The Power of Advanced Planning Tools EyeOn Belgium – Industry Network Event

Antwerp – April 19, 2017

Agenda

APS : Getting started and tool selection

The APS Compass : User requirements, design & implementation

Team capabilities & organizational changes

2

APS Characteristics

– There are some generally accepted APS characteristics:

• Constraint-based

• Optimization

• Scenario simulation

• Coverage of multiple stages in the supply chain (if fully deployed)

– ERP tells you what is going on, APS what should be going on

3

APS Prerequisites

4

– APS can be part of your solution in dealing with planning complexity if a number of prerequisites are fulfilled:

• Synchronized processes

• Knowledgeable people

• Organizational discipline

• Solid master data management

– APS can be a part of your problem in dealing with planning complexity when the prerequisites are not met

APS Functionality

5

1. Some of the typical APS offerings

Constrained planning

Scenario simulation

E2E visibility ( when fully deployed)

2. Optimisation through heuristics & solvers are useful, but very dependent on correct inputs and configuration

3. Revenue & margin management is not always a typical APS offering

APS is a key enabler for decision making

6

Set clear planning objectives

Pay attention to the decision making process

APS elements to consider

7

FEASIBLE PLAN

PLAN ADHERENCE

PLAN INTEGRATION

Typical approach

8

51 42

Objectives & scope• Objectives connected

to goals• Target operating

Model ( TOM), Stadtler (scope), SCOR (process), data flow model (integration)

Analysis• Assess current

state• Gap analysis

Design• Starting from decisions• ‘what do you need to

receive, do and provide to make that decision’

• Integration (‘handovers’) with other functions

Implement• Cutover to new

process• Planning solution and

master data updates/ changes

• Training & change management

Decision drivenTake decisions at place (horizon, scope, aggregation) where quality is best

3

Tool Selection• Business case • Functional

requirements• Selection process

(RFI/ RFQ/ Demo/…)

Scoping : Stadtler as a tool to define scope

9

Integration between the different planning layers / processes

Clear distinction of decisions per planning layer

Long term

Mid term

Short term

Rough Cut CapacityPlanning (RCCP)

Material Requirements

Planning (MRP) ATP & Demandfulfillment

Demand PlanningDistribution Resource

Planning (DRP)

Sales & Operations Planning (S&OP)

Scheduling Transport planning

Strategic Network Design

Supply Network Planning

Purchasing Production Distribution Sales

Bucket Detail Frequency

+ + +

Positioning Stadtler within other approaches like SCOR

10

Source: supply chain council Source: Stadtler & Kilger, 2005

Functions in relation to each otherLinear, process level

There is more than Business and Functional Requirements !

11

Requirement Type Requirement Scope

Business Requirements Higher level statements of the goals, objectives, or needs of the enterprise

Stakeholder Requirements

Statements of the needs of a particular stakeholder or class of stakeholders. They describe the needs that a given stakeholder has and how that stakeholder will interact with a solution

Solution Requirements Characteristics of a solution that meet business requirements and stakeholder requirements

Functional Behaviour and information that the solution will manage

Non-functional Describe environmental conditions under which the solution must remain effective or qualities that the systems must have

Transition Requirements Describe capabilities that the solution must have in order to facilitate transition from the current state of the enterprise to a desired future state

Business Analysis Body of Knowledge® (BABOK® Guide)

Target Operating Model : the first step

Purpose of the Target Operating Model

The planning principles do not include process descriptions, but describe principles, improvements in current WOW , process implementation risks with regard to elements enabling a successful implementation 12

Last changed: 30/05/2016 (BLA)

Level Description

Level 1Generic

• Planning principles

Level 2Configuration

• Differentiate complexity• Differentiate the businesses & supply chain models (MTO/ MTS/ …)

Level 3Process blocks

• Main process blocks• Swimming lanes• Metrics related to tasks

Level 4Workflow of tasks

• Workflow of tasks:• Sequence of steps• Input / Output

Level 5Work instruction

• Work instructions• System transactions

Implementation phasing - example

13

Demand Planning is in general a good starting point

Start per function, highest impact improvements first

Combined NRP& RCCP – next logical step

Supply Planning MPS & Detailed Scheduling

Inventory Planning & DRP as the last step

– Base level and standardized plant / warehouse alignment

– Inventory control

– Optimize in the plants– Drive supply KPI

– Inventory optimization– Full close loop planning to execution

Tooling Selection – Abundance of Choice - SC Magazine IT Subway

14 http://itsubwaymap.com/

To0l selection

– Some overlooked shortlisting reasons

• Integration technology

• Technical and functional breadth of solution

– Some overemphasized reasons

• Gartner

• “One vendor” ERP vs APS mantra

15

10 step selection process for planning tools

1. Check (high level) process design &

requirements

2. Define functional requirements

3. Create short list/ Send out Request for

Information (RfI)

