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Vas Dem MPS - 2 © The Delos Partnership 2004
The Delos ModelThe Delos ModelFor Business Integration For Business Integration
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
Vas Dem MPS - 3 © The Delos Partnership 2004
InnovationInnovation
What counts as innovation ?– New product– Change to existing product : line extension– New Manufacturing process– Change to Manufacturing Process– Regulatory change– Capital Expansion– ERP Project
Vas Dem MPS - 4 © The Delos Partnership 2004
Integration of InnovationIntegration of Innovation
• Innovation carried out by many functions
• All innovation has impact on different areas
• Typical functional split– Development– Supply Chain
Vas Dem MPS - 5 © The Delos Partnership 2004
Integrated Business Plan
Integration of InnovationIntegration of Innovation
Innovation Supply Chain
Vas Dem MPS - 6 © The Delos Partnership 2004
InnovationInnovation
All share the following issues– Need Project Plan– Need Justification– Need co-ordination– Need cross project resource management– Difficult to forecast– Needs integration into all other processes
Vas Dem MPS - 7 © The Delos Partnership 2004
Management of InnovationManagement of Innovation
Stage/Gate Process
Formal Process for Managing Project
Gate0
Gate0
Gate1
Gate1
Gate2
Gate2
Gate3
Gate3
Gate4
Gate4
Stage 0Stage 0 Stage 1Stage 1 Stage 2Stage 2 Stage 3Stage 3 Stage 4Stage 4
Review
InvestigateInvestigate FinancialCase
FinancialCase
DevelopDevelop TestTest LaunchLaunch
Vas Dem MPS - 8 © The Delos Partnership 2004
Overall Process for Change Overall Process for Change ControlControl
Request change to product
Review impact of change
Notify
People who
Need to know
Accept or reject request
Advise change agreed
Notify
People who
Need to know
Vas Dem MPS - 9 © The Delos Partnership 2004
Example of Data Change FormExample of Data Change Form
Change Note Number : Date of Request : __/__/__ Change Type : Add/Amend/Delete
Originator: Effective Date:-Requested __/__/__-Actual __/__/__
Part number :
Department : BOM Attached ? : Y/N
Other Related Changes :
Reason for Request for change
Notification given to : Tick
Description of Change : Development
Manufacturing
Planning
Financial Consequences of Change : Purchasing
Quality
Sales and Marketing
Approved by : Date of Approval __/__/__ Regulatory
Vas Dem MPS - 10 © The Delos Partnership 2004
Example of Data Change Example of Data Change FormForm
Production Quantity on hand: Rework and Scrap Value
Quantity in WIP : Routing Change
Purchasing Supplier : New Part Number
New Cost : New Order Qty
On order : New Safety Stock
Quality Specifications : New Lead Time
Test requirements: Customer Code
Development Reference no,: Vendor Code
BOM Change note: Batch control
Sales Customers Financial Projection attached: Y/N
Quantity on hand
Finance Standard Cost Data Controller :
Regulatory Standards affected
Vas Dem MPS - 11 © The Delos Partnership 2004
Management of InnovationManagement of Innovation
Needs Management across all the projects
0
20
40
60
80
100
120
1st Qtr 2nd Qtr 3rd Qtr 4th QtrQtr
Capacity - Design Resource
Dem Cap
Req Cap
Vas Dem MPS - 12 © The Delos Partnership 2004
Integration with Supply Integration with Supply ChainChain
Design
Purchase
Intermediate Manufacture
Sub-assemble
Finish
Distribute
Cumulative Lead TimeCumulative Lead Time
Insert NewProducts Here
Insert NewProducts Here
Vas Dem MPS - 13 © The Delos Partnership 2004
Bill of Activity – Link with Bill of Activity – Link with PlanningPlanning
ShipShip
MakeMake
ProcessValidation
ProcessValidation
DevelopProcess
DevelopProcess
SourceProduct
SourceProduct
DevelopTooling
DevelopTooling
SourceEquipment
SourceEquipment
DesignEquipment
DesignEquipment
Lt = 2 weeksLt = 2 weeks
Lt = 6 weeksLt = 6 weeksSource
Raw Material
Source Raw
MaterialLt = 4 weeksLt = 4 weeks
Lt = 10 weeksLt = 10 weeks
Lt = 6 weeksLt = 6 weeks
Vas Dem MPS - 14 © The Delos Partnership 2004
Integrated Innovations Integrated Innovations PlanningPlanning
IDEAS
COMMERCIALSUCCESS
IEP AT FAMILYLEVEL – VOLUMEAND VALUE
MPS AT PRODUCTLEVEL – VOLUMEAND VALUE
TIME
MPS/MRP AT PRODUCT ANDCOMPONENTLEVEL – VOLUME
Vas Dem MPS - 15 © The Delos Partnership 2004
The Delos ModelThe Delos ModelFor Business Integration For Business Integration
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
Vas Dem MPS - 16 © The Delos Partnership 2004
Common Reasons for Not Common Reasons for Not FForecastingorecastingI can never make it
100% accurate
My business has toomany unforeseen
peaksMy business isdifferent - you can’t forecast it
I don’t know who’s responsible
for it anywayIt’s not in my
objectives
I’m measured on getting high sales
- so who cares about the forecast
The factory nevermake what I forecast
anyway
Nobody thanks me for it – so why
bother ?
