RightChain Planning
Animated publication
RightChain ™ Planning
Internal and External Collaborative Optimization & Planning
Edward H. Frazelle, Ph.D. Founder, President and CEO RightChain ™ Incorporated
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Disintegrated Planning
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
From the Wrong Chain to the RightChain ™
Cost per Unit
Cost per Unit
Cost per Unit
Cost per Unit
Transport
Transport
Warehouse
Customer
Factory Vendor
Maximize Vehicle Utilization
Maximize Vehicle Utilization
Maximize Line Yield Minimize Unit Cost
Max Labor Utilization Max Space Utilization
Maximize Sales
Factory Vendor Wrong Chain RightChain ™
Transport
Transport
Warehouse
Meet forecast pickup & delivery schedule
Customer
Meet forecast pickup & delivery schedule
at lowest possible cost while meeting quality goals.
at lowest possible cost while meeting quality goals.
Meet forecasted schedule
Meet forecast throughput & storage requirements lowest possible cost while meeting quality goals.
at lowest possible cost while meeting quality goals.
Minimize total supply chain costs. Meet pre-determined customer service targets. Max imize forecast accuracy.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Integrated Business Planning Requires Multiple 3D Perspectives with Supporting Systems, Processes, and Organization
Market Share
Revenue
Employees
VALUE
STRATEGY
CONSTITUENTS
Share Holders
Expense
Capital
Customers
Growth
Profit
Long Term
Demand
Sales
HORIZONS
SUPPLY CHAIN
BUSINESS
Logistics
Supply
Short Term
Middle Term
Finance
Operations
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Supply Chains in Perspective Complexity Number of Products Mix of Products Demand Variability Geography Number & Mix of Customers/Contracts Number & Mix of Suppliers Regulations Time Zones & Country Borders
Physicality Heavy Hazardous Hard Conditions Dimensions Rurality
Asset Intensity Infrastructure Requirements
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Supply Chains in Perspective
Physicality
Military Mining/Natural Resources
Chemicals/Plastics
Food & Beverage
Aerospace
Heavy Industry
CPG
Automotive
Mail Order Service Parts
Healthcare
Semi-Conductor
Bio/Pharma
Retail
Complexity
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Introduction
RCP Definition RCP Models RCP Cycles RCP Journey RCP Benefits
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated| All Rights Reserved)
What is RightChain ™ Planning? RightChain ™ Planning (RCP) is a formal and regularly repeating planning process connecting, optimizing, aligning, and reconciling the plans of traditionally independent business activities including sales, finance, operations, and logistics. The objective of RCP is to maximize the competitive, financial and service performance of the enterprise by continuously optimizing the deployment of enterprise resources including capital, equipment, inventory, facilities, people, and systems. RCP seeks to identify and implement the optimal mix of revenue, expense, and capital to ensure long-term growth in shareholder value. RCP allows the enterprise to better predict and more effectively respond to changing competitive, market, technological, and regulatory conditions. RCP is differentiated from S&OP as follows: RCP typically incorporates more dimensions of financial performance and has even heavier participation from finance. RCP includes more aspects of strategic plans and initiatives. RCP includes more aspects of product, customer, and supplier development & portfolios. RCP includes more aspects of risk management and heavier participation from business risk management. RCP utilizes more sophisticated modeling with larger modeling data bases.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Model
Strategy
Strategy
Organization
Data
Metrics
Analytics
Systems
Strategy
Strategy
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RCP Molecule Diagram
Demand Planning
Supply Planning
DP
SP
RCP
FP
LP
Financial Planning
Logistics Planning
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Model
