This is a transcription of a podcast with Jeff Slater, an expert in his field and he has some very progressive ideas on how to leverage the Supply Chain for competitive advantage. Lean Six Sigma is a tool that he uses to accomplish many of his objectives and he explained the use of them at Sonoco.

1. Application of Lean Six Sigma
to the Supply Chain
Guest was Jeff Slater of Sonoco
Business901 Podcast
Transcript

2. This is a transcript of a podcast that featured Jeff Slater, the
Operational Excellence and Productivity Leader for Sonoco. Sonoco
is a $4.1 billion global manufacturer of industrial and consumer
products and provider of packaging services, with more than 300
operations in 35 countries, serving customers in some 85 nations.
Jeff is an expert in his field and had some very progressive ideas on
how to leverage the Supply Chain for competitive advantage. Lean
Six Sigma is a tool that he uses to accomplish many of his
objectives and he explained the use of them at Sonoco.
Jeff will be presenting a case study on the Application of Lean Six
Sigma to the Supply Chain at The Global Lean, Six Sigma and
Business Improvement Summit. This summit represents the largest
gathering of leading experts and senior executives across various
industries that are passionate about achieving process and business
excellence.
Jeff, also writes book reviews for ASQ (American Society of Quality)
on Lean - Six Sigma and drove customer quality initiatives as the
primary contact for Wal-mart business -Sam’s Choice brand cookies.
Jeff recently received his Certification in Lean Manufacturing from
the University of Michigan, studying with Jeffrey Liker (Toyota Way)
and Mike Rother (Learning to See).
Sonoco News: On July 15, 2009, the Board of Directors of
Sonoco (NYSE: SON) today declared a regular quarterly
dividend of $.27 per common share. This is the 337th
consecutive quarterly dividend. For more information on the
Company, visit their web site at http://www.sonoco.com.
Application of Lean
Six Sigma to the
Supply Chain

3. Joe Dager: I'd like to thank everyone for joining us today. This is
Joe Dager, the host of the Business901 podcast. Participating in the
program today is Jeff Slater, the Operating Excellence and
Productivity Leader for Sonoco Products. Jeff, can you give us a brief
overview of Sonoco, and what your position entails?
Jeff Slater: Well, Sonoco is a broadly diverse company that was
founded well over 110 years ago; 11 decades ago. We earn
approximately four billion in sales; we have about 300 operations in
about 35 countries in some 85 nations. The products we serve are
both industrial and consumer in nature. Our consumer products are
probably well known, but we sell to manufacturers, and the products
are used in your kitchen and in your home, and you don't even
realize it.
Our industrial products are sold more in the neighborhood of fabrics
and products that are rolled up, and there are some other divisions
that we have that provide other industrial applications. We just
declared our 337th consecutive quarterly dividend, which we are
very proud of, and it continues to increase, and we're in great shape
to continue that dividend going forward.
Myself, I'm actually related to the Operating Excellence part of the
business. Our Manufacturing Excellence, our Maintenance Excellence
groups all reside in our area as well, as related to Sigma training
programs. My job is threefold. It's to make sure that we are
recognizing and supporting the people in the company, and making
sure that there is continuous skills development.
Number two, we are also responsible for managing the project flow
through the system, and insuring that we have projects that are
well managed and well recognized.
Application of Lean
Six Sigma to the
Supply Chain

4. And then the third leg of that is making sure that we have
productivity dollars in the neighborhood of $100 million this year to
deliver for Sonoco's bottom line, because everything that we take
out in productivity will make us more profitable in the long run.
That's about it for Sonoco and my role right now.
Joe: OK, so you're responsible just to put $100 million on the
bottom line. That's not too big of a job, is it?
Jeff: No, not at all! Luckily, there are a lot of great people working
for Sonoco that help in that endeavor every year.
Joe: Sonoco; I was very impressed when you said that there were,
what was it? 337...
Jeff: Consecutive dividends.
Joe: Yes, I mean that's just unbelievable! There are very, very few
in the world that could promote that.
Jeff: We are actually one of the very few. We started out on the
NASDAQ; we are now on the New York Stock Exchange and, yes, we
are one of very few that can actually claim that title there. So it
makes us a very good investment right now. Without throwing out
exact numbers, we are in the three to four percent dividend range,
so it makes us a good investment at this point. Surely to say, when
we announced the last dividend, the stock went up three to four
dollars. So it may not be as good of an investment right now, but it
was a couple of weeks ago.
Application of Lean
Six Sigma to the
Supply Chain

