Supply Chain Segmentation & Analytics Moving from Theory to Implementation January 21, 2015 AIMMS.com info@aimms.com
Meet the Presenters Dr. Gerhard Plenert Consultant and Author Dr. Gerhard Plenert has been helping organizations execute operational and supply chain transformations for more than twenty years. He was a tenured full professor at California State University, Chico, and a professor at BYU Provo, BYU Hawaii, the University of Malaysia, and the University of San Diego. He has worked for the largest companies in the world, including companies like Aramco, Microsoft, Cisco, HP, Johnson and Johnson, Shell, Apple, Ford, Nike, Google, Cisco, and Rolls Royce. Chris Gordon Supply Chain Principal at AIMMS Chris has worked in supply chain consulting and operations across Europe, the US and India for more than 25 years. He s driven dozens of supply chain initiatives with a heavy focus on leveraging analytical evidence to promote major business change. AIMMS.com
Objectives of this Webinar Share a consumable definition of Supply Chain Segmentation Provide a step-by-step guide to achieving segmentation value Share a series of examples to increase initiative speed and time to value Share where supply chain segmentation can go next with leading edge use of optimization An opportunity to engage in this ongoing dialogue with the presenters and your industry peers AIMMS.com
What is Supply Chain Segmentation (SCS)? SCS is about Differentiating Groupings by: Region / Location Volumes Product Characteristics Etc.
What is Supply Chain Segmentation (SCS)? SCS finds common Characteristics within the differentiated groupings SCS identifies optimal methodologies around each group
SCS How it works? B Reduce Cost Production Logistics Warehousing Inventory holding cost Planning Misalignments Technology Obsolescence A Manage Product Lifecycle Stages Launch / New product introduction Active Growth Stable - Maturity Declining End-Of-Life 3-Pronged Approach to Maximize Return on Availability C Increase Benefits Revenue Margin Establish Yourself as the Preferred Supplier Market Share Competitor Substitution Avoidance Ease of Doing Business Economies of Scale
Demand Identify the Life Cycle Stages of B A C the Product ROA Introduction Growth Maturity Decline End of Life Product Phase Out New Product Phase In Planning Horizon
Identify cost drivers that impact return on availability B A ROA C Cost Drivers Impact of the Driver Attributes Lifecycle length Product avaiability / obsolesence Long Medium Short Volatility Level of inventory buffering Low Medium High Product Customization Interdependencies / stock outs Low Medium High Product Criticality Customer operational shutdowns Low Medium High Geography / Location Pipeline length / inventory staging Onshore Nearshore Farshore Product Turnaround Shelf Life / inventory levels Fast Medium Slow Gross Margin Risk / profitability High Medium Low Seasonality Inventory buildup / planning Heavy Medium None Channel Hazards Planning / inventory costs High Medium Low Cost of Availability High Medium Low Minimize Cost
Identify the customer segments that drive benefits B A ROA C Segments Tier-1 Tier-2 Tier-3 Definition High-priority customers with strategic / critical importance to our company (The 20 % of the customers that make up 80 % of our business) Medium priority customers who deserve the next best level of Supply chain support Low-priority customers who are relatively at the lowest level in the hierarchy (The majority of our customers, around 50 to 60 %, who make up only about 20 % of our business)
Segmentation tailored to your key business drivers Attribute Impact Cost Drivers Impact of the Driver Low High Lifecycle length Volatility Product Customization Product Criticality Geography / Location Product Turnaround Gross Margin Seasonality Channel Hazards Product avaiability / obsolesence Level of inventory buffering Interdependencies / stock outs Customer operational shutdowns Pipeline length / inventory staging Shelf Life / inventory levels Risk / profitability Inventory buildup / planning Planning / inventory costs
Example Segmentation Matrix to maximize return on availability Lifecycle Stage Cost of Availability Tier 1 Customers Tier 2 Customers Tier 3 Customers Launch Low Med High Low Active Med High End of Life Low Med High
Example Segmentation Matrix to maximize return on availability Chart 5-15 Lifecycle Stage Cost of Availability Tier 1 Customers Tier 2 Customers Tier 3 Customers Availability Lead Time Availability Lead Time Availability Lead Time Launch Low High 5 Days Custom Medium 25 Days Agile Medium 30 Days Agile Med High 5 Days Custom Medium 30 Days Agile Low 35 Days Efficient High High 5 Days Custom Medium 35 Days Efficient Low 40 Days Efficient Low High 10 Days Efficient High 25 Days Efficient High 30 Days Efficient Active Med High 10 Days Efficient High 25 Days Efficient Medium 30 Days Efficient High High 30 Days Agile Medium 30 Days Efficient Low 35 Days Efficient End of Life Low High 15 Days Efficient Medium 35 Days Efficient Low 40 Days Efficient Med High 35 Days Agile Low 40 Days Efficient Low 45 Days Efficient High High 40 Days Agile Low 45 Days Efficient Low 50 Days Efficient
