Optimization of Resources: More with Less? Alfred den Besten Global Marketing Director
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1 Optimization of Resources: More with Less? Alfred den Besten Global Marketing Director 1
2 PPP Value 2
3 Sustainability: about conflicting KPI s? 3
4 Balanced Optimization: The Perfect Round? 4
5 Doing more with less! Our delivery performance has increased from 40% to 91% and our inventory level has been reduced by 26%. This is shown by the fact that our production has increased 24%, for a large part attributed 5
6 Optimization = Less Waste 6
7 Advanced Planning & Scheduling 7
8 Planning & Scheduling is Key 8
9 The planning roadmap KPI s Planning Levels Business Logic 9 DSS vs Automatic Optimization
10 The KPI Matrix: a balance act? 10
11 Example: Four Scheduling KPIs 11
12 The planning roadmap KPI s Planning Levels Business Logic 12 DSS vs Automatic Optimization
13 Planning Levels Input Level Goal Horizon Forecast STRATEGIC PLANNING Coordination of capabilities (deal between production and sales) Product mix & route allocation Raw material demand Yearly / Monthly Orders & Forecast SUPPLY CHAIN PLANNING COMPANY PLANNING Order acceptance and due date determination (ATP/CTP) Order planning Material management Weeks ahead 11/09 12/09 Orders COLLABORATIVE SCHEDULING Assignment of material to orders Sequencing of orders on machines Batching orders Days ahead Sept-05 Sept-06 Sept-07 Orders & Changes REVISION Operational excellence Real-time scheduling and alerting Daily (hourly) 7h 7½h 8 h 13
14 The planning roadmap KPI s Planning Levels Business Logic 14 DSS vs Automatic Optimization
15 Planning = capturing any rule or constraint Individual contracts Average hours per week Overtime rules Maximum length of shift Existence and length of breaks Maximum hours within one block of work Daily breaks at location of residence Minimum time between turns of duty Weekly rest Route and traction knowledge Training requirements route retention Drivers periodic assessments by traction inspectors Personal preferences employees Fuelling, catering and cleaning rules Track constraints Traction constraints Sequencing rules Walking time platform to platform Maintenance regulations Machine capacities Sequencing rules Contamination rules Working time directives Location time windows Trailer capacities Toll Hotel costs Trailer swap spots Stacking rules Customer priority rules Driver skills Training requirements FIFO/LIFO Mounting rules Driving regulations Warehouse capacities Desired Stock levels VMI Rules 15
16 The planning roadmap KPI s Planning Levels Business Logic 16 DSS vs Automatic Optimization
17 Planning = Decision Support + Automatic Planning Decision support: What- if scenario s Automatically calculating all consequences of any change or disturbance Automatic Planning: Fully automatic generating an optimal plan or schedule Multiple and weighted KPI s 17
18 Customer Case: AKZO Nobel Power Coatings The Road to Delivering the Business Goals Reduction of Working Capital and Improving Service Performance 18
19 Some Key Facts 2011 Revenue 15.7 billion 57,240 employees EBITDA: 1.8 billion* Net income: 0.5 billion 40 percent of revenue from high growth markets A leader in sustainability Revenue by business area EBITDA* by business area 34% 33% 31% Performance Coatings 46% Decorative Paints Specialty Chemicals 33% 23% 19
20 European Business +10,000 customers, from major multinationals to single tradesmen Number 1 player in the market Main markets: Architectural, Automotive, Domestic Appliance, Furniture, General Metal Finishing Service differentiate s our business 8 Manufacturing plants, 12 Warehouses 5000 Stocked SKU s, +10,000 make-to-order products 60:40 split Make to Stock v Make to Order 20
21 The Challenges Organized on a country basis, with each major market having a factory Duplication of product manufacturing between plants In-stock performance, MTO lead times, pricing structures differ by site Manufacturing sites competed with one another for production Sales regions without a manufacturing site were disadvantaged Consequences: Inventory too high Inconsistent service levels Lack of supply chain visibility Duplication of planning tasks across plants High planning staff numbers 21
22 Supply Chain & Production Facts Production Complexity Supply Chain Complexity Next-day supply for stock items 5-day lead time for MTO 5000 stocked SKUs in Europe West 1000 Euro Range colors 2000 MTC items 2000 local MTS items 40,000 batches No tinting possible after extrusion Batch size between 25KG and 40 tons Smallest component 0.5% of mix 22
