The initial unit of measure selected was sales units, which wasn’t satisfactory to Manufacturing since sales units ranged in size from 5ml single-use samples to 500ml units for salon sales. After considerable discussion, Sales agreed to use liters as the unit of measure for body lotions. Bart Billings, Demand Manager, offered to provide mix factors for the various packing options to enable a future view of packaging resource requirements, including bottles, pouch foil, tubes, wipes, and so on. While planning body lotion bulk manufacturing in liters was logical, mix and conversion factors would be needed in finishing operations to assess future filling and packaging equipment capacity requirements.

Alexandra and Greg approved this proposal. Peter could now ask Janice Hackworth to begin to create the item-level master supply planning model using the demand forecast in liters. Conversion of unit volume to financial units would be a simple mathematical exercise handled by the ERP system.

The next task was to define and document official sources of the aggregate numbers for demand and supply, for mix factors, and key resources to be monitored. These data sources would be placed under robust change control, meaning limited access and formally documented policies and procedures. The only person authorized to modify demand numbers would be the Demand Manager or his designated backup; supply numbers would be controlled only by the Supply Planning Manager; and through the Supply Planning Manager, access to the operational resource definitions and numbers would be limited to a carefully selected group of planners. However, all numbers would be visible to key players.

Bart’s Demand team then turned to the task of redefining key performance measures according to Class A best-practices at the Capable level, which included defining the hierarchy of measures, the metrics for each measure—that is, determining the data source, timing, algorithm, calculations, and output—and how these would fit into the balanced score card they were tasked with developing. Angus Martin led the Performance Measures team and had worked with Jeff Black, Janice Hackworth, Bill Bates, Production Operations Process Design Team Leader, and Peter Bertrand to develop the initial standards for defining metrics and measures. To their relief, they discovered quickly that most of the raw data were already available. They would simply have to limit access to that raw data to the people who were tasked, under the new policy and procedures, with managing the underlying metrics and calculating the measures.

At the time of the kick-off meeting, David purchased a license for Effective Management’s Enterprise Sales and Operations Planning Tool’ (ESOPT) software. This tool operates outside the ERP system but through an interface pulls in any data required for calculation, analysis, and presentation of data in graphical format. ESOPT also has its own database, including assumptions and history tracking, making it a comprehensive tool for displaying a great deal of data to facilitate senior management decision making. Results can be projected on a screen during any Integrated Business Management meeting. While spreadsheets can be used, this ready-made tool can be started-up quickly, simplifies the presentation of family status and trends, and enables instantaneous analysis of “what-if” scenarios in both unit volume and financial terms. The graphics make the presentation of analysis results understandable and efficient.

Janice Hackworth, Supply Planning Manager, was eager to use the aggregate supply data in master supply planning modeling. She learned that the ERP system enabled her to hardwire aggregate and detailed supply plan numbers. Bart Billings, Demand Manager, discovered at the same time similar functionality that enabled hardwiring of aggregate and detailed demand numbers. Neither had been aware of this functionality but found it to be intuitive and easy to use. Both were relieved to use just one system instead of the multiple spreadsheets that required them to input the same data in several places and continuously reconcile the data between spreadsheets.

Bart, Peter, David, and Alexandra agreed the Integrated Business Management process was ready to test for the first cycle of meetings, at least for the Body Lotions family.

Each of the reviews was dependent on timely availability of reliable data. The team soon discovered that, for this first cycle, the previous month’s sales actuals weren’t going to be available until the tenth day of the current month, far too late for a monthly meeting cycle. By communicating the urgency and streamlining procedures, actual sales were reported, at least for the Body Lotions family, on the second day of April. Similarly, development of the supply organization’s actual results and performance measures for the same family were accelerated and provided that same day.

For this first cycle, it was not possible to reach agreement on new product introduction information. The team agreed reluctantly to use the most recent data available to Sharon Rogers, the newly assigned Product Coordinator since, in the future, she would be accountable for gathering this information. Realization of this shortcoming had the interesting effect of energizing the current Product and Brand Managers to take more interest in the product pipeline and its potential impact on the product portfolio and customer service. The effect of this wake-up call was recognized immediately in improved product development, introduction procedures, and decision-making. Manufacturing could now prepare to meet published development volumes and dates. The milestone team began to experience what Roxanne had told them—the first step in improvement is standardization [see Figure 7.1]. By simply following robust product management procedures, Cosmetics Products was planting the seeds for improving customer service.

As the journey unfolded, Greg knew that much of his personal drive and energy was fueled by the support and encouragement of Penny and their boys. There were long days and weeks, and short breaks rather than their usual two-week vacations. His family could sense that Greg was doing what was needed. They could also sense his excitement and confidence about the progress his team was making.

Just four weeks after they started the process, Greg settled into his chair in the executive conference room for the first Management Business Review (MBR) meeting, the culmination of their first monthly Integrated Business Management cycle. The executive team was present, along with key planning managers, the Body Lotions Product Manager, and the Purchasing and Finance managers. Tom, their Effective Management coach, had been present for all the preceding Reviews. He would provide the team with feedback and coaching following this MBR to facilitate their continued learning. Tom had Greg added a self-evaluation step to the published MBR agenda. The whole process was remarkably different from what Cosmetics Products had previously called its Sales and Operations Planning meeting. Greg attended that meeting only one time when he joined the company, found it to be little more than a debate about short-term forecast numbers and never again participated.

In preparation for this MBR, Greg had already been briefed by Bart about the issues that surfaced and were resolved during each stage of the month-long process, and about a significant issue yet to be resolved. The formal Integrated Reconciliation Review resulted in just one issue to be decided during the MBR. Greg and the rest of the executive team were counting on Tom to help steer them through the agenda.

At the beginning of the MBR, Tom reviewed their progress to date as the first step on their journey. He encouraged them to keep their expectations realistic for this first MBR. “Let’s look at this as a beginning,” Tom said [Figure 16.1].