Vas Dem MPS - 17 © The Delos Partnership 2004
Forecasting – DefinitionForecasting – Definition
A forecast is a formal request to the Supply Management function…
From Sales and Marketing to
have the product, materials andCapacity available according to the quantity
and
At the time
that they anticipate the demand will occur from the Customer to ship the product to their premises
Vas Dem MPS - 18 © The Delos Partnership 2004
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
Vas Dem MPS - 19 © The Delos Partnership 2004
The Ten Rules of The Ten Rules of ForecastingForecasting
1. A forecast is necessary for planning supply and supporting financial and business plans
2. A forecast is never going to be right
3. A forecast is wrong because the assumptions were wrong
4. Accountability for the forecast rests with Sales and Marketing
5. Forecasting needs an application of intelligence
6. More accurate forecasting comes from your customers’ customer
7. Forecasts at an aggregate level are more accurate than the detail
8. Effective management of demand is key to managing forecast inaccuracy
9. A written policy for managing flexibility is essential
10. Measuring forecast accuracy will improve the process
Vas Dem MPS - 20 © The Delos Partnership 2004
Forecast must be Forecast must be supported by Assumptionssupported by Assumptions
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
1254 145 145 156 156 170 170 135 135 135 145 160 160
1345 145 167 135 180 200 200 200 200 150 150 150 200
1256 100 200 200 200 200 200 300 300 200 200 200 200
1347 50 50 50 50 40 40 30 30 20 20 40 50
NUMBERS !
ASSUMPTIONS
Vas Dem MPS - 21 © The Delos Partnership 2004
Sales Forecasting: InputsSales Forecasting: Inputs
• New Customers• New Products• Pricing Initiatives• Advertising And Promotions• Cannibalisation• Customers Own Forecast• Competitors Activity• External Factors
Vas Dem MPS - 22 © The Delos Partnership 2004
Move to Customer Centric Move to Customer Centric Sales PlanningSales Planning
Manufacturing
Distance
Rem
ote
ness
Research &Development
Planning
Marketing
Sales Customer
Traditional
Vas Dem MPS - 23 © The Delos Partnership 2004
Move to Customer Centric Move to Customer Centric Sales PlanningSales Planning
ManufacturingManufacturing
Research &Development
Research &DevelopmentPlanningPlanning
MarketingMarketing SalesSales
CustomerCustomer
ManufacturingManufacturing
Research &Development
Research &DevelopmentPlanningPlanning
MarketingMarketing SalesSales
CustomerCustomer
ManufacturingManufacturing
Research &Development
Research &DevelopmentPlanningPlanning
MarketingMarketing SalesSales
CustomerCustomer
Vas Dem MPS - 24 © The Delos Partnership 2004
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
Vas Dem MPS - 25 © The Delos Partnership 2004
Customer Relationship Customer Relationship ManagementManagement
Strategy
Customer relationshipManager
Sales and Marketing
SystemForecast
Plan
ManufacturingAnd Purchasing
ERPSystem
Consensus ForecastConsensus Forecast
Vas Dem MPS - 26 © The Delos Partnership 2004
The Delos ModelThe Delos ModelFor Business Integration For Business Integration
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
Vas Dem MPS - 27 © The Delos Partnership 2004
Basic FormulaBasic Formula
Item DataBOM’s
And Routes
StockAnd
Capacity
Master Schedule
Forecasts Orders
Suppliers Factories
What do theyActually Want ?
What haveWe got ?
Whatdoes it need ?
What do we need to do ?
What do we thinktheyWant ?
