2000, dow corning corporation. all rights reserved. 2000 supply-chain world conference presentation...
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2000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Overview of Supply Chain Re-engineering Overview of Supply Chain Re-engineering Process at Dow Corning CorporationProcess at Dow Corning Corporation
Presented at2000 Supply-Chain World Conference
Chicago, Illinois
April 12, 2000
Timothy A. Troup, P.E.
Supply Chain Specialist
Dow Corning Corporation
Midland, Michigan
22000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
AgendaAgenda
• In the “Beginning”
• Dow Corning Case Study - Widgets Supply Chain
• Key Learnings & Recommendations
2000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
• Develops, Manufactures & Markets Silicones, Poly- crystalline Silicon & Related Specialty Chemicals.
• Products Are Used By Virtually Every Major Industry In The World.
• $2.6B Sales (1999) 5 Global Industry Business Units (IBUs) 5,000 Products 7,200 Active Patents Worldwide 8,000 + Employees Worldwide 45,000 Customers Worldwide 25 Major Mfg Locations On All 5 Continents
Dow Corning CorporationDow Corning Corporation
42000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
DCC Time Line of Supply Chain - ProgressDCC Time Line of Supply Chain - Progress
Pre-1990
1991-1992
1993-1995
1996- 1997
1998- 1999
1999- 2000
FunctionalOrganizationwith AreaControl
1stDow CorningBusiness toAnalyzeSupply Chain -Little Impact
Regional Pilot SupplyChain Studywith SomeSuccess, but limited in scope
Major GlobalSupply ChainProject withProven Processwith PRTM &Dow CorningSupply ChainOperations
Major Dow CorningReorganizationto SupportHorizontal &Supply ChainDrivenOrganization
2ndDow CorningBusinesswith DynamicModeling
52000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Where Are We Today?Where Are We Today?
• WE’VE ADOPTED THE SUPPLY CHAIN COUNCIL’s ““SCOR” MODELSCOR” MODEL AS OUR SC MODELING STANDARD
(PLAN / SOURCE / MAKE / DELIVER)(PLAN / SOURCE / MAKE / DELIVER)
• WE’VE ACQUIRED & LEARNED HOW TO UTILIZE “PRTM's” SC ANALYSIS METHODOLOGYANALYSIS METHODOLOGY
• WE’VE GENERATED OUR OWN DOW CORNINGDOW CORNING SPECIFIC METHODOLOGYSPECIFIC METHODOLOGY & TOOL UPGRADES
• WE’VE GAINED SC ANALYSIS EXPERIENCESC ANALYSIS EXPERIENCE VIA
SEVERAL DOW CORNING SC ANALYSES
62000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
We Are Utilizing a “Process-Centered” We Are Utilizing a “Process-Centered” Approach to Supply-Chain ManagementApproach to Supply-Chain ManagementSupply-chain support elements must be present to achieve significant performance improvement
Operations Strategy Performance Targets and Benchmarks
AssetsDeliveryPerformance /
Quality
CostFlexibility and Responsiveness
PlanSource Make Deliver
Supply-Chain Management Processes
• Value Proposition• Core Competencies• Make/Buy Decisions• Capacity Rationalization
Organization and Decision-Making
Policies and Procedures
xxx xxxx xxxx xxxxx xxxxx
Information
Systems and Tools
Senior Management
Source:Pittiglio Rabin Todd & McGrath (PRTM)
72000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Integrated Supply-Chain Management Links Integrated Supply-Chain Management Links Each Business Entity in the Supply ChainEach Business Entity in the Supply Chain
Supplier
Plan
Customer Customer’sCustomer
Suppliers’Supplier
Make DeliverMakeSourceDeliver Source
(internal or external) (internal or external)
Source DeliverMakeDeliver Source
The direct linkage of all a manufacturers product delivery processes to those of its customers and their customers and those of its suppliers and their suppliers
Plan“Manages supplier’s
supplier relationship”
Plan
“Manages supplier’srelationship”
Plan
“Manages customerrelationship”
Plan
“Manages customer’s customer relationship”
Source: Supply Chain Council SCOR Model
Dow Corning CorporationDow Corning Corporation
82000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
First We Must Identify the Primary Supply Chain(s) of First We Must Identify the Primary Supply Chain(s) of Interest From the Many “Threads” That Make up a Interest From the Many “Threads” That Make up a Network, or “Chain of Chains”Network, or “Chain of Chains”
Multiple SuppliersMultiple Production Operations within a
Business
Multiple Customers
SOURCE MAKE DELIVER
SOURCE MAKE DELIVER
Source Make DeliverSOURCE
MAKEDELIVER
SOURCE MAKEDELIVER
Source: Supply Chain Council SCOR Model
2000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
The Focus of Supply Chain The Focus of Supply Chain Management is to more effectively Management is to more effectively serve customers serve customers
... seamless fabric of information flow,... seamless fabric of information flow, physical distribution flow, and cash physical distribution flow, and cash
flow for the benefit of the end Customer. flow for the benefit of the end Customer.
