using forecast collaboration
DESCRIPTION
As the pace of overall business accelerates, remaining nimble and responsive to demand fluctuations while keeping inventory costs under control requires new thinking and new tools. Simon Ellis, Practice Director for IDC Manufacturing Insights, and Dudley Lance, Sales Director for TAKE Solutions, discuss: Automating forecast collaboration Achieving alignment without sacrificing quality Avoiding negative impact on service Impact on the value chainTRANSCRIPT
Using Forecast Collaboration Tools to Align the Supply and Demand Sides of the
Supply Chain
Presented by Simon Ellis, IDC Manufacturing Insights
Dudley Lance, TAKE Solutions
Using Forecast Collaboration Tools to Align the
Supply and Demand Sides of the Supply Chain TAKE Solutions Webinar - October 2012 Simon Ellis, Kimberly Knickle, IDC Manufacturing Insights
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o Ubiquitous access to information
o More intense brand competition
o Manufacturing and Retail ‘battle’ for the consumer
o Omni-channel consumer
o A stronger ‘voice’
o More ‘value’ oriented – happy to not spend!
o ‘Privately Happy, Publicly Unhappy’ syndrome
Manufacturer Retailer
The ‘Omni’ Store
Consumer
Innovation Brand Loyalty Performance differentiation
Value Margin Retail Differentiation
Price Availability Shopping Experience
‘Many of my customers are coming into our dealerships knowing more about the net margins on the vehicles than my salespeople do … not a good position to be in if you want to make any money” – A New Jersey Care Dealer
Three BIG Industry Trends
An ‘Empowered’ Consumer
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o Forecasting is not the major problem, lack of flexibility is!
o The expectation for mass customization
o Make-to-Stock versus Make-to-Order
o From B-to-B to B-to-C
o Balancing inventory with capacity
o Supply chain segmentation
o Postponement
o SKU simplification
Make-to-
Stock
Make-to-
Order
Forecast-Centric
Response-Centric
Balance of Forecasting and Responsiveness Required
‘Five years ago, all of our products went to the major OEMs; now, I do almost one quarter of my business with consumer markets – and I have to worry about color and style” – A Global Disc Drive Manufacturer
Demand Volatility
Three BIG Industry Trends
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o Complexity versus complication
o Profitable proximity sourcing – a balance between cost and lead-time
o The Challenge of Risk management
o Supply chain segmentation
o Cost and service
o Simplification
o Visibility/transparency, driven by key use cases like traceability
‘I’m trying to manage multiple product categories, with different and growing levels of complexity, across a single supply chain that isn’t optimized for any of them. Is it any wonder my service levels stink?” – A Global Consumer Goods Manufacturer
Cost-Optimized Sourcing
Lead-time- Optimized Sourcing
Demand/Supply Balanced Sourcing
Sustainability (Green)
Risk Management
Quality (Product Integrity)
Performance: Metrics – Perfect Order, Cost, Quality, Time-to-
Recovery
Network Planning/ Optimization
Portfolio Differentiation
Inventory Optimization
Expertise/ Talent
Design/PLM Collaboration
Supplier Viability
Three BIG Industry Trends
Supply Complexity
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Demand Volatility
Supply Complexity
Complexity management
Cost Control
Risk Management
Service Centricity
Balance Forecasting and Responsiveness (Agility)
Technology Pillars: Cloud, Big Data/Analytics,
Mobility, Social Business
THE Supply Chain Challenge
Product Quality & Safety
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The Resilient Supply Chain
o Big Data/Analytics to address business problems (real-time data)
o Prioritized product quality
o Cadence mismatches
o Collaborative demand sensing and planning
o Responsiveness versus forecasting – fluidity, adaptable
o Risk management/supply chain segmentation – Massively
Multidimensional
The necessity for supply chain speed, in the context of complexity and
data overload, requires manufacturing supply chains to embrace
resiliency and become ‘massively multidimensional’
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Analytics
Sales & Operations Planning
Fulfillment Demand Supply
Inventory Management & Optimization
Network Optimization
Production Planning
Factory Scheduling
WSE
Trans.
Order Management
Supply Planning
Fast Planning/MRP
Demand Sensing
Demand Forecasting
Upstream and Downstream Data
Quality
Service
Cost
Planning in the Supply Chain
More data, less ‘eyeballs’
Understand and leverage value – real-time, near-real-time, aggregation
Align strategic, tactical, and operational goals and activities
Collaboration becomes a key capability
© IDC Manufacturing Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 9
Analytics
Sales & Operations Planning
Fulfillment Demand Supply
Inventory Management & Optimization
Network Optimization
Production Planning
Factory Scheduling
WSE
Trans.
