Our path to Demand Driven Supply Chain. Manohar Madhira Chris Sakchalathorn Ali Khaki

Transcription

1 Our path to Demand Driven Supply Chain Manohar Madhira Chris Sakchalathorn Ali Khaki

2 Software giant, has a Supply Chain? Why?

3 Microsoft s Hardware Journey Microsoft Softcard for Apple II 1980 Microsoft Mouse 1983 Microsoft MacEnhancer 1985 Microsoft MACH Microsoft Keyboard 1994 Microsoft Sidewinder 1996 Microsoft Xbox 2001 Microsoft Xbox Microsoft Hardware story (courtesy pcmag.com and pcworld.com) Microsoft Confidential

4 Microsoft s Hardware Journey Microsoft Zune 2006 Microsoft Surface Microsoft Kinect 2010 Microsoft Hardware story (courtesy pcmag.com and pcworld.com)

5 Microsoft s Hardware Journey Custom Controllers Hololens Xbox Family Surface Hub Surface Studio Surface Book Surface Pro Surface Laptop

6 Background about operations

7 MSC Functions and Numbers >290M Units Manufactured & Shipped >31,000 Number of Active SKU s ~$11B Total Amount of Annual Spend 13 Number of Manufacturing Locations 3M+ Est. FY16 Number of Retail and Commercial Sales orders 191 Countries Served >600+ Number of Suppliers (includes component suppliers) 52 Number of Distribution Centers 3.5M+ Est. FY16 Deliveries 30K+ Number of Outlets (Carriers, Retailers and MS Stores) Last Updated: February 2016 Microsoft Confidential

8 Changing Landscape Earlier 2015 Pressures Opportunities One major event every year The Holiday Season New product every 2-3 years Multiple events and markets Multiple new products every year COGS Growth YOY 15% to 33% Inventory obsolescence Build to Order Mass Customization 3-5 years average shelf life COGS as % of revenue: 20% Shelf life 1-2 years COGS as % of revenue: 35% Coping Mechanisms Build exactly to forecast Allocate product and capacities based on forecast / statistics

9 Manohar s Personal Story 2014 Daughter Microsoft Perfect Gift 1 2 Months later 2 3 Lenovo Yoga

10 1DSC One Devices Supply Chain

11 ANALYT ICS SUPPLY CHAIN O S LIFECYCLE 1DSC Operating System for the Hardware Supply Chain Envision a Product Engineering R & D Plan Product, Source parts Manufacture Deliver Product to Channel Customer Purchase Activation Customer Issues Contact support to resolve Receive units Repair units Fulfil to customer Capture feedback Optimize & Predict Supply Chain Partner Systems Make SC Partner Connect Collaborative Portal Supply Chain MS Sales Universal Stores CM-PLM CM-SFCS Deliver WMS TMS Supply Chain Collaboration Device Telemetry MS Store / CSS Jarvis Entitlement Design Tools SAP MAX (Supply Chain Analytics) MS Product CAD 1PDM Plan & Optimize Integration Network Plan Source Deliver Trade Care HD Insight Event Hubs NPI Sourcing Planning Manufacturing GSC Returns / Care Quality Financial performance Functional End to End First Pass Yield Spend Supplier Quality Demand Accuracy Supply Fulfillment Functional End to End First Pass Yield Sales vs Forecast Inventory Health Return Rate CSAT Factory quality Field quality P & L Inventory Supplier Compliance Inventory Risk Functional OBA On time Delivery TAT Repair quality Quality excursions OPEX *1DSC Infrastructure

12 LIFECYCLE Intelligent Supply Chain Envision a Product Engineering R & D Plan Product, Source parts Manufacture Deliver Product to Channel Customer Purchase Activation Customer Issues Contact support to resolve Receive units Repair units Fulfil to customer Capture feedback Optimize & Predict Supply Chain Data Socia l External data Environmenta l Economic Digitized Infrastructure Advanced Analytics and Machine Learning Algorithmic decisions Intelligent Supply Chain Cloud Data first Man Machine harmony Analytical not operational Data Driven Organization

13 Demand Driven Supply Chain

14 Design and Development 2015 Oct > July 2015 Adhoc analysis of stock out impacts Possible solutions Excel simulation of TOC logic Aug min conversation with Shane Kolar, Sr Director, Planning on how TOC could offer a robust solution Aug 26 1 st workshop with CTO, IT GM, Planning Team Aug 28 Sep 13 Sep Sep Dec Dec 16 Analysis of current data 1 st version of simulator Joint workshop with GRL, Illumati, Microsoft Planning and IT Teams on system design System development and testing Simulation refinement System Changes live in production with BTO, BTA logic

15 Implementation and Adoption 2016 Jan - Mar Pilot runs for BTO Pilot runs for BTA for few product lines April - July Change Management End of August Mostly implemented for Finished Goods

