Rohm and Haas - · PDF fileRough Cut Capacity Planning (RCCP) Master Scheduling (MPS)...

Rohm and Haas- MRP II Class A

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R&H Business Management Evolution

Pre 1985 Mid 1980s to Mid 1990s Post 1995

• Technology-basedCompetition

• Multiple legacysystems &processes

• Regional matrixorganization

• Good prices• Market leadership

despite “Arrogance”• Mediocre customer

service

• Technology-basedCompetition

• Multiple legacysystems &processes

• Regional matrixorganization

• Good prices• Market leadership

despite “Arrogance”• Mediocre customer

service

• Increasing technology &price competition

• Common systemsinstallation/process reengineering projects

• Global, cross functionalbusiness units

• Total Quality Leadership • Customer focus• Better customer satisfaction• Operational scrambling

• Increasing technology &price competition

• Common systemsinstallation/process reengineering projects

• Global, cross functionalbusiness units

• Total Quality Leadership • Customer focus• Better customer satisfaction• Operational scrambling

• Pricing pressure - toughcompetition

• Drive to formal, commonprocesses

• Stronger global scope ofbusiness units andsupport functions

• Redesigned businessmodels/businesspolicies

• Competition based onsupply chain excellence

• Pricing pressure - toughcompetition

• Drive to formal, commonprocesses

• Stronger global scope ofbusiness units andsupport functions

• Redesigned businessmodels/businesspolicies

• Competition based onsupply chain excellence

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R&H Supply Chain Process Vision

3

Delivery

WarehouseOperations

Shipping

FreightPayables

PayingExternalSupply

InternalSupply

Order Entry/Processing

Sales & OperationsPlanning (S&OP)

ShippingWarehouseOperations

Master Production Schedule

Quality Product

Strategic/BusinessPlanning Process

Development Process

Demand Creation Process

Materials/ServicesPlanning

PayingExternalSupply

InternalSupply

TransportationPlanning

Conversion

Production

PlantScheduling

mrp, Procurement,

Paying

Production & QualityReporting

Order Mgmt

Order Entry/Processing

Billing/Collecting

DemandManagement

Planning

Sales & OperationsPlanning (S&OP)

SupplyManagement

Orders

RequiredMaterials/Services

WarehouseOperations

FreightPayables

Objectives

• Understand MRP II Class ‘A’– Principles– Processes– Terminology

• Define Roles • Define benefits

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mrp, MRPII and ERP

• mrp (material requirements planning): methodology developed in 1970’s for planning what raw materials to purchase to meet production schedule in the factory

• MRPII Manufacturing Resource Planning(): business management methodology evolved from “mrp” in the 1970’s/’80’s, covering planning of all resources needed to balance supply & demand in a manufacturing business or company

• ERP (Enterprise Resource Planning): software systems developed in the1990’s to run MRPII business management processes in a more integrated manner across all units and sites of a manufacturing enterprise

5

SAP SoftwareImplementation

Drive to Class ALevels of

Performance

Class ABusinessProcess Design

MRP II Business Process

ERP (SAP/Manugistics)Software Implementation

AchieveClass A

Certification

How are the MRP II andERP Programs Linked?

MRP II / ERP Program Phases

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MRP II Class A BusinessOperational Excellence

• Delivering excellent customer service profitably across complex global supply chains requires:– Excellent business processes– Highly trained people– Integrated software systems

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Basic Supply ChainManagement Process

•What Do We Have

• What Does The Customer Need?

• How Much?

• When?

• Where?

DEMAND

BALANCING

SUPPLY

Forecast

•What Do We Need?

• How Much?

• When?

? Inventory•What Are We Going to Make?

• How Much?

• When MPS?BOM• What Does It Take to Make It?

•How Much RM Do We Have?

mrp

Formal Vs Informal Processes

Informal Processes• “Dueling” data• Disconnected processes• Internal competition• Fuzzy accountability• “Apparent” flexibility

Formal Processes• Common, accurate data• Integrated tools/functions• Cooperative

communication• Clear, measured

accountability• True, disciplined flexibility

MRP II ProcessBusiness Planning

(BP)

Sales & OperationsPlanning(S&OP)

DemandManagement

(DM)

Rough CutCapacity Planning

(RCCP)

MasterScheduling

(MPS)

Material & CapacityPlanning

(MRP & CRP)

ProcessSteps

(Routes)Plant & Supplier

Scheduling

GET?

