Lecture Series: Consumer Electronics Supply Chain Managementmetin/FuJen/Folios/ce_oem.pdf ·...

2003 © Mohit Juneja & Divakar Rajamani

Lecture Series: Consumer Electronics Supply Chain Management

Mohit Junejai2 Technologies

Divakar Rajamani, Ph.D.University of Texas at Dallas

Center for Intelligent Supply Networks (C4ISN)


Lecture 3: OEMs and Sales Companies Planning Processes

2003 © Mohit Juneja & Divakar Rajamani Slide 3 Center for Intelligent Supply NetworksC4ISN

Agenda

CE Products and Supply Chain StructureCE Planning Processes and RolesOEM and Sales Companies Planning Processes

Demand PlanningSupply PlanningAllocation Planning

Summary: Demand and Supply Balance


CE Products and Supply Chain Structure


PV-SD5000

Digital Still Cameras

Electric Shavers

Plasma TV

VCR’S

End Product Offerings - Diverse Product Range

4-month life cycle

50 % sales done in

December

Hi TechLow turn

High Margin

CommodityLow TechHigh Turn

Low Margin


Consumer Electronics US Market Sales

US Consumers bought 95 billion dollars of CE product in 2002


Supply Chain for End Product


Industry Characteristics4 month lead time

Built to stock Delays,Out of stockOverstocked

Coordination


CE Industry Issues

High degree of parts customizationLong R&D design process timesLong lead time to create additional capacity for custom partsPoor customer service / supply flexibilityLow re-use of partsShort component life cycles leading to service issues

High supply risk due to reliance on custom partsShort product lifecyclesHigh demand unpredictability, inflexible manufacturingUnresponsiveness to demand signals due to manual monthly planningFragmented procurement across factories

Inventory boom-bust cycle (bull-whip effect)Low customer service levelsGeographically fragmented supply chainMargin erosionHigh spares inventory, inconsistent availability

Stock outsReducing marginsHigh logistics costsHigh inventory, store level stockoutsHigh promotions costs

COMPONENTSUPPLIERS

OEMs SALES COMPANIES

RETAILERS


CE Planning Processes and Roles


CO

LLAB

OR

ATIO

NCE Industry Key Planning Processes

DEM

AND

LOG

ISTI

CSAL

LOC

ATIO

N

SupplierCollaboration

FactoryPlanning

CPFR

DemandPlanning

TransportationPlanning

AllocationPlanning

DistributionPlanning

DemandPlanning


ReplenishmentPlanningSU

PPLY

FactoryCollaboration

DemandPlanning


MasterPlanning Factory

Planning


SupplierCollaboration

FactoryCollaboration CPFR

CO

LLAB

OR

ATIO

NCE Industry Key Planning Roles

DemandPlanning

DemandPlanning

DemandPlanningDE

MAN

D



TransportationPlanningLO

GIS

TICS

AllocationPlanning

ALLO

CAT

ION

FactoryPlanning

MasterPlanning

DistributionPlanning

ReplenishmentPlanningSU

PPLY Factory

Planning

MerchandisePlanner

Buyer

LogisticsPlanner

Merchandise &DemandPlanners

DemandPlanner

Procurement Planner

Procurement &Demand, MasterPlanners

Buyer & FactoryPlanners

Master, FactoryPlanner & Buyer

FactoryPlanner

DemandPlanner

DemandPlanner

LogisticsPlanner

LogisticsPlanner


Planning Processes in OEMs and Sales Companies

Demand, Supply and Allocation Planning


Demand and Supply Balance

Demand Planning

Supply Planning

Allocation Planning

Information aboutIndustry growthMarket sharesRegional salesInventory levels PromotionsNew product plans

Consensus withSalesFinanceFactoryMarketing

Unconstrained Demand Plan

Constrained Demand PlanSupply Plan

Constrained Demand PlanSupply PlanAllocation Plan

Allocation Rules byFamilyRegionChannel


Demand Planning

Definition, Process and Organizations


Demand Planning

DefinitionThe Demand Planning process helps predict and influence future sales by customer

BenefitsDecrease inventory obsolescence and mark downsIncrease customer service and fill rates

Sales companies forecast based on shipments and historical sales, market information as well as planned promotions. They forecast across retailers in a market.

OEM’s forecast across sales companies based on market analysis, business plan as well as historical shipments to sales companies.


