© the delos partnership 2007 page 1 integrated enterprise leadership process steps

© The Delos Partnership 2007 page 1

Integrated Enterprise Integrated Enterprise LeadershipLeadership

Process Steps


IEL Process StepsIEL Process Steps

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Week 1 Week 2 Week 3 Week 4

InnovationInnovationReviewReview


CustomerCustomerDemandDemandReviewReview


SupplySupplyPlanPlan

ReviewReview


ReviewReview

PriorityPriorityReviewReview


Stage 1Stage 1

Stage 2Stage 2

SeniorSeniorTeamTeam

ReviewReview


ReviewReview

Stage 5Stage 5

Stage 7Stage 7

Stage 3Stage 3

SupportSupportReviewReview


Stage 6Stage 6

Stage 4Stage 4


Integrated Business PlanIntegration of InnovationIntegration of Innovation

Innovation

Supply Chain

DemandPlan

SupportActivities

0

5,000

10,000

15,000

20,000

25,000

30,000

Euros

Sales Contrib

Sales/Profit

Financial Analysis

Budget

Previous

Current


Innovation step - PurposeInnovation step - Purpose

1. To manage all “new things” against strategic intent, and prioritise where needed

2. To review changes to plans and implications on other parts of the business

3. To review overall performance and managing projects

It is not about managing projects, but must link to those other projects.


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


Integration of InnovationIntegration of Innovation

• Innovation is carried out by many functions

• All innovation has impact on different areas

• Resources are finite

• Priorities need to be set for innovation projects


Innovation ProjectsInnovation Projects

All share the following issues Need Project Plan Need business justification Need co-ordination Need cross project resource management Difficult to forecast Need integration into all other processes


Management of Innovation needs a Management of Innovation needs a processprocess

Stage/Gate Process

Gate1

Gate1

Gate2

Gate2

Gate3

Gate3

Gate4

Gate4

Gate5

Gate5

Stage 0Stage 0 Stage 1Stage 1 Stage 2Stage 2 Stage 3Stage 3 Stage 4Stage 4

Review

InitialInvestigation

InitialInvestigation

ResearchAnd Develop Full businessCase

ResearchAnd Develop Full businessCase

Develop Product in lineWith customerRequirements.

Develop Product in lineWith customerRequirements.

Test market products and service . Develop market

Test market products and service . Develop market

Full production marketing and Sales of product

Full production marketing and Sales of product

Stage 5Stage 5

IdeationIdeation

Is it a good idea?

Does it fit our

criteria ?

BusinessCase and

prioritisation.

Meets customer, supply and

financial criteria.

Meets customers’

and operations

needs..


Project Choices – the Five Questions for Project Choices – the Five Questions for initial investigationinitial investigation

Project

Project

StrategicFit

StrategicFit

Market Attractiveness

Market Attractiveness

TechnologyFit

TechnologyFit Business ImpactBusiness Impact

ChangeOrientation

ChangeOrientation


First Cut Priority CheckFirst Cut Priority CheckProject Strategic Market Technology Business

ImpactChange orientation

Overall Average

1 10 10 10 10 10 10.0

2 10 8 7 10 5 8.0

3 9 8 5 8 8 7.6

4 7 6 7 7 9 7.2

5 4 7 8 9 5 6.6

6 3 8 9 6 5 6.2

7 7 4 4 5 8 5.6

8 6 5 5 5 4 5.0

9 2 3 2 3 7 3.4


Financial justification for ideasFinancial justification for ideas

Year 1 Year 2 Year 3 Year 4 Year 5

Volume 100 115 120 140 150

Sales 10 12 13 15 17

Contribution 2 2.5 2.75 2.5 2

Inc Overheads

0.5 0.5 0.5 0.5 0.5

Cash Flow 1.5 2.0 2.25 2 1.5

Wkg Capital 1 0.5 0.2 0.2 0.2

Cap Expenditure

4

Net Cash Flow

-3.5 1.5 2.05 1.8 1.3

Net Present Value @ 15 % =


Prioritisation of ideasPrioritisation of ideas

Project Name Value [£ m NPV] Strategic Fit Risk Rank

ABC 20 5 5 500

PQR 50 2 5 500

VWY 45 5 2 450

XYZ 20 5 4 400

DEF 33 4 3 396

RST 2 5 5 200

LMN 5 5 5 125

OPQ 100 1 1 100

FRG 40 2 1 80


Financial CaseFinancial Case

Integrate into Business Plan

Issues How much When


Integration into Business PlanIntegration into Business PlanYear 1 Year 2 Year 3 Year 4 Year 5