TAKE?

NEED?

MAKE?

HAVE?

Bills of Material(BOM)

InventoryRecords

(IRA)

WorkCenter

Capacity

10Sell Make DeliverDO!

PLANNING PROCESS SUPPLY CHAIN

CUSTOMERS

S&OPDRP

FORECASTING

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WAREHOUSES

MPS

mrp

SUPPLIERSCHEDULING

APR Whse US Whse

Rohm and Haas Manufacturing

SUPPLIERS

Key MRPII Principles

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• Formal processes (beginning with S&OP at the top)

• One set of numbers used by all• Accurate data• Realistic plans• Disciplined execution of the Plan• Clear Accountability• Metrics with RCCA• “Silence is Approval”

Class A

LevelQualitative

CriteriaQuantitative

Criteria

A

B

C

D

91 - 100%

80 - 90%

70 - 79%

60 - 69%

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EMBG Management Process “Class A” Assessment Scorecard (Summary Level)

Business Unit: __________________________ Site: _________________________ A. General Management Processes A1. Corporate Direction A2. Management - Active Leadership A3. Linkage to Strategic/Business Planning A4. Linkage to Demand Creation Process A5. Linkage to New Product Development Process A6. Employee Education and Involvement A7. TQL Process - Continuous Improvement A8. Financial Processes B. Planning Processes Sales & Operations Planning B1. Sales & Operations Planning Process Demand Management B2. Forecasting and Demand Planning B3. Network Design & Analysis B4. Distribution Planning & Replenishment B5. Collaborative Planning Supply Management B6. Master Production Scheduling B7. Capacity Analysis B8. Kan Ban Planning B9. Financial Analysis C. Materials & Services Supply Processes C1. Planning of External Supply C2. Planning of Internal Supply C3. Transportation & Warehouse Planning D. Order Management Processes D1. Order Entry Processing D2. Billing & Collecting

4321 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----

E. Production Processes E1. Plant Scheduling E2. MRP, Procurement and Paying E3. Conversion E4. Production and Quality Reporting F. Delivery Processes F1. Shipping/Delivery Management G. Data Quality G1. Single Set of Numbers G2. Inventory Record Accuracy G3. Bill of Material Accuracy G4. Capacity Planning Parameter Accuracy G5. Product Change Control Process H. Performance Measurements H1. Customer Service A) External Customer - On Time Delivery B) Distribution - On Time Delivery C) Internal Auto Replenishment-On Time Delivery H2. Sales Forecast Accuracy - Family Level H3. Sales Forecast Accuracy - SKU Level H4. Performance to Production Plan (Family) H5. Performance to Master Production Schedule (SKU) H6. Supplier Delivery to Scheduled Receipt H7. Cycle Time Performance H8. Number of Expedited Shipments and Associated Costs H9. PO to Invoice Variance H10. Percent Rework of Orders H11 Quality Performance H12. Financial Performance

4321 ----- ----- ----- ----- ----- ----- >95% >98% >95% ----- >95% >95% >95% Measured Measured 98%-102% >95% >95% Measured Measured Measured Measured Measured Measured

Overall Score: ______ Class:________Class A = 3.5 → 4.0 Class B = 2.5 → 3.5 Class C = 1.5 → 2.5 Class D <1.5

Class A

Materials FocusedTop Management Allows

Break Even

LevelQualitative

CriteriaQuantitative

Criteria

A

B

C

D

Business WideAll Functions

Top Management UsesSignificant Improvements

Operations FocusedTop Management SupportsMeasurable Improvements

Superficial UseEveryone Ignores

Adds Cost/Confusion

91 - 100%

80 - 90%

70 - 79%

60 - 69%

MRP II Key Metrics

Data Accuracy(BOM, Routings)

Planning / Scheduling

MRP Procurement

Forecast Accuracy

Customer Service

Focus AreaFocus Area

> 98% Accuracy

> 95% Performance to Plan

> 95% Supplier On-Time Delivery

Measured & CI

> 95% On-Time Delivery

OutcomeOutcome

Inventory Record Accuracy > 95% Accuracy

Now?Now?

