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SC for Startups

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Supply Chain Operations For Startups

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Supply Chain & Sales Operations
Business Development Officer
Supply Chain Instructor
Why Am I Here
Commercial (Product Man...

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Focus Provide Feedback Be Curious & Ask
Guidelines

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SC for Startups

  1. 1. Supply Chain Operations For Startups
  2. 2. Supply Chain & Sales Operations Business Development Officer Supply Chain Instructor Why Am I Here Commercial (Product Management)
  3. 3. Focus Provide Feedback Be Curious & Ask Guidelines
  4. 4. What’s In It For You - Determining the optimal service level to your customers. - Providing tools to identify your product / service strength. - Getting introduced to different methods for developing sales forecast based on your business’s stage. - Helping with planning your resources/investments. - Providing hints for managing procurement. - Providing guidance with respect to inventory management.
  5. 5. Why Supply Chain
  6. 6. Consists of Aims to The right Product The right Time The right Customer The right Quantity ++ +To Achieve Supplier Factory Distributor Retailer Customer Supply Chain In Brief
  7. 7. Outline Setting Service Level to Customers S&OP & Demand Planning Product Life Cycle & Forecasting Procurement Inventory Management Resources
  8. 8. Service Level To Customers
  9. 9. - What’s is the optimal Service Level to your Customers (Order Fulfillment). - More than this level you lose money, Less than it you lose customers. - Affected by Competition, Regulation, Consumer Awareness & Targeting. 0 200 400 600 800 1000 1200 0 10 20 30 40 50 60 70 80 90 95 99 100 Service Level To Customers Cost Service Level
  10. 10. Service Level To Customers - Current world setup requires business to deliver High Service Level. - Accordingly we have cost implications for this High Service Level: - Investment in developing better forecast to meet customers demand. - Higher inventory levels to meet unexpected customers demand. - Investment in logistics (Warehousing & Transportation).
  11. 11. Outline Setting Service Level to Customers S&OP & Demand Planning Product Life Cycle & Forecasting Procurement Inventory Management Resources
  12. 12. Demand Commercial Procurement Production Material Planning Logistics Sales & Operations Planning Cycle
  13. 13. - “I think there is a world market for maybe 5 computers.” Thomas Watson, IBM Chairman, 1943 - “We don’t like the band’s sound, and anyway guitar music is on the way out.” Decca Record Co. on rejecting the Beatles, 1961 - “640 kB (of system memory) ought to be enough for anybody.” Bill Gates, 1981 Demand Planning
  14. 14. - Aim of Demand Planning is to reduce error, NOT to predict 100% accurate projections. - 3 Demand Concepts: - Target / Business Plan. - History / Actuals. - Demand / Forecast. - 3 Types of Forecasting: - Qualitative techniques (Expert opinions, sample of users). - Time series (Historical data & pattern changes). - Causal models (relationships between variables / Regressions). Demand Planning
  15. 15. Time Qty Forecast Forecast should be within a certain margin Forecast Actual Demand Planning
  16. 16. Outline Setting Service Level to Customers S&OP & Demand Planning Product Life Cycle & Forecasting Procurement Inventory Management Resources
  17. 17. Product Life Cycle & Forecasting Phase Introduction Growth (Turning Point) Maturity Forecasting Tools Concept Testing, Delphi Method, Consumer Surveys Intention to Purchase, Data of similar products, Brand Attitude Time series Functionality Time Consuming Less Time Consuming Plug & Play Importance of Past Data Low Average High
