Post on 02-Jan-2016
transcript
Supply Chain Planning
Objectives Understand demand management and forecasting
objectives
Understand the terminology and objectives of various levels of planning – S&OP, MRP, DRP, CRP, ERP, APS
Understand how different planning activities relate to each other
Recognize the importance of issues such as data accuracy, lead times, integration, and cross-functional inputs in planning processes
Supply Production Fulfillment
O
per
atio
nal
T
acti
cal
Str
ateg
ic
P
lan
nin
g
P
lan
nin
g
P
lan
nin
g
Supply Chain Design
MaterialsPlanning
ProductionPlanning
DistributionPlanning
Forecasting
Demand Management
Inventory Management
Purchasing
Receiving
ProductionControl
Sales
Shipping
Adapted from Taylor, “A Master Plan for Software Selection, SCMR, Jan, 2004
Sales & Ops Planning (SOP or SIOP)
Demand Planning
Supply Chain Management Planning Matrix
Elements of Demand PlanningElements of Demand Planning
Demand Forecasting Demand Management
Market, Operating, and Business Environment
Pas
t dem
and
valu
es
Env
iron
men
tal f
acto
rs
Exp
ert j
udgm
ents
Pri
cing
Pro
mot
ion
Ord
er s
ched
ulin
g
Forecasts
Plans
Materials andCapacity Planning
and Scheduling
Objectives:• Influence pattern of customer orders to promote
effectiveness and/or internal efficiency• Reduce unpredictable variability of demand
pattern• Set targets to increase marketing & pricing
effectiveness
Many Factors Influence Demand
Internal
Promotions & sales initiatives
Pricing
Product substitution
New product introductions
External
Competitive actions
Economic conditions
Downstream & related products
Components of Demand Base demand Trend Seasonality and cycles Shifts Random variation
When developing forecasts, every effort should be made to consider
all relevant factors, and to eliminate all irrelevant factors
Forecasting Techniques
Judgment-based
• Grass roots
• Market research
• Historical analogy
• Executive judgment
Model-based
• Time-series models
• Causal models
• Simulation
Sta
ble
Sh
ort
Ter
mIt
em L
evel
Un
stable
Lon
ger Term
Aggregate
Ways to Gather and Develop InputsExecutives and experts• Delphi method• Panel consensus• Focused forecasting
Customers and Sales Representatives• Surveys• Focus groups• “Markets”• “Obermeyer” method
Quantitative Methods
Time series modelsMoving average
Exponential smoothing
Regression Causal models
Regression Simulation Others
ttt
t
nt
tt
FdF
ndF
11
1
Ft = a + bt
Ft = B + bd(Dt) + ba(At) + bf(Ft-1)
Evaluating Forecast Models Bias
Mean Absolute Deviation
Mean Absolute Percentage Error
Mean Squared Error
Tracking Signal
MADfdTS
nfdMSE
nd
fdMAPE
nfdMAD
nfdeavgBias
tt
n
tt
n
t
t
ttn
t
tt
n
t
tt
n
tt
1
2
1
1
1
1
1
)100(
The Forecasting Environment
The specific organizational situation must dictate the choice of forecasting technique
• Time horizon/lead time requirements
• Level of detail needed by user
• Range of demand and number of product segments
• Need for early-warning signals and continuing patterns
• Constancy of past performance
• Existing business processes
• Cost of forecasting process versus accuracy of forecasts
Supply Production Fulfillment
O
per
atio
nal
T
acti
cal
Str
ateg
ic
P
lan
nin
g
P
lan
nin
g
P
lan
nin
g
Supply Chain Design
MaterialsPlanning
ProductionPlanning
DistributionPlanning
Forecasting
Demand Management
Inventory Management
Purchasing
Receiving
ProductionControl
Sales
Shipping
Adapted from Taylor, “A Master Plan for Software Selection, SCMR, Jan, 2004
Sales & Ops Planning (SOP or SIOP)
Demand Planning
Supply Chain Management Planning Matrix
Inputs• Inventory
Replishment• Capacity
Constraints• Mix Constraints• Material• Transportation &
Storage
Inputs•Orders on hand•Current Customers•New Customers•Competition•Margin Analysis•New Products•Pricing•Economy
Business Planning(Budget/Forecast)
Un
constrained
Marketin
g Plan
VolumeSales & Operations
Planning
Sales PlanOperations
Plan
Resource P
lan
Detailed Planning & Execution Systems
APS, Production Planning, Plant Scheduling, Supplier Scheduling
S&OP Overview
The S&OP Process
Step 6Execute Action
Plan & Follow-up
Step 6Execute Action
Plan & Follow-up
Step 1Demand Review
• Sales • Program Mgmt.• Other
Step 1Demand Review
• Sales • Program Mgmt.• Other
Step 2Supply Review
• Engineering• Manufacturing• Purch&Matls Mgt
Step 2Supply Review
• Engineering• Manufacturing• Purch&Matls Mgt
Step 3Reconcile &
DevelopAlternatives
Step 5Executive Meeting
• Review of alternatives• Decision making
Step 5Executive Meeting
• Review of alternatives• Decision making
Step 4Financial Review
Step 4Financial Review
ONEPLAN
Step 0Creating
Functional Input
Step 0Creating
Functional Input
Plan Adjustments
S&OP Maturity Model
Adapted from: Lapide, Journal of Business Forecasting, 2005
Stage 1: Marginal Process Stage 2: Rudimentary Process
Stage 3: Classic Process Stage 4: Ideal Process
Informal meetings
