1. Lean and Agile 1 © The Delos Partnership 2004 Lean and Agile Applying the ideas to the Demand side

2. Lean and Agile 2 © The Delos Partnership 2004 The Delos Model Vision Strategy Prioritisation Prioritisation Innovation Innovation Demand Support Supply Supply

3. Lean and Agile 3 © The Delos Partnership 2004 30 18 10 18 14 10 Price isn’t everything… Factors involved in the purchasing decision (%) McKinsey

4. Lean and Agile 4 © The Delos Partnership 2004 Lowest Cost or Different? Price Value: Quality Benefits Aldi Kwiksave Sainsbury Tesco Waitrose Marks & Spencer

5. Lean and Agile 5 © The Delos Partnership 2004 Value & Cost Perceived Value Cost x Rover Ford x Change in Cost Change in Value High Low High

6. Lean and Agile 6 © The Delos Partnership 2004 New value What could be added to the ‘product-service bundle’ that customers would value…  Competitive advantage  Higher pricing e.g. - packaging - delivery - customisation - advice and after service

7. Lean and Agile 7 © The Delos Partnership 2004 Adding value…

8. Lean and Agile 8 © The Delos Partnership 2004 Value position Increasing Value Brand development Tailored service Flexible response Partnership Service support Understanding the customer’s customer Reducing Perceived Costs ( Price) Inventory reduction Reduced stockouts Improved cash flow Reduced handling / order processing

9. Lean and Agile 9 © The Delos Partnership 2004 New Car Value Attributes Importance vs Satisfaction 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Brand Product Characteristics Price Payment Terms Order/Delivery Time Dealer Reputation Staff at the Dealer Dealer Facilities After Sales Service Importance Satisfaction Cardiff Business School New car - Competitive Factors

10. Lean and Agile 10 © The Delos Partnership 2004 Identify Competitive Factors Factor12345 COST Price Pressure Not a key issueOnly fair issueImportantVery importantKey issue Our ability to produce at low cost ? NoneFairReasonableStrongExcellent VOLUME Variation in Sales month to month +/-10 %+/-20 %+/30 %+/-50 %> +/-50 % We can vary production volumes +/-10 %+/-20%+/30%+/-50%> +/50 % MIX Market demand of range 0-45-1920-4950-99> 100 We can easily make 0-45-1920-4950-99> 100 RESPONSE Market Pressure for quick LittleFairModerateGreatKey Our ability to provide quick NoneFairModerateStrongVery capable

11. Lean and Agile 11 © The Delos Partnership 2004 Workshop Workshop on Competitive Factors

12. Lean and Agile 12 © The Delos Partnership 2004 Value Proposition Strategy Sales and Marketing Operations/ Supply Chain Design/ Development Operational Excellence Low number of SKU’s; must forecast Low cost and long runs; assets utilised Simplified designs to reduce cost Customer Intimacy Large range of products Flexible response – any product any time Will reflect customers designs intimately Product Leadership Lots of launches; 80 % fail. Brand leadership. Small runs, capable of trial quantities and failures One step ahead of the consumer

13. Lean and Agile 13 © The Delos Partnership 2004 Product Mapping Volume Demand variability Demand lead time Variety Product Life Cycle Margin (profitability) % cost breakdown (labour content)

14. Lean and Agile 14 © The Delos Partnership 2004 Volume Clusters AB ‘Runners’ ‘Repeaters’ ‘Strangers’ SALES PRODUCTS C

15. © The Delos Partnership 2004 Product profiles AB D C Sales Volume time

16. Lean and Agile 16 © The Delos Partnership 2004 High Demand Variability Low Low Volume High Volume / Variability Analysis

17. Lean and Agile 17 © The Delos Partnership 2004 High Demand Variability Low Low Volume High Volume / Variability Analysis

18. Lean and Agile 18 © The Delos Partnership 2004 MRP scheduling Modular design Skill flexibility Mixed model cells Collaborative forecasts Design for postponement Kanban to stock point Mixed model cells Flexible working hours Spare capacity Collaborative forecasts MRP scheduling Modular design Mixed model cells Collaborative forecasts Kanban scheduling Focussed factories Dedicated cells Calculated forecasts High Demand Variability Low Low Volume High Operations / Design impact