  18. 18. TOM Un-aided Recall Aided Recall Prompt Recognition Unrecognized Awareness Consideration Trial Repurchase Loyalty Advocacy Forecasting Tools For Growth Phase Brand Attitude Survey Status Vs Competition Intention To Purchase Survey Your Product Status (Turning Point)
  19. 19. Forecasting Tools For Maturity Phase Time Series Options: - Linear (Trend Adjusted Method). - Random (Moving Average, Exponential Smoothing & Naive Forecasting). - Seasonal (Seasonal Index).
  20. 20. Forecasting Tools For Maturity Phase - Steps for building future forecast: - Gather historical data. - Leave the most recent part of the data. - Apply different forecasting methods (scenarios) on older part of the data to forecast the recent part of the date (forecasting the actual). - Measure forecast error for each scenario. - Select the method with the least forecast error. - Apply the selected method to forecast the upcoming period. - Keep on doing it regularly. Forecast improves by time.
  21. 21. Forecasting Tools For Maturity Phase
  22. 22. Forecasting Tools For Maturity Phase
  23. 23. Forecasting Tools For Maturity Phase
  24. 24. Forecasting Tools For Maturity Phase
  25. 25. SKU Forecast Orders Absolute Error Forecast Accuracy SKU A 100 50 50 50% SKU B 100 100 0 100% SKU C 100 150 50 50% Total 300 300 100 67% KPI #1 - Forecast Accuracy Over Forecasting Under Forecasting
  26. 26. Forecasting Tips - Forecast total market, then plan resources based on your product / brand target market share. - At least 6 points before using a statistical method. - Use Naive forecasting for the 1st couple of points (Months / Weeks). - Differentiate between Pipeline filling & actual customer demand. - Data cleansing required to remove outliers & extreme external factors.
  27. 27. Forecasting Tip Sales to Innovators Vs Sales to Imitators!!
  28. 28. Forecasting Tip For Managing P&L - Forecast (baseline) should be sold without marketing / trade activities. - Difference between Business Target & Forecast is usually supported by activities (marketing / promotions budget). - Accordingly, build your marketing budget based on activities needed to close the gap between Target & Forecast (Putting branding aside). Gross Sales 120 Mio Trade Discounts 15 Mio Price Off Promotions 5 Mio Net Sales 100 Mio Warehousing 15 Mio Transportation 5 Mio Raw Materials 25 Mio Packaging Material 10 Mio COGS “Costs of Goods Sold” 35 Mio Marginal Contribution 45 Mio Marketing Spend 10 Mio Overhead 10 Mio Profit/Loss “EBIT” 25 Mio
  29. 29. Outline Setting Service Level to Customers S&OP & Demand Planning Product Life Cycle & Forecasting Procurement Inventory Management Resources
  30. 30. Leverage Volumes Partnership Non Critical Bottleneck Sourcing Strategy
  31. 31. Factor / Supplier X Y W Z Landed Cost 3 2 3 1 Lead Time 3 3 2 3 Minimum Order Quantity 2 2 3 1 Capacity 2 2 2 2 Quality 1 3 3 3 Total Score 11 12 13 10 3 is best option – 1 is worst option Total Cost Of Ownership
  32. 32. Cash Cow Essential Client Growing Business IrritantLeverage Partnership Bottleneck NonCritical Your view of the supplier SuppliersviewofYou Suppliers Management
  33. 33. Order # Ordered Qty Received Qty Requested Delivery Date Actual Delivery Date Quality 1 1,000 1,150 15-Apr 14-Apr Rejected 2 1,000 1,000 15-Apr 15-Apr Ok 3 1,000 1,000 15-Apr 15-Apr Ok 4 1,000 1,050 15-Apr 15-Apr Ok 5 1,000 1,000 15-Apr 17-Apr Ok 6 1,000 1,100 15-Apr 12-Apr Ok 7 1,000 1,000 15-Apr 20-Apr Ok 8 1,000 950 15-Apr 1-May Ok 9 1,000 830 15-Apr 15-Apr Ok 10 1,000 1,000 15-Apr 15-Apr Ok KPI #2 - Supplier Service Level
  34. 34. Outline Setting Service Level to Customers S&OP & Demand Planning Product Life Cycle & Forecasting Procurement Inventory Management Resources
