west intro 1 © the delos partnership 2005 integrated enterprise leadership an introduction
TRANSCRIPT
West Intro 1 © The Delos Partnership 2005
Integrated Enterprise Integrated Enterprise LeadershipLeadership
An Introduction
West Intro 2 © The Delos Partnership 2005
ABC Company ABC Company
“We want to deliver quality products to our customers, competitively priced, delivered on time. We will ensure that our employees are satisfied with their work, and we will take care of the environment.” said the mission statement at the entrance.
Marketing is in the middle of a special promotion, which has suddenly been arranged. The artwork – as usual - is having to be arranged at short notice for the packaging. Sales have just quoted for a big contract which will mean significant extra business above the business plan. It is two months until year end, and if they get the order then the Sales and Marketing Director will get a bonus for exceeding her target. Customer Services will be working late tonight to catch up with the backlog of orders.
Operations has heard the rumour about a 'big order‘. But they've heard about these before. So they are proceeding with their plans to cancel overtime. The Operations Director meets monthly, individually, with the marketing managers to get a feel for the market. Then he meets with his Production Planner, compares his ideas with past history and they finalise the forecast and production plan, largely based on history.
West Intro 3 © The Delos Partnership 2005
ABC Company .. ABC Company .. Cont’dCont’d
Corporate are short on cash flow, and hence have told the division to implement a cost reduction programme, and to reduce inventory by 20%. The Finance Director is working on ways to do this, however is reluctant to make any write-offs of current obsolete inventory, so is wanting to restrict any further purchases.
The Manufacturing Manager has just come back from a course with ideas on Total Productive Maintenance, and Operating Equipment Effectiveness. He wants a smaller product range and bigger batches. His basic manufacturing philosophy is that lower costs are achieved through maximising utilisation of machines, keeping direct labour at maximum levels of output.
The Development department are in the middle of developing a revolutionary new product, that will dramatically increase market share. However, a minor modification to the product will reduce costs, and enhance the quality. Customer response is excellent. Unfortunately it will delay the launch to Quarter 3 of the next year.
The Chairman and the Chief Financial Officer just met with a key group of Stock-market analysts, and have said that cash-flow will improve this year through a radical cost reduction and inventory management programme. Sales and Profit will rise by 20 % next year, which should mean an increase of 25 % in Earnings per share, due to an exciting new product to be launched in Quarter 4 of this year.
West Intro 4 © The Delos Partnership 2005
Signs of problems in Signs of problems in companycompany
• What are the major reasons for failures in providing the customer with what they want and when they want it ?
• What are the major signs of problems in an organisation when looking around a manufacturing site ?
West Intro 5 © The Delos Partnership 2005
Signs of problems within Signs of problems within the companythe company
West Intro 6 © The Delos Partnership 2005
Causes of InventoryCauses of Inventory
What are the main causes of inventory ?
West Intro 7 © The Delos Partnership 2005
Conflicting objectivesConflicting objectives
Inventory
Customer Service
ManufacturingCosts
ManufacturingFlexibility
West Intro 8 © The Delos Partnership 2005
Conflicting objectivesConflicting objectives
Finance
Marketing
Manufacturing Sales
West Intro 9 © The Delos Partnership 2005
Disintegrated Business Disintegrated Business PlanningPlanning
Long termplan
Short termPlan
Medium TermPlan
West Intro 10 © The Delos Partnership 2005
Vertical Functional Vertical Functional OrganisationOrganisation
MDMD
SalesSales MarketingMarketing TechnicalTechnical OperationsOperations FinanceFinance HRHR
R& D
R& D
MKTG
MKTG
SALES
SALES
OPS
OPS
ACCTS
ACCTS
HR
HR
Directors
Managers
Supervisors/Team Leaders
West Intro 11 © The Delos Partnership 2005
Lack of VisibilityLack of Visibility
05
10152025
303540
4550