4. Send out Request for Proposal (RfP)

5. RfP discussion meeting 6. Review suppliers

7. Prepare scripts for demo sessions

8. Demo sessions with suppliers

9. Final selection 10. Negotiation

Milestone: main activities of to-be process

Milestone: required functionality must have and nice to have

Milestone: send out RfP Milestone: get to know supplier and review critical requirements

Milestone: short list of potential suppliers

Milestone: decide on suppliers to consider in next phase

Milestone: determine differentiators in req. between suppliers

Milestone: 1st preferred supplier2nd best supplier

Milestone: define demo script to make final selection

Milestone: agree on contract with supplier

Create business case (costs)

Create business case (benefits)

Thoughts on tool selection

– Short list based on existing tool knowledge, not only analyst lists

– Requirement based, organize second line of review

– Dig deeper on delivery technology (cloud, on premise, SaaS, …..)

– Set service requirements for the APS vendor

17

Agenda

APS : Getting started and tool selection

The APS Compass : User requirements, design & implementation

Team capabilities & organizational changes

18

19

Design

Designs trade offs : Make it work

Central vs local

Aggregated vs level of detail

Analytical vs transactional

Fast scenarios vs single outcome

Heuristics / solver vs manual

Graphical representation vs numeric

20

Managing design tracks: best practices

– Planned order, process / production order, sales, purchasing cycles

– Master data integration

– Cross systems integration

21

Overall Design

Core IntegrationPrinciples

Functional Design

Integration Design

Master Data Design

Key messages for design

22

Translate requirements to tangible concepts like cycles, actions, interfaces

Integrally consider functional, master data, integration and performance aspects

Master data design and location standardization can be sacrificed, if specific business process requirements are key and integration does not suffer

Understand your supply chain

Approach

24

Define horizon and aggregation level per planning layer

1

2

3

Map Supply Chain

Map decisions per planning layer

4 Define the process

Approach

25

Mapping Supply Chain Define horizons

• Based on the decisions per horizon, define horizon per planning layer

• Determine aggregation level to take decisions.

Map magnitude of divergence:

Map decisions

• Review decisions that have to be taken within planning

• Determine per decision the planning layer

• Agree what resource to plan in DP, S&OP, MPS and schedulingHere the concept of user stories can support well to fetch al decisions and make the design practical for a user

Describe processes

• Define planning processes

• Focus on hand-over rules (timing, responsibilities)

• Define constraints (e.g. combined pipelines)

• Determine bottlenecks in the supply chain process:✓ Utilization rates (iron

and/or human)✓ Days of storage

Critically review all bottlenecks. Prevent planning all bottlenecks, find alternatives.

Clear Hand-over processes

SKUBase RM

26

Clear Hand-over processes

Think cycles and set clear responsibilities

27

Close open orders

Interface stock/ sales

orders

Run MRP

Evaluate schedule

6:00

8:00

Receive S&OP plan

Create MPS

Determine capacity

constraints

Day 15

Day 17Receive forecast update

Evaluate stock

position

Determine

new MPS plan

Monday

Tuesday

Daily

Weekly

Monthly

MPS Process

S&

OP

Pla

nn

er

MP

S P

lan

ner

Sa

les

Pro

du

cti

on

Sch

ed

ule

rC

SR

Ra

w M

ate

ria

l p

lan

ne

r

DailyMonthly5th Weekly

Planned anticipation

stock

Production Calendar

Stock Targets

Outcome S&OP

Process

Current Stock Level

Constraint Demand

Plan

Netting of

Demand based

on new

forecast

Determine

Requirement

s MA

Review

Alerts

Solve alert

by adjusting

GMN

planning

Weekly

Production

Meeting

Process

outcome of

meeting

Review

Alerts

Plan supply

MA

Current Stock Level

Netting of

Demand based

on new

forecast

Sales Order Book

Demand

Control

Process

Current Stock Level

Sales Order Book

ATP Process Back Orders

Review

Alerts

Check

starting

stock

position

Possible to

solve w/o

interfering

fixed

horizon?

