how Honeywell standardized supply chain planning across 37 companies worldwide

Benji Green, Honeywell (Kinexions22 screenshot)

As a highly diversified global manufacturer, Honeywell faced a huge transformation effort when its management decided about seven years ago to drive standardization across the organization. It is a $34 billion revenue organization with four major business groups, spanning performance materials, aerospace, construction technologies and safety and productivity, making anything from a million earplugs a day to jet engines that cost $1 million each and take weeks or months to build. As part of the larger initiative, an important priority was to transform the way supply chain works, and the supply chain planning element fell to Benji Green in his role as VP, Digital. Planning Transformation Integrated Supply Chain (ISC). The scale of the task was immense, as he explains:

Only 13% of our planners actually worked for a planning manager, the rest of them were in an operational organization, in an execution type role. Of the 1,800 planners we had, there were 1,500 different job codes – there were hardly any standards.

Each factory had a different planning configuration. We have over 2 million active SKUs, again, very diverse. [We had] nine different scheduling systems, plus hundreds of thousands of spreadsheets.

Speaking at this month’s Kinexions conference, Green reflected on what has been achieved in the project and what takeaways he can pass on to others. One of the first priorities was to design an overarching model that would provide an enterprise-wide framework for how planning was done. This was a huge task, given the diversity of the many different companies spread across over 300 manufacturing and distribution sites running 13 different MRP systems – although thankfully 13 was a big improvement over the 150+ that existed before.

Establish overall consistency

The model the team arrived at for supply and demand planning is necessarily modular, to accommodate the different approaches needed for such a diverse set of operations. But certain principles are fundamental. One principle is a demand-driven supply chain. Green explains:

We don’t want a supply-driven supply chain. If I disconnect from my market, I will eventually lose it.

To plan accurately to achieve this goal, he says it’s important to establish three parameters: what you want to build to meet demand, what you have the capacity to build, and the statistically optimal level of inventory. to balance financial and customer service considerations. From this starting point, the Honeywell team developed a very detailed model outlining the overall process that everyone should become familiar with. At the same time, work roles have been standardized in material planning, growing from the hundreds previously in place to a total of 36 – six functions with six layers each. The model helps everyone orient their role within the context of the enterprise-wide planning process. He explains:

Every decision we have made has been to reinforce, or conform or unite with, the model. It has done wonders in my opinion for training, education, standardization. [It’s] give everyone a North Star and help people understand: “Their job is to do this, my job is to do that”. If I trust them to do their job, I can do mine, which is defined by the model.

The choice of technology platform was also important to enhance consistency. He adds:

I didn’t want custom software. Because I don’t have a custom business – I have 37 different businesses – I wanted as much standard capability and capability out of the box as possible so it would create that standardization, without me and the team go and develop. So this out-of-the-box resource was really important.

“Deploy in Fertile Soil”

After choosing Kinaxis RapidResponse as a product that met Honeywell’s criteria, deciding where to deploy it first became crucial. “I knew we had to prove the business case,” he explains. It means finding what he calls “fertile soil”. He explains:

They need to have a working IT environment, you don’t want to try to deploy to five ERPs at once. The vast majority of the time and the project is data work – data mapping, validation, cleaning, etc. And then of course, user training in parallel.

So you have to think about the IT landscape, so that I can do rapid data deployment. And then you have to have willing adopters, people who are level two, level three maturity organizations that realize there’s a level four and five that they want to achieve, and those are willing adopters. They say, ‘Yes, I can do it.’ They are capable, and they are eager to improve.

And then, of course, the company must have enough value opportunities. If you want to go deploy this on a negative business case, you will not be approved, you are assured.

When it comes to ROI, it’s important to aim high. He says:

My view is that the return on your investment for these should be between 10 and 12 times. And that’s the bottom tier – if you want to invest four or five million, you have to be able to recoup $40-50 million on your business.

In Honeywell’s case, this meant opting for a deployment where improving handoffs between different participants within a single manufacturing and distribution network was highly beneficial due to the impact on working capital. He explains:

There are usually incredible amounts of garbage in connected networks… If you do it on a network [and] plan the whole network at one time, your working capital will be the greatest return on investment.

This meant deploying all functions within that network, rather than deploying a single function across multiple networks. He specifies :

Think of them as functions versus the network. You can deploy the application to 20 sites and 20 networks, 20 companies, whatever. Or you can say, “Okay, I’ll deploy demand, inventory optimization, constrained production planning, material planning, all on one network.” And there’s tremendous value in doing it on a single network.

We chose to use the entire network, mainly because I knew my long game was to deploy all the functions. We wanted to move forward and get a sample or phase one that performed all functions across an entire network.

Maintain momentum

This choice turned out to be the right one, in particular because the general management, although supportive, wanted to see the results before moving on to the next phase. Green says:

Our very first phase had only 26 sites. It took us almost 10 months, and we connected two ERPs. Then we took a cool down period. We wanted to make sure it worked. The CEO in particular [wanted evidence] that this was going to be a revolutionary strategy. So he wanted to wait six months.

But after that period, we started to take off, and we are moving really fast now. We have four different deployments, all in parallel across multiple companies. By the end of this year, just in the fourth quarter, we will have completed more than 150 sites, [representing] 72% of the company’s turnover.

Leadership support was very important in fostering a culture of transformation across the company, but being able to show results was essential, and Green’s advice is to make the most of it. He says:

When you start getting results, advertise them – every time you talk to your boss, your boss’ co-worker, and their boss – until everyone knows the numbers and the benefits you get it, and promote it. What that does is that ultimately you’ve convinced the boss that it’s worth it, finance is going to give you more money for the next phase, and the other companies are going to hear it and they’ll start pulling — “I want this, I want better working capital.” So you build that demand instead of being pushed.

Adoption is key, which is why the team took care to ensure that the first phase was rolled out with people who saw the benefits. They also ensured that leaders understood what was realistically going to be achieved and the role they needed to play to ensure success. Green explains:

We literally just made the checklist of training and things the company has to agree to do, non-negotiable. Then the executives digitally sign off that they were there, they received the training, they accepted the non-negotiables. And it’s part of our business case and overall project requirements, even to start projects.

Anticipating what’s next also helps maintain momentum. He says:

Think about your maturity model… Every month we talk about what’s next. It feeds on maturity, it feeds on competence, it pushes for adoption.

Talent is the other important factor, especially now that there is an increasing focus on supply chain issues and skilled and experienced people are in high demand. One of Green’s first steps was to establish a Planning Center of Excellence (COE). Now, each of the four business groups is building its own center of excellence, which it says builds organizational resilience by bolstering the breadth of resources across the business. Another crucial risk factor to control is to ensure stability at the top of the implementation team, whether it is an internal resource or, as in the case of Honeywell, a company. third-party advice. He warns :

The architect of the solution, the critical PM, who must be continuous through all your deployments, because with each deployment you will find something new, you must configure a little, adjust a little. I don’t want to risk the confidence of the brains of the COE and the solution architect at this level of the process changing.

For more diginomica stories from Kinexions22, visit our Kinexions22 event hub. The event took place in San Diego from May 9-11, 2022 and many sessions, including those above, are available on demand through the end of June. Click here to register and view now.

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