Implementing Replenishment in a Hi-Tech Environment

Transcription

1 Implementing Replenishment in a Hi-Tech Environment A Teledyne DALSA Case Study long lead times high mix low volume high variability Presented By: Paul Balmforth, Teledyne DALSA Duncan Patrick, CMS Montera Inc. June 5, TOCICO. All rights reserved. 1

2 Objectives Share what we learned about TOC Replenishment and how we advanced this great solution Share some of our implementation insights Share some of our detailed methodologies and approaches 2

3 Contents An Overview of Teledyne DALSA 8 Messages to Share Summary and Discussion 3

4 Teledyne DALSA - EveryWhereYouLook 4

5 Teledyne DALSA Leverage image sensor design (CCD+CMOS) and our own CCD wafer foundry Depth of technology and breadth of product offering Provide a total package of vision components (sensors, cameras, imaging processing and software to tie it all together) Unique proficiency in developing custom products Image Sensors Secure supply of silicon wafers Digital Cameras Frame Grabbers Image Processing Software Smart Cameras We are the digital imaging industry s only completely vertically integrated supplier, offering Silicon to Smart Cameras 5

6 About Teledyne DALSA DWO Manufacturing employees, generated $140m sales revenue in Organised into 4 self contained business units ( Value Streams ) KPI driven. Formal monthly reviews against GOPs. Frame Grabbers, approx. 45,000 units in ASP $500 to $2, products. Standard Product Cameras, approx. 40,000 units in ASP $500 to $15, Products. Standard Product Sensors, approx. 75,000 units in ASP $100 to $2, Products. ASCFO and semi custom, approx. 1,000 units in ASP $2,000 to $300, products 6

7 Teledyne DALSA TOC Journey Q4, 2009 TOC Operations Training Q1, 2010 TOC Application Assessment Q2, 2010 TOC Executive Training Q3, 2010 DBR Pilot in Sensor Value Stream Q1, 2011 CDR Design in Camera Value Stream Q2, 2011 CDR & DBR Full Scale Rollout 7

8 Results Then and Now Key Performance Measures Then (Jan 2011) Customer Lead Time Median % Orders Shipped in 2 days % Orders Shipped < 1 week % Orders Shipped in < 3 weeks 12 Days 10% 22% 40% On-Time Delivery to Customers 85% RM Part Availability 65% FG Availability 62% Now (Mar 2012) 6 Days 19% 38% 76% 97% 97%+ 97%+ FG Inventory Turns (replenished) n/a 10X 8

9 Customer tolerance time is significantly shorter than Total Supply Time 16 Weeks, Large MOQ Sensor - Wafers 10 to 12 Weeks, Large MOQ Sensor - Glass & Package 8 to 16 Weeks, Medium MOQ Printed Circuit Board Assemblies Teledyne DALSA Customers 4 to 8 weeks, Large MOQ Metal Work Manufacturing Lead Time 3 to 10 Days Other Hardware Customer Lead Time Request 1-2 wks 9

10 Characteristics Demand can be highly variable more than 10x Demand is often low volume but repetitive High number of finished goods and RM parts Ongoing technical revisions make Product Life Cycle of RM Parts much shorter than Finished Goods Some very long supplier lead times and large MOQs relative to demand Unpredictable and potentially very large yield loss on Wafers Ongoing management pressure to increase inventory turns 10

11 Implemented CDR and DBR 16 Weeks, Large MOQ Sensor - Wafers 10 to 12 Weeks, Large MOQ Sensor - Glass & Package 8 to 16 Weeks, Medium MOQ PCBA TDALSA Customers 4 to 8 weeks, Large MOQ Metal Work Manufacturing Lead Time 3 to 10 Days Other Hardware Customer Lead Time Request 1-2 wks 11

