Date post: | 29-Oct-2014 |
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Managing Risk Through Marching to the Same Drum
The Planning Rhythm
charlotte diener consulting llc
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Changing Variables in the Supply Chain
Market ExpansionDesign
Growth
Global Manufacturing Footprint
Customer Facing Risks- Intense and fast-paced
competition- Increasing customer
expectations- Fast product lifecycle
management pressures
Supply Risks- Expanding global supply
chains- Supplier financial
solvency/decisions
Macro/Environmental Risks- Terrorism- Weather
charlotte diener consulting llc
YOUR LOGOPage 3
Some risks are predictable and repeated- Customer forecasts- Cycle time variances- Transportation lags during peak seasons
• Some risks are predictable, but intermittent– Factory transfers– Supplier relationship issues
• Some risks are unpredictable– Robbery– Yield busts– “Acts of God”
Predictability of Risk Varies
charlotte diener consulting llc
YOUR LOGOcharlotte diener consulting llc
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The Supply Chain Must Manage Risk to Create Business Value
The over-arching objective for Supply Chain Managers is to provide time-appropriate supply allowing the company to:
Build Revenue
While the supply chain continually
Cuts Costs
Loss of revenue is the biggest risk to any business
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Step 1 =Plug Into the Corporate Strategy to See the Score
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Tactical Planning = Rhythm
Execution = Drum Beat
Strategy =
Sheet Music
Capacity Inventory Product
Demand
Financial
Horizon 12 – 36 months out
charlotte diener consulting llc
YOUR LOGOPage 6
The Information Management Challenge
CorporateStrategy
Information Flow
Customer Expectations
Product Design
Product Flow
Demand Creation
Capacity Alignment
FinishedGoods
DieWafers
Suppliers Customers
Supply Chain Management must complete the circuit by plugging into flows
and connecting with the corporate strategy charlotte diener consulting llc
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Step 2 = Establish the Timing Rhythm
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Tactical Planning = Rhythm
Execution = Drum Beat
Strategy =
Sheet Music
Capacity Inventory Product
Demand
Financial
Horizon 4 - 6 months out
charlotte diener consulting llc
YOUR LOGOcharlotte diener consulting llc
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Use the S&OP Process to Establish Rhythm
S&OP Meeting
Demand Review
New Products Review
Financial Review
Resources
Focus Areas- Demand
Management
- Capacity Planning
- Design / Engineering
- Master Scheduling
- New Product Introduction and Strategic Initiative Integration
Integrates demand and supply planning, inventory planning, new product introduction, financial planning, and strategic initiatives to achieve improved business results
Each meeting (or regularly scheduled conversation) has a separate focus
Tracks events, and their movement around the loop for disposition
Supply Review
Start
Process Map
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Demand Review
Start
Setting the Quarter Target(One Quarter Out)
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Quarterly Consensus Demand Review
- Triangulate across multiple domains
- Sales Operations – Bottoms up customer driven forecast
“Which customer wants what and what is the priority?”
Business Management – Event based forecasts – Confidence Curves
“Which new products are strategic to what strategic customers?”
- Supply Chain Organization – Trend and collaborative forecasts
“What is the actual order history vs. the forecast?”
Leads the meeting/conversation
charlotte diener consulting llc
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Setting the Quarter Target(One Quarter Out)
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• Supply Management – Supplier capacity commitmentsWhat are the supplier commitments?
• Manufacturing/Operations Management – Manufacturing Plan “What actions are necessary to maximize output to demand?”
Supply Chain Organization – Supplier Schedules and Customer Commitments
“What can we deliver and when?”
Quarterly Supply Review
- Shows potential demand/supply mismatches
Leads the meeting/conversation
Supply Review
charlotte diener consulting llc
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Setting the Quarter Target(One Quarter Out
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Quarterly Financial Review
- Establishes the Quarterly Revenue target/projection
• Sales Management – Review demand forecastWhat are the most probable, high and low side forecasts?
• Supply Chain Management – Review supply forecast“What is the most probable, high and low side output?”
• Business Management – Review competitive landscape“What must we do to maintain or grow market share?”
Finance Management – Review financial commitments“What number do we need to achieve?”
Leads the meeting/conversation
Financial Review
charlotte diener consulting llc
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Hold the S&OP Meeting to Set the Target Rhythm
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Meeting is held quarterly, BUT
The review is for
Current Quarter+2 through Current Quarter +6
Sales/Marketing – Long term market and customer driven forecast“What design wins do we have and what is happening with the customers’ business and
the market?”
Business Management – Strategic revenue forecasts -Event based forecasts – Confidence Curves
“”What do we think will happen?”
Supply Chain Organization/Operations – Supply forecasts – New suppliers – Capacity outlook
“What supply is in place for the medium term and what is happening with the suppliers?”
Finance – Forecast reconciliation“How does this picture correlate to our current outlook?”
Any of these groups can lead the meeting/conversation charlotte diener consulting llc
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Check for Potential Rhythmic ChangesThe New Product Review
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Meeting is held quarterly, BUT:
The review is forCurrent Quarter+2 through Current Quarter +6
Any of these groups can lead the meeting/conversation
TD/Design Management – Tape out forecasts – new designs in the pipeline – new technology requirements
“”What do we need from others to make these products successful?”
Sales/Marketing – Long term customer design win forecast“What design wins do we have, when does the customer need the parts, what is the
sample plan, what is the competition doing?”