Order Management
Supply Planning
Fast Planning/MRP
Demand Sensing
Demand Forecasting
Upstream and Downstream Data
Quality
Service
Cost
Planning in the Supply Chain
More data, less ‘eyeballs’
Understand and leverage value – real-time, near-real-time, aggregation
Align strategic, tactical, and operational goals and activities
Collaboration becomes a key capability
Customer Collaboration
© IDC Manufacturing Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 10
Analytics
Sales & Operations Planning
Fulfillment Demand Supply
Inventory Management & Optimization
Network Optimization
Production Planning
Factory Scheduling
WSE
Trans.
Order Management
Supply Planning
Fast Planning/MRP
Demand Sensing
Demand Forecasting
Upstream and Downstream Data
Quality
Service
Cost
Planning in the Supply Chain
More data, less ‘eyeballs’
Understand and leverage value – real-time, near-real-time, aggregation
Align strategic, tactical, and operational goals and activities
Collaboration becomes a key capability
Customer & Supply Collaboration
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Top Supply Chain Priorities – 2012/2013
Reduce overall supply chain costs – 81.7%
Respond more quickly to supply or demand changes (supply chain agility) – 54.6%
Improve product quality/safety – 52.7%
Improve overall customer service – 49.0%
Improve the process of bringing new products to market – 36.6%
Improve supply chain risk awareness and mitigation – 19.7%
© IDC Manufacturing Insights. Reproduction is forbidden unless authorized. All rights reserved. Page 12
Top Supply Chain Priorities – Activity Drivers
Respond more quickly to supply or demand changes
0.0 0.1 0.1 0.2 0.2 0.3 0.3 0.4
Other
Ensure ability to quickly meet new customer and/ormarket requirements
Reduce outbound lead-times through distributionnetwork changes
Improve collaboration with suppliers
Establishing or more broadly deploying lean, six-sigma, or other quality management processes…
Reduce inbound lead-times through sourcingnetwork changes
Enabling better supply chain visibility and/ortraceability
Improving manufacturing execution, factoryflexibility, and/or capabilities
Increase demand forecast accuracy
(%)
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Top Supply Chain Application Investments
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
SRM
Materials Tracking
CAD/CAM
Order Management
Supply Chain Planning
Quality Management
Demand Planning & Forecasting
Inventory Planning & Optimization
Production Scheduling
Sales & Operations Planning
(%)
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Demand Complexity
Supply Complexity
Low
Low
High
High
Technology Oriented Value Chains (Electronics) -Use of collaboration to create visibility and link early demand feedback to supply /product requirements changes. Goal to Accelerate Time-to-Volume
Brand Oriented Value Chains (CPG)- Use of advanced S&OP tools to adjust operational response to early demand signals. Goal to Calibrate to Demand
Engineering Oriented Value Chains (Automotive, A&D) – Extensive use of PLM and front end design Collaboration. Goal to Drive Reuse
Asset Oriented Value Chains (Oil & Gas, Chemicals) – Use of supply chain execution tools for simple visibility and transportation management. Goal to Maximize ROA
Figure 4 Manufacturing Value Chains
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Essential Guidance
Conduct a capabilities inventory
Balance Forecasting with Responsiveness
Collaborate, collaborate, collaborate
Invest that idle cash – there is opportunity in the intelligent
supply chain!
Using Forecast Collaboration Tools to Align the Supply and Demand Sides of the
Supply Chain
Dudley Lance, Sales Director
TAKE Solutions
The “Bullwhip” Phenomenon
Term is used to describe the pattern in supply chain networks of increasing inventory swings in response to unanticipated changes in demand.
Problems from “Bullwhip Effect” Inefficiencies throughout the supply chain
regarding time, cost and quality
Demand uncertainty necessitates excessive inventory (safety stock) used as a cushion which leads to huge investments and delays.
Carrying extra inventory, especially for extended periods of time, can quickly eat away at margins.