Sales Cont'n Net Profit
Last YrBudgetYTD
Year to date is below budget and last year, and therefore there is an urgent need to cut costs, and reduce inventory, in order to improve cash flow…
West Intro 12 © The Delos Partnership 2005
Functional MeasuresFunctional Measures
Actual Volumevs Budget
Actual Salesvs Budget
InventoryLevel
ProjectCosts
Leads to Silo Management Mentality Leads to Silo Management Mentality
Manufacturing Director
Manufacturing Director
Sales Director
Sales Director
Finance Director
Finance Director
Development Director
Development Director
ManagingDirector
ManagingDirector
West Intro 13 © The Delos Partnership 2005
The informal companyThe informal company
• Multiple sets of numbers• Multiple spreadsheets• Multiple ways of working• Confusion over real objectives• Defensive functional behaviour• Rumours around the corridor• Ad hoc communication• Short-term focus• Heroes are favourites
West Intro 14 © The Delos Partnership 2005
Objectives for IntegrationObjectives for Integration
• One set of numbers at all times• Integrated Plans• Realistic Plans• Teamwork• Communication of goals and objectives• Decisions made in timely fashion• Consistent performance measures• Delivery of the Strategy
West Intro 15 © The Delos Partnership 2005
The Delos ModelThe Delos ModelFor Business Integration For Business Integration
InnovationInnovation
VisionVision
StrategyStrategy
PrioritisationPrioritisation
DemandDemand
SupportSupport
SupplySupply
West Intro 16 © The Delos Partnership 2005
Strategy vs. ExecutionStrategy vs. Execution
““It is not so much the strategy that causes the It is not so much the strategy that causes the failure. 80 % of companies fail to execute their failure. 80 % of companies fail to execute their strategy”strategy”
- - Kaplan and Norton: Kaplan and Norton:
““Strategy Focussed Organisation”Strategy Focussed Organisation”
““It is not so much the strategy that causes the It is not so much the strategy that causes the failure. 80 % of companies fail to execute their failure. 80 % of companies fail to execute their strategy”strategy”
- - Kaplan and Norton: Kaplan and Norton:
““Strategy Focussed Organisation”Strategy Focussed Organisation”
West Intro 17 © The Delos Partnership 2005
Vision and StrategyVision and Strategy• Vision
– Clear statement of direction– Understood by all
• Strategy– Means of getting there– Requires clear focus
• Operational Excellence• Customer Intimacy• Product Leadership
West Intro 18 © The Delos Partnership 2005
A Vision or…A Vision or…
“We don’t so much have a vision,
more a hallucination, really.”
Anonymous senior manager, anonymous multinational
West Intro 19 © The Delos Partnership 2005
Strategic ChoicesStrategic Choices
Key Strategic Choices
– Operational Excellence
– Customer Intimacy
– Product Leadership
West Intro 20 © The Delos Partnership 2005
Management of InnovationManagement of InnovationIntegrated Project Management – Programme Management
West Intro 21 © The Delos Partnership 2005
Forecasting Needs a Forecasting Needs a Simple ProcessSimple Process
Filter Filter DemandDemand
ComputeComputeforecastforecast
CaptureCaptureActualActual
C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T
C O N S E N S U S C O N S E N S U S F O R E C A S TF O R E C A S T
Hold Demand ReviewHold Demand Review
Agree commercialAgree commercial plansplans
AgreeAgreeExceptional demandExceptional demand
AssumptionAssumptions written s written down and down and
agreedagreed
AssumptionAssumptions written s written down and down and
agreedagreed
ReviewReviewAccuracyAccuracy
West Intro 22 © The Delos Partnership 2005
Master SchedulerMaster Scheduler
Strategy
Master Scheduler
Sales Forecasts
CustomerOrders
ManufacturingPlan
PurchasingPlan
MRPSystem
Balanced PlanBalanced Plan
West Intro 23 © The Delos Partnership 2005
Integrated Enterprise Integrated Enterprise PlanningPlanning
Annual OperatingPlan
Monthly Review
Master ProductionSchedule
SupplierSchedule
FactorySchedule
Volume [Family]Value42 months horizon
Volume [Family]Value30 months horizon
Volume SKUValue18 months horizon
Volume [Part number]Value18 months horizon
West Intro 24 © The Delos Partnership 2005
Integration of ProcessesIntegration of Processes
Strategic Review
IEP Review Demand Plan
Master Schedule
Project Plan
MRP/CRP/
Activities
WTL/
Orders/
Tasks
How Often Yearly Monthly Weekly Daily Hourly
