Kinexions22 - how Honeywell standardized supply chain planning across 37 businesses globally

Phil Wainewright Profile picture for user pwainewright May 26, 2022 Audio mode
Summary:
Transforming supply and demand planning at Honeywell meant big changes to how its planners operate - but the payback has been worth it

Benji Green, Honeywell, speaks at Kinexions22
Benji Green, Honeywell (Kinexions22 screengrab)

As a highly diverse global manufacturer, Honeywell faced a huge transformation effort when its leadership decided around seven years ago to drive standardization across the organization. This is a $34 billion revenue organization with four major business groups, spanning performance materials, aerospace, building technologies and safety and productivity, making anything from a million earplugs a day to jet engines that cost $1 million apiece and take weeks or months to build. Within the wider initiative, one important priority was to transform the supply chain operation, and the supply chain planning element of this fell to Benji Green in his role as VP, Digital Planning Transformation Integrated Supply Chain (ISC). The scale of the task was huge, as he explains:

Only 13% of our planners actually worked for a planning leader, the rest of them were in an operations organization, in an execution type role. Of the 1,800 planners we had, there were 1,500 different job codes — there basically was no standard.

Every plant had a different planning setup. We have over 2 million active SKUs, again, very diverse. [We had] nine different planning systems, on top of hundreds of thousands of spreadsheets.

Speaking at this month's Kinexions conference, Green reflected on what has been achieved in the project and the takeaways he can pass on to others. One of the first priorities was to design an overall 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 businesses spread across more than 300 manufacturing and distribution sites running 13 different MRP systems — though thankfully 13 was a big improvement on the more than 150 that had previously existed.

Establishing global consistency

The model the team arrived at for supply and demand planning is necessarily modular, to accommodate the various 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 ultimately lose it.

To plan accurately to meet that goal, he says that 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 inventory level to balance financial and customer service considerations. From this starting point, the Honeywell team developed a highly detailed model setting out the global process that everyone should become familiar with. At the same time, job roles were standardized within materials planning from the hundreds previously in place to a total of 36 — six functions with six layers in each. The model helps everyone orient their role in the context of the enterprise-wide planning process. He explains:

Every decision we've made has been to reinforce, or in conformance or unity with, the model. It's done wonders in my view for training, education, standardization. [It's] given everybody a North star, and helping people understand, 'Their job is to do this, my job is to do that. If I trust they're doing their job, I can do mine, which is defined by the model.'

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

I didn't want customized software. Because I don't have a custom business — I have 37 different businesses — I wanted as standard, out-of-the-box capacity and capability as possible, so that it created that standardization, without me and the team going and developing. So this out-of-the-box resource was really important.

'Deploy in fertile soil'

Having settled on Kinaxis RapidResponse as the product that met Honeywell's criteria, the choice of where to deploy it first became crucial. "I knew we had to prove the business case," he explains. That means finding what he calls "fertile soil." He explains:

They need to have an IT landscape that works, you don't want to go try to deploy on five ERPs at one time. The large majority of the time and the project is data work — data mapping, validation, cleansing, et cetera. And then of course, the user training in parallel.

So you've got to think about the IT landscape, so I could do quick data deployment. And then you've got to have willing adopters, people who are level-two, level-three maturity organization that realize there's a level four and five that they want to get to, and they're willing adopters. They say, 'Yes, I can do this.' They're capable, and they're anxious to get better.

And then, of course, the business has got to have enough value opportunity. If you want to go deploy this on a business case that's negative, you won't be approved, you're guaranteed.

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

My view is, the return on your investments for these should be between 10-12x. And that's the lower level — if you want to invest four or five million, you need to be able to get $40-50 million back on your business.

In Honeywell's case, that meant going for a deployment where there were big wins from improving the handovers between different participants within a single manufacturing and distribution network, because of the impact on working capital. He explains:

There tends to be incredible amounts of waste in connected networks ... If you do it over a network [and] plan the entire network at one time, your working capital is going to be the biggest ROI.

That meant deploying the entire set of functions within that network, rather than deploying a single function across multiple networks. He elaborates:

Think about it as functions versus the network. You can deploy demand across 20 sites and 20 networks, 20 businesses, whatever. Or you can say, 'Okay, I'm gonna deploy demand, inventory optimization, constrained production planning, materials planning, all on one network.' And there's huge value in doing it on one network.

We chose to go network full scope, primarily because I knew my long game was to deploy all of the functions. We wanted to go ahead and get a sample or phase one that did every function throughout an entire network.

Maintaining momentum

That choice proved to be the right one, especially because executive leadership, although supportive, wanted to see the results before moving on to the next phase. Green recounts:

Our very first phase was only 26 sites. That took us nearly 10 months, and we connected two ERPs. Then we took a cooling period. We wanted to make sure that it was working. The CEO specifically [wanted evidence] that this was going to be a game-changing strategy. So he wanted to wait six months.

But after that period, we've started to take off, and we're moving real fast now. We've got four different deployments, all in parallel across many businesses. By the end of this year, just in the fourth quarter, we're going to have nearly 150-plus sites done, [representing] 72% of the business's revenue.

Executive support was very important in driving a culture of transformation across the whole business, but being able to show results was key, and Green's advice is to make the most of it. He says:

When you start to get the results, advertise the hell out of it — every time you talk to your boss, your boss's peer and their boss — until everyone knows the numbers and the benefits you're getting, and they're promoting them. What that does is ultimately, you've convinced the boss that it's worth the money, finance is going to give you more money for the next phase, and the other businesses are going to hear it and they're going to start pulling it — 'I want this, I want better working capital.' So you build this demand instead of being pushed.

Adoption is critical, and that is why the team took such care to make sure the first phase was being deployed with people who saw the benefit. They also made sure that executive leaders understood what was realistically going to be achieved and the role they needed to play to ensure success. Green explains:

We just literally laid out the checklist of training and things that the business has to agree to do, non-negotiable. Then we have the executives digitally sign off that they were there, they got the training, they agreed to the non-negotiables. And that's part of our business case and overall project requirements, to even start projects.

Thinking ahead to what's next also helps to maintain momentum. He says:

Think about your maturity model ... Every month we're talking about what's next. It feeds on the maturity, it feeds on the competency, it drives adoption.

Talent is the other big factor, especially now that there's a growing focus on supply chain issues and skilled, experienced people are highly sought after. One of the first steps Green took was to establish a planning Center of Excellence (COE). Now each of the four business groups are building their own COE, which he believes builds more organizational resilience by strengthening the breadth of resource across the enterprise. Another crucial risk factor to control is to ensure stability at the top of the implementation team, whether that's an internal resource or, as in Honeywell's case, at a third-party consulting firm. He warns:

The solution architect, the critical PM, that needs to be continuous through all of your deployments, because every deployment, you'll find something new, you have to configure a little bit, tweak a little bit. I don't want to risk that brain trust of both the COE and the solution architect, at that level of the process, to change.


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


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