The Scoop on S&OP: One Company’s Recession Story

tom-wallace

Tom Wallace

This is my first posting to the IBF’s new blog, and I’d like to express my thanks, first of all, to you, the readers and also to Anish Jain of the IBF who invited me in.

Okay, let’s get to work. Are you ready for a horror story? It ranks right up there with “Night of the Living Dead,” “Creature from the Black Lagoon,” and “Aliens II.”  It’s about dealing with these horrible, horrifying economic times we’re in.

A few weeks ago, I was talking with Ross Bushman, the COO/President of Cast-Fab Technologies, a large and very successful foundry. Until recently their largest market was wind power – the equipment used to generate electrical power from wind – but as with so many other things the recession and financial meltdown got in the way.

Ross explained to me that 1) developing a wind farm is a very expensive proposition 2) the developers of wind farms rarely have enough internal capital to fund these projects themselves and 3) they therefore turn to external funders such as banks, investment firms, insurance companies and so forth.

Well, Ross said that things started to go south in the 3rd quarter of 2008. Their three largest wind farm customers were funded by Lehman Brothers (bankruptcy), Wachovia Bank (bought by Europeans), and AIG (and we all know what happened to them). Thus the funding went away. The wind farm developers told Cast-Fab to stop producing their orders.

The result: Cast-Fab’s wind power business went away overnight. The orders were cancelled. Ross told me how he and his team used their Executive S&OP process to manage the decline, using what some call the “Mini-S&OP Cycle” to quickly track demand shifts and their impact on workload.  Here’s what Ross said:

“I am convinced that we kept more people employed for a longer time due to our S&OP process and our ability to instantly see how new forecasts affected the shop load.  Being pro-active within our workforce reductions helped everyone – even though it was tough for people to see at the time.   Too often companies wait until they see last month’s numbers before making decisions. S&OP enables us – and almost “forces” us – to be pro-active.”

Here’s another piece of good news: the business will come back. And when it starts to kick back in,  you can be sure that Cast-Fab will use their S&OP process to help them proactively plan their production rate increases, the timing of their recalls and new hires, and thus be ready to meet the demand.

The moral of the story: S&OP can be a big help both in the downside part of a recession and also in the recovery.

LEARN HOW THEY DID IT

I did a webinar recently and covered the Cast-Fab story in more detail. To see it, go to here

Want to learn how they did it from the “horse’s mouth” and get the complete story? Ross Bushman, Cast-Fab’s COO, will be a keynote speaker at the S&OP Best of the Best Conference in Chicago on June 18-19, co-sponsored by IBF and APICS. He’ll be joined by over a dozen other experts in how to use Executive S&OP to manage a business more effectively. For details, you can check into
www.ibf.org/apicsibf.cfm

Thanks for listening,

Tom
www.tfwallace.com

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