Demand Planning Process

Basic Data Structure for DPBasic Forecast Types Typical Forecast Generation Process Forecasting Techniques


Basic Data Structure for DP

Organization HierarchyProduct HierarchyTime


Basic Forecast Types

Revenue Forecasting Unit Forecasting

Key ParametersPlanning Horizon : 9 – 24 monthsPlanning Frequency : Weekly/MonthlyPlanning Buckets : Weeks > Months


Typical Forecast Generation Process

Top Down (Strategic)$, Executive, Annual Statistical forecast works hereForecast based on Market Share for Business plan

Bottom Up (Operational)SKU, sales rep, customer, Weekly or MonthlyConsensus forecast works here

Middle Out$, Manager, Weekly or Monthly

Consensus (statistics vs sales rep) / Collaboration (sales rep vs customer)

SKU, Sales rep, customer, Weekly or Monthly


Typical Forecast Generation ProcessSy

stem

Syst

emSa

les

Sale

sM

arke

ting

Mar

ketin

gPl

anne

rPl

anne

rC

usto

mer

Cus

tom

er

1: Baseline Statistical Forecast

(M, W)

2a: Bottom-UpForecast Entry (D)

2b: Bottom-UpForecast Entry (D)

2c: EDI Input (D) 2d: Demand Collaboration (D)

3: Consensus Forecasting

& Set Top Down Business Plan Target

(M)4a: Event Planning

(E)

4b: Event Planning (E)

5: Forecast Netting (D)

6: Aggregation &Comparison to Top

DownTargets (W)

Unconstrained Demand


Forecasting Techniques

Statistical Techniques500 +Exponential SmoothingMoving Average…..


Organization involved in Demand Planning

Sales CompaniesSalesMarketingDemand Planning Group

OEMsDemand Planning Group

Demand Planning

Marketing

Sales

Rule Based

StatisticalAttach Rate

Bottom-Up

Middle-Out

Top-Down

UnitRevenue


Supply Planning Process

Definition, Process and Organizations


Supply PlanningDefinition

The supply planning process optimizes the use of both capacity and material in order to maximize satisfying anticipated demand

BenefitsReduce cost of inventory, expeditingGlobal coordination – sharing information across supply chain entities

Sales companies perform a distribution plancreates the material purchasecreates the inventory deployment across warehouses

OEMs create a capacity and material feasible master plan across factories and make factory sourcing decisions

OEM/Component supplier - Factoryeach factory creates a material and capacity feasible productionschedule and detailed material procurement plan based on its vendor allocation and preference rules


Supply Planning ProcessSupply Planning Process

Sales Companies-Distribution planRequirements plan

Inventory balancing across DC’sMaintain target safety stocksGenerate desired procurement requirement

Inventory deployment planGenerate warehouse allocation

OEM-Master planRequirements plan

Factory sourcingDirect procurement

Inventory deployment planGenerate sales company allocation

Factory planGenerate capacity schedulesGenerate detailed procurement plansGenerate commit against master plan requirement


Supply Planning ProcessIn

vent

ory

Inve

ntor

yFa

ctor

yFa

ctor

ySy

stem

Syst

em 1: Generate Purchase Plan,

constrained, unconstrained

demand

2: Adjust Purchase and

Sales

3: Updated Purchase Plan

4: Factory gets Purchase Plan

5: Factory generates a

commit

6: Updated with Factory Commit

7: Netting Forecast and

Allocation

8: Generate & Update

Warehouse Allocation

9: Adjust Warehouse Allocation

10: Sends Adjustments

and Destinations

11: Factory receives

adjustments and

destinations

Constrained Demand3a: Generate

Factory Allocation


Organizations

OEMProcurement

Purchase Plan (typically alternate suppliers and agreements in place for key components)

Recommended PurchasesExceptions

PlanningMaster Plan

Meet demand at earliest given constraints


Allocation Planning

Definition, Process


Allocation PlanningDefinition

Allocation planning process refers to disaggregating expected supply / commits to the customer against anticipated demand. The order promising function is an extension of allocation planning where a sales order is promised against this allocation.

BenefitsIncreased customer service and retentionIncreased profitsIncreased order promising accuracy – hitting promise dates in execution

Sales companiescreate allocation plans from warehouse / Sales org to different retailers / groups of retailersPromise sales orders against allocated supply

OEMs create allocation plans for allocation of finished goods between various sales companies – this is usually done as a part of the master plan


Allocation Planning Process

Allocation planningData structure for allocation planningRules – FCFS, order priority, customer priority

Order PromisingProvide order shipment date to customersRules – ship complete, ASAP, alternates


Allocation Planning ProcessD

eman

dD

eman

dSy

stem

Syst

em 5: Check Sales orders against

Allocations

4: Review Allocation

3: Generate at Account Level

2: Generate Warehouse Allocation

1: Net Forecast

3a (DP-2d): Demand Collaboration (D)

Cus

tom

erC

usto

mer

6a (DP-6): Aggregation &

Comparison to Top Down Targets (W)


Summary: Demand and Supply Balancing

Generate Statistical Forecast

Generate Constrained Demand &

Purchase Plan

Allocate to Orders

Receive Sales Orders from Customers

Allocate Inventory to

Accounts

Net Orders and Forecast

Create Unconstraine

d Demand

Generate Collaboration & Consensus

Forecast

Send Purchase Plan

to Factories

Create Factory Plan and Confirm

Generate Warehouse Allocations

Generate Purchase

Orders

Receive Inventory at Warehouse

DemandLoop

SupplyLoop

Lecture Series: Consumer Electronics Supply Chain Managementmetin/FuJen/Folios/ce_oem.pdf ·...

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