5. Joe: What's your outlook? Do you have a positive outlook going
forward here?
Jeff: We have a very positive outlook, especially on the consumer
side of the business. One of our key focuses is to continue
developing new products, and we try to focus on the "value added"
portion of the market, like most companies do. We just have
unusual success in that area; coming up with new factors that we
think are value added for the end consumer and our customers. A
couple of examples of that would be we actually produce all of the
film for Kraft and Nabisco, on their Chips Ahoy, Oreos, and those
products; where you see the easy open and seal packages.
That's actually one of our patented processes and products. We just
rolled out another cereal box, where we take away the concept of
the old bag in the box, and we actually put the cereal straight in an
oval tube that looks like a cereal box, but has a flip top lid on it,
much like a (not to use somebody else's brand name here) but a
Rubbermaid container. You don't have to deal with ripping that bag
open and spilling cereal everywhere. And there are a few other
notable things, like a top on a powdered infant formula can that
allows you to clean off the top of a scoop, whereas before it would
mound up, and you would dump it all over the counter, as opposed
to in the bottle for the baby.
A couple of other things, just in some of the other products that we
do are more focused on industrial. We've got a pallet block, which is
primarily recyclable material, but it also increases the nail pull,
which is the number one complaint of pallet manufacturers. It
damages the products, and they end up being liable for that, as
well.
Application of Lean
Six Sigma to the
Supply Chain

6. There are lots of different areas and lots of new products that you
can probably find out about on our website, Sonoco.com. You might
be surprised with some of the things that you find. One of the most
well known, and I'll be quiet after this, is the Pringles can. We
actually make the Pringles can for Proctor & Gamble, and that is
probably one of our claims to fame.
Joe: Your whole product line must have changed a lot because the
things I'm hearing you going through as far as recycling and green
initiatives has to be a key focus for you, doesn't it?
Jeff: Recycling and green initiatives is probably one of our core
foundational things for Sonoco. We started out in the paper industry,
but because we put such an emphasis on recycling, we are a major
player in recycled paper and plastics. One of our claims to fame is
that we use no virgin material in our paper whatsoever, and the way
we get away with that is that you use virgin plastic liners in the
products that we do sell, that go to the end consumer. But the paper
is all recyclable, and it is a great sales pitch right now, when you are
talking to people in the market.
So, we actually go out and sell it as a service, as well. Like, if your
company came to us and said, "We want to learn how to be more
green or focus on a recycled product" we'll go in and analyze the
stuff that you're taking to a landfill right now, and we'll either take
that and generate money for you by creating markets and selling it,
or we will actually take some of those products ourselves and
include them in our processes where we currently use recycled
materials.
Application of Lean
Six Sigma to the
Supply Chain

7. Joe: I'm really familiar with, what was it, the Sona-tubes for the
concrete forms?
Jeff: Yes.
Joe: In years back we actually designed some products around
that. We used the tubes as one of our templates to pour refractory
around, and then we could pull it out. That was our inner lining!
Jeff: Oh wow, interesting. Our products, as we've grown, have
gotten out of some of the primary areas you might see. But, I
mean, even a roll of toilet paper tissue, or rolls that go in paint
rollers were products of ours. So you'd see them all over the place.
But the Sona-tube is one of our recent successes. We actually
created one that allows you to create a completely smooth form
which can then be painted or left smooth in itself, whereas before it
would be really rough or have striations in it. So that's one of our
patented processes there, as well.
Joe: Is your main expertise supply chain management?
Jeff: My specific specialization is supply chain, and Lean and Six
Sigma. The topic I'm actually speaking at the conference on at the
summit is actually on “How can you apply Lean Six Sigma to Supply
Chains.” I've been lucky enough to be in both those fields and see
some neat opportunities - synergism, if you will - to apply those
concepts and get even a better, more organized delivery system and
higher customer service as a result.
Application of Lean
Six Sigma to the
Supply Chain