102000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Case Study - Case Study -
Global Widgets Supply Chain (GWSC)Global Widgets Supply Chain (GWSC)
2000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Supply-Chain Improvements Are Identified & Framed Supply-Chain Improvements Are Identified & Framed Using the SCOR Model in a Three Phase ApproachUsing the SCOR Model in a Three Phase Approach
Identify the Need to Change
Identify the Value of Change
Obtain Measurable
Results
Pilot the
Changes
Performance Goals and
Phased Targets
Fact-Based Implementation
Plans
Implementation
Implementation of Best Practices and Systems Solutions
Pilot Projects
Rapid Roll-out of Success
Across Business
Continuous Improvement and Successful,
Sustainable Competitive Advantage
Gaps, Opportunities,
Value of Closing Gaps
Visioning Using SCOR
1.3 Value Proposition
1.5 Basis of Competition
Leveraged BenchmarkingUsing SCOR
Metrics
Supply-ChainMaturity
Assessment using SCOR Best Practices
1.1 Quantitative Dx
Phase 1 — Diagnostic & VisioningPhase 1 — Diagnostic & Visioning Phase 2Phase 2
Roll-out
Phase 3Phase 3
1.6 Implementation
1.2 Qualitative Dx 1.4 Visioning
Source:Pittiglio Rabin Todd & McGrath (PRTM)
122000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Supply-Chain Analysis & Re-engineering StepsSupply-Chain Analysis & Re-engineering Steps
DIAGNOSIS (“AS IS” Supply-Chain)DIAGNOSIS (“AS IS” Supply-Chain)• Clearly Defined SC Scope & Critical Drivers• External Benchmarking• Value Proposition Evaluation• SC Mapping (Geographic (L-1), Process (L-2) & Key Metrics (L-2))• SC Workflow Decomposition Analysis• External Customer Interviews VISIONING (“TO BE” Supply-Chain)VISIONING (“TO BE” Supply-Chain)• Identify Critical Supply-Chain Attributes• Define Strategic “Basis of Differentiation”• Define “TO BE” Supply-Chain Structural Components• Define “TO BE” Process & System Upgrades Required• Prioritize Re-engineering Projects / Initiatives • Project Chartering & Economic Analysis
IMPLEMENTATION (Re-engineering the Supply-Chain) IMPLEMENTATION (Re-engineering the Supply-Chain)
132000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
• Benchmarking (Internal & External)
• Work Flow Processes & Structural Assets
• Visioning
• Re-engineering Projects & Economic Impacts
Supply-Chain Analysis & Re-engineering FocusSupply-Chain Analysis & Re-engineering Focus
142000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
• Benchmarking (Internal & External)
• Work Flow Processes & Structural Assets
• Visioning
• Re-engineering Projects & Economic Impacts
Supply-Chain Analysis & Re-engineering FocusSupply-Chain Analysis & Re-engineering Focus
152000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
HP Inkjet Supplies Business—CartridgesHoltraChem—Chemical Warehousing & DistributionICI—Paints/DecorativeJohnson & Johnson—Korea Ltd.Kimberly-Clark—Away-From-Home SectorMcNeil Consumer ProductsModus Media InternationalSonoco Products—High Density Film Products
Avon ProductsBASF—Automotive RefinishBASF—Plastic MaterialsBASF—Agricultural ProductsCarpenter Technology—Steel OperationsDow Chemical—Global Ion ExchangeDow Chemical—Specialty Plastics EuropeDow Corning—WidgetsGenCorp—Decorative & Building Products
Three Primary Characteristics of Widgets Supply-Chain Three Primary Characteristics of Widgets Supply-Chain Were Identified & a Custom Population was SelectedWere Identified & a Custom Population was Selected
Dow Corning – Widgets Characteristics Custom PopulationConformance
Chemical or Packaged Goods Sectors 100%
Make-to-Stock Manufacturing Strategy 100%
Use of Direct or Distributor Channels as Primary Sales Channels 90%
Source Pittiglio Rabin Todd & McGrath (PRTM)
162000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Summary SCORcard for Widget BusinessSummary SCORcard for Widget Business
95%
3.6 days
25.9 days
88%
30 days
89 days
110 days
11.4%
$175K
57 days
74 days
1.8 turns
Europe Asia Americas
Supply-Chain Performance Versus Custom Population
0% – 20% 20% – 40% 40% – 60% 60% – 80% 80% – 100%
Key Perspectives Level 1 MetricsMajor
Opportunity DisadvantageAverage
or Median AdvantageBest-
in-Class
Delivery Performance to Request 99%
Order Fulfillment Lead Time (MTS) 1.0 days
Order Fulfillment Lead Time (MTO) 10.3 days
Perfect Order Fulfillment 99%
Upside Flexibility 3 days
Supply-Chain Response Time (MTS)* 48 days
Supply-Chain Response Time (MTO)* 57 days
Supply-Chain Management Cost 6.8%
Value Added per Employee $305K
Total Inventory Days of Supply 33 days
Cash-to-Cash Cycle Time 43 days
Net Asset Turns 3.1 turns
Delivery Performance/
Quality
Flexibility &Responsiveness
Cost
Assets
Cu
sto
me
r-fa
cin
gIn
tern
al-
fac
ing
99%
1.0 days
10.3 days
99%
3 days
48 days
57 days
6.8%
$305K
33 days
43 days
3.1 turns
Source:Pittiglio Rabin Todd & McGrath (PRTM)
