1. West Intro 1 © The Delos Partnership 2005 Integrated Enterprise Leadership An Introduction

2. West Intro 2 © The Delos Partnership 2005 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.

3. West Intro 3 © The Delos Partnership 2005 ABC Company.. Cont’d 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 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 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.

4. West Intro 4 © The Delos Partnership 2005 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 ?

5. West Intro 5 © The Delos Partnership 2005 Signs of problems within the company

6. West Intro 6 © The Delos Partnership 2005 Causes of Inventory What are the main causes of inventory ?

7. West Intro 7 © The Delos Partnership 2005 Conflicting objectives Inventory Customer Service Manufacturing Costs Manufacturing Flexibility

8. West Intro 8 © The Delos Partnership 2005 Conflicting objectives Finance Marketing Manufacturing Sales

9. West Intro 9 © The Delos Partnership 2005 Disintegrated Business Planning Long term plan Short term Plan Medium Term Plan

10. West Intro 10 © The Delos Partnership 2005 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

11. West Intro 11 © The Delos Partnership 2005 Lack of Visibility Year to date is below budget and last year, and therefore there is an urgent need to cut costs, and reduce inventory, in order to improve cash flow…

12. West Intro 12 © The Delos Partnership 2005 Functional Measures Actual Volume vs Budget Actual Sales vs Budget Inventory Level Project Costs Leads to Silo Management Mentality Manufacturing Director Manufacturing Director Sales Director Sales Director Finance Director Finance Director Development Director Development Director Managing Director Managing Director

13. West Intro 13 © The Delos Partnership 2005 The informal company Multiple sets of numbers Multiple spreadsheets Multiple ways of working Confusion over real objectives Defensive functional behaviour Rumours around the corridor Ad hoc communication Short-term focus Heroes are favourites

14. West Intro 14 © The Delos Partnership 2005 Objectives for Integration One set of numbers at all times Integrated Plans Realistic Plans Teamwork Communication of goals and objectives Decisions made in timely fashion Consistent performance measures Delivery of the Strategy

15. West Intro 15 © The Delos Partnership 2005 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

16. West Intro 16 © The Delos Partnership 2005 Strategy vs. Execution “It is not so much the strategy that causes the failure. 80 % of companies fail to execute their strategy” - Kaplan and Norton: “Strategy Focussed Organisation” “It is not so much the strategy that causes the failure. 80 % of companies fail to execute their strategy” - Kaplan and Norton: “Strategy Focussed Organisation”

17. West Intro 17 © The Delos Partnership 2005 Vision and Strategy Vision –Clear statement of direction –Understood by all Strategy –Means of getting there –Requires clear focus Operational Excellence Customer Intimacy Product Leadership

18. West Intro 18 © The Delos Partnership 2005 A Vision or… “We don’t so much have a vision, more a hallucination, really.” Anonymous senior manager, anonymous multinational

19. West Intro 19 © The Delos Partnership 2005 Strategic Choices Key Strategic Choices –Operational Excellence –Customer Intimacy –Product Leadership

20. West Intro 20 © The Delos Partnership 2005 Management of Innovation Integrated Project Management – Programme Management

21. West Intro 21 © The Delos Partnership 2005 Forecasting Needs a Simple Process FilterDemand Computeforecast CaptureActual C O N S E N S U S F O R E C A S T C O N S E N S U S F O R E C A S T Hold Demand Review Agree commercial plans plans Agree Exceptional demand Assumptions written down and agreed ReviewAccuracy

22. West Intro 22 © The Delos Partnership 2005 Master Scheduler Strategy Master Scheduler Sales Forecasts Customer Orders Manufacturing Plan Purchasing Plan MRP System Balanced Plan

23. West Intro 23 © The Delos Partnership 2005 Integrated Enterprise Planning Annual Operating Plan Monthly Review Master Production Schedule Supplier Schedule Factory Schedule Volume [Family] Value 42 months horizon Volume [Family] Value 30 months horizon Volume SKU Value 18 months horizon Volume [Part number] Value 18 months horizon

24. West Intro 24 © The Delos Partnership 2005 Integration of Processes Strategic Review IEP ReviewDemand Plan Master Schedule Project Plan MRP/CRP/ Activities WTL/ Orders/ Tasks How OftenYearlyMonthlyWeeklyDailyHourly WhoBoard ManagersComputer Units£’sFamiliesProductsParts/ Activities Parts/ Tasks Horizon3 years2 years Focus1-3 years0-2 years0 to Cum Lead Time Part Lead Time Time bucketsYearsMonthsWeeksDaysHours Detail

25. West Intro 25 © The Delos Partnership 2005 Traditional Measures Sales versus budget Machine Utilisation Purchase Price Variance Overhead Recovery Headcount Direct Labour Productivity Inventory Level

26. West Intro 26 © The Delos Partnership 2005 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

27. West Intro 27 © The Delos Partnership 2005 The Core Measures and Financial Effect

28. West Intro 28 © The Delos Partnership 2005 Velocity Measure STORESTORE STORESTORE INSPECTINSPECT INSPECTINSPECT RECEIVERECEIVE RECEIVERECEIVE PICKPICK PICKPICK RUNRUN RUNRUN INSPECTINSPECT INSPECTINSPECT STORESTORE STORESTORE RUNRUN RUNRUN INSPECTINSPECT INSPECTINSPECT STORESTORE STORESTORE Elapsed Time VA Velocity % = sum of Value Added Time [VA] ------------------------------------- Total Elapsed Time

29. West Intro 29 © The Delos Partnership 2005 Values of A Six Sigma Company IssueClassicalSix sigma ProblemsFixingPreventing AnalysisExperienceData Process Adjustment Tweaking Statistical Process Control FocusProductProcess BehaviourReactivePro-active ReasoningExperienceStatistical

30. West Intro 30 © The Delos Partnership 2005 Measuring Forecast Accuracy Will Improve the Process

31. West Intro 31 © The Delos Partnership 2005 Integration of Ideas On Time DeliveryCostQuality TQ/6s Needs to useImprovesEssentialTool JITLeanImprovesEssentialToolChallenges ERP II PlanningEssentialTool Feeds Data Uses data

32. West Intro 32 © The Delos Partnership 2005 People Values TraditionalNowFuture Process problems Not my jobOwnershipAccountability Management Style SuperviseFacilitator/ Team Leader Coach Working Style IndividualTeamEmpowered Teams Training and Education Non-existentLuxuryNecessity KnowledgeIgnorantUnderstandsExpert Attitude to People LiabilityCostAsset

33. West Intro 33 © The Delos Partnership 2005 Teamwork With a common vision and a strategy there is a chance to develop common –Objectives –Commitment –Team direction

34. West Intro 34 © The Delos Partnership 2005 Integration – focus and result CULTURE/ BEHAVIOUR TECHNOLOGY WAYS OF WORKING No tools to do the job - - Frustration Formal Procedures in place But nothing to use them With !

35. West Intro 35 © The Delos Partnership 2005 Integration – focus and result CULTURE/ BEHAVIOUR TECHNOLOGY WAYS OF WORKING No formal procedures - - Automated chaos Systems in place But no control Over how to use Them !

36. West Intro 36 © The Delos Partnership 2005 Integration – focus and result CULTURE/ BEHAVIOUR TECHNOLOGY WAYS OF WORKING No hearts and minds - -Alienation System in place Procedures in place But no-one uses them !

37. West Intro 37 © The Delos Partnership 2005 Integration the right blend! CULTURE/ BEHAVIOUR TECHNOLOGY WAYS OF WORKING