Post on 02-Jul-2015
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Synchronisation
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What’s happening in the UK drinks industry?
Market trends and factors:
❑ Beer consumption declining slowly (1% pa)
❑ Shift from pubs to home consumption (on to off trade)
Last year: 3% reduction in on-trade volumes offset by 2% growth in off trade
Margins smaller in off trade
Supermarket buyers - no brand loyalty - squeezing margins
❑ Shift from pints to PPLs eg Miller, Bud
❑ Emergence of ‘Pub Groups’, like the Supermarkets, squeezing margin
❑ Pub chains ‘doing’ supply chain management
❑ Sector is a laggard in service performance
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Typical supply chain- the ring of stock
Supply chain diagnostic:❑ Too much stock, in the wrong place❑ Expensive, poor quality supply chain❑ Arcane working practices❑ No central visibility or control
Pub
Pub
Pub
Pub
PubPub
Fully stocked depotBrewery
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More advanced supply chain
Brewery
Pub
Pub
Pub
Pub
PubPub
RDC Stockless depot
Features:❑ Lower stock levels held further up supply chain❑ Central control of inventory and service❑ Short response times❑ Smaller total asset base
Stock
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Advantages of stockholding hubs
❑ Move stock buffer further up supply chain, from a local to regional level
❑ Bring real demand closer to manufacturing
❑ Strip out unnecessary network costs due to demand distortion
However,
Maintaining service requires a synchronised supply chain
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What is synchronisation?
❑ In principle; moving the supply chain from “push” to “pull”, creating a make to order supply chain
❑ In practice; making today what was sold yesterday, or
brew to forecast, package to sales :
❑ Pre-Requisites include
a daily supply chain planning cycle
removing internal sources of ‘demand distortion’
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1 2 3 4 5 6Sales
Getting Production closer to Sales
❑ Synchronisation is a technique that couples final production and distribution to customer sales.
Supply chain driven by manufacturing push
Manufacturing synchronised to sales
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Moving the ‘De-Coupling’ Point
De-coupling point
PackagingFiltration
Brewing and Fermentation
De-coupling point
Forecast drives most supply chain activities
Forecast drives
brewing and
fermentation
Filtration, packaging and replenishment driven by real customer demand
Customer
demand
ColdCondit -ioning
BrightBeer
Replenishment Stock in Depot
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Internal Demand Distortion
❑ Factors distorting demand, preventing synchronisation include :
Sub-optimal supply chain planning by sequential process owners
Lack of trust
Conformance to plan
Manufacturing and packaging batch sizes
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LBA Sales Depot. Order DRP Production PackagingFunctions
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Required changes to planning cycle
❑ Weekly Planning Cycle- eg Brewing
M T W T F M T W T F
M T W T F M T W T F
Plan Stock
Replenish stock
Plan Stock
Replenish stock
❑ Daily Planning Cycle (Assumes 48 hr order leadtime)- eg network DRP
Reaction time to forecast changes drops 10 to 3 working days
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The impact of Synchronisation - Triple play charts for Cans
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Group canningTotal group cans - Actual picture
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Group canningTotal group cans - Synchronisation
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Impact on Supply Chain & Stock Deployed
Synchronisation facilitates a change in stock deployment strategy :
❑ Provides large reduction in cycle stock of major products.
❑ The requirement to hold safety stock against forecast error reduces by moving stock further up the supply chain- eg:
Forecast error by SKU at depot = 20%+
Forecast error by SKU by region = 3-6%
Forecast error by liquid level (national) = 0.5-3.0%
❑ It also requires an integrated approach to planning across supply chain functions
End to end visibility of capacity and demand
Establishing a consistent planning drumbeat throughout the supply chain
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Flexibility to adjust ‘A’ product volumes on daily pack frequency
gives large-scale finishedgoods stock reductions
Minor products will be‘packed to liquid’
to reduce CCT storagerequirement.