Volume 100 115 120 140 150

Sales 10 12 13 15 17

Contribution 2 2.5 2.75 2.5 2

Inc Overheads 0.5 0.5 0.5 0.5 0.5

Cash Flow 1.5 2.0 2.25 2 1.5

Wkg Capital 1 0.5 0.2 0.2 0.2

Cap Expenditure

4

Net Cash Flow -3.5 1.5 2.05 1.8 1.3

164Cum Diff

125-1Difference

132

125

119

Actual Demand

120

120

120

Demand Plan

-1-2-3

Months

120

4

120

5

120

6

120

7

120

8

120

3

Cum Diff

Difference

New Demand Plan

120

120

120

Last Demand Plan

921

Months

360

360

Q1Q4

-17

-13

Cum Diff

-4-7-6Difference

121

118

119

Actual Supply

125

125

125

Supply Plan

-1-2-3

120

4

120

5

120

6

120

7

120

8

120

3

Cum Diff

Difference

New Supply Plan

120

125

125

Last Supply Plan

921

360

360

Q1Q4

-33

-17

-5Difference

485966Actual Stock 66

817671Stock Plan

-1-2-3

91

4

91

5

91

6

91

7

91

8

91

3

Difference

New Stock Plan

919186Last Stock Plan

921 Q1Q4

Make – To- Stock


Management of InnovationManagement of Innovation

Integrated Project Management – Programme Management

0

20

40

60

80

100

120

1st Qtr 2nd Qtr 3rd Qtr 4th QtrQtr

Capacity - Design Resource

Dem Cap

Req Cap


Integrated Enterprise Leadership Integrated Enterprise Leadership

-3 -2 -1

Demand Plan 70 70 70

Actual Demand 71 75 80

Difference 1 5 10

Cum Diff 6 16

Months 1 2 3 4 5 6 7 8 9

Last Demand Plan 70 70 70 70 70 70 70 70 70

New Demand Plan

Difference

Cum Diff

Months Q4 Q1

210 210

-3 -2 -1

Supply Plan 75 75 75

Actual Supply 70 69 71

Difference -5 -6 -4

Cum Diff -11 -15

1 2 3 4 5 6 7 8 9

Last Supply Plan 75 75 70 70 70 70 70 70 70

New Supply Plan

Difference

Cum Diff

Q4 Q1

210 210

-3 -2 -1

Order Book Plan 61 56 51

Actual Orders 66 67 73 82

Difference 6 17 31

1 2 3 4 5 6 7 8 9

Last Plan 46 41 41 41 41 41 41 41 41

New Plan

Difference

Q4 Q1

41 41

Family ABC

New ForecastsNew Forecasts

Impact on SupplyImpact on Supply


Integration with Supply ChainIntegration with Supply Chain

Design

Purchase

Intermediate Manufacture

Sub-assemble

Finish

Distribute

Cumulative Lead TimeCumulative Lead Time

Insert NewProducts Here

Insert NewProducts Here


Integrated Innovations PlanningIntegrated Innovations Planning

IDEAS

COMMERCIALSUCCESS

IEL AT FAMILYLEVEL – VOLUMEAND VALUE

MPS AT PRODUCTLEVEL – VOLUMEAND VALUE

TIME

MPS/MRP AT PRODUCT ANDCOMPONENTLEVEL – VOLUME


New Product Development New Product Development PerformancePerformance

Definition

Purpose

Horizon

Source of information

Number of new products developed on time

Improve NPD process

New product development time

Activity schedule in planning system or project plans


NPD Performance ReportNPD Performance ReportProject reference

Planned Date

Actual Date

Hit/ Miss

Comment

A1001 23/2/99 02/3/99 Miss

A1096 23/2/99 15/3/99 Miss

B2304 24/2/99 17/2/99 Hit

B2403 25/2/99 18/2/99 Hit

D1237 26/2/99 27/2/99 Miss

D1453 26/2/99 20/2/99 Hit

NPD Performance = 3/6 = 50 %


Earned Value MeasureEarned Value Measure

Definition

Purpose

Horizon

Source of Info

Proportion of work completed in value compared with work scheduled to be completed

To review cost versus budget status of project

Length of Project

Project Plan reports


Earned Value ReportEarned Value Report

Value A B C D E F Total

Planned 100 150 100 250 200 200 1000

Earned 100 150 100 100 200 0 650

% comp. 100 100 100 40 100 0

Variance 0 0 0 -150 0 -200 -350

Actual Cost

90 220 80 300 220 910

Variance to EV

+10 -70 +20 -200 -20 -260

Variance Spend

+10 -70 +20 -50 -20 +200 -90

Activities/Time


Culture/behaviourCulture/behaviour

• Over optimism on likely success of new product

• Failure to manage scope of project effectively

• Abilene syndrome – management of agreement

• Functional development – lack of focus on customer.


Traditional functional managementTraditional functional managementStage/Gate Process

Gate1

Gate1

Gate2

Gate2

Gate3

Gate3

Gate4

Gate4

Gate5

Gate5


Review

ResearchDepartment

ResearchDepartment

DevelopmentDepartment




OperationsDepartment


CommercialDepartment


Stage 5Stage 5

ResearchDepartment

ResearchDepartment


Process or program managementProcess or program managementStage/Gate Process

Gate1

Gate1

Gate2

Gate2

Gate3

Gate3

Gate4

Gate4

Gate5

Gate5


Review

Stage 5Stage 5

ResearchDepartment

ResearchDepartment



Financial/SupportDepartment

Financial/SupportDepartment






Innovations ManagerInnovations Manager

Strategy

Innovation Manager

DevelopmentIdeas

ProjectPlans

DevelopmentPlans

Supply Plans

ProjectSystem

Prioritised PlansPrioritised Plans


Innovations Review MeetingInnovations Review Meeting

• Strategy• Priorities• Update on projects• Impact analysis• Financial plans – forecasts, prices and costs• Review against strategiccriteria•Performance Measures

