Advancing Supply Chain Integration with the Sell Through Monitor

Transcription

1 TRACK : Alignment to Demand Cultivating shared business goals and Demand chain alignment Advancing Supply Chain Integration with the Sell Through Monitor Frederic Gaurier SelfPerf.com Frederic Gaurier Operations, Total Quality, Continuous Improvement, Management of Change Last two decades = half consulting, half operational manager Worked at a world leader in luxury goods : Louis Vuitton Head of supplier performance improvement and Director for industrial transformation in 5 BU, at a luxury goods world leader Co founder in 2011 of SelfPerf.com, sustainable performance maturity self assessment on operations best practices 2 1

2 This session in 100 words New business paradigm : shorter life cycles and larger offerings Example of fashion : driven by seasonal products Sell Thru" monitoring could be used as an inspiration? Align the whole supply chain Here are shared practices and results from last 5 years experience : practical, with real figures and tools 3 What has ACME company and its partners achieved from 2005 to 2010? Number of products sold increased by 100% Manufacturing lead time reduced by 30% Distribution lead time reduced by 50% Procurement lead time reduced by 60% Inventory value limited to 5% increase only 4 2

3 Improved performance of sellthru index from 110 to 125 : how? SellThru explained to everyone : 3 key leverages 5 KEY 1 SellThru what is it really? 6 3

4 Common calculation of SellThru in a retailing store Sales in period Inventory beginning of period Measured in % Example : 100 pants #A sold this week Inventory item #A on last Monday morning = 800 SellThru item #A is 100/800 = 12,5% this week 7 Usual practices with SellThru in point of sales are Item classification Selling and replenishing priority Manage returns (clothing, books ) or discount (software ) On internet stores: item product category 8 4

5 How to get better SellThru? Higher sales as regards stable inventory Based on former example : 200 pants #A sold this other week SellThru item #A is 200/800 = 25% that week Lower inventory as regards regular sales Based on other example : Inventory item #A on other Monday morning is 400 SellThru item #A is 100/400 = 25% that week 9 Customer sales could be sharedwith everyone in the whole supply chain? and become a baseline for all? Inventories could be added up and considered as one single baseline as well? Both could be combined and give birth to a simple, single monitor? 10 5

6 SellThru as global business KPI SellThru (NEW) = Σ SALES to Final Customer Σ MANUFACTURED Finished goods + Global inventory at beginning of period 11 Then Whole supply chain is reactive to demand evolution Everyone in the chain acts in same direction Action of one has an impact for all This requires coordination SellThru objectives SellThru alert levels to stop or trigger supply Priority settings for actions on sales or inventory 12 6

7 KEY 2 = Global planning and monitoring works! Marcy Supply Chain Planner Sergio Boss Alison Marketing Manager Stanley Raw material supplier Hugo Procurement Manager 13 Dan Plant Director Lawrence Logistics Manager Better reactivity to actual sales? 14 7

8 Example Product launch Period = 25 weeks of sales (1 season) Inventory baseline (Index 100) = level at Sales start Targeted SellThru for season = 95% Targeted customer service = 0% o.o.s. (out of stock) Max. manufacturing weekly capacity = 10% baseline Production ramp up = 50% of capacity during 2 weeks 15 Example Product parameters Replenishment: lead time = 4 weeks Economic Order Quantity = 20% of baseline Manufacturing 1 st work order = 50% baseline Then, manufacturing work order = 35% until W19 End of collection = W

9 Product launch Planned profile 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Planned production Planned SellThru Planned Inventory 17 Product launch Actual (+20%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Planned production Planned Inventory Actual SellThru Actual production Planned SellThru Actual Inventory 18 9

