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Supply Chain for Management Consultants & Business Analysts

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This presentation will help you drastically improve your knowledge and skills in optimizing supply chain of any company through a series of practical cases. It is designed for people who want to become management consultants, business analysts or have to run and optimize supply chai on daily bases. In the course you will learn 3 things:
1. How to understand supply chain activities
2. How to optimize supply chain in order to get more things done, cheaper at higher quality with less resources
3. Where to look for savings and improvements, how to calculate potential savings in Excel and implement them
The course is based on my 14 years of experience as a consultant in top consulting companies and as a Board Member responsible for strategy, improvement and turn-arounds in biggest companies from Retail, FMCG, SMG, B2B sector that I worked for. On many occasions I had to optimize the whole supply chain side of the businesses I was responsible for. On the basis of what you will find in this course I have trained over 100 consultants, business analysts and managers who now are Supply Chain Directors, Operational Directors, COO, Investment Directors, Directors in Consulting Companies, Board Members etc.
This is part of my online course on Supply Chain for Management Consultants. Check the link to get a discount: http://bit.ly/SCMConsulting

Published in: Business
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Supply Chain for Management Consultants & Business Analysts

  1. 1. 1 Supply Chain for Management Consultants Practical guide how to improve the business of your customer
  2. 2. 2 Supply chain is extremely complex, especially in the era of multichannel and globalization. Therefore, you have to become very analytical and innovative to find savings and improvements
  3. 3. 3 Thanks to this presentation you will learn main aspects of supply chain that you need in consulting projects
  4. 4. 4 The presentation is organized into 9 sections General information on Supply Chain Retail - Examples of business analyses of Supply Chain FMCG - Examples of business analyses of Supply Chain SMCG - Examples of business analyses of Supply Chain Purchasing - general information Distribution model - general information Commodity - Examples of business analyses of Supply Chain Sales forecasting and customer service - general information Production Planning - general information
  5. 5. 5 General information on Supply Chain
  6. 6. 6 Introduction to General Information on Supply Chain
  7. 7. 7 In this section we will talk about 6 topics that will serve as an introduction and give you a flavor of what supply chain is What is Supply Chain? Components of Supply Chain Finding the strategic fit Lost sales and stock level How to tackle the uncertainty? How much Supply Chain costs?
  8. 8. 8 What you will see in this presentation is a part of my online course. For more check the link with discount below. You will find there a lot of cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15
  9. 9. 9 What is Supply Chain
  10. 10. 10 We can look at supply chain from 2 different perspectives Global perspective Internal perspective
  11. 11. 11 Operational framework for Supply Chain covers the physical flow of goods as well as exchange of information Physical flow of goods Flow of information Supply chain management and control Degree of integration/fragmentation External/internal organization and control Inbound logistics (Procurement) Internal logistics (Production) Outbound logistics (Distribution) Suppliers Producer Central Warehouse Point of Sales Customers Orders and order filling system Information regarding demand forecasting Information regarding efficiency and costs monitoring Other information - Procurement - Planning - WIP Management Stock management and warehouse management Transport Transport Transport
  12. 12. 12 We can also view the Supply Chain as internal processes from customer order taking till goods delivery Finished Products depot Shipping (delivery to customers) Raw materials warehouse Production Production planning Purchase planning Raw materials purchase Customer Service Office - Accepting an order Suppliers Customer CustomerRaw materials Products Raw materials Sales planning Physical flow of goods Information flow Supply chain management and control
  13. 13. 13 In other words by supply chain we mean all activities you do and resources you need to move goods and services at the right time, quantity and quality
  14. 14. 14 Components of Supply Chain
  15. 15. 15 We can be talking about 5 components that supply chain consist of Distribution / Logistics Procurement / Purchasing Production Planning Sales Forecasting Customer service
  16. 16. 16 Finding the strategic fit for the Supply Chain
  17. 17. 17 The successful supply chain strategy cannot be developed apart from overall strategy for the firm Product Developme nt Strategy Supply Chain Strategy ▪ Manufacturing ▪ Inventory ▪ Lead time ▪ Purchasing ▪ Transportation Marketing and Sales Strategy Information Technology Strategy Finance Strategy Human Resources Strategy Competitive Strategy / Landscape Source: Sunil Chopra, Supply Chain Management
  18. 18. 18 There are 2 things that you have to decide on to achieve the strategic fit Understand the customer and implied uncertainty of the demand Decide on the responsiveness of the supply chain required to compete on the market
  19. 19. 19 There are 2 things that you have to decide on to achieve the strategic fit Understand the customer and implied uncertainty of the demand Decide on the responsiveness of the supply chain required to compete on the market
  20. 20. 20 When we talk about uncertainty of the demand we have many different options Low implied demand uncertainty ▪ Purely functional products: commodities like petrol Somewhat certain demand ▪ Established goods: toothpaste, yogurt, Mars bars Somewhat uncertain demand ▪ New models of existing goods: Samsung 9, iPhone 9 High implied demand uncertainty ▪ Entirely new products: AI Source: Sunil Chopra, Supply Chain Management