16 Results Highest ever Inventory Turns for Microsoft Working Capital Savings ~ $250M Service Levels Up ~ 5%

17 TOC-based SCM Solution Design using S&T Tree TOC Based Supply Chain Solution Design 1DSC Strategy and Tactic Tree

18 Simulation Model

19 Hybrid TOC Model Demand is king, forecast is guide RRLT Demand 1 Set initial Set on-hand + on-target quantity target Target Based on total demand within lead time 2 Replenish product Place orders whenever On-Hand + On-Order falls below target On Order PO for 75 units On hand 3 Adjust Target a Could we have stocked out? Increase target if stock was in Red for a lead time duration (Too Much Red - TMR) Increase target 1200 b Do we have too much? Reduce target if stock was in Green for a lead time duration (Too Much Green - TMG) Reduce target 600 c Is forecast from step 1 significantly different Forecast 1800 from TMR, TMG or current target? TMR 1200 Adjust to forecast Forecast 1500 TMR 1200 Target 1800 Target 1200

20 Special Situations Launch Business 100% Subcontracting model - Forecasting needed to continue procurement - Priority communication challenges Varying and long lead times - Product life cycle 1 to 2 years - Component lead time 3 to 4 months Demand peaks 5 to 10 x normal run rates Frequent Demand peaks

21 Design and Development Cycle Analyze Patterns Implement in SAP Simulate Rules

22 Collaborative Supply Chain

23 Supply collaboration MS Planner performs planning in Simulation enviroment MICROSOFT CM reviews and commits to Forecast CM Benefits Better traceability with automated waterfall reporting Planning in Simulation Environment CM systems to ingest forecast CM to Commit to Forecast Review plan Variances Discussion focused around exceptions High automated process Scalable to multi-tier MS transmits forecast to Vendor MICROSOFT/CM CM reviews and commits to Forecast MICROSOFT/CM Better visibility of consignments parts to CM as same process is being leveraged Color coding to denote priority

24 Ariba T2/T3 Supplier Orchestration Microsoft ECC Native Outbound Transactions cxml 2b. Receive Consigned Material Forecast 3b. Send Forecast Commit 4b. Receive Standard PO Tier 2/3 Suppliers (via Ariba Portal or B2B) APO Native Intbound Transactions cxml Ariba Network 5b. Send PO confirmation 6b. Send ASN 4d. Copy of PO 10b. Goods Receipt 6f. Copy of ASN Tier n-1 Supplier / CM

25 Microsoft Status: Ariba Supply Chain Collaboration Status: Ariba Network is the backbone for Xbox and Surface line of products supply chain As of 3/17/17: 46 enabled suppliers out of which 35 transacting suppliers transmitting 118K+ of purchase orders worth $3.5Bil+ Scorecard: Efficiency and Speed Gains: Supplier Supportability process improvement: 90%+ (1-2hrs to ~5min) Planner s Efficiency improvement: 95%+ (order follow-ups/expediting reduced from 1-2 days to 1-2 hours) Supplier On-Boarding time improvement: 75% (on-boarding time reduced from 3-4 months to 3-4 weeks) Microsoft Planning Team quote: Today we successfully received automated (via Ariba) supportability from the supplier which took ~5 mins to approve, updated PREQS and create PO s (vs. 1-2 hours leveraging the previous process)

26 Future

27 Microsoft E2E Supply Chain Process Overview Level 1 Alerts and Case Management S&OP and Demand Planning Forecast (PFAM) Segmentati on Segment Forecast (SKU / DC) Supply Planning Aggregated Planning* Forecast Consumpti on* Net Requirement Disagg** Net Requirement (SKU / DC) Priority Calculation Unconstrained Net Requirement with priority Response Planning Demand Prioritization Rough Cut Capacity Planning Build Plan collaboration Constrained Planning with prioritization Demand Supply match based on Priority Create Purchase Requisition Collaboration Build Plan collaboration Supplier Commit PO Confirmation Production Order Status Segment Execution Goods Receipt ASN Component Consumption Purchase Order Order Confirmation Back Order Processing 2016 SAP SE or an SAP affiliate company. All rights reserved. Allocation Consumption Location/ Product Substitution Sales Order* (Availability Check) Segment Allocation (Channel) Planning * BTA/BTX/ATO/CTO ** Based on Shortage Calc 27

28 Future Architecture - IBP Current: Manual, Subjective & Siloed Subtitle Demand Planning Here Sell thru & Body content Promotion here Planning Body content here Demand Planning Tool Supply Planning & Collaboration CM Tier2..n After: Integrated, Objective & E2E Subtitle Here External Data Sell thru & Promotion Body content Planninghere CM Body content here PoS Tier2..n Tier2..n Consensus Forecast Independent Planning SAP SAP Tier2..n S&OP Decisions PLM Demand S&OP Supply Plan Decisions Plan Integrated Business Planning Financial Forecast PoS PLM Financial Forecast Master Data Historical Data

29 Path forward Simulation model to test rules at each implementation Expand solution to component purchases Expand solution to exchange and B-SKUs SAP Ariba Systemically communicate Build Priority with Suppliers SAP IBP Work with SAP to include TSL priorities into Response and Supply Modules Demand Driven MRP implementation in SAP

30