“As you know from your own assessment, today you’re in Transition 1 (T1), Disconnected Management Processes. Your first objective is move up to ‘Foundation Sales and Operations Planning’ (T2) over the next few months. That progress will afford you a better balance between supply and demand. This alone will help improve customer service and set the stage for even further improvement as the validity of your supporting plans improve.

“As progress in both milestones improves the credibility of your financial numbers, you’ll find the MBR focus will shift more toward a review of business performance against strategic goals and objectives. At that point, you’ll have achieved Capable Integrated Business Management (T3). It is only as you move beyond Capable Integrated Business Management that you’ll realize its true power. We aren’t concerned with that yet; it’s probably a year or more away. Now, let’s look at a typical MBR agenda [Figure 16.2].”

Bart interrupted. “For the moment, we’re using exactly this agenda. We may need to modify it after a couple cycles, but we’re staying with it for now. Just as a reminder to the team, we decided to use the Product Categories as our families for the moment mostly to support planning for Sales and Marketing, but the structure has the agreement of all functions. These families don’t exactly align with Manufacturing’s views of products and capacity requirements, but the supply organization can still perform Rough-Cut Resource Planning by restructuring the SKUs into Supply Planning families. We discovered this manipulation and analysis to be pretty straightforward in the ESOPT that we’ve licensed. Sorry to interrupt, Tom.”

“Thanks, Bart. That’s a good add. I want to reinforce the point that you’ll need to remain open to modifying your product families as you learn more about using those families to manage the business more effectively.”

During this first cycle, there was agreement to focus on just one family comprising nearly 60 SKUs, excluding Accessories, in the Body Lotions category. Greg reminded everyone, however, that he expected all families to be reviewed in April’s MBR.

Greg added, “When we’ve gained some experience with this new process, I want the MBR to be the first agenda item of our monthly Leadership Team meeting. I expect the MBR to be a crisp, decision-making meeting. We need to devote the right amount of time to this topic without delaying the other important agenda items. That means we all need to do our homework and come prepared for the MBR. Anything else I should add, Tom?” Greg asked.

“I think you’ve covered it well, Greg. I’m really glad you added those last points. Keep reminding yourselves that this is first and foremost a decision-making meeting. You’ll agree on the plans for managing this family for the next 24 months. You’ll need to decide on any required gap-closing actions and be prepared to resolve all open issues.”

“Thanks, Tom,” Greg replied. “My expectation regarding issues and decisions is that we’ll review briefly any issue and its business context, have time to ask clarifying questions, and then discuss the recommended solution and alternatives. Many of you have already worked with Bart in developing today’s issue and alternative recommendations. That prework is critical to the success of this process and to our business. Your effectiveness in this forum also correlates directly with the effectiveness of your subordinates in all the preparation and Review meetings leading up to the MBR. Likewise, your effectiveness will correlate directly with how well you engage in the Integrated Reconciliation process. I recognize that we’re all still learning, but we need to learn quickly. Resolve any questions you might have ahead of the MBR so that you’re prepared to make required decisions when you walk in the door. That completes my opening comments.”

Tom had helped each Review team implement the ESOPT and coached them on the information needed for the overall process. This allowed them to import information directly from their other systems; document assumptions; conduct “what-if” scenario analysis; display graphical representations of sales, production, and inventory plans; display key resources for capacity analysis; and see gaps between current revenue and profit projections and commitments. So it was with great anticipation that Greg waited for Bart to fire up the system and to see the charts depicting the Body Lotions family.

The picture that emerged from the historical data, previous month’s actual results, and future projections was not pretty. The period of heavy shipments for this family always occurred in early October when stores filled their shelves and stockrooms in anticipation of fall and winter dry skin conditions and for the buildup to the Christmas season. This shipment period was critical to category profitability for the entire year. Nevertheless, customer service performance was traditionally poor every fall when Cosmetics Products failed to ship, or undershipped orders for many SKUs while having surplus inventory of other SKUs. After last fall’s heavy shipment period, customer service improved slightly, but several high-volume SKUs continued with backorders exceeding 10 percent. Backorders were often canceled when customers turned to Cosmetics Products’ competitors to fill their shelves, stockrooms, and end-aisle display space. Greg’s only solace was the coaching from Tom who had said that, through implementation of the Planning Spine, backorders should soon drop to less than 5 percent, trending to less than 2 percent by the time the Capable Planning and Control level was achieved. Tom’s coaching helped Greg remain upbeat about the progress they were making in attacking the underlying causes of the poor results to date.

With final reminders that the MBR was for decision making, not information sharing, and for improving results, not assigning blame, Greg turned to Bart to lead the team through the agenda.

“Thanks, Greg. Since this is our first meeting, we have no outstanding action items or special issues; so we’ll skip that agenda item. Why don’t you take us through the performance scorecard review, Janice, and then introduce the issue and decision we need to make?”

Janice Hackworth, newly appointed Supply Planning Manager, began her portion of the agenda. “We’ll get to the issue and needed decision later when we get into the family overview charts. For now, let’s move to the performance review chart in your information packet.

“We’re focusing only on the Body Lotions family key performance indicators (KPIs) in today’s meeting. By next month, we’ll be able to present performance results for the entire business. For now we just need to become familiar with the format and content. The bad news is that nearly all our newly defined Class A measures and other KPIs for which we’ve been able to get data are below required levels.”

Janice spent a few minutes defining the key measures and summarized what work was being done by the milestone team to improve results. She explained that at the MBR in May more specific plans would be presented for each measure below the required minimum or negatively affecting customer service.

“This isn’t what I was hoping to see,” commented Greg after reviewing the graphical dashboard of results, “but it’s pretty much what I expected.” Greg shook his head and gestured for Janice to continue.

“Since this is our first MBR, I thought I’d ask Matt to bring all of us up to date on the complete Body Lotions new products pipeline. Matt would you do the honors?” Janice turned the meeting agenda over to Matt Rutherford, VP Engineering and Product Development. Matt discussed the status of each new product on the development path. He specifically highlighted one project that had slipped several months, and another whose launch could be accelerated if desired. Alexandra commented that, based on her Product Manager’s perspective, the delayed product was key in getting the portfolio a “new and improved” look in the consumers’ eyes since it addressed the current trends toward aromatherapy and skin detoxification. Unfortunately, the product that could be accelerated was timed to launch with related accessories that could not be accelerated.