• Supplier Valuation & Portfolio Management • Supplier Development • Supplier Service Policy • Supplier Performance
• Customer Valuation & Portfolio Management • Customer Service Policy • Forecasting • Customer Development • PLCM • Customer Risk
• Commodity Pricing • Production Capacity • Supplier Risk
Demand Planning
Supply Planning
Financial Planning
Logistics Planning
• Competition • Budgeting • Pricing • Stock Market • Market Volatility • Trading Optimization
• Network Capacity • Carrier Capacity • Inventory Management • Deployment
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
The Journey to Integrated Business Planning
True Demand
Forecast
Orchestrated
Demand
Logistics
Supply Chain
Value Chain
Planning Collaboration Logistics
SCI S&OP
ECR
CPFR
SIOP
ES&OP
Integrated Business Planning (IBP)
CRP
ERP
APS
MRP
MRPII
Systems
Optimization
BI/LSO/BDA
Simulation
Analytics
Balanced Scorecard
Command Center
TQM
Data Metrics
Data Warehousing
Data Visualization
Data Mining
2010s
1980s
1990s
2000s
PC
Internet
Wireless
Mobile/Cloud
Platform
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning
Plan Review
Data Collection
Executive S&OP
Planning
Pre S&OP
Demand Planning
Demand Data
Identify Gaps
Review Plan
Performance Review
Supply Planning
Resolve Gaps & Conflicts
Challenge Plan
Supply Data
Logistics Planning
Finalize S&OP
Make Decisions
Logistics Data
Process Review & Revision
Develop ES&OP Agenda
Commit to Consensus Plan
Financial Data
Financial Planning
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Activities
Demand Planning
Supply Planning
Logistics Planning
Financial Planning
Integrated Planning
Product Portfolio Management Customer Portfolio Management
Global Sourcing Optimization Supplier Portfolio Management
Logistics Network Optimization
Cost, Price & Rate Forecasting Currency & Trade Optimization
Integrated Scenario Simulation Consensus Decision Making Hour, Day Week, Month Qtr, Year Decision Horizon Optimization
Inventory Optimization
Collaborative Transportation Planning
Demand Orchestration
Supply Orchestration
Value Based Accounting
Product Capacity Planning
Logistics Capacity Planning
Demand Forecasting
Terms Optimization
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Enablers
Data
Systems
Analytics
Metrics
Team
Large Scale Optimization
Balance the Scales
Mad Skills
Data Integrity & Cleansing
Global Resource Visibility
High Speed Simulation
Span the Bridge
Super Structure
Automated Data Reconciliation
IBP DSS Filters
Animation & Visualization
Value Based Performance
Coordinated Calendars
Big Data Mining
Shadow Pricing
Aligned Accountability
Magical Meetings
Planning Execution Integration
Data Accuracy Measurement
Early Warning Systems
Command & Control
Conducive Culture
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Horizons Day Daily Operating Plan/ Schedule Day Metrics Day Decisions Day Data Day Analytics Day Team Week Weekly Operating Plan/ Schedule Week Metrics Week Decisions Week Data Week Analytics Week Team Month Integrated Operating/ Business Plan Month Metrics Month Decisions Month Data Month Analytics Month Team
Quarter Quarterly Operating/ Business Plan Quarterly Metrics Quarterly Decisions Quarterly Data Quarter Analytics Quarter Team
Year Annual Operating/ Business Plan Year Metrics Year Decisions Year Data Year Analytics Year Team
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Framework
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Practice Maturity Ladder
5% of all companies 25% of all companies 5% of all companies 50% of all companies 25% of all companies
Leading
Advanced
Middle Class
Basic
Zero
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Benefits
Profit increases by 3% to 5% of sales. Customer satisfaction moves to industry best-in class. Capital and asset utilization improves by 10% to 30%. Workforce culture transforms to team-based vs silo-based.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Honda Results
1. This Honda BU is the single most profitable BU in the automotive industry. 2. RCP Honda facilitated Honda overtaking Toyota as the auto industry’s high rated customer service provider.