172000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Widgets Initial Value Proposition — EuropeWidgets Initial Value Proposition — Europe
Europe
Supply-Chain Performance Versus Custom Population
Key Perspectives Level 1 MetricsMajor
Opportunity DisadvantageAverage
or Median AdvantageBest-
in-ClassValue to“Median”
Value to“BIC”
Delivery Performance to Request Revenue Increase
Order Fulfillment Lead Time (MTS) $4M/yr $20M/yr
Order Fulfillment Lead Time (MTO) Operating Profit Increase
Perfect Order Fulfillment $0.6M/yr $3.1M/yr
Upside Production Flexibility
Supply-Chain Response Time (MTS)
Supply-Chain Response Time (MTO)
++ Increase CustomerSatisfaction
Supply-Chain Management Cost -$1.6M/yr -$10.8M/yr
Value Added per Employee N/A
Total Inventory Days of Supply -$1.6Mone-time
-$11.2Mone-time
Cash-to-Cash Cycle Time -$0.8M/yr -$1.7M/yr
Net Asset Turns N/A
Operating Profit/Year $3.0M $15.6M
Total BenefitOne-time Inventory Reduction $1.6M $11.2M
Delivery Performance/
Quality
Flexibility &Responsiveness
Cost
Assets
Supply-Chain Performance Versus Custom Population
Key Perspectives Level 1 MetricsMajor
Opportunity DisadvantageAverage
or Median AdvantageBest-
in-ClassValue to
“Median”Value to
“BIC”
Delivery Performance to Request Revenue Increase
Order Fulfillment Lead Time (MTS) $4M/yr $20M/yr
Order Fulfillment Lead Time (MTO) Operating Profit Increase
Perfect Order Fulfillment $0.6M/yr $3.1M/yr
Upside Production Flexibility
Supply-Chain Response Time (MTS)
Supply-Chain Response Time (MTO)
++ Increase CustomerSatisfaction
Supply-Chain Management Cost -$1.6M/yr -$10.8M/yr
Value Added per Employee N/A
Total Inventory Days of Supply -$1.6Mone-time
-$11.2Mone-time
Cash-to-Cash Cycle Time -$0.8M/yr -$1.7M/yr
Net Asset Turns N/A
Operating Profit/Year $3.0M $15.6M
Total BenefitOne-time Inventory Reduction $1.6M $11.2M
Cu
sto
mer
-fa
cin
gIn
tern
al-f
acin
g
S u p p ly -C h a in P e r fo rm a n c e V e rs u s C u s to m P o p u la t io n
K e y P e rs p e c tiv e s L e v e l 1 M e tr ic sM a jo r
O p p o r tu n ity D is a d v a n ta g eA v e ra g e
o r M e d ia n A d v a n ta g eB e s t-
in -C la s sV a lu e to
“ M e d ia n ”V a lu e to
“ B IC ”
D e liv e ry P e r fo rm a n c e to R e q u e s t R e v e n u e In c re a s e
O rd e r F u lf i l lm e n t L e a d T im e (M T S ) $ 4 M /y r $ 2 0 M /y r
O rd e r F u lf i l lm e n t L e a d T im e (M T O ) O p e ra tin g P ro f it In c re a s e
P e rfe c t O rd e r F u lf i l lm e n t $ 0 .6 M /y r $ 3 .1 M /y r
U p s id e P ro d u c tio n F le x ib il ity
S u p p ly -C h a in R e s p o n s e T im e (M T S )
S u p p ly -C h a in R e s p o n s e T im e (M T O )
+ + In c re a s e C u s to m e rS a tis fa c t io n
S u p p ly -C h a in M a n a g e m e n t C o s t -$ 1 .6 M /y r -$ 1 0 .8 M /y r
V a lu e A d d e d p e r E m p lo y e e N /A
T o ta l In v e n to ry D a y s o f S u p p ly -$ 1 .6 Mo n e -t im e
-$ 1 1 .2 Mo n e -t im e
C a s h -to -C a s h C y c le T im e -$ 0 .8 M /y r -$ 1 .7 M /y r
N e t A s s e t T u rn s N /A
O p e ra tin g P ro f it /Y e a r $ 3 .0 M $ 1 5 .6 M
T o ta l B e n e f itO n e -t im e In v e n to ry R e d u c tio n $ 1 .6 M $ 1 1 .2 M
Supply-Chain Performance Versus Custom Population
Key Perspectives Level 1 MetricsMajor
Opportunity DisadvantageAverage
or Median AdvantageBest-
in-ClassValue to
“Median”Value to
“BIC”
Delivery Performance to Request Revenue Increase
Order Fulfillment Lead Time (MTS) $4M/yr $20M/yr
Order Fulfillment Lead Time (MTO) Operating Profit Increase
Perfect Order Fulfillment $0.6M/yr $3.1M/yr
Upside Production Flexibility
Supply-Chain Response Time (MTS)
Supply-Chain Response Time (MTO)
++ Increase CustomerSatisfaction
Supply-Chain Management Cost -$1.6M/yr -$10.8M/yr
Value Added per Employee N/A
Total Inventory Days of Supply -$1.6Mone-time
-$11.2Mone-time
Cash-to-Cash Cycle Time -$0.8M/yr -$1.7M/yr
Net Asset Turns N/A
Operating Profit/Year $3.0M $15.6M
Total BenefitOne-time Inventory Reduction $1.6M $11.2M
Supply-Chain Performance Versus Custom Population
Key Perspectives Level 1 MetricsMajor
Opportunity DisadvantageAverage
or Median AdvantageBest-
in-ClassValue to“Median”
Value to“BIC”
Delivery Performance to Request Revenue Increase
Order Fulfillment Lead Time (MTS) $4M/yr $20M/yr
Order Fulfillment Lead Time (MTO) Operating Profit Increase
Perfect Order Fulfillment $0.6M/yr $3.1M/yr
Upside Production Flexibility
Supply-Chain Response Time (MTS)
Supply-Chain Response Time (MTO)
++ Increase CustomerSatisfaction
Supply-Chain Management Cost -$1.6M/yr -$10.8M/yr
Value Added per Employee N/A
Total Inventory Days of Supply -$1.6Mone-time
-$11.2Mone-time
Cash-to-Cash Cycle Time -$0.8M/yr -$1.7M/yr
Net Asset Turns N/A
Operating Profit/Year $3.0M $15.6M
Total BenefitOne-time Inventory Reduction $1.6M $11.2M
Supply-Chain Performance Versus Custom Population
Key Perspectives Level 1 MetricsMajor
Opportunity DisadvantageAverage
