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Innovative Supply Chain and Manufacturing Production Systems For Presentation to the Annual Meeting of the Institute of Industrial Engineering Montreal,

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Presentation on theme: "Innovative Supply Chain and Manufacturing Production Systems For Presentation to the Annual Meeting of the Institute of Industrial Engineering Montreal,"— Presentation transcript:

1 Innovative Supply Chain and Manufacturing Production Systems For Presentation to the Annual Meeting of the Institute of Industrial Engineering Montreal, Canada June 1, 2014 Martin M. Stein, D.Sc

2 © Competitive Capabilities International Integrative Improvement System The Toyota Production System and Proctor and Gamble’s, IWS The Toyota Production System created a new form of management where culture change and climate in the organization were fundamental elements of production process control Proctor and Gamble’s, Integrated Work System, is a major advance over TPM, with linkages to the supply chain. Plants are now able to produce product in response to inventory shortages. Competitive advantage will require the expansion of internal capabilities and the rapid transfer new programs globally including for use by potential acquisitions and new plants. Internal Capability will permit the use of internal resources that implement best practices on a step by step basis. The availability of a road map for implementation will provide an efficient and effective process for guiding companies toward excellence in supply chain and manufacturing. 2

3 © Competitive Capabilities International Integrative Improvement System Creating Leadership Opportunities for Culture Change The TRACC System provides new opportunities for leaders to harness the organization’s energy for culture change. Cross-functional teams become engaged in problem solving at all levels. Situational problems are solved by teams of front-line workers supported by technical staff members. Systemic problems are supported by supervisors, managers and technical staff who are dealing with recurring issues so they are not repetitive. Strategic challenges are surfaced by the mid level teams who identify barriers to strategic implementation. The TRACC System contains several modules that drive culture change and organizational development. The Leading and Managing Change module is designed to create a holistic overview of the organization and is extremely important for companies with silo organization structures. Enablers also are included in the Human Capital Module where human resources, competency testing and professional development implementation actions required by culture change are provided. The End to End, Demand Driven Organization Model (Stage 4 and 5) requires integration of business planning and the creation of a Center of Excellence that also facilitate culture change. 3

4 © Competitive Capabilities International Integrative Improvement System Benefits of Integrating Manufacturing and Supply Chain Coordination of supply and demand is a critical element in the design of an end to end, demand driven value network. The most advanced companies such as Procter & Gamble have recognized that there are significant potential benefits form integrating supply and demand planning. The savings potential from manufacturing at P & G was $ 1B but when the supply chain opportunities were incorporated, savings potential tripled to $ 3B! The logical structuring and systematic approach for continuous improvement that is required for a manufacturing process can be extended to include and integrate the supply chain components such as logistics, customer service and warehousing. The latest version of the TRACC system has been expanded to include 11 additional modules for Supply Chain components. The combination of these to the 11 components for manufacturing, now create a comprehensive set of 22 that include over 1300 best practice staged and structured implementation actions. 4

5 © Competitive Capabilities International Integrative Improvement System TRACC provides the platform for sustainable performance improvement for a balanced set of metrics 5 Practice Maturity Performance CLASS WORLD 68% 77% 24% years 90% 23% Perfect Order SC Cost as % of Revenue 68% 90% 26% 21% Deliver 20% More Perfect Orders… …hold a third less inventory… 72 Days 54 Days …have lower SC costs equal to 5% of revenue Leaders and Laggards 85% 21% Days of Inventory Example adapted from AMR research and CCI results 26%

6 © Competitive Capabilities International Integrative Improvement System The TRACC offering is functionally initiated and ensures integration and alignments to Strategic and Operational Enablers Return Source Deliver Strategy Align Transform Plan Make Operational Enabler Organisational Enabler SUPPLIER CUSTOMER Supply Chain Strategy Workshops Supply Chain Alignment Leading and Managing Change Demand Planning Sales & Operations Planning Supply Planning Integrated Business Planning Procurement Health and Safety Environmental Sustainability 5S Teamwork Visual Management Focused Improvement Autonomous Maintenance Asset Care Set-up Time Reduction Quality Warehouse Management Transport Management Administrative Excellence Transactional Excellence Human Capital Innovate Product Lifecycle Management