Supply Chain Organization/Operations – Supply forecasts – New suppliers – Capacity outlook“What supply is in place for these designs and when will samples be available?”
New Product Review
charlotte diener consulting llc
YOUR LOGOPage 14
Step 3 = Establish the Drum Beat
Tactical Planning = Rhythm
Execution = Drum Beat
Strategy =
Sheet Music
Capacity Inventory Product
Demand
Financial
Horizon – Current Quarter
charlotte diener consulting llc
YOUR LOGOcharlotte diener consulting llc
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Monitor the Drum Beat
Continuous Planning checks the drum beat and keeps the rhythm. It integrates the connections between the outer loop, inner loop, and execution as well as moving the processes around their cycle.
S&OP Meeting
Demand Review
New Products Review
Financial
Review
Supply Review
Supply Gap Review
Demand Gap Review
New Products Status
Goals
Trends
Execution
Quarterly Cycle
Bi-weekly
Cycle
Plans
EventsGaps
Gaps
ActionsGaps
Goals ActionsGaps Actions
Financial Gap Review
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Supply/Demand Gap Review
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Meeting is held bi-weekly or weekly
Objective: One current, common, actionable plan to meet the target
Focus on TODAY
Business Management – Backlog review vs forecast“”Where is our backlog today vs our forecast for the quarter?”
• Finance – Backlog review vs. forecast“”Where is our backlog today vs. our forecast for the quarter?”
• Sales/Marketing – Market and customer action review“What can we do to close additional turns business?”
• Supply Chain Organization/Operations – Production review“Is all the available backlog scheduled? Can we pull-in more to meet customer request?
Do we need to build inventory for expected orders?”
Demand Gap ReviewSupply Gap Review
Note: If on allocation, the demand review should be held before the supply review, not concurrentlyLeads the meeting/conversation
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Financial Decision Gap Review
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Meeting is held bi-weekly or weekly
Objective: One current, common, actionable plan to meet the target
Focus on TODAY
• Business Management – Part by part actions“”Where are the drop-offs vs. last quarter? ”
Finance – Compile and Publish “the Plan”“”What is the action plan and can we get there?”
• Sales/Marketing – Market and customer action review“What can we do to close additional turns business?”
• Supply Chain Organization/Operations – Inventory, Lead-Time, Capacity Review“What inventory should we push? Can we adjust lead times? What capacity is under-
utilized
Financial Gap Review
Leads the meeting/conversation
charlotte diener consulting llc
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New Product Status
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New Product StatusMeeting is held bi-weekly
Objective: All hands on deck to launch successfully
TD/Design Management – Tape out forecasts and actuals – new designs in the pipeline
“”Are we on time? ”
Sales/Marketing – Long term customer design win forecast“What design wins do we have and what is the priority for
samples?”
Supply Chain Organization/Operations – Supply updates“What actions need to be taken urgently to ensure that samples
will be available?” Any of these groups can lead the meeting/conversation
charlotte diener consulting llc
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Closing the LoopPossible Rhythm Beat
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Continuous Planning integrates the connections between the outer loop, inner loop, and execution as well as moving the processes around their cycle.
S&OP Meeting
Demand Review
New Products Review
Financial
Review
Supply Review
Supply Gap Review
Demand Gap Review
New Products Status
Goals
Trends
Execution
Quarterly Cycle
Bi-weekly
Cycle
Plans
EventsGaps
Gaps
ActionsGaps
Goals ActionsGaps Actions
Financial Gap Review
Tuesday
Tuesday
Thursday
Thursday Week 11
Week 9Week 8
Week 6
Week 7
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Why Run to a Drumbeat?What Happens if You Don’t?
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• One number planning with no drumbeat review neglects variability and risk• Lots of data churning, little luxury of analysis• Too many unpleasant surprises
Product Lifecycle Mgmt disconnected to to Demand ManagementNew products create chaos, not revenue
Demand Planning and Review
Supply Planning and Review
Product Planning
Financial Review
S & OP
Potential of not meeting demandUnhappy customers
No Manual Rationalization ProcessNo scenario capabilityInefficient manufacturing
No risk scenario capabilityNo early warningFinancial surprises
Management Review
No review of numbersMeeting the target is achieved at the last minute, if at all
charlotte diener consulting llc
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Benefits of Drumbeat Planning
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New Products lead to upside revenue Company develops a reputation of innovation
Demand Planning and Review
Supply Planning and Review
Product Planning
Financial Review
S & OP
Achievable plan to meet customer demand existsCustomer communications are easierSales people spend time selling, not expediting
Time and discipline for analysisImproved communications with ManufacturingMinor course corrections are possible
Realistic expectations are setNo financial surprisesCapital planning and utilization is improved
Management Review
Achievable targets are set Early warning is in placeAction can be taken to mitigate risk
charlotte diener consulting llc
YOUR LOGOPage 22
Benefits of Drumbeat Planning
* Place your footnotes here
These benefits are possible if:
Process
S&OP is treated as a continuous process, not a management driven “event”
Process metrics defined and monitored
Process playbooks are defined
People
People are given the right responsibility, authority, and accountability
Systems
Systems capabilities support the process
Systems are flexible to change as business changes
charlotte diener consulting llc
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More Information
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If you need
more information and details
to schedule a review of your processes and systems
to implement a Planning Rhythm in your company
Contact Charlotte Diener Consulting
602-703-0529
charlotte diener consulting llc