or Median AdvantageBest-
in-ClassValue to
“Median”Value to
“BIC”
Delivery Performance to Request Revenue Increase
Order Fulfillment Lead Time (MTS) $4M/yr $20M/yr
Order Fulfillment Lead Time (MTO) Operating Profit Increase
Perfect Order Fulfillment $0.6M/yr $3.1M/yr
Upside Production Flexibility
Supply-Chain Response Time (MTS)
Supply-Chain Response Time (MTO)
++ Increase CustomerSatisfaction
Supply-Chain Management Cost -$1.6M/yr -$10.8M/yr
Value Added per Employee N/A
Total Inventory Days of Supply -$1.6Mone-time
-$11.2Mone-time
Cash-to-Cash Cycle Time -$0.8M/yr -$1.7M/yr
Net Asset Turns N/A
Operating Profit/Year $3.0M $15.6M
Total BenefitOne-time Inventory Reduction $1.6M $11.2M
Supply-Chain Performance Versus Custom Population
Key Perspectives Level 1 MetricsMajorOpportunityDisadvantage
Averageor MedianAdvantage
Best-in-Class
Value to“Median”
Value to“BIC”
Delivery Performance to Request Revenue Increase
Order Fulfillment Lead Time (MTS) $4M/yr $20M/yr
Order Fulfillment Lead Time (MTO) Operating Profit Increase
Perfect Order Fulfillment $0.6M/yr$3.1M/yr
Upside Production Flexibility
Supply-Chain Response Time (MTS)
Supply-Chain Response Time (MTO)
++ Increase CustomerSatisfaction
Supply-Chain Management Cost -$1.6M/yr-$10.8M/yr
Value Added per Employee N/A
Total Inventory Days of Supply -$1.6Mone-time
-$11.2Mone-time
Cash-to-Cash Cycle Time -$0.8M/yr-$1.7M/yr
Net Asset Turns N/A
Operating Profit/Year $3.0M$15.6M
Total BenefitOne-time Inventory Reduction $1.6M$11.2M
Source:Pittiglio Rabin Todd & McGrath (PRTM)
182000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Total Supply-Chain Management Cost — EuropeTotal Supply-Chain Management Cost — Europe
Order Management Cost Elementas % Revenue BIC Average
Europe
New Prod. Phase-In, Maintenance 0.03% 0.40% 0.25%
Create Customer Order 0.06% 0.30% 0.20%
Order Entry and Maintenance 0.05% 0.34% 0.74%
Program & Channel Management 0.10% 0.34% 0.84%
Order Fulfillment 0.07% 0.16% 0.20%
Distribution 0.62% 1.10% 1.24%
Transportation, Freight & Duties 1.32% 2.75% 4.06%
Customer Invoicing/Accounting 0.03% 0.19% 0.22%
Other 0.02% 0.08% 0.00%
Total Order Management Cost 2.31% 5.66% 7.80%
… as several order management cost elements are higher than average …
Material acquisition cost, however, is best-in-class
Material Acquisition Cost Elementas % Revenue BIC Average
Europe
Materials Management and Planning 0.27% 0.53% 0.50%
Supplier Quality Engineering 0.05% 0.07% 0.11%
Inbound Freight and Duties 0.26% 0.85% 0.00%
Receiving and Material Storage 0.25% 0.53% 0.35%
Incoming Inspection 0.03% 0.12% 0.02%
Material Process and ComponentEngineering
0.10% 0.15% 0.01%
Tooling 0.02% 0.21% 0.00%
Other 0.00% 0.00% 0.00%
Total Material Acquisition Cost 0.98% 2.45% 0.98%
Total Supply-Chain
Manage-ment Cost as % of Revenue
Definition: Total supply-chain management cost is the sum of supply-chain related MIS, Finance and Planning, Inventory Carrying, Material Acquisition, and Order Mgmt*Best-in-class is calculated based on those reporting data for all elements
5.77.8
2.8
1.02.5
1.7
1.81.9
1.3
0.40.5
0.3
1.10.9
0.8
0
2
4
6
8
10
12
14
Best-in-Class* Average Europe
MIS
Finance & Planning
Inventory Carrying
Material Acquisition
Order Management
Supply-chain management cost is substantially higher than best-in-class…%
6.8%
11.4% 12.2%
Inventory Carrying Cost Elementas % Revenue BIC Average Europe
Opportunity Cost 0.66% 0.99% 1.46%
Shrinkage 0.05% 0.10% 0.08%
Insurance and Taxes 0.06% 0.15% 0.10%
Total Obsolescence for RM, WIP,and Finished Goods
0.22% 0.55% 0.18%
Channel Obsolescence 0.01% 0.01% 0.04%
Field Service Parts Obsolescence 0.00% 0.00% 0.01%
Other 0.00% 0.03% 0.00%
Total Inventory Carrying Cost 1.00% 1.84% 1.87%
… and inventory carrying costs are high due to opportunity cost
192000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Total Widget Supply-Chain Management CostTotal Widget Supply-Chain Management Cost
2.8
5.7
3.7
7.8
2.4
1.7
2.5
1.4
7.6
1.0
1.3
1.8
1.6
2.5
1.9
0.4
0.5
0.3
0.4
0.3
0.9
0.8
1.2
1.1
0.2
0
5
10
15
Best-in-Class
Average U.S. Europe Korea
Definition: Total supply-chain management cost is the sum of supply-chain related MIS, Finance and Planning, Inventory Carrying, Material Acquisition, and Order Management
Total Supply-ChainManagement cost as a % of revenue
MISFinance and PlanningInventory CarryingMaterial AcquisitionOrder Management
6.8%
11.4%
8.3%
12.2%
13.0%
Asia
202000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
… largely due to high receivables …
Cash-to-Cash Cycle TimeCash-to-Cash Cycle Time
Cash to Cash Cycle Time, Days
43
87
37
81
74
0
25
50
75
100
Best-in-Class*
Average Europe US Asia
Cash-to-Cash cycle time for U.S. is best-in-class; while Asia and Europe are higher than average …
Definition: Cash-to-Cash cycle time is inventory days of supply + days sales outstanding—average payment period for materials (time it takes for a dollar to flow back into a company after its been spent for raw materials)