___

___

___

___

___

___

Root Cause Corrective Action for all metrics 16

System ReliabilityNeed?

80%

Make?Have? Take?

Get?

80%80% 80%

.8 X .8 X .8 X .8 = 41%41%

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Typical Benefits from MRPII Implementation

• Customer Service Improvement– Inventory Reduction– Productivity Increase– Purchase Cost Reduction– Improved Supplier Performance– Reduced Expediting

• Reduced Stress

ABCs of MRPII Class A

PRIORITY• "A"• "B"• "C"

ELEMENT• People (75%)• Data Accuracy (15%)• Computer Systems

(10%)

Designers/Implementers <=> Users

MRP IIBusiness Planning

(BP)


DemandManagement

(DM)


(RCCP)

MasterScheduling

(MPS)


(MRP & CRP)

ProcessSteps


Scheduling

GET?

TAKE?

NEED?

MAKE?

HAVE?


InventoryRecords

(IRA)

WorkCenter

Capacity


SALES & OPERATIONSPLANNING OBJECTIVES1. SUPPORT THE PROFIT PLAN2. SUPPORT THE CUSTOMER 3. INSURE REALISTIC PLANS4. LEAD CHANGE5. MANAGE INVENTORY6. MAKE DECISIONS - RESOLVE ISSUES7. MEASURE PERFORMANCE8. BUILD TEAM WORK!

S&OP - Rolling 24 Month Viewof the Business

Strategic Value Model 10 YRS+

BVM 5 Year PlanProfit Plan1 year

S&OP

Profit PlanYEAR 2

S&OP Process Flow

Communicate toOperations

ExistingDemand Plan

ObtainInput

UpdateDemand Plan

UpdateFinancials

Pre-S&OP Operations Update & Response

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New PlansApproved

CommunicatePlans

S&OPMeeting

Process Excellence – S&OP(Sales & Operations Planning)• General Manager runs the monthly process, it’s “how we run the

business”, not just a meeting • Focus is on future planning and decision making, less on history

(historical review just a basis for future planning)• ERP system forecasts volume/revenue/gross profit, identifies

cost/profit drivers, can re-project upsides/downsides for S&OP • Inventory is planned/actively managed as a result of Sales and

Production executing to the plan• Annual Business Plan (budget) comes directly from S&OP plan • S&OP Team oversees ongoing management of product line,

channels and business policies • Consistent metrics used across all R&H global units, with clear

responsibility/accountability linkages

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S&OP Enables

• Monthly organization alignment on a realistic, achievable, single 18-month plan for the whole business which focuses on customer needs and meets business requirements

• Open and honest communication about issues and plans

• Clear, formal decision making on key issues and business priorities affecting the business

• Continuous improvement with consistent use of metrics, root cause analysis, and corrective action


Demand Management - (DM)• Forecast• Channel Assignment• Customer Segmentation• DRP


(RCCP)

MasterScheduling

(MPS)


(MRP & CRP)

ProcessSteps


Scheduling

GET?

TAKE?

Business Planning(BP)

NEED?

MAKE?

HAVE?


InventoryRecords

(IRA)

WorkCenter

Capacity

Sell Make DeliverDO!

MRP II

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Key Class A Characteristics Demand Management

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• Sales owns the forecast • Demand plan used by all functions• All assumptions tracked for forecast changes• Sales / Marketing track forecast accuracy, have

improvement goals• Demand Manager / Planner reports into Sales

organization• Family plan = sum of detailed plans.• Warehouse stocking is automated using DRP• MTS/MTO categories based on quadrant analysis


(BP)


DemandManagement

(DM)


(RCCP)

MasterScheduling

(MPS)


(MRP & CRP)

ProcessSteps


Scheduling

GET?

TAKE?

NEED?

MAKE?

HAVE?


