Business Forecasting and Analytics Forum: Combining Lean and Agility to Manage Demand Uncertainty
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Explore the Lean and Agile supply strategies and the potential to incorporate aspects of both strategies into a new model that can provide benefits to both your company and your customers.
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Business Forecasting and Analytics Forum: Combining Lean and Agility to Manage Demand Uncertainty
- 1. BUSINESS FORECASTING AND ANALYTICS FORUM Boston, MA June 14-15, 2016 Richard Goyette, C.P.M RIWGO Supply Chain Services
- 2. Explore the Lean and Agile supply strategies and the potential to incorporate aspects of both strategies into a new model that can provide benefits to both your company and your customers.
- 3. Š RIWGO Supply Chain Services ď˝ Lean and Agile Supply Definitions ď˝ The Lean and Agile Paradigms ď˝ Attributes of Lean and Agile Supply Systems ď˝ âLeagileâ Hybrid Supply Options
- 4. Š RIWGO Supply Chain Services ď˝ Lean is defined by the elimination of waste (muda) ⌠Waste is anything does not add value to the process, product, or service. ď Anything the customer is unwilling to pay for. ⌠In a perfect system inventory would only exist at the point and time it is needed. Demand âpullsâ the process. ď Supply Chain is forecast driven, but activated by actual demand.
- 5. Š RIWGO Supply Chain Services ď˝ Agile Supply is defined as positioning all means of supply so that they can quickly adapt to changing situations. ⌠Must be able to withstand market changes, demand fluctuations, variable customer requirements, etc. ⌠Requires rapid flow of information from markets and customers throughout entire supply chain. ď Market responsive versus forecast driven. ⌠In a perfect system, the customer can get exactly what they want at itsâ required time.
- 6. Š RIWGO Supply Chain Services AGILE LEAN HIGHLOW VOLUME HIGH VARIABILITY
- 7. Š RIWGO Supply Chain Services ⢠Lean Supply Chains can function well when demand uncertainty is low and product variety is minimized. ⢠Principle means to win an order is lowest cost.
- 8. Š RIWGO Supply Chain Services ď˝ Agile Supply Chains can function well when production and fulfilment cycle times are short and materials are readily available. ⌠Principle means to win an order is customer value enhancement â Giving them exactly what they want.
- 9. Š RIWGO Supply Chain Services ď˝ Lean: ⌠Function well when demand uncertainty is low and product variety is minimized. ď âAny color you want, as long it is blackâ ď Production is level loaded and slow to react to demand shifts. ď Only as strong as itâs weakest link. ď Heavily relies on historical information to set capacity, avoid overproduction, and prevent excess issues. ď Missed opportunities!
- 10. Š RIWGO Supply Chain Services ď˝ Agile: ⌠Agile Supply Chains can function well when production and fulfilment cycle times are short and materials are readily available. ď SKU Proliferation ď Utilize inventory to buffer uncertainty ď Large number of changeovers. ď Higher costs ď Missed opportunities!
- 11. Š RIWGO Supply Chain Services Pull Production Kanban 5S/ Visual Control Poke Yoke Leveling SMED Cellular Mfg Jidoka Standard Operations Line Balancing TPM Green Boxes are highly useful in Agile Systems
- 12. Š RIWGO Supply Chain Services Distinguishing Attributes Lean Supply Agile Supply Typical Products Commodities, Consumer Electronics Fashion Goods Consumer Electronics Marketplace Demand Predictable Volatile Product Variety Low High Product Lifecycle Long Short Customer Drivers Cost Availability Profit Margins Low High Dominant Costs Physical Costs Marketability Costs Stockout Penalties Long Term Contractual Immediate and Volatile Purchasing Policy Buy Materials Assign Capacity Information Enrichment Highly Desirable Obligatory Forecasting Mechanism Algorithmic Consultative Source: Mason-Jones, Naylor, and Towill âEngineering the Leagile Supply Chainâ 2000
- 13. Š RIWGO Supply Chain Services â˘Time to Market â˘Concept to Delivery â˘Order Entry to Delivery â˘Response to Market Forces â˘Lead Time â˘Design, Conversion, Eng. Delivery â˘Materials, Inventory â˘Design and Engineering â˘Conversion â˘Quality Assurance â˘Distribution â˘Administration â˘Inventory â˘Materials â˘Customer Support â˘Product Service â˘Product Support â˘Flex to Meet Customer Demands â˘Flex. to Meet Market Changes â˘Meeting Customer Requirements â˘Fitness for Use â˘Process Integrity â˘Minimum Variances â˘Elimination of Waste â˘Continuous Improvement Quality Service Lead Time Cost
- 14. Š RIWGO Supply Chain Services Agile Supply 1.Quality 2.Cost 3.Lead-Time 1. Service Level Lean Supply 1.Quality 2.Lead-Time 3.Service Level 1. Cost Market Qualifiers Market Winners Source: Mason-Jones, Naylor, and Towill âEngineering the Leagile Supply Chainâ 2000
- 15. Š RIWGO Supply Chain Services ď˝ Leagile: A hybrid solution combining elements of both lean and agile supply systems to better meet the needs of the market AND the organization.
