Every business ‒ regardless of size, industry, or market ‒ can relate to the same challenge: customer frustration. It’s incredibly complicated to pinpoint when an order will ship and when it will arrive. Components and raw materials are still in short supply, logistics services remain delayed, and demand shifts and shocks are consistently unpredictable. Customers are looking for answers.
During this year’s Gartner Supply Chain Symposium, Hamish Scrimgeour, Global Director of Planning and S&OP at Johnson Controls, shared how his team is perfecting its ability to plan by converging and integrating business systems to orchestrate the supply chain across multiple global sites.
“We all need to aspire to improve supply chain planning. There’s no way you can orchestrate a value stream until you’ve got it all integrated,” Scrimgeour said. “We must think outside the site and move the supply chain as a single network.”
Change Fuels the Need to Do Things Differently
It’s well understood that the supply chain operations of the past, for the most part, have been good – but there’s always room for improvement. As the dynamics of supply and demand continue to evolve, businesses need to find ways to adapt quickly and pivot resources intelligently. And solutions and systems are part of that change.
Even though Johnson Controls is more than 150 years old, it has the heart of a young startup. Through its comprehensive digital portfolio OpenBlue, Johnson Controls offers seamlessly integrated products and solutions in building automation, building controls, refrigeration and air conditioning, as well as security, fire protection and fire suppression. The pure play smart sustainable buildings company is always focused on innovative solutions that make things smarter, safer and healthier, as well as more cost-effective, sustainable, and secure. That trait is what Johnson Controls is all about, whether designing a new thermostat or redesigning internal processes.
Serving 4 million customers in 150 countries with a global team of 100,000 experts across more than 100 locations (manufacturing sites and distribution centers), Johnson Controls’ ability to plan is critical. Its products and solutions are sold in commercial and residential markets to B2B and B2C buyers across six continents, presenting unique customer expectations, go-to-market strategies, and planning challenges.
“We have the entire gamut of manufacturing strategies,” remarked Scrimgeour. “Depending on the product design and customers, each subsidiary plans differently in little ways to address, for example, production scale, demand horizons, material risks, and customer value that is unique to them. And with an annual multi-billion spend on 6,000 vendors, approaches may vary based on the supplier’s size.”
Despite all these differences, Johnson Controls chose to integrate supply chain planning. Scrimgeour recounts the line of thinking behind the decision: “We’ve been using Logility solutions since 1997. But when our merger with Tyco, also a Logility customer, was completed in 2016, we saw a great opportunity to integrate the planning technology, processes, and data between the two companies.”
Transformation Begins with Convergence
Businesses cannot run 60 ERPs and expect to be on the same page – the same is true when every subsidiary has its own approach to demand and supply planning. But that was the situation that Johnson Controls wanted to change for itself.
“Converging all these ERPs and solutions is a big effort; however, it’s the best way to tie our supply chain planning across the entire business,” Scrimgeour said. “Every subsidiary and business unit has different requirements. But all of us agreed to enhance and continue working with Logility with a vision for end-to-end supply chain planning that was transparent, orchestrated, and optimized.”
The first step of the transformation focused on demand planning. The three-step process of booking, releasing, and building products is managed by one planner. Johnson Controls used Logility solutions to advance its supply chain planning processes from a demand perspective, encompassing capabilities for forecasting orders, tracking and tracing products, and identifying value-added opportunities.
The company also added a twist to this digital initiative – revenue recognition. In most cases, companies produce a widget and get revenue from it immediately after the purchase transaction. Johnson Controls’ engineer-to-order model, on the other hand, recognizes revenue in milestones throughout the building process, which means the value of every order must be monitored along the way.
As Johnson Controls moves further in its transformation, its planners will be able to forecast the workflow, timeline, and milestones for orders ahead of time.
“That’s one of the game changers this initiative with Logility will bring over the next few years,” highlighted Scrimgeour. “Getting orders booked, released, produced, and delivered requires much more than execution excellence. A large variety of parts, manufacturing strategies, and marketing programs must be managed seamlessly.”
In addition to elevating its demand planning, revenue recognition, and supply forecasting capabilities, Johnson Controls is balancing its inventory more effectively. The company has gained greater visibility into on-hand inventory across its distribution centers, with the assistance of its data analytics partners. Now, it can compare order trends with inventory quantities to better fill demand and optimize production capacity. Scrimgeour expects that distribution centers will be stocked with the right mix of stock and units based on demand close to them.
“Everyone Knows Where Everything Fits”
Johnson Controls is a prime example of the true potential of integrated planning. The company is motivated to cover all aspects of its supply chain planning processes across all value streams and manufacturing systems. But more importantly, employees can work together more collaboratively, intelligently, and strategically – irrespective of their subsidiary. The company sees it as a chance in a lifetime to be really at the foundation of redesigning supply chains that are going to be much more resilient, focused on ESG, and ultimately achieving “what we are all setting out to achieve.”