-Sporadic scheduling
Formal meetings
-Routine schedule
-Spotty attendance and participation
Formal meetings
-100% attendance and participation
Event-driven meetings
-Scheduled to address changes or supply-demand imbalances
Disjointed processes-Separate, misaligned plans
Interfaced processes-Demand plans reconciled-Supply plans aligned to demand plans
Integrated processes-Demand and supply plans jointly aligned-Collaboration with limited number of suppliers and customers
Extended processes
-Demand and supply plans aligned internally and externally
-External collaboration with all important suppliers & customers
Minimal technology
-Multitude of spreadsheets
Interfaced applications
-Demand planning and multi-facility APS systems interfaced on a one-way basis
Integrated applications
-Integrated demand and supply planning packages
-External information brought in manually
Full set of integrated technologies
-Advanced S&OP workbench
-External facing collaborative software integrated with internal systems
Traditional Measures
-Many metrics, function specific, outcomes only
Interfaced Measures
-Consolidated set of metrics
-Cross-functional awareness
Integrated Measures-Functional and aligned metrics approved by team-SOP process scorecard
Ideal Measures
-Profit-based metrics
-Measures of strategic initiative attainment
Lagging Performance
-Lagging in most dimensions
Matching Performance
-On par with industry averages
Few Bright Spots
-Leading in one or two areas
Industry Leader
-Setting the bar in service, turns, margins
Seven Virtues for Effective Planning
1. Planning objectives and metrics tied to business objectives
2. All relevant stakeholders included
3. Cross-LoB (planning unit) resource or demand requirements identified and rationalized
4. Diversity of information sources and analytical methods
5. Planning frequency consistent with the pace of business
6. Common sense usage of technology as an enabler, not as the executor
7. View planning as a process, and manage accordingly
COMPUTE/SYSTEMS
GROWTH
60’s Automated bill of materials
70’s MRP – Material Requirements Planning
80’s MRPII – Manufacturing Resource Planning
90’s ERP – Enterprise Resource Planning
APS – Advanced Planning Systems
00’s Extended Supply Chain
Planning Systems (Internet based)
BOM
MRPMRPII
ERP
BOM
MRPMRPII
BOM
MRP
BOM
APS Capabilities
Evolution in Planning Systems
Evolution of MRP to MRPII to ERP
Nolan, Brown, Kumar. “Esterline Technologies,” Case teaching note, 2006
8
ERP Functional Components
Accounting
Supply Production Demand
Supply Chain Planning Modules of an ERP System
Ope
rati
onal
Tac
tica
l
Str
ateg
ic
Supply Production Fulfillment
MasterPlanning
MasterPlanningM
PS
MP
SC
RP Capacity
PlanningMR
P MaterialsPlanning D
RP Distribution
Planning
Purchasing
Receiving
SalesInventory
ShippingAccounting
Source: Taylor, “A Master Plan for Software Selection, SCMR, Jan, 2004
The ERP Scheduling Process
DR
PM
PS
MR
PC
RP
DistributionRequirementsPlanning
MasterProductionScheduling
MaterialRequirementsPlanning
CapacityRequirementsPlanning
Distribution Schedule
Master Production Schedule
Procurement Schedule
Production Schedule
Source: Taylor, “A Master Plan for Software Selection, SCMR, Jan, 2004
Forecast
• Combines the finite capacity approach and memory-resident fast planning• Determines a plan that meets all demand needs and supply limitations (feasible
plan)• Optimizes the plan, based on math modeling techniques• Recommends a best overall solution that considers both material and resource
availability
Future Internet-based communication with external suppliers and customers
Supplier resources and capacity Demand forecasts Production schedules
Optimization across the extended supply chain
Advanced Planning and Scheduling Systems (APS)
Improving the System, e.g., Inventory/Service Relationship
Service Level
Inventory Level Company A
Company B
A –> B : Improving within the constraints
Company C
B –> C : Improving the constraints
Reduced product or resource complexity (common typology, reduced # categories)
Modular “product” design
Flexible supply (volume) Close collaboration Excess capacity Frequent planning updates Targeted responsiveness
Direct access to POS data (vertically integrated)
Quick updates to forecasts based on actual demands
Near 100% sales and labor data accuracy
Changing Demand-Supply Planning System Constraints
Faster response
More timely and accurate information
Postponement & complexity
management
More Timely and Accurate Information
Source: http://hbswk.hbs.edu/item.jhtml?id=1624&t=globalization&noseek=one
Key Takeaways
Demand Supply Forecasting and Planning must be viewed as a process, and managed accordingly
Better data and responsiveness relieves pressure on Demand-Supply planning
Operational metrics must avoid emphasizing local efficiency at the expense of global responsiveness