- 16. Š RIWGO Supply Chain Services 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% %ofTotalDemand % of Products Pareto Distribution Lean Agile ⢠Linear Demand ⢠Standard Work ⢠Pull Systems ⢠Automation ⢠Dedicated Lines ⢠Analytical Based S&OP ⢠Customization ⢠Quick Response ⢠Flexible Production Lines ⢠Safety Stock ⢠Consultative S&OP
- 17. Š RIWGO Supply Chain Services Customer ID Sum of Net Sales % of Total Cum Total Quad Class 689875 $2,870,983.00 18% 18% A 688769 $729,941.00 5% 23% A 688204 $670,000.00 4% 27% A 688125 $666,683.00 4% 32% A 689209 $538,000.00 3% 35% A 690135 $450,584.77 3% 38% A 688139 $420,040.00 3% 41% A 689375 $410,030.02 3% 43% A ⌠. ⌠. ⌠. ⌠. 27017 $150,053.05 1% 78% A 27382 $149,000.00 1% 79% A 687987 $148,000.00 1% 80% B 689537 $142,383.00 1% 81% B 677227 $140,060.45 1% 82% B 687699 $132,173.22 1% 83% B 688092 $131,780.00 1% 84% B 26675 $131,567.00 1% 84% B ⌠. ⌠. ⌠. ⌠. 688560 $9,345.45 0% 98% B 683874 $7,656.00 0% 99% B 687293 $2,868.25 0% 99% B 683746 $972.20 0% 100% B Customer Pareto SKU Sum of Net Sales % of Total Cum Total Quad Class ACUP-10695 $2,606,581.22 15% 15% A TWEN-11841 $2,517,050.00 14% 29% A ACCE-10184 $2,130,917.70 12% 41% A BECH-66509 $1,553,293.00 9% 50% A Vect-10696 $1,063,677.06 6% 56% A XYCF-11842 $1,058,875.77 6% 62% A SEVE-10185 $670,000.00 4% 65% A APPE-66510 $629,588.02 4% 69% A ⌠. ⌠. ⌠. ⌠. A Vect-14135 $329,526.00 2% 77% A XYCF-15281 $304,526.00 2% 79% A YPLO-16427 $279,526.00 2% 81% B ONMI-17573 $254,526.00 1% 82% B MICW-18719 $229,526.00 1% 83% B ⌠. ⌠. ⌠. ⌠. B AQAU-66514 $36,983.00 0% 99% B SPMM-10701 $35,237.00 0% 99% B GEMM-11847 $30,669.00 0% 100% B FORT-10190 $26,101.00 0% 100% B ECON-66515 $21,533.00 0% 100% B MICW-10702 $16,965.00 0% 100% B Customer ParetoSKU Pareto
- 18. Š RIWGO Supply Chain Services Sales: $2.5M Orders: 82 GM%: 31% $ Per Inv: $30.2K Sales: $9.8M Orders: 123 GM% 33.7% $ Per Inv. $79.3K Sales: $.785M Orders: 63 GM%: 29% $ Per Inv: $12.5K Sales: $2.6M Orders: 31 GM%: 26% $ Per Inv: $84.9K A B AB Product Classification Customer Classification Perform Quad Analysis by crossing customer classification to SKU classifications. Takeaway: Make sure your efforts are placed on the customer and items that truly impact your business B customers and products contribute only 4% of revenue but consume >20% of fulfilment resources.
