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

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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 Business Challenges Global supply chain management Insure a highly trained and motivated workforce Process alignment from sales and operations planning to the shipment of the product Marino Associates, LLC

2 2013 CXO S Objectives 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% 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 4 2

3 Align And Optimize Workflows with Lean Supply Chain Management 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 5 Workflow Alignment Workflow alignment begins with the customer. Workflow and processes for the management and control of customer information must be in place and sustainable 6 3

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 Marino Associates, LLC

5 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 9 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 10 5

6 What Is Lean Supply Chain Management? 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. Demand management Sourcing and procurement Order processing Production scheduling Inventory management Transportation Warehousing Customer relationship management Optimized ERP Quality The basics in place 11 Lean Supply Chain Management Customer Warehouses Raw Material 2nd Tier Suppliers 3rd Tier Suppliers Multiple Plants & Warehouses Consumer Single Plant Direct Suppliers MES Distribution APS Retail Transportation MRP II ERP Transportation SUPPLY CHAIN MANAGEMENT (SCM) 12 6

7 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 13 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 14 7

8 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 15 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? 16 8

9 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 17 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 Marino Associates, LLC

10 Sales and Operations Plan 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. 19 Sales And Operation Plan 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 20 10

11 Tactical Planning Aspects of S&OP 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. 21 ERP Alignment Information that is developed during the S&OP process must now feed a planning systems that is in alignment with the execution systems

12 ERP Alignment And Optimization 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? 23 Planning and Inventory Alignment (Inventory Drivers) 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) 24 12

13 Planning And Inventory Alignment (cont) 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 25 Alignment and Perfection is Required In The Order to Cash Cycle Front end Quotations Order entry Customer relationship management Demand planning Sales force automation Execution (lean ERP) Planning/inventory Purchasing Shop floor Receiving, warehousing, shipping 26 13

14 Alignment cont. Order to Cash Support Financials Rapid database build Part numbers, BOM s, routings Compliance New product introduction (NPI) Rapid customization of product Product rationalization 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 28 14

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 30 15

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 32 16

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 34 17

18 Sales to Ship Workflows will be in Alignment WHEN 1. All A suppliers have been value stream mapped and nonvalue 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 35 Sales To Ship Workflow Alignment (cont.) 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 36 18

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 38 19

20 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 (accounts payable/annual revenue x 365) 39 Forward Thinking Managers Are Aligning And Optimizing Workflows Utilizing Lean Concepts As A Primary Strategy To: 1. Increase market share 2. Reduce cost 3. Reduce inventories 4. Improve profits 40 20

21 IS IT TIME FOR CHANGE? Vision of future x Discontent with present Equals CHANGE x Path of low risk Thank you for attending this session I hope you have a fantastic conference Dan Marino Marino Associates, LLC 21

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