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December 01, 2020

BTOES From Home - SPEAKER SPOTLIGHT : Delivering Exceptional Operations Results: Breaking Inertia Through the Combination of Processes, People, and Measurements (KPIs)

Courtesy of ADAMA's Elhanan Abramov, below is a transcript of his speaking session on 'Delivering Exceptional Operations Results: Breaking Inertia Through the Combination of Processes, People, and Measurements (KPIs)' to Build a Thriving Enterprise that took place at BTOES From Home.

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Session Information:

Delivering Exceptional Operations Results: Breaking Inertia Through the Combination of Processes, People, and Measurements (KPIs)

  • How to break inertia by changing existing rooted perceptions?
  • What is the best process to achieve on-going continues improvements?
  •  How to harness the right KPIs to facilitate buy-in of people on all levels of the company?
  • The importance of focusing on tangible, visible results
  •  Creating a complete turnaround: from worst in class to BEST IN CLASS within few years. 

Session Transcript:

Thank you for your kind introduction and I'm glad also to thank the organizers for having these opportunities to present my ideas and experience in this very unique event.

Just imagine if somebody will come to you and say we can in a few years turn our company operations completely uh over from where it is today to a much much better place probably uh this will be regardless too ambitious or even not realistic.

So I'm going to share with you what is possible uh my experience was already described but i want to emphasize on one thing I have really passion to improve things especially when it comes to operations uh engineering projects logistics even r d and on the other hand i have zero tolerance for an effectiveness and here I come so I joined Adama in 2012 this is the id card for Adama is a number one leading provider for crop protection for farmers all over the world.

If you take the total arena including the patent-based companies it's number six sales of about four billion dollars per year out of about 16 billion total market grow rapidly in the last 20 years uh work in more than 100 countries and i circuit here one thing that I'm going to refer to later later the company is proud to offer the widest portfolio anybody can offer in the world and let's see so i joined adama and i got responsibility for everything from r d procurement production supply chain logistics distribution of course engineering in the middle and i believe that based on my experience knowledge strength.

Screenshot (73)-1My number one contribution will be in r d production maybe a little bit on on engineering uh just when i joined before i joined i have a meeting with the chairman of the company and we have a wonderful one-hour chat and at the end he called me and said Elie this company is great but in fact we are not doing money uh so your mission number one mission is the uh inventory management working capital because this is not working so uh what was the situation uh I inventory which carry us a lot of working capital uh even though we have many shortages because of the spread because of the number of products because of the complexity of the operation and we have an extremely highly logistic cost.

Now if you look at it what is the challenge it's very complex we have something like 300 different molecules so this is about half of everything the world have then we have 1500 different products if you go to the sk11 which include the size of the bottles the label etc. We get over 15 000 different as can you serve in more than 100 countries now couple this with the fact that the shelf life of the product is relatively short uh about two years uh how you manage these operations without having too many obsolete and without having too many uh too much inventory and what I described before is a vicious cycle you have my inventory.

I smoke capital and because of the shortages there is a huge mistrust I found out a huge mistrust between the selling units supply chain production and of course when there is a mistrust then inventory goes even up because people don't trust the system so they own more than they think they need ah and all these came with some other extras a lot of free work is cost a lot of money extra logistic because in many cases we move products from one area to another area also in some cases.

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We had to supply in the last minute not from our really source so we had some quality problems associated with these delays now the company of course was aware in the situation people in general believe that this is uh in fact fact of life because because of the size because of what we offer because of this geographical spread this is what we need to have but the company had pressures from the shareholders uh to do something about it so they tried many different ways so one thing was to put pressure on forecaster accuracy now this is agriculture you don't know what will be the weather next year you don't know what will be the different diseases in the field next year.

So in fact what i have remembered when i saw it a good friend of mine and a mentor for many years Dr. Goldwater maybe some of you heard about him from his many books it was sold all over the world in millions he said that if management force forces uh certainty on uncertain situation not only that it doesn't contribute on the contrary it has negative impact on there because if you embrace the uncertainty you know it's there then you can treat it if you force it like it is certain you create damage and i remember this very well and of course all these pressure on the selling unit to give better and better focus yield a lot of frustration because people were trying hard without a lot of success then of course the magic sophisticated id solutions now IP solutions and IT tools are important but what happened.