  21. 21. 21 Uncertainty level influences many aspect like margin, forecast error, stock out rate and markdowns ▪ Product margin ▪ Average forecast error ▪ Average stock out rate ▪ Average forced season-end markdown ▪ Low ▪ 10% ▪ 1% to 2% ▪ 0% ▪ High ▪ 40% to 100% ▪ 10% to 40% ▪ 10% to 25% Area Low Implied Uncertainty High Implied Uncertainty Source: Sunil Chopra, Supply Chain Management
  22. 22. 22 There are 2 things that you have to decide on to achieve the strategic fit Understand the customer and implied uncertainty of the demand Decide on the responsiveness of the supply chain required to compete on the market
  23. 23. 23 When we talk about responsiveness of the demand we have many different options Highly efficient ▪ Integrated steel mills: Production scheduled weeks or months in advance with little variety or flexibility Somewhat efficient ▪ Slow Fashion using Push model: a traditional make-to- stock manufacturer with production lead time of several weeks Somewhat responsive ▪ Most automotive production: delivering a large variety of product in a couple of weeks Highly responsive ▪ Dell: Custom made PCs and servers in a few days Source: Sunil Chopra, Supply Chain Management
  24. 24. 24 As you may have guessed. Responsiveness is expensive. Efficiency is much cheaper High Low Cost Low High Responsiveness
  25. 25. 25 Let’s now put responsiveness and demand uncertainty on 1 graph Responsive Supply Chain Responsiveness spectrum Efficient Supply Chain Certain demand Implied Uncertainty Spectrum Uncertain demand Source: Sunil Chopra, Supply Chain Management
  26. 26. 26 Comparison of efficient and responsive supply chain
  27. 27. 27 Let’s compare Efficient and Responsive Supply Chain Efficient Supply Chain ▪ Supply demand at the lowest cost Responsive Supply Chains ▪ Maximize performance at minimum product cost ▪ Lower margins because price is a prime customer driver ▪ Minimize inventory to lower cost ▪ Lower costs through high utilization Primary goal Product design strategy Pricing strategy Manufacturing strategy Inventory strategy Lead time strategy Supplier strategy Transportation strategy ▪ Greater reliance on low cost models ▪ Select based on cost and quality ▪ Reduce but not at the expense of costs ▪ Respond quickly to demand ▪ Create modularity to allow postponement of product differentiation ▪ Higher margins, as price is not a prime customer driver ▪ Maintain buffer inventory to meet unexpected demand ▪ Maintain capacity flexibility to meet unexpected demand ▪ Greater reliance on responsive models ▪ Select based speed, flexibility, and quality ▪ Aggressively reduce even if the costs are significant
  28. 28. 28 Type of products vs type of Supply Chain
  29. 29. 29 When we talk about types of supply chain that you should have you can also use the Hau Lee’s Uncertainty Framework High (evolving process) Supply uncertainty Low (stable process) Low (functional products) Demand Uncertainty High (innovative products) Efficient supply chain ▪ Grocery ▪ Basic apparel ▪ Food ▪ Gas and oil Responsive supply chain ▪ Fashion apparel (fast fashion) ▪ Computers, iPhones ▪ Physical books that are new Risk hedging supply chain ▪ Hydroelectric power ▪ Some food produce Agile supply chain ▪ Telecom ▪ High-end computer ▪ Semiconductors Source: Chase, Jacobs, Aquilano, Operations Management for competitive Advantage with global cases
  30. 30. 30 Those 4 types of supply chain differ in goals and tactics Goal ▪ Use tactics that provide highest cost efficiency Tactics used Efficient supply chain ▪ Eliminate non-value activities ▪ Pursue scale economies, do things in bulk ▪ Optimize capacity utilization especially of transportation modes and warehouses ▪ More push than pull ▪ Use tactics that enable you being responsive and flexible to the changing and diverse need of the customersResponsive supply chain ▪ Keep close the suppliers ▪ Operate on short lead times ▪ Use build-to-order and mass customization process ▪ More pull than push ▪ Use tactics of pooling and sharing resources in order to minimize the impact of disruptionRisk-hedging supply chain ▪ Keep higher safety stock ▪ Share stocks ▪ Provide info on the stock availability and transfer it or transfer customers to the place where the stock / capacity is available ▪ Use tactics that enable you being responsive and flexible to the changing and diverse need of the customers and at the same time by pooling and sharing resources enable you minimize the impact of disruption Agile supply chain ▪ Use tactics for risk hedging on the supply side ▪ Use tactics for responsive supply chain on the demand side Source: Chase, Jacobs, Aquilano, Operations Management for competitive Advantage with global cases
  31. 31. 31 Lost sales and stock level
  32. 32. 32 While analyzing stock-outs we should divide them into three groups to be able to estimate in a better way their influence on our profit and planning Initial budget Customer walks away to another store Customer postpones the purchase Customer buys a substitute at a lower price Real purchases performed by customers X% lower sales due to stock-outs 100
  33. 33. 33 In Supply Chain a lot of attention goes to stock level. It depends on the cost of lost sales and inventory cost Cost of keeping stocks** % Cost of lost sales* % Computers Newspapers Clothes Tendency to keep insufficient level of stocks Tendency to produce more than the expected demand *Lost margin **Marginal production cost minus residual unit price which could be achieved during sales Lost sales …Inventory cost
  34. 34. 34 How to tackle the uncertainty (buffering)
  35. 35. 35 Variability of demand means that you have to buffer with one of 3 things Ballpoint Pens ▪ Can’t buffer with time (who will backorder a cheap pen?) ▪ Can’t buffer with capacity (too expensive, and slow) ▪ Must buffer with inventory Ambulance Service ▪ Can’t buffer with inventory (stock of emergency services?) ▪ Can’t buffer with time (violates strategic objectives) ▪ Must buffer with capacity Organ Transplants ▪ Can’t buffer with WIP (perishable) ▪ Can’t buffer with capacity (ethically anyway) ▪ Must buffer with time Source: Wallace J. Hopp, Mark L. Spearman, 1996, 2000
