1 © The Delos Partnership 2003 Strategic Operations Planning One set of numbers at all times.

1 © The Delos Partnership 2003

Strategic Operations PlanningStrategic Operations Planning

One set of numbers at all times


ABC CompanyABC Company“‘We want to deliver Quality products to our customers, competitively priced, delivered on time. We will ensure that are employees are satisfied with their work and will consider this a fun place to be, and we will take care of the environment.” said the mission statement at the entrance.Sales have just tendered for a big contract which will mean significant extra business above the business plan. It is not long till year end, and if they get the order then the Sales and Marketing Director will get a bonus for exceeding his target. Customer Services will be working late tonight to catch up with the backlog of orders.Logistics 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 Logistics Director meets monthly, individually, with the Sales Manager to get a feel for the market. Then he meets with his Master Scheduler, compares his ideas with past history and they finalise the Forecast and Production Plan. 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.The Manufacturing Director has just come back from a course. He has come back 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 Distribution director believes that demand is increasing, so is going to open a Central Distribution centre just outside Paris. Development 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. The result has been a “buy” recommendation for the shares.

Would you buy the shares in this company ?


Objectives for Strategic Operations Objectives for Strategic Operations PlanningPlanning

• One set of numbers at all times

• Integrated Plans

• Teamwork

• Decisions made in timely fashion

• Consistent performance measures


Conflicting objectives ?Conflicting objectives ?

Inventory/Capacity

Customer Service

ManufacturingCosts

ManufacturingFlexibility


Conflicting objectivesConflicting objectives

Finance

Marketing

Manufacturing Sales


Vertical Functional OrganisationVertical Functional Organisation

MDMD

SalesSales MarketingMarketing TechnicalTechnical OperationsOperations FinanceFinance HRHR

R& D

R& D

MKTG

MKTG

SALES

SALES

OPS

OPS

ACCTS

ACCTS

HR

HR

Directors

Managers

Supervisors/Team Leaders


Functional MeasuresFunctional Measures

Paul RobinsM anufacturing D irector

J ames RobertsSales and M arketing D irector

Chris EvansFinance Drector

Phil H ouseT echnical D irector

J ohn SmithM anaging D irector

Actual Volumevs Budget

Actual Salesvs Budget

InventoryLevel

ProjectBudgets

Leads to Silo Management Mentality Leads to Silo Management Mentality


Disintegrated Business PlanningDisintegrated Business Planning

Long termplan

Short termPlan

Medium TermPlan


Lack of VisibilityLack of Visibility

05

10152025

303540

4550

Sales Cont'n Net Profit

Last YrBudgetYTD

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…


Disintegrated Business PlanningDisintegrated Business Planning

Annual operatingPlan

Master ProductionSchedule

SupplierSchedule

FactorySchedule

£’s/Euros

18 months

1/ year

SKU’s

12 weeks

1/week


Strategy vs ExecutionStrategy vs Execution

““It is not so much the strategy that causes It is not so much the strategy that causes the failure. 80 % of companies fail to the failure. 80 % of companies fail to execute their strategy”execute their strategy”

- Kaplan and Norton : “Strategy Focussed - Kaplan and Norton : “Strategy Focussed

Organisation”Organisation”

““It is not so much the strategy that causes It is not so much the strategy that causes the failure. 80 % of companies fail to the failure. 80 % of companies fail to execute their strategy”execute their strategy”

- Kaplan and Norton : “Strategy Focussed - Kaplan and Norton : “Strategy Focussed

Organisation”Organisation”


An Alice in Wonderland World ?An Alice in Wonderland World ?“Cheshire Puss” – said Alice – “ Would you tell me, please, which way I ought to go from here ?”

“That depends a good deal on where you want to get to” said the cat.

“I don’t much care where, so long as I get somewhere” said Alice

“Then it doesn’t matter which way you go” said the Cat.


