customer, or through web-based interactions. By the way, your APOS system has this functionality too! But typically, it is the fastest credible competitor who influences the customer’s perception of acceptable wait time. Some companies employ multiple models to meet varying customer needs; to do so, the company must have a complete understanding of the customer’s needs, the products’ characteristics, and its own capabilities.

“Which leads us to the concept of supply option reality on the customer’s terms [Figure 19.4].

“The entire supply chain must be organized to support the selected supply options. This in turn,” Tom reminded them, “leads to supply chain segmentation as a means of offering differentiated service and supply, depending on the customer group [Figure 19.5].”

Tom continued, “It’s worth remembering that this is extremely important for Cosmetics Products because of the volatile nature of consumer demand for fashion products. When Tender Care Pet Products reaches this decision point, their more stable portfolio and more predictable demand will allow them simpler and different choices than you’ll have to deal with. That means their demand control mechanisms will be less complex than yours.”

Tom added, “On top of all this, you need to apply Lean thinking.” He listed these points:

Tom continued, “Providing Quick Response/Continuous Replenishment means anticipating customer demand to prepare the supply chain for response. This means:

“And, by the way, you’ll need to educate your customers, just like you educated your suppliers during the Customer Service Initiative, to enable them to participate.

“The supply chain model must optimize the logistics footprint as an element of eliminating all forms of waste and reducing cash tied up in inventory. The control given by having your own logistics operations needs to be balanced by the opportunities and cost advantages offered by third-party logistics (3PL), or even alliance logistics (4PL).”

“More decisions to be made; my head is going to explode again! Is there any good news?” muttered David to himself.

Answering David’s unasked question, Tom continued. “The good news is that your advanced planner, optimizer, and scheduler, with a bit of upscaling, will provide more than adequate support for all these needs, including direct interface with supplier and customer data systems, and collaboration.

“On the demand side, forecast modeling by account manager, linked to the latest customer and consumer ordering and shipment patterns, help predict near-term customer activity. By ‘the latest,’ I mean based on the previous 5 or 10 days for your fashion-sensitive products. A similar modeling process would be used to evaluate and respond to the impact of promotions. Promotions management is an acquired expertise based on the types of promotions used, the frequency, and the extent and dynamic nature of the promotions portfolio. The role of the Demand Control Manager must be expanded to include the prediction of mix, volumes, and geographies, as well as order-promising based on linearity constraints. All of this knowledge should be incorporated into the Knowledge Management System to enable the Demand Control Manager to truly manage opportunity demand with the objective of accepting as much demand as possible, but intelligently, and always within the supply chain network’s capabilities. Let me give you an example of some leading edge capabilities.

“Today, some software applications are capable of processing billions of point of sale transactions, through retailer planning systems, linked directly to the distribution resource planning, master supply planning, and scheduling systems of manufacturing companies. Forecasts are developed by item and by store across an 18- to 24-month horizon and updated daily. In this process, which is an advanced form of supplier managed inventory, but across multiple nodes through the distribution network, the supplier or manufacturer is the recipient of improved forecasts and real-time inventory data, updated in real time, in all distribution nodes from the manufacturer to the customers’ shelves. As a result, supply chains are reducing working capital by millions of dollars while reducing out-of-stocks and increasing availability of consumer units on store shelves. The result: increased velocity, increased sales, and reduced cost of goods sold. That combination is a winner for any supply chain.

“The Lean Supply Chain is continuously reducing inventories as it increases velocity and becomes more cost effective, but that leaves it with very little ability to respond to uncontrolled demand. That’s why it is becoming critically important to merge demand and supply planning and activities.”

Workshop participants had been given plenty to think about. However, their success with earlier initiatives enabled them to see the work ahead as just another series of healthy challenges.

During the Leadership Initiative, several unexpected events delayed completion. First, it became obvious that Cosmetics Products needed to create a full-time Packaging Engineering department to more effectively meet the challenges of continued expansion of its portfolio of products and promotion materials and an increasing demand for unique customer packaging formats and presentations. The Amalgamated Packaging Engineering group could no longer meet the needs of all Divisions. Greg’s Leadership Team agreed with the direction but still wanted a close linkage with the corporate group to avoid unnecessary duplication of technology.

