DuPont Case Study. Supply Chain Management as a Transformation Strategy

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1 DuPont Case Study Supply Chain Management as a Transformation Strategy DuPont is a $30.5 billion, multinational company with headquarters in Wilmington, Delaware. Its leaders believe in the miracles of science, which also serves as the company s tagline. However, with operations in more than 70 countries and diverse product lines including those for agriculture, nutrition, electronics, communications, home and construction, and more DuPont leaders sought to find some miracles of supply chain. Five years ago, DuPont decision makers made a commitment to capitalize on supply chain management, something that had not been particularly well recognized in the past. To move forward, they pledged to disseminate supply chain knowledge and nurture the people who could share it. Economic hard times are a reality these days for organizations large and small. However, throughout the recession, DuPont s business goals have remained the same. DuPont leaders seek to reduce costs; improve productivity; and, above all, improve customer service. They see an integrated supply chain as the key to helping them meet these goals. In short, at DuPont, supply chain is the core business process that serves the entire corporation. DuPont leaders credit their corporate survival and success during the recession to their employees strong supply chain knowledge, which gave them visibility across business units. DuPont started in this arena with kaizen, lean, and six sigma. Once they added the need for lowcost sourcing, supply chain management was a natural segue. Still, no one could anticipate the speed of the economic decline. Once it was evident, leaders quickly identified the need for cash, and they had to drive management overrides into DuPont s production to reduce inventory, says Mathieu Vrijsen, former senior vice president of global operations DuPont executives also called together a corporate crisis committee. The group focused on variable contributions, spending, capital spending, and working capital. We furiously had to take costs down to lower our break-even point, says Don Wirth, DuPont vice president of integrated supply chain. One main priority at the executive level is to create a more responsive supply chain across DuPont s variety of business units. Because of the organization s emphasis on supply chain management and supply chain education, employees were able to move fast in response to the economic downturn, despite the markets freefalling and customer demand shrinking. Almost immediately, employees adjusted demand input in order to match production and inventory. In short, DuPont went back to basics.

2 Leaders leaned heavily on employees who had APICS training and certifications tapping the supply chain resources already available to them. Those with supply chain knowledge immediately went to work training others. DuPont leaders had been building supply chain management competency within the organization, but it s the economic crisis that made imperative the standardization of supply chain ideas. Business started to rely on demand planning, raw material planning, FTS scheduling [what does that stand for?], delivery schedules, logistics, and sales and operations planning. With this knowledge in place, decision makers examined demand and inventory information much more frequently. Existing systems were strengthened, enabling better access to information and quicker response, which also served to free up cash. For example, business unit leaders met weekly to discuss raw materials, production, inventory, demand signals, and more. The company s metrics didn t change; however, users started pulling data daily and weekly, instead of every six or eight weeks. Discussing the information among key stakeholders was done on a more routine basis, and the data being shared were standardized. When it gets tough, you still rely on these key business processes, says John McCool, vice president of DuPont s Performance Coatings EMEA. You might turn them up, run a little bit faster, go a little bit quicker but as long as you have good disciplined processes in place, they will serve you well. Wirth and David Peet, director of DuPont s inventory mega project, agree more disciplined processes allow for more innovation and success. You don t have to spend the day just working out that we really are saying the same thing in a different way, Wirth says. In one fell swoop, people were discussing and pushing standardized processes. That emphasis on communication extended to suppliers. DuPont decision makers started talking more to their suppliers, setting up more frequent check-ins from the field and sales organizations to load into planning processes. The reality we faced was everybody s reality; it was a shared experience, says Ann Lopez, supply chain manager for DuPont titanium technologies. All of these efforts served DuPont well during the recession, and they are preparing the organization to succeed in the future. Nurturing adaptability and flexibility enables the company to weather economic fluctuation. Now, DuPont is ready for increasing demand as the economy rebounds, but also is prepared for downswings that result from economic hiccups. Before, we were heroes at hitting the sales and earnings numbers, but we were just acquiring huge piles of inventory and tying up cash in order to do that, says Jim Collins, president of DuPont s crop protection business unit. I think the biggest opportunity we ve had is to manage