•Projects prioritised•Agreement onmajor new projects•Decisions on impactOn Financial plan•Issues for furtherReview•Improvements inprocess

Inputs Outputs

Agenda

1. Status on existing projects2. Changes to milestone dates3. Impact analysis4. Recommendations on

impacts5. Performance Measures

Agenda

1. Status on existing projects2. Changes to milestone dates3. Impact analysis4. Recommendations on

impacts5. Performance Measures


Framework for Process ReviewFramework for Process ReviewProcess Name : Process owner :Process Name : Process owner :

Inputs:Inputs: Purpose:Purpose: Outputs:Outputs:

People:People: Culture/Behaviour:Culture/Behaviour: Measures:Measures:

System/module:System/module: Requirements:Requirements: Expected Actions:Expected Actions:

Link to other processes :Link to other processes :


MeasuresMeasures Close out of actions - are dates being met as at original project start date Projects started in right lead time? Information provided in right format?

OutputsOutputs Revised resource plan Revised list of requirements Revised financial plan

InputsInputs R&T:

New materials New technologies New surface treatments

Environmental Requirements Feedback from previous cycle

PeoplePeople Process Owner:

Patrick Monclar (ISO P2) R&T Project Managers GPT Representative S&OP Co-ordinator?

Scope/PurposeScope/Purpose Projects which impact critical resource:

OperationsSupply Chain

Provide appropriate information to Supply/Customer Demand Review changes to existing projects (by exception)

Links to Other ProcessesLinks to Other Processes Global Planning Team

““Global Innovation Planning – R&T” ProcessGlobal Innovation Planning – R&T” Process



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ReviewReview


ReviewReview



Stage 1Stage 1

Stage 2Stage 2


ReviewReview


ReviewReview

Stage 5Stage 5

Stage 7Stage 7

Stage 3Stage 3



Stage 6Stage 6

Stage 4Stage 4


Demand Planning and ManagementDemand Planning and Management

Horizon

PLANMANAGEEXECUTE

Cumulative Lead Time

Add or subtractTo capacity

Strong Link to

Integrated Enterprise Leadership process

Capacity andMaterials“firm”

Take Orders

Today


The Ten Rules of ForecastingThe Ten Rules of Forecasting

1. A forecast is necessary for planning supply and supporting financial and business plans

2. A forecast is never going to be right3. A forecast is wrong because the assumptions were wrong4. Accountability for the forecast rests with Sales and Marketing 5. Forecasting needs an application of intelligence6. More accurate forecasting comes from your customers’ customer7. Forecasts at an aggregate level are more accurate than the detail8. Effective management of demand is key to managing forecast

inaccuracy9. A written policy for managing flexibility is essential10.Measuring forecast accuracy will improve the process


Common Reasons for Not ForecastingCommon Reasons for Not Forecasting

I can never make it100% 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 ?


Forecasting - is there a definition?Forecasting - is there a definition?


Forecasting – DefinedForecasting – Defined

A forecast is a formal request to the Supply Management function from Sales and Marketing

to have the product, materials and capacity 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


Forecasting Needs a Simple ProcessForecasting Needs a Simple Process

Filter Filter DemandDemand

ComputeComputeforecastforecast

CaptureCaptureActualActual

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

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

Hold Demand ReviewHold Demand Review

Agree commercialAgree commercial plansplans

AgreeAgreeExceptional demandExceptional demand

AssumptionAssumptions written s written down and down and

agreedagreed

AssumptionAssumptions written s written down and down and

agreedagreed

ReviewReviewAccuracyAccuracy


Impact of Biassed ForecastImpact of Biassed Forecast

Increase resources to meet higher demand

OVERFORECASTING IS AS BAD AS UNDERFORECASTING

More StocksMore Labour

More MaterialsMore Plant

No SalesCost of Goods

increases

OVERFORECASTING

GROSSMARGIN

GROSSMARGIN

Stocks LowLabour UnavailableShort of CapacityShort of Materials

Lost SalesCost of Goods

increases

GROSSMARGIN

GROSSMARGIN

UNDERFORECASTING

Resources insufficient tomeet demand


Execute Statistical ForecastExecute Statistical Forecast

• Use demand history to produce trends and identify patterns

• Key influences to be derived : Base Trend Seasonality


Sales Forecasting: InputsSales Forecasting: Inputs

• New Customers• New Products• Pricing Initiatives• Advertising And Promotions• Cannibalisation• Customers Own Forecast• Competitors Activity• External Factors


Effect of New Products on Old Effect of New Products on Old ProductsProducts

CannibalisationDefinition: The impact (usually negative) of sales

on old product from new product Assess the impact -

Timing Volume Finance

Review impact on run-out of old product – Product Life cycle effect


Demand CreationDemand Creation

Demand Facts Population Numbers between age 13-16 Children less than 11

Demand Drivers Events (Xmas) Desires Technology

Demand Controllers Pricing Promotion Distribution Advertising Packaging

ASSUMPTIONS

RESULTS

• Market Share• Market Reach• Frequency of purchase


Sales Planning ProcessSales Planning Process

EXAMPLE

Sales vision and strategic framework

Carry out channel analysis and identify opportunities

Establish sales development prioritiesand draft channel strategies

Review draft brand plans

Issue long term plans

Develop detailed implementation plans

Monitor implementation

P D

A C


Collaborative Planning - ProgressCollaborative Planning - Progress

Data Exchange

Vendor Managed Inventory

Co-ManagedInventory

Trading Partnership

Integrated Planning and 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


Review “Exceptional” DemandReview “Exceptional” Demand

Review large potential business Tenders New contracts Large one time demand

Decide whether to include in forecast or not Avoid probabilities Decide on hedging strategy Agree on acceptance of risk


