Lean and Agile 1 © The Delos Partnership 2004 Lean and Agile Applying the ideas to the Demand side.

Lean and Agile 1 © The Delos Partnership 2004

Lean and AgileLean and Agile

Applying the ideas to the Demand side


The Delos ModelThe Delos Model

VisionVision

StrategyStrategy

PrioritisationPrioritisation

InnovationInnovationDemandDemand

SupportSupport

SupplySupply


30

18

10

18

14

10

Price isn’t everything…Price isn’t everything… Factors involved in the purchasing Factors involved in the purchasing decision (%)decision (%)

McKinsey


Lowest Cost or Different?Lowest Cost or Different?

Price

Value:•Quality•Benefits

Aldi

Kwiksave

Sainsbury

Tesco

Waitrose

Marks &Spencer


Value & CostValue & CostPerceivedValue

Cost

x Rover

Ford x

Change in Cost

Change in Value

High

Low

Low High


New valueNew value

What could be added to the ‘product-service bundle’ that customers would value…

Competitive advantage Higher pricinge.g.

- packaging- delivery- customisation- advice and after service


Adding value…Adding value…


Value positionValue position

Increasing Value • Brand development• Tailored service • Flexible response • Partnership• Service support• Understanding thecustomer’s customer

Reducing Perceived Costs ( Price)• Inventory reduction• Reduced stockouts • Improved cash flow• Reduced handling / order processing


New Car Value Attributes Importance vs Satisfaction

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Brand

Produ

ct Cha

ract

erist

ics

Price

Paym

ent T

erm

s

Order

/Deli

very

Tim

e

Dealer

Rep

utat

ion

Staff

at th

e Dea

ler

Dealer

Fac

ilities

After S

ales

Servic

e

Importance

Satisfaction

Cardiff Business School

New car - Competitive FactorsNew car - Competitive Factors


Identify Competitive FactorsIdentify Competitive Factors

Factor 1 2 3 4 5CC

OO

SS

TT

Price Pressure Not a key issue Only fair issue Important Very important Key issue

Our ability to produce at low cost ?

None Fair Reasonable Strong Excellent

VV

OO

LL

UU

MM

EE

Variation in Sales month to month

+/-10 % +/-20 % +/30 % +/-50 % > +/-50 %

We can vary production volumes

+/-10 % +/-20% +/30% +/-50% > +/50 %

MM

II

XX

Market demand of range

0-4 5-19 20-49 50-99 > 100

We can easily make

0-4 5-19 20-49 50-99 > 100

RR

EE

SS

PP

OO

NN

SS

EE

Market

Pressure for quick

Little Fair Moderate Great Key

Our ability to provide quick

None Fair Moderate Strong Very capable


WorkshopWorkshop

Workshop on Competitive Factors

Workshop on Competitive Factors


Value PropositionValue Proposition

StrategyStrategy

Sales and Marketing

Operations/

Supply Chain

Design/

Development

Operational Operational ExcellenceExcellence

Low number of SKU’s; must forecast

Low cost and long runs; assets utilised

Simplified designs to reduce cost

Customer Customer IntimacyIntimacy

Large range of products

Flexible response – any product any time

Will reflect customers designs intimately

Product Product LeadershipLeadership

Lots of launches; 80 % fail. Brand leadership.

Small runs, capable of trial quantities and failures

One step ahead of the consumer


Product MappingProduct Mapping

• Volume

• Demand variability

• Demand lead time

• Variety

• Product Life Cycle

• Margin (profitability)

• % cost breakdown (labour content)


Volume Clusters Volume Clusters

A B

‘Runners’

‘Repeaters’

‘Strangers’

SA

LE

S

PRODUCTS

C

© The Delos Partnership 2004

Product profilesProduct profilesA B

DC

SalesVolume

time


0%

50%

100%

150%

200%

250%

300%

350%

£0 £20,000 £40,000 £60,000 £80,000 £100,000 £120,000 £140,000 £160,000 £180,000 £200,000

Holding magnets

D-Range UK

Special

Soleniod Valves

AC Laminated

Tubular

Coils

Fluid Power

D-Range FW

Televisions

CD Players

DVD Players

Speakers

Amplifiers

Visual Display

Ancilliaries

Servicing

Installation

High

DemandVariability

Low

Low Volume High

Volume / Variability Volume / Variability AnalysisAnalysis


• MRP scheduling• Modular design• Skill flexibility• Mixed model cells• Collaborative forecasts

• Design for postponement• Kanban to stock point• Mixed model cells• Flexible working hours• Spare capacity• Collaborative forecasts

• MRP scheduling• Modular design• Mixed model cells• Collaborative forecasts

• Kanban scheduling• Focussed factories• Dedicated cells• Calculated forecasts

High

DemandVariability

Low

Low Volume High

Operations / Design impactOperations / Design impact


UKTurkey

UK Taiwan

High

DemandVariability

Low

Low Volume High

Clusters: Supply chain Clusters: Supply chain designdesign


Map the process – value–add?Map the process – value–add?RetailOutlet

RetailOutlet

Consumer

Customer ?