Who Board Board Managers Computer Computer
Units £’s Families Products Parts/
Activities
Parts/
Tasks
Horizon 3 years 2 years 2 years 2 years 2 years
Focus 1-3 years 0-2 years 0 to Cum Lead Time 0 to Cum Lead Time
Part Lead Time
Time buckets Years Months Weeks Days Hours
DetailDetail
West Intro 25 © The Delos Partnership 2005
Traditional MeasuresTraditional Measures
• Sales versus budget• Machine Utilisation• Purchase Price Variance• Overhead Recovery• Headcount• Direct Labour Productivity• Inventory Level
West Intro 26 © The Delos Partnership 2005
The Delos Core MeasuresThe Delos Core Measures
1.1. Customer Order Delivery – the “Perfect Order”Customer Order Delivery – the “Perfect Order”
2.2. Demand Forecast AccuracyDemand Forecast Accuracy
3.3. Lead Time Reduction - Demand, Supply and ChangeLead Time Reduction - Demand, Supply and Change
4.4. Quality, Right First Time – Demand, Supply and Quality, Right First Time – Demand, Supply and ChangeChange
5.5. Schedule Achievement – In-house and outsourcedSchedule Achievement – In-house and outsourced
6.6. New Product IntroductionNew Product Introduction
7.7. Velocity – all processesVelocity – all processes
West Intro 27 © The Delos Partnership 2005
The Core Measures and The Core Measures and Financial EffectFinancial Effect
West Intro 28 © The Delos Partnership 2005
Velocity MeasureVelocity Measure
STORE
STORE
INSPECT
INSPECT
RECEIVE
RECEIVE
PICK
PICK
RUN
RUN
INSPECT
INSPECT
STORE
STORE
RUN
RUN
INSPECT
INSPECT
STORE
STORE
Elapsed Time
VAVA VAVA
Velocity % = sum of Value Added Time [VA]-------------------------------------
Total Elapsed Time
West Intro 29 © The Delos Partnership 2005
Values of A Six Sigma Values of A Six Sigma CompanyCompany
Issue Classical Six sigma
ProblemsProblems FixingFixing PreventingPreventing
AnalysisAnalysis ExperienceExperience DataData
Process AdjustmentProcess Adjustment TweakingTweaking Statistical Process Statistical Process ControlControl
FocusFocus ProductProduct ProcessProcess
BehaviourBehaviour ReactiveReactive Pro-activePro-active
ReasoningReasoning ExperienceExperience StatisticalStatistical
West Intro 30 © The Delos Partnership 2005
Measuring Forecast Accuracy Will Measuring Forecast Accuracy Will Improve the ProcessImprove the Process
-25
-20
-15
-10
-5
0
5
10
15
20
25
Feb Mar Apr May Jun Jul Aug Sep Nov Dec Jan Feb Mar Feb Mar Apr May
Upper Accuracy Lower
West Intro 31 © The Delos Partnership 2005
Integration of IdeasIntegration of IdeasOn TimeOn Time
DeliveryDelivery
CostCost QualityQuality
TQ/6sTQ/6s Needs toNeeds to
useuse
ImprovesImproves EssentialEssential
ToolTool
JITJIT
LeanLeanImprovesImproves EssentialEssential
ToolTool
ChallengesChallenges
ERP IIERP II
PlanningPlanningEssentialEssential
ToolTool
Feeds DataFeeds Data Uses dataUses data
West Intro 32 © The Delos Partnership 2005
People ValuesPeople Values
TraditionalTraditional NowNow FutureFuture
Process problemsProcess problems Not my job Ownership Accountability
Management Management StyleStyle
Supervise Facilitator/
Team Leader
Coach
Working StyleWorking Style Individual Team Empowered
Teams
Training and Training and
EducationEducation
Non-existent Luxury Necessity
KnowledgeKnowledge Ignorant Understands Expert
Attitude to PeopleAttitude to People Liability Cost Asset
West Intro 33 © The Delos Partnership 2005
TeamworkTeamworkWith a common vision and a strategy there is a chance
to develop common
– Objectives
– Commitment
– Team direction
West Intro 34 © The Delos Partnership 2005
Integration – focus and Integration – focus and resultresult
CULTURE/BEHAVIOUR
TECHNO
LOG
YWAYS O
F
WO
RKING
No tools to do thejob
- Frustration
Formal Proceduresin place
But nothing to use themWith !
West Intro 35 © The Delos Partnership 2005
Integration – focus and Integration – focus and resultresult
CULTURE/BEHAVIOUR
TECHNO
LOG
YWAYS O
F
WO
RKING
No formal procedures
- Automated chaos
Systems in place
But no controlOver how to useThem !
West Intro 36 © The Delos Partnership 2005
Integration – focus and Integration – focus and resultresult
CULTURE/BEHAVIOUR
TECHNO
LOG
YWAYS O
F
WO
RKING
No heartsand minds
-Alienation
System in placeProcedures in place
But no-one uses them !
West Intro 37 © The Delos Partnership 2005
Integration the right blend!Integration the right blend!
CULTURE/BEHAVIOUR
TECHNO
LOG
YWAYS O
F
WO
RKING