software applications in supply chain management project management and implementation implications...
TRANSCRIPT
Software Applications in Supply Chain Management
Project Management and Implementation Implications
Guest Lecture - February 26, 2002
Dominic Noce [[email protected]]
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Formerly - Supply Chain Management Consultant PricewaterhouseCoopers
Manager, Production PlanningTraffic Manager Pet Incorporated (acquired by Pillsbury which was then recently acquired by General Mills)
My Background
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Agenda
Supply Chain Performance Improvement Project
Network Design / Optimization - typical project issues
Supply Chain Planning System Implementation
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Supply Chain Performance Improvement Project
Client: Fortune 200 Global Consumer Products Company (personal care products)
The client’s problem - Low Inventory Turnover
PeerCompanies Our Client
02468
Inventory Turnover Ratio (ITR)
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Supply Chain Performance Improvement ProjectExisting Client Issues
Long lead times - Manufacturing in few locations; 8 to 12 weeks delivery
Lack of supply chain management expertise
Explosive growth in some markets (Eastern Europe)
Lack of communications; data visibility; technology
Global ERP implementation would not impact the International Group for five years -- need improvements now
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Supply Chain Performance Improvement ProjectDiagnostic - Mexico and South Africa
Findings: ITR improvement to 6 turns was achievable in the near term
Improvement required a series of initiatives
Performance Measures
Training
Supply Demand Planning Process
Network Design
Inventory Management Methodology
ITR
6
3
Current Performance
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Supply Chain Performance Improvement ProjectProject results and realities
Most of the improvements implemented
Significant turnover improvement during the engagement
Delivered a plan and business case to achieve the rest– $100 Million inventory reduction– 60% Customer service improvement– Shorter lead times / improved flexibility
REALITY– International Group Leadership change (lost original sponsor)– Interim technology / process recommendation not approved– Project ended / International would wait for ERP to achieve additional improvements– Subsequent corporate restructuring eliminated International Group
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Supply Chain Network Design and OptimizationWhat to watch out for
Key project activities
Collect Data
Validate current network
Select optional scenarios
Model scenarios
Evaluate inventory impact
Sensitivity analysis
Present optimal andrecommended scenarios
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Supply Chain Network Design and OptimizationWhat to watch out for
What’s wrong with this picture? - Consumer Packaged Goods
Demand
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Supply Chain Network Design and OptimizationWhat to watch out for
You tell the model to select the best 6 distribution centers.
What happened?
CustomerIncumbent Network
Potential New Distribution Ctrs.
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Supply Chain Network Design and OptimizationWhat to watch out for
Should we reduce the number of distribution centers.
What are the benefits?
Customer
Distribution Ctrs.
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Supply Chain Network Design and OptimizationWhat to watch out for
What generally happens when we eliminate distribution centers?
Customer
Distribution Ctrs.
•Transportation expense rises•Handling costs - depends•Manufacturing costs - depends
•Inventory - decreases•Inventory carrying cost - decreases•Why?
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Supply Chain Network Design and OptimizationWhat to watch out for
Network optimization tools don’t handle inventory very well.
Therefore, inventory is usually handled outside of the model.
As you reduce the number of distribution centers, the networks total required safety stock decreases.
Aggregation of demand reduces variability.
TotalInventory
# of Distribution Centers
Rule of Thumb - Square Root Law
Inventory Reduction result from network change
1 2 3 4 5 10 151 0% -29% -42% -50% -55% -68% -74%2 29% 0% -18% -29% -37% -55% -63%3 42% 18% 0% -13% -23% -45% -55%4 50% 29% 13% 0% -11% -37% -48%5 55% 37% 23% 11% 0% -29% -42%
10 68% 55% 45% 37% 29% 0% -18%15 74% 63% 55% 48% 42% 18% 0%E
xist
ing
# of
S
tock
ing
Poi
nts
New # of Stocking Points
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Supply Chain Planning System Implementation
Client: Global 100 Consumer Products Company (food and personal care products) North American Food Group - i2 Demand Planner / i2 Supply Planner
The client’s problem - Long, expensive and UNSUCCESSFUL system implementation
– Demand Planner - in place but not being used – Supply Planner - implementation halted
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Supply Chain Planning System Implementation Existing Client Issues
Poor forecast accuracy
System results not reasonable, therefore, ignored
Users were trained to navigate through the software, not how to forecast or manage the results
Client did not want to proceed with Supply Planner until demand planning issues were resolved
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Supply Chain Planning System Implementation Action Plan
Key project activities
Supply chain planning diagnostic
Supply chain synchronization processdesign
Demand planning pilot / process roll-out
Demand planning system integrationimprovements
Supply chain synchronization -Integrated pilot (DP and SCP)
Supply chain synchronization - Roll-outintegrated process - all businesses
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Supply Chain Planning System Implementation Results
Users trained on daily process and interpretation of outputs
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Supply Chain Planning System Implementation Results
Improved forecasting algorithm - utilizes causal factors related to sales promotions (the largest driver of lift)
National Weekly Forecast Error
0%
10%
20%
30%
40%
50%
60%
70%
07-Nov 21-Nov 05-Dec 19-Dec 02-J an 16-J an 30-J an 13-Feb 27-Feb 13-Mar 27-Mar
Shipment Week
We
igh
ted
AB
S P
erc
en
t Er
ror
Percent Error Average
Before Changes After Changes
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Supply Chain Planning System Implementation Results
Improved forecasting process
Diet Iced Tea
-
20.00
40.00
60.00
80.00
100.00
07-Nov 14-Nov 21-Nov 28-Nov 05-Dec 12-Dec 19-Dec 26-Dec 02-Jan 09-Jan
Week
Ca
ses
(000
)
Statistical Base Promotional Lift Sales
YTD / Current Consensus Last Year Marketing
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Supply Chain Planning System Implementation Results
Documented new process design and business requirements
Activity: Generate StatisticalForecast
Timing: Weekly
Who: Demand Planning
What: Execute DemandPlanner system. Review and resolve exceptions.
To Whom: Sales, Marketing, Finance, Supply Planning
Inputs•Demand history•Sales events•VMI data•Marketing intelligence
Outputs•Statistical base forecast•Promotional lift forecast
Controls•Forecast error
Mechanisms•i2 Demand Planner•Data Warehouse
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Supply Chain Planning System Implementation Final result
Project stopped / sponsor wanted Manugistics
Corporate stopped all projects to select global Supply Chain solution (leaning toward SAP APO)
Major acquisition of another food company which had just implemented Manugistics Demand and Supply
Latest update – Still working out the politics
– Our client planning supply with spreadsheets (that we developed)
– DP is the better forecasting tool
– Manugistics is entrenched within the acquired company
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Software Applications in Supply Chain ManagementProject Management and Implementation Implications
Questions