Using Supply Chain Forecasting and Planning methodology organizations can align revenue and sales with demand for indirect material and service requirements to reduce transaction cost, increase speed and efficiency, support growth while lowering total cost. Presentation by Bill Kohnen at Supply Chain Planning and Forecast Forum Manila Philippines

1. Supply Chain Forecasting and Planning to
Optimize Indirect Material Spend and
Support Growth
Using Supply Chain Forecasting and Planning methodology organizations can align revenue and sales with demand for indirect
material and service requirements to reduce transaction cost, increase speed and efficiency, support growth while lowering total
cost. This is particularly important for non-manufacturing companies and even traditional manufacturing companies as they move
towards more service related revenue streams. This discussion will be an overview of steps companies can take to align customer
demand, operational requirements and financial considerations to optimize indirect materials spend.
Bill Kohnen Supply Chain Planning and Forecast Forum Manila Philippines May 2017

2. Purchased Materials and Service Greater
Impact in Service Economy
• Purchased Materials and Services = 50% of Revenue
• Cost of Acquiring Material and Services = 10%
•
• Materials/Services Technology and Innovation Differentiation
• Materials/Services Customer Delivery Value Creation
Alignment of Revenue and Sales with Indirect Spend Requirements Will Drive Growth and Profit

3. • What Do We Need
• Who Do We Need
• When
• Process to Get
• Resources Needed to Obtain

4. Situation
• Revenue Growth
• Headcount
• Customers
• Velocity
• Resources
• Current State Analysis
• Forecast Requirements
• Model
• Identify Gaps
• Survey Market For Solutions
• Evaluate Details of Solutions
• Implement
• Establish Measures
• Evaluate
• Adjust
• Repeat
Process

5. Current State Analysis
• To Support Current Volume we need
Item # Cost # Transactions Lead time Issues
Computers 250 250,000 12 6 weeks Deployment
Security 500 15,000 48 As Needed Transparency
Catering 100 5,000 100 Many Bills
Car Service 70 70 Late Bills
0
50
100
150
$0
$100,000
$200,000
$300,000
Computers Car Service Security Catering
Spend vs. Transactions
Spend Txns
0 1 2 3 4 5
Computers
Security
Car Service
Catering
Needed Delivery vs Actual
Actual Need

6. Forecast Requirements
Item # Cost # Transactions Lead time Issues
Computers 350 350,000 12 2 weeks Deployment
Security 700 25,000 48 As Needed Transparency
Catering 200 10,000 100 Many Bills
Car Service 110 70 Late Bills

7. Model

8. Identify Gaps
• Lead time times for computers
• Resources for order and pay
• Cash Planning
• Availability of Supplier Resources

9. Survey and Evaluate Solutions
• Consolidation of Orders and Invoices
• Add inventory for computers
• Self service process for ordering standard service
• Pre training and qualification of support staff
• Streamline payment approval process
• Establish monitoring and metrics
• Cash forecast alignment with requirements

10. Implement
• End Users
• Suppliers
• Corporate Finance
• Site Teams
• Systems
• Process

11. Establish Measures and Monitor
0
20
40
60
80
100
Q1 Q2 Q3 Q4
Transactions
30% Reduction
0
5
10
15
Previous Current
Payment Approvals
Days
Continued Monitoring of Revenue and Growth Plans
Quarter Sufficient
Funds
Balance vs
Forecast
Q1 Y 5%
Q2 N -10%
Q3 Y 15%
Q4 Y 5%
Quarter Supply Meets
Demand
Q1 Y
Q2 Y
Q3 N
Q4 Y
0
5
10
15
Process Cost
Quarter Total Cost Savings
Q1 5%
Q2 7%
Q3 3%
Q4 7%

12. Adjust
• Incorporate needs for “special events” and projects beyond plans
• Format of consolidated orders
• Faster more efficient process also resulted in capacity to clear old/aging
issues which once address will not be regular need
• Further segmented and review needs by type of growth based on
employees and customer as they have different requirements
• Process change expanded further and automated where possible

13. Repeat
• Things change – market, acquisitions, turnover, new suppliers etc.
• A fast, streamlined process with little in process inventory can
respond to change better with less disruption.