*Best-in-class is calculated based on those reporting data for all elements
Days of Sales
Outstanding
44
71
46
87
53
0
20
40
60
80
100
Best-in-Class*
Average Europe US Asia
Payables for production material are average for Europe and U.S., but approaching
best-in-class for Asia
88
45 45
60
43
0
20
40
60
80
100
Best-in-Class
Average Europe US Asia
Average Payables Period for Production Materials,
Days
… and average inventory performance
Total Inventory Days of Supply
33
57
36
5461
0
20
40
60
80
Best-in-Class*
Average Europe US Asia
212000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Examining performance by supply-chain process Examining performance by supply-chain process highlights opportunities in Plan and Deliver in Europe…highlights opportunities in Plan and Deliver in Europe…
Inventory Days of SupplySupply-Chain-Related Finance and Planning CostSupply-Chain-Related MIS Cost
PLAN
Forecast Accuracy ($)
Value-Added Productivity/Payroll Dollar
MAKE
Source/Make Cycle Time (MTO)
Upside Production Flexibilityby 20%
Source/Make Cycle Time (MTS)
Source/Make Cycle Time (MTS)
Upside Production Flexibility by 20%
Inventory Carrying Cost
Material Acquisition Cost
SOURCE
Average Payment Period
Sourcing Lead Time (MTS)
Sourcing Lead Time (MTO)
Sourcing Lead Time (MTS)
Total Supply-Chain Cost
Value-Added Productivity/Employee
Cash-to-Cash Cycle Time
OVERALL
Asset Turns
Total Supply-Chain ResponseTime (MTO)
Total Supply-Chain ResponseTime (MTS)
Total Supply-Chain ResponseTime (MTS)
Order Mgt. Cost
Days Sales Outstanding
DELIVER
Order Fulfillment LT (MTS)
Delivery to Request Date
Order Fulfillment LT (MTO)Order Fulfillment LT (MTS)
Perfect Order Fulfillment
Delivery to Request Date
Advantage
Disadvantage
World Class
MajorOpportunity
Parity
13
100
88
75
63
50
38
25
0
Percentile
Total Europe
Widget Div. #1
Widget Div. #2
Source: Pittiglio Rabin Todd & McGrath (PRTM)
222000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
• Benchmarking (Internal & External)
• Work Flow Processes & Structural Assets
• Visioning
• Re-engineering Projects & Economic Impacts
Supply-Chain Analysis & Re-engineering FocusSupply-Chain Analysis & Re-engineering Focus
232000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
European Supply-Chain Diagnostic ActivitiesEuropean Supply-Chain Diagnostic Activities
Supply-Chain ProcessWorkshops
• Overall supply-chain configuration (SCOR Level 2)
• Business Process Elements (SCOR Level 3)
– Deliver — Order Management– Deliver — Transportation and
Warehouse Management– Make– Source– Plan
Benchmarking
• Div. #1 and Div. #2 responses for “customer-facing” metrics
• Overall European data for “internal- facing” metrics
Internal Interviews
Xxx xxxxxxxxx
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Division #1 Division #2
Customer Interviews
Customer #1 — Belgium
Customer #2 — UK (Distributor)
Customer #3 — Holland (Distributor)
Customer #4 — UK (Direct)
Customer #5 — Holland (Direct)
Customer #6 — UK (Direct)
Customer #7 — UK (Direct)
Findings
242000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Major European Findings From Interviews Major European Findings From Interviews and Workshops by Supply-Chain Elementand Workshops by Supply-Chain Element
Plan
• Lack of organized forecasting process
• Finished goods inventory planning not integrated and responsibility rests at the lowest levels of the organization
• Too many planners
Source
• Few Joint Service Agreements in place
• Apparent overlap of purchasing responsibilities
Make
• Manual scheduling techniques
• Complicated scheduling and inventory mgmt due to imbalance between machining and packaging lines
Deliver
• Local warehouse structure not delivering expected benefits
• Multiple order entry points adding costs without value
• Lack of corporate guidance to RSC’s results in unnecessary complexity
252000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Widgets “AS-IS” Geographic (L-1) Map - EuropeWidgets “AS-IS” Geographic (L-1) Map - Europe
OrderEntry
MFG Plant Warehouse Contract
MFGStorage
Tank
OrderEntry
MFG Plant
Warehouse
ContractMFG
StorageTank
MFG Plant
StorageTank
OrderEntry
ContractMFG
Warehouse
Warehouse
ContractMFG
OrderEntry
262000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Widgets “AS-IS” Process (L-2) Map - Europe Widgets “AS-IS” Process (L-2) Map - Europe
PLAN SOURCE MAKE DELIVER
SCOR Modeling Level 2ExternalSuppliers
InternalSuppliers
Warehouses Distributors Direct Customers
MAKE DELIVERSOURCE
PLAN
272000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
• Benchmarking (Internal & External)
• Work Flow Processes & Structural Assets
• Visioning
• Re-engineering Projects & Economic Impacts
Supply-Chain Analysis & Re-engineering FocusSupply-Chain Analysis & Re-engineering Focus
