Collaborating for Better Business. What is Supply Chain. Huge Elephant! 10/21/2013

Transcription

1 Collaborating for Better Business Bhaskar Majee, CSCP Director, Sales Planning and Operations Philips What is Supply Chain The sequence of processes involved in the production and distribution of a commodity APICS Definition: The global network used to deliver productsand servicesfrom raw material to end customers through the engineered flow of information, physical distribution and cash. Huge Elephant! 1

2 What is Collaboration The action of working with someoneto produce or create something. The SCOR model a cross-industry open standard The five integrated processes provide a boundary-free view of the true end-to-end Extended Supply Chain Supports intra- and cross-enterprise optimization of arbitrary scale Plan Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source Return Return Return Return Return Return Return Return Suppliers Supplier Supplier Your Company Customer Customer s Customer Internal or External Internal or External 2

3 Integrated Business Planning STRATEGIC TACTICAL OPERATIONAL Material Ordering Production Scheduling Production/ Material Supply Capacity Planning Inventory Control Objectives & Policies Sales & Operations Planning Inventory Planning Primary Distribution Scheduling Market Replenishment Demand Planning Secondary Distribution Scheduling Sales Order Processing Customer Supply Key Tasks Supply Chain Strategy Strategic Foot Print Service Policies Inventory Polices Production Policies Roles & Responsibilities Accountabilities Metrics Process Activity schedules FG Inventory Levels Production/material supply: Scheduling of labor and equipment Placement of purchase orders on suppliers for equipment or services Market replenishment: Reporting of inventory levels at all points of the supply chain Distribution scheduling and warehouse control Customer supply: Management of the order process Distribution and picking scheduling Where does S&OP fit? High S&OP and Executive S&OP Quality/ Reliability TQM Poke-Yoke ISO Six Sigma Complexity S&OP LEAN Coordination Low Rate of Change High Lean Mfg Changeover Set Up Time Single Flow JIT S&OP ERP MRP Stocking Strategy 3

4 S&OP Process: Generic Data Gathering Demand Planning Supply Planning Last Month Actual Sales Baseline Forecast Actual Inventory Pre S&OP Market Forecast 18 months Level depends on business Product Family, FG SKU, Option Etc. Executive S&OP Check Capacity Check Component Stocking Check Raw Material Stock Share Forecast Up Stream Resolve Gaps Resolve Conflicts Propose Options for Gaps that cannot be closed Align with all functions including finance for revenue and inventory Prepare Agenda for executive S&OP Final Decision and Game Plan If any major change communicate across all functions End Of Month Week 1 Week 2 Week 3 Week 1 What is S&OP Volume It s a process not a silver bullet It s the only decision making regarding Supply Demand volume, mix, demand and supply. It s a fixed cycle: Weekly or monthly planning rhythm. Mix People are as important as process and system, if not more It is consensus driven: Cross functional sales, marketing, product development, finance, manufacturing and supply chain. The ugly truth needs to be said as is. Execute the S&OP plan 4

5 /21/2013 SIMPLE RIGHT Challenges to collaborative planning! The Bullwhip Effect Retailer s Orders to Wholesaler Order Manufacturer s Production Wholesaler s Orders to Manufacturer Order Large swings at the tip Delivery Order Delivery Delivery Consumer Demand at Retailer Small perturbation at the handle What Causes It? 1. Behavioral Misperceptions of feedback 2. Systemic Demand forecasting Order batching Price variations Rationing game

6 Example: Effect of Lead Time Stable demand: 100 units / week; lead time: 4 weeks; The retailer places an order every week. Wholesaler 100 units 100 units 100 units 100 units Retailer 100 units If demand drops by 10% (to 90 units) the order to the wholesaler drops by Demand Forecasting Contributing factors Lag in information flow Lack of information flow Counter measures Shorten lead time Better information Current practice /state-of-the-art EDI and cross docking Sharing sell-thru data required by contracts (e.g., HP, Apple, IBM) Vendor managed inventory (VMI) (P&G and Wal-Mart) Quick response 6