Run alerts

based on

orders (no

forecast)

Alert

solved?

Confirm new

schedule

Consult

product mng

for

prioritization

No

Yes

Yes

No

Updated process orders

Updated process orders

Confirmed

Schedule

Production

performance

day-1

Updated planned orders

Updated planned orders

Planning rules

Planning rules &

component availability

Planning rules &

component availability

Planning rules: min, target stock level, max stock level (storage capacity), sequencing rules

Component availability: availability of raw materials and packaging material

Run MRP

Order long

lead-time

components

Discuss with MPS

planner to align

planning in case

insufficient supply

Run MRP

Order raw

materials/

packaging

Discuss with

scheduler to align

planning in case

insufficient supply

Projected Stock level

RM/

Packaging

ordered

RM/Packaging

ordered

2

2

Current Stock Level

Current Stock Level

PO

PO

Agreed

Schedule

Determine Req

bottleneck

production

lines

Plan supply

at bottleneck

resources

Push supply to

low utilized

production

lines

Evaluate

impact on

bulk raw

materials

Evaluate

impact on

bulk raw

materials

Order bulk

raw

materialsing

Discuss with

scheduler to align

planning in case

insufficient supply

Projected Stock level

Storage Capacity

tanks

Bulk RM ordered

1

Current Stock Level

PO

1

1

Handover

Schedule

D+1

Process

orders (REL)

Planned

Production

Required # of

people

...

Harmonized snap shot

6:22

SAP

SAP

Month

Week

Day

Define swim lane

80% of process inefficiencies are caused by poor hand-over process

28

Demand Planning & S&OP

Supply Network Planning (SNP)

Rough Cut CapacityPlanning (RCCP)

Scheduling

DetailBuckets

+ +

Months

Weeks

Aggregated

SKU

How to translate from aggregatedlevel to SKU level?

Planning objects are:- Demand Plan- Inventory Plan- Sourcing Plan

Integrate and don’t overcomplicate

Optimization? If Excel is the starting point….

30

30

Network Requirements File Allocation File

First and second stage plan NPI Planning

DSP Daily Schedule DSP Batch Schedule by Hour

Packing ScheduleUSP Daily Schedule

Scheduling Level of Detail Master Planning Level of Detail

No

t Co

nn

ecte

d

Optimization? Let’s start with visualization

31

Use the available alerting functionality:1. Planned vs target inventory2. Capacity utilization3. Component availability4. Demand Changes5. ...

Understand degree of freedom by combine with type of demand:Does my alert still exists when I only considered confirmed demand?

VISUALIZEALERTING

Don’t plan every resource, but apply upstream restriction in planning rules

32

• Apply Single Point of Planning, the rest will follow!• Production processes can consist of multiple upstream steps• Most likely these processes will have separately different constraints• To avoid multiple review of the planning per process step, include the upstream constraint in the

planning rules of the last step

>

Manage volatility

Stop Forecast .... Manage Volatile Demand

34

Why forecasting?

Capacity Management

Make financial forecast

Sourcing of raw materials

Ordering of critical components

Replenishment of stock

?

Use the right replenishment strategy!

– Most process industry companies prefer stability in their manufacturing processes.

• Batch size driven systems (EOQ) trigger replenishment based on stock levels.Timing of replenishment orders is uncertain, quantity is certain.

• Periodic replenishment systems (EPEC) trigger replenishment based on timing.Timing of replenishment is certain, quantity is uncertain

35

8 4 4 2 1 1

Week 2

Week 1

Week 4

Week 3

Flexibleslots

Fixedrhythm

80-90% of companies use rule-of-thumb to set safety stocks

36

In a world that is full of dynamics can we suffice with such aneasy method?

• All customers are equal, but some are more equal thanothers: S&OP guidance on service offering

• Consider the relevant factors: demand uncertainty, target service level, shelf lifes, supply uncertainty and productioncapabilities.

• Mind the signal and the noise:it is not about the most advanced statistics, just rigor statistics

37

Feasible plan

Feasible Planning

Average production times is only correct in 50% of the cases...