CustomerDistribution

CustomerDistribution

Europe

Americas

Far East

Europe

Our CompanyOur CompanySuppliersSuppliers TransportTransport

GOODSGOODS

INFORMATIONINFORMATION

Shareholders/Stakeholders


Forecasting/Demand StrategyForecasting/Demand Strategy

• Runners

• Repeaters

• Strangers

• Make to Stock – End item Forecast

• Assemble to Order – Family Forecast

• Forecast of capacity required


Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process

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


Sales Forecasting: InputsSales Forecasting: Inputs

• New Customers• New Products• Pricing Initiatives• Advertising And Promotions• Cannibalisation• Customers Own Forecast• Competitors Activity• External Factors


Customer Relationship Customer Relationship ManagementManagement

Strategy

Customer relationshipManager

Sales and Marketing

SystemForecast

Plan

ManufacturingAnd Purchasing

ERPSystem

Consensus ForecastConsensus Forecast


Get Input From Customer’s Get Input From Customer’s PlansPlans• Will require understanding of Customers

Plans

• Needs effective Sales Planning Process

• May be linked into Customer Replenishment Planning Process


Alignment with CustomersAlignment with Customers

Custo

mer

Company

Customer

CustomerCustomer

Now?

Future! Common Language

Their Financial year data

Common measures Customer Service Customer Profit

Common logistics

Company

Customer

CommonObjectivesCommon

Objectives


COLLABORATIVE PLANNING - COLLABORATIVE PLANNING - PROGRESSPROGRESS

Data Exchange

Vendor Managed Inventory

Co-ManagedInventory

Trading Partnership

Integrated Planningand Replenishment

•Ability to view customer data•No management process•Possibly available on Internet

•Agreed process for managing inventory (VMI) – supplier’s problem!

•Supplier schedules provided

•Agreed process for managing inventory•Mutual availability of data and plans in joint systems•Supplier schedules provided, and forecasts provided.

•Mutual sharing of long term plans•Full briefing on long term strategy•Joint improvement activities

•Joint forecast review•Joint agreement on business plans and inventory strategy

•Joint improvement activities

Time


COLLABORATIVE COLLABORATIVE FORECASTINGFORECASTING

CPR• Collaborate

• Plan

• Replenish

SEAMLESS

CUSTOMER

OUR COMPANY

VisionVision

StrategyStrategy



SupportSupport

SupplySupply

VisionVision

StrategyStrategy



SupportSupport

SupplySupply


Customer Relationship Customer Relationship StrategyStrategy

Design

Purchase

Intermediate Manufacture

Sub-assemble

Finish

Distribute

WhereDo you meetTheCustomer ?

StockTo Order

End itemForecast

CapacityForecast

FamilyForecast


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Actual Demand

Proj Avail Balance

75 50 25 0 50 25 0 50 30 10 65 45

Available to Promise

CumulativeATP

Master Schedule

75 75 75

End Item Level Forecast End Item Level Forecast

Part Number: 12345 Lead Time: 2 periods Safety Stock: 0 Min Ord Qty: 75 On Hand: 100


Global Supply Chain Global Supply Chain PlanningPlanningExtension of make to stock environment

Used when geography separatesmake from sell

Allows for visibility in chain to maximise inventory control


Global Supply Chain Global Supply Chain PlanningPlanning

Bill of Distribution Same Product Code :Location code needed


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 25 25 25 25 25 25 25 25 20 20 20 20

Warehouse Demand

Actual Demand

Proj Avail Balance


Master Schedule

150 150 150 150 150 150

Master Schedule UKMaster Schedule UK

Part Number: 12345 Lead Time: 2 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 300Location : 001 UK


Customer Replenishment Customer Replenishment PlanningPlanning• Same concept as DRP

• Works off customer forecast - not one’s own

• Provides visibility of customers’ inventory (consignment and non-consignment)

• Reduces inventory


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 0 25 25 25 25 25 25 25 20 20 20 20

