Financial performance continued to improve, making the Cosmetics Products division the best performing division on a volume-adjusted basis. Susan, the CEO, and several of her Executive Team members, including Andrew Jones, the CFO, visited with Greg’s Leadership Team and toured both factories to satisfy themselves that the improved results were real and sustainable. Feedback from these visits was positive and resulted in Cosmetics Products being named Amalgamated’s ‘Business of the Year’. Accompanying the award was a cash bonus shared among all Cosmetics Products employees. Susan, through the Board of Directors, gave Greg a significant salary increase and stock option grant. Susan viewed Greg as Amalgamated’s most valuable player for the future; she didn’t want to lose him to another company. She planned to expand the work done in Cosmetics Products to the other divisions, with Greg’s help.

Greg asked Sara Miles, VP of Finance, and Alexandra Templeton, VP of Sales and Marketing, to analyze the current and projected market situation, including credible worst-case scenarios. Over the following month, they utilized all publicly available information and the latest information from their benchmarking service to explore what was happening with their customers and competitors.

Alexandra presented their findings and conclusions to Greg’s Leadership Team. “We have some good news and some bad news. The good news is that our market share is still growing, but the growth is slowing. Our benchmarking service spoke about potentially big changes coming from one of our leading competitors, Quintessential Beauty Care (QBC). It’s obvious that they’ve made progress similar to ours over the past few years. That’s to be expected from a strong competitor; they aren’t going to roll over just because we’re getting better, are they? They’ve recently launched several new product lines targeted at the eighteen- to twenty-five-year age group, and those products are selling well. Our detailed analysis of the data we gathered from customers and focus groups and from independent market research tell us that QBC is rapidly eroding our competitive advantage with this age group. Another key competitor, Classic Cosmetics, is pricing its products aggressively, ostensibly to erode our market share. They have the deep pockets of their holding company and present a real threat. We can’t expect to go head-to-head with them in a price war. Our customers are loyal and our products are rated superior to theirs in blind tests, but marginally so. As a result, we could soon find them snapping at our heels. Worst-case scenario is a 4 percent market share loss in twelve months; more than that if we don’t counter somehow.”

“Did you say 4 percent, Alexandra?” asked Greg. She nodded and Greg continued. “We have to respond, and respond quickly. I need to know more about what Classic is up to. Any thoughts, Alexandra?”

“Did I mention that QBC is also beginning a business improvement program? From what I hear, I don’t believe they’ve approached it as aggressively as we have. It seems they made great progress for a while, and then slipped a little. Our processes seem to be in better control than theirs, but if we do nothing, they just might catch up. Your other question concerning Classic I can answer, thanks to a conversation I had with Sam Elliott just before he retired. He was having lunch with one of our major transportation suppliers. There was an offhand comment made about difficult transportation issues they were having in arranging routes for Classic’s products that were going to come out of the Far East. Sam didn’t want to get into sensitive competitive information, so he let the subject drop. Nevertheless, that passing comment tells me Classic is outsourcing some intermediates or even finished products to a low-cost manufacturer. This is disturbing and may explain why Classic thinks they can price their products more aggressively without affecting their margins too much. We’re lucky Sam overheard that comment, but we’ll have to see what other information we can dig up in the public record.”

Greg wasn’t finished. “Alexandra, what are we going to do about QBC’s new product line? We can’t let them steal our customers. Those eighteen- to twenty-five-year-olds will be someone’s loyal customers for the next 50 years. We need to make sure they are our loyal customers!”

“I’ve had a look at what they’re doing, Greg, and have to admit their new packaging has a real impact on the shelf. Their television advertising is actually quite memorable and appealing. And I hate to admit it, but I’m way past my twenty-fifth birthday! Last week I formed a team including Matt and our most creative Product Development Manager—Mary Brewer, New Product Development Director, two of our Product Managers, the creative director of our ad agency, and a couple of representatives from our most advanced packaging suppliers. They will give me some proposals in the next two weeks to counter this threat. When we come up with the right response, I want to follow that blitz approach we used in installing the new production lines to launch the new products, and begin developing the next set of products to put QBC on the defensive. Just for additional input, I’ve also included a couple of younger women from our staff, and also one of Zachary’s people, to ensure we have the perspective of a few more young people to challenge the thinking of our older folks—like me.” Alexandra’s sense of humor was appreciated by Greg’s team, although Greg didn’t smile.