7 © Competitive Capabilities International Integrative Improvement System 7 TRACC stages: The maturity growth is defined over 5 stages and the implementation sequence ensures sound foundations Disconnected Basics established Misaligned Ignorant Fragmented Controlling Crises Management Fire fighting Unclear strategy Unclear goals Undefined Silo approaches Ad hoc Competent Identify Selective adoption Recognition of waste / value Risk awareness Value articulated Prioritisation Stabilisation Clearly defined Initial awareness Understanding of root causes Standardised Integrated Deployed Knowledge Expert Consistent Competent Clear / focused Available Business process driven Addressing Root causes AlignedExcellence Simplicity Sharing Collaboration Visibility External / Internal Culture of learning Improvement Best in the class within industry Eliminating root causes of problems Culture of teaching International benchmarking Resilient Virility Dynamic Predictive Orchestrating Shaping Confidence & Trust Advanced detection Stage 1Stage 2Stage 3Stage 4Stage 5 Disconnected Basics established Competent Aligned DDVN Stage 5 Stage 1 Stage 2 Stage 3 Stage 4

8 © Competitive Capabilities International Integrative Improvement System Planning TRACC’s: The Maturity Pathway 8 Shaping No Insight Functional Forecasts Consensus Forecasts DEMAND PLANNING Stage 1Stage 2Stage 3Stage 4Stage 5 Disconnected Basics established Competent Aligned DDVN Stage 5 Stage 1 Stage 2 Stage 3 Stage 4 SUPPLY CHAIN Disarray Basic Plans Reliable Plans SUPPLY PLANNING Fragmented and Reactive Rudimentary Integration Aligned and Focused SALES & OPS PLANNING Sensing INTEGRATED BUSINESS PLANNING

9 © Competitive Capabilities International Integrative Improvement System 9 Decision-making in Planning TRACC’s 9 DP IBP SP S&OP SCA S&OP DP SP Supply Chain Alignment Determine customer segmentation and differentiated internal supply chains Network configuration decisions with regard to manufacturing facilities, sourcing locations, distribution centres and routes Collaboration decisions with regard to 2 nd and 3 rd tier customer and suppliers High capital investment decisions High importance and high complexity Long term — 3 to 5 years Broad impact on entire internal and external supply chain and organisation Supply Chain Alignment Determine customer segmentation and differentiated internal supply chains Network configuration decisions with regard to manufacturing facilities, sourcing locations, distribution centres and routes Collaboration decisions with regard to 2 nd and 3 rd tier customer and suppliers High capital investment decisions High importance and high complexity Long term — 3 to 5 years Broad impact on entire internal and external supply chain and organisation Integrated Business Planning Set direction and priorities for business Decisions aimed at closing gap between supply chain plans and financial objectives Decisions on new products, new markets and new improvement projects Risk and opportunity based High importance and high complexity High investment decisions Medium to long term — 18 to 24 months Integrated Business Planning Set direction and priorities for business Decisions aimed at closing gap between supply chain plans and financial objectives Decisions on new products, new markets and new improvement projects Risk and opportunity based High importance and high complexity High investment decisions Medium to long term — 18 to 24 months Sales and Operation Planning Balancing demand and supply Controlling inventory Product portfolio management High-level capacity constraint decisions Decision on reaching consensus on demand and supply plans Medium term — 6 to18 months Execution of strategy Sales and Operation Planning Balancing demand and supply Controlling inventory Product portfolio management High-level capacity constraint decisions Decision on reaching consensus on demand and supply plans Medium term — 6 to18 months Execution of strategy Supply Planning Constrained supply plans Finite capacity plans Daily, weekly, monthly Rough-cut plans — 18 to 24 month horizon Supply Planning Constrained supply plans Finite capacity plans Daily, weekly, monthly Rough-cut plans — 18 to 24 month horizon Demand planning Consensus demand plan 18 to 24 month horizon Demand planning Consensus demand plan 18 to 24 month horizon

10 © Competitive Capabilities International Integrative Improvement System Planning TRACC’s: Integration drives consolidation of Information and timing Customers Supplier Strategic Planning Supply Chain Alignment TRACC Strategic Planning Supply Chain Alignment TRACC Collaboration Marketing and Sales planning Demand Planning and Communication MATERIALS PLANNING Material Planning (MRP) Material Releasing CAPACITY PLANNING Resource Planning (RP) Rough Cut Capacity Planning (RCCP) Capacity Requirements Planning (CRP) Finite Loading PRODUCTION PLANNING Production Planning (MPP) Production Scheduling (MPS) Finite Scheduling (FPS) DEPLOYMENT PLANNING Inventory Planning (IP) Distribution Deployment Plan (DRP) Medium Term (weeks or months) Material Plans Short Term (days or weeks) Vendor Schedules Medium Term (weeks or months) Resource Availability Short Term (days or weeks) RCCP Plans or Info Short Term (weeks or months) Requirements Capacity Plans Medium Term (weeks or months) Production Plans Short Term (days or weeks) Production Schedules Short Term (hours or days) Finite Schedules Medium Term (weeks or months) Inventory Targets Short Term (days or weeks) Deployment Requirements Make (Convert) Supply Demand Customer-driven Supply Chain (i.e. pull based) Purchase orders Sales and Operations Planning TRACC Shipment History Business unit plans and budgets Price plans, promotion schedules, etc. Sales forecast Procurement TRACC Consumer orders Order Fulfilment TRACC Warehousing TRACC Transportation TRACC Supply Planning TRACC Demand Planning TRACC 10