282000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
GWSC Visioning ProcessGWSC Visioning Process
Global Widget Business Other
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
Visioning Team
Tim TroupScott BarberConsultant #1Consultant #2Consultant #3
ReviewCustomers, Competitors,
and Widget Goals
Combine 11 Product Market Segments into 4
Categories Based on Supply Chain Commonality
Define Customer-FacingRequirements for 4 Product Market Segment Categories
Define Plan/Source/Make/Deliver Requirements Necessary to Serve 4 Product Market
Segment Categories
Review “as-is” Supply-Chain Configurations
for Each Area
Recommend Supply-ChainChanges by Geography
and Plan/Source/Make/Deliver
Develop “to-be” Supply-Chain for Each Area
Group Recommendationsinto Implementation Projects
Strategic Visioning
Tactical Visioning
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
Xxx xxxxxxxx
292000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Widgets Consumer / Trades Market Segment Widgets Consumer / Trades Market Segment “Basis of Competitive Differentiation” “Basis of Competitive Differentiation”
Attribute MajorOpportunity Disadvantage Average Advantage
Best-in-Class
On-Time Delivery to CRD
Customer Facing Flexibility
Perfect Order Fulfillment
Order Fulfillment Lead-Time
Product Variation
Color Customization
Local Manufacturing Presence Not Required To Be Successful
Local Inventory/Warehousing Local To Region (2 – 3 Days Away)
Local Sales Presence Sub Region Language Specialization
Customer Service By Region, Multi-Lingual In Market
Price (1 – 4) 3 (4 Is Least Price Sensitive)
Product Range Limited # (6 – 10) Of Global Products
Product Technology (1 – 4) 2.5 (4 Requires Least Sophisticated Product Technology)
Geographic Focus Global
Local Technical Service Centralized By Region/Area
Area = Americas, Asia, or Europe—highest levelRegion = As defined by OU structure, except Europe is considered a regionSub-region = Grouping by language requirements or sizeLocal = Within a country, 3 – 4 hour transportation time
= how we need to compete to be successful
(1)
(1) This attribute is required to be at least in the advantage category for the North America Market
302000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Europe — The Future (2 – 5 years) Europe — The Future (2 – 5 years) • MAKE Sites (6)
– Bangor, Belgium– Dusseldorf, Germany– Roma, Italy– Cordina, Germany– Fasday, UK– PTC, Germany
• Warehouses (9+45)– Bangor, Belgium– Copersigen, Belgium– Wochester, UK– Madrid, Spain– Roma, Italy– Baste, France– Manheim, Germany– Cordina, Germany– Dusseldorf, Germany– 45 Machinos, Germany
• Order Entry Sites (8)– La Notal, Belgium– Vienna, Austria– Dusseldorf, Germany– Cordina, Germany– Roma, Italy– Moisle, France– Madrid, Spain– Mersey, UK
MAKE Sites (2)
• Bangor
• PTC Site, TBD
Warehouses (1+)
• Copersigen
Order Entry Sites (3 to 1)
• Roma
312000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Europe “AS-IS” Supply-Chain ConfigurationEurope “AS-IS” Supply-Chain Configuration
PLAN SOURCE MAKE DELIVER
SCOR Modeling Level 2ExternalSuppliers
InternalSuppliers
Warehouses Distributors Direct Customers
MAKE DELIVERSOURCE
PLAN
322000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Europe “TO-BE” Supply-Chain ConfigurationEurope “TO-BE” Supply-Chain Configuration
PLA N SOU R C E MA K E D ELIVER
SCOR Modeling Level 2ExternalSuppliers
InternalSuppliers
Warehouses Distributors
MAKE
Direct Customers
DELIVERSOURCE
PLAN
332000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
• Benchmarking (Internal & External)
• Work Flow Processes & Structural Assets
• Visioning
• Re-engineering Projects & Economic Impacts
Supply-Chain Analysis & Re-engineering FocusSupply-Chain Analysis & Re-engineering Focus
342000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Project Definition TasksProject Definition Tasks
CreateProject
Charters
PerformEconomicAnalysis
Load Resultsinto BusinessHealth Model
RefineProject
Charters
DefineProjects
(from Visioning)
BuildImplementation
Milestones
352000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
The Widgets Visioning Team Defined the Following The Widgets Visioning Team Defined the Following Implementation Projects Required to Attain the VisionImplementation Projects Required to Attain the Vision
= less impact= most impact * Included in global procurement initiative
Americas Europe Asia Plan Source Make Deliver
Geographical Supply-Chain
Area of ImpactArea of Impact
4 “Make” sites consolidation
Project(Ranked by priority)
5 Warehousing and distribution consolidation
1 Demand supply management
6 Order management and supporting business process consolidation
3 Supply strategy
2 Supply-chain organization and metrics
11 Japan Widgets supply-chain reengineering
9 Business brand and product line rationalization