InventoryRecords

(IRA)

WorkCenter

Capacity


Process Excellence - Supply Management• Master Production Schedules support all sources of Demand and

drive short-term schedules in SAP• Real schedule is in ERP system, no parallel spreadsheets or systems• Performance to Plan/Schedule metrics tracked/improved. Changes

are tracked/ managed formally .• MTS, FTO & MTO schedules meet business policies• The Master Production Schedule (MPS) is capacity feasible (realistic)

for full 18 month planning horizon..• Predictive maintenance and Planned downtime is accounted for in

the Master Production Schedule (MPS)• Effective DRP planning for interregional supply• Aggregate (family) capacity and production plans are built up from

SKU detail

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(BP)


DemandManagement

(DM)


(RCCP)

MasterScheduling

(MPS)


(MRP & CRP)

ProcessSteps


Scheduling

GET?

TAKE?

NEED?

MAKE?

HAVE?


InventoryRecords

(IRA)

WorkCentersCapacity


Data Accuracy Is the Foundation for MRP II Class “A” - and- Trustingthe ERP System

INVENTORYRECORDS

(IRA)

95%

BILLS OFMATERIAL

(BOM)

98%

PLANNINGDATA

(Lead timesOrder QuantitySafety Stock)

>98%

WORKCENTER

ROUTINGS&

CAPACITY

> 95%

Metric = % of records found accurate # of records checked

(“record”, not “aggregate”, level)

Data Cleansing = Event; Data Quality = Process/Prevention 33


(BP)


DemandManagement

(DM)


(RCCP)

MasterScheduling

(MPS)


(mrp & CRP)

ProcessSteps


Scheduling

GET?

TAKE?

NEED?

MAKE?

HAVE?


InventoryRecords

(IRA)

WorkCenter

Capacity


Process Excellence - Material Requirements Planning & Supplier Scheduling

• “mrp” runs routinely, materials needs are projected automatically

• Procurement recommendations are used/trusted; manual PO’s minimized/eliminated

• There are no separate parallel spreadsheets/processes • Planning Data is measured and formally managed• Supplier scheduling automated; where appropriate,

suppliers are responsible for managing our stocks.• Planning data (Safety stocks, lead times , order

quantities) are formally managed. Accountability is clear.

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(BP)


DemandManagement

(DM)


(RCCP)

MasterScheduling

(MPS)


(MRP & CRP)

ProcessSteps


Scheduling

GET?

TAKE?

NEED?

MAKE?

HAVE?


InventoryRecords

(IRA)

WorkCenter

Capacity

Sell Make Deliver 36DO!

Process Excellence – Sell, Make, Deliver

Selling• Real Time ATP enables reliable commitments to customers• Business policies and lead times are formal and honored • Promises to customers are > 95% accurate• Performance vs. requested and promised dates is tracked • Invoices are 98% accurate Making• Real schedule is in the ERP system, no parallel systems• Performance to the Schedule is > 95%, schedule changes managed formally• Real time data entry - Production & QualityDelivery• On time delivery is measured and improved• Warehouse moves and shipments reported in real time• Warehouse staff responsible for FG inventory accuracy

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Sub-processesKey Resource analysis Supplier SegmentationPerformance ManagementContractMaterials requirements planning (mrp)Supplier schedulingSMI / SOI / SOMI

PrinciplesFormal Processes for management of global procurement strategiesAutomatic material releasesSupplier schedules and Long range plans based on our consumption projectionsReal-time entry of receipts into the systemAccurate data on Due Dates for incoming materialsPurchasing responsible for negotiating lowest total costPerformance measurements: vendor rating system (on time delivery, quality, price, technical support, etc.)

External Procurement

Process OutputsFormal Procurement Strategy Action PlansTime-phased delivery schedule for supplyInfo to drive shared cost & inventory reduction

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THE SUPPLY CHAIN ICEBERGTHE SUPPLY CHAIN ICEBERGTHE SUPPLY CHAIN ICEBERG