  35. 35. Types of Inventory - Raw Materials – RM - Maintenance, Repair & Operating Supplies – MRO - Finished Goods – FG Reasons for Inventory - Decoupling Function - Demand Variability - Supply Inconsistency - Price Variability / Hedging Inventory Cost = Item Cost + Ordering Cost + Holding Cost The Question Is: How Much To Order & When To Order? Inventory Management
  36. 36. - Safety Stock = Service Level Factor * Mean Absolute Deviation - Forecast Error: As it goes up, SS increase - Service Level To Customers: As it goes up, SS increases - SSL: As it goes up, SS decreases Demand 20 25 22 18 24 20 18 17 18 19 20 21 22 23 24 25 26 Average Safety Stock
  37. 37. - Service Level is the agreed upon number of out of stocks / missed orders Service Level Factor
  38. 38. 3250 2000 1750 1738 1732 1736 1750 1850 2000 0 500 1000 1500 2000 2500 3000 3500 100 200 300 320 346 370 400 500 600 Ordering Cost Holding Cost Total Cost Yearly Demand 6000 Tons Holding Cost Per Unit 5 EGP Ordering Cost Per Order 50 EGP Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Case 9 Q Tons 100 200 300 320 346 370 400 500 600 Ordering Cost 3000 1500 1000 938 866 811 750 600 500 Holding Cost 250 500 750 800 866 925 1000 1250 1500 Total Cost 3250 2000 1750 1738 1732 1736 1750 1850 2000 Economic Order Quantity – How Much
  39. 39. EOQ = (2 * Order Cost * Demand ) / Holding Cost Economic Order Quantity
  40. 40. - ROP is demand during supplier lead time + Safety Stock Re Ordering Point - When
  41. 41. SKU Forecast Stock DOH SKU A 100 50 0.5 SKU B 100 100 1 SKU C 100 200 2 Total 300 350 1.17 KPI #3 - Days On Hand (Stocks Vs Demand) SKU: Stock Keeping Unit
  42. 42. SKU Forecast Shipped Shortage Order Fulfillment SKU A 100 80 20 80% SKU B 100 100 0 100% SKU C 100 20 80 20% Total 300 200 100 66% KPI #4 - Order Fulfillment (Shipped Vs Demand) SKU: Stock Keeping Unit
  43. 43. Outline Setting Service Level to Customers S&OP & Demand Planning Product Life Cycle & Forecasting Procurement Inventory Management Resources
  44. 44. Material for Certificates - CPIM - CIPS Websites: - APICS - Gartner - Supply Chain Brain - Supply Chain Management Review Best Sellers - Designing and Managing the Supply Chain by David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi - Essentials of Supply Chain Management by Michael H. Hugos - Logistics and Supply Chain Management by Martin Christopher - Logistics Management and Strategy: Competing through the Supply Chain by Alan Harrison and Remko Van Hoek - Purchasing and Supply Chain Management by Robert Monczka, Robert Handfield, Larry Giunipero and James Patterson - Purchasing and Supply Chain Management: Analysis, Strategy, Planning and Practice by Arjan J. Van Weele - Strategic Supply Chain Management: The Five Core Disciplines for Top Performance by Shoshanah Cohen and Joseph Roussel - Supply Chain Logistics Management by Donald Bowersox, David Closs and M. Bixby Cooper - Supply Chain Management, Strategy, Planning and Operation by Sunil Chopra and Peter Meindl - The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage by Yossi Sheffi Resources
  45. 45. Case Fill Rate Lean Six Sigma Consensus Demand Forecast Availability S&OP Supplier Service Level Demand Outliers Lead Time Forecast Accuracy Days of Supply Utilization End to End Process MRP Tender Capacity Planning ERP Capex Inventory Turn Over ABC Analysis Backhaul Minimum Order Quantity SKU Optimization Change Over Vendor Managed Inventory Bullwhip Effect Pareto Chart Inco Terms Key Words / Mind Refresher
  46. 46. Contact Details - LinkedIn: Yahia Arafa - Email: yahia.arafa@careeradvancers.net - Mobile: 002 0100 789 8227

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