© The Delos Partnership 2007 page 1 Supply Chain Management Introduction to the basic tools and techniques.

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Presentation transcript:

© The Delos Partnership 2007 page 1 Supply Chain Management Introduction to the basic tools and techniques

© The Delos Partnership 2007 page 2 Balancing the objectives Inventory Customer Service Manufacturing Costs Manufacturing Flexibility

© The Delos Partnership 2007 page 3 ABC Company “We want to deliver Quality products to our customers, competitively priced, delivered on time. We will ensure that our employees are satisfied with their work, and we will take care of the environment.” said the mission statement at the entrance. Marketing is in the middle of a special promotion, which has suddenly been arranged. The artwork – as usual- is having to be arranged at short notice for the packaging. Sales have just quoted for a big contract which will mean significant extra business above the business plan. It is two months until year end, and if they get the order then the Sales and Marketing Director will get a bonus for exceeding her target. Customer Services will be working late tonight to catch up with the backlog of orders. Operations has heard the rumour about a 'big order.‘ But they've heard about these before. So they are proceeding with their plans to cancel overtime. The Operations Director meets monthly, individually, with the Marketing managers to get a feel for the market. Then he meets with his Production Planner, compares his ideas with past history and they finalise the Forecast and Production Plan, largely based on history.

© The Delos Partnership 2007 page 4 ABC Company “Corporate are short on Cash Flow, and hence have told the division to implement a cost reduction programme, and to reduce inventory by 20%. The Finance Director is working on ways to do this, however is reluctant to make any write-offs of current obsolete inventory, so is wanting to restrict any further purchases. The Manufacturing Manager has just come back from a course. He has come back with ideas on Total Productive Maintenance, and Operating Equipment Effectiveness. He wants a smaller product range and bigger batches. His basic manufacturing philosophy is that lower costs are achieved through maximising utilisation of machines, keeping direct labour at maximum levels of output. The Distribution manager believes that demand is increasing, so is going to open a Central Distribution centre just outside Coventry. The Development department are in the middle of developing a revolutionary new product, that will dramatically increase market share. However, a minor modification to the product will reduce costs, and enhance the quality. Customer response is excellent. Unfortunately it will delay the launch to Quarter 3 of the next year. The Chairman and the Chief Financial Officer just met with a key group of Stock-market analysts, and have said that cash-flow will improve this year through a radical cost reduction and inventory management programme. Sales and Profit will rise by 20 % next year, which should mean an increase of 25 % in Earnings per share, due to an exciting new product to be launched in Quarter 4 of this year.

© The Delos Partnership 2007 page 5 Signs of problems in company What are the major reasons for failures in providing the customer with what they want and when they want it ? What are the major signs of problems in an organisation when looking around a manufacturing site ?

© The Delos Partnership 2007 page 6 Signs of problems within the company

© The Delos Partnership 2007 page 7 Reasons for problems What are the reasons for the problems that you have identified ? Classify these as either System Process Cultural/Behavioural

© The Delos Partnership 2007 page 8 Causes of Inventory What are the main causes of inventory ?

© The Delos Partnership 2007 page 9 Vertical Functional Organisation MD Sales Marketing Technical Operations Finance HR R&DR&D R&DR&D MKTGMKTG MKTGMKTG SALESSALES SALESSALES OPSOPS OPSOPS ACCTSACCTS ACCTSACCTS HRHR HRHR Directors Managers Supervisors/Team Leaders

© The Delos Partnership 2007 page 10 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

© The Delos Partnership 2007 page 11 Basic Formula Item Data BOM’s And Routes Stock And Capacity Master Schedule ForecastsOrders Suppliers Factories What do they Actually Want ? What have We got ? What does it need ? What do we need to do ? What do we think they Want ?

© The Delos Partnership 2007 page 12 Periods Forecast Actual Demand Proj Avail Balance Available to Promise Cumulative ATP Master Schedule 75 Item Level Forecast Part Number: Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100

© The Delos Partnership 2007 page 13 Customer Profile Customer X 50per month Customer Y 10 per month Customer Z 5 per month Customers A… 35 per month Total =100 per month Forecast at End Item Level

© The Delos Partnership 2007 page 14 Demand Management Horizon PLAN MANAGE EXECUTE Cumulative Lead Time Add or subtract To capacity Strong Link to Integrated Enterprise Planning Process Capacity and Materials “firm” Release Orders Customer Lead Time ?

© The Delos Partnership 2007 page 15 Demand Management Strategy Demand Manager Sales and Marketing System Forecast Plan Manufacturing And Purchasing ERP System Consensus Forecast

© The Delos Partnership 2007 page 16 Master Scheduling – what does it replace? Order point Throw orders into factory and expedite out Standard Lead Times Suppliers must be responsive to our sudden changes in demands We say yes to all orders and pray that manufacturing can respond Whoever shouts loudest gets what they want Firefighting and expediting

© The Delos Partnership 2007 page 17 Objectives of Master Scheduling 1.Provide an achievable plan that drives the company 2.To provide reliable promises to customers 3.Provide stability and efficiency to supply chain 4.Achieve highest possible levels of customer service with optimum inventory

© The Delos Partnership 2007 page 18 Balance of Supply and Demand DemandsSupply

© The Delos Partnership 2007 page 19 Master Scheduling – what is it? Detailed statement of what a company can do by part number in planning system Based on realistic material and capacity plans The basis for promises that customers can rely on, and advice on when products will be available. Provides stability to supply chain People manage; computer calculates Provides the detailed basis for the SOP process.