  36. 36. 36 KPIs for Supply Chain
  37. 37. 37 The primary goals of Supply Chain are: minimization of costs with assumed optimal service level and maximization of elasticity Costs minimization Maximization of elasticity Optimization of customer service level ▪ Delivery time accuracy ▪ Delivery flexibility ▪ Service time ▪ Products quality ▪ Reaction speed ▪ ‘Time to market’ ▪ Operational costs ▪ Fixed assets ▪ Stock level
  38. 38. 38 There can be different specific KPIs on every stage Customer service level Supplier Producer Distributor Point of sales Customer Production plan vs. production Finished goods availability Resources and materials stock level Finished goods stock level Material availability Fully / without mistakes In time Availability on shelf Time accuracy of deliveries Length of filling the order process Raw materials price level Raw materials quality OEE x = Sale vs. plan
  39. 39. 39 How much Supply Chain costs
  40. 40. 40 Supply chain cost may represent significant percentage of total costs in many industries 100 75 50 25 0 Engineering Airline industry Food industry Motor industry Health service Electronics/domestic appliances Chemical industry Banking Media
  41. 41. 41 Impact of Supply Chain on ROCE
  42. 42. 42 The course is organized into 8 sections and I will be adding new soon ▪ Distribution ▪ Planning ▪ Depot management ROCE Operating profit Capital employed Costs Revenue on sales Fixed assets Current assets ▪ Distribution ▪ Planning ▪ Distribution ▪ Depot management ▪ Planning ▪ Purchasing Medium Low High + – / ▪ Purchasing ▪ Distribution High Area of impactRelative impact A C D B
  43. 43. 43 The course is organized into 8 sections and I will be adding new soon Operating costs Production costs S&M costs Distribution costs Administrative costs Materials Energy Remuneration Maintenance Other Transport Packaging Warehouses Other Other + + + ▪ Logistic assets maintenance cost f.e. depots, fork lift trucks, cars, etc. ▪ Cost of material purchase POS ▪ Cost of materials and raw materials purchase ▪ Consumption, level of waste materials (specifications) Hypothetical determinants ▪ Cost of energy purchase ▪ Energy consumption (production planning ) ▪ Employment scale (production planning, distribution, depots) ▪ Cost of spare parts purchase ▪ Cars exploitation ▪ Routes planning ▪ Cost of purchase og logistic services ▪ Cost of packaging purchase ▪ Level of pallets return / recovery ▪ Cost of administrative materials purchase A
  44. 44. 44 The course is organized into 8 sections and I will be adding new soon Sales Sales volume Prices x ▪ Level of customer service ▪ Operating costs ▪ Availability of products on different distribution system stages ✓ Producer’s depot ✓ Distributors ✓ Point s of retail sale ▪ (planning, purchasing, distribution) Hypothetical determinants B
  45. 45. 45 The course is organized into 8 sections and I will be adding new soon Capital employed Fixed assets Working capital + ▪ Stock level ▪ Purchasing policy / strategy ▪ Payment maturities / purchasing policy ▪ Distribution assets (i.e. warehouses) ▪ Warehouse equipment ▪ Quote-to-cash ▪ Accuracy of invoicing + Other receivables + Raw materials and packaging + Finished goods - Trade liabilities Tangible fixed assets Long-term investments Intangible + - Other liabilities + Trade receivables + ▪ Stock level ▪ Distribution model Hypothetical determinants C D
  46. 46. 46 Cycle view of Supply Chain
  47. 47. 47 The course is organized into 8 sections and I will be adding new soon Customer Order Cycle Replenishment Cycle Manufacturing Cycle Procurement Cycle Retailer Distributor Manufacturer Supplier Cycles Stages Customer Source: Sunil Chopra, Supply Chain Management
  48. 48. 48 Push/pull view of supply chain processes (L.L. Bean) Customer Order Cycle Replenishment Cycle Manufacturing Cycle L.L. Bean Manufacturer Pull processes Customer Procurement Cycle Supplier Customer Order Arrives Customer Order Cycle Replenishment Manufacturing Procurement Cycles Push processes Source: Sunil Chopra, Supply Chain Management
  49. 49. 49 Push/pull view of supply chain processes (DELL) Customer Order and Manufacturing Cycle Manufacturer (Dell) Pull processes Customer Procurement Cycle Supplier Customer Order Arrives Customer Order and Manufacturing Cycle Procurement Cycle Push processes Source: Sunil Chopra, Supply Chain Management
  50. 50. 50 Types of consulting projects done in Supply Chain
  51. 51. 51 There are 6 typical supply chain project that you will perform for your customers Operational Audit Performance Improvement Creating the Supply Chain Strategy Division Integration New business development
  52. 52. 52 Distribution model - general information
  53. 53. 53 Introduction to Distribution Model
  54. 54. 54 Distribution is the physical part of the supply chain. Its aim is to get the right products to the factory or customers on time, unharmed, fast while keeping as little inventory as possible
  55. 55. 55 In this section you will learn 5 things Goals of Distribution Model Basic laws of distribution Where you can find savings in distribution Typical problems in Distribution Different types of distribution
  56. 56. 56 Goals of Distribution Model
  57. 57. 57 The primary goals of distribution are cost minimization and proper execution of orders Costs minimization % of order execution Cost related to the inventory ▪ Cost of warehousing ▪ Cost of frozen capital ▪ Cost of lost sales ▪ On Time ▪ In Full ▪ Free of Error ▪ Minimize the cost per unit of transportation
  58. 58. 58 For transportation we have simple goals that can be measured using the OT-IF-EF framework IFOT% order execution EF 90%90%72,9% 90% ▪ Delivered on time ▪ In Full – meaning the exact number as it was supposed to be delivered ▪ Error Free – exactly what was asked for with all accompanying documents