Tom interrupted. “Matt, have you rescheduled the new product commitment date to reflect the delay?”

“We decided not to do that, Tom. We wanted to stay with the original date so we could pick up the Past Due alerts from the planning system.”

“So, Matt, the demand plan we’re looking at includes volume that you know can’t be sold and shipped. And I’ll bet that new product is replacing another product. If I’m right about that, chances are pretty good that you’ll run out of the current product before the new product is available. That’s what I call a ‘double whammy!’ Consider this an example emphasizing the need for realism from everyone, whatever the causes.”

“You’re right about that, Tom,” commented Greg. “Bart and Jeff, I want you to take care of that demand issue ASAP. Matt, and for everyone else in this room, if you have a problem, raise it with Bart for review in Integrated Reconciliation. That’s how we agree what to do about our plans when we see potential issues. I really dislike surprises like this. Remember that for next time!”

Tom added, “Here’s the good news. When you’ve incorporated new products properly, the Integrated Business Management process will be a great help in delivering product launches on schedule.”

There were no more questions or comments about new products, so Janice continued with the agenda. “Now, since we are dealing with only one family and this is our first meeting, I’m going to move right to the family review for Body Lotions. I’ll be presenting this today, but we’ll change that over the next few months so that the appropriate product manager, brand, or category manager accountable for each family will lead the family reviews.”

Janice projected a sales chart that showed low first quarter sales. She explained that the below-forecast sales resulted from a production shortfall but was quick to add that there was also a significant forecast error. As Greg looked at the screen projection of the family’s Demand Summary, he turned to Alexandra.

“So you’re telling me, Alexandra, that we forecast more demand than actually materialized, but then we couldn’t even produce what we expected to sell? That really concerns me, since this is one of our higher profit lines. We can’t afford to fall short on this family. I’ll get to the production issue in a minute, but first, why did we miss the sales forecast?”

“I’d like to answer Greg’s question, Alexandra,” said Carole Brown, Body Lotions Product Manager. “I haven’t been in agreement with the forecast for these products for a long time.” She continued in some detail before declaring, “I believe the next few months’ sales forecasts are at least 20 percent too high.”

There was a palpably uncomfortable silence in the room for what seemed a full minute. As Alexandra was about to respond to Greg’s question and to Carole’s comment, Tom interrupted. “Greg, what’s your reaction?”

“I’m not sure what you’re thinking, Tom. I know we just experienced a very uncomfortable silence. What’s your advice to me and to all of us?”

“Perhaps I was a bit vague, Greg. Carole, I don’t want you to take this personally. Just consider it coaching for the entire team. There’s a cardinal rule for the meeting we call the Demand Review. Some of our clients refer to this review as their ‘consensus forecast meeting’ with ‘consensus’ being the operative word. It’s essential that Sales, Marketing and Demand Management end up in absolute agreement or at least consensus about the assumptions and the unconstrained demand for SKU’s and families. If that team can’t reach consensus on the forecast, how can you expect your supply team to create its plans and supply alternatives? If there is no consensus, plans brought to the MBR are worthless. I watched the President of one business correctly bring an MBR to an abrupt and embarrassing end when her Marketing and Sales VPs openly disagreed about the forecast during that meeting. So, if you really were not in agreement with the forecast, Carole, you should not have agreed during the Demand Review. ‘Silence is approval.’ Your silence meant to others that you were in agreement with the demand forecast. It is not acceptable to ride the fence or second-guess those numbers later. In other words, based on what you’re saying, there was no consensus on which the supply team could do its work, and no possible chance of having an effective meeting today.”

Tom turned to Greg. “That may have sounded harsh, but that’s what I was thinking, Greg.” Tom’s ability to give straight feedback surfaced again.

Carole responded before Greg could comment. “I know you said not to take your comments personally, Tom, but that felt pretty damned personal!”

Greg could empathize with Carole’s feelings, but knew that Tom was right. Greg also knew that he needed to establish a culture that welcomes critique, even harsh critique.

“I certainly appreciate your candor and can understand your feelings, Carole; but in a spirit of learning from our mistakes, I have to agree with Tom. We all need to seek and welcome constructive criticism from Tom and from each other. Otherwise we’ll never improve customer service. Quite frankly, I’ve also had some of those same concerns about our forecasts but didn’t articulate them either; so Tom’s comments are directed to me as well as to you. Looks like we all have a lot of learning to do!”

Alexandra finally regained the floor. “I was about to say, Greg, mea culpa. The buck stops with me, not Carole. As we reviewed the history of this family, we became aware of a strong sales plan bias. It appears that we routinely forecast high, plan for that high level of revenue and profit, and then watch as actual sales, revenue, and profit fall short of forecast, month after month. Carole brought it to my attention in the past, but I just didn’t listen carefully enough or understand the implications of forecast bias. At the time, we were already planning the following month’s sales and weren’t paying enough attention to what happened in the previous month. It’s no wonder Manufacturing has been second-guessing our forecasts! I think we’ve all learned a valuable lesson today.”

Alexandra continued. “Greg, we’re still exploring the reasons why, but obviously our current sales and marketing efforts are not building the market share, volume, or margins we need. I’m learning a big lesson from the Integrated Business Management process in this very first month. For now, we’ll lower the forecast while we figure out what is causing our unfounded optimism.”

Bart added, “Alexandra is right, Greg. We haven’t yet determined the cause of the continuing shortfall, but there is some good news.”

Greg looked skeptical. “If you can find any good news in all of this, Bart, I’m all ears.”

“This isn’t a new problem, Greg. We’ve been suffering from it for a long time. We’ve started to document our demand assumptions and examine the plans and results in an entirely different way. For the first time, we understand that we have a fundamental problem with this family. This month it literally jumped out of the data at us. We knew something wasn’t right, of course, but in the past we’ve been looking at all the SKUs individually. We were in data overload and couldn’t see the forest because the trees kept getting in the way. We just didn’t see the pattern that is so obvious to us now. It’s also obvious that this Integrated Business Management process is going to make us face and address issues proactively.”

