How to Revamp a Supply Chain from the Ground Up

Replacing a supply chain is a daunting task but it need not be an impossible one, says David Fox, Valpak's vice president of manufacturing. It requires thought, planning, research and the right tools. And it helps a lot if you work with something you already know.

/images/stories/70x50/bug_knowledgecenter_70x70_(2).jpgFour years ago, Cox Target Media (CTM) was buried under the weight of a trend that we should have been celebrating: explosive growth. CTM, which produces the ubiquitous blue Valpak envelopes sent to households nationwide, was shipping 20 billion coupons in 500 million envelopes a year. Trouble was, our manual processes at two old printing plants in Florida and North Carolina could no longer handle the volume and complexity of what CTM was producing.

Revamping our company's 30-year-old production systems was no easy feat. It was a mammoth project, which included an internal supply chain transformation that kicked off in 2004. It culminated with the recent opening of the new Valpak Manufacturing Center - a $220-million, 470,000-square-foot facility in St. Petersburg, Fla.

No company could complete such a huge endeavor without learning a thing or two about what works in supply chain management. Our experience, which led to the creation of best practices throughout the company, may provide some headache-saving advice for any business attempting to future-proof its supply chain. While no two supply chain projects are exactly the same, here are four basic lessons we learned from our project.

1. Buy, Don't Build

While it was tempting to build our own supply chain software - designed specifically to meet the needs of the Valpak business - a cost/benefit analysis proved that using SAP Advanced Planner and Optimizer (SAP APO) would do the job at a much cheaper price.

Our analysis proved that, in the long term, our business would save in maintenance and total cost of ownership by buying instead of building from scratch. We also knew we would benefit because SAP APO, once installed, would be able to share data in real-time with our existing SAP back-end systems. Additionally, SAP APO's flexible and configurable system made an ambitious project manageable and very profitable in the end.

2. Choose Partners with Proven Track Records

In our case, we already had a history with SAP, having installed our company's sales, manufacturing and auto-booking systems to run our back-end. Bristlecone, our supply chain optimization partner, had completed many SAP APO modeling and deployment engagements in multiple industries at other companies. Bristlecone understood how to model the system to any supply chain environment and then deploy it.

We also had full confidence in our 15-person team, which included our vendors and leaders from each part of the Valpak business. Investing in top-of-their-field partners helped us bring a massive project to a close on time and on budget.

3. Simplify and Automate as Much as Possible

We got rid of carts that workers used to push around while shouting work schedules to each other. We replaced them with machines that quietly produce orders in coordinated batches. New technology enabled us to do more with a smaller plant work force by reducing the company's per-job production timetable from four days to just four hours. In the old world, coupons were often handled 12 times in the warehouse before being sent out. Today, our retrained employees work behind computers to manage the process.

While a printing press may have the potential to make a coupon 256 different ways, we've whittled choices down to basic configurations that apply to 80 percent of all customer orders. Also, when an order is processed today, the APO system looks at aggregate demand, determining where commonalities exist. Though coupons can still be individualized for a customer, the system makes it easier to create economies of scale. Now, from the time paper goes into the printing press until the time when the postal carrier takes the blue envelopes destined for delivery, no human hands have touched the coupons.

4. Test Extensively Before Any Launch

We tested different parts of our new supply chain for nine months to one year before going live. Our consultants worked with Valpak business managers over a few months to test-drive the system hard and iron out any kinks. This ensured that we were 100 percent ready at launch.

Today, Valpak has the capability to produce 54 billion coupons annually. The new facility showcases some of the world's most advanced systems in printing, collation, packaging, warehouse, material movement and mail distribution. Best of all, we've future-proofed our business by optimizing our business processes and making the most of our packaged software.

Now we're celebrating our growth instead of worrying about it.

/images/stories/heads/fox_dave70x70.jpg David Fox is Vice President of Manufacturing at Valpak, a Cox Target Media company. He is responsible for overseeing all manufacturing operations for Valpak. He was one of the company's key Project Directors in the planning, design, construction and systems integration of the company's new $220 million Valpak Manufacturing Center in St. Petersburg, Fla.

David joined the company in 1996 and served in a number of IT positions, including Director of Management Information Systems (MIS). He holds a bachelor's degree from Lehigh University and an MBA from George Washington University. He can be reached at