10 Benefits of sharing SellThru Manufacturing can react without waiting for the classical successive replenishment orders of distribution levels Inventory of finished goods is monitored from the beginning, in order to have the relevant global level The only focus of distribution can be the speed of flows from manufacturing to point of sales and the balanced response to actual demand 19 KEY 3 Speed up distribution and lower inventory is possible Marcy Supply Chain Planner Jenny Store Manager Stanley Raw material supplier Hugo Procurement Manager Dan Plant Director Lawrence Logistics Manager Brian Wholesaler 20 10

11 Better distribution inventory management? 21 Classical approach: safety stock SS = Z x (LeadTime (in weeks) x σ S ²) + (Sales (Weekly) ² x σ LT ²) Example : Z = 1,65 for 95,05% * LT = 2 weeks with σ LT = 0,2 weeks Sales = 100 units per week, with σ S = 10 units SS = 1,65 x (4 x 100) + ( x 0,04) = 1,65 x ( 50% of weekly demand) * Source = Gaussian distribution tables 22 11

12 Classical approach applied: high cost for poor service? Central warehouse Subcontractors Plants Production Suppliers S& OP Regional warehouses Wholesalers Stores Business Unit Distribution Supplier 95% 95% 95% 95% 95% 95% 95% 1 every 4 final customer not satisfied in average 23 Customer Limits of classical approach: a tradeoff between cost and service quality Monitoring i is focused on results of each step Performance becomes mainly point of sales problem Replenishment is long from manufacturing to POS If issues, disputes raise easily 24 12

13 Additional issues created with cross channel distribution 80% to 90% of product launches miss the expected targets t when a multi channel ldistribution ib ti exists (source = Gartner group study 2012) Replenishment rules are different between channels Data, process and management rules are usually contradictory Forecasts and inventory models dl are highly hl challenged hll by unplanned events (lived ex. : 20% on FG creates 250% on material) 25 Work differently with SellThru as unique and shared KPI Working on processes higher speed Lower inventory requirements Quicker replenishments Reactivity to final customer demand Shorter lead times are obtained by Reliability: reduction of internally created variability Elimination of wastes Higher frequency of delivery with smaller lot sizes Bottlenecks identification and elimination 26 13

14 SellThru approach applied The results Suppliers Plants Subcontractors Central warehouse S & OP Regional warehouses Retailers Stores Production Business Unit Distribution Supplier Pushed Pulled Pulled 99% 100% 99% 100% 99% 100% 1 every 25 final customer not satisfied in average Customer 27 Case: Return on experience Effort necessary to strive for best practices and practice them Not enough resources (ex : 250 sites audits not possible) Context created acceptance for self assessment = momentum Key : Self roadmap designed and deployed for manufacturing and suppliers, in order to sustainably improve performance Key: automated replenishment systems to reduce lead times in distribution + DRP to rebalance inventory + staffed flow managers in central and regions 28 14

15 KEY 4 Involve upstream supply network to ensure sustainable success Sergio Boss Dan Plant Director Stanley Raw material supplier Hugo Procurement Manager 29 Marcy Supply Chain Planner Improving everyone s capabilities? 30 15

16 A maturity model becomes necessary to align, educate and sustain action Waste elimination and variability reduction is performed through hquality and lean tools 20% to 60% lead time crunch done with field people Based on the success obtained in speed and inventory, a common maturity roadmap arises Quicker improvement by selfassessment 31 Investigate weak performance areas revealed by low SellThru: scope Source and framework for global and sustainable performance 16

17 Investigate weak performance areas revealed by low SellThru: maturity Source for structuring maturity levels 33 Continuous improvement with a common maturity model : architecture Customer Product Service Processes Durability 4 areas to be explored, step by step, merging the best of Operations Management standards (ISO9000, Lean management, TQM and Sustainability ) 34 17

18 Continuous improvement with a common maturity model : quotation Single and systematic quotation rules for each practice 35 Continuous improvement with a common maturity model Each practice, within each topic, at every maturity level should be quoted in order to have a complete view. Lowest levels show improvement priorities. Example of quotation Quotation should be reviewed every 6 months