Warehouse Demand

100

150

50 150 100 50

Actual Demand

25

Proj Avail Balance

275 150 75 50 175 150 175 100 80 60 190 170


125 0 150 0 0

Master Schedule

150 150 150 150 150

Master Schedule - UKMaster Schedule - UK

Part Number: 12345 Lead Time: 2 periods Safety Stock: 50 Min Ord Qty: 150 On Hand: 300Location : 001 UK


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 5 20 20 20 20 20 20 20 20 20 20 20

Actual Demand

15

Proj Avail Balance

60 40 20 100 80 60 40 20 100 80 60 40


65 100 100

Master Schedule

100 100

Planned Release

100 100

CPR – Customer ABCCPR – Customer ABC

Part Number: 12345 Lead Time: 2 periods Safety Stock: 20 Min Ord Qty: 100 On Hand: 80Location : 002 Customer ABC


Assemble to Order strategy Assemble to Order strategy can be supported by Family can be supported by Family ForecastForecast

Design

Purchase


Sub-assemble

Finish

Distribute


StockTo Order

FamilyForecast


Product VariantsProduct Variants

Blue PenPart Number 12346

Blue PenPart Number 12346

Red PenPart Number 12345

Red PenPart Number 12345

Black PenPart Number 12347

Black PenPart Number 12347

Green PenPart Number 12348

Green PenPart Number 12348

Variant Forecast Actual

Blue 40 50

Red 60 70

Black 30 20

Green 70 60

Total 200 200

How manyNibs

And

How manyCaps and barrelsNeeded ?


Planning FamilyPlanning Family

Blue OptionPart Number 12346

Blue OptionPart Number 12346

Red OptionPart Number 12345

Red OptionPart Number 12345

Black OptionPart Number 12347

Black OptionPart Number 12347

Green OptionPart Number 12348

Green OptionPart Number 12348

Common Parts46783

Common Parts46783

Pen Family43785

Pen Family43785

20 % = 0.2

30 % = 0.3

15 % = 0.15

35 % = 0.35

Forecast = 200/mth

100 % = 1.0


Modular Bill Works BestModular Bill Works Best

• If end item forecasting difficult or impossible because of number of items

• Manufacturing lead time exceeds competitive lead time


Customer Relationship Customer Relationship StrategyStrategy

Design

Purchase


Sub-assemble

Finish

Distribute


StockTo Order

CapacityForecast


Forecast of Capacity Forecast of Capacity

Work Centre Number : 41 Cum Lead Time : 6 periods Load Factor : 70%

Order 1456 : Item 1435 100 units 1.1 hours per unit = 110 hours

Order 1567 : Item 1325 200 units 1.2 hours per unit = 240 hours

Periods 1 2 3 4 5 6 7 8 9 10 11 12 13

Forecast 0 0 0 0 0 0 42 56 56 56 56 56 56

Actual Demand

56 56 56 56 56 56 14

Proj Avail Balance

0 0 0 0 0 0 0 0 0 0 0 0 0


42 56 56 56 56 56 56

CumulativeATP

42 98 154 210 266 322 378

Master Schedule

56 56 56 56 56 56 56 56 56 56 56 56 56


Forecast AccuracyForecast Accuracy

Definition

Purpose

Horizon

Source of Information

Percent of items within a tolerance

Assess the degree of flexibility required by the supply side and to improve the process

Cumulative lead time (= purchasing plus manufacturing LT)

Forecasting module Sales module


Forecast Accuracy Report - Forecast Accuracy Report - MADMAD

Group Product Forecast Actual Error % Error

Product Group A

Product 123 100 120 +20 20

Product 456 200 150 -50 25

Product 789 300 330 +30 10

Total 600 600 0 17 %

Product Group B

Product 345 200 300 +100 50

Product 567 500 300 -200 40

Product 890 600 700 +100 17

Product 678 200 400 +200 100

Total 1500 1700 200 40 %


Forecast AccuracyForecast Accuracy

Forecast Accuracy by Family

0%

10%

20%

30%

40%

50%

60%

Family A Family B Family C Family D Family E Family F

Family

% accuracyTarget

Above Target


Forecast Quality and BiasForecast Quality and Bias

0

5

10

15

20

25

30

35

40

% of Items

Normal

Graph Forecasts to display Bias

Bias


Demand PlanningDemand Planning

1. Categorise Product Range and Customer Base

2. Determine appropriate stocking/forecasting strategy

3. Forecast at highest level possible

4. Measure accuracy of forecasts to eliminate variation.

Lean and Agile 1 © The Delos Partnership 2004 Lean and Agile Applying the ideas to the Demand side.

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Transcript of Lean and Agile 1 © The Delos Partnership 2004 Lean and Agile Applying the ideas to the Demand side.