Product Type Make Planning Class Frequency Flexibility
A Keg Daily Daily volumes varied in line with sales. Higher WIP stocks provide reactivity
B + C Keg Bi-weekly or Volumes adjusted in line weekly with sales, but within fixed
sequence
A Bottle Bi-weekly or Volumes varied in line with weekly sales. Higher WIP stocks
provide planning flexibility
B + C Bottle Fortnightly/monthly Volumes adjusted at SKU fixed cycle. SKUs level, but restricted to grouped on plan by ‘liquid group’ batch size. Common liquid Fixed cycle and liquid batch
restrictions apply
Setting up demand based production templates
What might this mean across the portfolio ?
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Setting up the demand based production templates: example
Week: 29 30 31 32Line 1 11 10 9 8Line 2 14 13 12 13Line 3 5 6 5 5Total 30 29 26 26
Total 111 Runs averaging 2,731 Hls
Current Plan Rules
Week: 29 30 31 32Line 1 17 17 17 17Line 2 5 5 5 5Line 3 7 7 7 7
Total 29 29 29 29
Total 116 Runs averaging 2,613 Hls
Synchronised Plan Rules
❑ Example synchronised planning rules
A’s : 81% : Avg volume over 10,000 Hls per week : Daily
B’s : 7% : 5,000 - 10,000 Hls per week : Twice per week
C’s : 12% :Less than 5,000 Hls per week : Every week
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The imperative to trial
It is essential to trial synchronisation prior to making any major process changes to demonstrate:
❑ Synchronisation principles in practice- this fosters confidence
❑ Significant stock reduction of a limited product range by
removing internal demand distortion
using the synchronisation template in daily planning
❑ Weak links in the current supply chain, for example
linkage between distribution, production and material plans
flexibility to changes in forecast
production conformance to plan reliability
forecast accuracy
Lessons learned from trials are of vital importance when rolling out synchronisation
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Synchronisation trials showed stock reduction was possible…..
...but the trials required:❑ consistent data integrity across several systems❑ synchronised manufacturing and network operations❑ significant planning input to manage
Stock reduction trial
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Start of trial
Data from actual trial
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Systems support for integrated planning
❑ In this case, trials demonstrated that synchronisation principles worked in practice, however:
Using current systems these trials are very resource hungry
Managing data across functional boundaries required an integrated system
❑ The key business requirements of the integrated supply chain system were defined...
Global visibility of stock and orders
Single set of numbers
Automation of highly labour intensive planning process
Stock management from maturation vessels to secondary depots
Returns management
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Supply chain systems to support synchronisation
The benefits of synchronisation are enabled by an APS system to support integrated supply chain planning interfaces to the existing IT landsacpe
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ColdConditioning
Physical Supply Chain
Transactional data fed to ERP systems
Demand capture fed from ERP systems
Brewing Packaging Finished GoodsStorage
NetworkReplenishment
SecondaryDistribution
Advanced Planning and Scheduling system
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Summary of planning process
One single supply chain plan in multiple time buckets…
Plan to ForecastRespond to Orders
Packaging schedule• 0-48hours• by hour• by SKU• by line• volumes
synchronised to orders
Constrained capacity horizon
• 3-28 days• by day• by SKU• by line• synchronisation
template applied • activity driven by
forecast
Rough cut horizon• 5-13 weeks• by week• by pack type &
size• by liquid type• by line• synchronisation
template applied• task smoothed
against capacity
IBM Horizon• 4-24 months (or 2
FY ends)• by period• by volume• by liquid type• by pack type &
size• by line• constrained only
by major resource
0 28d 13w2xFY end48h
• Brewing• Materials
procurement• Capacity planning
• Synchronised packaging
• Depot replenishment• Availability to promise
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Conclusion
Synchronisation is a key enabler of a low cost, responsive supply chain….
…it delivers benefits beyond inventory savings
... it is easy to understand and trial (relatively!)
…it delivers early financial benefits