Supply Chain Brain

Consider Real Estate Info
Early When Adding Facilities
Making S&OP, Lean
and SAP Work Together

When companies decide to add distribution or

production facilities to their network because

of a network redesign or business acquisition,

they should consider real estate issues early in

the process, says Noah Shales, managing

director of the strategic consulting group at

Grubb & Ellis, a commercial real estate firm.

Gathering this information can be quite difficult, Shales says, “but digging it out is essential to getting a complete picture of a facility decision.”

He classifies much of what Grubb & Ellis does for clients as forensic real-estate information work.

“Real-estate data tends to frustrate companies because it doesn’t follow the rules of everything else they are procuring and trying to control,” he says. “No two properties are alike and no two companies write leases in the same way, which makes the task of getting all the information in one place for master planning, so a company can really model the implications of different choices, quite difficult.”

In addition, Shales says, real estate operates on a different time cycle than other factors of logistics and production, with leases being long-term. “Likewise, companies are accustomed to thinking of most decision factors, such as labor and materials, as being available in whatever form they want if they negotiate correctly,” he says. “That is not necessarily true with real estate.”

Grubb & Ellis intensified its focus on the logistics real-estate market a couple of years ago, establishing an internal logistics council staffed with professionals trained in logistics. It also began a research program aimed at this market. The first of what will be a series of quarterly reports tracking logistics real-estate recently was published. One of its findings, Shales reports, is that logistics facilities are following overall market trends in terms of excess capacity.

Kelly Slate, director of supply chain and busi-

ness process management for the chemical

division of Milliken & Co., describes the chal-

lenges of this ambitious project, and offers

some advice on getting started.

Beware those who say they have tossed together a bunch of disparate processes and applications and come up with a really tasty recipe for success. That’s the word from Slate, who is well along in doing just that for her company.

Looking to progress from its legacy state,

Milliken implemented SAP two years ago. Then it launched its lean program in the latter part of 2008. Now it’s trying to layer sales and operations planning on top of those processes. When Slate and her team looked around to see what companies, in or out of the chemical industry, might have experience along these lines, they found no one.

“We’ve found some people who say they are using them together, but what we usually find is that they’re using SAP as their system. They’re using lean in some processes, and they’re using sales and operations planning in some processes. But what we actually find is that they’re not linking them together. They’re still three separate activities.”

Slate says her team wants to understand how you can set MRP strategies in SAP to determine “supermarkets” for lean and generate trigger points.

“Today people are using SAP, but they’re not actually using SAP to do the signals in lean. Where they are doing sales and operations planning, they’re doing it on the other end and it’s not being fed from the data from the other two systems and processes.”