If you put IP solution on a that process then not only that you don't contribute anything because you stay with the same process you waste a lot of resources and one thing I want to say about statistic-based solutions statistics-based solution assumes that next year will be the same or similar to last years and now again this is agriculture nobody can expect exactly.

What is going to happen the last thing they tried for years and actually to some extent work is to control and prioritize every single internal order now you can do that you can reduce the numbers especially at the end of the quarter you can delay orders in order to force you needs to be more lean but you don't really fix the source of the problem now if you do this again and again i don't have to tell you what does it mean wiser people for me already said.

It so here I am I'm not from this industry people told me in the company again and again listen you are dreaming this is reality we cannot really change a lot uh now I listen so I bought the number one company that can do a really bad work and we bought a company that actually has about 90 percent of the total sales as internal data from the companies that use this benchmark for their own uses.

So I have to to set to do it in order to reflect reality become now they came up with many many data and many many ideas but just look at this one this is Adama versus the industry for four years let's leave aside 2009 because it was bad for everybody in the industry but even if you took the next three years Adama was actually far away from the average in fact adama was by far worst in class.

Now uh when we had this and we showed these to the people first of all they were shocked because you know we thought we are good and in many aspects of of the business we were great not only good so why we had these uh ideas that we are good the paradigm was that if you have more inventory you have less shortages now since the company number one uh mission was to grow and to grow fast we didn't tolerate shortages.

So we thought we increased inventory and we will have less shortages in fact this was not the case and i will show you later so we need to change the paradigm so how you do it first of all we share the benchmark in all level i still remember the first meeting with the management of the company showing them the results everybody was shocked but we share it with everybody else and you know even people.

That are not connected directly to this process uh it was important and we'll see later why to get them into the picture now we share the benchmark we also share the vision what can be achieved we share a few principles just direction for the solution we didn't put a parallel full solution because i personally believe that you need to build the solution the full solution with the people in the film you cannot come with the full pledge plan and say this is what it is so we use the fact that we need to build the solution together in order also to build the team around these new solutions uh i was looking for partners at the company uh and when i talk with everybody I listen to one thing many of them say listen your ideas are great but they will jeopardize our kpis uh so whenever you do want to do a change you have to keep in mind these kpis and I'm going to talk about this later.

BFH BLOG

After this we run few pilots uh of course we look for low-hanging fruits but we took pilots which are not very too small but not too risky to the company on the other so i would present before the cases the principles so this is the reality this is the characteristic of supply chain in agrochemical industry so if you go to the left side you have material sourcing and production and formulation which relatively lonely time sometimes between six to nine months but on these you can have relatively accurate focus because if you take the aggregate on the same molecule for example from all over the world for all the products different products you can get a reasonable forecast.

Let's say plus minus five to ten percent which is manageable then if you go to the right side you must have very short time when you deal with country level distribution farmers uh on the other end you cannot expect accurate focus so you have to uh embrace these parameters in your design so the few principles we took is to have very limited note and focus for only for sourcing and capacity planning so when I came to the company actually you the selling units were required to put 18 months uh forecast on the sku level so every product everyone just think of the poor guy in canada or the us that have to bring you the data.

What he will sell in agriculture 18 months from now impossible so they failed again and again and again so we change this we say no we need just the total amount just to plan our sourcing capacity and production capacity then we move the supply from push to pool so instead of looking at the yearly or three months forecast and send the material we say no we'll send some and we'll look at the actual sale uh we implement something called dynamic buffer management of course you need some tool to manage.

It so instead of fixing which was the case before fixing the uh how much you need extra for each product so it'd be very comfortable you have 30 or 40 percent more uh if it's less good so you have less buffer so you have dynamic buffer we change along with the sales with the actual sales in the field uh of course you need to change the operations to be much more flexible to support this change so these were the principles.