“Okay,” Greg responded, “I think it’s a bit of a stretch to call it ‘good news,’ but I agree that recognizing a performance pattern, even a bad one, is better than not recognizing that there is a pattern at all. Now, I’ll ask the hard question. What are you and your demand management team doing about it, Bart?”

“For the short term, we’ll reduce forecasts across the board for the SKUs that have habitually fallen short of our prediction. When the issue came up in the Reconciliation Review, we built a scenario in the ESOPT tool depicting a sales plan reduction of 20 percent. On my laptop, while we’ve been talking, I’ve added to the scenario the delay of the new product, so we can look at the impact of both on the screen.

“As you can see, the new sales plan lowers the revenue and profit forecast for the family and for the entire business, of course, but it now reflects what we really expect to happen. To offset that loss, we’ll develop additional marketing and sales initiatives in other families. If we can get the product from the plants, these initiatives should make up for the predicted revenue and profit loss in the Body Lotions family. Janice and I will review the supply capability to meet the increased volumes for the other families. We’ll present details about those new initiatives in next month’s MBR.” Those present were disappointed to see more bad news, but impressed with how quickly the new scenario could be developed and projected during the meeting.

Janice took control again, “Let’s get back to the agenda. We have one issue statement and an evaluated recommendation for decision today. You’ve all seen it, but I’ll remind you that it deals with the need for additional production capacity for the Body Lotions family. It was a complex issue for us to sort through during the Demand, Supply, and Reconciliation reviews, but I believe the recommendation is clear and the case compelling.” Greg picked up his copy of the issue document.

“Now, David, it’s your turn to help me understand what’s going on. Let me get this straight. We have undersold this family, but despite that, we’re looking simultaneously at dismal customer service performance and high inventories. What the heck’s going on? This isn’t making any sense to me. I was told we had plenty of capacity. We just reduced the forecast and now you’re telling me we still don’t have enough capacity! Enlighten me, please.”

David responded. “We believed we had capacity, Greg. In aggregate, it appears that we do have plenty of capacity, but when you get into the details of the product mix, it’s not quite that straightforward.” David then went into a blow-by-blow account of how they created the shortfall through a series of events and decisions that just like dominoes, cascaded problems through the entire supply chain. He then told Greg that the situation was even worse than what he just described. I’ll try to clarify what happened.” Before he could continue, Tom interrupted him.

“David, at the beginning of this meeting, Greg reminded us that this is not an information-sharing session. Keep it business focused. This is not the place to air dirty laundry. The past is past; we just need to learn from it, and keep focused on planning the next 24 months.

“So, David, in one sentence tell us what will happen if you don’t get the additional capacity described in the issue recommendation.”

“Well, Greg, we still have to analyze our capacity in a little more detail given the 20 percent reduction in the demand plan, but I know we’ll still be near the maximum of our capability, and maybe even higher. That would put us near a 100 percent loading, which is high risk and unrealistic. We’ve already been using most of our 10 percent capacity reserve for several months. Since Marketing plans to grow this product family, we’ll need to increase our capacity before they start advertising and selling the additional volume. Given the equipment and installation lead times, it will be year-end before we see any new capacity on line—after the heavy shipping period. Jeff will need to build that constraint into his demand management plans. While we’re at it, have a look at months 18 through 24. I’ve never been able to see that far out in our plans before, but, assuming this reduced demand plan is approximately right, we’ll still need a major capacity increase by the middle of next calendar year. If we do it right and continue to manage demand, we’ll avoid having this issue on the agenda again. Sorry, Tom. That was a bit more than one sentence.”

Alexandra jumped in, “Greg, this product line is strategic to our growth and profitability. I’d recommend we seek immediate authorization of capital funds for the capacity increase. While we’re developing the capital request and justification documents, we’ll go through the forecast again and give you the demand that we believe we can achieve with various marketing programs.” There was a brief period of silence before Tom offered a comment.

“This is what we call teamwork, and it’s the first sign that you are making progress! Congratulations!”

“Thanks, Tom, but we still have a long way to go. David, how confident are you of the amount of money you put into the Issue Document?” Greg asked.

“It’s a rough estimate, but we are confident that the $3.5 million is adequate since we’ve purchased similar equipment recently,” David replied.

“I saw that number and was hoping I wouldn’t have to carry that much bad news to Susan after our very first MBR, and only one family at that!”

“The new equipment won’t be operational for nine months after we order it, but there are some additional steps we can take to help ease the capacity constraint sooner,” David continued. “We’ll work with the supplier of our current high speed lines to increase their output. They’ve been eager to make those upgrades, but we just haven’t wanted to spend the money. The supplier wants to bid on any new equipment we buy in the future, so should give us a great price for the rate increase upgrades. We can be confident they’ll meet their rate increase commitment to us; if they fail, they know they won’t have a chance to get the contract on additional production lines. That’s the second part of our recommendation, following the forecast reduction recommendation.

“The third part of the recommendation is to maintain maximum capacity on a day-to-day basis by hiring additional employees to keep the lines running around the clock. Making that move will result in a slight productivity decrease that Sara Miles estimates will cost us about one percent of margin on those products. The employees we add will also be trained on the new lines when installed, so we aren’t looking at them as ‘temporary help.’ We estimate three months to get new people on board and trained. During that period, we’ll ask the current employees to work more overtime than they would like. They’re great people and will be happy to help us so long as they see we have a business need and a plan to get out of this situation. Operating at maximum capacity during this period of low seasonal demand allows us to build inventory and be better prepared late summer when shipments pick up again.”