  59. 59. 59 You would also look at the cost per unit. I recommend decomposing it so you can say more about the drivers of this cost COST TONNE = COST km or miles LOAD x x TONNE km or miles LOAD ▪ Here you want to minimize the cost of 1 km ▪ Here you want to minimize the number of km that a single shipment (load) has to go through ▪ Here you want to increase the usage of the shipment (load) – have more tons there
  60. 60. 60 Basic laws of distribution
  61. 61. 61 The course is organized into 8 sections and I will be adding new soon Inventory Costs Transpor- tation Cost Facility Costs Response time Total Logistics Cost Number of Facilities Number of Facilities Number of Facilities Number of Facilities Relationship between Number of Facilities and Facility Costs Variation in Logistics Cost and Response Time with Number of Facilities Relationship between Number of Facilities and Inventory Costs Relationship between Number of Facilities and Transportation Costs
  62. 62. 62 Different types of distribution
  63. 63. 63 There is no idle distribution scheme. Each and every has its pros and cons Suppliers Retail Stores Direct shipping Suppliers Retail Stores Direct shipping with milk run
  64. 64. 64 There is no idle distribution scheme. Each and every has its pros and cons DC Suppliers Retail Stores All shipment via DC Suppliers Retail Stores DC Milk runs from DC
  65. 65. 65 There is no idle distribution scheme. Each and every has its pros and cons Pros ▪ No intermediate warehouse ▪ Simple to coordinate Cons ▪ Lower transportation costs for small lots ▪ Lower inventories ▪ Lower inbound transportation cost through consolidation ▪ Lower outbound transportation cost for small lots ▪ Very low inventory requirement ▪ Lower transportation cost through consolidation Direct shipping Direct shipping with milk runs All shipments via central DC with inventory storage All shipments via central DC with cross-dock Shipping via DC using milk runs Tailored network ▪ Transportation choice best matches needs of individual product and store ▪ High inventories (due to large lot size) ▪ Significant receiving expense ▪ Increased coordination complexity ▪ Increased inventory cost ▪ Increased handling at DC ▪ Further increase in coordination complexity ▪ Increased coordination complexity ▪ Highest coordination complexity
  66. 66. 66 Where you can find savings in distribution
  67. 67. 67 In distribution there are number of standard places where you can find savings Warehousing Distribution Logistics Cost per kilometer Truck utilization Frozen capital Warehousing space Number of kilometers Waste in transport Waste in warehousing Allocation of equipment Stock outs ▪ Consolidate transportation contracts and negotiate prices ▪ Change trucks ▪ Reduce fuel consumption ▪ Check of real km with the planned ones ▪ Move orders to another distribution center/plant ▪ Change routing ▪ Sell return trips ▪ Consolidate transports to the same direction / region ▪ Introduce second level in trucks ▪ Improve of pallets controls ▪ Improve the control of expiry date ▪ Introduce FIFO ▪ Improve security checks ▪ Reallocate resources to other locations ▪ Centralize warehouses ▪ Negotiate price ▪ Reorganize warehouses ▪ Find optimal levels of stocks with respect to loss revenue due to stock out and cost of frozen capital
  68. 68. 68 Typical problems in Distribution
  69. 69. 69 There are a few typical problem usually occur in logistics Potential Problem ▪ Lack of control over the flow of goods in distribution channels Analysis needed ▪ Not optimal distribution model (distribution channel structure, location, distribution centers number. Analysis of distribution stage etc.) Logistics ▪ Employed resources (people, cars, fork lift trucks etc.) are higher than needs ▪ Low usage of cars ▪ Low planning of car routes ▪ Low customer service level (OTIFEF) ▪ Low level of returnable packaging return ▪ Level of control over goods in distribution channels (access to stocks in warehouses in specific channels) ▪ Identification of alternative distribution models (Best practices analysis, Competition analysis) ▪ Analysis of employed resources usage (f.e. Number of shipments per one car, number of loading per one fork lift truck etc.) ▪ Analysis of cars utilization (number of goods transported vs. cars capacity) ▪ Analysis of car loading methods ▪ Analysis of car packing / palletizing methods ▪ Low customer service level (OTIFEF) ▪ Analysis of OTIFEF (execution of dispatch on ticme, fully, without mistakes) ▪ Analysis of routes planning process, random analysis of real routes ▪ Packaging sent vs. returned
  70. 70. 70 There are a few typical problem usually occur in stock management Potential Problem ▪ Not optimal stock level (too less – shortages, too much – risk of outdating, frozen capital, wrong exploitation of depot etc.) Analysis needed Stock management ▪ Analysis of the lever of order realization (number of executed vs. number of accepted ) – Analysis of lost sales ▪ Analysis of products availability within last months ▪ Analysis of stock level vs. average monthly sale (sale coverage with stocks, outdating risk) ▪ Analysis of the way in which stock level are evaluated ▪ Low usage of warehouse space ▪ Stocks levels vs. warehouse capacity (number of pallets stored vs. theoretical number of pallet places), Analysis of warehouse organization ▪ Employed resources (people, cars, fork lift trucks etc.) are higher than needs ▪ Analysis of the usage of employed resources (i.e.. number of loadings per one forklift, etc.), benchmarking between warehouses / production plants ▪ High warehouse losses (shortages, damages, utilization etc.) ▪ Analysis of warehouse losses costs and reasons ▪ High value of spoiled goods (f.e. outdated) ▪ Analysis of costs related to spoiled goods
  71. 71. 71 For more check the link with discount below. You will find there a lot of cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15
  72. 72. 72 Sales forecasting and customer service - general information
  73. 73. 73 Introduction to sales forecasting and customer service