8. Joe: What's different today about supply chain management from,
let's say, like five years ago?
Jeff: Well, supply chain actually is one of those concepts that
somebody wrote a book about and coined the phrase, and since
then it's been growing and kind of changing as a result. You and I
have even talked about this before, but the market itself, with the
way the economy is right now, supply chain is going through a
pretty dramatic shift. It was beforehand, and it's kind of going in the
opposite direction now.
But before the economy shrunk, supply chain was one of those
things that you had to start getting into because of the globalization
of the market. With the kind of drawback in the way the economy
just recently, it's actually comes more to the forefront.
Because people are now realizing that in order to be more
competitive and take cost out of their processes while still
maintaining that global footprint, they have to take the cost out of
their supply chain and reduce their lead times. Now more than ever,
delivery has become one of those factors in talking with your
customers. There are three things I say that you can lose a
customer by doing: either poor cost, poor quality, or poor delivery.
Delivery is one of those that actually get tied up in the supply chain
concept. Cost is another factor that gets tied up. Then in some
cases, your delivery, your supply chain, can impact your quality as
well. So if you want something that's going to hit all three of those
ways that you could lose a customer or gain one, supply chain's the
concept to apply.
Application of Lean
Six Sigma to the
Supply Chain

9. Joe: Having a manufacturing background, in reflection I am
amazed at how much energy is put into the manufacturing, put into
the building, and the design. The actual delivery of the product is
somewhat of an afterthought. The receiving of product can be an
afterthought, but it's such a huge percentage of the total product
that it is forgotten about sometimes.
Jeff: Well, something that's just happened as well in the
investment market. You were talking about Sonoco being a good
investment. The analysts have started looking at things differently.
Initially, they were looking at your return on investment as a
primary reason they would invest in your company. But now the
three things have kind of upside downed themselves. Cash is
probably the number one thing in investors' eyes because cash says
whether you are healthy or not as a company. You can be losing
money, but as long as you have cash flow, you're still a viable
company. So if you look at cash, supply chain, and taking inventory
out of your supply chain, and reducing your lead times is a great
way to impact your cash flow, and it's an immediate impact. It'll
happen immediately, that next quarter, as you get that inventory
out of the process.
Joe: Like Dell Computer and how they actually operate with a
negative cash flow.
Jeff: Exactly. Dell, Toyota.
Joe: What a perfect business model if you can do that.
Jeff: Yes, exactly.
Application of Lean
Six Sigma to the
Supply Chain

10. Joe: Definitely. How do Lean and Six Sigma play a role in supply
chain? We know it used to you solve problems, but can you give me
specific answers of how that applies to your supply chain?
Jeff: Sure, sure. The two obvious ones to me are what you just
mentioned about solving problems. Lean Six Sigma allows you to
have instruction methodology in how you solve those problems and
also gives you tools to solve those problems.
The other side of that coin is that Lean Six Sigma's concepts.
Applied on a plant or a manufacturing floor is the same as
expanded and applied over an entire value chain or network. The
same things they would do at that plant level, which is reduce the
time that the material stays within that process. It reduces the
variability in that process and ensures that the delivery occurs with
good quality, right time, right place, right quantity, and all those
things that are your customers' rights when it comes down to
selling product.
Joe: Now, when you use Six Sigma, do you look at all the tools
and the statistical models? Do you use all the models? Do you go
through all the analysis? Do you use Minitab, DOE and other
models?
Jeff: You touch on several of them. When you do a training
project, you attempt to make them use as many of the tools as
possible, sometimes whether they fit or not. But the key here is
only using the tools that really apply to the project, that are going
to make an impact when you start doing projects in the real world.
Application of Lean
Six Sigma to the
Supply Chain