I'm not going into this table in indeed so each one of the steps for example raw material and active production how you plan it what are the reasons it's important to reflect to people not only the policy but also the reason they should understand the reasoning behind every policy that you put now so you need uh uh to be aggressive on the production and buy of the raw materials and active you need to be very cautious on the end on the sku level when you formulate backfill now also we took advantage of the fact that uh to create extra capacity on packaging land or even formulation it's much less expensive than invest in new production so uh here you can allow yourself to have extra capacity in order to not to do things too early.

So two case studies uh one of them is Europe uh Europe is was number one lucrative market for adama as well as for many other companies in this area highly regulated very profitable uh high barrier for entering so it was really important to have a good solution here so we made a pilot about total sales of about 50 million dollars as a pilot and what we have done we took advantage of the fact that in many cases you have the same product with many different skus in different countries of different size so we have created an hub in Europe sending the formulated material from Israel and uh we took the advantage that we have this aggregation in order to serve the countries across the year along the season although.

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it's a very short season we observe the cells day by day and actually supply whatever they need when they sell more uh so the better we have uh better aggregation you can have less inventory because it's in one place you can have smaller buffer and then you have to respond much faster to the market so if some country can sell much more you can still supply it so we run this exercise and what happened on this year we see that these previous years the same countries the same products of the pilot they finished the year the end of year inventory was about 25.

We finished the year on this pilot with 10 products in the country plus another five percent still in the house not field not taxon still available not only for Europe to move to other countries if needed so this was their their results uh uh but you know people are suspicious so they asked maybe this year was better maybe this country is very well so we have done all kind of corporations for example this one if you look at the same countries uh how much they end the season with on other products which are not in the final they actually have 78 so in the pilot they have 10 and the rest 38.

Now if you look at the total sense uh it wasn't a bad year uh they all all items of these countries 96 percent of the workload of the focus on the pilot items because we have this ability to be more flexible of the supply the actual cells were 17 higher than the forecast total so uh we plan to do another uh bigger pilot and then the region and the country managers came to us and say we're convinced let's go full way to the full flavor second case study is the u.s. extremely competitive market very relatively low margin at the macons which is a big advantage to formulation packing facilities but they were run as independent business units so they their kpi again were to make money so in many cases they prefer to give services to external customers over Adama USA huge amount of warehouses.

All over the country because they have a special promise that they thought bring a lot of value to the commercial activities to supply within 24 hours so they have they must have most of the products everywhere all the time so reality check first of all we check these 24 hours for this how do you measure if your value your value proposition give really benefit to the customer you ask the customer and we ask the customers distributors and farmers whether for these 24 hours.

They are ready to pay small something like less than one percent more and they say no we don't need in fact we don't need this extra service at all so it was easy to change then uh we uh we found that there is an intensive use of external formulators because of the fact that the the under my own uh plants were busy with others and these create extremely long lead time for the active and the procurement because if you go to external formulator you cannot give you this service at the peak season so he told you listen bring your stuff six months ahead for me to do it for you.

So a lot of uh inventory shortages because you cannot react during the peak season because you don't have the facility uh high inventory high cost of internal logistics within the us out of about 10 million of logistics we found us we found out that one million dollars is moving items between warehouses off at the and us so we changed very few things we changed the logistics spread to a few hubs we changed the structure in the operation mode of the plants so we told them you don't have to make money you have to give first priority service to adam ios so they lost because of this change they lost three hundred thousand dollars per year so just imagine.

Screenshot (73)-1

If you compare it to the benefit of having these plants available for you full year especially in the high season so we change these of course we change their kpi to adjust it uh results and amazing sharp increase in availability 20 saving on total logistic costs so it's this by itself is more than this one million dollars saved before drastic reduction on lead time and inventory so it was a great win and we again took this pilot and go to full full-blown a year later now this is something i want to focus on because i believe that many many good intentions and good projects of improvement fail not because the solution is not good just because you don't invest enough and pay attention enough on how to deal with people and how to do it to deal with their kpis along this process so again my friend and mentor dr godrat he told for years tell me how you measure me and i will tell you how i will be so if you want to change behavior of people.

You must change their kpis so what we have done is people first i mentioned it before involvement of people from all departments and geographies you and you you will be surprised on people that are not connected to supply chain they will come with great ideas how to support because now they understand what is needed for them you share the vision you share the word you share the expected outcome i said before you tailor the solution with the people first of all it will be different solution based on the same principles in different parts of the world but important don't ignore criticism and embrace objections.