Vas Dem MPS - 28 © The Delos Partnership 2004
Master Production Master Production SchedulingScheduling• MRP and CRP without a Master
Schedule leads to Chaos at the speed of light
• Use Firm Planned Orders to control the plan
• Master Scheduling software identifies imbalance and recommends action
Vas Dem MPS - 29 © The Delos Partnership 2004
Master ScheduleMaster Schedule
Item Number
Safety Stock YieldLead Time
BatchOn
HandAlloc.
Periods 1 2 3 4 5 6 7 8 9 10
Period
Cumul
Master Schedule Receipt
Projected Available Balance
Description :
Forecasts
Actual Demand
Available to Promise
Vas Dem MPS - 30 © The Delos Partnership 2004
12345 as MPS Item12345 as MPS ItemItem Number
Safety Stock 0 Yield 0Lead Time
2 Batch 3000On
Hand2700 Alloc.
Periods 1 2 3 4 5 6 7 8 9 102500 0 2500 0 2500 0 2500 0 2500 0
2700 200 200 700 700 1200 1200 1700 1700 2200 2200Period
Cumul
Master Schedule Receipt 0 0 3000 0 3000 0 3000 0 3000 0
Bottles
Forecasts
Actual Demand
Available to Promise
Projected Available Balance
12345 Description :
Vas Dem MPS - 31 © The Delos Partnership 2004
Customer profileCustomer profile
Customer Demand
Customer A 2500 per month
Customer B 1250 per month
Customer C 500 per month
Customers D.. 750 per month
Vas Dem MPS - 32 © The Delos Partnership 2004
Forecast ConsumptionForecast Consumption
Item Number
Safety Stock 0 Yield 0Lead Time
2 Batch 3000On
Hand2700 Alloc.
Periods 1 2 3 4 5 6 7 8 9 102500 0 2500 0 2500 0 2500 0 2500 0
2700 200 200 700 700 1200 1200 1700 1700 2200 2200Period 2700 3000 3000 3000 3000Cumul 2700 2700 5700 5700 8700 8700 11700 11700 14700 14700
Master Schedule Receipt 0 0 3000 0 3000 0 3000 0 3000 0
Available to Promise
12345 Description : Bottles
Forecasts
Actual Demand
Projected Available Balance
Vas Dem MPS - 33 © The Delos Partnership 2004
Master Schedule - ATPMaster Schedule - ATPItem Number
Safety Stock 0 Yield 0Lead Time
2 Batch 3000On
Hand2700 Alloc.
Periods 1 2 3 4 5 6 7 8 9 102500 0 2500 0 2500 0 2500 0 2500 0
2700 200 200 700 700 1200 1200 1700 1700 2200 2200Period 2700 3000 3000 3000 3000Cumul 2700 2700 5700 5700 8700 8700 11700 11700 14700 14700
Master Schedule Receipt 0 0 3000 0 3000 0 3000 0 3000 0
Available to Promise
12345 Description : Bottles
Forecasts
Actual Demand
Projected Available Balance
Vas Dem MPS - 34 © The Delos Partnership 2004
Master Scheduling Master Scheduling ManagementManagement
Horizon
PLANMANAGEEXECUTE
Cumulative Lead TimeCumulative Lead Time
Add or subtractTo capacity
Strong Link to
Global Sales and OperationsPlanning Process
Capacity andMaterials“firm”
Release Orders
Firm Planned OrdersFirm Planned Orders
Vas Dem MPS - 35 © The Delos Partnership 2004
Abnormal Demand - Abnormal Demand - WorkshopWorkshop
Item Number CLT
Safety Stock 0 Yield 0Lead Time
2 Batch 3000On
Hand2700 Alloc. 7 wks
Periods 1 2 3 4 5 6 7 8 9 101250 0 2500 0 2500 0 2500 0 2500 01250
2700 200 200 700 700 1200 1200 1700 1700 2200 2200Period 1450 3000 3000 3000 3000Cumul 1450 1450 4450 4450 7450 7450 10450 10450 13450 13450
Master Schedule Receipt 0 0 3000 0 3000 0 3000 0 3000 0
Customer C wants delivery of 5000 as soon as possible; when can they have delivery ? This is not forecast.
Actual Demand
Projected Available Balance
Available to Promise
12345 Description : Bottles
Forecasts
Vas Dem MPS - 36 © The Delos Partnership 2004
All incoming customer orders All incoming customer orders should be screened (evaluated) should be screened (evaluated)
for normal/abnormal demand for normal/abnormal demand characteristics.characteristics.