  74. 74. 74 Sales forecasting is about predicting the future demand. You want to figure out ahead of time how much products, what products and when the customer will need
  75. 75. 75 In this section you will learn 3 things Goals of sales forecasting and customer service Sales forecasting and customer service value drivers Typical problems in sales forecasting and customer service
  76. 76. 76 Sales forecasting Production planning Procurement plan Resource planning Corporate budget Target setting for sales force Negotiations and contracting Maintenance planning Sales forecasting is important part of the supply chain as it will influence all other elements
  77. 77. 77 Goals of Sales forecasting and customer service
  78. 78. 78 The primary goals of sales forecasting is to guess what the customer will need but also make sure that you can achieve planned EBITDA Achieve budgeted EBITDA Keep or grow shares in the market Minimize capital employed ▪ Try to keep as little as possible inventory in the system ▪ Try to minimize required assets ▪ Have the stock on-time ▪ Have the stock in the right place and quantity ▪ Balance lost sales with costs ▪ Plan the amount of goods in the system that will allow the firm to achieve the assumed goals
  79. 79. 79 Sales forecasting and customer service value drivers
  80. 80. 80 We have number of drivers through which sales forecasting can influence the EBITDA of the company Sales forecasting and customer service Accuracy and frequency of sales forecasting Order lead time Number of complaints CRM capabilities Availability of customer service Driver Impact on ▪ Number of stock-outs, back- orders, production costs, shrinkage and waste ▪ Client satisfaction, ▪ Ability to win new contracts ▪ Ability to win early/ late orders (especially in FMCG) ▪ Client retention ratio , ability to win new clients ▪ Client loyalty , ability to win new clients, operating costs
  81. 81. 81 Typical problems in Sales forecasting and customer service
  82. 82. 82 There are a few typical problem usually occur in Sales Forecasting Potential Problem ▪ Low accuracy of sales forecasts Analysis needed ▪ Low stability of sales plans, frequent changes Creating the sales forecast / plan ▪ Low level of detail planning ▪ Short planning horizon ▪ Not optimal customer service process ▪ Time of accepting orders („panic orders”) ✓ Logistics parameters (orders scale, delivery time) ✓ Time of passing orders to its execution ▪ Unstable inflow of orders during the month ▪ Real sales vs. sales plan (for SKU) ▪ % of coverage by sales plan real sales (i.e. for customers) ▪ Sales planning process analysis (who, when, input data etc.) ▪ Number and scale of plan corrections a month/week ▪ Level of detail planning vs. procurement/production needs ▪ Sales planning horizon vs. production planning horizon vs. „lead time” and stock management model ▪ Analysis of customer service process (process mapping) ✓ Number of orders accepted in particular hours / time of day ✓ Average scale of deliveries (total and for SKU), time of filling the orders ✓ Time of accepting order vs. time of passing the order ✓ Analysis of sales within a month ▪ Analysis of sales by weeks Receiving and managing the orders
  83. 83. 83 Production Planning - general information
  84. 84. 84 Introduction to Production Planning
  85. 85. 85 In production planning you have to decide how to organize production so that it is optimal not only from the point of view of production but the whole supply chain
  86. 86. 86 In this section you will learn 3 things Goal of production planning Production Planning value drivers Typical problems in Production Planning
  87. 87. 87 Goals of Production Planning
  88. 88. 88 The primary goals of Production Planning is to efficiently produce, with low inventory and providing at the same time on time delivery Efficiency of production High Customer Service Low inventory ▪ WIP ▪ Finished Goods ▪ Raw Materials ▪ High utilization of machines ▪ Smooth production ▪ Low costs ▪ On time delivery ▪ Delivery according to the order
  89. 89. 89 Production Planning Value Drivers
  90. 90. 90 Several drivers related to production planning have impacts on value generation Production planning Allocation of products to machines/ production routes Machine utilization Batch order Batch size Driver Impact on ▪ Machine efficiency, throughput, waste level ▪ Delivery time, throughput, costs ▪ WIP level, lead time, efficiency of machines, waste level ▪ Waste level, efficiency of machines (set up time), lead time Variability ▪ Delivery time, throughput, waste level
  91. 91. 91 Typical problems in Production Planning
  92. 92. 92 There are a few typical problem usually occur in production planning Potential Problem ▪ Production planning process not linked with sales planning process Analysis needed ▪ Production planning does not take into account machine park abilities, production plan does not optimize OEE, i.e.: ✓ Short production batches ✓ Frequent setups / losses of raw materials ✓ Products not ascribed to machines on which their production is optimal ▪ Low stability of production plans ▪ Real production differs from production plans ▪ Short planning horizon Production planning vs sales planning process ▪ Analysis of production planning process (process mapping) ▪ Number and scale of plan corrections a month / week Production planning vs production ▪ Analysis of the logic behind planning model used (production for warehouses vs. production as a realization of orders) ▪ Analysis of production planning efficiency (impact on OEE): ✓ Analysis of planned downtime (frequency and length of setups) ✓ Analysis of production batches length in comparison with optimal batches length and scale of orders / sale in regarded period ✓ Analysis of the level of shortages on different production lines / for different length of production batches ▪ Production planning horizon vs. „lead time” and stock management model ▪ Real production vs. production plan
  93. 93. 93 Purchasing - general information
  94. 94. 94 Introduction to Purchasing
