A BEST Case: Forecast Improvement Project A Tale of Two BUs
Green Belt Project Scope: EUR Region Two Business Units with distinct supply chains Goal: Accuracy improvement by Q3 2013 Workshop in Nov 2013 Results to Date BU1: Forecast accuracy since January 2013 very stable and upward trending BU2: Forecast accuracy since January 2013 was relatively stable but below target. Experienced a significant drop in April and a downward trend from August 2
Focused Problem Statement For Edwards products sold in Europe, the demand forecasting accuracy for commercial and non-commercial products is less than the corporate goal which leads to: Back Orders Diminished customer service satisfaction Excess inventory High expedited shipping costs Metric: Forecast Accuracy (Lag 2) Bias was not an objective metric but a diagnostic metric
Process Mapping Workshop Objectives Identify root causes of lower than required forecast accuracy and prioritize improvement opportunities Create and align on the optimal future state process Detail a prioritized roadmap for improvement to future state with measurable and time-bound actions achievable during calendar year 2013 Define governance to ensure implementation Standardize process with the intent to replicate to all regions
Current State Maps 5
Emerging Themes Work not standardized across BUs Excess waiting time Overprocessing Roles & responsibilities not clear Engagement not optimal Poor communication Silo-ed view of process steps and responsibilities 6
Opportunities Prioritized by Impact and Effort Impact vs. Effort Comparison of Action Items 10 23 25 10 17 22 Additional Action Items 2 16 20 21 Automating Processes 3 27 Standardized Templates 4 15 Revenue/Non-Revenue 5 14Demand 6 1 Separation 8 19 9 1 Comparison of S&OP Demand Forecast 0 10 9 8 7 6 5 4 3 2 1 0 to Finance Sales Forecast EFFORTin Dollars 30 Improvement Opportunities Clear Definitions 20 Just & Metrics Do It s 5 Kaizen Events 5 Projects 11 24 26 18 29 13 9 8 7 6 5 4 3 2 IMPACT High Impact/Low Effort Define Sales and Marketing Responsibilities Input for NPI What Product Level to Review Forecast Accuracy? Align SC Demand Forecast to Finance Sales Forecast What is Standard Definition of Demand? 7
Milestones Overview Definitions 2013 Q1 Q2 Q3 Q4 Demand Forecast (Q1), X-level to review fcst acc on (Q1), ABC Coding (Q1), Roles & Responsibilities (Q1) Communication Global/region review meetings (Q1), training & awareness (Q1), feedback loops (Q2) Alignment Demand/sales/financial forecast (Q1), Controlled allocation to regions (Q3), separate direct sales & consignment (Q1-2) Toolbox JDA upgrade (Q3), forecast template (Q1-2), capturing of original demand (Q2)
Results Vary: Accuracy and Bias 120% Forecast Accuracy and Bias 140% 100% 120% Bias 80% 100% Accuracy 60% 80% 40% Jan Feb Mar Apr May Jun Jul Aug Sep 60% Target Bias BU1 Bias BU2 Goal Accuracy BU1 Accuracy BU2 9
I-MR Charts by stages BU1 stability of process BU2 No change in variability Improved Stability No significant change 10
Forecast by Product Groups High Volume Products 100% BU1 Forecast Accuracy by Product Groups 90% BU2 Forecast Accuracy by Product Groups 80% 80% 60% 70% 40% 60% 20% 50% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Goal P1 BU1 P2 BU1 P3 BU1 P4 BU1 P5 BU1 P6 BU1 40% Jan Feb Mar Apr May Jun Jul Aug Sep Goal P1 BU2 P2 BU2 P3 BU2 P4 BU2 P5 BU2 High volume products have higher Forecast Accuracy High volume products have the worst drop in forecast accuracy Code reduction Program impact 11
Country level forecast BU1 Forecast Accuracy by Country BU2 Forecast Accuracy by Country 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Goal C1 BU1 C2 BU1 C3 BU1 C4 BU1 C5 BU1 C6 BU1 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jul Aug Sep Goal C1 BU2 C2 BU2 C3 BU3 C4 BU2 C5 BU2 Country level forecasting had no differentiating impact 12
Base Forecast vs Final Forecast 90% Forecast Accuracy Base vs Final 85% 80% 75% 70% 65% 60% Jan Feb Mar Apr May Jun Jul Aug Sep Goal Final BU1 Base BU1 Final BU2 Base BU2 Base Forecast consistently has higher accuracy BU1 made only selective (< 10%) changes to Base forecast BU2 Overrides almost all of Base forecast 13
Actions Underway Demand striping Separate consignment/non Revenue visibility Forecast/revenue comparison Automated size distribution Automated Statistical Tuning Alerts for focus in critical areas Seek Executive engagement not sponsorship 14
Why BEST Structured framework for management of efforts Roadmap, Templates, Toolkits Focus on objectives Problem statement VSM: Overheads are beneficial cross functional team Process thinking Individual Growth 15
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