Distorted information downstream results in:
Missed schedules due to late shipments or long lead times
Lack of timely and accurate supplier commitments
High inventory/scrap/rework due to excess purchases
Fulfillment mistakes and missed shipments
High procurement costs due to manual processes
Traditional Technology used…
Demand Planning & Forecasting
MRP, ERP, WMS
Spreadsheets
B2B Technology
The problem with traditional tools…
Multiple systems of record
Information latency
Lack of “business logic” w/ B2B connectivity tools
No “Closed Loop” collaboration capabilities
“Cracking” the Bullwhip Effect
Before
After
Effective Demand Collaboration and the financial impact on your business..
On-Time Delivery
Production Efficiency
Cash Conversion Cycle
Direct Material Costs
Days Inventory Outstanding
Automated Forecast Collaboration
Modular Applications
Customer Supplier A
Supplier B
Supplier C
Portal
Demand
Collaboration
Quality
Collaboration
Supplier
Management
Inventory Visibility
and Control
Procurement
Collaboration AP Automation
Drop Ship
Sales Order
Package Tracking
and Shipment
Confirmation
ERP 1
ERP 2
Forecast Visibility through sharing of schedules and longer term plans (pre-PO) typically replacing spreadsheets and e-mail based manual processes
Supplier commitments and lead-time are provided via a supplier portal (or b2b connection) with automated feedback to backend systems, including creation of order releases
Exception-based notification to planners and suppliers
Control the “bullwhip” effect – leads to increased inventory turns (i.e. reduction of inventory), increased customer service levels and efficient supply chain processes
Demand Collaboration Overview
Supplier Adoption is a Key!
Target critical component suppliers as a starting point
Communicate the benefits to your suppliers to gain adoption
Minimize the barrier of entry for suppliers
Challenges
Needed to publish demand and forecast material requirements for 18 months to selected suppliers. Supplier can plan capacity, commit to BHI and update lead-time.
Solution
OneSCM Forecast Visibility
Demand and forecast requirements are published to Suppliers.
View Forecast by Material (6-weekly / 18-monthly buckets)
View by Period
Summary View of Material with 18-Monthly buckets.
Supplier can plan capacity, update commit quantity and lead time.
Listing of Purchase Orders created from Forecast Data is available in all views.
Results
Improved On-Time Delivery
Optimized Days Inventory Outstanding
Improved Cash Conversion Cycle
Improved Capacity planning
Update of Lead Time by supplier and approved by buyer to systematically update SAP
World's third-largest oilfield services
company with operations in over 90
countries. They provide advanced
products and services to help
customers drill, evaluate, complete
and produce oil and gas wells.
2011 Stats
Revenues: $19.8B
Income: $1.7B
Employees: >57,700
Customer Success: Baker Hughes
Challenges
Order fulfillment is predicated on short lead times
Final assemblies have an average BOM of more than 2,000 components (75% of BOM parts are directly sourced)
Required improved accuracy of inbound deliveries in key areas of time, quality and quantity, while reducing inventory levels and direct spend costs.
Solution
OneSCM PO Collaboration and Demand Collaboration
Over 400 OEM and Contract Manufacturers worldwide
Increased visibility to purchasing data, acknowledgements and use of rule-based MRP changes to open orders
Shipping controls to collaborate on delivery dates
12-month forecast visibility and collaboration
Results
$22 million in savings with an ROI of nearly 500% and $2.5 million in recurring annualized savings
33% reduction in warehouse space
20-40% reduction in inventory
25-30% reduction in receiving discrepancies
30% reduction in premium freight costs
For more than 40 years, Applied
Materials has provided innovative
equipment, services and software to
enable the manufacture of advanced
semiconductor, flat panel display and
solar photovoltaic products. Applied’s
technologies help make innovations
like smartphones, flat screen TVs and
solar panels more affordable and
accessible to consumers and businesses
around the world.
Customer Success: Applied Materials
About TAKE Supply Chain Solutions
Division of TAKE Solutions, Inc.
In business since 1994 ~ 400 customers
>150 Fortune-1000 customers
> 900 employees
CMMI Level 5, PCMM Level 3 & ISO27001
Headquartered in Austin, TX.
Offices in North America, Europe, Middle East and South East Asia
Solutions deployed globally at thousands of locations serving tens of thousands of users
Technologies that leverage the ERP platform Oracle Gold Partner, SAP Certified, ERP-agnostic
Saas, On-premise or Hybrid deployment
Solutions focused in:
Supplier collaboration and management
Mobile data collection applications
RF & barcode printing applications
Returns management
Industry Awards
Thank you
We’d be happy to answer any questions you have right now.
Or, please contact
TAKE Solutions: 800-324-5143