12 Top 8 Messages to Share 8. Get the Necessary Buy In for the Cultural Change 7. Abandoning the Forecast is a Leap of Faith 6. Reducing Supplier Lead Times means helping Suppliers establish their own strategic Stock Buffers 5. Size Stock Buffers to better handle Long Lead Times and Large MOQs 4. The timing of the orders in the buffer is not less important than the total amount in the buffer 3. Waiting for Inventory to stay too long in the red zone is too late to re-size for LLT items 2. Align Buying Structure to be more Sales Focused vs. Supply Focused 1. Implement a Replenishment Policy Matrix Item and Order 12

13 Message #8 Get the Necessary Buy In for the Cultural Change Established Self Managed Value Streams with a focus on clear metrics and goals, exposed problems demonstrating the need for step function change in performance Introduced TOC principles to key influencers in Teledyne DALSA, showing the need for change and the possibilities with TOC Introduced TOC to every person in Manufacturing via The Goal movie sessions with stop/go and questions. Shared the vision across the company Implemented Pilot DBR, winning the Team of the Year Ensured my team and I Walked the Talk to keep TOC as the only path 13

14 Message #7 Abandoning the Forecast is a Leap of Faith The forecast was a crutch for operations, all hiring, material purchases, facility expansion was related to the forecast High backlog was seen as a positive measure of business health The JR rule had stood unchallenged for 20 years, multiply starting backlog by 2.5 and you have the Q billings Post CDR and DBR we have two quarters at 4.7 and 4.1 multiples of the starting backlog Forecast accuracy at the part number level was an impediment to Manufacturing Typical accuracy of the forecast was 15%, leading to ordering the wrong material and building the wrong product 14

15 Message #6 Reducing Supplier Lead Times means helping Suppliers establish their own strategic Stock Buffers EXAMPLE 16 weeks SLT $3M On-Order Then Now Component Suppliers Component Suppliers SLT < 6 wks Component Suppliers SLT > 6 wks 1 to 40 weeks SLT Purchase to Order Purchase to Stock $300K potential liability PCBA Supplier Avge - 50 components / PCBA Max 120 components Total components 2 week Mfg. LT PCBA Supplier 300 Components with SLT>6 wks 60 Components unique to TD 8 weeks SLT $1.5M On-Order TD PCBA 40 PCBA TD PCBA 40 PCBA Inventory Liability savings moving from 16 wks to 8 wks $1.5M savings less $300K 15 potential liability

16 MC across SLT Message #5 Size Stock Buffers to better handle Long Lead Times and Large MOQs Demand Driven MOQ Driven Definitions Supply Constraints AC across SLT AC across SLT OLT Order Lead Time SLT Supply Lead Time AC across SLTV MC-AC across SLT SLTV MOQ Supply Lead Time Variability Minimum Order Quantity MC across OLT MOQ Demand AC Average Consumption ½ MC across OLT ½ MC across OLT MC Maximum Consumption The size of the zones change according to the demand variability and lead time structure The bigger the OLT or MOQ, the bigger the yellow zone The longer the SLT, the bigger the green zone 16

17 Message #4 The timing of the orders in the buffer is not less important than the total amount in the buffer OLT = 1 week; MOQ = 24; SLT = 8 weeks; AC = 12 / wk On Order Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8 Then 72 Now OLT = 1 week; MOQ = 1; SLT = 6 weeks; AC = 10 / wk On Order Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8 Then 50 Now Having enough on order to keep the Buffer full is not sufficient you need to have visibility of PO frequency and timing in the pipeline Supply Pipeline Health 17

18 Supply Pipeline Health ABC 3476 ABC 3476 The purpose of Supply Pipeline Health is to have visibility into the nature and structure of the On Order Supply 18

19 Message #3 Waiting for Inventory to stay too long in the red zone is too late to re-size for LLT items Long Lead Time RM Resizing Actual RM AC : Buffered RM AC Actual RM AC : FG AC Notes Increase if > by 120% Approx. Equal Use Actual AC Consideration - Actual AC measurement 60d, 120d, 180d Chose to use 60d to 120d for Increases and 180d for decreases 19 > First confirm if Inventory Adjustment or unexpected Yield < First confirm if FG stock reduction Decrease if < 50% Approx. Equal Only go half way > See above < See above

