Business Challenges. Customer retention and new customer acquisition (customer relationship management)

(1)

Align and Optimize Workflows

with Lean

Dan Marino

Marino Associates, LLC

• Strategic and tactical planning

• Information systems integration

• Customer retention and new customer acquisition (customer relationship management)

• Profit pressures

• Cost control and reduction

• Global supply chain management

• Insure a highly trained and motivated workforce

• Process alignment from sales and operations planning to the shipment of the product

Business Challenges

(2)

• Increase growth top line revenue 64%

• Improve customer satisfaction and retention 64%

• Remain or gain competitive advantage 59%

• Cut overall corporation expense 41%

• Reduce fragmented business applications 27%

• Create a more productive workforce 20%

2013 CXO’S Objectives

3

Lean Supply Chain Management

Business Forces

• Cost management and reduction

• Demand management:

- Lead time reduction - Agility

- Competitive pricing - Global sourcing - Outsourcing

• Software sophistication

• Customer satisfaction

• Risk management

• Market share and margin improvements

(3)

The alignment of all key processes that allow a company to meet or exceed:

• Customer expectations

• Revenue management

• Management of internal and external capacity

• Profit maximization

Align And Optimize Workflows with

Lean Supply Chain Management

5

Workflow alignment begins with the customer.

Workflow and processes for the management

and control of customer information must be in

place and sustainable

Workflow Alignment

(4)

Align and Optimize Sales to Ship

Workflows With Lean Thinking

Lean thinking is just not a manufacturing technique.

Applying lean to the supply chain from order entry to

shipping eliminates waste while providing the end customer exactly what they want when they need it. This is essential to become a successful and profitable company.

Why Optimize Sales To Ship Workflows

• To develop flexible supply chains

• To quickly respond to a constant changing market environment

• To flex capacity both up and down

• To align inventory spend with competitive customer lead time requirements

• Efficient supply chains

• To achieve overall cost reductions and savings

• Collaborative supply chains

• To ensure incentives of supply chain players are aligned

• There is a requirement to analyze your supply chains holistically when planning and making strategic and tactical decisions

(5)

9

Best In Class Lean Supply Chain

Companies Are Realizing Financial and

Operating Advantages over Their

Competition

• More responsive to customer needs

• More responsive to market changes

• More effective in controlling cost

MORE PROFITABLE

Question To Be Answered For Alignment and

Optimization

• What is the optimum supply chain?

• Which processes should be performed where?

• Which DC supplies which customers?

• What is the optimal supplier/manufacturing/customer network?

• Which facilities should be opened/closed?

• How does the supply chain perform?

• Cost, financial and cash flow analysis of the supply chain

• Serviceability, time and lost sales projections

• Asset: inventory, in-transit, investments

• Evaluation of advanced trade-offs analysis

• Cost vs. service

• Inventories vs. capacity

(6)

11

What Is Lean Supply Chain Management?

Demand management

Sourcing and procurement

Order processing

Production scheduling

Inventory management

Transportation

Warehousing

Customer relationship management

Optimized ERP

Quality

The basics in place

The process of managing the flow of material and information beginning at the lowest raw material level of the supply chain to the ultimate consumption of the finished product.

Lean Supply Chain Management

Raw

Material 2nd Tier Suppliers 3rd Tier Suppliers

Transportation

Direct Suppliers

Single Plant

Multiple Plants

& Warehouses Customer Warehouses

Consumer

Retail Transportation Distribution MES

APS MRP II ERP

SUPPLY CHAIN MANAGEMENT (SCM)

(7)

13

Supply Chain Management Needs to be

Company Specific

• Companies need to develop their own supply chain processes, measurements and controls.