“Thanks, Alexandra. Now, David, have you had any thoughts about the outsourcing issue?”

“As you’d expect, Greg, Alexandra didn’t wait for this meeting to tell me, so I’ve had a couple of days to explore some options. I also got Dan from Effective Management to come in to give me his perspective on the outsourcing issue in general. We’ve always taken pride in being able to produce all our products in our two plants. But beyond that aspect of our culture, I’ve concluded, with Dan’s coaching, that our procurement processes are not yet mature enough to take advantage of outsourcing. He reminded me that we have a number of issues with no good solutions. Some product lines would require a reformulation since they have short shelf-life components that would be prohibitively expensive to transport from so far away. I believe we’ll need a procurement initiative to improve and modify our understanding, culture, and processes to be ready for outsourcing.” Sara interrupted at this point.

“Actually, Greg, our current financial processes and measures, according to Dan, could lead us to make a poor outsourcing decision. As you know, we’ve configured our Enterprise Resource Planning (ERP) system to report in terms of standard costing in keeping with common accounting practices. We also pay close attention to unit prices. Our main monitor of procurement effectiveness is purchase price variance. We had only a couple of hours with Dan, but he convinced me that we should consider our procurement financials differently. He suggested we focus less on the purchase price and more on the total landed cost in our factories. Greg, that approach would reduce the apparent differential between outsourced components and those locally sourced. He also talked at length about ‘total cost of ownership,’ including disposal costs, of all our incoming materials. We’ve all heard stories about the unintended consequences of outsourcing, such as the toy manufacturer that found the advantages of outsourcing to low-cost labor rate factories were more than offset by high-cost litigation and loss of goodwill caused by product recalls and injuries caused by contamination. No company can tolerate that kind of damage to their company or brand image. There were similar problems with a toothpaste produced using outsourced components. Although both companies reduced their manufacturing costs significantly, their total cost of ownership made outsourcing components and labor to a low-cost country a poor decision in those cases.

“These sorts of things can happen here at home, too. But with less inventory in the pipeline and shorter lead times we can find and respond to quality or regulatory issues much faster. The benefits of having a shorter and more contained supply chain are also factors to balance in reaching the decision to outsource.”

“Good summary. I think I’ve heard enough for now. I’ll have Roxanne or Dan come in for a day to meet with us and Peter. Peter will coordinate our next Class A initiative, to help us figure out what this new market information means to our next steps.”

Ten days later, the team met with Roxanne who listened to the summary of events since the last celebration. She summarized their key points on a presentation slide she was projecting so all could see it, then facilitated a discussion of their potential responses to the market challenges of competing products and aggressive pricing. Greg, as usual, was eager to get things moving.

“What I’m hearing, to be blunt, is that the competition is catching up or in some cases, staying ahead of us. Our procurement procedures are weak, and we need to put some rocket fuel in our supply chain to give it higher velocity and make it more agile and responsive, to use Roxanne’s words.”

“Let me build on that thought, Greg,” replied Roxanne. “What the facts tell me is that you need a tailored initiative to head off the challenges and restore your growth. You need to establish and sustain a competitive advantage. In fact that could be a good name for a tailored initiative, the ‘Competitive Advantage Initiative.’ I want to remind you that what you do next will build on the four Class A Milestones you’ve achieved in the Customer Service and Customer Satisfaction Initiatives. After you outlined the situation for me during our phone conversation, I developed a spreadsheet showing the complete Checklist. It shows what you’ve accomplished already and the scores attained for each chapter and definition. To me, the most obvious next step to address the competitive needs you’ve identified is the Capable External Sourcing Milestone. You already meet many of the elements outside the External Sourcing chapter, and now you need to incorporate other specific External Sourcing chapter requirements. This means you’d need a procurement team working on improving their processes to be consistent with all your existing processes, and the future improvements.” There were nods of agreement around the table.

“Now, hold on to your seats, because I’m going to suggest you add four more milestones to this Competitive Advantage Initiative.” Her statement resulted in a uniform expression of disbelief.

“Hang on, Roxanne,” exclaimed Peter. “We found two milestones about all we could handle. How could we possibly manage five at the same time?”