Zachary, VP of HR, spoke up. “David, your case is mathematically correct, but don’t underestimate the effect on our employees. Almost everyone likes some overtime, or longer shifts, for a while. Then it either becomes an expected part of their income or they begin to resent it. They’d rather be with their families or taking care of personal business, especially in the summer months when their children are on summer break from school. Further, we know from experience that overworking people leads to lower and lower productivity, more mistakes and accidents, and threatens quality. It’s a shortsighted solution which I can’t support for any significant length of time.”

A long silence followed before Tom intervened. “Zach, were you involved in the Integrated Reconciliation discussion?”

“No,” said Zachary, “but I should have been involved.”

Tom intervened again. “Look, it’s early in the life of this process. A few glitches are inevitable. Let’s chalk this one up to experience and learn from it. Now, about half an hour ago you had a plan that included lots of overtime. Since then we’ve learned that the Demand Plan will be reduced by 20 percent. We’ve just looked at the Demand Scenario, but I suggest you repeat Integrated Reconciliation before proceeding. Let’s call it a ’do over.’ Do a more thorough simulation of this family’s supply and demand picture over the next 24 months with all the changes you’ve discussed, reassess the Rough-Cut Resource situation, and then restart this family review before we end this month’s MBR. Involve all the executives and the other key representatives here and see what you learn. Greg, is there any possibility of extending this meeting to resolve this issue?” Greg thought for a moment.

“Thanks, Tom, that’s a good idea. Bart, how soon do you think we can be ready to restart the family review?”

“Shouldn’t take any longer than an hour, Greg,” Bart replied.

Tom continued with his coaching intervention. “I want you to commit to each other that this is the first and last time you let this happen. Integrated Reconciliation requires all stakeholders affected by a decision to be involved, not just those raising the issues. Learn from this experience.”

Greg called a one-hour MBR meeting recess. The Integrated Reconciliation team completed its simulation and alternative solution analysis in less than that time, and the MBR team immediately reconvened.

Bart began again. “Let’s start over with the issue and Body Lotions family review. The situation is the same; we are still recommending additional capacity, but we have another option. I’ll present the first option; Matt will present the second.” First he described the standard engineering approach and schedule for adding the capacity. Other members of the Integrated Reconciliation team contributed to the discussion when Greg questioned elements of that proposal. Then David displayed the impact of that option on Supply Demand balance. The graphical presentation of the scenario allowed Greg to see instantly that the new capacity would miss the peak sales season. He began to make a point about the impact on customer service as well as on share and profitability when Matt interrupted him explaining that he had a second, recommended option to present.

“Greg, we also saw that this standard construction and start-up approach would miss the season and knew that was unacceptable. That discussion led to our recommended solution. There is some risk and expense involved, but I’ve studied the techniques at length and know of businesses that have successfully used them. I’ll be talking with their Engineering Directors in the next few days to gather more information. Before I get into the details, however, let me ask you a question. Starting with a plot of land, how long does it take to build a modest one-floor house?”

“That’s an easy question, since my nephew and his new wife just did it. It took them four months, but more likely it takes six to allow for weather interruptions and availability of framers, roofers, and so on.”

“I agree that would be typical. But that same project could be completed in less than a week by using what is called a blitz-project approach. I’ve seen a film of such a house being built. In fact it took less than 24 hours to complete.

“Our second and recommended proposal is to use some of those techniques in our capacity increase project. We’ll have to do much more precise project planning, and we’ll incur some premium costs for labor, equipment, construction and freight, maybe as much as 10 percent over that $3.5 million we quoted earlier today. However, if we reach the decision within the next week, we can have the equipment on site within three months. I’ll assign my best project manager who has a track record of delivering on time and budget. We’ll have the additional equipment installed and commissioned by the first week of September, giving us about three weeks of contingency time before the real demand crunch. Zachary, you raised some very valid HR concerns an hour ago. Bring Greg up to speed on your latest thinking about those concerns.”

“Greg, using a mix of our current people and new hires, we can have people ready to use the new equipment by the beginning of September. We’ll begin their technical training on the new equipment while it’s still in the manufacturer’s facility. I called the most likely vendor’s HR manager a few minutes ago to confirm that our people would be welcome in their factory to participate in the equipment shakedown and commissioning. He was delighted; said that approach will reduce the start up learning curve and make us an even more satisfied customer! Our people will be able to test run the equipment and practice some of those fast changeover and cleaning techniques in changing sizes and products before the equipment even gets into the plant. David will work with Sam Elliott at corporate to ensure we can accelerate the equipment contracts without creating any external auditor issues. Gordon will cover the financial aspects of the blitz proposal. Gordon, you’re up.”

Gordon Fast, senior Finance manager, began his comments. “Looking at the premium costs for the blitz approach, and comparing those with the financial impact of missing peak season sales again, it’s a no-brainer. I rounded Matt’s $350,000 incremental cost increase up to half a million for this comparison. Compared with the loss of $2 million in incremental profit, which doesn’t even factor in the impact of continuing customer discontent, it really is a no-brainer. My recommendation is that we go with the blitz schedule.”

Greg looked stunned and pleased. “I have to tell you that regardless of the decision we reach, I’ve dreamed of the day when you would perform as a real team. If you’re all confident we can actually execute this plan, I’m in complete agreement. How long will it take to get the documents ready for me to take to Susan?”

Sara Miles looked a bit sheepish at this point and said, “Well actually Greg, we’ve nearly finished pulling together what you need. The documents will be ready for your signature by the first thing tomorrow. Gordon and his analysts will stay late if necessary to finalize the business case. You can meet with Susan any time after 8:00 A.M.”

Greg commented aloud, more to himself than to the assembled team, “Roxanne told us we would be surprised with what we learned in the first cycle of meetings. She was right again!” He looked thoughtful as he spoke sincerely to the team, “I’m impressed! I know we’ve stumbled a bit in this first cycle, but we’ll learn from those mistakes and not repeat them next month.

“One more thing,” Greg continued. “I don’t want to operate this close to capacity. Let’s agree that we shouldn’t be planning to use more than about 85 percent of our planned capacity for routine requirements so that can respond to changing customer and consumer demand and have capacity available for development, testing, and maintenance.” Everyone nodded in agreement.