Vision and StrategyVision and Strategy

• Vision– Clear statement of direction– Understood by all

• Strategy– Means of getting there– Requires clear focus

• Operational Excellence• Customer Intimacy• Product Leadership


Setting the VisionSetting the Vision

•Simple•Owned by the Managing Director•Understood by everyone•Visible•e.g. Simply the best


Vision – Messier DowtyVision – Messier Dowty


StrategyStrategy

Clear Focus on overall strategy– Strengths/Weaknesses/Opportunities/

Threats– Market Position– Competitive Position– Technological Position


Strategic ChoicesStrategic Choices

Key Strategic Choices– Operational Excellence

– Customer Intimacy

– Product Leadership


WorkshopWorkshop

Where are you now, and where do you want to be in 5 years time ?

• OPERATIONAL EXCELLENCE

• CUSTOMER INTIMACY

• PRODUCT LEADERSHIP


TeamworkTeamwork

With a common vision and a strategy there is a chance to develop common

•Objectives

•Commitment

•Team direction


Supporting ProcessesSupporting Processes

There are three key supporting processes– Innovation

• New products• New processes

– Customer Relationship management• Sales linkage• Marketing linkage

– Supplier Relationship management


Delos Business ModelDelos Business Model

Strategy

PrioritisationPrioritisation

Changes

Vision

Demand Supply

Support


Management of InnovationManagement of InnovationNeeds Management across all the projects


Demand Planning Needs a Simple Demand Planning Needs a Simple ProcessProcess

FilterDemand

Execute Forecast

CaptureActual

C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T

Review Commercial Plans

Review ExceptionalDemand

Hold Demand Review

Assumptions written down and agreed


Master SchedulerMaster Scheduler

Strategy

Master Scheduler

Sales Forecasts

CustomerOrders

ManufacturingPlan

PurchasingPlan

MRPSystem

Balanced PlanBalanced Plan


In Balance ?In Balance ?

0

20

40

60

80

100

120

140

1 3 5 7 9 11

Demo Cap

Req Cap



• Which customer gets preference

• Spares or Original Equipment

• New product versus existing product

• Which market gets supply

Must be balanced


SOP Gap AnalysisSOP Gap Analysis

Strategic planStrategic plan

Time Now

SOP ForecastSOP Forecast

Actual statusActual status

years

profitprofit

outputoutput

revenuerevenue

profitprofit

outputoutput

revenuerevenue

What is the GAP and what are the action plans to close it?What is the GAP and what are the action plans to close it?



Annual OperatingPlan

Monthly Review

Master ProductionSchedule

SupplierSchedule

FactorySchedule

Volume [Family]Value42 months horizon

Volume [Family]Value30 months horizon

Volume SKUValue18 months horizon

Volume [Part number]Value18 months horizon


MeasurementMeasurement

What gets measured is whatGets done

What gets measured is whatGets done

Actual versus Budget

Actual versus target

Actual versus Budget

Actual versus target

Traditional Measures


On track …On track …“From looking at the wake behind the ship, I cansee we are still on course…”


Delos Business ModelDelos Business Model

Strategy


Changes

Vision

Demand Supply

Support


Goal DeploymentGoal Deployment

EmployeesOwner

Supply ChainOwner

InnovationOwner

CommunityOwner

CustomerOwner

ShareholderOwner

TARGETSSenior Management

Business Support

Supply Management

Demand Management

New Activity Management

PERSPECTIVE

Process Owners

GOALS

Objectives

PROCESS


Velocity MeasureVelocity Measure

STORE

STORE

INSPECT

INSPECT

RECEIVE

RECEIVE

PICK

PICK

RUN

RUN

INSPECT

INSPECT

STORE

STORE

RUN

RUN

INSPECT

INSPECT

STORE

STORE

Elapsed Time

VAVA VAVA

Velocity % = sum of Value Added Time [VA]-------------------------------------

Total Elapsed Time


Integrated BusinessIntegrated Business

VisionAnd Strategy

Processes

People

Improvement

Measures

CustomerService

ShareholderPerformance

Innovation

Suppliers



• Needs a vision and strategy

• Requires integration of the key processes

• All-embracing performance measures– Measuring processes and not people

• Aim is to manage change effectively in pursuit of increased shareholder value

1 © The Delos Partnership 2003 Strategic Operations Planning One set of numbers at all times.

Documents

Transcript of 1 © The Delos Partnership 2003 Strategic Operations Planning One set of numbers at all times.