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S&OP with Supply Chain Simulations


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Easy, accurate supply chain simulations drive an almost real-time S&OP (sales & operations planning) process. It is understandable and interesting for a wide range of business and operations people. Presentation is based on work with real manufacturing company - See a short video about this here -

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S&OP with Supply Chain Simulations

  1. 1. Sales & Operations Planning (S&OP) with Supply Chain Simulations Deliver better logistics planning and greater operating efficiencies Michael Hugos, SCM Globe Corporation
  2. 2. 2 Necessity is the Mother of Invention • Challenge – Expand “Java Furniture Company” supply chain to support rising sales worldwide. Guide multi-disciplinary task force to evaluate options and design new supply chain • Goal – Train and empower people to manage high performance supply chain and respond effectively to continuous change by combining strengths of people and computers – Combine rising numbers of people trained in logistics and supply chain management with ever-cheaper technology to create value (See Brynjolfsson and McAfee, 2012, MIT Digital Frontier, Race Against the Machine) – Create resilient, easy to use and cost-effective supply chain management platform with consumer technology and available cloud- based applications • This presentation is based on work done with actual company manufacturing furniture in Indonesia and exporting to customers around the world - • See a short video about this here:
  3. 3. 3 Sales & Operations Planning (S&OP) 1. Sales Forecasting 2. Demand Planning 3. Supply Planning 4. Reconcile Plans 5. Implement & Monitor NOTES: • S&OP is guiding framework for supply chain planning • Build supply chain model based on data from Demand Plan and Supply Plan. • Reconcile Supply Plan with Demand Plan by making adjustments to the supply chain model based on monitoring simulation results. • Supply chain model that delivers best results becomes the operating plan for the next 30 day period! Modeling and Simulation Demand Plan: - Product specs - Facility demands Supply Plan: - Vehicle specs - Delivery Routes Mkt Forecast: - Sales by market - Prices and costs Operating Plan: Effective supply chain operating plan for 30 days Operating Cost: Operating budget and performance metrics
  4. 4. 4 Easy and Accurate Supply Chain Simulations • Define combinations of PRODUCTS, FACILITIES, VEHICLES and ROUTES • Then place them on a map to create accurate supply chain models Products – Facilities – Vehicles – Routes Store Factory Product Category C Product Category B Product Category A Store Store Store Warehouse Train Large Truck Medium Truck Depot
  5. 5. 5 Step 1. Sales Forecasting: Business Operations Sales Forecast defines products, prices and market demands: • Product sales, product prices and customer demand by market area • Costs of supplies and services used by company
  6. 6. 6 Step 2. Demand Planning: Products, Facilities Sales Forecast drives creation of Demand Plan Specify PRODUCTS in supply chain (at category level in shipping container or pallet size quantities) Specify FACILITIES in supply chain and assign product demand and production rates to individual facilities
  7. 7. 7 Step 2. Demand Planning: Data Used PRODUCTS Name Price Weight (kg) Size (m3) Data is for average product in each category (pallet size) Category A Small $650 30 kg 1.0 m3 Category B Medium $1,500 60 kg 1.5 m3 etc. FACILITY Name Type Storage Rent Ops Cost Specify each supply chain facility Java Main Factory Factory 18,000 m3 $0.1/ m3 $13,530 Jakarta Store 1 Store 500 m3 $1.5/ m3 $350 etc. FACILITY - PRODUCT Product Name Demand Production On-Hand Define product demand and production for each facility Category A Small 4 0 60 Category B Medium 3 0 20 etc. Small data sets define PRODUCTS and FACILITIES
  8. 8. 8 Step 3. Supply Planning: Vehicles, Routes Demand Plan drives creation of Supply Plan: • Decide how to use available VEHICLES to move products between facilities • Define ROUTES and delivery schedules for vehicles serving each facility
  9. 9. 9 Step 3. Supply Planning: Data Used VEHICLE Name Type Carry Volume Max Weight (kg) Speed per Hr Ops Cost per km Delay - Depart Define data for each vehicle Small Truck Truck 40 m3 4,000 45 $0.45 8 Rail Freight Train 130 m3 63,000 65 $0.13 24 etc. ROUTE Name Vehicle Distance Time Define vehicle routes (each vehicle has one or more routes) Factory - Stores Small Truck - 2 (calculated) (calculated) Port - Factory Med Truck - 10 (calculated) (calculated) etc. ROUTE - PRODUCT Name Facility/Stop Drop Qty Pickup Qty Define product drop qty for each product at each facility on a route Product A Store 1 8 0 Product B Store 1 11 0 etc. Simple data sets enable accurate simulation of any supply chain
  10. 10. 10 STEP 4. Reconcile Plans: Build Supply Chain Test Supply Plan to see if it meets requirements of Demand Plan: • Demand Plan - data for: 1. PRODUCTS; 2. FACILITIES; and product demand • Supply Plan - data for: 3. VEHICLES; 4. ROUTES; and product delivery qty
  11. 11. 11 Step 4. Reconcile Plans: Run Simulations-Fix Problems Simulations find supply and demand mismatches and show operating metrics • Simulate operations to find and fix points of failure • Explore options, make adjustments so supply chain runs for 30 - 60 days Supply chain model that works best in simulations becomes real operating plan!
  12. 12. 12 STEP 4. Reconcile Plans: Analyze Simulation Data • On-screen displays show graphical and numeric data for use in resolving problems • Simulation data can be downloaded to spreadsheets for printed reports and analysis Simulations generate data for analysis and problem solving
  13. 13. 13 STEP 5. Implement and Monitor: Operations • Collect real-time operating data from Facilities, Vehicles, and Routes • Respond to new situations as they arise Continue planning and simulating responses to new situations as they arise… (Back to Step 1) Model that works best in simulations becomes real operating plan
  14. 14. 14 STEP 5: Implement and Monitor: Collaboration Procurement SalesOperations Finance • Cloud-based platform accessible with PC or laptop and Internet connection • People learn to work collaboratively to solve common problems • Driven by easy and accurate simulations to support group decision making • Technology is secure, resilient and cost-effective Cloud-based collaboration platform accessible and usable by all
  15. 15. 15 Major Findings to Date 1. Findings based on four years work with companies in Asia, Europe and North America, plus students and instructors at colleges, universities and education seminars around the world 2. Simple and accurate modeling and simulation enables use by wide audience of academic, business and professional people, not just small group of experts 3. Map-based user interface enables understanding of overall supply chain structure and performance, and develops real-world skills for improving supply chain operations 4. Engages participants and develops both analytical and intuitive understanding of supply chain principles and practices 5. Encourages effective collaboration between people to achieve common goals when all can see what is happening in a supply chain as it happens 6. Can monitor real supply chains and support online S&OP process where cross-functional project teams review supply chain operations and make adjustments to respond to changing situations November 2017, SCM Globe Corp. See full Java Furniture Company case study on SCM Globe website -
  16. 16. 16 Supply Chain Modeling and Simulation Learn more about supply chains and simulations on SCM Globe website: • Java Furniture Company – models real company supply chain for use in business analysis • Cincinnati Seasonings – introductory case for learning about supply chains and simulations • Alexander the Great – supply chain supporting Alexander’s campaign in Afghanistan, based on historical research by professor at University of California, Berkeley • Go to  click “Start Here”  click “Case Studies”