“I thought you’d ask that! It is possible because of what you’ve already achieved and the business processes you’ve already improved and continue to improve. Let me explain how it could work. I’m suggesting the Initiative include the following milestones:

“Now to make it clearer, let me draw this out for you” [Figure 18.1].

David responded, “This doesn’t look like a tailored initiative. You’ve just plugged in standard milestones.”

“Yes, it does look like that, David. Milestone templates describe associated business processes and operating performance levels related to your position on the journey to Class A. You won’t be undertaking any of these templates in their entirety. We’ll identify where you have gaps and tailor the template requirements so that your work plan will be tailored versions of what appears in the template. Within about 18 months, you’ll have completed this Initiative and meet the requirements for certification in all five milestones. In fact, due to the overlap of the nine milestones, by completing this Initiative, you’ll also meet all requirements for certification in the Foundation Business Improvement Capability Milestone. So you’ll actually be addressing a total of six milestones.”

Following some intense discussion about scope and resources needed, Greg announced his decision to create what they would call the ‘Competitive Advantage Initiative’ encompassing the six milestones that Roxanne had described. The Leadership Team launched the Initiative. Greg chartered a subteam of David, Alexandra, Matt, Sara, and Peter to complete the Leadership Phase of the Proven Path and financially justify the work.

Two weeks later, the subteam presented its proposal for moving ahead with the Competitive Advantage Initiative. With only minor adjustments, Greg had the package he needed for Susan’s approval. Sara’s financial analysis reflected another significant return on investment, far above Amalgamated’s financial hurdle rate. By this time, Cosmetics Products financial projections had proven so reliable, Susan’s Executive Leadership team no longer questioned the validity of their estimates. Within two weeks of Susan’s approval, and with some help from Dan, Peter had converted the Initiative content into a program management format with a committed calendar of events. Resources were assigned from operating departments and from a core business improvement “Center of Expertise” comprised of a few Class A knowledgeable and experienced people freed up as a result of earlier milestone productivity improvements. This unique, self-funding team of internal Class A experts was tasked with helping process owners ensure all business processes and related results would continuously improve.

Greg’s Steering Committee soon learned that the External Sourcing Milestone portion of the Competitive Advantage Initiative would integrate sourcing activities more completely with operations and product management. Key objectives of the milestone:

Roxanne had cautioned David and Peter that some of their biggest challenges would come in upgrading internal supply processes. Beyond improvements required by other milestone templates, the velocity focus in Advanced Internal Supply required considerably more than token application of Lean principles (“eliminating waste in all its forms”), beginning with a basic understanding of what is considered waste. The milestone also requires elimination of variability, which requires thorough understanding at all levels of process and performance statistics. The goal is “failure free” processes through application of the Six Sigma methodology. People doing the work would learn to solve their process and performance problems, meaning that managers, supervisors, and technical experts would become coaches and resources—sometimes an impossible transition for experienced managers who were taught early in their career that controlling information was the way to increase their power and importance.

“Everyone becomes part of the team within the scope of the Advanced Internal Supply Milestone; the operative word is ‘teamwork.’ The supporting continuous improvement framework which W. Edwards Deming called the Shewart Cycle, or PDCA (Plan, Do, Check, Act), and its associated robust change management procedures ensure that all changes are institutionalized by being built into documented processes; informal changes to operating procedures can no longer be tolerated. Managers must become serious practitioners of empowerment, a change that often affects reporting structures.

“You’ll be improving the synchronization of material flow through the supply chain as you prepare for a transition to a Demand-Pull model, where everything is driven by an objective of meeting customers’ requests directly from the process line, or from a token buffer stock that is refreshed frequently, and perhaps even daily given your finishing lead times.” That comment caused David to hold his head and audibly exhale.

“I believe my head is about to explode! I’ve read about that model as an interesting and unattainable theory; I never thought I’d ever be asked to implement it! Our Planning and Manufacturing groups have improved light-years in their agility and flexibility, but Demand-Pull will be a huge challenge. Guess it qualifies as another ‘breakthrough goal’ because I have no idea how we’re going to pull it off!”

Greg responded, “I heard you say something like that before the Customer Satisfaction Initiative, too, David. We accomplished that one; we’ll accomplish this one also. Please continue, Roxanne.”

