High Tech Forecasting Planning Summit Presentation


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High tech forecasting planning summit presentation by Gerry Fay

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  • You will use this slide to further introduce yourself and your experience taking just a few seconds to highlight that you are leading the new SC Solutions practice - Avnet Velocity - which is bringing innovation and thought leadership into the sector on behalf of Avnet and its Supply Chain partners (customers & suppliers).
  • Here we highlight the industry dynamics on the left hand side of the slide followed thereafter with the resulting consequences. Here we are stressing that our mission (which should be the mission for all) is to not hide from the stressful dynamics of the industry but rather to embrace them and develop innovative solutions to address the resulting consequences in order to avoid any negative impacts. This allows the chance to set the scene for the follow-on messages that “Sensing and Responding” in addition to well executed “Command and Control” allows us to react well and at speed. The velocity in this equation is very necessary as latency is a key driver for supply chain disruptions, overall supply continuity and waste (e.g. inventory)
  • This is a slide developed in conjunction with Pascal simply highlighting how these industry dynamics play out in a real scenario – in this case with the Apple iPhone. It demonstrates the carry-on effect upon a cross-segment basis starting first with the new phone design with new features/functionality resulting in the opening up the overall smart phone market to a new level – thus, resulting in increased consumer desire for the product – including more bandwidth requirements for the increased content (e.g. aps) and on to the need for more production of infrastructure placing demand thru to the need for more and leading edge components. The slide build helps you to tell the story in a comfortable fashion and the iPhone scenario should be familiar to most attendees even though they may not be directly in the Electronics/Hi-tech sector.
  • This slide and the following slide is also to used to re-emphasize the physical, financial, and information flows that occur within the supply chain across multiple entities. The result is often times that by the time all this transactional activity occurs – the result is a frustrated consumer who has lost the customer experience he/she was anticipating. The following slide simple
  • Demonstrate the force of the combined elements Command, Control, Sense & Respond. Again – restating the belief that the command and control functions are almost a given mandate from the customers whereas the Sense & Respond pieces added create a remarkable differentiator – and together the four form the Integrated Planning and Execution discipline required by business to deliver a sustainable supply chain.
  • Definition from AMR Research
  • Source: http://isourceonline.com/article_arch.asp?article_id=8964
  • Source: http://isourceonline.com/article_arch.asp?article_id=8964
  • SCM is all about the trade-offs and compromises to be made against these key factors.
  • Sales forecasts are revenue numbers in dollars by regions and customers Marketing forecasts are in dollars and unit sales by product lines Finance forecasts are in dollars by internal organization Demand forecasts are in units by SKU numbers and their components. The practice at most companies is to let finance organizations reconcile the spreadsheets manually, identifying gaps. This process involves days of back-and-forth e-mails, meetings and phone calls, which should give finance departments a better understanding of underlying assumptions. Departments are then asked to tweak their plans to make sure they fit together within an acceptable margin of error.
  • Majority of the information is only somewhat visible meaning only related departments have the information only FG and RM Inventory is highly visible (Maybe because they are physical things and thus seen by everyone :-) Lot of improvement can be done if the various plans are available across the organization so they are prepared to react to it... Move from reactive to proactive with visibility in plans like production, purchasing and sourcing companies can develop scenarios to help them understand what their action will be incase of some events... Sales and operations planning process is one great tool and process to help provide visibility across the organization to the various plans Another significant area of improvement is around visibility in product design.. A study from AMR research had mentioned that 60-70% of costs of a supply chain are decided in the product design stage.. So definitely involving all the concerned parties like marketing, sourcing in a collaborative design effort can help reduce the costs right in the beginning...
  • All information is not equal... Demand information is considered critical and it is quite understandable as that is driving majority of the decisions and processes within a supply chain... And so is customer order status as everyone in the supply chain is in some way responsible to help achieve that perfect order... Majority of the items listed above are marked as quite important so cannot be overlooked....