Unit PriceUnit PriceUnit Price

long lead timeslong lead timeslong lead timesexpeditingexpeditingexpediting

behaviorsbehaviorsbehaviors

changing scheduleschanging scheduleschanging schedulesduplication of effortduplication of effortduplication of effort

multiple inspectionsmultiple inspectionsmultiple inspections

inventoryinventoryinventory

delivery timesdelivery timesdelivery timesrelationshiprelationshiprelationship

minimum batch sizesminimum batch sizesminimum batch sizescomplexitycomplexitycomplexity

reworked productreworked productreworked product

scrap and lossesscrap and lossesscrap and losses

confused communicationsconfused communicationsconfused communicationsreworkreworkrework

quarantined goodsquarantined goodsquarantined goods

Procurement TemplatesTEMPLATE Outputs

Quadrant AnalysisPurchasing Strategy Key Resource Analysis

Supplier Categorization Strategic AlliancePartnerApproved

Performance Management

Formal Expectations

Supplier Performance - good/badEliminate/Add Activities

Contract Process Amended Contract with Current SupplierNew Contract with Current SupplierNew Supplier and New Contract

Key Resource Analysis and Strategy Development

• Decide which purchased resources are key to the business

• Decide and document purchasing strategies• Identify gaps and develop action plans for key

resources

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Performance ManagementExpectation of Suppliers

• Suppliers must understand what is expected of them in an MRP II Class A environment

• Documented in formal contracts• Supplier Education• METRICS with RCCA

(on time delivery, quality, price, technical support, etc.)

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Supplier Selection and Approval

• Purpose is to select and approve new or existing raw material suppliers to fulfill business requirements

• Subprocess of the Contract Process• Applies to suppliers of resources

purchased externally on competitive bids (excluding Stores and MRO)

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ExternalProcurement

Role of Buyers

Monitor supplier performance

Solve major problems

Technology development

• Understand Business Needs

• Value/Costs

• Know the Market

• Source, negotiate & contract

• Manage relationships

• Educate suppliers• Service/Quality

PORTFOLIO ANALYSISPORTFOLIO ANALYSIS

1. Segments the Buyers Expenditure1. Segments the Buyers Expenditure

2. Critiques the Current Practice2. Critiques the Current Practice

3. Establishes a Formal Improvement Plan3. Establishes a Formal Improvement Plan

4. Alignment & Teamwork4. Alignment & Teamwork

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Bottleneck

Routine

Critical

Leverage

HIGH

HIGHLOW

RISK/COMPLEXITY

PROFIT POTENTIAL

Supply Chain ManagementDevelop Contingency SourcesPartnership w/Key SuppliersMed - Long term Contract

Aggressive Cost ReductionSupply Chain ManagementMove to Supplier EconToll ConversionAlliances, Long Term Cost Base Contracts

Streamline Purch. Proc.

Flexible Term Agreement

Market/Spot PricingConsolidate Business1-3 month PricingBid AnnuallyDevelop Multiple Sources

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Quadrant Analysis - Key resource classification

A mapping tool for analyzing market conditions and segmenting key resources into specific classifications to support purchasing strategy development and execution.

Critical: vital and of global importanceUnique qualities are required high expenditure

Bottleneck: single source complex supply chain, unacceptable performance risk to global business objectives.

Routine: multiple sources common specifications andlow value. low market difficulty. .

Leverage: high in expenditures common specifications multiple purchase pointsspot buying - prices are market-driven.

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Supplier Categorization

Strategic Alliance•commitment to Class "A" & CI•The risks and rewards are shared.•All pertinent information shared

•business plans•Supplier Long Range Plans•Supplier Schedules

•Long term contracts required

Partner•commitment to Class "A" & CI•All pertinent information shared

•Supplier Long-Range Plans •Supplier Schedules

•The Supplier demonstrates Class “A processes •Long-term contracts considered.

Approved Supplier•commitment to continuous improvement desirable.•traditional Buyer/Seller relationship exists

•Purchase Orders,•Contracts - as required

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C1. Procurement Planning and ManagementKey Class A Characteristics

D. Supplier performance management process:1) Supplier performance tracked & improved with formal supplier criteria and ratings2) Performance metrics defined, supplier performance >95%3) Suppliers do RCCA4) Regular performance reviews conducted with suppliers5) Real time global spend info from ERP is used for contract mgmt at global/regional/local levels

B. Supply/Material Strategy:1) All items and suppliers covered.2) The number of suppliers is rationalized.3) Suppliers/materials are classified using R&H Procurement Quadrant Analysis (or similar).4) Suppliers are educated on MRP II principles and understand their role.5) Partner/strategic suppliers have formal action plans which are followed.6) Global/regional/local accountability clearly defined and followed.7) Material Planner and Buyer roles clearly defined