  95. 95. 95 Purchasing is extremely important part of the supply chain. It is the stage at which you get the right materials or goods for your business, hopefully at the right time and price
  96. 96. 96 In this section you will learn 3 things Goal of Purchasing Purchasing value drivers Typical problems in Purchasing
  97. 97. 97 Goals of Purchasing
  98. 98. 98 The primary goals of Purchasing is to buy what is needed at lowest possible cost and keeping low inventory at the same time On-time and free of error Minimize the total cost of usage / ownership Low Inventory ▪ WIP ▪ Finished Goods ▪ Raw Materials ▪ Take into account not only cost of purchasing but also all related costs (i.e. waste, efficiency changes in production ▪ Take into account cost of warehousing and frozen capital ▪ On time delivery ▪ Delivery according to the order
  99. 99. 99 Purchasing value drivers
  100. 100. 100 Several drivers related to purchasing have impacts on value generation Purchasing Reviewing specification of purchased materials Purchasing planning Renegotiation of Contracts Consolidation of suppliers Driver Impact on ▪ Cost of goods sold (COGS) ▪ Waste ▪ Inventor ▪ COGS ▪ Waste ▪ Inventory ▪ Better prices ▪ Better prices and terms of payment ▪ Cash Flow ▪ Shorter lead times and Lower inventory Centralization of purchasing ▪ Better prices and terms of payment
  101. 101. 101 Typical problems in Purchasing
  102. 102. 102 There are a few typical problem usually occur in Purchasing (1/2) Potential Problem ▪ Purchasing planning process not linked to production / sale planning process Analysis needed Purchasing planning process ▪ Analysis of purchasing planning process (process mapping) ▪ Analysis of materials and raw materials stock level vs. average usage ▪ Analysis of stock aging and identification of lingering stocks ▪ Not optimal stock level (too small – setups, too much – risk of outdating, frozen capital, wrong exploitation of depot) ▪ Analysis of materials and raw materials stock level ▪ Analysis of production downtime reasons ▪ Analysis of materials / raw materials availability ▪ Fragmented or too monopolized supplier base ▪ Analysis of suppliers for specific purchase items number ▪ Non-market prices for materials, raw materials and services (purchasing power used to a small extent) ▪ „Value stream” analysis ▪ Benchmarking between production plants / companies / direct and indirect competition / other customers you have worked for ▪ Competitive offers analysis (sending offers to alternative suppliers) ▪ Analysis of optimal orders scale ▪ Analysis of prices in time / Analysis of reason of changes ▪ Specification or / and quality of materials, raw materials and services not matched to needs ▪ Analysis of specifications, present level vs. required level, analysis of competition specifications, analysis of specification change possibility (f.e. by usage of optimizing units) Suppliers Materials
  103. 103. 103 There are a few typical problem usually occur in Purchasing (2/2) Potential Problem ▪ Insufficient control system / Inadequate tools: ✓ Insufficient control of deliveries quality ✓ Insufficient control of delivered raw materials’ quantity ✓ Insufficient control of raw materials’ prices on the world’s markets ✓ Inadequate tools for control of purchasing budget and expenses realization ✓ Lack of clear purchasing procedures Analysis needed Competencies and Procedures ▪ Analysis of tools used to control ✓ Quality of deliveries ✓ Quantity of delivered resources ✓ Raw material prices on the world’s market ✓ Purchasing budget and expenses ▪ Analysis of purchasing procedure (process mapping) ▪ Databases of suppliers / purchasing items / specifications etc. ▪ Low competences of procurement department employees ▪ Analysis of employees’ competences: ✓ Experience / knowledge of the suppliers market and industry ✓ Negotiation, analytical and organizational skills ▪ ‘Excess’ of purchasing procedures ▪ Not optimal organization and location of purchasing department ✓ Too centralized / decentralized ✓ Weak purchasing position in comparison with other departments (position in the organizational structure) ✓ Function situated „far from Board of Directors” ✓ Wrong competences division inside department ✓ Lack of motivating system for traders ▪ Analysis of traders work time division ▪ Analysis of purchasing department organization ▪ Products introduction / change of products does not take into raw materials stock level / materials stock ▪ Stock rotation vs. changes in products portfolio
  104. 104. 104 For more check the link with discount below. You will find there a lot of cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15
  105. 105. 105 Retail - Examples of business analyses of Supply Chain
  106. 106. 106 Introduction to Retail section
  107. 107. 107 This section will cover 3 things Overview of the Retail Supply Chain Main Challenges in Supply Chain Cases of Business Analyses
  108. 108. 108 Overview of Supply Chain in Retail
  109. 109. 109 Retail has become extremely competitive. Retail supply chain has become extremely complicated due to having some of the supplier far away, multichannel, increased importance of private labels and bigger changes in external conditions
  110. 110. 110 Retail supply chain is not only long and involves many parties but also is fluctuating a lot
  111. 111. 111 Main challenges in Supply Chain in Retail
  112. 112. 112 There are number of challenges in the Supply Chain in Retail Managing suppliers in Far East Managing your own brand Long Supply Chain and Long Lead Time Local differences on markets where it operates Automation Increasing cost of labor at your country and China Supply chain activities in the stores More extreme weather conditions Multichannel New retail concept including manufacturing Big Data for Planning and Allocation
  113. 113. 113 Introduction to cases for Retail
  114. 114. 114 In this section I will show you examples of analyses that you will be doing in retail for supply chain Groceries – warehouse optimization Fashion – division of products for 2 business units Kids ware -measuring the costs and the capacity of central warehouse Convenience stores – analysis of tariffs Pharmaceuticals – how to manage long tail DIY – internal logistics optimization