“These improvements will provide the foundation for achieving the 99.5 percent performance level required for full Class A certification. With all master data moving to at least 99.5 percent accuracy, your planners will begin to rely on the advanced planner, optimizer, and scheduler (APOS) software to take over some scheduling basics. The system is faster and effectively error-free, providing, of course, your master data and transaction integrity match the required precision and that the ‘knowledge’ you’ve built in the supply chain model in the APOS system is realistic and consistent with your operating strategy.

“I know you utilize Kanban replenishment in a few areas, but most Kanban is ‘push’ whenever you replenish—even more so with a seasonal demand product line. We’ll introduce you to far more effective methods to reduce Kanban stock levels by utilizing improved demand synchronization techniques that rely on enhanced demand management and control. You may even find an area where you could implement demand-led ‘flow-manufacturing,’ but that will probably have to wait for your next initiative.

“You’ll need to minimize asset outages and unplanned downtime significantly, which means that your Total Productive Maintenance program will transition to be more of a Total Predictive Maintenance program. I realize that package of work must sound overwhelming, but as you truly empower your people and create high-performance, self-directed work teams, you’ll be amazed at how quickly the improvements fall into place. As with the very first Initiative, however, the rate of progress will directly correlate with the Leadership Team’s focus and commitment to excellence!”

Roxanne’s enthusiasm was infectious. She continued, outlining improvements required by the Capable Management of Demand Milestone. The changes included:

This time it was Alexandra’s turn hold her head and groan. “Daily forecasts? I know, Greg. We were successful before and we’ll be successful again. Sorry for the interruption, Roxanne.”

Roxanne explained that improved processes developed with the Capable Distribution and Logistics Milestone would accelerate product delivery to customers. Having safe, error-free distribution and logistics capabilities, and an enhanced ability to service more orders with smaller quantities more effectively, would be essential to their future success. “The possibility of using third-party logistics (3PL) to minimize shipping costs is an option for you, providing Cosmetics Products has adequate expertise and feedback controls to manage the providers. There is no point in degrading supply chain velocity because of an unreliable logistics provider. Treat your logistics suppliers the same as any material supplier in terms of building trading partner relationships and performance expectations.

“There’s a reason I’ve delayed the Capable Supply Chain Milestone by nine months on this diagram [Figure 18.1]. This milestone requires capabilities established as part of the earlier milestones. It becomes rather like the final piece in this Initiative jigsaw puzzle.”

Greg’s Leadership Team, along with Peter, chartered the Competitive Advantage Initiative team, which included the individual milestone champions and leaders. Samantha Williams from Effective Management, supported by Cosmetics Products’ Six Sigma black belts, provided further education and coaching on Agile, Lean, and Six Sigma to all design teams. Roxanne and Zachary teamed to provide education to help managers and supervisors make the transition to internal coaches and to begin building high-performance, self-directed work teams. Although a small number of shop floor managers and supervisors left the company because they could not make that transition from directing to coaching, others proved to be excellent students. Newly empowered operators, technicians, and clerical staff reveled in their ability to improve the workplace, manufacturing methods, and results. The resulting flood of improvements kept Gabriella Jemison and her organization busy validating process revisions and updating product structures to enable postponement of uniqueness during the manufacturing process. With most products, they could now postpone final product identity until the last processing step and determination of the packaging presentation as triggered by customer orders received the previous day. In one case, a manufacturing operator’s suggestion led to application of the final additives through injection into a common bulk product as the materials moved from bulk storage through in-line mass-flow metered mixers on the way to the filling and packaging line. Product changeover time for that particular product line was reduced from over 70 minutes to less than 1 minute. That product and all its packaging variations became finish-to-order, reducing inventory and lead time, and reducing exposure to forecast variability during a much shortened customer order lead time. The overall impact of this and many similar improvements were being tracked on charts showing increasing velocity, declining inventories, and improving customer service.

Product introductions were now being well managed with their rigorous Stage and Gate procedures. Introductions were causing minimum production disruptions. David’s planners acknowledged a capacity increase of 11 percent, which enabled Cosmetics Products to avoid, or at least delay, a significant capital investment and disruption that would have been caused by construction.