7 Consolidate procurement *
8 Direct order entry from distributor/customer
10 Application of global purchasing methodologies to current and new products *
362000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Project # 4: Global Widget Business Project # 4: Global Widget Business “Make” Site Consolidation“Make” Site Consolidation• Purpose:
– To reduce the present number of Global Widget Business MAKE sites globally to the number needed to meet the Widget Businesses’ goals
• Needs:– Too many MAKE and/or packaging sites in the
Widgets business have resulted in:• RONA that is well below target• Below optimized capacity utilization rates and
manufacturing efficiencies
• Expected Results:– Global reduction in MAKE sites from XX to X– Achieve a (Fixed/Variable) Cost Savings of $29,999 M
by year end 2000– Achieve DSI Reduction of X Day(s) by year end 2000– Achieve a Working Capital Reduction of $2,222 M
which realizes an opportunity cost avoidance of $555 M (@ XX% C of C) by year end 2000
– Improve customer facing metrics (Delivery Performance and Perfect Order Fulfillment) to BIC
– A major step change is achieved towards Global Products and Global MAKE processes
• Timeline:– July 1998 to Q4 1999
Americas Team
Europe Team
Asia Team
Implementation Structure
Mr. Smith
SC Leader
Mr. Lue
Mr. Brown
Ms. Jones
Ms. Jones
Mnf’ing
Mnf’ing (Bulk)
Ec Eval
Pack’ging
Mr. Brown
Mr. Lue
Glo
ba
l M
an
ag
em
en
t T
ea
m(4
– 5
Pe
op
le,
20
%
Co
mm
itm
en
t)
Are
a T
ea
ms
(4
– 5
Pe
op
le,
40
– 6
0%
C
om
mit
me
nt)
Process Eng
HR
Mnf’ing
Mnf’ing (Bulk)
Ec Eval
Pack’ging
Process Eng
HR
Mnf’ing
Mnf’ing (Bulk)
Ec Eval
Pack’ging
Process Eng
HR
Logistics Logistics
Logistics
372000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Make Consolidation MilestonesMake Consolidation MilestonesJuly 98 Aug 98 Sept 98 Oct 98 Nov 98 Dec 98 Q1 99 Q2 99 Q3 99 Q4 99 Q1 2000
Project Planning
Define Metrics
Analysis Phase
European Analysis Complete
Americas and Pacific Analyses Complete
European Implementation Complete
Project Implementation
Americas Implementation Complete
Pacific Implementation Complete
Confirm Project Improvements
382000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Economic Analysis — Total of All Widget ProjectsEconomic Analysis — Total of All Widget Projects
* Contains inventory expense items of space/racks/equipment, personnel, inventory planning and management, record keeping, inventory counting, plant floor space, and lot inspections plus other infrastructure savings
** Contains inventory expense items of Fixed: Insurance/Tax/IT costs/Assoc. Tech Support, Variable: Damage/Shrinkage/Obsolescence/Scrap/Rework
Fixed and Variable Cost Savings due to Widgets projects $000sFixed cost savings from consolidation * Fixed: $30,100Other savings not included above
Inventory**
Transportation and raw material efficiencies
Fixed:Variable:
Variable:
$6,108$3,256
$5,181Total annual savings: $44,645
Working Capital Reduction $000s
Working Capital Reduction @ FASC (one-time) $30,630Inventory Cost Avoidance @ 15% C of C (annual) $9,095
Cost and Capital to Implement Widgets projects $000s
Implementation Costs:
Cost: (ex. Severance, Lease, Relocation)Capital: (ex. New and/or Relocation Assets)
$29,000
$9,000
One-Time Charge for Widgets Change: $38,000
392000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
EE MethodologyEE Methodology
Main focus: Large reduction of Fixed Expenses in a short time frame– Target cost savings: $20 million in 1999,
building up to $50 million per year by YE 2000
Evaluation tool: – Income statement and balance sheet projections
Business Unit Health model
– Cash Flow analysis could be applied to provide a longer term perspective
402000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Expense Cost/Savings projection
(40,000)
(30,000)
(20,000)
(10,000)
-
10,000
20,000
30,000
40,000
50,000
1999 2000 2001
$ (
000
's)
Imp
rov
em
en
t
Restructuring
Fixed
Variable
Widgets Expense / Cost Savings ProjectionWidgets Expense / Cost Savings Projection
412000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Basis of CompetitionBasis of Competition
• Review and agree on how Widget Business will supply its customer base
• Review and prioritize implementation projects required to realize the vision
• Confirm that Widget Business has resources required to complete implementation
422000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Key Supply-Chain
Learnings & Recommendations
Key Supply-Chain
Learnings & Recommendations
432000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Key IssuesKey Issues
• Defining Scope
• Assigning Players
• Keeping to “Tight” Schedule
• Participation of Key Players
• Moving Forward on Projects
• Sub-Optimization
• Coordination of Efforts
442000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
What Have We Learned To-Date?What Have We Learned To-Date?