38

+ Average batch times work fine within production planningNote: planning to maximum capacity of < 100%

- Average batch times in scheduling will result in plan adherence issuesNote: planning to all available machine hrs

For scheduling use production batch times with e.g. a 90% upper bound percentile

Pull forward demand when production is running well.

Scheduling

RCCP

Closing the loop for advanced planning systems

Define top parameters

• Using simulation determine to which parameters the outcome is most sensitive

Integrate in APS

• Integrate real-time to APS and transactional systems as parameters

• Use variance as input to safety stock and scenario calculations

Define true parameter value

APS’s have grown to support real-time, data driven insights. However: the data loop is not closed

• Determine the true parameter valuebottom up, using e.g. movement data

“Exactly Wrong”

Advanced Planning

Estimated Data

40

Optimal team

Thoughts on organizational set-up for demand planning

Centralized• Simple governance structure• Alignment of supply chain, financial & overall business goals• Process standardization• Lower bias • Career paths more attractive: better recruiting and retention

Decentralized• Proximity to market: sense demand• Flexibility to shape demand (NPI, promoted products)• Autonomy to match (local) supply to demand in best way

Sales & Marketing• Clear accountability

Operations / Supply Chain management• Independent• Expertise with planning

41

Thoughts on organizational setup for supply planning

Decentralized• Short lead times• Special / local / production resources• High degree of tacit knowledge• Intederpendencies amongst production lines within

the site

Centralized• Normal / long lead times• Common production resources• Production rules are clear and well described• Limited interdependencies between lines

All levels integrated in one function• Isolated product groups• Necessity to perform Production Planning

at low level of detail (e.g. in case of campaign planning)

• Unreliable production resources

Benefit: reduces amount of handover moments, hence inefficiencies

Multiple functions• Multi-sourcing production base• Complex supply chain network

• multiple warehouses • high level of intedepencies

Benefit: prevents that planner is driven by short term issues and midterm planning gets no attention

Supply Network Planning

RCCP

Scheduling

43

Closing, tips and tricksClosing

What to do tomorrow?

44

Think cycles and be 100% clear about hand-over process

Don’t try to forecast it all, plan for flexibility to manage

uncertainty in demand & supply

Visualize first, optimize later

Stimulate right behaviorIf you can avoid a hand-over,

avoid the hand-over!

Start scheduling as late as possible

Working for the purpose of documenting…..or the other way around?

45

Testing

• Testing: cover requirements• But: prevent too narrow and functional focus

Formal Documentation as a necessity

• SOP, work instructions• Master data management• Functional and technical design

Vision Booklet

Reference Documentation as enabler

• Quick reference cards• Process vision• Championed behaviours

Key Engineer

Go Live

46

Business Process

Key UserOrganize for Quick Analytics• Forecast results, # orders interfaced, total inventories• Try and find side effects (orders missing, status changing, etc)

Agenda

APS : Getting started and tool selection

The APS Compass : User requirements, design & implementation

Team capabilities & organizational changes

47

Move people with H3-ladder

H3- change ladder

– 7. lead: lead others in the change

– 6. ownership: show commitment and ownership of the change

– 5. execute: experiment

– 4. commit: want to do it, willing to accept consequences.

– 3. believe: convinced “I can do it” and believe the change will be of benefit

– 2. understand: see “what does it mean for me”

– 1. aware: aware of the change through communication of the stakeholder driving the change

– unaware: unaware of the change

1

2

3

4

5

6

7

unaware

aware

understand

believe

ownership

execute

lead

commit

Hands

Heart

Head

48

Ingredients for a successful APS implementation

• Commitment of organizational members to system application usage and new processes

But also

• Organizations are supposed to improve the system as well as the organization process- Clear objective of APS system automation vs different way of working

• Training develop documentation both on new system and new business processes- Sufficient resources, but also expert resources (e.g. key user approach)

• Include data & change management as part of the program

• Step-by-step implementation of modules and network- Scope of the project, starting points, what’s next and how (e.g. different locations)

49

Critical Success Factors

The most important critical success factors: • Top management support• Project team work and composition• Project management • Change management culture and programme

Factors also regularly mentioned are • Communication • Project champion • Business process reengineering

Taking into account at least those seven critical success factors mentioned above should result in less uncertainty, better understanding among employees, and more commitment, and as a result of that lower resistance to change and higher project success rates.

50

Mentimeter session

51

eyeon.nleyeon