3. RCP Honda has resulted in a 40% reduction in inventory investment. 4. RCP Honda has resulted in a 20% reduction in operating expenses.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Pratt & Whitney
1. RCP helps PW operate as the world’s most profitable aerospace BU. 2. RCP allows PW to offer their industry’s highest customer service.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Disney
1. RC helped Disney reduce inventory levels by 33%. 2. RC helped Disney increase service levels from 82% to 94% 3. RC helped Disney cut mark downs in half. 4. RC helped Disney increase profit by 2% of sales. 5. RC increased retail sales per square foot by 10%.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Terms of Collaboration
Cooperation Sharing
Consensus Integration Collaboration Synchronization Orchestration
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated| All Rights Reserved)
Coordination Terms cooperation: a situation in which people work together to do something sharing: to have or use something with others consensus: a general agreement about something : an idea or opinion that is shared by all the people in a group integration : the combining and coordinating of separate parts or elements into a unified whole collaborate : to work jointly with others or together especially in an intellectual endeavor synchronize : to cause to agree in time or to make happen at the same time and speed
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Supply Chain Integration Test
Is timely point-of-sale ( point-of-consumption) information used to provide early warning of rapid shifts in demand? Are agreed upon, accurate demand forecasts used to "pull" products/services through the supply chain from raw materials through manufacturing to distribution to customers, in the right amounts and in the right assortments, when needed? Do major customers regularly provide their demand projections and plans for growth? Are major suppliers regularly provided with business plans and demand projections? Does purchasing, manufacturing, product flow, inventory and transaction information move seamlessly throughout the supply chain? Is there an electronic link (e.g.. for demand measurements, forecasts, automatic replenishment, electronic funds transfer) with all major customers? Is there an electronic link (e.g... for forecasts, automatic replenishment, manufacturing resource planning (MAP) transmitted as purchase order, electronic funds transfer) with major suppliers? Is there an electronic link (e.g. for load planning, negotiating rates, electronic dispatching, delivery acknowledgments, electronic fund transfer) with major carriers? Have service and performance measurements been implemented between each stage of the supply chain to monitor supply chain performance? Are supply chain processes coordinated and managed horizontally across the organization to minimize hand-offs and reduce cycle times?
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Collaborative Planning, Forecasting & Replenishment Model & Wiring Diagram
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Collaborative Planning Concept Design
Production Capacity
Production Schedule
POS, Forecasts, Time Windows Delivery Schedule
Storage/Handling Capacity Operating Schedule
Lane Capacities
Lane Capacities
Transportation Schedule
Transportation Schedule
Manufacturer
Retailer
Wholesaler
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Operations Synchronization
PIck
PIck
PIck
Load
Load
Load
Stock
Stock
Stock
Deliver
Deliver
Deliver
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Value Chain Development Tracks
Inbound
Outbound
Delivery
Logistics Center
Customer
Supply
A&T
Metrics & Targets Service Policies & Contracting Inventory Optimization Sourcing & Supplier Management Transportation & Material Flow
MISSION
SUPPLY
LOGISTICS
Warehousing, Kitting, & Material Handling Outsourcing Value Chain Information Systems Security, Compliance & Risk Organization & Culture
INFRASTRUCTURE
ADMINISTRATION
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
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RightChain ™ Planning Framework ACTIVITIES