  115. 115. 115 To see the cases go to my online course. Below a link with a nice discount. You will find there the cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15
  116. 116. 116 FMCG - Examples of business analyses of Supply Chain
  117. 117. 117 Introduction to FMCG section
  118. 118. 118 In this section consists of 3 parts Overview of the FMCG Supply Chain Main Challenges in Supply Chain Cases of Business Analyses
  119. 119. 119 Overview of Supply Chain in FMCG
  120. 120. 120 FMCG are all branded goods that you consume frequently during the year. In this category we have food, cosmetics and other similar products
  121. 121. 121 FMCG supply chain is pretty complicated on the outbound side – the distribution to end-customers
  122. 122. 122 Main challenges in Supply Chain in FMCG
  123. 123. 123 There are number of challenges in the Supply Chain in FMCG Many suppliers Dedicated transportation modes Many Channels of sales Minimum Order Quantity Direct DistributionMultichannel Local version of the product Shelf Life Added value services and products Distribution through Marketplaces Customization
  124. 124. 124 Introduction to cases for FMCG
  125. 125. 125 In this section I will show you examples of analyses that you will be doing in retail for supply chain Chicken Producer - Top- down approach Chicken Producer - Fuel usage Chicken Producer - Overtime analysis Juice Producer - Simulation Optimal production batch analysis - FMCG 2-stage production planning
  126. 126. 126 To see the cases go to my online course. Below a link with a nice discount. You will find there the cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15
  127. 127. 127 SMCG - Examples of business analyses of Supply Chain
  128. 128. 128 Introduction to SMCG section
  129. 129. 129 In this section you will learn 3 things Overview of the SMCG supply Chain Main Challenges in Supply Chain in SMCG Cases of Business Analyses
  130. 130. 130 Overview of Supply Chain in SMCG
  131. 131. 131 SMCG are all branded goods that you consume infrequently during your life. In this category we have cars, domestic appliances and other similar products
  132. 132. 132 SMCG supply chain is extremely complicated on the supplier side
  133. 133. 133 Main challenges in Supply Chain in SMCG
  134. 134. 134 SMCG supply chains have to face many challanges Many suppliers and sub-contractors Short lead times Focus on minimizing Inventory Flow of information between partners Multichannel Lean manufacturing principles applied to Supply Chain Automation Modularization and Standardization Customization Non-standard transportation modes Supply Chain of added services and products
  135. 135. 135 Introduction to cases for SMCG
  136. 136. 136 In this section I will show you examples of analyses that you will be doing in SMCG for supply chain Transportation mode vs value density Car Industry – Planning the flow of finished goods Kanban Continuous flow in production
  137. 137. 137 For more on lean manufacturing and other related techniques check my online course Click to check my course Essential Lean Manufacturing for Management Consultants $90 $10
  138. 138. 138 Commodity - Examples of business analyses of Supply Chain
  139. 139. 139 Introduction to Commodity section
  140. 140. 140 In this section you will learn 3 things Overview of the Commodity Supply Chain Main Challenges in Supply Chain in Commodities Cases of Business Analyses
  141. 141. 141 Overview of Supply Chain in commodity
  142. 142. 142 Types of Commodities Metals (gold, silver, platinum) Energy (natural gas, oil) Agriculture (corn, rice, cocoa, sugar, cotton, soybeans) Hard commodities Hard commodities Commodity is a basic good used in commerce that is interchangeable with other commodities of the same type Examples Soft commoditiesSoft commodities Livestock and Meat (lean hogs, pork bellies, live cattle) Characteristics
  143. 143. 143 Commodity chain is based on gathering resources, transforming them into commodities and finally distributing them to consumers Flow of commodities Production Processing Trading and consumptions Processors Retailers Transport Transport Distributors Description Producers Transport ▪ Depends on commodity type we have different types of Producers: ✓ Farmers ✓ Extractors ✓ Miners ▪ Depends on commodity type we can have different type of processing: ✓ Refinery ✓ Slaughter ✓ Plantation mill ✓ Mine ▪ Depends on commodity type we can sell products on: ✓ Local market ✓ International market
  144. 144. 144 Main challenges in commodity business
  145. 145. 145 There are number of challenges in commodity business you should take into consideration at during consulting projects Price fluctuations Changes in regulations Changes in duties Appearance of substitute
  146. 146. 146 Main challenges in Supply Chain in commodity
  147. 147. 147 There are number of challenges in Supply chain in commodities you should take into consideration at during consulting projects Long and complex supply chain Limited shelf- life 2 stages (push&pull) production planning Limited geographic distribution Dedicated transport modes Supplier catchment area Customer catchment area
  148. 148. 148 Introduction to cases for commodity
  149. 149. 149 In this section I will show you examples of analyses that you will be doing in commodity for supply chain Managing capacity Customer catchment area Supplier catchment area Plywood – finding the best spot for your factory
  150. 150. 150 Why you need to do capacity management
  151. 151. 151 Why do you need to manage capacity? Factories take time to build Market leaders want to build ahead of time capacity no to loose market share Cash flow management You may want to increase your responsiveness New capacity = New technology New capacity may help you lower your cost Managing capacity means also closing down some facilities
  152. 152. 152 How to manage capacity?