» Tools

» Education and training

» Goals and expectations

» Product line specific chains

» Product line specific goals

» Supplier specific strategy

Lean Supply Chain

Balance To Profit

•Lack of clarity

•Variability

•NPI

•Information sharing

•Decisions making ability

•Organization issues

•Inadequate systems

•Inventory reduction

•Lead time reduction

•Limit liability

•Rapid ramp-up

•On-time and complete

•Cost reduction

(8)

15

The Results Of An Unbalanced Supply

Chain

• Increased cost to expedite material

• Increased cost of premium freight

• Increased cost of excessive inventory

• Increased cost of excessive set-up charges

• Increased customer dissatisfaction

• Increased profitability decline

To Bring Your Lean Supply Chain In Balance

Companies Need To Ask These Questions

1. Are your workflows optimized and aligned?

2. Does your company understand the principles of lean supply chain management?

3. Do you understand your customers’ needs and requirements?

4. Do you understand the operational and financial impact of lean supply chain management?

5. Does your management team embrace lean supply chain management as both a strategy and a process?

6. Do you have the systems, organization and expertise in place to maximize your lean supply chain efforts?

(9)

17

Lean Supply Chain Tools

• Supply chain analysis (value mapping)

• Consignment

• Vendor managed Inventories

• Supplier implants

• Kanban

• Relocating suppliers

• Portals

• Transportation control

• Knowing your inventory drivers

• Formal NPI

• Buying capacity

Align and Optimize Key Workflows And

Processes

• Sales and operations planning

• Optimized and aligned ERP

• Demand management

• Product line management

• Operations management

• Master production scheduling

• Planning and inventory management

• Procurement

• Capacity management

• Factory flow

• Transportation management

(10)

The purpose of sales and operations plan (S&OP) is to synchronize the plans and actions of

marketing, sales, operations, finance, information services, human resources, and any other

functions that are affected.

Sales and Operations Plan

19

The S&OP is the most realistic plan that a company can use to meet the monthly and quarterly goals of:

– Finance – Customer – Operations – Marketing – Engineering – Sales

– Human resources

Sales And Operation Plan

(11)

Act as a communication tool that transmits current supply chain information throughout the organization on a timely basis

Provide predictable revenue management

Improve customer relations

Improve the management and control of inventory

Assign accountability for elements of the business plan

Sense and react to marketplace variability

Provide visibility for all new product status within the S&OP horizon

Provide information to support all supply chain decisions

Continuously improve the process to increase ROI throughout the organization.

Tactical Planning Aspects of S&OP

21

• Information that is developed during the S&OP process must now feed a planning systems that is in alignment with the execution systems.

ERP Alignment

(12)

• Is ERP in alignment and helping you to improve customer satisfaction?

• Is ERP in alignment and assisting you in lowering your inventory?

• Is ERP in alignment with your order-to-delivery cycle time?

• Has ERP shortened your time-to-market?

• Has ERP helped you achieve a competitive advantage?

• Is ERP giving you the information and metrics you need?

ERP Alignment And Optimization

23

1. Shop loading philosophy (mix model scheduling, kanban)

2. Forecast changes- MPS instability/configuration changes 3. Lack of exception message discipline

4. Manufacturing lead times 5. Safety stock

6. Lot sizes

7. Min/max/multiples

8. Lead time modifiers (move, queue, receiving, inspection)

Planning and Inventory Alignment

(Inventory Drivers)

(13)

9. Yield/robustness 10. Inaccurate inventory 11. Unshipped backlog

12. Lack of obsolete/inactive business rules 13. Lack of rescheduling-date alignment

messages (customer orders, MPS orders, production orders, purchase orders)

14. Lack of bill of material control 15. Lack of ECO’s controls

16. Purchasing lead times

Planning And Inventory Alignment

(cont)

25

• Front end

• Quotations

• Order entry

• Customer relationship management

• Demand planning

• Sales force automation

• Execution (lean ERP)

• Planning/inventory

• Purchasing

• Shop floor

• Receiving, warehousing, shipping

Alignment and Perfection is Required

In The “Order to Cash” Cycle

(14)

•

Support

• Rapid database build

• Part numbers, BOM’s, routings

• Compliance

• New product introduction (NPI)

• Rapid customization of product

• Product rationalization

• Financials

Alignment cont.