Perhaps the most challenging and exciting work was eliminating process variability and creating failure-free processes. Nearly everyone was skeptical about delivering failure-free products, especially given the natural variability of some incoming materials. Nevertheless, rigorous application of root-cause analysis and statistical analysis of process records yielded surprising improvements. In one processing operation, variable drying caused slight, but measurable variation in the surface finish of a product. A high-gloss finish presented less surface area exposure to the air than a lower-gloss or matte finish. The matte finish presented a greater surface area exposed to the air, and resulted in a shorter product life due to oxidation. Product shelf life printed on the consumer unit was determined by the worst case shelf life conditions. Creative root-cause analysis determined the variation was caused by power fluctuations during processing. The source of the variation proved to be a faulty power supply stabilizer located in the factory’s electrical power system. By replacing and routinely monitoring a new unit the plant began producing uniformly high gloss product, allowing a six-month shelf-life extension. The quantity of expired product returned by retail customers plummeted.

Every department submitted reports documenting improvements in waste and variability both in production and administrative processes. One notable example was from a remote customer service office still using manual customer order processing procedures. The order entry clerk had decided to enter in the ERP system all West Coast orders on Tuesdays, East Coast on Thursdays, Canada on Fridays, and export orders on Mondays and Wednesdays. That sequence had saved her time, but added costly delays in fulfilling customer requirements. As she learned more about the capabilities of the ERP system she began processing orders within an hour of their being placed by customers. On average, she reduced customer lead time by five days.

The Capable Management of Demand team struggled at the outset of its work until Bart Billings provided strong leadership. He insisted on achievable, but breakthrough, change. He attended Effective Management’s Advanced Supply Planning course and was intrigued with the possibility of merging supply and demand planning processes in advance of the supply chain becoming truly demand-led, an even greater challenge for the future. The Steering Committee approved the team’s recommendation to create a Demand Control Manager role. Controlling near-term customer demand, given ever decreasing inventories and lead times, required more attention to detail than the Demand Planning Manager and an assistant could provide. Told by Samantha during a private coaching session that point-of-use buffer stocks would be determined using this near-term information, David thought he knew what she meant. But when she started discussing linearity and Heijunka as requirements for Advanced Demand Control, he realized he had once again entered deep water and would need more education quickly—before those topics became Greg’s next “bright idea”!

The Capable Management of Demand team completed its work in 10 months, delayed one month due to illness of one of its key members. Nevertheless the benefits delivered exceeded expectation.

The Capable Distribution and Logistics team advanced the work of the former Capable Planning and Control team. Master data accuracy provided a major challenge, given the large number of records. Customer masters, critical for accurate invoicing, proved to be only 65 percent accurate. Although some of the errors, such as a transposed numbers in a zip code, were minor, others (inaccurate ship-to addresses, names, and telephone contact details) were more serious and caused administrative waste. Worse yet was the number of records with incorrect, and sometimes overstated, discount information. Incorrect billing statements resulted in frequent and serious customer complaints until the team corrected the records and eliminated all related billing errors. The team developed formal and rigorous change control procedures and took advantage of ERP system capabilities to cross-check data such as zip, area, and postal codes against geographic areas to eliminate this type of data entry error.

Retraining on the way the Distribution Requirements Planning (DRP) system was to be used improved both the quality of the system’s recommendations and the data flow. They had found the distribution and logistics course helpful in thinking differently about their issues and potential process improvements.

The distribution and logistics group proposed changing material flow in the Atlanta warehouse to increase material handling, picking, and packing efficiency. After David verified that the team had received the recommendations from Atlanta’s self-directed warehouse team, walked through the facility with the warehouse team members to review the proposed changes, and reviewed their basis for the predicted efficiency and cost improvements, he approved all changes. The team also presented a proposal for relatively minor upgrades to their bar code label printers and readers that David agreed to fund from his capital budget.

The Capable Distribution and Logistics Milestone team piqued David’s interest with information from a materials handling conference one of its members had attended. They weren’t ready to make a proposal yet, but showed David some sketches and literature from suppliers of automated sorting and picking (sortation) equipment. The Dallas warehouse manager and a subteam from his warehouse recently visited other companies to see the equipment in action. They reported that finished cases of product were fed into the system and magazines were loaded with individual consumer units by warehouse operators. From that point to the point where both full and mixed containers of products were assembled into unit loads for large customers, and mixed quantities of consumer units were placed into individual shipping cartons for small customers, all activity was controlled by the customer order number bar code. Little manual work was required, and the error rate was being measured in parts per million. The Atlanta and Dallas Plant managers agreed to lead a task force jointly to develop the proposal and bring it to the Leadership Team. With this continuous improvement opportunity now in development, the team successfully completed its Capable Distribution and Logistics Milestone in just nine months and began offering support to the other teams still working on their portions of the Competitive Advantage Initiative.