  • SCOR Model – traditional Plan, Source, Make & Deliver aspects – where we can review all processes across our enterprise and speak the same language on processes and metrics using this industry standard model.
  • Broken down into drivers Internal (Economic) and External (Services) – their related attributes and associated metrics.
  • In order to increase maturity then SC Visibility is a first step….with that information we can move up the ladder by introducing SC Risk Management and Sense & Respond capability – ultimately leading to a perfectly sustainable sc which considers the economic, ecologic and service related elements!
  • Review of Key Take-aways re-emphasizing that this extension of planning capability into “sensing and responding” is not easy – but a competitive differentiator. The 3 factors to help would be to have an extended S&OP process for collaboration and also the resolution of the key visibility issues. Collaboration will be further enhanced with an understanding of all the players processes and measurement of key performance indicators for continuous
  • High Tech Forecasting Planning Summit Presentation

    1. 1. High-Tech Forecasting & Planning Summit April 14th, 2011 San Francisco Demand Sensing in Volatile Times
    2. 2. Your presenter <ul><li>Gerry Fay, Senior Vice President </li></ul><ul><ul><li>Leads Avnet EMs SC Solutions Practice: </li></ul></ul><ul><ul><li>Avnet Velocity </li></ul></ul><ul><ul><li>SVP of Global and Strategic Accounts </li></ul></ul><ul><ul><li>Former President Americas for MEMEC </li></ul></ul><ul><ul><li>Former COO ATLAS Services </li></ul></ul>
    3. 3. We can’t hide from the industry dynamics of volatility Time to Market Mass Customization Long Lead time for Components Component capacity inflexibility Capital investment exponential Asia = biggest market and lowest labor cost Industry hungry for working capital Technology enables innovation & creates new markets needing more Velocity in response Sustainability quest CONSEQUENCES Design to Supply Chain entanglement Emphasis on Flexibility, Reactivity, Speed Cash-to-Cash Cycle time is vital Brutal supply/demand cycles Supply/capacity management is a competitive advantage Sustainability in supply base management, and partnership is crucial to supply continuity Demand ‘sensing and responding’ plus well executed ‘command & control’ is key
    4. 4. The domino effect of innovation “ I need to upgrade my network tomorrow” “ I need to introduce next generation network tomorrow” “ I need next generation technology tomorrow!” MORE CONTENT “ Today Apple re-invents the phone” Steve Jobs – Jan 9, 2007 OEM “ I need one now !” Consumers “ I need more bandwidth now!” Network Providers “ I need to increase production now!” Infrastructure OEMs & EMS companies “ I need more wafers now!” Component Manufacturers
    5. 5. Ecosystem complexity Start Frustrated Consumer External Wafer Fabs Internal Fabs Component BE (Sort & Test) Component FE (Assy) Distributor OEM’s OEM’s OEM’s Contract Mfrs (motherboard/subassy)
    6. 6. Ecosystem complexity Start Frustrated Consumer Delays. Lack of Visibility. Dis-satisfaction. Cost. Obsolescence. External Wafer Fabs Internal Fabs Component BE (Sort & Test) Component FE (Assy) Distributor OEM’s OEM’s OEM’s Contract Mfrs (motherboard/subassy)
    7. 7. Why Supply Chain Planning? Increased Margin Reduced net working capital Optimal capacity utilization Reduced administration effort Competitive Advantage Higher delivery reliability Higher product availability Higher production flexibility “ In the Electronic Industry lead time is at least as important as price !”