Forecast AccuracyForecast Accuracy

Definition

Purpose

Horizon

Source of Information

Percent of items within a tolerance

Assess the degree of flexibility required by the supply side and to improve the process

Cumulative lead time (= purchasing plus manufacturing)

Forecasting module Sales module


Forecast Accuracy Report – by ErrorForecast Accuracy Report – by Error

Group Product Forecast Actual Error % Error

Product Group A

Product 123 100 120 +20 20

Product 456 200 150 -50 25

Product 789 300 330 +30 10

Total 600 600 0 17 %

Product Group B

Product 345 200 300 +100 50

Product 567 500 300 -200 40

Product 890 600 700 +100 17

Product 678 200 400 +200 100

Total 1500 1700 200 40 %


Forecast Quality and BiasForecast Quality and Bias

0

5

10

15

20

25

30

35

40

% of Items

Normal

Graph forecasts to display bias

Bias


Customer ServiceCustomer Service

Definition

Purpose

Horizon


Number of orders delivered to required date to customers’ premises

Flexibility required to meet customer needs

Make To Stock - none

Make To Order - product lead time

Sales order entry


Order Required Date

Actual Date

Required Quantity

Actual Quantity

Hit/ Miss

1435 22/2/99 23/2/99 1050 1050 Miss

1560 23/2/99 23/2/99 2000 2000 Hit

1573 24/2/99 23/2/99 300 300 Miss

1745 25/2/99 25/2/99 450 500 Miss

1800 26/2/99 26/2/99 700 650 Miss

1820 26/2/99 26/2/99 1000 1000 Hit

Customer Service Report – Customer Service Report – Against Request DateAgainst Request Date

Customer Service = 2/6 = 33 %


Sales and Marketing FocusSales and Marketing Focus

Month 1 Region A Region B

Cust

A

Cust

B

Cust

C

Cust

A

Cust

D

Cust

E

Prod

Group

ABC

Prod 1

Prod 2

Prod 3

Prod

Group XYZ

Prod 4

Prod 5

Prod 6


Cust

A

Cust

B

Cust

C

Cust

A

Cust

D

Cust

E

Prod

Group

ABC

Prod 1

Prod 2

Prod 3

Prod

Group XYZ

Prod 4

Prod 5

Prod 6


Cust

A

Cust

B

Cust

C

Cust

A

Cust

D

Cust

E

Prod

Group

ABC

Prod 1

Prod 2

Prod 3

Prod

Group XYZ

Prod 4

Prod 5

Prod 6


Cust

A

Cust

B

Cust

C

Cust

A

Cust

D

Cust

E

Prod

Group

ABC

Prod 1

Prod 2

Prod 3

Prod

Group XYZ

Prod 4

Prod 5

Prod 6


Cust

A

Cust

B

Cust

C

Cust

A

Cust

D

Cust

E

Prod

Group

ABC

Prod 1

Prod 2

Prod 3

Prod

Group XYZ

Prod 4

Prod 5

Prod 6


Cust

A

Cust

B

Cust

C

Cust

A

Cust

D

Cust

E

Prod

Group

ABC

Prod 1

Prod 2

Prod 3

Prod

Group XYZ

Prod 4

Prod 5

Prod 6

Sales/Account

Managers

Sales/Account

Managers

MarketingMarketing

One

Set of

Numbers

One

Set of

Numbers


Cultural issuesCultural issues

1. Over optimism or pessimism2. Reforecasting to the budget3. Not spending the time on forecasting4. Forecasting what you want production

to make and not what the customer wants

5. Not understanding forecast accuracy is a tool to improve the process.


Demand ManagementDemand Management

Strategy

Demand Manager

Sales and Marketing

SystemForecast

Plan

ManufacturingAnd Purchasing

ERPSystem

Consensus ForecastConsensus Forecast


Demand Review MeetingDemand Review Meeting

• Strategy• Update on Assumptions• New Product developments• Major changes to Forecasts• Competitive threats/opportunities•Performance Measures

•Unconstrained Demand• Agreement on Risks and mitigation• Actions to close gaps•FinancialProjections• Actions for improving process

Inputs Outputs

Agenda

1. Revised Forecasts2. New Products3. Competitor analysis4. Gaps to strategic plan and

proposals5. Performance Measures

Agenda

1. Revised Forecasts2. New Products3. Competitor analysis4. Gaps to strategic plan and

proposals5. Performance Measures


Framework for Process Review – Customer Framework for Process Review – Customer Demand Demand