© The Delos Partnership 2007 page 20 Master Scheduling – how is it done ? The Computer system calculates if demand and supply imbalanced The computer generates action messages Planner responds to action messages and deals with the art of the possible

© The Delos Partnership 2007 page 21 Weeks Forecast Actual Demand Proj Avail Balance Available to Promise Cumulative ATP Master Schedule 75 End Item Level Forecast Part Number: Lead Time: 2 weeks Safety Stock: 0 Min Ord Qty: 75 On Hand: 100

© The Delos Partnership 2007 page 22 Time Fence Policy Horizon PLAN MANAGEEXECUTE Cumulative Lead Time Add or subtract To capacity Strong Link to Sales and Operations Planning Process Capacity and Materials “firm” Release Orders Open SesameFirmNO !

© The Delos Partnership 2007 page 23 Time Fence Policy Should relate to Cum Lt  Requires review of CLT by product  Could be different by product group Should state who can change and when Should be clear about “Emergency Changes”

© The Delos Partnership 2007 page 24 Master Scheduler Strategy Sales Forecasts Customer Orders Manufacturing Plan Purchasing Plan MRP System Balanced Plan Master Scheduler

© The Delos Partnership 2007 page 25 Priority setting The key to determining priorities in any organisation should be the schedule date Not red tags Not three stars, two stars Not driven by output measures The only measure is therefore schedule achievement..

© The Delos Partnership 2007 page 26 The Delos Core Measures 1.Customer Order Delivery – the “Perfect Order” 2.Demand Forecast Accuracy 3.Lead Time Reduction - Demand, Supply and Change 4.Quality, Right First Time – Demand, Supply and Change 5.Schedule Achievement – In-house and outsourced 6.New Product Introduction 7.Velocity – all processes

© The Delos Partnership 2007 page 27 The Core Measures and Financial Effect

© The Delos Partnership 2007 page 28 Result of effective Master Scheduling Everyone uses the planning system  Planner to plan  Manufacturing to make Spreadsheets or planning tools disappear A supply chain that is not jerked around Customers get what they are promised 100 % Customers get what they require 98 % Customers get what they need 100 %

© The Delos Partnership 2007 page 29 New Product Integration Design Purchase Intermediate Manufacture Sub-assemble Finish Distribute Cumulative Lead Time Insert New Products Here Insert New Products Here

© The Delos Partnership 2007 page 30 Innovations Manager Strategy Innovation Manager Development Ideas Project Plans Development Plans Supply Plans Project System Prioritised Plans

© The Delos Partnership 2007 page 31 Policy on MTS/ATO/MTO/ETO Design Purchase Intermediate Manufacture Sub-assemble Finish Distribute Cumulative Lead Time

© The Delos Partnership 2007 page 32 Computer Systems Detailed Execution Master Scheduling needs to be part of a framework Aggregate Planning Strategy Detailed Planning PROGRAMMESPROGRAMMES DEMANDDEMAND SUPPLYSUPPLY MPS SOP WTL

© The Delos Partnership 2007 page 33 Make to Stock Production = Demand Plan + (Inventory Target- Current Inventory) = ) PRODUCTION STOCK

© The Delos Partnership 2007 page 34 Integrated Enterprise Leadership -3-2 Demand Plan 120 Actual Demand Difference 512 Cum Diff 416 Months Last Demand Plan 120 New Demand Plan Difference Cum Diff Months Q4Q Supply Plan 125 Actual Supply Difference Cum Diff Last Supply Plan New Supply Plan Difference Cum Diff Q4Q Stock Plan Actual Stock Difference Last Stock Plan8691 New Stock Plan Difference Q4Q1 91 Make – To- Stock

© The Delos Partnership 2007 page 35 Benefits of Integrated Enterprise Leadership One set of agreed & realistic numbers Balanced load & capacity Plan will be realistic & stable Customer delivery dates will be achievable Proactive not reactive planning Earlier feedback to customers of any changes to the plan Greater ability to deal effectively with non-routine or unanticipated situations A Sound foundation for decisions taken through the IEL process

© The Delos Partnership 2007 page 36 Integration CULTURE/ BEHAVIOUR TECHNOLOGY WAYS OF WORKING Consumer And Customer Focussed Simplicity Itself Delivering Shareholder Value

© The Delos Partnership 2007 page 37 Cultural Issues to tackle “Hope springs eternal” – WSBAR EOMC,EOQC,EOYC Finger pointing Feedback early – not just too late “If it is not Past due then it is not urgent” Inaccurate data Addiction to fire-fighting Priority set by dates and not by shouting loudly