ENABLERS Data Metrics
Demand Planning Supply Planning Logistics Planning Financial Planning Integrated Planning
Analytics Systems Organization
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Demand Planning Best Practices
Product Portfolio Management Customer Portfolio Management Demand Shaping & Orchestration Best-Fit Consensus Demand Forecasting
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated| All Rights Reserved)
Total Supply Chain Cost to Sales Ratio vs. Number of SKUs
2004 2005 2006 2007 2008 2009
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Brand Gross Margin Pareto
10 brands yield 80% of total gross margin 47 brands yield 95% of total gross margin
3 brands yield 50% of total gross margin
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Gross Margin Pareto by Customer
2,867 customers yield 95% of total gross margin
989 customers yield 80% of total gross margin
225 customers yield 50% of total gross margin
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
SKU-Customer Gross Margin Pareto
94,718 SKU-Customers yield 95% of total gross margin
39,313 SKU-Customers yield 80% of total gross margin
10,156 SKU-Customers yield 50% of total gross margin
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Gross Margin Pareto Summary
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Diet Coke vs Mello Yellow Sales per Food Lion Store by Per Capita Income by Zip Code
Same chain Diet Coke sales per store increase significantly as per-capita income increases. Vice-versa for Mello Yellow sales.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
ACTIVE SKU Reconciliation
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
S&OP – Portfolio Management
Objective of This Analysis: Identify at different levels (Subsidiary, Business, Division) the current status of the SKUs in terms of: Quantity ($ Level and MOI), Sales CGM, etc.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RCP with Customer/SKU Valuation
SERVICE LEVEL
SKU CLASS % OTIF
SAFETY STOCK PLANNING TYPE
CHANNEL CUSTOMER CLASS
VALUE ADDED SERVICES
PA SHIPPING FREQUENCY RETURN POLICY
A B C D A B C D A B C D A B C D A B C D A B C D A B C D A B C D A B C D
95% 97% 93% 95% 90% 92% 88% 90% 93% 95% 90% 92% 88% 90% 85% 87% 90% 92% 88% 90% 85% 87% 82% 84% 85% 87% 83% 85% 80% 82% 80% 82% 98% 100% 96% 98% 94% 96% 92% 94% 96% 98% 94% 96% 92% 94% 90% 92% 96% 98% 94% 96% 92% 94% 90% 92% 96% 98% 94% 96% 92% 94% 90% 92% 95% 97% 95% 97% 95% 97% 95% 97%
25 DAYS 27 DAYS 38 DAYS 59 DAYS 25 DAYS 27 DAYS 38 DAYS 59 DAYS 25 DAYS 27 DAYS 38 DAYS 59 DAYS 25 DAYS 27 DAYS 38 DAYS 59 DAYS 25 DAYS 27 DAYS 38 DAYS 59 DAYS 25 DAYS 27 DAYS 38 DAYS 59 DAYS 25 DAYS 27 DAYS 38 DAYS 59 DAYS 25 DAYS 27 DAYS 38 DAYS 59 DAYS
ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO ONLY STOCKABLE ITEMS SOLD LESS THAN 6 MONTHS AGO
3 TIMES A WEEK
COLLABORATIVE LEVEL 3
D I S T R I B U I T O R S
A
CUSTOM
TWICE A WEEK
STATISTICAL FORECAST
B
LIMITED
STATISTICAL FORECAST
C
ONCE A WEEK
LIMITED
STATISTICAL FORECAST
D
ONCE A WEEK
LIMITED
5 TIMES A WEEK
COLLABORATIVE LEVEL 2
A
CUSTOM
C U S T O M E R S
3 TIMES A WEEK
STATISTICAL FORECAST
B
LIMITED
TWICE A WEEK
STATISTICAL FORECAST
C
LIMITED
STATISTICAL FORECAST
D
ONCE A WEEK
LIMITED
TWICE A WEEK
VIRTUAL WAREHOUSE
COLLABORATIVE LEVEL 1
RETAILERS
A
CUSTOM
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Forecasting Methodology
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
SKU Classification Matrix
Strategic Value
Strategic Value
High
Low High
Low High
Age
Age
Young
Old
Young
Old
Strategic Value
Strategic Value
Value
Low
Low High Young
Age
Age
Low High Young
Old
Old
Volume
Low
High
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Closed-Loop, Consensus Forecasting Utilize a cross-functional team to develop a single forecast for the long, medium, and short term.
Demand Signals Actual Demand Economic Indicators Industry Indicators
S M T W T F S Special Events
Model Modifications
Mathematical Model
Human Input
Actual Demand
Demand Forecast
Error Calculations
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Incorporate leading and lagging economic and industry indicators in top-down forecasts.