“Order to Cash”

27

Align and Optimize Lean Suppliers

• Responsive to change

• Cost controlled with lean processes

• Include suppliers in the value chain

• Assist suppliers in their lean transformation

• Involve them in your lean activities

• Work in collaboration

(15)

Align and Optimize Lean Procurement

• E-Procurement:

• Process all transactions, strategic sourcing, bidding and reverse auctions using web-based applications

• Automate Procurement:

• “A” items under kanban control

• “B” items under auto MRP planning

• “C” items under vendor managed inventory

29

Align and Optimize Lean Procurement

(cont.)

• Supply Chain Visibility

• Suppliers must be able to see into their customers operations and customers must be able to see into their suppliers operations

• Organizations should value map the current value stream and create “to be” processes

• The supply should create a flow on information while establishing a pull of information and products

(16)

Align and Optimize Lean Manufacturing

• Produce what the customer wants, in the

quantity the customer wants, when the customer

wants it and with minimum resources.

• Create a pull on the rest of the organization

• Presents the greatest opportunity for cost

reduction and quality improvement

• Can become a competitive weapon for sales

31

Lean Warehousing

• Eliminate non-value added processes and

wastes in product:

• Receiving

• Put-away

• Location control

• Picking

• Packing

• Shipping

(17)

Align and Optimize Lean Warehousing

(cont.)

• Warehouse wastes can be costly:

• Defective product management

• Excessive product management

• Excessive motion and handling

• Excessive processing steps

• Excessive transportation steps and distances

• Excessive delays in the information flow

33

Align and Optimize Lean Transportation

• Lean process and concepts:

• Core carrier programs

• Improved transportation administrative processes and automated functions

• Optimized mode selection and pooling orders

• Combined multi-stop truckloads

• Cross docking

• Right sizing equipment

• Import/export transportation processes

• Inbound transportation and backhauls

(18)

1. All “A” suppliers have been value stream mapped and non- value added activities eliminated

2. No buyer involvement for “A” supplier releasing

3. All “A” suppliers have service agreements (VMI, Evergreen, consignment, productivity, and schedule Agreements)

4. All “A” suppliers deliver at first operation or “kanban supermarket”

5. Same day or next day delivery for “A” supplier demand

Sales to Ship Workflows will be in Alignment

WHEN…

35

6. Key suppliers feed “supermarket” or point-of consumption buffer areas

7. All pallets are pre labeled

8. All key “A” suppliers are all certified No inspection No counting

9. All “A” suppliers have qualified specifications

10. All key “A” suppliers have standard delivery schedule 11. “B” suppliers will use “auto” MRP

12. “C” suppliers will use “bread man” deliveries

Sales To Ship Workflow Alignment (cont.)

(19)

Path Forward

• To align and optimize workflows with lean

thinking companies must:

• Require an attitude of continuous improvement based on action

• Apply lean to all elements of the supply chain

• Attack all of the traditional silos

• Embrace change

• Adopt a sense of urgency

37

Key Steps to Align and Optimize

• Understand customer requirements and value

• Align revenue plans, sales and operations plans and operations processes

• Optimize to manage demand volatility

• Create flow

• Achieve excellence in the basics

• Achieve excellence in the use of ERP

• Develop meaningful performance metrics

(20)

39

Stay on the Path to Profit with Key

Performance Indicators

Customer service

•Line fill

•On-time and complete

•Percent time in stock Inventory

•Days of inventory

•Inventory turns Speed

•Cash to cash (Inv+A/R-A/P) in days of supply

Days of working capital-DWC (working capital/annual revenue x 365)

Days sales outstanding-DSO (accounts receivable/annual revenue x 365)

Days of inventory- DIO (inventory value/COGS x 365) Days payable outstanding- DPO