    8. 8. Silver bullet? <ul><li>Command & Control - Expected </li></ul><ul><li>Sense & Respond - Differentiator </li></ul><ul><li>Consider SC Risk </li></ul><ul><li>Be responsible to our environment </li></ul><ul><li>Build a resilient and sustainable supply chain that brings benefit to all players in our ecosystem </li></ul>
    9. 9. Integrated Planning & Execution Source: Adapted from SAP LEARN Continually analyze and learn from exceptions and incorporate intelligence into business processes Collaborate and respond to internal and external demand and supply deviations across the business network RESPOND Plan and adapt to network-driven demand based upon business objectives CONTROL COMMAND Execute a fulfillment network based upon the available or anticipated capability of the supply network and logistics resource SENSE In real time, sense and alert deviations caused by internal and external events
    10. 10. Sense & Respond <ul><li>“ Demand sensing is the translation of downstream data with minimal latency to understand what is being sold, who is buying the product, and the impact of demand-shaping programs.” </li></ul><ul><ul><ul><li>AMR Research </li></ul></ul></ul><ul><li>Demand sensing is a requirement for “Extended S&OP” along with transparency of key supply chain data </li></ul>
    11. 11. How? Requires a focus and dedication across the ecosystem players!
    12. 12. Traditional Distribution Extended S&OP 1. Sales Revenue Planning <ul><li>Macro market Data / Trends </li></ul><ul><li>Technology Roadmap </li></ul><ul><li>Macro-view factors </li></ul><ul><li>Macro Constraints </li></ul>2. Demand Planning <ul><li>Aggregation of Forecast </li></ul><ul><li>Demand Shaping (Cross-Industry view) </li></ul><ul><li>Market specific data </li></ul>3. Supply Planning <ul><li>Capacity Planning (Labor, Resource) </li></ul><ul><li>Inventory Optimization </li></ul><ul><li>Material Planning </li></ul><ul><li>Transportation </li></ul><ul><li>Vendor Reduction </li></ul>4. Profit based Supply/Demand Balancing <ul><li>Scenario Planning </li></ul><ul><li>inventory Balancing </li></ul><ul><li>Expediting </li></ul><ul><li>Consensus </li></ul>5. Management Review <ul><li>KPI Measurement (Working Capital, Gross Margins, Inventory Turns </li></ul><ul><li>QBR </li></ul><ul><li>Performance Scorecard for continuous improvement </li></ul>
    13. 13. Expanded Distribution Value Proposition Key Orchestrator of SC Info/Visibility Extended S&OP 1. Sales Revenue Planning <ul><li>Macro market Data / Trends </li></ul><ul><li>Technology Roadmap </li></ul><ul><li>Macro-view factors </li></ul><ul><li>Macro Constraints </li></ul>2. Demand Planning <ul><li>Aggregation of Forecast </li></ul><ul><li>Demand Shaping (Cross-Industry view) </li></ul><ul><li>Market specific data </li></ul>3. Supply Planning <ul><li>Capacity Planning (Labor, Resource) </li></ul><ul><li>Inventory Optimization </li></ul><ul><li>Material Planning </li></ul><ul><li>Transportation </li></ul><ul><li>Vendor Reduction </li></ul>4. Profit based Supply/Demand Balancing <ul><li>Scenario Planning </li></ul><ul><li>inventory Balancing </li></ul><ul><li>Expediting </li></ul><ul><li>Consensus </li></ul>5. Management Review <ul><li>KPI Measurement (Working Capital, Gross Margins, Inventory Turns </li></ul><ul><li>QBR </li></ul><ul><li>Performance Scorecard for continuous improvement </li></ul>Customer Input <ul><li>Demand Forecasts </li></ul><ul><li>Events, Promotions, NPI information </li></ul>Supplier Input <ul><li>Capacity Updates </li></ul><ul><li>Scheduled Maintenance </li></ul>
    14. 14. 3 Factors to drive success <ul><li>Extended S&OP </li></ul><ul><li>Resolve Visibility Issues </li></ul><ul><li>Focus on cross-enterprise process and performance </li></ul>
    15. 15. Extended S&OP to balance compromise between . . . Flexibility vs. Inventory Security vs. Liability Cost vs. Lead Time Gross Profit vs. Cash flow Lead time vs. Demand Labor Cost vs. Transportation cost