Industry Indicators
Economic Indicators
AFFC Market Share
Outstanding Orders
Historical Demand
Forecasting Toolkit
Trend Analysis
Management Judgement
Sales Forecast
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Forecasting Benefits Example Aerospace Industry
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Poor forecasting and its impact on POs
Forecast = Avg Demand over Last 2 Months
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Forecasting Honda
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Framework ACTIVITIES
ENABLERS Data Metrics
Demand Planning Supply Planning Logistics Planning Financial Planning Integrated Planning
Analytics Systems Organization
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Global Sourcing Optimization Supplier Portfolio Management Supplier Risk Management Leadtime Management Supply Shaping & Orchestration Time Fence Optimization Suppler Integration Supply Planning Best Practices
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated| All Rights Reserved)
Capacity Planning Strategies The broad classes of capacity planning are lead strategy, lag strategy, match strategy, and adjustment strategy. Lead strategy is adding capacity in anticipation of an increase in demand. Lead strategy is an aggressive strategy with the goal of luring customers away from the company's competitors by improving the service level and reducing leadtime. It is also a strategy aimed at reducing stockout costs. A large capacity does not necessarily imply high inventory levels, but it can imply in higher cycle stock costs. Excess capacity can also be rented to other companies. Lag strategy refers to adding capacity only after the organization is running at full capacity or beyond due to increase in demand. This is a more conservative strategy. It decreases the risk of waste, but it may result in the loss of possible customers either by stockout or low service levels. Match strategy is adding capacity in small amounts in response to changing demand in the market. This is a more moderate strategy. Adjustment strategy is adding or reducing capacity in small or large amounts due to consumer's demand, or, due to major changes to product or system architecture.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Sourcing Optimization
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Global Sourcing Strategy
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Supplier Development Model
Leverage
Collaborate
Improve
Maintain
Relational Criticality
Supplier Performance
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
FY03 Lead Time Reduction – LT30 (10% MAR) Inbound Leadtime Optimization
L e a d T im e R e d u c t i o n P r o j e c t G o a l : 1 m o n t h l e a d t im e f o r c u r r e n t m o d e l p a r t s
Survey Top 106 suppliers for lead time reduction opportunities 1. Order Smoothing 2. Better Forecasting 3. Earlier Forecasting
1 . 2 . 3 .
D a t e : A u g u s t 3 , 2 0 0 1
A H M A t t e n d e e s : M r . H i r o s h i N a k a m u r a
T y p e o f M e e t in g :
C o n f e r e n c e C a l l M e e t in g a t S P P C M e e t in g a t S u p p l i e r O t h e r E x p la i n :
C a lh a c
4 . 5 .
V e n d o r N a m e :
V e n d o r C o d e : 0 1 4 0
V e n d o r A t t e n d e e s : M r . R e i j i M a t s u i
V i c e P r e s i d e n t
N a m e
T i t l e
M r . B o b D e S h i e l d s M r . S c h u y l e r A s a r i M s . C h e r y l K o n n o N a m e
S r . M a n a g e r
M a n a g e r
T i t l e
P r o c u r e m e n t S p e c i a l i s t I n v e n t o r y S u p e r v i s o r T i t l e
N a m e N a m e
M r . S t a n l e y W h i t t e m o r e
T i t l e
6 . C u r r e n t l e a d t im e f o r c u r r e n t m o d e l p a r t s : T h r e e m o n t h s 7 . N e g o t ia t e d l e a d t im e f o r c u r r e n t m o d e l p a r t s : T a r g e t t in g o n e m o n t h w i t h s o m e c o n d i t io n 8 . O r d e r p r o j e c t i o n r e q u i r e m e n t s f r o m A H M ? Y e s N o 9 . I f y e s , p l e a s e e x p l a i n w h a t t y p e i s r e q u i r e d ( w i t h d e t a i l s , i . e . 1 2 m o n t h s r o l l i n g , 3 m o n t h s f i r m , + / - 2 0 % v a r ia n c e f r o m u n f i r m t o f i r m ) : T B A
1 0 . I f o t h e r A H M r e q u i r e m e n t s a r e n e c e s s a r y , p l e a s e p r o v i d e d e t a i l s : T B A (M o s t p r o b a b l y ) 1 . C o m m i tm e n t f r o m A H f o r c o m p o n e n t s p a r t s p u r c h a s in g . 2 . P r i c e u p f o r c o v e r i n g a d d i t i o n a l e x p e n s e s .
4. EDI 5. EFT
1 1 . I f v e n d o r c a n p r o v i d e o n e m o n t h l e a d t im e n o w , w h y n o t p r e v io u s l y ? P l e a s e e x p l a in i n d e t a i l : B e c a u s e t h e r e a r e s o m e a d d i t i o n a l i s s u e s t o b e s e t t l e d a m o n g T 2 s u p p l i e r s , C a l h a c a n d A H .
