Leggett & Platt, the diversified components manufacturer, was moving away from a focus on market share in favor of one emphasizing profitability. To make the plan work, the company would need to synchronize operations across its supply chain, according to Wood. Specifically, the road map called for implementation of an integrated capacity planning and modeling tool.
One of Leggett's business units had been running a formal sales and operations planning (S&OP) planning process for about a decade. "We wanted to extend that across all of our business," says Wood. The decision was particularly well-timed, coming before the economic crisis that hit the U.S. in the fourth quarter of 2008.
Leggett's goal was to "deliver more value back to our shareholders, either in increased dividends or increased stock price." A state-of-the-art planning tool would help to free up working capital. In fact, Wood says, the company expects to take $25m worth of inventory out of the business this year. "We've been improving our cash cycle for the last two to three years," he notes. "This was another methodology to help us accelerate it."
Leggett has 20 business units in all. Recently it went live with capacity planning and modeling in two of them, and expects to have all units up and running on the new system by the end of 2011. Of particular value is the tool's ability to integrate processes among business units, a feature that the company will be testing over the coming year.
Of course, it will have to deal with the usual corporate silos that make it tough to achieve internal collaboration. Leggett is tackling the problem by appointing a highly visible executive sponsor, in the form of its chief operating officer. He hails from the business unit that already has 10 years of experience in S&OP. In addition, the company has assembled a "top-notch" deployment team, and is adjusting employee incentives so that everyone is focused on achieving the same goals. "It's holistic," says Wood. "Everybody's got a voice in the game."
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