E. Supplier Planning:1) Supplier scheduling and collaborative planning is in place for identified suppliers; 2) Purchasing uses SAP/Networks data to provide Supplier Schedules.3) Long term plans are communicated monthly4) Supplier schedules are communicated weeklyC. Supplier selection process:

1) Supplier selection process is fully documented & followed2) Criteria defined3) Supports collaborative dealings for leverage, savings sharing, total value

F. MetricsMetrics tracked at Global/Regional level, including key Class A metrics:1) Supplier on time delivery2) mrp planning data quality3) Purchasing data qualityDiscretionary process improvement metrics:4) Purchase price variance5) RM Inventory turns6) Obsolete and slow moving RM inventory

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ExternalProcurement

Supplier Scheduling

• Delivery to a schedule (not orders)• Structured, disciplined, managed

process• Requires valid production schedules• Requires clear, simple

communications• Requires supplier collaboration

ExternalProcurement Supplier Partnerships

• Share gains• Supplier education• Critical information shared• Joint participation in product development,

cost reduction & value analysis• Business agreement• “Supplier Scheduling” and “SOMI”

mechanics• Silence is approval• Continuous Improvement

SUPPLIER SCHEDULEExternal

Procurement

Week of TOTAL REQUIREMENTS PURCHASE ORDERS PLANNED ORDERSMay 4, 1998 1,330,000 1,330,000 -

May 11, 1998 1,140,000 1,140,000-

May 18, 1998 950,000 570,000380,000

May 25, 1998 1,140,000 -1,140,000

June 1, 1998 950,000 - 380,000

June 8, 1998 1,140,000 - 1,140,000

••

OUTSTANDING PURCHASE ORDERS FOR SUPPLIERRecommendation

MRP Recommended Date/Time

S513275 1 190,000 5/04/98 24:00 - -S513276 1 190,000 5/05/98 24:00 - -S513277 1 190 000 5/05/98 24:00 - -

ExternalProcurement

Role of Supplier Schedulers

• Delivery schedule releases

• Reschedules

• Routine communications

• Monitor performance & problems

• Material requirements planning

ExternalProcurement Supplier Owned/Managed

Inventory (SOI/SMI)Supplier Linking

• Formal linkage• Suppliers own/manage inventory• Integrated supply / demand plans• Supplier determines replenishment

based on plant production schedule (not orders)

• Payments to suppliers by EFT based on consumption

• “Win / Win”

Criteria for Selecting SOI/SMI Candidates

ExternalProcurement

• Supplier Attributes:Willingness to develop long term partnershipCommitted to reducing supply chain costsExercises broad, open communicationsPractices MRPII/planning conceptsHas broad level of interest throughout the companySupplier process is capable; no quality issues

Material Attributes:High annual usage volumePredictable usage patterns

Audit Checklist

E2. mrp, Supplier SchedulingKey Class A Characteristics

C. Metrics:are defined, tracked and used to drive improvement Class A Required:1) Procurement recommendations executed without changes > 95%2) % of PO’s issued with full lead time > 95 % 3) “On Time” delivery by vendors > 95%, 4) Procurement data accuracy >95% Optional metrics for process improvement5) RM inventory turns 6) Purchase price variance7) Supplier Schedule forecast accuracy

A. mrp/purchasing processes:1) ERP mrp planning occurs daily, drives RM supply2) Procurement recommendations are trusted/used3) No parallel processes/manual PO’s4) Accountability for RM inventory is clear5) Safety stock policy clear and followed6) Raw material stocking policy is formal and periodically updated D. Payment:

1) Accts Payable process is automated/ streamlined through the ERP systemB. Procurement Data Accuracy:

1) Procurement and planning parameter accuracy (esp. LT/ OQ/ SS) is measured and maintained by ongoing process

E. Supplier Scheduling:1) The Supplier Scheduling process automatically communicates requirements to selected vendors on a weekly basis.2) Long term material requirements are shared with vendors each month.3) SOMI is being pursued. Where appropriate, vendors responsible for owning and managing raw material inventory.

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EMBG

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