Abnormal DemandAbnormal Demand
Vas Dem MPS - 37 © The Delos Partnership 2004
Identifying Abnormal Identifying Abnormal DemandsDemands• Individual Customer Order
– Demand Source• Customer• Market Sector• Trade Sector• Export vs UK
– Quantity• Size Of Order
– For that customer [e.g. > 10 for customer Y]– For any customer [e.g. > 5 for any other than X]
• % Of Forecast
• Cumulative Demand– Track Variances to date in week or month
• Keep it simple !
Vas Dem MPS - 38 © The Delos Partnership 2004
Each abnormal order must be coded Each abnormal order must be coded with an abnormal demand flag so that with an abnormal demand flag so that
the planning system will not consume the planning system will not consume the forecast.the forecast.
This can be done through the order This can be done through the order entry system or after the fact when entry system or after the fact when the demand resides in the planning the demand resides in the planning
system – but before the Master system – but before the Master Schedule is recalculated!Schedule is recalculated!
Software requirementSoftware requirement
Vas Dem MPS - 39 © The Delos Partnership 2004
Process to Manage Process to Manage DemandDemand
Check if Forecast is normalIf normal – promise it
• Recalculate Available to Promise• Consume the Forecast• Recalculate PAB
If abnormal1. Check if any is normal2. Promise normal part of Forecast• Recalculate Available to Promise• Consume the Forecast• Recalculate PAB
For remaining abnormal demand Determine agreeable promise date Advise customer Agree any risks to other customers Recalculate Available to Promise Consume the Forecast Recalculate PAB Review action messages in MPS
Vas Dem MPS - 40 © The Delos Partnership 2004
Abnormal Demand PolicyAbnormal Demand Policy
•Company needs to have a policy that states the process and mechanism for identifying and dealing with abnormal demands
•Accountability needs to be established with Sales and Marketing - the originators of the Forecast !
Abnormal Demand Policy
Vas Dem MPS - 41 © The Delos Partnership 2004
Ways to Manage Abnormal Ways to Manage Abnormal DemandDemand
• Safety Capacity
• Safety Stock
• Manage the Product Range
• Reduce Lead Times
• Redesign the Product
• Sell something else!
Vas Dem MPS - 42 © The Delos Partnership 2004
Safety Stock - EffectSafety Stock - Effect
Planned projected available stock calculated not toGo below Safety Stock
Item Number CLT
Safety Stock 2500 Yield 0Lead Time
2 Batch 3000On
Hand2700 Alloc. 7 wks
Periods 1 2 3 4 5 6 7 8 9 101250 0 2500 0 2500 0 2500 0 2500 01250
2700 3200 3200 3700 3700 4200 4200 4700 4700 5200 5200Period 4450 3000 3000 3000 3000Cumul 4450 4450 7450 7450 10450 10450 13450 13450 16450 16450
Master Schedule Receipt 3000 0 3000 0 3000 3000 0 3000 0
Available to Promise
12345 Description : Bottles
Forecasts
Actual Demand
Projected Available Balance
Vas Dem MPS - 43 © The Delos Partnership 2004
Time FencesTime Fences
• Demand Time Fence– Controls when forecasts disappear
• Material Time Fence– Controls when Planned orders become firm
orders
• Capacity Time Fence– Indicates where capacity is an issue for
increasing demand
Vas Dem MPS - 44 © The Delos Partnership 2004
WorkshopWorkshop
1. What are the rules on changes to the schedule ?
2. What would be the right time fences in the business ?
3. How will they be reflected in the system ?
Vas Dem MPS - 45 © The Delos Partnership 2004
Master SchedulerMaster Scheduler
Strategy
Sales Forecasts
CustomerOrders
ManufacturingPlan
PurchasingPlan
MRPSystem
Balanced PlanBalanced Plan
Master Scheduler
Vas Dem MPS - 46 © The Delos Partnership 2004
Master SchedulerMaster Scheduler
Master Scheduler
GeneralGeneralManagerManager
ProgrammeProgrammeManagersManagers CustomerCustomer
ServicesServices
FactoryFactoryManagersManagers SupplierSupplier
ManagersManagers
EngineersEngineers
QualityQualityFinanceFinance
Vas Dem MPS - 47 © The Delos Partnership 2004
MPS Job Description ?MPS Job Description ?
• 5 Years experience on Shop Floor• 5 Years experience in Purchasing• 5 Years in Programme Management• 5 Years in Engineering• 5 Years in Finance• 5 Years in Customer Service• BA in Engineering, MBA in Business Studies…. 30 years old….. £ 1,000 per month