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The Planning Rhythm: Managing Risk Through Marching to the Same Drum

Date post: 29-Oct-2014
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This presentation shows how a high tech company can plan production in synch with finance and sales to reach target numbers and better serve customers. Posted with permission from Charlotte Diener, who presented on this topic in May 2011, at Momentum, the annual Tensoft FSM User Conference.
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YOUR LOGO Managing Risk Through Marching to the Same Drum The Planning Rhythm charlotte diener consulting llc
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Page 1: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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Managing Risk Through Marching to the Same Drum

The Planning Rhythm

charlotte diener consulting llc

Page 2: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 3: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 4: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

YOUR LOGOcharlotte diener consulting llc

Page 4

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

Page 5: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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Step 1 =Plug Into the Corporate Strategy to See the Score

Page 5

Tactical Planning = Rhythm

Execution = Drum Beat

Strategy =

Sheet Music

Capacity Inventory Product

Demand

Financial

Horizon 12 – 36 months out

charlotte diener consulting llc

Page 6: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 7: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 8: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

YOUR LOGOcharlotte diener consulting llc

Page 8

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

Page 9: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 10: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 11: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 12: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 13: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 14: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 15: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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

Page 17: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 18: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 19: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

YOUR LOGOcharlotte diener consulting llc

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

Page 20: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 21: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 22: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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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

Page 23: The Planning Rhythm: Managing Risk Through Marching to the Same Drum

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More Information

Page 23

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

[email protected]

602-703-0529

charlotte diener consulting llc


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