11. So your question, do we use all those tools? No, we don't use them
all the time, but the one that you hit on that is probably used quite
a bit, especially on some of the Black Belt projects, is Design of
Experiment. It's one of those things that you do to actually tell if
your process has gotten better or worse. Then you actually use
statistics to give yourself a mathematical foundation of whether the
process has improved or not. So all those things do apply.
Lean was a nice complement because it allows you to stabilize the
process. In some cases, you come in, and you can't even start doing
some of the measurements and the statistical analysis because the
process is in such chaos. Lean helps you get to a point where you
could start a Six Sigma project, if necessary. Sometimes they're just
combined. So it's using the right tools at the right time with the
right project.
Joe: What you're talking about at the conference is supply chain,
and responsiveness, and flexibility. Can you be responsive and
flexible at the same time, or are you just winging it, taking away
from one, and kind of adding to the other?
Jeff: Well, that's one of those big discussions in supply chains. A lot
of people say that you add capital into a process and you're, in a
sense, being responsible, responsive to your customers at that
point. But you lose flexibility because "I bought a specific machine
to deliver a specific product". Well, the concept is yes, you can do
both of those at the same time but you have to make sure your
machine is flexible to do that.
And I'll use an example from my previous life, and it was at Corning.
In the old days, the concept was that you build a gigantic furnace
that melts glass and provides a huge line of insulation or fiberglass
sheets coming out.
Application of Lean
Six Sigma to the
Supply Chain

12. Those large lines, they were hard to start up, hard to shut down, so
they'd run them 24/7 and make whatever they could coming off the
line. But the concept they're playing around with and working with
in one of their Toronto facilities is a small line, it's easy to turn on
and turn off if demand so justifies it, and it allows kind of flex line
for different products. A relatively quick rather than the huge
change-over that you have related to a large glass furnace sort of
thing.
So, yes you can be responsive and flexible, it has to start in the new
equipment development process, the design process, and new
product development process. You also have to hit that factor
because if you design a product that's not flexible or you design a
product that's not complimentary to your current product line, you'll
also run into problems. Then you'll be forced to buy a very specific
piece of equipment.
Joe: Well, Jeff, that's one of the things that we always talk about
with Six Sigma. It's great at defining problems. It's great at
providing solutions but when on a new product development, it has
some limitations. Do you find that being true?
Jeff: We don't use as many tools as you would in a normal product
project when we do our new product development. However, there
are a couple of key tools we use, for example, like FMEA, Failure
Modes and Effects Analysis. This is a process that helps you identify
potential failures in the process and we've found that this tool
specifically is very critical in new product development, and doing it
earlier in the process opposed to later is much better.
Application of Lean
Six Sigma to the
Supply Chain

13. There's also the design for Six Sigma process, DMADV, as some
people might know it, similar to the DMAIC process. But if you
utilize this, it was also help you again in specifying equipment that's
responsive and flexible. But it also helps you in designing that
product, so it does fit with your supply chain, does fit with your
manufacturing processes, and makes it something you might be
able to use for another product later on sort of thing. So, yes, it
absolutely can be applied greatly to our new product development
process and we use it religiously, just some of the tools get popped
in and out as we need them.
Joe: Is it accepted throughout your entire business structure, do
people accept Six Sigma and Lean as part of life at Sonoco?
Jeff: I'm probably a pessimist when it comes down to that because
I see the full potential of really adopting it as an approach to
business. And I would say that we're scratching the surface, but at
the same extent, we have a much more engaged leadership team
when it comes to Lean Six Sigma. We target individuals who have
Lean Six Sigma when we hire from the outside and we don't really
look at people that don't have that kind of tool set, or if we do, they
better have another really good tool set that we're specifically hiring
for.
I would say we're fully and extensively using it at the higher levels.
The lower levels, we're working on that. It's a continuous
improvement type thing and we're in the process of going through a
development of the Sonoco performance system, which you could
kind of parallel with some of the other great companies out there,
like Toyota, Milliken, and Danaher. But again, you have to kind of go
through it and grow yourself, so we're developing it all around what
our culture is and our history and the tools that we currently use.
It'll be as good as the other ones, but it's going to be different
because we're a different company, we service different customers.
Application of Lean
Six Sigma to the
Supply Chain