“I guess that’s it for today.” Nods around the room indicated agreement, but Bart spoke up.

“Hold on a minute, Greg. We can probably pass on the meeting critique today since we had quite a bit of it as we went through the meeting, but you need formally to approve the demand, production, and inventory plans for the Body Lotion family, and we need to review the decisions made. I would suggest that you ask each of your team members for their commitment to this Body Lotions Family plan. Let’s just make sure there is no misunderstanding.”

Greg went around the room starting with Sales and Marketing, then Operations and Supply Chain, Human Resources, Engineering, and last but not least, Finance. Each team member responded affirmatively. With that the meeting ended. Bart would publish the decisions from the meeting by the end of the day.

The next morning Greg called Susan to talk about the capital equipment funding request. After hearing the urgency in his voice and impact on the revenue, she squeezed him into her schedule. Greg began the meeting by showing Susan the demand, supply, and rough-cut charts from the ESOP tool. She came to quick agreement that they needed to act quickly. Deferring some other capital expenditures to free up the money might take some time, but she gave him the authority to buy the equipment immediately.

The blitz schedule project was underway. Greg had a real Leadership Team, no longer a dysfunctional committee.

After talking to Susan, Greg sat in his office staring at Amalgamated’s well-manicured grounds, but looking at nothing in particular. He replayed the MBR meeting in his mind. He was impressed with the team’s approach in analyzing and presenting the Body Lotions family, and surprised by how thoroughly and professionally the presenters made their case. He thought, “Perhaps this is what Tom meant when he told me that Integrated Business Management Process is a superb process for developing the next generation of executives. That’s a major benefit that I hadn’t even considered.” He recognized that the learning was just beginning and wondered what they might discover in May. He couldn’t decide whether it was good to find lots of problems and get all of them on the table as opportunities, or hope for just a few problems. “That really is another ‘no-brainer,’” he thought to himself. “The problems are hovering all around us just waiting to be discovered, regardless of what I hope for.”

The teams developing the Planning Spine processes, business rules, and procedures were also making rapid progress. The planners on the team could at last see how their ERP system would help them maintain valid plans and monitor progress against those plans. The Data team set up and applied all the system security profiles and implemented a robust change control procedure. Monthly data integrity audits reflected rapid accuracy improvement in all data structures. The data team was confident of achieving 95 percent accuracy within the next two to three months, and at least 98 percent in the not too distant future. Interestingly, the number of data corrections and journal entries being made in Finance had fallen off significantly as a result of better data and more accurate and timely transactions on the shop floor. The Inventory Accuracy team included some shop floor people who began to understand and train others on the importance of transaction integrity and timeliness. Inventory accuracy was improving but was not yet good enough. The data team was preparing requests for more modern measuring equipment such as mass-flow meters and load-cells, and bar-coding printers and scanners. Additional training and behavior changes, the inexpensive part of their improvement plan, would get them to 95 percent quickly and yield even further improvement over the next few months.

The Inventory Accuracy team was confirming the theory that poor performance is attributable more to inadequate training, processes, equipment, and other system design issues than to the people working within that system. Those involved were energized and committed to achieving their goals. Control Group Cycle Counting accuracy results had already increased to over 96 percent. The team was nearly ready to implement routine cycle-counting procedures in all plants and warehouses.

Since the kick-off meeting in downtown Atlanta, Roxanne had been on site with the Customer Service Initiative team for several days every month along with Dan and Tom, each at first for as many as five days, but now fewer than that as the people continued to grow in their knowledge, confidence, and effectiveness. In addition, Tom and Dan visited with the headquarters and plant design teams periodically to coach them on emerging design team issues and questions. The ability of Roxanne’s team to transfer its knowledge to Cosmetics Products was apparent, as evidenced by the rapidly improving results.

The Conference Room Pilot was successful, requiring only a few process and ERP system configuration modifications. The test demonstrated goodness of fit for the Planning Spine model and its rules. Several Leadership Team members dropped in from time to time to observe and provide support. The pilot team was satisfied with the results and proposed implementing the new business processes for Body Lotions. They would need to pay close attention to common ingredients and products that were also used in other product categories, but were determined to ensure that the live pilot would not disturb or be disturbed by other categories’ activities. The Steering Committee agreed and targeted September 1 as the cutover date for all of Cosmetics Products, with the live pilot on Body Lotions beginning on July 1.

The live pilot required the most up-to-date forecasts and current orders. The Demand Team had been working on improving the forecasting process and resulting forecast accuracy by documenting Sales and Marketing assumptions for the Body Lotions family. Not surprisingly, the team would find themselves engaged in heated discussions about the forecast numbers until they began to develop a common understanding about demand drivers. For the first time, Sales and Marketing began an assumptions-based consensus of future volumes. They also learned that unconstrained demand did not mean inflated numbers intended to keep pressure on Manufacturing, but realistic estimates based on the market assumptions without regard to any internal supply constraints. As suggested by Dan, they focused first on developing the 24-month, month-by-month aggregate family forecast. A key assumption was that by year-end they would no longer be struggling with poor customer service and, as a result, sales would increase by 7 percent. This aggregate volume became their consensus forecast. They committed among themselves to maintain a high degree of accuracy with the aggregate forecast and found that they could use history as one element of the forecast going forward, and as a “sanity check” during the critical first three months where SKU forecasts were needed to drive the supply chain. For small volume products with volatile customer preferences, they agreed to forecast the volume for those products in aggregate by week through the first 13 weeks to ensure an adequate supply of bulk products. Then, driven preferably by point-of-sale data to determine current customer preferences, they would disaggregate the weekly aggregate forecasts into SKU forecasts. In turn, these SKU forecasts would be used to determine filling and packaging material, labor, and equipment requirements.

Manufacturing would now have to follow closely the weekly bulk product and SKU requirements driven from forecasts and orders. The new manufacturing measures would support cross-functional supply chain performance, rather than seek to optimize internal Manufacturing objectives such as utilization.