19. Lean and Agile 19 © The Delos Partnership 2004 UK Turkey UKTaiwan High Demand Variability Low Low Volume High Clusters: Supply chain design

20. Lean and Agile 20 © The Delos Partnership 2004 Map the process – value–add? Retail Outlet Retail Outlet Consumer Customer ? Customer Distribution Customer Distribution Europe Americas Far East Europe Our Company Suppliers Transport GOODS INFORMATION Shareholders/Stakeholders

21. Lean and Agile 21 © The Delos Partnership 2004 Forecasting/Demand Strategy Runners Repeaters Strangers Make to Stock – End item Forecast Assemble to Order – Family Forecast Forecast of capacity required

22. Lean and Agile 22 © The Delos Partnership 2004 Forecasting Needs a Simple Process Filter Demand Execute Forecast Capture Actual C O N S E N S U S F O R E C A S T Review Commercial Plans Review Exceptional Demand Hold Demand Review Assumptions written down and agreed

23. Lean and Agile 23 © The Delos Partnership 2004 Sales Forecasting: Inputs New Customers New Products Pricing Initiatives Advertising And Promotions Cannibalisation Customers Own Forecast Competitors Activity External Factors

24. Lean and Agile 24 © The Delos Partnership 2004 Customer Relationship Management Strategy Customer relationship Manager Sales and Marketing System Forecast Plan Manufacturing And Purchasing ERP System Consensus Forecast

25. Lean and Agile 25 © The Delos Partnership 2004 Get Input From Customer’s Plans Will require understanding of Customers Plans Needs effective Sales Planning Process May be linked into Customer Replenishment Planning Process

26. Lean and Agile 26 © The Delos Partnership 2004 Alignment with Customers Customer Company Customer Now? Future!  Common Language  Their Financial year data  Common measures  Customer Service  Customer Profit  Common logistics Company Customer Common Objectives Common Objectives

27. Lean and Agile 27 © The Delos Partnership 2004 COLLABORATIVE PLANNING - PROGRESS Data Exchange Vendor Managed Inventory Co-Managed Inventory Trading Partnership Integrated Planning and Replenishment Ability to view customer data No management process Possibly available on Internet Agreed process for managing inventory (VMI) – supplier’s problem! Supplier schedules provided Agreed process for managing inventory Mutual availability of data and plans in joint systems Supplier schedules provided, and forecasts provided. Mutual sharing of long term plans Full briefing on long term strategy Joint improvement activities Joint forecast review Joint agreement on business plans and inventory strategy Joint improvement activities Time

28. Lean and Agile 28 © The Delos Partnership 2004 COLLABORATIVE FORECASTING CPR Collaborate Plan Replenish SEAMLESSSEAMLESS CUSTOMER OUR COMPANY Vision Strategy Prioritisation Prioritisation Innovation Innovation Demand Support Supply Supply Vision Strategy Prioritisation Prioritisation Innovation Innovation Demand Support Supply Supply

29. Lean and Agile 29 © The Delos Partnership 2004 Customer Relationship Strategy Design Purchase Intermediate Manufacture Sub-assemble Finish Distribute Where Do you meet The Customer ? StockTo Order End item Forecast Capacity Forecast Family Forecast

30. Lean and Agile 30 © The Delos Partnership 2004 Periods123456789101112 Forecast25 20 Actual Demand Proj Avail Balance 7550250502505030106545 Available to Promise Cumulative ATP Master Schedule 75 End Item Level Forecast Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100

31. Lean and Agile 31 © The Delos Partnership 2004 Global Supply Chain Planning Extension of make to stock environment Used when geography separates make from sell Allows for visibility in chain to maximise inventory control

32. Lean and Agile 32 © The Delos Partnership 2004 Global Supply Chain Planning Bill of Distribution Same Product Code : Location code needed

33. Lean and Agile 33 © The Delos Partnership 2004 Periods123456789101112 Forecast25 20 Warehouse Demand Actual Demand Proj Avail Balance Available to Promise Master Schedule 150 Master Schedule UK Part Number: 12345 Lead Time: 2 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 300 Location : 001 UK

34. Lean and Agile 34 © The Delos Partnership 2004 Customer Replenishment Planning Same concept as DRP Works off customer forecast - not one’s own Provides visibility of customers’ inventory (consignment and non- consignment) Reduces inventory