14. Joe: You've been part of Six Sigma for a lot of years. Why do you
think it's one of the ones that stuck, let's say, over TQM and Theory
of Constraints?
Jeff: You know, and I would actually argue a little here that Six
Sigma's one of those ones that kind of built off of the Theory of
Constraints and the TQM process, it's just kind of another iteration
with the statistics applied to it. The reason why I believe that Six
Sigma probably stuck a little bit better was it's similar to Lean.
There was a great leader in that area really had utilized the tool and
demonstrated how well it improved their business and managed
their business, which is GE, of course. I think they demonstrated
their leadership, and much like Lean in Toyota. Toyota started out as
number four, probably number five in the automotive industry as it
consolidated, but now they're number one.
So I think you have two great examples of, if you make this part of
your culture, if you make this part of how you do business opposed
to just another tool, or another flavor of the month, how much it
can impact your business and improve your overall operations. I
think that's part of the reason it really was successful.
The value has to be proven in any organization. That's why it works
some places and not at others, because you got to have that top
down support. If the value's never been proven out, then people
end up dropping it, like the last flavor of the month.
Joe: Now, do you do a storyboard at the end of each of these, and
go through and do a presentation of what savings there were or
what was accomplished with the Six Sigma project?
Application of Lean
Six Sigma to the
Supply Chain

15. Jeff: At the end of every project there is one, and that's where the
one leg of my responsibilities I was talking about, the continued
Lean and recognition for customer satisfaction through excellence.
We have several different levels of recognition. One is for
certification with Lean and Six Sigma. We also utilize what we call
an executive presentation where high profile projects get the
opportunity to present those projects to the CEO and the
management committee then.
And we also have what we call, I mentioned just a minute ago, the
customer satisfaction through excellence. Projects and individuals
who went that extra mile, or projects that really delivered for the
customer, receive corporate recognition where they're actually flown
in to the corporate office. They have a golf night, dinner,
celebration, and then the presentation, very close to when we have
our annual report out as well, for the corporation.
We have a pretty extensive process by which we recognize and
celebrate these projects,
and then we thoroughly encourage the plants to do recognition for
individuals and projects at their level, as well, as we are trying to
promote more floor-run projects and individuals on the floor kind of
leading projects and utilizing these tools themselves.
Joe: OK. There's one thing I notice in one of the notes I had here.
It was "perfect order, what do you mean by that?
Jeff: "Perfect order" is a term that has been coined for supply
chain, where you take into account -- it's almost like an calculation
for supply chain, where you basically take three different metrics or
percentages, percent on time delivery, percent customer
satisfaction, and percent fill rate and you basically multiply those
together to see how you are performing overall, as a corporation on
supply chain and customer satisfaction.
Application of Lean
Six Sigma to the
Supply Chain

16. So, our perfect order describes those two different metrics. It's a
pretty common one, if you look out to the Supply Chain Council.
They utilize that term quite a bit. There are other companies, who
are adopting it, as well.
Joe: Well, it's common for the supply chain people, I am not
necessarily in that field and it just jumped out at me, right away.
What exactly does he mean by that?
Jeff: It's a great concept to talk about because what we're really
trying to say is: how do we achieve that perfect experience for the
customer -- that they order it; they enjoy the ordering process; we
manufacture it in a timely manner for them; and we deliver it at the
time that they requested it be delivered. So in a sense, you're trying
to achieve this perfect experience -- this perfect order.
Joe: Where do you see supply chain management going? I mean,
how much can you improve? The customer's perspective may be;
everything customized and everything "right now.“ Is that really the
idea that the supply chain has also?
Jeff: Supply chain is one of those concepts that really has to be
somewhat modified for the industry and the types of customers you
serve. Supply chain's always going to be around because of the way
it touches the cost equation, in the process; how it touches the
customer; and ultimately, how it touches the experience that
customers have with your company. Supply chain, I see going much
farther than it has in the past.
Application of Lean
Six Sigma to the
Supply Chain