If you really listen to the concerns of the people across this process of change you will find real goldmine will find that people can actually help you to improve your solution because of their comments remarks sometimes it can be a nasty rumor but you still have to listen you have to focus at all on kpis this is crucial but also try to focus as much as possible on global kpis vs local ones it is not easy uh there is not a silver bullet here you come to a guy the manual at the warehouse in mexico tell to him you are now part of the global operations and you need to take care of the global inventory uh and you know what when they understand.

It they again come with ideas and they contribute to the process in the way that you cannot even imagine again it is not simple to do but it's crucial and we we made actually something like 10 of the kpis of everybody in the company on okay on working capital results uh this is i don't need to explain we went down constantly and drastically over four years uh and again people are suspicious people tell you maybe these years were better maybe their own industry went from this direction.

BFH BLOG

So what you do reality check again with benchmarking so one slide tell the whole story we started here we were wasting class with 238 days of inventory versus the industry average uh the industry actually in this year went up because the market was much tougher uh a lot of changes in the market and they did not realize changed these changes fast enough we came after four years to be first in class not only much lower than the average but first in class in all industry ah my good friend the cfo the company always tell me okay nice intelligent smart show me the money so in these four years we reduce the working capital of the company only on inventory by 400 million dollars.

This is about 25 of the total initial working capital and this is an absolute number and this year the companies still grow on sales so you need to serve more sales with much much lower inventory so maybe the service were damaged availability went up from 75 to 90 but actually it went up much more because 75 was tricky it was measured against the promised delivery date.

We changed it to be against the requirement the real need of the market and it went up to 90 so it was a drastic move additional saving in all aspects logistics production uh you know each one of them tens of millions of dollars over this period quality went up of course we have done many other activities to increase uh to improve quality but this was a real contributor to this process all these in less than four years so what is next this is always the question so many people you know this is their green curve many people believe that.

If you do such a leap you already squeeze the lemon and now we can improve very little i personally believe on the right curve when you are here you already have a much better operations and much better muscles you are able to do the neck sleep much better than if you do it five years ago so why not so I'm not going to get into it but there was a new plan a new program.

How to go to the next level and of course using the extra money that the company produce so i'd like to thank you for your attention and remember this can be done at any company even the best ones anytime anywhere I was retired from Adama two and a half years ago and from then i support as a consultant for a few companies delivered these messages help them as much as i can and i put myself available to everybody here in the audience to do it, thank you.

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About the Author

download - 2020-12-01T190445.817Elhanan Abramov,
Ex EVP Global Operations,
ADAMA.

Dr. Abramov has an internal drive to improve things around him. Throughout his career, he has developed and implemented processes to improve organizations and operations and their effectiveness by leading significant changes. Dr. Abramov joined Adama in 2012 as Executive VP for Global Operations. ADAMA Agricultural Solutions Ltd. is one of the world's leading crop protection companies, with a revenue of ~4 B$. A large part of Eli’s role at Adama has been to deliver on the company purpose of "Creating Simplicity in Agriculture” through operations. During the 6 years, under Eli’s leadership as an Executive VP for Global Operations, Adama has become the best in class within its Industry on all aspects of Supply Chain and Inventory management. In addition, the Operations team have managed to drastically reduce the cost of goods which reflects in huge improvement on all aspects of the business performances. Before Joining Adama, from 2009 to 2012, Dr. Abramov has served as CEO of Baran Group, the largest and leading Engineering and project management Group in Israel. The Group serves many different industries (Chemical and Petrochemical, Energy, Water, Infrastructures, Telecom and more). Dr. Abramov holds a Ph.D. (Summa cum Laude) in Materials Science and Engineering, Ben- Gurion University of the Negev. Eli is also a member of the Executive Board of the Israeli Manufacturing Association and serves as the Head of the biggest Union within the association responsible for the Chemical, Pharmaceutical and Environmental Industries On a more personal note, Eli is a strong proponent of giving back to the community, and serves as Chairman of the Executive Committee for the Sami Shamoon College for Engineering.

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