Process NameProcess NameInputsInputs

Business strategy Business strategy

Order book salesOrder book sales

Assumptions Assumptions

Major forecast changesMajor forecast changes

Innovation Innovation

Purpose/AgendaPurpose/Agenda

1. 1. Review new product forecastsReview new product forecasts

2. Review changes to previous 2. Review changes to previous forecastsforecasts

3. Agree and sign off assumptions3. Agree and sign off assumptions

4. Agree actions to close gaps4. Agree actions to close gaps

5. Review performance 5. Review performance measuresmeasures

OutputsOutputs

Sales Forecast/Demand PlanSales Forecast/Demand Plan

Unconstrained demandUnconstrained demand

Uncertainties Uncertainties

Financial projectionFinancial projection

PeoplePeople

Sales Director (lead), KAM, Bid Sales Director (lead), KAM, Bid Support Manager, Demand Support Manager, Demand Manager, Commercial Manager, Commercial

Desired CultureDesired Culture

Cohesive and agreed sales planCohesive and agreed sales plan

MeasuresMeasures

Business planBusiness plan

Forecast accuracy Forecast accuracy

Order book valueOrder book value

Customer service –on time in full Customer service –on time in full to customer promise dateto customer promise date

Systems to support this stepSystems to support this step

ACT!, TABS, Excel, Corporate Planning modelACT!, TABS, Excel, Corporate Planning model

Link to other ProcessesLink to other Processes

Supply, Prioritisation and Senior Team ReviewSupply, Prioritisation and Senior Team Review



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ReviewReview


ReviewReview



Stage 1Stage 1

Stage 2Stage 2


ReviewReview


ReviewReview

Stage 5Stage 5

Stage 7Stage 7

Stage 3Stage 3



Stage 6Stage 6

Stage 4Stage 4


Supply Chain ManagementSupply Chain Management

Horizon

PLANMANAGEEXECUTE



Strong Link to

Integrated Enterprise Leadership Process


Release Orders


Supply Planning should happen at two Supply Planning should happen at two levels..levels..

-3 -2 -1



Difference -6 -7 -4

Cum Diff -13 -17

1 2 3 4 5 6 7 8 9

Last Supply Plan 125 125 120 120 120 120 120 120 120

New Supply Plan

Difference

Cum Diff

Q4 Q1

360 360

FamilyFamily

DetailDetailMaster \Schedule

CapacityRequirements

Plan

ComponentPlan

RoughCutRoughCut

MRP/CRP

Filling Machine : Cap Req

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 2 3 4 5 6 7 8 9 10 11 12

Months

Hours

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000


Rough Cut Capacity PlanningRough Cut Capacity Planning

Objective Translate Family Volumes into capacity requirements Test validity of plan against demonstrated capacity

How Use planning profiles Use critical resources Use demonstrated capacity

Result Possible problem areas


Rough Cut Capacity PlanningRough Cut Capacity Planning

RequiredCapacity

DemonstratedCapacity

Family Volumes x

Rate per hour

Family Volumes x

Rate per hour

Actual ProductionPer month

Actual ProductionPer month

CriticalResources


Rough Cut ProfileRough Cut Profile

Key Resources

Units Families

A B C D E F

Supplier A Lts 2.1 3.4 4.2 1.3Warehouse Pallet

s12 14 20 5 10

Quality Assurance Hrs 3 5 3 10 7 2Line ABC Hrs 2 5 1 5.6Labeller Hrs 4 7 2 5Filling m/c Hrs 3 7 9 2 5

Hours per 000 units


Rough Cut ResultRough Cut ResultMonth 5Month 5

Key Resources Required Production Volumes Capacity

A

220

B

200

C

35

D

40

E

150

F

15

Req Dem Max

Supplier A

Warehouse

Quality Assurance

Line ABC

Labeller

Filling m/c


Rough Cut Result Rough Cut Result – Month 5– Month 5

220 200 35 40 150 15

Key ResourcesUnits FamiliesA B C D E F

Supplier A Lts 462 680 - 168 195 - 1,505 1,500 2,500

Warehouse Pallets 2,640 - 490 800 750 150 4,830 4,000 4,000

QA Hrs 660 1,000 105 400 1,050 30 3,245 3,500 4,200

Line ABC Hrs - 400 175 40 840 - 1,455 1,500 2,500

Labeller Hrs 880 1,400 70 200 - - 2,550 1,500 2,500

Filling m/c Hrs 660 1,400 315 80 750 - 3,205 3,000 4,500

REQ CAP

DEM CAP

MAX CAP

ROUGH CUT CAPACITY PLANNINGResult for Month 5

Production Volumes


Rough Cut Result Rough Cut Result – Graph by Resource– Graph by Resource

Month 5 - RCCP

0

1000

2000

3000

4000

5000

6000

Supplier A Warehouse QA Line ABC Labeller Filling m/c

Resources

Un

its REQ CAP

DEM CAP

MAX CAP


Rough Cut ResultRough Cut ResultCapacity RequirementCapacity Requirement

Filling Machine : Cap Req

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 2 3 4 5 6 7 8 9 10 11 12

Months

Hou

rs

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000


Objectives of Master ScheduleObjectives of Master Schedule

• State forward production plan by Stock Keeping Unit (SKU)