35. Lean and Agile 35 © The Delos Partnership 2004 Periods123456789101112 Forecast025 20 Warehouse Demand 100 150 5015010050 Actual Demand 25 Proj Avail Balance 27515075501751501751008060190170 Available to Promise 125015000 Master Schedule 150 Master Schedule - UK Part Number: 12345 Lead Time: 2 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 300 Location : 001 UK

36. Lean and Agile 36 © The Delos Partnership 2004 Periods123456789101112 Forecast520 Actual Demand 15 Proj Avail Balance 60402010080604020100806040 Available to Promise 65100 Master Schedule 100 Planned Release 100 CPR – Customer ABC Part Number: 12345 Lead Time: 2 periods Safety Stock: 20 Min Ord Qty: 100 On Hand: 80 Location : 002 Customer ABC

37. Lean and Agile 37 © The Delos Partnership 2004 Assemble to Order strategy can be supported by Family Forecast Design Purchase Intermediate Manufacture Sub-assemble Finish Distribute Where Do you meet The Customer ? StockTo Order Family Forecast

38. Lean and Agile 38 © The Delos Partnership 2004 Product Variants Blue Pen Part Number 12346 Blue Pen Part Number 12346 Red Pen Part Number 12345 Red Pen Part Number 12345 Black Pen Part Number 12347 Black Pen Part Number 12347 Green Pen Part Number 12348 Green Pen Part Number 12348 VariantForecastActual Blue4050 Red6070 Black3020 Green7060 Total200 How many Nibs And How many Caps and barrels Needed ?

39. Lean and Agile 39 © The Delos Partnership 2004 Planning Family Blue Option Part Number 12346 Blue Option Part Number 12346 Red Option Part Number 12345 Red Option Part Number 12345 Black Option Part Number 12347 Black Option Part Number 12347 Green Option Part Number 12348 Green Option Part Number 12348 Common Parts 46783 Common Parts 46783 Pen Family 43785 Pen Family 43785 20 % = 0.2 30 % = 0.3 15 % = 0.15 35 % = 0.35 Forecast = 200/mth 100 % = 1.0

40. Lean and Agile 40 © The Delos Partnership 2004 Modular Bill Works Best If end item forecasting difficult or impossible because of number of items Manufacturing lead time exceeds competitive lead time

41. Lean and Agile 41 © The Delos Partnership 2004 Customer Relationship Strategy Design Purchase Intermediate Manufacture Sub-assemble Finish Distribute Where Do you meet The Customer ? StockTo Order Capacity Forecast

42. Lean and Agile 42 © The Delos Partnership 2004 Forecast of Capacity Work Centre Number : 41 Cum Lead Time : 6 periods Load Factor : 70% Order 1456 : Item 1435 100 units 1.1 hours per unit = 110 hours Order 1567 : Item 1325 200 units 1.2 hours per unit = 240 hours Periods12345678910111213 Forecast0000004256 Actual Demand 56 14 Proj Avail Balance 0000000000000 Available to Promise 4256 Cumulative ATP 4298154210266322378 Master Schedule 56

43. Lean and Agile 43 © The Delos Partnership 2004 Forecast Accuracy  Definition  Purpose  Horizon  Source of Information  Percent of items within a tolerance  Assess the degree of flexibility required by the supply side and to improve the process  Cumulative lead time (= purchasing plus manufacturing LT)  Forecasting module  Sales module

44. Lean and Agile 44 © The Delos Partnership 2004 Forecast Accuracy Report - MAD GroupProductForecastActualError% Error Product Group A Product 123100120+2020 Product 456200150-5025 Product 789300330+3010 Total600 017 % Product Group B Product 345200300+10050 Product 567500300-20040 Product 890600700+10017 Product 678200400+200100 Total1500170020040 %

45. Lean and Agile 45 © The Delos Partnership 2004 Forecast Accuracy Above Target

46. Lean and Agile 46 © The Delos Partnership 2004 Forecast Quality and Bias Graph Forecasts to display Bias Bias

47. Lean and Agile 47 © The Delos Partnership 2004 Demand Planning 1.Categorise Product Range and Customer Base 2.Determine appropriate stocking/forecasting strategy 3.Forecast at highest level possible 4.Measure accuracy of forecasts to eliminate variation.