The rate of packaging changes had caused Procurement to begin to seek and develop packaging suppliers who used lean and agile manufacturing techniques. Their research based on a total-cost-of-ownership (TCO) model led them to Blingco Products Inc. in Cumming, near Atlanta. Blingco was a green-field start-up organization that had invested in good people and technology. Additionally, their parent company insisted that all education, processes, and technology be built on Class A concepts and principles. This became Cosmetics Products’ first truly collaborative trading partner model, the first of what would become many for the Division.

Greg and his team had to resolve other emerging issues.

The Accessories Category had always been the problem child. Not strictly a core competency, it was a business difficult to control, but essential to many promotions. Customers and consumers loved special promotions containing a free accessory with the purchase of a product. Included in the options the executives considered was moving the business to a collaborative supplier-partner, but they couldn’t find a supplier willing to handle the many different accessory types of accessory: leather, plastic, metal, glass and even electronics. Another option considered was outsourcing to a design and manufacturing agency in the Far East. The cost model suggested that the typical accessory cost at the final promotion assembly stage would be one-third that of the U.S. manufactured item, even with a TCO-based analysis. Attractive, but with one caveat. With a total lead time from idea to packaging of 16 weeks, Procurement was certain this option would not pass risk-assessment criteria. But Marketing was attracted by the increased margin potential. The end result was segmentation of accessories into “standard accessories” with the highest volume and fairly stable demand being outsourced to the Far East; and “tailored accessories,” which were unique designs for a specific customer or promotion being manufactured by a much smaller Accessories division.

These decisions and risk assessments were facilitated by the division’s move to activity-based costing (ABC). Andrew Jones, Amalgamated’s CFO, had long ago stated that a move to ABC would occur “over his dead body,” but later agreed to a pilot of the approach in Cosmetics Products, which began in the logistics organization. The resulting increase in knowledge of the nature and control of cost drivers, and the way ABC brought clarity to cost implications and decision-making processes impressed Andrew. The expansion of ABC to the rest of Cosmetics Products followed rapidly. It was now clear that many SKUs previously believed to be profitable were actually being subsidized by other products. This knowledge led to further portfolio rationalization and margin increase. As other divisions followed Cosmetics Products lead in Class A Initiatives, they, too, would move on to activity-based costing.

This major Supply Chain Leadership Initiative achieved sustained performance, including Upper Quartile performance in the U.S. Cosmetics Products industry, in 26 months, only two months behind schedule.

The course of life is never predictable: events outside their control contributed to the delay. David experienced a family crisis that required him to be out of the country for four weeks. Since formal succession planning was part of the new culture, Janice Hackworth, Supply Planning Manager, filled the role admirably during his absence. Six months after David’s return, Sam Elliott, Senior VP Supply Chain, announced his retirement. Susan, in agreement with her Executive Committee, took Greg’s recommendation and promoted David into Sam’s role. Greg later confirmed Janice’s promotion as a permanent replacement for David. Janice and Greg agreed to promote her backup into the role of Supply Planning Manager, and succession planning continued.

But the biggest change, about nine months into the Leadership Initiative, was Susan’s announcement that she would be leaving Amalgamated in two months to accept the position of CEO of a global pharmaceutical company. Everyone was happy for Susan, but recognized that her loss would result a major leadership gap. Andrew Jones and James Richards, Chairman Emeritus, were named by the Board of Directors to lead the executive search. But during a meeting of Susan’s Executive Team, Sam Elliott, whose retirement was now imminent, proposed Greg be promoted to CEO to maintain momentum and take advantage of all that he had learned. Greg was stunned but elated that his peers recognized his accomplishments and had enough confidence in his abilities to even entertain the notion. He excused himself from the meeting so that the others could openly discuss the proposal. Susan chaired the discussion but excused herself from the vote. After 30 minutes, Greg was called back into the conference room. Susan announced to Greg that her Executive Team was in unanimous agreement with Sam’s recommendation. She and Andrew would speak with James Richards and carry the recommendation to the Board of Directors.

