Using Forecast Collaboration

Using Forecast Collaboration Tools to Align the Supply and Demand Sides of the

Supply Chain

Presented by Simon Ellis, IDC Manufacturing Insights

Dudley Lance, TAKE Solutions

Using Forecast Collaboration Tools to Align the

Supply and Demand Sides of the Supply Chain TAKE Solutions Webinar - October 2012 Simon Ellis, Kimberly Knickle, IDC Manufacturing Insights

© IDC Manufacturing Insights. Reproduction is forbidden unless authorized. All rights reserved.

o Ubiquitous access to information

o More intense brand competition

o Manufacturing and Retail ‘battle’ for the consumer

o Omni-channel consumer

o A stronger ‘voice’

o More ‘value’ oriented – happy to not spend!

o ‘Privately Happy, Publicly Unhappy’ syndrome

Manufacturer Retailer

The ‘Omni’ Store

Consumer

Innovation Brand Loyalty Performance differentiation

Value Margin Retail Differentiation

Price Availability Shopping Experience

‘Many of my customers are coming into our dealerships knowing more about the net margins on the vehicles than my salespeople do … not a good position to be in if you want to make any money” – A New Jersey Care Dealer

Three BIG Industry Trends

An ‘Empowered’ Consumer


o Forecasting is not the major problem, lack of flexibility is!

o The expectation for mass customization

o Make-to-Stock versus Make-to-Order

o From B-to-B to B-to-C

o Balancing inventory with capacity

o Supply chain segmentation

o Postponement

o SKU simplification

Make-to-

Stock

Make-to-

Order

Forecast-Centric

Response-Centric

Balance of Forecasting and Responsiveness Required

‘Five years ago, all of our products went to the major OEMs; now, I do almost one quarter of my business with consumer markets – and I have to worry about color and style” – A Global Disc Drive Manufacturer

Demand Volatility



o Complexity versus complication

o Profitable proximity sourcing – a balance between cost and lead-time

o The Challenge of Risk management

o Supply chain segmentation

o Cost and service

o Simplification

o Visibility/transparency, driven by key use cases like traceability

‘I’m trying to manage multiple product categories, with different and growing levels of complexity, across a single supply chain that isn’t optimized for any of them. Is it any wonder my service levels stink?” – A Global Consumer Goods Manufacturer

Cost-Optimized Sourcing

Lead-time- Optimized Sourcing

Demand/Supply Balanced Sourcing

Sustainability (Green)

Risk Management

Quality (Product Integrity)

Performance: Metrics – Perfect Order, Cost, Quality, Time-to-

Recovery

Network Planning/ Optimization

Portfolio Differentiation

Inventory Optimization

Expertise/ Talent

Design/PLM Collaboration

Supplier Viability


Supply Complexity


Demand Volatility

Supply Complexity

Complexity management

Cost Control

Risk Management

Service Centricity

Balance Forecasting and Responsiveness (Agility)

Technology Pillars: Cloud, Big Data/Analytics,

Mobility, Social Business

THE Supply Chain Challenge

Product Quality & Safety


The Resilient Supply Chain

o Big Data/Analytics to address business problems (real-time data)

o Prioritized product quality

o Cadence mismatches

o Collaborative demand sensing and planning

o Responsiveness versus forecasting – fluidity, adaptable

o Risk management/supply chain segmentation – Massively

Multidimensional

The necessity for supply chain speed, in the context of complexity and

data overload, requires manufacturing supply chains to embrace

resiliency and become ‘massively multidimensional’


Analytics

Sales & Operations Planning

Fulfillment Demand Supply

Inventory Management & Optimization

Network Optimization

Production Planning

Factory Scheduling

WSE

Trans.

Order Management

Supply Planning

Fast Planning/MRP

Demand Sensing

Demand Forecasting

Upstream and Downstream Data

Quality

Service

Cost

Planning in the Supply Chain

More data, less ‘eyeballs’

Understand and leverage value – real-time, near-real-time, aggregation

Align strategic, tactical, and operational goals and activities

Collaboration becomes a key capability


Analytics





Production Planning

Factory Scheduling

WSE

Trans.