Example Segmentation Matrix to maximize return on availability Chart 5-17 Lifecycle Stage Cost of Availability Tier 1 Customers Tier 2 Customers Tier 3 Customers Availability Lead Time Availability Lead Time Availability Lead Time Launch Low High 5 Days Custom Medium 25 Days Agile Medium 30 Days Agile Med High 5 Days Custom Medium 30 Days Agile Low 35 Days Efficient High High 5 Days Custom Medium 35 Days Efficient Low 40 Days Efficient Low High 10 Days Efficient High 25 Days Efficient High 30 Days Efficient Active Med High 10 Days Efficient High 25 Days Efficient Medium 30 Days Efficient High High 30 Days Agile Medium 30 Days Efficient Low 35 Days Efficient End of Life Low High 15 Days Efficient Medium 35 Days Efficient Low 40 Days Efficient Med High 35 Days Agile Low 40 Days Efficient Low 45 Days Efficient High High 40 Days Agile Low 45 Days Efficient Low 50 Days Efficient
Example Segmentation Matrix to Chart 5-25 maximize return on availability - Aerospace Lifecycle Stage Cost of Availability Tier 1 Suppliers Tier 2 Suppliers Tier 3 Suppliers Criticality Lead Time Criticality Lead Time Criticality Lead Time Launch Active End of Life Low High 120 Days Custom Medium 120 Days Efficient Medium 120 Days Efficient 1 Med High 120 Days Custom Medium 120 Days Efficient Low 120 Days Efficient High High 120 Days Custom Medium 120 Days Efficient Low 120 Days Efficient Low High 10 Days Efficient High 20 Days Efficient Low 30 Days Efficient Med High 10 Days Agile High 20 Days Efficient Medium 30 Days Efficient High High 10 Days Agile Medium 20 Days Agile Low 30 Days Efficient Low High 20 Days Efficient Low 30 Days Efficient Low 40 Days Efficient Med High 30 Days Efficient Low 40 Days Efficient Low 45 Days Efficient High High 40 Days 2 3 4 5 Efficient Low 50 Days Efficient Low 50 Days Efficient 6
Example Segmentation Matrix to Chart 5-29 maximize return on availability - Pharmaceutical Lifecycle Stage Cost of Availability Tier 1 Customer Tier 2 Customer Tier 3 Customer Shipping Criticality Lead Time Shipping Criticality Lead Time Shipping Criticality Lead Time Launch Active End of Life Low Low 2 Days Custom Low 2 Days Efficient Low 3 Days Efficient 1 Med Medium 2 Days Custom Medium 2 Days Efficient Medium 3 Days Efficient High High 1 Day Custom High 1 Day Efficient High 1 Day Efficient Low Low 2 Days Efficient Low 2 Days Efficient Low 3 Days Efficient 2 Med Medium 2 Days Efficient Medium 2 Days Efficient Medium 3 Days Efficient 3 High High 1 Day Efficient High 1 Day Efficient High 1 Day Efficient Low Low 2 Days Efficient Low 2 Days Efficient Low 3 Days Efficient Med Medium 2 Days Efficient Medium 2 Days Efficient Medium 3 Days Efficient High High 1 Day Efficient High 1 Day Efficient High 1 Day Efficient 4
Example Segmentation Matrix to Chart 5-33 maximize return on availability Hi Tech Lifecycle Stage Cost of Availability Tier 1 Customer Tier 2 Customer Tier 3 Customer Product Availability Safety Stock / Inventory Buffering Levels Product Availability Safety Stock / Inventory Buffering Levels Product Availability Safety Stock / Inventory Buffering Levels Launch Active Low High Max Custom High Max Custom High Medium Custom 1 Med High Max Custom High Max Custom High Medium Custom High High Max Custom High Max Custom High Medium Custom Low High Medium Agile High Medium Agile High Medium Agile 2 Med High Medium Agile High Medium Agile High Medium Agile High High Medium Agile High Medium Agile High Medium Agile 4 End of Life Low Low Minimum Efficient Low Minimum Efficient Low Minimum Efficient 3 Med Low Minimum Efficient Low Minimum Efficient Low Minimum Efficient High Low Minimum Efficient Low Minimum Efficient Low Minimum Efficient
SCS Characteristics Mapping Example High Tech Supply Chain Characteristics Forecast Production Planning and Scheduling Operational Processes Automat ion Levels Metrics S&OP Time Series Associative S&OP ATP CTP Demand Pull EOQ BTS/MTS BOO/MTO Min/Max OIL 2-Bin ROP VMI LSS JIT SS Manual Shop Floor MES Motivation Inventory Operating Costs Customer Quality Chart 6-17 High Tech Segmentation Example 1 2 3 4
SCS Goal Mapping Example - Aerospace Chart 6-14 Targets Aerospace Segmentation Example Supply Chain Characteristics 1 2 3 4 5 6 Planning Cadence Bi-Weekly Bi-Weekly Weekly Bi-Weekly Bi-Weekly On Demand % of SKUs 15% 40% 5% 15% 20% 5% % of Revenue 20% 50% 3% 10% 15% 2% % of Inventory 15% 40% 5% 15% 20% 5% % of Planning Effort 50% 5% 10% 20% 5% 10% Touch Level of Planners High Low Low Medium Low Low
Open Loop Semi-Automated Tomorrow Deployable Segment Prescriptions Tomorrow Segment Opportunity Costs Today Segmentation as a strategic tool Closed Loop Tomorrow Automated Segment Flagging Operational Tactical Strategic
Where next? an opportunity to engage We are building a series of basic and more advanced AIMMS segmentation model frameworks which will be free to AIMMS users and available as a trial to future AIMMS users Collaborate with the AIMMS team and your business peers in a short series of online segmentation model building workshops Be part of the evolution of supply chain segmentation and be the first to bring business benefit AIMMS.com
Questions? AIMMS.com
Thank You! If you have any questions, please contact the presenters: Dr. Gerhard Plenert, PhD gerhard@gerhardplenert.com www.gerhardplenert.com 916-233-9758 Chris Gordon Supply Chain Principal, AIMMS Chris.Gordon@AIMMS.com 425-458-4024 Link to slides and recording will be emailed to you Stay tuned for future webinars, white papers and case studies AIMMS.com
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