19 Continuous improvement with a common maturity model Improve continuously Adapt deployment approach to context 37 KEY 5 Let s share a starter kit for your own journey Anita and Ben Customers 38 19

20 Lessons learned after 5 years of deployment and use of referential Do s Focus on evolution (improvement) not on absolute levell Select actions according to stakes and customer view Periodically re assess where you are, where you go and adjust action plan Perform selfassessment as steering committee activity Don ts Try to perform actions on all and every item set priority Do it for the customer only do it for yourself 39 New operational requirements regarding the supply chain Ability to react quickly in case of Inventory shortage or excess as regards global ldemand d trends Unbalance between demand and delivery capacity in specific points of distribution Consolidated follow up Global inventory level within the whole SC Distribution and location of inventory along the SC 40 20

21 New operational requirements regarding business and monitoring Adapt marketing and merchandising according to product availability issues Development concerns (quality, colors ) Manufacturing issues (capacity, social, technical ) Quick response required by competition offering Share information more frequently along the chain Anticipate risks and trends instead of discovering issues Unpredicted demand (ex. : Madonna s Manhattan bag ) ADAWAT 41 Return on experience using SellThru Do s Share data Know margin of error and have accurate data, instead of investing tremendous efforts in precision that creates inaccuracy Have common definition of KPI s and of the shared KPI SellThru Share objectives and meet frequently to talk issues and news based on the same data 42 21

22 Return on experience using SellThru Don ts Work in silo (responsibility is good, but no cooperation is destructive) Optimize locally only (good for local but counterproductive for client) Divide information and objective in order to better control o 43 How to use SellThru as global KPI? Performance (SellThru) = Actual % Planned % ALE ERT Low interest of customers? Sales efficiency? Advance in manufacturing? Unbalanced inventory? Success beyond forecasts? Manufacturing issues? Too much hard selling? Inventory release too early? 44 22

23 How to use SellThru as global KPI? Performance (SellThru) = Actual % Planned % ACTI ION More promotion? Adjust merchandising? Reducesubcontracting? Run DRP and rebalance? Increase industrial capacity? Speed logistic flows? Manage shortage, set quotas? Suppress special offers? 45 Driving Questions Do you have experience in using sell thru in the endto end supply chain? How would you use selfassessment as an improvement tool? 46 23

24 Thanks for attending the conference Please contact me directly, I d be happy to provide the additional complimentary package below 6 memo cards (1 or 2 pages) How to calculate and use Sell thru monitor Summarized reference for maturity framework Continuous improvement maturity framework List of data required to calculate Sell Thru List of possible use of the monitor on the field A free access to 2 on line services : 1 month for company selfassessment roadmap 1 year access to the book 47 Contact information: e mail: twitter: LinkedIn: Visit: frederic.gaurier@selfperf.com fredgaurier

25 Is the SellThru the new key monitor for an integrated supply chain? by Frederic Gaurier 1. BEST PRACTICES A (1/2). How to calculate SellThru? SellThru (NEW) = Σ SALES to Final Customer Σ MANUFACTURED Finished goods + Global inventory at beginning of period Best practice Range : % Measures : VALUE (In currency) QUANTITY (Number of units) Attention : use same unit price for the ratio in value, otherwise the margin effect will false calculation Both ratios should be the same, if no price effect occurs in points of sale Granularity : Collection/Season, Quarter (For global activity and for marketing) Week, day (For plotting results on a cumulative curve and show trend) Product family (For marketing, merchandising and supply chain monitoring) Item # (For merchandising and inventory management) 50 25

26 A (2/2). How to use SellThru as global business KPI? Performance (SellThru) = Actual % Planned % Best practice ALERT Low interest of customers? Sales efficiency? Advance in manufacturing? Unbalanced inventory? Success beyond forecasts? Manufacturing issues? Too much hard selling? Inventory release too early? ACTION More promotion? Adjust merchandising? Reduce subcontracting? Run DRP and rebalance? Increase industrial capacity? Speed logistic flows? Manage shortage, set quotas? Suppress special offers? 51 B. Investigate weak performance areas revealed by low SellThru Best practice Source for global & sustainable performance Structure used to assess & measure practices periodically Source for maturity 52 26