3 inventory, liberate that cash, and do it in a way that still meets the demand that we have out there. Vrijsen agrees that standard processes and improvements, such as sales and operations planning and batch size reduction, were put to the test, and they passed. People in the businesses have now become believers, and realize these processes are not an option, Vrijsen says. We can now claim success that is blatantly ours. Leaders plan to continue maintaining an efficient supply chain by keeping inventory down, accounts receivable current, and costs low. Plus, the supply chain mindset enables better product management. Of DuPont s thousands of stockkeeping units, some are more than 25 years old, and some are brand new. Because of systems that were strengthened during the recession, DuPont decision makers can react effectively to information coming from Europe, Asia, North America, and other places to efficiently manage inventory and preserve customer relationships. A large group of workers were freed up from the decline in business, which enabled capable people to do project work, explains D. Chris Koelsch, DuPont s director of the Supply Chain Center of Competency. Plus, people were able to address deeper issues. We now see better leveragability using common approaches, he says. With that comes better information and sustainability. Matthew Koenings, supply chain director of DuPont electronic technologies, sums it up: We used this window to make some strong improvements that are going to position us much better than our competitors. APICS Certification Throughout DuPont s transnational organization, 206 people have earned the APICS Certified in Production and Inventory Management (CPIM) and 57 people have earned the APICS Certified Supply Chain Professional (CSCP) designation. Anybody who has experienced APICS certification uses the knowledge gained every day to optimize inventory, reference and use best practices, and more. In particular, APICS education is used to coach others throughout the supply chain in information; issues; challenges; and standard definitions, which is something DuPont leaders have really embraced. We learned to recognize supply chain management as a key business process that is integrated and woven throughout the entire business, McCool says. That takes a special expertise to understand, lead, and run. It is a critical core function of the business, and it needs to be staffed as such. McCool relies on Randall Willis, CSCP, who is the supply chain director of the performance coatings business unit. McCool says it s essential to get a person on his leadership team who

4 understands supply chain, and, therefore, can help build and develop a robust supply chain organization. APICS certification and education have benefitted DuPont s employees personally, as well. According to a DuPont internal survey, job satisfaction increased with employees who had participated in APICS education. Following are some statements that were included with the survey responses: When I went through APICS courses, my job all of a sudden made sense I really understand how to connect all of these different pieces When my advice is backed up by the [APICS] body of knowledge, my influence grows. I think one of the things that drive job satisfaction is understanding better what you re trying to do and where you re trying to go, says Peter Murray, CIRM, DuPont s global competency and development leader. Peter Nealley, CPIM, CSCP, has worked for DuPont for more than 20 years. He talks about how supply chain used to be viewed by operations management professionals. From my standpoint, they were the bad buys who would give me these bad schedules that kept me from getting 100 percent yield. Nealley soon learned he would have to change his attitude, especially after one of his senior managers told him there would be tighter integration of supply chain and operations. If Nealley wanted to get ahead, he would have to get some supply chain experience. When the opportunity came, he jumped to become a supply chain leader, despite his lack of experience. He soon found DuPont s Center for Competency and learned about APICS. APICS education felt like something that, from a personal standpoint, I would need to do to be more effective in my role. But, more broadly than that, it felt like [something] our organization needed to go through together. We, at DuPont, were in the early stages of our supply chain transformation. Nealley says that, before APICS education, there was myth and black magic surrounding supply chain. After employees went through APICS education, they worked with a standard approach to supply chain. Similar to Nealley, John Siepelinga, CSCP, CPIM, had a limited and negative view of supply chain. After APICS education, Siepelinga offers a different take. Even though you re in that middle between operations of the plant and sales, you re able to apply that knowledge to make sure you re doing the right things, honoring the right metrics, and reviewing the right things so you re able to do what you re supposed to from a supply chain perspective.

5 In Glass Laminate Solutions, where Siepelinga is the global supply chain manager, 13 people in Korea, Europe, and North America have earned their CPIM designations. David Peet is director of DuPont s inventory mega project. He says he used to think that good ideas, smart insights, hard work, collaboration, and working together made up the whole package. He paid attention to people and tools, but didn t spend a lot of time thinking about processes. During the second half of my career, I kind of understood a little bit, Peet says. It s not just how smart we are or how hard we work or how excited we get, it s about having a real plan. Peet s experience taught him that everything runs through the supply chain. It s the integration point and the operationalization of the business. Plus, it s the business plan in action. We re waking up to the idea that supply chain touches all parts, functions, and facets of the business.

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