The Competitive Advantage Initiative Team continued its active support of the milestone teams by tracking progress of their deliverables, synchronizing activities, breaking barriers with the help of the Steering Committee, and acknowledging success. Peter coordinated milestone teams associated with the five milestones (the sixth milestone being inherent within the other five) and reported progress, problems, and plans during each Steering Committee meeting. As predicted, the Advanced Internal Supply Team was generating excitement throughout the company and delivering stunning improvements. All key performance indicators (KPIs) were now routinely at 99 percent with some of them periodically hitting 99.5 percent. Greg, David, and others recalled the time not too long ago when they had considered achieving that level of performance to be impossible.

The Capable External Sourcing team faced a cultural challenge, although formal job description responsibilities had already been changed by Zachary’s Human Resources organization. Through extensive education and training, they had progressed from being buyers and expeditors, to adding value to the business as professional purchasing agents. Their most carefully managed KPI in the past, purchase price variance, was still being tracked, but it was no longer a driver of rewards and, therefore, occasional dysfunctional behavior. David, who also headed up procurement activities, learned that the term “procurement” was more than a new organizational buzz word for “purchasing.” The strategic nature of the modified roles gave confidence to those involved in sourcing and contracting that they would be critical players in developing extended supply chain partners and in collaborative efforts to build winning supply chains. This paradigm shift, difficult at first, resulted in a group significantly more motivated and effective in delivering bottom-line business benefits.

One of the team’s most important contributions was implementing “Total Cost of Ownership.” They first categorized numerous elements of Total Cost of Ownership besides the price—as the elements included price—such as supplier performance, installation, inventory, disposal, operability of the material, participation in waste reduction activities, and environmental impact.

Their thought was to rate each purchased material or service to reach a score or rating for each potential supplier. Dan Evans, their Effective Management coach, cautioned them that making a sourcing decision based only on the rating would be unwise. The rating was useful input to the decision, but it would take a cross-functional team of knowledgeable individuals to determine which supplier would be most effective and reliable. Following Dan’s counsel, they developed a charter for a Strategic Sourcing Committee that would develop recommended suppliers for new or changed materials and services, including sub-contracting. Their recommendations would be reviewed and approved by the Cosmetics Products Leadership Team. Progress was rapid, as were the resulting benefits of their work in selecting new suppliers and materials based on Total Cost of Ownership. Sam Elliott, Amalgamated’s Senior Vice President Supply Chain, reviewed the policy, procedures, and results and announced to all Division Presidents and Supply Chain VPs that he wanted the new processes implemented across all divisions. The Capable External Sourcing team completed its milestone in nine months. Members of the team volunteered to help other Divisions implement Total Cost of Ownership as an aid to decision making.

The Capable Supply Chain team began its work nine months after the other teams started, and included appropriate members from other design teams as supply chain experts. Armed with what they had learned in the Managing the Extended Supply Chain course, they attacked their remaining best practice gaps in several supply chain redesign workshops that David also attended. They were grateful for the delay since they could take advantage of work accomplished by the other milestone teams. The external supply chain work was new and challenging even at the Capable Milestone level. Technically, they were responsible for fewer than five topics, but the need to integrate their process design with procurement, suppliers, all internal supply points, distribution and logistics, and a third-party distributor for one channel, made the work complex. They were building a foundation for the future Advanced External Supply Chain Milestone. Peter’s integrating role and skills proved invaluable in facilitating the integration aspects of their work.

In the early days of the Class A work, Roxanne advised Greg and his leadership team that one way to beat the competition would be to out-innovate them—keeping them off balance with a pipeline of products making obsolete their own products so frequently that the competition couldn’t keep up. If a competitor had a lengthy supply chain with elements in remote regions of the world, it might never recover, and so remain at a permanent disadvantage. The new products wouldn’t require breakthrough innovations; they just had to be perceived as different, of good value, attractively packaged and creatively advertised. Those truly new products offering unique and attractive features, could also command premium prices. The image of an innovator, higher market share, bigger margins, and competitors put back on their heels was a winning and hard-to-overcome combination. At the time Roxanne provided that advice, however, Cosmetics Products was in no condition to achieve such a desirable state of affairs.

