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  • This is all about the right mix of the right stuff – all driven by your company’s business strategy Business strategy ultimately drives to creation of shareholder value (high market valuation)
  • S&OP – lower noise – reduces noise – better planning – what’s the right thing to make and what can we make and shape demand accordingly Do you have the capability to help us shape demand When does the SC planning group get meaningful information from the shop floor? Network design – designed in response to product portfolio and brand segmentation Smaller mfg organization dealing with less exceptions – this is the jump CPG – too little segmentation Automotive – pushes back to suppliers A&D – program optimization – no program to program
  • Outside in – SC tells mfg what’s important !!
  • Because manufacturing can work around this, therefore it looks fine from up top
  • Given the gaps that continue to feature in our studies, we have to ask how it is that we can even claim we understand out current state? EXCEPTION – we can’t hold spare, we react to exceptions – its all fire fighting Expediting costs, overshifts, overtime, catch supplier problems in process Trying to provide supply chain with data
  • Manufacturing fights fires – Schedulers Expedited shipments Crummy on time delivery Manages to get things done ... But getting to the next level is going to take a massive reconceptualization of the way we do business
  • What can Supply Chain do for manufacturing? Not been enough signal from SC for mfg to reduce noise to signal – need better signal from SC and better signal from shop floor Mfg reacting – with exceptions – Outsourcing not as good as could be Co-packing not working as well as it can Can’t fix by putting in another application
  • ERP clearly has a role to play in this environment in process orchestration, but there is still a need for investments in local capabilities and focused applications to achieve the kind of operational excellence required. And based on the inquiries we get from many of our clients, providing the business with visibility into the real performance of manufacturing continues to be an area that needs work.
  • M-MDM: Products Assets Processes Specifications Etc. How many of you have bloated execution and planning organizations on shop floor dealing with exceptions? Organization

© 2008 AMR Research, Inc. | Page 1 © 2008 AMR Research, Inc. | Page 1 Presentation Transcript

  • Alison Smith Research Director, Manufacturing Operations Simon Jacobson Research Director, Manufacturing Operations Next-Generation Demand-Driven Manufacturing Strategy
  • What we’ll discuss today
    • Reliable, stable, and profitable product supply is the core of demand-driven value network performance.
    • Differences in manufacturing priorities across styles of supply chains
    • Evolving manufacturing plant and IT priorities
    • Measurement strategies to achieve alignment
    • Leadership and organization models
  • Together, operations and innovation create value Higher cash flow, profits, p/e Operational Excellence (Perfect Order, Cycle Times Total Supply Chain Cost) Leader Leader Laggard Laggard P S D Innovation Excellence (Time to Value, Return on R&D) Winners Losers
  • Aligning the pillars for shareholder value Demand Networks Design Networks Supply Response Supply Relationships Cost/Value Tradeoffs Business Processes Innovation IT Strategy and Architecture 7 Core Themes Organization and Leadership Skills and Talent Performance Measurement
  • Start by developing the operating strategy… Supply chain strategy Business Strategy What are the right things to do to increase company value? Demand-driven value-network strategy What are the right ways to support the business strategy? What are the right tradeoffs between value drivers for each value network? Right product platforms Design the supply response Build organizational systems and manage talent Align supply relationships Align demand relationships Effective supply networks Execution of buy-side strategies Continuous Improvement Capabilities required Supply chain network design Design networks Innovation methodologies Demand networks Joint value creation strategies Business Process How do I do the right things right?
  • Supply chain strategy Business strategy What are the right things to do to increase company value? Demand-driven adaptive value-network strategy What are the right ways to support the business strategy? Right product platforms Design the supply response Build organizational systems and manage talent Design supply relationships Align demand relationships Determine effective supply networks Strategic standardization Execution of buy-side strategies Continuous improvement Capabilities required Supply chain network design Sustainability Design networks Innovation Demand networks Joint value creation strategies Business Process How do I do the right things right? Innovation Design the mfg. response Talent for mfg. excellence Align supply relationships Demand management Direct material sourcing strategies Supplier development Performance management Continuous improvement Talent development Metrics alignment Agility & responsiveness strategies Corporate responsibility Demand shaping: flows to assets Demand sensing to demand visibility Alignment and Orchestration of Strategy: S&OP The role of innovation to manufacturing value Balance in product cycles to manufacturing cycles Technology & process innovation Manufacturing Execution Excellence … then build the product supply elements Reliable supply Support of growth strategies Factory as knowledge Workers Reward supply relationships Demand Translation Collaboration Supplier scorecards Kaizen events Health and safety Union versus non-union Security requirements Intellectual property Commercialization reliability Continuous Improvement Programs Service requirements Demand sensing in the slush period Manufacturing performance Efficiency and effectiveness Deliver against Inventory Strategies
  • Process, metrics and IT systems aligned for transformation Stage 1: Markets / Product Line Focused Stage 2: Cost Control Stage 3: Demand Driven Stage 4: Value Driven Process
    • Distributed business units and functions
    • Focused on local markets and products
    • Consolidated and standardized business processes, infrastructure and standardized controls
    • Efficiency
    • Extended set of integrated lean, business, and supply chain processes
    • Integrated front and back office
    • Focused on outward-facing demand and supplier management efficiency
    • Joint value creation
    • Profitable relationships with upstream and downstream network partners
    • Focus on outside-in demand translation into joint value
    Metrics
    • Local business unit metric s
    • Business/geography/unit performance
    • Market share
    • Revenue
    • Efficiency, costs, standards