- 19. ď˝ Purchased Parts Inventory Cost Per Unit Total % of Total Parts Active % of Total Active Inventory Value % of Total Inventory Unit Cost <= $3 862 33% 725 34% $ 199,415 2% Unit Cost $3>X<$10 508 20% 418 20% $ 197,563 2% Unit Cost >=$10 1,219 47% 992 46% $ 9,807,508 96% Total Inventoried Parts 2,589 2,135 $ 10,204,486 54% of all active purchased parts cost less than $10, yet only account for 4% of total inventory.
- 20. ď˝ 45% of all PO receipts and 50% of total transactions are related to parts that cost less than $10. ď˝ Resource allocation in nearly even between parts making up only 4% of Inventory valuation and the remaining 96%. ď˝ Frequency of PO receipts for low value parts makes it likely that shortages could occur that will impact ability to meet customer requirements. Cost Per Unit Inventory Transfers (*) PO Receipts Total Inv Trans. Xaction Per Part Xaction Per Active Part (**) PO Rec Per Act Part Unit Cost < $3 13,880 3,608 17,488 20 24 5.0 Unit Cost $3>X<$10 8,840 4,618 13,458 26 32 11.0 Unit Cost >$10 19,962 10,253 30,215 25 30 10.3 Totals 42,681 18,479 61,160 24 29 8.7 (*) = 50% of actual transactions to offset issue and receipt transaction (**) = Active part = activity in last 12 months. Plan for every part where resource allocation and return on effort is part of the consideration.
- 21. Š RIWGO Supply Chain Services ď˝ De-Coupling / Postponement: ⌠Utilize lean principles to produce to common level. ⌠Customize to final configuration. ⌠De-Coupling points can vary based on product and needs of company. ⌠Goal should be to push de-coupling point as close to completion of product as possible. ď Incorporate postponement / de-coupling potential into design criteria. ď Develop Flex Stations to minimize waste while providing for multiple manufacturing options.
- 22. Š RIWGO Supply Chain Services Make to Order/ Standard Product Product is completed to established process from start to finish. â˘Custom products â˘Make to Stock Base Level Assembly Utilize standard base assembly and complete to final configuration. â˘Modular products â˘Add-on configurations â˘Higher complexity finished configuration End Stage Customization Product is 90%+ complete and is finished to order â˘Custom covering â˘Software programming â˘Accessory kits â˘Simple bolt on configurations. Lean Decoupling Point 1 Lean Decoupling Point 2 Flex Points have multiple configuration options that can be done in-line.
- 23. Š RIWGO Supply Chain Services ď˝ Cellular Manufacturing: ⌠Establish Agile cells dedicated to high service level requirements. ď˝ âDonât Sweat the small stuffâ ⌠Expand stocking parameters of the non-trivial / many items to offset uncertainty and best utilize resources. ď Breadman ď Kanban Systems ď VMI
- 24. Š RIWGO Supply Chain Services ď˝ âEverything but the kitchen sinkâ ⌠Include multiple options for final configuration with the product to allow customer to configure to their needs. ď˝ Technology Based Solutions: ⌠Software configurations ⌠3D Printing Plugs for multiple regions included, limiting the need to adjust for specific demand.
- 25. Š RIWGO Supply Chain Services ď˝ Upselling / Order Conversion ⌠Monitor demand and create plans to incentivize customers to purchase targeted products. ⌠Specials / Promotions ď˝ Outsourcing ⌠Move production of non-core products to 3rd parties. ď Turnkey Finished Goods ď Sub-Assemblies ⌠Partner with 3rd party distributors to hold stock to increase availability and mitigate inventory risk.
- 27. Š RIWGO Supply Chain Services Richard Goyette ďhttp://www.riwgo.com ďrgoyette@riwgo.com ď https://www.linkedin.com/in/rickgoyette