17. There are little things, right now, where people touch orders when
they come in, they touch the order, when it's connected to a truck
for delivery, and they touch it here and they touch it there; all those
are opportunities for bad experiences or errors to occur in the
process.
And where I see supply chain going is there's going to be a lot more
optimization; there's going to be a lot more event management,
meaning that there's going to be systems out there that are going
to tell you when there's an upset to the supply chain and you
manage the exceptions to the process. And then, there's going to be
this whole automation that allows us to quit touching the order, take
the order, and it just goes straight through the process without a lot
of interruptions. Or you create a process where you customize a
product, as opposed to having something...
There's a lot of cases where they're doing analysis and you find out
that building it overseas is great because it's a low-cost to
manufacture, but by the time you factor in all the supply chain costs
and the risks involved with timing, that you would have been better
off paying a little bit more for having it made American made and
customize it to exactly what the customer wants.
Joe: You know, part of that is, is that we are becoming so
customized and our needs and wants are getting so targeted, that
the ability to respond, to customize and deliver quickly is what's
going to bring manufacturing back here.
Jeff: And that's the magic to the Internet. One, first of all, it's
allowed certain niche companies to develop great products and
great markets by being very niche oriented
Application of Lean
Six Sigma to the
Supply Chain

18. but it also allows us to cater to and know exactly what the
customer's needs are. We're all familiar with the concept that is, "If
I could go online and actually spec out the car that I wanted, I'd
probably be a lot happier than having to go to the dealership,
maybe get the color I want with the features I want" sort of thing. I
mean, several companies are really leveraging this to their benefit.
Dell, as I mentioned before, is one of the great leaders in this area
because they try not to hold any inventory whatsoever. The printers
and the monitors are sent directly from their third party
manufacturer. They don't even touch them and then they actually
use the Internet to sell off inventory that doesn't sell on some of the
hedges they want. For example, if they have a CD drive that just for
whatever reason didn't sell the way they expected it to, they'll put it
in with one of their models online and say discount it $50 to just get
the inventory out of their books sort of thing. But, even so, the guy
that wants to customize his computer and isn't worried about price
can go out there and make a computer exactly the way he wants it.
Joe: Is Sonoco looking at doing things like that with some of their
products?
Jeff: Well, the interesting thing about Sonoco is, is that a lot of our
products are already customized for our customers. Some of the
examples I gave like the Kraft wrapping for the cookies, the cereal
box for Target. In a lot of cases, these companies want very specific
things and we produce those things very specifically for them.
Another example would be Hampton Farms, which is probably not a
wide known brand name for peanuts, but they came into us and said
they were looking to make a plastic tub and this is what we're
thinking about and this is how we'd like it to look.
Application of Lean
Six Sigma to the
Supply Chain

19. Well, they wrote it on a napkin and we took it back to our
development lab. We actually gave them a prototype to carry home
with them to actually share and show around the office. It was such
a huge success; you know they signed up for the business right
away.
Being responsive to those customers and being able to customize to
what they need is one of the things we do very, very well.
Joe: I will finish up by saying thank you to Jeff and to Sonoco
Products. If you'd like to know more about Sonoco products, they
can be found at Sonoco.com, and if you'd like to learn more about
supply chain management, I'd encourage you to go to the Global
Lean Six Sigma and Business Improvement Summit. You'll find that
at www.WCBF.com. Jeff will be there on the first day. I believe you're
slated to talk.
Jeff: Yes, sir.
Joe: And on Wednesday, October 14. I, for one, will be attending
your session and learn a little bit more about Supply Chains. I'd like
to wrap it up and thank everyone for listening to the Business901
podcast.
Application of Lean
Six Sigma to the
Supply Chain

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