Despite the concerns of some, Roxanne assured them that a formal and disciplined product development and launch process wouldn’t constrain people’s creativity. Companies who enter into a Class A journey develop a burning passion for improvement and innovation, and an intolerance of the status quo.

Cosmetics Products’ new product development and launch process was now in place, but the Product Management and Product Development organizations found software support for creating new formulations and package designs meeting all regulatory requirements problematic. Design errors and misdirected activities were common and time-consuming because the archive of past development activity was difficult to mine for information, user-unfriendly, and populated with often inaccurate data. Product managers, supported by Alexandra and Samantha, requested a marketing-led expansion of the Knowledge Management Systems [see Figure 17.2] infrastructure to include a Product Data Management (PDM) module as part the Competitive Advantage Initiative. The requested PDM functionality would be used to control formulations during development; facilitate learning from past experiences; structure regulatory requirements into development templates, automatically provide feedback of potential breaches before any actual trial, and generally accelerate the overall development process. The PDM module would be hardwired to the ERP system as the official source for authorized formulations, including Bills of Materials and Routings. This expansion of the Knowledge Management System would cause some additional learning time. Data accuracy auditing and change control software would have to be extended to the PDM system to ensure the resident formulations reflected the latest product engineering standards.

Following funding approval, IT resources, product managers and product engineers input on the PDM module functionality, the end-users—the product and design engineers—spent six months configuring, populating, and learning to use this “experience” (knowledge) database, to encode regulatory and quality requirements and to overcome several post start-up issues, including requests for nice but unnecessary functionality. Three months after implementation the flow of product introductions had increased significantly while typical lead time from concept to launch for an average complexity product plummeted from more than 100 days to a consistent 65 to 70 days. Further leverage of the functionality in the software, improvements to the Stage and Gate process, and refinement of the associated deliverables templates nearly eliminated formulation, packaging design, and regulatory compliance errors. Time for most projects from concept to launch decreased to, on average, 40 days. Cosmetics Products was launching products and new end-aisle product displays flawlessly at the rate of over 50 per month with excellent customer service.

Cosmetics Products was becoming known within its consumer and customer base as a dynamic, modern and innovative company by frequently introducing “new and improved” products across all their product lines and categories. They could now supply reasonably low volumes with a high replenishment frequency economically. Their new agility, responsiveness, and creativity resulted in a consumer expectation that their competitors in the region could not match. Growth rate reached double digits, and the Amalgamated Board of Directors finally and thankfully could see the future they had envisioned when approving entry into the Cosmetics business. For the first time, there were questions raised in the Board meeting about the viability of expanding the business into other regions of the world. The Board agreed to table that discussion until there was further evidence that the gains made so far were sustainable.

After a 20-month effort, Cosmetics Products achieved its Competitive Advantage Initiative. With great pride, Greg received, on behalf of everyone in Cosmetics Products, six additional Milestone Awards. For the occasion, Roxanne was accompanied by Effective Management’s Region President, Walt Jones. Coverage of the award by the Atlanta Business Chronicle and Atlanta Journal and Constitution Business Press further enhanced both Cosmetics Products’ and Amalgamated’s rapidly improving stature.

Shortly after the award presentation, their new Knowledge Management Systems and more agile development processes paid big dividends when oil prices doubled and a key ingredient increased in price by over 25 percent. The company had run several contingency scenarios in the event the oil market destabilized and was ready to move some of their product lines to new and more environmentally friendly seed-based ingredients developed recently by one of its trading partners. Advertising copy, packaging designs, and approved artwork were ready in concert with the new formulations. Cosmetics Products was the first company to introduce and advertise the benefits of these new eco-friendly formulations. News of their innovation accompanied by packages with high shelf impact and innovative advertising, and their ability to avoid punishing price increases resulted in yet another significant market share increase for Cosmetics Products. While other companies suffered losses as a result of the economic pressure, Cosmetics Products took over market leadership in the specialty cosmetics products category.

Responding to business reporters, Greg attributed their success to an intense focus on the customer and an empowered dedicated, workforce. When talking to Penny later that evening, he said “Risking your wrath about the ‘laurels’ thing, we’ve come so far that I really don’t believe there’s much left to do.”

He was wrong. It wasn’t over yet.