7 Order Batching Contributing factors Sales quotas Transportation discounts Ordering costs MRP systems Counter measures EDI & computer assisted ordering (CAO) Discounted on assorted truckload, consolidated by 3rd party logistics Regular delivery appointment Price Variations Contributing factors Promotions Quantity discount Counter measures Everyday low price No discount to retailers Direct discount to consumers via coupon 7

8 Rationing Game Suppose limited production capacity during peak season Supplier/manufacturer will ration the supply to satisfy retailers orders Retailers know this Q: What happens next? At suppliers end tight capacity (real or perceived) At retailers end» Anticipate demand peak order more, buffer,?» Competition with other retailers for the same product Rationing Game cont d.. Counter measures Vendor managed inventory Stock up stream vs. downstream Change to MTO/ATO vs. MTS 8

9 Quick Response (CPFR) Vendors receive POS data from retailers, and use this information to synchronize their production and inventory activities. The retailers still prepare individual orders, but the POS data is used by the supplier to improve forecasting and scheduling. Virtual Integration Virtual integration means you stick together a business with partners that are treated as if they re inside the company. What does a tech company like Dell gain from virtual integration? 9

10 Gains from Virtual Integration Cutting costs Employees Inventories Intermediaries Responsiveness Inventory velocity (important when dealing with obsolescence) Smoother introduction of new products Can easily implement price changes Visibility to real demand Accounts Receivable = 0, Accounts Payable > 0 Technology Shift/ Product Life Cycle 10

11 What is the right supply chain planning for your product? RFID VMI? Outsourcing?. Quick response? S&OP Make to order? Transparency - Collaboration Supplier Inventory Across the Supply Chain Customer QR CR ACR VMI Consignment Information Sharing LOW Level of Trust HIGH QR= Quick Response CR= Continuous Replenishment ACR = Advanced CR VMI = Vendor Managed Inventory 11

12 The Approach: Keep it Simple Integrated Multi tier supplier collaboration Collaborate across all tiers of supply chain, increase inventory velocity across the supply chain Supplier stocking strategy & optimization Collaborate with key suppliers S&OP Stocking strategy Compliments S&OP and drives standardized execution Gets you into monthly planning rhythm Basic Time Stocking Strategy Analyze & Define Implement Control Analyze & define Determine component ABC/ XYZ (volume, value, order frequency) Determine stocking policy (MRP, ROP) Simulate safety stock level in relation to service level Agree on stock and service scenario Analyze current and define needed processes, tools and organization Implement Update the system settings and the execution process Add periodic parameter review process (e.g. to adjust safety stock) Handle NPI and EOL properly (at S&OP level) Share forecast with suppliers Establish a meaningful set of leading KPI s to monitor Prepare customer service offer and supply opt. phase Control Review current implemented processes Implement changes where needed 12

13 When Demand Uncertainty? Average demand rate d. Is ROP = d L good enough? d L slope d slope d Stockout! 0 Place order Receive order Place order Receive order Time L L Safety Stock ROP = d L + SS Increase ROP by SS ROP d L SS 0 L L Time 13

14 Safety Stock (SS) When demand has unpredictable variability, safety stock is held to cushion against uncertainties ROP = Average demand during lead time + SS With SS, will shortage still occur? - Yes, if actual demand during lead time > ROP What determines SS? Service level Demand variability Lead time What Determines Safety Stock? L L Service Level ROP d L SS Distribution of demand during lead time 14

15 How to Compute ROP for a Service Level? Case 1: Normally Distributed Demand Stdev = σ L Probability of no stockout during lead time (= service level) Probability of stockout during lead time 0 d L SS Quantity ROP z = NORMSINV(service level) SS = z σ L ROP = d L + SS Survey 15

16 Thank you for coming Comments / Q & A 16