• Summarise what the business can do

• Provide Available to Promise information for Sales/Customer Service

• Provide stability to the supply organisation Firm Planned Orders


Master Schedule Link to IELMaster Schedule Link to IEL

Product B3Product B2

MPSProduct B1

IEL Family B

16

6Cum Diff

10

51Difference

80

75

71

Actual Demand

70

70

70

Demand Plan

-1

-2

-3

Months

70

4

70

5

70

6

70

7

70

8

70

3

Cum Diff

Difference

New Demand Plan

70

70

70

Last Demand Plan

921

Months

210

210

Q1

Q4

-15

-11

Cum Diff

-4

-6

-5

Difference

71

69

70

Actual Supply

75

75

75

Supply Plan

-1

-2

-3

70

4

70

5

70

6

70

7

70

8

70

3

Cum Diff

Difference

New Supply Plan

70

75

75

Last Supply Plan

921

210

210

Q1

Q4

31

17

6Difference

82

73

67

Actual Orders 66

51

56

61

Order Book Plan

-1

-2

-3

41

4

41

5

41

6

41

7

41

8

41

3

Difference

New Plan

41

41

46

Last Plan

921

41

41

Q1

Q4

Make – To- Order


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 ?


Planned OrdersPlanned Orders

PlannedOrders

CapacityRequirements

Plan

ComponentPlan

Red Item

14356

Sub-Item

43781

2 per

•Automatic re-plan•Plans Matched sets of Parts•Plans hours for CRP


Capacity Requirements PlanCapacity Requirements Plan

Opn No

Work Centre

Operation Set Run

10 45 Inspect 0.5 0.10

20 55 Mix 1.0 0.5

30 65 Pack 1.0 0.2

Routing

Work Centre Information

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8

Reqd

Demo

8

Planned Order Release

00Projected Available Balance

2525Scheduled Receipts

202020202020Projected

Gross Requirements

97654321Periods

55 55 55 55 1010 -15-15 1010 1010 1010 -10-10

2525 2525

1515


Capacity Plan resolutionCapacity Plan resolution

Capacity Plan WC 45

105

85

107125

112

75

132123

110

020406080

100120140

1 2 3 4 5 6 7 8 9

Weeks

Ho

urs Required

Demo


Time Fence PolicyTime Fence Policy

Horizon

PLANMANAGEEXECUTE



Strong Link toIntegrated Enterprise Leadership Process


Release Orders

Open SesameFirmNO !


Time Fence PolicyTime Fence Policy

• Should relate to Cumulative Lead Time (CLT) Requires review of CLT by product Could be different by product group

• Should state who can change and when• Should be clear about “Emergency

Changes”• Must be adhered to !


Integrated Enterprise LeadershipIntegrated Enterprise Leadership

-3 -2 -1

Demand Plan 120 120 120

Actual Demand 119 125 132

Difference -1 5 12

Cum Diff 4 16

Months 1 2 3 4 5 6 7 8 9

Last Demand Plan 120 120 120 120 120 120 120 120 120

New Demand Plan

Difference

Cum Diff

Months Q4 Q1

360 360

-3 -2 -1



Difference -6 -7 -4

Cum Diff -13 -17

1 2 3 4 5 6 7 8 9

Last Supply Plan 125 125 120 120 120 120 120 120 120

New Supply Plan

Difference

Cum Diff

Q4 Q1

360 360

-3 -2 -1

Stock Plan 71 76 81

Actual Stock 66 66 59 48

Difference -5 -17 -33

1 2 3 4 5 6 7 8 9

Last Stock Plan 86 91 91 91 91 91 91 91 91

New Stock Plan

Difference

Q4 Q1

Make – To- Stock Senior Team FocusMPS Focus


Master Schedule Master Schedule

• Definition

• Purpose

• Horizon

• Source of Information

• Valid Material and Capacity plans and stability of those plans

• Improve planning process, and provide desired stability to supply chain

• Product’s Cumulative Lead Time

• Master Scheduling module


Master Schedule AchievementMaster Schedule Achievement

Firm Plan Order

Plan Start Date

Actual Start Date

Planned Quantity

Actual Quantity

Hit/ Miss

10034 22/2/99 23/2/99 1050 1050 Miss

10067 23/2/99 23/2/99 2000 2000 Hit

10165 24/2/99 24/2/99 300 300 Hit

10230 25/2/99 25/2/99 500 500 Hit

10376 26/2/99 26/2/99 700 700 Hit

12782 26/2/99 26/2/99 1000 1000 Hit

Schedule Achievement = 5/6 = 84 %


Right First Time ReportRight First Time Report

Commentary

•Right First Time suffered from new component supplier

•Product specs not updated

Right First Time

0

20

40

60

80

100

120

Rig

ht Fir

st Tim

e

Actual

Target


Supplier PerformanceSupplier Performance

Definition

Purpose

Horizon


Number of deliveries received into stock on or before due date/time

Improve supplier delivery process

Purchasing Lead Time or Time Fence

Vendor Schedule or Purchase Order`


Supplier Achievement ReportSupplier Achievement Report

Commentary•Supplier achievement suffered from alternative supplier having quality problems•The new product caused untold problems

Supplier Achievemnt

0

20

40

60

80

100

120

% o

n t

ime

Actual

Target


Master SchedulerMaster Scheduler

Strategy

Sales Forecasts

CustomerOrders

ManufacturingPlan

PurchasingPlan

MRPSystem

Balanced PlanBalanced Plan

Master Scheduler


Supply Review MeetingSupply Review Meeting

• Update on new Products/Projects•Latest Forecast of unconstrained demand•Rough Cut and Demonstrated Capacity• Detailed capacity issues• Material constraints• Performance Measures