Developing the SKU mix percentage history was presenting a significant challenge since the SKU history file had not been adjusted for Cosmetics Products’ own behaviors. Sales and Marketing had not kept track of backorders, promotion lifts, late shipments, and the amount of backorders more than six weeks old that were scrubbed from the files. As a result, statistical forecasts would be essentially meaningless for the next few months. Regardless of those challenges, it was becoming clear to the Demand Management and the pilot teams that long production cycles were a significant contributor to poor responsiveness and customer service.

The negative implications of utilization as a key measure and the resulting long manufacturing run operating strategy, originally established by Tony, were now clearer than ever to the Pilot Team. That team brought its concerns and recommendations about the long cycle times to the Implementation Team and later to the Steering Committee. They proposed an operating strategy change to more frequent, smaller batch runs both in bulk manufacturing and on the filling and packaging lines. Unless set-up times were reduced, however, this change would further constrain supply capability, an unacceptable trade-off for Body Lotions. Peter agreed to contact Samantha Williams, Effective Management’s Agile, Lean, and Six Sigma expert to see if there might be some simple “Single Minute Exchange of Dies” (SMED) techniques that could, as quickly as possible, reduce changeover times. Bill Bates, Production Operations Team Leader agreed to host her visit to the plants. Angus Martin also agreed to put top priority on developing appropriate manufacturing performance measures to replace dependence on utilization as the key measure for Manufacturing.

During an earlier visit, Roxanne had explained the value of using Overall Equipment Effectiveness (OEE) to replace Utilization as a measure of machine-paced processes, although there could still be some value in tracking Utilization if a company chose to do so. She emphasized the point that OEE is a more holistic and meaningful measure of work location performance because it aggregates the combined effects of process availability, performance, and quality. She also advised them that the measure should not be put in place without clear definition and examples being incorporated into documented procedures and until appropriate education had been provided to the supply organization on its purpose and usefulness. She shared experiences of companies failing to properly prepare their organizations before building the measure into incentive plans, only to experience distortion of the results to the point that the measure was abandoned. In using OEE, she explained, Cosmetics Products would need to be clear that OEE should not be used as a Capacity Planning factor since ‘Load Factor’ is more reliable and effective for Capacity Planning, and it works for both machine-paced and labor-paced operations. During the Schedulers’ education, Effective Management would explain and recommend the use of Load Factor for Capacity Planning and Overall Equipment Effectiveness to track machine-paced process performance.

Within four weeks, the demand forecast was ready for the live pilot; the planning model had simulated producing varying body lotion bulk manufacturing batch sizes and frequencies while optimizing equipment effectiveness. A new SMED task force under Samantha’s and Angus’s guidance had already identified some low-hanging fruit and reduced changeover times by 60 percent with very little spending. The SMED team of operators and mechanics was excited about its progress and anticipated they could eliminate 75 percent of the time wasted by ineffective set-ups, changeovers, and cleanings.

Internal cascade education and training built on a combination of Business Excellence concepts and newly documented Cosmetics Products procedures began immediately. Chris Deutsh, Systems Analyst, who had been working with the design teams since the beginning, reported that IT was ready to support the live pilot and had developed supporting plans for the full cutover on September 1. He took advantage of a break in production for major maintenance activities on the last two days of August to ensure integrity of data loading and to validate that the newly configured system would correctly support the business. This break would also allow Finance to run end-of-month reports to mark the end of the system’s current configuration.

The live pilot was a complete success. During its first month, Planning produced plans that were executed flawlessly by Manufacturing and the rest of the supply chain. Customers received their body lotions orders in full as promised more than 90 percent of the time, even while other Cosmetics Products categories were still performing below 50 percent. The more customer-centric master supply plans, supported by Available-to-Promise (ATP) functionality, allowed realistic promises to be made. The Demand Management Team had difficulty implementing a Demand Control process in the ERP system to spot abnormal demands, but developed a simple procedure outside the system to be used temporarily. At order entry or using a system report for electronically processed orders, the clerks would identify orders accounting for more than 10 percent of the SKU available-to-promise quantity. Follow-up with the appropriate demand and sales representatives allowed them to catch and manage a few unexpectedly large (unforecast) orders.

At the end of the month, Customer Service representatives surveyed a number of customers and learned that the customers recognized the difference in service with this product category. The team was now confident that it could resolve the causes of the remaining missed or delayed shipments and exceed 95 percent on time and in full line fill by year-end. There were no impediments to moving forward across all products except for the needed capacity increase being addressed by the blitz schedule project.

The Steering Committee gave unanimous approval for the Planning and Control Milestone Team to roll out the planning model and the Planning Spine concepts across all Cosmetics Products categories.

After five months, all Capable Planning and Control performance measures were nearing required levels and still trending in the right directions. Finance reported that, at least for Body Lotions, ERP system generated data required little investigation or correction as a result of improved master data and transaction integrity. The benefit would also have been seen in other categories, except that master data in those categories had not yet been updated. Finance confirmed significant reduction of finished goods, work-in-process and component inventories. The monthly wall-to-wall physical counts had been replaced for all inventories, storage locations and categories by far more efficient and accurate process control cycle-counting procedures. Productivity was also increasing as a result of more effective schedules, fewer unplanned changeover events, and trust in ERP system numbers.

Less visible but equally successful was improving effectiveness of the Integrated Business Management process. The Leadership Team had become more effective with each process cycle, making better cross-functional decisions and providing more effective guidance to the business. Greg now had a mechanism to understand the business and to control Cosmetics Products top-down and bottom-up.

Success continued with the September 1 Planning and Control process cutover to all product categories. Within two months, performance measures in all categories replicated the upward trends seen in Body Lotions and were nearing 90 percent in nearly all measures by year-end. At the same time, the teams celebrated Body Lotions’ measures all reaching Capable Planning and Control levels of performance (95+ percent).

The blitz project successfully commissioned the additional capacity in September, in time for the peak season. After a few trial runs for validation, the process was handed over to production, fit-for-use. The future was looking brighter for Cosmetics Products.