1 2 . I f v e n d o r c a n n o t p r o v i d e o n e m o n t h l e a d t im e , p l e a s e e x p l a i n i n c o m p l e t e d e t a i l a s t o w h y n o t : ( P l e a s e m a k e a n a n s w e r w i t h u s i n g B O M s t r u c t u r e t o s h o w w h i c h w o r k - in - p r o c e s s i s c a u s i n g ) P r e s e n t s i t u a t io n ; T h e r e a r e T 2 s u p p l i e r s w h i c h h a v e c o m p o n e n t p a r t s c o m i n g f r o m t h e i r p a r e n t C o m p a n i e s i n J a p a n . T h u s i t t a k e s m o r e t h a n t h r e e m o n t h s l e a d - t im e a s i t ’ s c o m in g f r o m J a p a n . O n e o f s a m p l e i s P /N 3 8 9 2 4 - P 0 6 - A 0 2 : P l e a s e s e e a n a t t a c h e d s h e e t f o r d e t a i l . 1 3 . I f v e n d o r c a n n o t p r o v i d e o n e m o n t h l e a d t im e , c a n c u r r e n t l e a d t im e b e r e d u c e d ? Y e s T o h o w m a n y m o n t h s ? N o A d d i t io n a l c o m m e n t s : C a lh a c h a s u n d e r s t o o d A H ’ s n e e d s a n d t o h a v e in t e n t i o n t o c o l l a b o r a t e w i t h A H t o im p l e m e n t i t . . B u t t h e r e a r e i s s u e s t o b e s e t t l e d f o r t h e I m p l e m e n t a t i o n o f o n e m o n t h l e a d - t im e s y s t e m .
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Inbound Leadtime Optimization Benefits
Supplier On Time Delivery
88.0% 91.0% 94.0% 97.0% 100.0%
FY01 FY02 FY03 FY04 FY05 FY06 FY07 Measured in Pieces Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Percentage of Outstanding Orders Past Due Suppliers - Value Based
0% 10% 20% 30% 40%
FY02 FY03 FY04 FY05 FY06 FY07 Year 3 Year 4 Year 5 Year 6 Year 7 Year 1 Year 2
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Supplier Risk Cube
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RightChain ™ Planning Framework ACTIVITIES
ENABLERS Data Metrics
Demand Planning Supply Planning Logistics Planning Financial Planning Integrated Planning
Analytics Systems Organization
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Logistics Planning Best Practices
Network Optimization & Simulation Material Flow Optimization & Simulation Financial Inventory Performance Inventory Optimization Inventory Deployment Optimization Logistics Capacity Planning
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Disney Merchandise Sourcing Map
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RightChain ™ Global Supply Chain Strategy
Long Beach Consolidation – Haul 53s
Baseline
DLR/CA Consolidation – Rail 53s
DLR/CA Consolidation – Haul 53s
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RightChain ™ Global Supply Chain Strategy
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RightChain ™ Sourcing Optimization
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Collaborative Logistics Tour Example
Georgia-Pacific
Bangor
General Mills
Green Bay
Buffalo
Buffalo
Cedar Rapids
Wells
Cedar Rapids
Chicago
Chicago
Mechanicsburg
Georgia-Pacific General Mills
Bangor
Green Bay
Buffalo
Wells
Cedar Rapids
Annual Savings One-Way Shipments $3,821,000 Dedicated Tour $3,090,000 Shared Savings $ 731,000
Chicago
Mechanicsburg
Benefits Efficiency gain…19%
Driver turnover…under 10% Service reliability…over 99%
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Load Planning
207302
251391
206674
208236
207076
207076
208014
Honda
207302
208014
208169
206674
207076
207076
207076
208014
251391
208169
207076
207076
208236
251127
Rte. 101
48’ Trailer 25 cages
Total Parts Cube
Total Cube Assigned
Stop Number PHSHTO Lines
Total Cu.Ft
Cages Assign
Loose Req.
Loose Assign
Min Cube Req.