  153. 153. 153 When managing the capacity you will have to answer some questions Managing capacity What will be the operational impact of the change in capacity? When to create new capacity? Where and what? What capacities to close down?
  154. 154. 154 Why do you need to manage capacity? 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 1 6 11 16 21 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 1 6 11 16 21 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 1 6 11 16 21 In the market Ahead of market (lead market( Follow the market (lag market)
  155. 155. 155 The right approach to capacity will differ depending on the market characteristics In the market Ahead of market (lead market) Follow the market (lag market) ▪You want to preserve your share ▪Building too early the capacity is too costly and you do not see extra value in it ▪Growth of the demand is pretty predictable ▪There is some value in responsiveness (you may get higher prices for shorter lead time) ▪Demand is pretty difficult to properly predict ▪You can use this tactic to increase your share in the market ▪Keeping extra fee capacity is expensive ▪Margins in the business are low ▪The market is experiencing slow grow ▪Demand is pretty difficult to properly predict
  156. 156. 156 There are a few ways in which you can expand your capacities What options you have for capacity increase Subcontract some of the processes or production Squeeze more from current assets Expand current facilities Build new facilities Buy existing facilities
  157. 157. 157 Supplier catchment area
  158. 158. 158 Locations of some factories depends on the so called supplier catchment area. You are looking for area where you have sufficient amount of resources or suppliers K K K K K K K K K K K K K K K K K K K K
  159. 159. 159 Below some examples of businesses where the supplier catchment area is crucial Energy production Production based on big usage of specific mineral Production based on natural resources Production based on specific subcontractors ▪ Coal, oil, wind ▪ Salt, ceramic tiles ▪ Wood, paper, plywood, slaughter houses, food processing ▪ Small domestic appliances, Silicon Valley
  160. 160. 160 Customer catchment area
  161. 161. 161 The customer catchment area is important in picking the right location for the factory. Both B2B as well as B2C
  162. 162. 162 If you want to standardize the work I recommend the following approach Define on what depends your catchment area Gather data Draw catchment area – how big it is? See which customers are within the catchment area Estimate the demand and make the decision
  163. 163. 163 To see the cases go to my online course. Below a link with a nice discount. You will find there the cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15
  164. 164. 164 You can also check the presentation with an overview of my most favorite functions in Excel Essential Excel for Business Analysts and Consultants A practical guide presentation
  165. 165. 165 Check what course will help you to be word class Management Consultant Top 10 courses that every Management Consultant should take My super objective view presentation
  166. 166. 166 There are also some books that I highly recommend Top 25 books that every Management Consultant should read My super objective view presentation
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  168. 168. 168 If you want to check how in practice to manage a consulting project a would recommend my presentation How to manage a consulting project? A practical guide presentation
  169. 169. 169 You can also find some useful tips on Excel Business modeling of offline businesses in Excel A practical guide presentation
  170. 170. 170 You can also find some useful tips on Excel Retail for Business Analysts and Management Consultants A practical guide presentation
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  173. 173. 173 Check my other presentations 5 examples of business / financial models in Excel Practical guide how to check whether the business makes sense presentation
  174. 174. 174 Check my other presentations Essential Lean Manufacturing for Management Consultants Practical guide how to cut costs presentation
  175. 175. 175 Check my other presentations What is an issue tree and how to use it? Practical guide with examples presentation
  176. 176. 176 Check my other presentations Excel shortcuts for Management Consultants and Business Analysts Practical guide how to work fast in Excel presentation
  177. 177. 177 You can also have a look at how to create a financial model in Excel Financial Modeling for Business Analysts and Management Consultants Step by step guide presentation
  178. 178. 178 Check also my other presentations Management Consulting Presentations Practical guide how to prepare a great presentation presentation
  179. 179. 179 Check my presentation that will help you get into consulting How to get into consulting Practical guide how to pass the case part presentation
  180. 180. 180 I recommend also looking at some techniques to improve your business. Click on the cover below to go to the presentation How to become world class analyst A practical guide presentation
  181. 181. 181 Check also my other presentations Management Consulting Presentations Practical guide how to prepare a great presentation presentation
  182. 182. 182 Check also my other presentations Production for Management Consultants Practical guide presentation
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  184. 184. 184 Check my presentation on starting and running consulting company How to create management consulting presentations? A practical guide presentation
  185. 185. 185 Check my extensive presentation on productivity hacks to see how you can me 10x more productive Management consultant productivity hacks How to be lazy and still get things done presentation
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  187. 187. 187 Check my presentation on starting and running consulting company Start and run consulting company A practical guide presentation
  188. 188. 188 Check my presentation on restaurant business model to understand it properly How to open a successful restaurant A practical guide presentation
  189. 189. 189 Check my presentation on on-line models to understand them properly On-line Business Models A practical guide presentation
  190. 190. 190 For more check also my on-line course Click to check my course On-line Business Models in Excel – Practical Guide $45 $15
  191. 191. 191 There is an interesting summary of ways to test cheaply businesses MVP – how to test your business idea without building the product A practical guide presentation
  192. 192. 192 To see the cases go to my online course. Below a link with a nice discount. You will find there the cases with calculations and Excel provided. Click to check my course Supply Chain for Management Consultants $190 $15

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