• Recommendations for resolving issues• Actions to meet plan•Agreed Supply Plan• Proposals for improving process

Inputs Outputs

Agenda

1. Required production plan2. Issues in meeting plan3. Proposals for resolving

issues4. Capex projects5. Performance Measures

Agenda

1. Required production plan2. Issues in meeting plan3. Proposals for resolving

issues4. Capex projects5. Performance Measures


By SiteBy Site

SUPPLY PLANNING SUPPLY PLANNING PROFORMA (1)PROFORMA (1)

Site Load & Capacity Profile

Critical Workcentre Load & Capacity Profiles

-30

-20

-10

0

10

2030

2003 2004 2005 2006 2007

Variance to Demand plan

EFA

A320

A340

0

100

200

300

400

2003 2004 2005 2006 2007

Supply plan

EFA

A320

A340

Other Workcentre Load & Capacity Profiles

0

100

200

300

400

2003 2004 2005 2006 2007

Demand plan

EFA

A320

A340

• 5 year horizon - Rolling first 24 months - Fixed years 3 to 5 (re-establishment of year 5 @ Roll 1)

• OE by programme• Spares by major parts (product/process)


MeasuresMeasures Schedule adherence MPS stability Expedited parts internal/external Concessions Actual/planned capacity

OutputsOutputs Load/capacity issues Statement of policy decisions Supply plan Requirements for cap-ex Security stocks Recording of actions taken “What if?” scenarios & alternatives for resolving issues Identification of risk on materials

See slides 29-30

InputsInputsSupply Planning:

Material Planning (MRP) Capacity Planning Maintenance Planning Make/Buy Operations Assumptions:

Demonstrated capacities Arrears management Lead-times

Supplier Partnerships Purchase schedules Performance measurements Quality

Feedback from previous cyclePeoplePeople

Process Owner:Process Owner: L. Schneider-Maunoury (ISO P6)L. Schneider-Maunoury (ISO P6)

Site Operations Managers Maintenance Quality Master scheduler Site procurement/Supply Chain Mgr’s Global procurement GPT S&OP Co-ordinator Human resources

Scope/PurposeScope/Purpose Produce a realistic Manufacturing & Supply Plan Balance required capacity vs. planned capacity Define mismatches on capacity Resolve Operating Plan only issues Improve:

Process Quality Job satisfaction Flow to increase capacity

NOT to solve all issues

Links to Other ProcessesLinks to Other Processes Make/buy Load/capacity reviews MPS - where applied GPT

““Supply Planning” ProcessSupply Planning” Process



AACCTTIIOONN

AACCTTIIOONN







ReviewReview


ReviewReview



Stage 1Stage 1

Stage 2Stage 2


ReviewReview


ReviewReview

Stage 5Stage 5

Stage 7Stage 7

Stage 3Stage 3



Stage 6Stage 6

Stage 4Stage 4


SupportSupport

What are the support activities?They will depend on your particular

organisation – one person’s critical activity is another’s support role!

Examples:FinanceITQualityEngineeringHuman Resources


Support stepSupport step• Establish the resource needs and priorities for all

support activities – e.g. Finance Human Resources Information Technology Engineering

• Provide financial base for decisions• Highlight resource issues in these areas, which are

relevant• To ensure that all plans – innovation, demand and

supply – are underpinned by the appropriate support resources.


Financial planFinancial plan

Pull together all the volume plans into one financial picture

• Volume x price = revenue• Volume x cost = variable cost• Margin = revenue – variable cost• Overheads are fixed• Profit is the result• Assumptions on assets• Cash Flow calculation


Revised Financial PlanRevised Financial Plan

0

5,000

10,000

15,000

20,000

25,000

30,000

Euros

Sales Contrib EBITDA

Sales/Profit

Financial Analysis

Budget

Previous

Current


Reviewing the GapReviewing the GapFinancial Strategic Forecast

0

5

10

15

20

25

1 2 3 4 5

Year

£m.

All New

New

Extend

Current

Aspiration


BudgetBudget


Preparation of the budgetPreparation of the budget

Financial projection enables Visibility of current year outturn – early Visibility of subsequent year(s) to enable budget to

be one set of numbers – early

Requires culture change No six month process No sandbagging of the numbers Simple cut-off period “Roughly right” rather than “precisely wrong”


Budgets – the issuesBudgets – the issues

• Annual budgets irrelevant in a fast changing world

• It is a game played by any number of players

• Budget is used as a “control mechanism” – but it does not work


Information ResourcesInformation Resources

I have been trying to get that report on Customer Service written for six

months. You can never get anything out of that

department !

I have been trying to get that report on Customer Service written for six

months. You can never get anything out of that

department !