Totes Assign
1 7 2 2 2 2 3 2
1 2 3 4 5 6 7 8
251127 44.5756 2,739.50 53.30 2.0 207076 199.144 18,817.00 366.09 8.0 208236 76.2517 3,406.18 66.27 4.0 206674 75.7429 5,449.93 106.03 4.0 208169 98.3179 6,530.31 127.05 5.0 251391 63.7583 4,374.85 85.11 4.0 208014 116.98 7,711.16 150.02 6.0 207302 87.9914 4,330.05 84.24 5.0
11.13
16.05
61.19
66.11
115.44 166.50 415.80
516.92
14.45 34.74 42.25 26.30 38.78 24.94
20.85 50.11 60.94 37.93 55.93 35.97
114.57 134.86 142.37 126.42 188.96 125.06
120.97
150.23
161.06
138.05
206.11
136.09
762.76
1,038.1
21
308.03 444.27 1,309.23
1495.53
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RightChain ™ Inventory Optimization
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Inventory Optimization
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
Inventory Planning & Management Process
Current Inventory Levels
Sales Forecast
Manufacturing Capacity
Inventory Planning Toolkit
Capacity Utilization Plan
Inventory Master Plan
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RightChain ™ Planning Framework ACTIVITIES
ENABLERS Data Metrics
Demand Planning Supply Planning Logistics Planning Financial Planning Integrated Planning
Analytics Systems Organization
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Financial Planning Best Practices
Cost, Price, and Rate (CPR) Forecast Optimization Currency & Trading Optimization (CTO) Value Based Financial Performance Accounting Price Elasticity is a Regular Aspect of IBP Financial Metrics Side by Side with All other Metrics Econometric Modeling and Optimization
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Cost, Price and Rate (CPR) Forecasting
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
CPR Forecasting Factors Cost Fuel Cost
Utility Cost Wage Rates
Price
Spot Pricing Contract Pricing
Rate Forecasting Interest Rates
Exchange Rates
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Global Trade & Currency Optimization
Backtesting Entry/Exit Optimization Entry/Exit Automation Trading Strategy Optimization Strategy Development Strategy Simulation Genetic Algorithms Real Time Market Updates
MultiCharts.com
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Annual Demand
Unit Inventory Value
Purchase Order Setup Cost
Inventory Carrying Rate
RightChain™ Finance
Outbound Mode
Number of DCs
Lot Size Inventory
Forecast Accuracy
Pipeline Inventory
No. of SKUs
Average Inventory Level
Leadtime
Safety Stock
Unit Inventory Value
DC Locations
Fill Rate
Average Inventory Value
Shortage Factor
Opportunity Cost of Capital
Capital Charges
Shareholder Value
Duties & Taxes
Selling Price
Revenue
Insurance
Inventory Carrying Rate
Obsolescence Loss & Damage
Annual Demand
Expense
Finance Customer Service Inventory Supply Transportation Warehousing Key
Unit Inventory Value
Storage & Handling
DC Performance
Unit Purchase Cost
Unit Landing Cost
Lot Size
Supplier
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Leadtime
Carrier Reliability
Inbound Mode
RightChain ™ Scoreboard
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RightChain ™ Golden Triangle
Balanced financial performance metrics incorporate revenue, expense, and capital. Examples of balanced financial metrics
Include: 1. EVA 2. ROIC 3. GMROI
Substitution
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Honda’s Supply Chain Finance
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RightChain ™ Planning Framework ACTIVITIES
ENABLERS Data Metrics
Demand Planning Supply Planning Logistics Planning Financial Planning Integrated Planning
Analytics Systems Organization
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Integrated Business Planning Best Practices
Horizon Optimization & Integration (HOI) Integrated Scenario Simulation (ISS) Consensus Decision Making (CDM) Collaborative Integrated Business Planning (CIBP)
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RightChain ™ Planning Concept for BP
Sales & Marketing
Finance & Strategy
Supply Chain Planning Platform
Monthly Supply Chain Plan
Supply Chain Performance
Manufacturing & Procurement
Supply Chain Logistics
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RightChain ™ Planning Concept for Alicorp
PLANEAMIENTO INTEGRADO
Planeamiento de la Producción
Planeamiento de la Distribución
Gestión de Materiales
Planeamiento de la Demanda
Ventas
MKT
Compras
Proveedor
Almacén
Producción
Distribución
Cliente
Consumidor
*Finanzas establece la rentabilidad de la compañía con las cifras objetivo y guía los planes para alinearlos con las estrategias de la empresa.