Order Management

Supply Planning

Fast Planning/MRP

Demand Sensing

Demand Forecasting


Quality

Service

Cost






Customer Collaboration


Analytics





Production Planning

Factory Scheduling

WSE

Trans.

Order Management

Supply Planning

Fast Planning/MRP

Demand Sensing

Demand Forecasting


Quality

Service

Cost






Customer & Supply Collaboration


Top Supply Chain Priorities – 2012/2013

Reduce overall supply chain costs – 81.7%

Respond more quickly to supply or demand changes (supply chain agility) – 54.6%

Improve product quality/safety – 52.7%

Improve overall customer service – 49.0%

Improve the process of bringing new products to market – 36.6%

Improve supply chain risk awareness and mitigation – 19.7%


Top Supply Chain Priorities – Activity Drivers

Respond more quickly to supply or demand changes

0.0 0.1 0.1 0.2 0.2 0.3 0.3 0.4

Other

Ensure ability to quickly meet new customer and/ormarket requirements

Reduce outbound lead-times through distributionnetwork changes

Improve collaboration with suppliers

Establishing or more broadly deploying lean, six-sigma, or other quality management processes…

Reduce inbound lead-times through sourcingnetwork changes

Enabling better supply chain visibility and/ortraceability

Improving manufacturing execution, factoryflexibility, and/or capabilities

Increase demand forecast accuracy

(%)


Top Supply Chain Application Investments

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

SRM

Materials Tracking

CAD/CAM

Order Management

Supply Chain Planning

Quality Management

Demand Planning & Forecasting

Inventory Planning & Optimization

Production Scheduling


(%)


Demand Complexity

Supply Complexity

Low

Low

High

High

Technology Oriented Value Chains (Electronics) -Use of collaboration to create visibility and link early demand feedback to supply /product requirements changes. Goal to Accelerate Time-to-Volume

Brand Oriented Value Chains (CPG)- Use of advanced S&OP tools to adjust operational response to early demand signals. Goal to Calibrate to Demand

Engineering Oriented Value Chains (Automotive, A&D) – Extensive use of PLM and front end design Collaboration. Goal to Drive Reuse

Asset Oriented Value Chains (Oil & Gas, Chemicals) – Use of supply chain execution tools for simple visibility and transportation management. Goal to Maximize ROA

Figure 4 Manufacturing Value Chains


Essential Guidance

Conduct a capabilities inventory

Balance Forecasting with Responsiveness

Collaborate, collaborate, collaborate

Invest that idle cash – there is opportunity in the intelligent

supply chain!

Using Forecast Collaboration Tools to Align the Supply and Demand Sides of the

Supply Chain

Dudley Lance, Sales Director

TAKE Solutions

The “Bullwhip” Phenomenon

Term is used to describe the pattern in supply chain networks of increasing inventory swings in response to unanticipated changes in demand.

Problems from “Bullwhip Effect” Inefficiencies throughout the supply chain

regarding time, cost and quality

Demand uncertainty necessitates excessive inventory (safety stock) used as a cushion which leads to huge investments and delays.

Carrying extra inventory, especially for extended periods of time, can quickly eat away at margins.

Distorted information downstream results in:

Missed schedules due to late shipments or long lead times

Lack of timely and accurate supplier commitments

High inventory/scrap/rework due to excess purchases

Fulfillment mistakes and missed shipments

High procurement costs due to manual processes

Traditional Technology used…

Demand Planning & Forecasting

MRP, ERP, WMS

Spreadsheets

B2B Technology

The problem with traditional tools…

Multiple systems of record

Information latency

Lack of “business logic” w/ B2B connectivity tools

No “Closed Loop” collaboration capabilities

“Cracking” the Bullwhip Effect

Before

After

Effective Demand Collaboration and the financial impact on your business..