• Well Defined & Integrated IBU StrategiesIBU Strategies Are Critical PrecursorsCritical Precursors To Optimal SC Definition & Operation . . . .
- - Global Industry Business Unit Strategy(s) - - Commercial Strategy(s) - - Product Line Strategy(s)
- - Supply Chain Strategy(s)
452000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Mission, Vision, Goals, Strategy, Strategic Initiatives, SCOREcard
Commercial Strategies (4-P’s), Industry SCOREcard
Supply Chain Strategies, Goals & SC SCOREcard(Plan, Source, Make, Deliver)
Product Line
Strategies, Goals & PL/BPU SCOREcard
(1) IBU strategy is the sum of (and drives) commercial strategy, product line strategy, and supply chain strategy.(2) Commercial strategies lead product line strategy and supply chain strategy.(3) IBU balanced SCOREcard addresses key stakeholders and includes key metrics from commercial, PL and SC SCOREcards.
Harmonization
IBU Strategic FrameworkIBU Strategic Framework
462000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
What Have We Learned To-Date?What Have We Learned To-Date?
• Supply-Chain Cost Reduction & Optimization Opportunities Are In The $MMsOpportunities Are In The $MMs For DCC ($150MM By 2001) • Supply-Chain Re-engineering “Is NotIs Not” Free Free
• Rapid SC Analysis is “Resource / SupportResource / Support IntensiveIntensive”
• Staffing & ImplementationStaffing & Implementation of Supply-Chain Initiatives Has Been Our Biggest Challenge
472000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
What Have We Learned To-Date?What Have We Learned To-Date?
• “SuboptimizationSuboptimization” is a Legitimate Issue (By Business / IBU & By Geography)
• Many of DCC’s Key SC Links Are “SharedShared” • Many SC Re-engineering Opportunities are “Multi-Business / IBUMulti-Business / IBU” in Breadth
• Significant Insights Result From Infrastructure “MappingMapping” & Supply Chain “BenchmarkingBenchmarking”
482000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
• Ultimately, Consolidation / Elimination of Supply-Chain Costs Is Relatively Easy ...
The challenge lies in re-engineering ourThe challenge lies in re-engineering our supply-chain configurations & processes so thatsupply-chain configurations & processes so that we can optimize our Supply Chainwe can optimize our Supply Chain Management Management costs costs & ensure we provide our targeted levels& ensure we provide our targeted levels
of customer serviceof customer service..
+ +
Project ImplementationProject Implementation
What Have We Learned To-Date?What Have We Learned To-Date?
492000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
Concerns going forward...Concerns going forward...
• Keeping Implementations on track with organization changes
• Rapid staffing of projects
• Stopping Supply Chain Improvement too soon (Remember the Customer!Remember the Customer!)
502000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
““Best in Class” Companies Follow a “Process- Best in Class” Companies Follow a “Process- Centered” Approach to Supply-Chain Management Centered” Approach to Supply-Chain Management
Source: Pittiglio Rabin Todd & McGrath (PRTM)
Supply-chain support elements must be present to achieve significant performance improvement
Operations Strategy Performance Targets and Benchmarks
AssetsDeliveryPerformance /
Quality
CostFlexibility and Responsiveness
PlanSource Make Deliver
Supply-Chain Management Processes
• Value Proposition• Core Competencies• Make/Buy Decisions• Capacity Rationalization
Organization and Decision-Making
Policies and Procedures
xxx xxxx xxxx xxxxx xxxxx
Information
Systems and Tools
Senior Management
2000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
QuestionsQuestions
&&
DialogueDialogue
QuestionsQuestions
&&
DialogueDialogue
522000, Dow Corning Corporation. All Rights Reserved. 2000 Supply-Chain World Conference Presentation – T.A. Troup
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