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RightChain ™ Planning Concept for Pratt & Whitney FLIOPS Process
Stress
Engines Spares
Manufacturing
Employees
Program 1
Procurement
Logistics
Demand
Capacity
FLIOPs
Inventory
Storage
Customers Shareholders
Program 2
I/T
People
OTD EBIT ROS AIV
Engines Spares
FLIOPS: Finance, Logistics, Inventory, and Operations Planning System
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RightChain ™ Planning Process for Pratt & Whitney
FLIOPS connects decision making across finance, logistics, inventory, and operations on a daily, weekly, monthly, quarterly, and annual basis.
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RCP Pratt Decision Flow
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RightChain ™ Replenishment Walt Disney World Food & Merchandise
N o
Event Calendar
Attendance Forecast
POS Data
RightChain™ SKUs
RightChain™ Forecasting
Forecasted Demand
RightChain™ Turns
RightChain™ Sourcing
Forecast Errors
Recommended Purchase Order
RightChain™ Lots
EDI PO
RightChain™ Replenishment
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Lowe’s and Whirlpool Collaborative Planning
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Collaborative Planning with Supply Chain Partners
Manufacturer
Wholesaler
Retailer
R&D
Marketing
Merchandising
Logistics
Logistics
Logistics
Planning
Planning
Planning
Systems
Systems
Systems
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RightChain ™ Planning Framework ACTIVITIES
ENABLERS Data Metrics
Demand Planning Supply Planning Logistics Planning Financial Planning Integrated Planning
Analytics Systems Organization
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RCP Data Best Practices
Big Data Analytics (BDA) Virtual/Cloud Data Warehousing (VDW/CDW)
Data Integrity & Cleansing (DIC) Data Mining & Pattern Recognition
A large-scale, cloud-based data warehouse is (1) fully populated with accurate and reliable data, (2) mined on a regular basis to surface and visualize patterns revealing and predicting problems and opportunities, and (3) supports large scale optimization and scenario simulation.
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated| All Rights Reserved)
RightChain ™ Planning Framework ACTIVITIES
ENABLERS Data Metrics
Demand Planning Supply Planning Logistics Planning Financial Planning Integrated Planning
Analytics Systems Organization
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RCP Metrics Best Practices
Constituent Based Coverage Metrics cover the concerns of employees, customers, shareholders, and the community. Value Based Indicators (VBI) Financial metrics include value based indicators incorporating revenue, expense and capital. Spanning Metrics Financial, productivity, utilization, cycle time, and quality indicators span all business activities. Control Towers and Command Centers Ownership and Accountability
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Total Value Chain Metrics
FSL
A&T
S
$x/yr
$x/yr
$x/yr
$x/yr
$x/yr
$x/yr $x/yr
Cost VCCT
X days X days
X days X days X days
X days
X days
X% X
X% X% X% X% X% X% X X X X X X
OTD% Flex/Risk
$x
$x
$x
$x
$x
$x
$x X days
Inv$ Inv
X days X days
X days X days X days
X days
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RCP Scoreboard
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RCP Command Center
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RightChain ™ Scoreboard
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RCP Metrics Ownership
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Parts Division FY 09 Tree
RCP Target Tree
Direct Charges $
$180.8
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RightChain ™ Planning Framework ACTIVITIES
ENABLERS Data Metrics
Demand Planning Supply Planning Logistics Planning Financial Planning Integrated Planning
Analytics Systems Organization
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RightChain ™ : Maximizing Financial & Service Performance with Supply Chain Strategy © RightChain ™ Incorporated (All Rights Reserved)
RCP Analytics Best Practices
IBP Decision Support Filters Real Time Simulation Integrated Scenario Simulation Simulation Animation Shadow Pricing Big Data & Large Scale Optimization
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RightChain ™ Inventory Digital Twin
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