How am I expected to

get something out of nothing


IT Resources SchedulerIT Resources Scheduler

Strategy

Project Plans

Help DeskEnquiries

Infrastructure plan

ResourceRequirements

MaintenancePlan

Balanced PlanBalanced Plan

IT ResourcesScheduler


Information ResourcesInformation Resources

Integrated Project Management

0

20

40

60

80

100

120

1st Qtr 2nd Qtr 3rd Qtr 4th QtrQtr

Capacity - Programming Resource

Dem Cap

Req Cap


Order Required Date

Actual Date

Required Quantity

Actual Quantity

Hit/ Miss

1435 22/2/99 23/2/99 1050 1050 Miss

1560 23/2/99 23/2/99 2000 2000 Hit

1573 24/2/99 23/2/99 300 300 Miss

1745 25/2/99 25/2/99 450 500 Miss

1800 26/2/99 26/2/99 700 650 Miss

1820 26/2/99 26/2/99 1000 1000 Hit

Customer Service Report – Customer Service Report – Against Request DateAgainst Request Date

Customer Service = 2/6 = 33 %


Order Promise Date

Actual Date

Promised Quantity

Actual Quantity

Hit/ Miss

1435 23/2/99 23/2/99 1050 1050 Hit 1560 23/2/99 23/2/99 2000 2000 Hit 1573 24/2/99 23/2/99 300 300 Hit 1745 25/2/99 25/2/99 450 450 Hit 1800 26/2/99 26/2/99 650 650 Hit 1820 26/2/99 26/2/99 1000 1000 Hit

Customer Service Report – Against Customer Service Report – Against Promise DatePromise Date

Customer Service = 6/6 =100 %


Human ResourcesHuman Resources

1. Plan for Direct and Indirect labour requirements

2. Organisational development

3. Training plans by individual as a result of Training Needs analysis• What financial benefits being delivered ?• What resource issues exist ?

4. Management of• Pay negotiations• Move to Annualised hours

5. Downsizing, Rightsizing, upsizing, outsourcing


Quality AssuranceQuality AssuranceTime

period2005Q3

2005Q4

2006Q1

2006Q2

2006Q3

2006Q4

>>>>>>

2010Q4

Numbers of unitsUnit Of Measure

75 75 100 100 100 100 150

QA on manufacturing and assembly

12 12 18 16 14 14 18

New product project A (Strategic plan ref # 12)

1 2 3 2 1 0 0

New product project B (Strategic plan ref # 06)

0 0 1 2 3 3 0

New Layout Project (Strategic plan ref # 15)

1 1 1 2 4 1 0

Total # of people 14 15 23 22 22 18 18


Support Review MeetingSupport Review Meeting

• Update on new Products/Projects•Latest projection of demand and supply and inventory/shipments in Financial terms• Projection of Overheads• Assumptions on debtors creditors/debtors• Performance Measures•Strategic financial plan

• Recommendations for resolving issues• Actions to meet plan• Agreed revised financial plan• Proposals for improving process

Inputs Outputs

Agenda

1. Latest projections on Profit and cash flow

2. Issues in meeting strategic plan

3. Proposals for resolving issues

4. Performance Measures

Agenda

1. Latest projections on Profit and cash flow

2. Issues in meeting strategic plan

3. Proposals for resolving issues

4. Performance Measures


Need for Multi-Level Integrated PlanningNeed for Multi-Level Integrated Planning

LOCAL/COUNTRY

Brand Development

Customer’sTastes

REGIONAL/SECTOR

GLOBAL

ManufacturingEconomics

ResearchCosts

Financing

Competition

LEVEL 1

LEVEL 2

LEVEL 3


Where do the main processes occurWhere do the main processes occur ? ?

InnovationCustomer

Relationships

SupplyManagement

FinancialPriorities

StrategicReview

LEVEL 1Customer/Country/Market

LEVEL 2Region/Country Grouping/Business Sector

LEVEL 3Region/Global


Multi-Level Integrated Enterprise PlanningMulti-Level Integrated Enterprise Planning


DemandPlanning

DemandPlanning

DemandPlanning

DemandPlanning

DemandPlanningCustomer

New ActivityReview

Innovation

Innovation

SupplyReview

SupplyReview

SupplyReview

SupplyReview

FinancialPriorities

ConsolidatedRecocniliation

FinancialPriorities

CorporateReview

SeniorTeam

Review

GLOBAL

LOCAL

LEVEL 1Country/Market

LEVEL 2Region/Business

Unit

LEVEL 3Europe/

Global HQ


Top Level GS&OP Process Diagram:Top Level GS&OP Process Diagram:

GlobalInnovation

CustomerDemand

SupplyPlanning

PriorityPlanning

SeniorTeam


LEVEL 1

Country

LEVEL 2

Business

Unit

LEVEL 3Global

R&TIntersiteDemand

BU Demand

CSDemand

SiteDemand

BU/CS Priority Planning

SeniorTeam

Review

GlobalPlanning

PriorityPlanningBy Site

Innovation

@Sites

SupplyPlanningBy Site


Revised Top Level GS&OP Cycle:Revised Top Level GS&OP Cycle:

Week 3

Week 2

Week 1

Week 4

M T W FT

5 6 7 8

Calendar Month 1

1 2

9

12 13 14 15 16

19 20 21 22 23

26 27 28 3029

BU Demand

CSDemand

STR

GlobalPlanning

Site PriorityPlanning

R&T

SiteDemand

Innovation@ Sites

IntersiteDemand




M T W FTCalendar Month 2

62 3 4 5

139 10 11 12

2016 17 18 19

2723 24 25 26

30 31

STR

GlobalPlanning

BU Demand

CSDemand

SiteDemand

Innovation@ Sites

IntersiteDemand

Site PriorityPlanning


R&T

© the delos partnership 2007 page 1 integrated enterprise leadership process steps

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