23 Before Different planning systems in use Heavy use of Excel No integration with SAP Not reactive enough No cross-plant visibility De-centralised planning decisions 23
24 Powder Coating: GOALS! Improved service Reduction in OWC Reduced planning resources Greater central control Optimizing plant capacities, reducing imbalances in use of temps and overtime working Control of stock ranges, to control SKU proliferation Reduction in slow-moving and obsolete stock 24
25 The vision to reach the goals & beyond Creation of a single supply entity in Europe in 2008, servicing country selling businesses Central control of manufacturing, logistics, inventories, capital investment programs But The business was lacking the infrastructure to reliably manage central planning A single European SAP system in progress, but more visualization needed The business needed a tool to link SAP and MRP output to detailed line schedules Prerequisites for Operational Excellence: One single regional Supply Chain Management Mature logistics network in the region One ERP system 25
26 Creating the Supply Chain & Team Central planning team for West Europe trained planning experts Consolidating output from national S&OP processes, and generating forecasts Inventory management stock policies and stock locations Running MRP, generating a master production schedule Allocating required from production to manufacturing sites Tracking plant utilisation levels and demand loading Moving products between manufacturing plants to balance capacity and optimize use of resources OTIF service levels MTS in-stock performance and MTO lead times Obsolete stock reduction 26
27 First step towards solving the puzzle The Planning Process Vision S&OP Plan Refine Capacity MRP Pre-mix Schedule Extrusion Schedule (3d) Mill Schedule (2-3w) Planning/ Inventory Production Feedback 27
28 Central Planning / Local Scheduling Inventory Managemen t MRP is used in SAP to generate plan orders Parameters about safety stock, forecast, etc., are maintained in ERP System Process Order Available capacity Quinitiq capacity overview Optionally re-allocate process order Plant Process Order 3-week plant sequence Enter production feedback Quintiq inventory info Quintiq requires the stock levels, to determine the scheduling space for the process order Review plant schedule Central Planning Plant Schedule Local Site Scheduling 28
29 Results: Daily Central Planning Central Control MRP parameters, in close co-operation with local selling businesses Run MRP daily, validate and firm MRP output Allocate production to manufacturing plant Load new process orders onto Quintiq plant schedules Review, control utilisation and predicted service levels across the region using Quintiq reporting Produce detailed in-stock performance reports by manufacturing site and by warehouse Local Take allocated new products from Central Planning Team and detailed line schedule them on Quintiq Update detailed Quintiq schedule, considering line running speeds, new urgencies, scheduled preventive maintenance Review meeting with central planner Other Upload Quintiq manufacturing dates back into SAP and run raw materials MRP based on these dates Customer service desks access Quintiq to review planned manufacture dates for outstanding orders, and are able to quote lead times to customers 29
30 Business Benefits Allows AKZO Nobel to react in real time to changing market demand Total transparency leading to: Better capacity balancing improved schedule stability Improved capacity utilization, and reduction in temps and overtime (app. 5% reduction) Reduce SC FTEs by 6 Reduce FG inventory by 5% through improved planning and intra-warehouse transfers Reduce slow-moving and obsolete stock (SLOB) by 20% Improve service performance by reducing out-of-stocks and MTO lead time (app. 1% increase in sales value) 30
31 Why with Quintiq? Proven track record in a number of industries and recognised APS leaders Project management standardised project management tool for system implementation Extremely configurable around central planning basics Visualization of complex multi-stage process routings Scenario modeling balancing OTIF and best manufacturing sequence Networked system can be accessed and updated from multiple plants Compatibility Interface with SAP Reporting comprehensive and configurable suite of reports 31
32 Question and Answer 32
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