20 Buyer 1 Supplier Account Manager 1 Buyer 2 Supplier Account Manager 2 Buyer 3 Supplier Account Manager 3 Genie Falcon Piranha 2 Spyder 2 Spyder 3 Minerva Sirius Rigel Other Genie Falcon Piranha 2 Spyder 2 Spyder 3 Minerva Sirius Rigel Other Message #2 Align Buying Structure to be more Sales Focused vs. Supply Focused Sales Forecast to Production Forecast into MRP Commodity PCBAs PCBA Suppliers THEN Camera Families Commodity Wafers / Packages / Glass W / P / G Suppliers Commodity Metalwork / Hardware MW / HW Suppliers Camera Family Group A Buyer 1 Commodity PCBAs Supplier Account Manager 1 PCBA Suppliers NOW Camera Families Replenish Stock Buffers Camera Family Group B Buyer 2 Commodity Wafers / Packages / Glass Supplier Account Manager 2 W / P / G Suppliers Camera Family Group C Buyer 3 Commodity Metalwork / Hardware Supplier Account Manager 3 MW / HW Suppliers - Buying to ensure complete camera supply - Much easier to ensure alignment between RMSB and FGSB - Better suited to re-size RM Parts as demand changes for FG parts - Helps buyer to better understand the product and market to make better decisions 20

21 Message #1 Implement a Replenishment Policy Matrix Item and Order Parts PTS Parts PTF FG - MTS A: <=6 per Tx B: All FG - MTO A: >6 per Tx C: All 45% of Volume 50% of Volume 5% of Volume The Replenishment Policy should not only be ITEM specific it should also be ORDER specific Typically, customers were willing to wait for larger orders (>6) MTS Lead Times offered at 1 week or less MTO Lead Times offered at 2 weeks plus 21

22 Summary - 8 Messages to Share 8. Get the Necessary Buy In for the Cultural Change 7. Abandoning the Forecast is a Leap of Faith 6. Reducing Supplier Lead Times means helping Suppliers establish their own strategic Stock Buffers 5. Size Stock Buffers to better handle Long Lead Times and Large MOQs 4. The timing of the orders in the buffer is not less important than the total amount in the buffer 3. Waiting for Inventory to stay too long in the red zone is too late to re-size for LLT items 2. Align Buying Structure to be more Sales Focused vs. Supply Focused 1. Implement a Replenishment Policy Matrix Item and Order 22

23 Presenter Bios Paul Balmforth, BSc Paul Balmforth is Vice President of Teledyne DALSA Digital Imaging where he is focused on exploiting competitive technical product design advantages to maximize profit through innovative manufacturing processes. Prior to Teledyne DALSA, Paul successfully implemented DBR into Seagate Microelectronics, where he held the position of Director of Process Engineering. Paul was first exposed to The Goal as a Staff Process Engineer at National Semiconductor. Paul holds a Bachelor of Science (Honours) from Lancaster University. 23 Duncan Patrick, MBA, CMC Duncan Patrick is Executive Vice President of CMS Montera Inc. where he is working with clients to assist them design and implement Theory of Constraints based solutions focused on accelerating project execution, optimizing production execution and synchronizing inventory replenishment. Prior to CMS Montera, Duncan was a member of the senior leadership team of an industrial distributor, consulting manager at Ernst & Young, and Landman with Husky Oil. Duncan holds an MBA degree from the Richard Ivey School of Business, Western University and a Bachelor of Commerce degree (with distinction) from The University of Calgary. Duncan is certified by the Theory of Constraints International Certification Organization in all aspects of TOC. Duncan is also a Certified Management Consultant from the CAMC.