May 2013 More than 10000 items to review on a monthly andor weekly rolling planning horizon Volatile and complex planning environment Difficulty to hire and retain skilled specialists in supply chain or operations management ID: 744059
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Slide1
Supply Chain PlanningDemand Planning Excellence – Automotive Industry
May 2013Slide2
More than 10,000 items to review on a monthly and/or weekly rolling planning horizonVolatile and complex planning environmentDifficulty to hire and retain skilled specialists in supply chain or operations managementOften only one resource to manage the total puzzle
IT systems not connected and not integrated
Functions are not connected, centralized or integratedFew or limited resources to invest on advanced IT systemsERP system lack of functionalities to support decision making processExtensive usage of Excel spreadsheetsLack of operational performance measures (KPIs)Limited business intelligence capabilities
Planning Complexity for a Typical Mid-Market Company
2
Demand Planning Process ExampleSlide3
Automotive Industry
3
Industry : manufacturer and distributor of automotive parts (OEM and aftermarket)
Number of active items (skus
)
8000
Required service level (fill rate) : >= 96 %
17 warehouses located
in North America (Canada and USA)3 manufacturing plants located in CanadaUsage of domestic and offshore sources (Asia)15 major national client accountsLead times require accurate 3-month forecast
Demand Planning Process Example
AsiaSlide4
Business Objectives : « Aftermarket » distribution channelIncrease forecast accuracies (1, 2 and 3 periods ahead (months))
Decrease inventory of finished goods in the network
Maintain and increase customer serviceReduce planning complexityBusiness Objectives
4
Demand Planning Process ExampleSlide5
Modules Deployed 5
Demand Planning Process ExampleSlide6
Required Planning Technology Enablers6
Usage and enablement of all of these features
The key is to integrate all the information into the same planning workspace (screen)
Planner shall see, by default, only the important elements on which he should focus on
Planner should have drill down capability to see components that create or influence the value’s behavior
Reaction time between the change of an input and the visualization of its impacts on a set of outputs should tend to be “real time“
Demand Planning Process ExampleSlide7
Usage of diverse non standard Excel spreadsheets to build forecasts
Manual and labor intensive planning process
Each business unit had the responsibility to supply its sales forecasts
A team at headquarter had the responsibility of consolidating and formatting forecasts from all business units
Long response time (long planning cycle) and heavy usage of human resourcesPlanning Environment Prior to the Implementation of
nSkep Demand Planning
7
Product Line i
…Product Line NBuild and manage forecasts
Excel files (non standard)
Consolidate files
Use forecasts
Procurement
Production
Finances – Budget tracking
2
2
3
Demand Planning Process ExampleSlide8
The Vision8
Control tower
Collaborate
Control
Plan
Execute
Measure
Clients
Distribution
a
nd transportation
Suppliers +
Supply Chain
One planning tool
Integrated with the transactional systems
With BI capabilities
Configurable and flexible
Manufacturing plants
Demand Planning Process ExampleSlide9
Implementation Phases9
Phase 1
Phase 2
Centralization
and standardization
Optimization and Simplification
Demand Planning Process ExampleSlide10
Centralized Demand
P
lanning Function10
Centralized Function
Step 1 Improvements
1
2
5
#Number of resources involved in the process
Statistical forecasts – automated process
Segmentation of the process by product line and by ABC classes
Measure and track forecast accuracies Consolidation of data flows and planning processes on a centralized platform Stabilize data flowsReduce number of participants
Better visibility
Demand Planning Process ExampleSlide11
Centralized Demand
P
lanning Function11
Centralized Function
Step 1 Challenges
A large quantity of information to review
Difficulty to trust the system (change management challenge)
Wrong interpretation of the outputs
Improper or weak understanding of statistical models and how they manipulate information Long time required to review all forecasts Difficulty to properly interpret risks Bias caused by human factorsDemand Planning Process ExampleSlide12
Manage by Exception
Automation and Optimization12
Segmentation of the Complexity and
P
rocesses
Strong Positive Trend
Strong Negative TrendStable Trend
Risks - Variability
Sort by importance
Alerts
Demand Planning Process Example
Reviews achieved by the planner
3 130 items (40 %) to review
Automated
r
eviews by the system
4 717 items (60 %) reviewed by the system
Seasonal
New
Discrete
Non SeasonalSlide13
Manage by Exception
Automation and Optimization13
Segmentation of the Complexity and
P
rocesses – Second Level of Segmentation
Sales Forecasts
Reviews achieved by the planner
Automated reviews by the system
1845 items (23.50 %)
6002 items (76.50 %)
Demand Planning Process ExampleSlide14
Manage by Exception
Automation and Optimization
14
Manage by Exception - Automation and Optimization
Step 2 Improvements
Reduce by 76% the number of items reviewed on a monthly basis
Increase the users’ trust with the planning system
Help focus on the most important elements Reduce complexity Quickly identify problems and suspicious behaviors Reduce planning cycle time
Demand Planning Process Example
Seasonal
New
Discrete
Non SeasonalSlide15
Manage by Exception
Automation and Optimization15
Manage by
E
xception - Automation and Optimization
Step 2 Challenges
Difficulty to reconcile operational forecasts with financial trends
Gaps between the two forecast flowsDemand Planning Process Example
Seasonal
New
Discrete
Non SeasonalSlide16
Internal Collaboration
16
Sales +
Supply
Chain + Finances (Complete
Internal
Collaboration)
Flex
Budgetconsensus
«
bottom
-up & top-down »
Supply
Chain
Finances
Sales and
Supply
Chain
Demand Planning Process Example
Production &
ProcurementSlide17
Internal Collaboration
17
Sales + Supply Chain + Finances (Complete Internal Collaboration)
Step 3 Improvements
Alignment of operational forecasts and financial trends
Better forecast at the Item-Hub levels and at the Item-DC levels
Coherent communication of the demand plan to all actors within the company (one version of the truth)
Demand Planning Process ExampleSlide18
Demand Planning Process ExampleBusiness Objectives : « Aftermarket » distribution channel
Increase forecast accuracies (1, 2 and
3 periods ahead (months))Increase forecast accuracies by more than 5 pointsDecrease finished good inventory in the overall networkFor only ten items, inventory value reduced by more than $50,000Maintain and increase customer service
Reduce planning complexityCentralized demand planning functionStandardized processes
Reduced number of actorsReduced planning cycle time
Tangible Benefits
18Slide19
Key Takeaways19
Demand Planning Process ExampleSlide20
Thank You!20