    16. 16. 3 Factors to drive success <ul><li>Extended S&OP </li></ul><ul><li>Resolve Visibility Issues </li></ul><ul><li>Focus on cross-enterprise process and performance </li></ul>
    17. 17. Resolve Visibility Issues <ul><li>Right information to enable </li></ul><ul><ul><li>Right product </li></ul></ul><ul><ul><li>Right time </li></ul></ul><ul><ul><li>Right place </li></ul></ul><ul><ul><li>Cost-effective decision making for efficient product or service delivery </li></ul></ul>
    18. 18. Visibility Drives Clarity <ul><li>You need to change the paradigm </li></ul><ul><ul><li>Sales = revenue forecast </li></ul></ul><ul><ul><li>Finance = Op plan based on budgets </li></ul></ul><ul><ul><li>Marketing = research on new and existing products </li></ul></ul><ul><ul><li>Manufacturing = demand based on history and future expectations </li></ul></ul><ul><li>We don’t even measure the same way. </li></ul><ul><ul><li>Sales forecasts = revenue numbers in dollars </li></ul></ul><ul><ul><li>Marketing forecasts = dollars and unit sales by product lines </li></ul></ul><ul><ul><li>Finance forecasts = in dollars by internal organization </li></ul></ul><ul><ul><li>Demand forecasts =in units by SKU numbers and their components. </li></ul></ul>
    19. 19. How do you fix it? <ul><li>You must have one version of the truth! </li></ul><ul><li>Create an S&OP enterprise plan of record: a single repository of past, present and future forecasts, plans and assumptions from across the enterprise. </li></ul><ul><li>With a consolidated operating plan, all constituents would drive more consistent results, measure performance and ensure compliance with regulations. </li></ul><ul><li>… and Finance isn't holding the bag! </li></ul>
    20. 20. Level of Internal Visibility <ul><li>Insufficient internal visibility </li></ul>Source: InForum 2009 Planning visibility can enable pro-active response
    21. 21. Level of External Visibility <ul><li>Lower than internal visibility </li></ul><ul><li>Execution elements more visible than planning </li></ul>Source: InForum 2009
    22. 22. Importance of Information <ul><li>Demand information is critical as it the driver for all subsequent planning & execution </li></ul>Source: InForum 2009
    23. 23. 3 Factors to drive success <ul><li>Extended S&OP </li></ul><ul><li>Resolve Visibility Issues </li></ul><ul><li>Focus on cross-enterprise process and performance </li></ul>
    24. 24. Focus on cross-enterprise process & performance Source: Supply Chain Council Supplier Customer Suppliers’ Supplier Source Internal or External Internal or External Your Company Return Deliver Make Source Return Plan Deliver Return Source Return Make Source Return Plan Deliver Return Deliver Make Plan Return Return Customers’ Customer
    25. 25. SC Sustainability score card Economic Services Drivers Attributes Metrics Internal Externa l Ecologic
    26. 26. Increase sustainable advantage with “sensing & responding” Supply Chain Visibility Supply Chain Risk Management Sense & Response Management Competitive Advantage Supply Chain Maturity Sustainable Supply Chain Management Visibility Sustainability Predictability Economic Ecologic Service
    27. 27. Key Takeaways <ul><li>Planning is deceptively simple </li></ul><ul><li>Poor planning will jeopardize your business </li></ul><ul><li>‘ Sensing & Responding’ will proactively help improve enterprise performance if coupled with capable ‘Command & Control’ </li></ul><ul><li>3 Key Factors will drive success: </li></ul><ul><li>Extended S&OP – across the enterprise </li></ul><ul><li>Resolve Visibility Issues – especially demand data </li></ul><ul><li>Focus on cross-enterprise process and performance – for continuous improvement </li></ul>Collaboration & Communication are key to success
    28. 28. Thank You! [email_address]