    • Speeds, feeds, cycle times
    • Transaction platforms
    • Integrated core metrics
    • Inside – out metrics
    • Transactional business performance management
    • Service levels, adherence, compliance
    • Collaboration metrics
    • Outside-in metrics
    • Joint value creation
    • relationships and networks
    • Profitable perfect orders
    • Relationship process
    • management metrics
    IT Systems
    • Local IT organization, governance systems and standards
    • Centralized IT leadership and standards, consolidated platforms, data and infrastructure
    • Business-IT partnership
    • Governance of the distributed IT organization
    • IT operations excellence
    • Business leadership of enabling IT
    • Business-skilled IT resources embedded in business processes
  • Manufacturing components look like:
    • Manufacturing sites autonomous; unique process control and application architectures
    • Plant/site has own plant utilization, efficiency, and cost metrics
    • No replication of best practices, and no demand-driven metrics (that is, schedule adherence)
    • Focus is on local optimization
    • Common SLAs and metrics for in-house and contract manufacturing
    • Multiplant planning and finite capacity scheduling for supply side tradeoff decisions
    • Manufacturing constraints and costs modeled, and included in S&OP
    • Formal process for strategic manufacturing outsourcing decisions and relationship management
    • Extend demand-pull systems to suppliers and performance visibility to customers
    • Short and predictable cycle times exploited by changes to supply network and/or active demand-shaping to level load manufacturing lines/sites or inventories
    • Supply sensing for closed loop schedule optimization and network scheduling
    • Network visibility of demand-driven metrics, such as schedule adherence, profit velocity, cycle time variances
    • Design for supply–NPDI exploits common manufacturing processes and platforms; R&D utilizes manufacturing master data
    Markets Focused Customer and Brand Control Demand Driven Value Driven
    • Ops excellence strategy: focus on cycle times, product mix, FG inventories, and right first time quality. Disconnected from demand/supply sensing, shaping
    • Manufacturing CoEs, common definition of performance data, identification and replication of best practices
    • Focus on plant capacity utilization and efficiency measures
  • Hackett uses actual data to identify world-class performers in procurement
    • EFFECTIVENESS
    • Economic return
    • Supply base leverage and performance
    • Role of procurement
    • Process quality
    • Information and analysis
    • Examples :
    • Spend cost reduction and avoidance savings as a percent of spend
    • Percent of suppliers comprising the top 80% of spend
    • On-time supplier delivery percentage
    • Internal customer satisfaction ratings
    • Percent of spend formally influenced by procurement
    • Percent of transactions requiring post-issuance activity
    • Ability to view detailed spend data on an enterprise-wide basis
    • EFFICIENCY
    • Process costs
    • Productivity
    • Cycle times
    • Technology leverage
    • Costs per transaction
    • Staffing Levels
    • Examples :
    • Procurement process costs as a percent of spend
    • Number of POs processed per FTE
    • Receipt processing cycle time
    • Percent of RFXs submitted electronically
    • Ratio of labor to technology cost
    • Cost per PO
    • FTEs per $1B of spend
    Procurement Sample
  • How do you measure manufacturing performance? Mfg quality metrics Supplier quality metrics Mfg cost metrics Mfg responsiveness metrics Schedule adherence metrics Mfg flexibility metrics Measuring demand metrics Q. Which of the following manufacturing metrics do you track today in your manufacturing operations?
  • Perceptions of manufacturing capabilities % of responses, n=100
  • Reality check! Manufacturing operations fundamentals are iffy % respondents, n=197; this chart shows top six only 50% 48% 47% 46% 45% 43% 37% 39% 33% 39% 35% 32% Providing real manufacturing costs, capabilities, and capacity to the business for effective sales and operations planning Managing inventory across the extended supply chain (e.g., with contract manufacturers, component suppliers, and third-party logistics Asset performance management and reliability centered maintenance programs to improve availability and performance of manufacturing tools and equipment Managing supplier quality, compliance, and performance Providing manufacturing with accurate and timely forecasts of demand Acquiring near real-time production information for site level performance metrics Importance Performance Importance and Performance on Manufacturing Business Process Red arrows indicate statistically significant gap
  • Transforming manufacturing: turning inside out 1 Week  Planning by day Weekly planning for the year for X weeks Balance in months Annual planning Integrated point systems and IT-driven master data S&OP balances supply and demand Tactical Planning Production Materials Assets Operational Planning Strategic Planning
  • Transforming manufacturing: turning inside out on its head Tactical Planning Products Demand Supply Planning Architecture; Master Data, Standards, and Processes PBN-architected solutions and planning master data S&OP bidirectionally and adaptively translates opportunity Into execution Operations and innovation excellence architecture, manufacturing master data, standards, and capabilities Operational Planning Strategic Planning 1 Week  Planning by day Weekly planning for the year for X weeks Balance in months Annual planning Right First Time
  • Pillars of demand driven Manufacturing Architecture
    • Enterprise as Orchestrator:
      • Products and specifications managed centrally and electronically communicated across fleet of assets (plants)–owned and outsourced
      • Global visibility of production performance and traceability, genealogy, and quality management across the extended supply network needed for warranty, safety, and compliance
      • Event driven (demand variation, new supply network constraints) S&OP and same-day scheduling across fleet of assets (plants), requiring deeper insight of equipment and process capability (network finite capacity scheduling)
    • Excellence in Local Plant Execution Components
      • Product or specification management
      • Production order and recipe execution
      • Flexible plant automation for rapid changeovers
      • Track and trace, genealogy, quality
      • Equipment and process capability, plant production dispatching/scheduling
      • WIP visibility
      • Schedule adherence
  • Manufacturing SOA: A new organizational model Network: Quality Genealogy Compliance Performance P&PLM Etc. M-MDM: Products Assets Processes Specifications Etc.
  • Questions and Answers