On-Time Delivery

Production Efficiency

Cash Conversion Cycle

Direct Material Costs

Days Inventory Outstanding

Automated Forecast Collaboration

Modular Applications

Customer Supplier A

Supplier B

Supplier C

Portal

Demand

Collaboration

Quality

Collaboration

Supplier

Management

Inventory Visibility

and Control

Procurement

Collaboration AP Automation

Drop Ship

Sales Order

Package Tracking

and Shipment

Confirmation

ERP 1

ERP 2

Forecast Visibility through sharing of schedules and longer term plans (pre-PO) typically replacing spreadsheets and e-mail based manual processes

Supplier commitments and lead-time are provided via a supplier portal (or b2b connection) with automated feedback to backend systems, including creation of order releases

Exception-based notification to planners and suppliers

Control the “bullwhip” effect – leads to increased inventory turns (i.e. reduction of inventory), increased customer service levels and efficient supply chain processes

Demand Collaboration Overview

Supplier Adoption is a Key!

Target critical component suppliers as a starting point

Communicate the benefits to your suppliers to gain adoption

Minimize the barrier of entry for suppliers

Challenges

Needed to publish demand and forecast material requirements for 18 months to selected suppliers. Supplier can plan capacity, commit to BHI and update lead-time.

Solution

OneSCM Forecast Visibility

Demand and forecast requirements are published to Suppliers.

View Forecast by Material (6-weekly / 18-monthly buckets)

View by Period

Summary View of Material with 18-Monthly buckets.

Supplier can plan capacity, update commit quantity and lead time.

Listing of Purchase Orders created from Forecast Data is available in all views.

Results

Improved On-Time Delivery

Optimized Days Inventory Outstanding

Improved Cash Conversion Cycle

Improved Capacity planning

Update of Lead Time by supplier and approved by buyer to systematically update SAP

World's third-largest oilfield services

company with operations in over 90

countries. They provide advanced

products and services to help

customers drill, evaluate, complete

and produce oil and gas wells.

2011 Stats

Revenues: $19.8B

Income: $1.7B

Employees: >57,700

Customer Success: Baker Hughes

Challenges

Order fulfillment is predicated on short lead times

Final assemblies have an average BOM of more than 2,000 components (75% of BOM parts are directly sourced)

Required improved accuracy of inbound deliveries in key areas of time, quality and quantity, while reducing inventory levels and direct spend costs.

Solution

OneSCM PO Collaboration and Demand Collaboration

Over 400 OEM and Contract Manufacturers worldwide

Increased visibility to purchasing data, acknowledgements and use of rule-based MRP changes to open orders

Shipping controls to collaborate on delivery dates

12-month forecast visibility and collaboration

Results

$22 million in savings with an ROI of nearly 500% and $2.5 million in recurring annualized savings

33% reduction in warehouse space

20-40% reduction in inventory

25-30% reduction in receiving discrepancies

30% reduction in premium freight costs

For more than 40 years, Applied

Materials has provided innovative

equipment, services and software to

enable the manufacture of advanced

semiconductor, flat panel display and

solar photovoltaic products. Applied’s

technologies help make innovations

like smartphones, flat screen TVs and

solar panels more affordable and

accessible to consumers and businesses

around the world.

Customer Success: Applied Materials

About TAKE Supply Chain Solutions

Division of TAKE Solutions, Inc.

In business since 1994 ~ 400 customers

>150 Fortune-1000 customers

> 900 employees

CMMI Level 5, PCMM Level 3 & ISO27001

Headquartered in Austin, TX.

Offices in North America, Europe, Middle East and South East Asia

Solutions deployed globally at thousands of locations serving tens of thousands of users

Technologies that leverage the ERP platform Oracle Gold Partner, SAP Certified, ERP-agnostic

Saas, On-premise or Hybrid deployment

Solutions focused in:

Supplier collaboration and management

Mobile data collection applications

RF & barcode printing applications

Returns management

Industry Awards

Thank you

We’d be happy to answer any questions you have right now.

Or, please contact

TAKE Solutions: 800-324-5143

[email protected]

[email protected]

Using Forecast Collaboration

Business

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