Noce (ppt)

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Noce (ppt)

  1. 1. Software Applications in Supply Chain Management Project Management and Implementation Implications Guest Lecture - February 26, 2002 Dominic Noce [dominicnoce@msn.com]
  2. 2. My Background Formerly - Supply Chain Management Consultant PricewaterhouseCoopers Manager, Production Planning Traffic Manager Pet Incorporated (acquired by Pillsbury which was then recently acquired by General Mills)
  3. 3. Agenda <ul><li>Supply Chain Performance Improvement Project </li></ul><ul><li>Network Design / Optimization - typical project issues </li></ul><ul><li>Supply Chain Planning System Implementation </li></ul>
  4. 4. Supply Chain Performance Improvement Project <ul><li>Client: Fortune 200 Global Consumer Products Company (personal care products) </li></ul><ul><li>The client’s problem - Low Inventory Turnover </li></ul>
  5. 5. Supply Chain Performance Improvement Project Existing Client Issues <ul><li>Long lead times - Manufacturing in few locations; 8 to 12 weeks delivery </li></ul><ul><li>Lack of supply chain management expertise </li></ul><ul><li>Explosive growth in some markets (Eastern Europe) </li></ul><ul><li>Lack of communications; data visibility; technology </li></ul><ul><li>Global ERP implementation would not impact the International Group for five years -- need improvements now </li></ul>
  6. 6. Supply Chain Performance Improvement Project Diagnostic - Mexico and South Africa <ul><li>Findings: ITR improvement to 6 turns was achievable in the near term </li></ul><ul><li>Improvement required a series of initiatives </li></ul>Performance Measures Training Supply Demand Planning Process Network Design Inventory Management Methodology ITR 6 3 Current Performance
  7. 7. Supply Chain Performance Improvement Project Project results and realities <ul><li>Most of the improvements implemented </li></ul><ul><li>Significant turnover improvement during the engagement </li></ul><ul><li>Delivered a plan and business case to achieve the rest </li></ul><ul><ul><li>$100 Million inventory reduction </li></ul></ul><ul><ul><li>60% Customer service improvement </li></ul></ul><ul><ul><li>Shorter lead times / improved flexibility </li></ul></ul><ul><li>REALITY </li></ul><ul><ul><li>International Group Leadership change (lost original sponsor) </li></ul></ul><ul><ul><li>Interim technology / process recommendation not approved </li></ul></ul><ul><ul><li>Project ended / International would wait for ERP to achieve additional improvements </li></ul></ul><ul><ul><li>Subsequent corporate restructuring eliminated International Group </li></ul></ul>
  8. 8. Supply Chain Network Design and Optimization What to watch out for <ul><li>Key project activities </li></ul>
  9. 9. Supply Chain Network Design and Optimization What to watch out for <ul><li>What’s wrong with this picture? - Consumer Packaged Goods </li></ul>Demand
  10. 10. Supply Chain Network Design and Optimization What to watch out for <ul><li>You tell the model to select the best 6 distribution centers. </li></ul><ul><li>What happened? </li></ul>Customer <ul><li>Incumbent Network </li></ul><ul><li>Potential New Distribution Ctrs. </li></ul>
  11. 11. Supply Chain Network Design and Optimization What to watch out for <ul><li>Should we reduce the number of distribution centers. </li></ul><ul><li>What are the benefits? </li></ul>Customer <ul><li>Distribution Ctrs. </li></ul>
  12. 12. Supply Chain Network Design and Optimization What to watch out for <ul><li>What generally happens when we eliminate distribution centers? </li></ul>Customer <ul><li>Distribution Ctrs. </li></ul><ul><li>Transportation expense rises </li></ul><ul><li>Handling costs - depends </li></ul><ul><li>Manufacturing costs - depends </li></ul><ul><li>Inventory - decreases </li></ul><ul><li>Inventory carrying cost - decreases </li></ul><ul><li>Why? </li></ul>
  13. 13. Supply Chain Network Design and Optimization What to watch out for <ul><li>Network optimization tools don’t handle inventory very well. </li></ul><ul><li>Therefore, inventory is usually handled outside of the model. </li></ul><ul><li>As you reduce the number of distribution centers, the networks total required safety stock decreases. </li></ul><ul><li>Aggregation of demand reduces variability. </li></ul>Total Inventory # of Distribution Centers Rule of Thumb - Square Root Law Inventory Reduction result from network change
  14. 14. Supply Chain Planning System Implementation <ul><li>Client: Global 100 Consumer Products Company (food and personal care products) North American Food Group - i2 Demand Planner / i2 Supply Planner </li></ul><ul><li>The client’s problem - Long, expensive and UNSUCCESSFUL system implementation </li></ul><ul><ul><li>Demand Planner - in place but not being used </li></ul></ul><ul><ul><li>Supply Planner - implementation halted </li></ul></ul>
  15. 15. Supply Chain Planning System Implementation Existing Client Issues <ul><li>Poor forecast accuracy </li></ul><ul><li>System results not reasonable, therefore, ignored </li></ul><ul><li>Users were trained to navigate through the software, not how to forecast or manage the results </li></ul><ul><li>Client did not want to proceed with Supply Planner until demand planning issues were resolved </li></ul>
  16. 16. Supply Chain Planning System Implementation Action Plan <ul><li>Key project activities </li></ul>
  17. 17. Supply Chain Planning System Implementation Results <ul><li>Users trained on daily process and interpretation of outputs </li></ul>
  18. 18. Supply Chain Planning System Implementation Results <ul><li>Improved forecasting algorithm - utilizes causal factors related to sales promotions (the largest driver of lift) </li></ul>Before Changes After Changes
  19. 19. Supply Chain Planning System Implementation Results <ul><li>Improved forecasting process </li></ul>
  20. 20. Supply Chain Planning System Implementation Results <ul><li>Documented new process design and business requirements </li></ul>Activity: Generate Statistical Forecast Timing: Weekly Who: Demand Planning What: Execute Demand Planner system. Review and resolve exceptions. To Whom: Sales, Marketing, Finance, Supply Planning <ul><li>Inputs </li></ul><ul><li>Demand history </li></ul><ul><li>Sales events </li></ul><ul><li>VMI data </li></ul><ul><li>Marketing intelligence </li></ul><ul><li>Outputs </li></ul><ul><li>Statistical base forecast </li></ul><ul><li>Promotional lift forecast </li></ul><ul><li>Controls </li></ul><ul><li>Forecast error </li></ul><ul><li>Mechanisms </li></ul><ul><li>i2 Demand Planner </li></ul><ul><li>Data Warehouse </li></ul>
  21. 21. Supply Chain Planning System Implementation Final result <ul><li>Project stopped / sponsor wanted Manugistics </li></ul><ul><li>Corporate stopped all projects to select global Supply Chain solution (leaning toward SAP APO) </li></ul><ul><li>Major acquisition of another food company which had just implemented Manugistics Demand and Supply </li></ul><ul><li>Latest update </li></ul><ul><ul><li>Still working out the politics </li></ul></ul><ul><ul><li>Our client planning supply with spreadsheets (that we developed) </li></ul></ul><ul><ul><li>DP is the better forecasting tool </li></ul></ul><ul><ul><li>Manugistics is entrenched within the acquired company </li></ul></ul>
  22. 22. Software Applications in Supply Chain Management Project Management and Implementation Implications <ul><li>Questions </li></ul>

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