Greg was seeing tangible benefits in all areas as a result of the Customer Service Initiative and eagerly shared the progress with Susan during their monthly meetings. Customer service results continued inching upward even while finished product, raw material, and work-in-process inventories were being reduced across the Division. Finally, the right products were being delivered to the distribution centers and customers in full at the right time.

Every month, each milestone team conducted internal self-assessments of their progress against the Checklist. In January, Peter asked Roxanne and Tom to conduct an interim assessment to calibrate and confirm their internal assessments. The assessment conducted by Roxanne and her team confirmed that milestone teams were making good progress, but resulted in a few specific recommendations, as expected. The teams welcomed the external assessment and responded to Roxanne’s and Tom’s recommendations with increased focus and enthusiasm. By the end of May, just over a year after the first MBR meeting, Cosmetics Products Division had sustained Capable levels of performance for more than three months. The teams were ready for a Effective Management’s final assessment.

Greg phoned Roxanne personally to check her availability. Given her frequent visits, Roxanne was aware that Cosmetics Products was complying with the milestones requirements, including the projected business benefits. She agreed to schedule herself and Dan to conduct the final assessment over three day period in the second week of July.

Greg, along with everyone else in Cosmetics Products, was confident yet tense as the assessment week finally arrived. His final message on the day before Roxanne and Dan arrived was to encourage assessment participants to be open and honest with the assessors. He reminded them that their success to date had been a result of their openness with each other and with Roxanne, and that now was not the time to change that behavior.

Assessment presentations and results reviews were well prepared and progressed smoothly over the three days. Roxanne and Dan were paying close attention to the behaviors and interactions among the people. Polished presentations could always be created to hide real issues; both Roxanne and Dan had experienced that in the past. They asked to visit several operating areas to confirm what was being presented. The visits confirmed the presented results; observed behaviors were as they’d hoped. Bottom-line financial benefits were far above what had been predicted. Roxanne and Dan conferred for an hour to compare notes and then provided a brief wrap up at the end of the final session. Roxanne announced that Cosmetics Products had successfully achieved both Capable-Level Milestones with flying colors. Greg was elated, but Dan advised them there were lots of areas for further improvement that they would highlight in the report to be provided within two weeks.

Greg started planning the official Milestone Award ceremony and the celebration. When the report arrived on July 22, Greg called his team, the Milestone Leaders, and the Design Team Leaders together for a meeting to see for themselves that they had officially and successfully passed the assessments and to thank them again for their work. He gave the report to David to follow up on the detailed assessment results and the list of improvement actions.

Greg phoned Roxanne while the team was still with him in the conference room to thank her for the formal certification and the report; and to invite her to an award ceremony and dinner, which they agreed to schedule on August 15.

Normally the Effective Management Coach presented Class A Milestone awards, but Roxanne wanted to acknowledge the strong support that Susan Barnett, CEO, provided for the work and for Greg through the period in which his business results were getting worse. In a phone call before the awards dinner, Roxanne arranged for Susan to present Greg with the awards. With the local newspapers there to record the event, Susan first presented Greg the Capable Planning and Control Award, which he in turn handed directly to David, thanking him publicly for kick-starting the Customer Service Initiative. Susan next presented Greg the Capable Integrated Business Management Award, which he hugged for a few seconds before handing it over to Alexandra. Greg then presented certificates to each member of the Milestone and Process Design Teams commemorating their significant contributions and accomplishments. Following a brief address by Greg, and a corporate acknowledgement from Susan, the dinner and celebration began.

Roxanne caught up with Greg and Susan before she left. “I just want to leave you with a few thoughts. Of course you’re proud and satisfied with the justly deserved results and awards—a bit like the laurels the Greeks awarded to their top athletes—and that’s appropriate. But beware of what might happen next. There’s an old saying, ‘If you’re resting on your laurels, you’re wearing them in the wrong place.’ Don’t let everyone become complacent; they need the next challenge, and then another one after that. I know without question that your division is now the best in Amalgamated, but remember the Total Quality Management adage, ‘Being the best is the enemy of being better.’ Just think about that. Meanwhile enjoy your accomplishments!”

Greg’s accomplishments did not go unnoticed by either Amalgamated’s Executive Team or Board of Directors. As Susan had predicted, they’d given Greg a long leash and financial support, then watched for signs of the recovery. As the recovery came, the Board realized the importance of their faith in Susan’s and Greg’s leadership at a time when Cosmetics Products was on a rapid slide to oblivion.

“Well, Greg, how’s it feel now?” Penny said when Greg, smiling broadly, arrived home late that evening.

“Fantastic. It still hasn’t sunk in—not the awards, but the progress we’ve made and the business results we’ve achieved. I’ve been invited to visit Blackstone to talk with Martin Bennett.”

“Your old CEO, Greg? That sounds promising doesn’t it?” said Penny.

Greg nodded. “They’ve started stocking most of our product lines again, and I’m interested in what he has in mind. You know, getting Blackstone’s business back has been a personal achievement that means as much to me as any award. Guess I still admire Marty and appreciate his support. I’m really looking forward to seeing him again.” He collapsed into his recliner and closed his eyes, contented.

“Greg,” called Penny as she sat on the chair next to him.

“Yeah?”

“I haven’t heard you say anything about what happens next. You’re not bailing out now are you? I thought you’d have plans for the next round of improvements.”

“Penny! Give me a break. You sound just like Roxanne.”

“Well, Greg, if Roxanne told you the same thing … You know, when I was in business, I saw it happen all too often. Someone makes the big leap forward and then just rests on his laurels while others overtake him.”

“Odd that you should mention the laurels while I’m sitting in my recliner.”

“I don’t know what you mean by that, but what I mentioned is called the ‘hare and tortoise effect.’ Don’t believe that the world, or your Board for that matter, is going to admire this accomplishment until you retire. Why don’t you do a mental SWOT analysis—headlines only. I’ll pour you a glass of wine, but I’ll only let you have it when you tell me your weaknesses and threats.”

Greg groaned, but began mulling over what opportunities he needed to address next, with Penny as his very welcome and skilled resident coach.