27 C (1/2). Continuous improvement with a common maturity model Best practice 4 areas to be explored, step by step, merging the best of Operations Management standards (ISO9000, Lean management, TQM & Sustainability ) 53 C (2/2). Continuous improvement with a common maturity model Best practice Example of quotation Single & systematic quotation rules for each practice Each practice, within each topic, at every maturity level, should be quoted in order to complete view. Lowest levels show improvement priorities. Quotation should be reviewed every 6 months. 54 Possible deployment approaches 27

28 Is the SellThru the new key monitor for an integrated supply chain? 2. TAKE AWAY by Frederic Gaurier I. Data required to calculate NB : the SellThru KPI Static data Item description Item unique ID # Classification attributes (sales, marketing, logistics, manufacturing) Lead times (Point of sales replenishment, Distribution warehouses replenishment, manufacturing & assembly, materials reorder cycle) Supply Chain network description Suppliers Manufacturers & subcontractors Warehouses (central, regional ) and wholesalers Points of Sales (stores, e commerce, call centers) Plans & Forecasts Sales forecasts by items, directly or derived from product family forecasts Manufacturing plans (derived from S&OP) Planned projected cumulative SellThru on the period (season, collection, quarter, year ), by week All of the above consolidated as required for reference All data could be collected in a daily bucket (instead of weekly), if the information system is performing enough Take away Dynamic data Sales From manufacturing entities to distribution network To final customers At item # level In quantities & in value (if possible) Inventories in all distribution channels Points of sales Wholesalers Warehouses (regional & central) Consolidated & Calculated Global Sales to final customers by item #, by week Global sales from manufacturers to distribution network, by week Global inventory of finished goods, at item # level Cumulative actual SellThru on the period, by week Grouping by product family or geography as required KPI = Actual Planned 56 28

29 II. Possible use on the field of the SellThru KPI Monitoring Focus by item ID# Spot the preferred color or configuration and adjust inventory, demand or provide advice to sales associates for alternative products in case of shortage Monitor the go for manufacturing level so as to trigger work orders in the workshops and raw material replenishments for suppliers Average of all items of same product family Monitor the success of a product family so as to adjust inventory levels of manufacturing capacity accordingly Adjust merchandising or promotion plan in favor of required family, and move according resources from successful ones Global business or geography Monitor the whole business trends according to plan, taking into account from material suppliers to final customer sales Assess the level of success of the whole product offer on the market Take away Solving issues In case of higher sell trough Spot manufacturing issues if sales are not above expected level (not enough goods released) Procurement shortages? Production issues? Quality causes? Delay in deliveries? Spot the hot products if manufacturing is at expected level (sales higher than expected) Too much special deals? How to increase production capacity? Side effect of other shortage? In case of lower sell trough Spot supply chain issues if sales are not below expected level (too much goods in inventory) Is DRP necessary to rebalance inventory? Delay in deliveries to stores and customers? Actual transit lead times unreliable? Spot the bad products if no inventory shortage exist (sales lower than expected) Would customers like alternative products? Is additional promotion necessary? Is pricing policy relevant? 57 III. Your free access Register now! (1/2) 1 year access to the electronic version of the book "Performance 2.0, a roadmap for company sustainable performance Take away 1 month access to the interactive online selfassessment tool presented duringthe conference (SelfBook content including quotation system and reports) Value = 15. / 20. US$ Value = 150. / 200. US$ 58 29

30 III. Your free access Register now! (2/2) 1. Go to Take away 2. Choose menu Login and I register 3. Make sure to enter the code APICS2012 in Code field when you fill the form On line registration should be done in the timeframe the APICS 2012 Denver conference by 15/11/ Click I register, follow instructions and enjoy