Two weeks later, the move was official. Greg was named CEO and Alexandra was promoted to the position of President, Cosmetics Products Division. Susan’s vision of a viable Cosmetics Products business and her trust in Greg’s ability to right the ship were rewarded.

Just three months after Greg’s promotion, three Effective Management coaches conducted a four-day assessment. Following a compilation and analysis of the results through the eList and on-site assessments, Cosmetics Products was awarded Class A status in Business Excellence. As before, Greg and Alexandra organized a special celebration. They invited the entire Cosmetics Products organization, Amalgamated’s Executive Team, the Board of Directors, Susan, local dignitaries, the local business press, and, of course, Roxanne, Dan, and Tom to the same Atlanta hotel where the initial kick-off event had been held. Sentimental, yes; but a memorable event.

This time, Alexandra called the meeting to order, acknowledged Greg and introduced Roxanne. “Greg, Susan, Alexandra, Board Members, and ladies and gentlemen. We completed the assessment of Cosmetics Products’ processes and business results against the Class A Checklist for Business Excellence. I am extremely pleased to present Cosmetics Products its Class A Certification in Business Excellence. Your progress and results have been nothing short of remarkable!”

Roxanne continued her brief presentation making note of some of the impressive achievements. At the end of her remarks, Tom and Dan joined Roxanne uncovering the highly valued Class A Business Excellence Award. Roxanne called Greg and Alexandra forward and presented them with the Award to the flashes of the press photographers’ cameras, and applause from the assembly.

Martin Bennett, President and CEO, Blackstone Pharmacies, next presented his company’s “Supplier of the Year” Award to Cosmetics Products, noting his delight with the improvements made. He also announced that, based on seeing the turnaround at Amalgamated, he had just reached agreement with Effective Management to conduct a diagnostic assessment of Blackstone.

James Richards, Chairman Emeritus and grandson of Amalgamated Consumer Products Corporation’s founder, expressed his thanks for the work done, benefits delivered and the rewards achieved. He said the accomplishments of Cosmetics Products were completely in the spirit of his grandfather, who would have been delighted with the stewardship of his company had he been present this day.

With that, Alexandra allowed Greg to hold the Award himself. She stepped back, publicly acknowledging his leadership in the achievement. Greg held the plaque for a time, and then raised it for all to see. He passed the Award back to Alexandra, who showed it to the other Leadership Team members and then set it on a stand and invited everyone to take a closer look. Greg then ended the official meeting and opened the doors for the celebratory dinner in the main ballroom.

Roxanne was interviewed by the local business press later and was asked to comment on what she considered the major contributors to winning the award. She replied without hesitation, “Commitment, persistence, and determination—led from the top. First, Greg had a personal commitment to excellence. He was the champion and never wavered in his commitment to success. Second, the company had an excellent succession plan in place. Alexandra picked up the reins when Greg was promoted and never missed a beat. Greg created one of the strongest leadership teams it has been my privilege to work with, and now he seems to be doing the same thing with Amalgamated’s Executive Team. Watch this space for future announcements; Amalgamated’s just beginning!”

At home, Penny remained the conscience that wouldn’t let Greg give up his quest for excellence beyond excellence. Greg reminded Penny that his next challenge was a big one in getting all of Amalgamated to Class A. “That can’t be nearly as difficult as it was the first time through!” she chided Greg. “After all you already know the road and location of all the potholes. You know, when you look closely at those maturity maps you’ve been studying, the company is already about half way to Class A, isn’t it? The rest should be easier.”

Greg tried to point out that the higher you move in the Transition chart, the harder it is to make it to the next level. “Well,” she said as she smiled, “you know where I am if you need some help and guidance!” Penny was ever effective in keeping Greg’s hat size from increasing. Both knew that Greg counted on Penny’s encouragement, support, understanding, and straight feedback in good times as well as in the midst of seemingly unmanageable challenges.