11 © Competitive Capabilities International Integrative Improvement System Case Study: Kellogg Latin America Kellogg Latin America consists of 8 plants in Mexico, Brazil, Venezuela, Ecuador and Colombia. At present, 7 of these plants are utilizing the manufacturing TRACC system. Recently, Kellogg Latin America, has added Supply Chain Alignment, Demand Planning, Supply Planning and Sales and Operations Planning modules of the expanded TRACC system for Supply Chain. This region will be the first region at Kellogg’s to launch the Supply Chain modules. In , task forces will be organized to implement the Stage 1 to 3 Implementation best practices. Initial conclusions are that there will be organizational change required to move to the end to end demand value based network. 11

12 © Competitive Capabilities International Integrative Improvement System Implementation Philosophy Operations excellence systems must show results by improving hard KPIs or they will lose support before they are embedded in the culture. CLASS WORLD Practice Performance Back of the pack Stragglers Can't go the distance Contenders Promising Defining what 'good' looks like and monitoring best practice implementation ensures a focus not on current performance, but on long-term, sustainable market-beating performance. X Y Embedding best practices underpins lasting performance. World class organisations drive performance improvement by standardising practices and continuously improving these standards. 12

13 © Competitive Capabilities International Integrative Improvement System Case study: SABMiller - Practice Performance Ranking (presented at public conference) 13

14 © Competitive Capabilities International Integrative Improvement System Case Study: SABMiller – Energy Usage (presented at public conference) 14 Low High

15 © Competitive Capabilities International Integrative Improvement System Case Study: DuPont Production System (presented at public conference) 15 Our DPS System (powered by TRACC) has returned $2 billion back to the business in the last two years. DuPont: The TRACC Integrative Improvement System is the backbone for the DuPont Production System globally. Paul Mocniak, Program Manager, DPS TRACC, DuPont, USA

16 © Competitive Capabilities International Integrative Improvement System Case Study: DuPont integrated Improvement Approach (presented at public conference) DPS Vision statement Everyone, everyday in pursuit of Operations Excellence enabling DuPont to win in a dynamic world DPS Vision statement Everyone, everyday in pursuit of Operations Excellence enabling DuPont to win in a dynamic world Current and future requirements for capability and performance Required business outcomes Managing process Keep focus on what really matters, with the right people Managing process Keep focus on what really matters, with the right people Technical model Apply tools and practices to drive focused improvement at all levels Technical model Apply tools and practices to drive focused improvement at all levels Capability building Insure the right skills and coaching Capability building Insure the right skills and coaching Mindsets and behaviours Align cultural norms with the organisation's vision, mission Mindsets and behaviours Align cultural norms with the organisation's vision, mission Brought in to support and sustain all aspects of DPS

17 © Competitive Capabilities International Integrative Improvement System Case Study: Heinz integrated Improvement Approach (presented at public conference) 17

18 © Competitive Capabilities International Integrative Improvement System Example: Quantification and Opportunity Prioritisation 18 Performance Assessment $ Opportunity Practice Assessment How sustainable are your current practices?

19 © Competitive Capabilities International Integrative Improvement System 19 Phase 3: Performance Management Control Loops Example HourShiftDayWeekMonthQuarterYear Corporate VP SC Site Site manager Department Dept manager Area Team leaders Process - Line Team Machine Operator 1-2 hour review P-Q-D alignment feedback Shift Review P-Q-D Shift Review P-Q-D Day Review P-Q-D-C-S-M Day Review P-Q-D-C-S-M Week Review P-Q-D-C-S-M Week Review P-Q-D-C-S-M Month Review P-Q-D-C-S-M Month Review P-Q-D-C-S-M Month Review P-Q-D-C-S-M Quarter Review P-Q-D-C-S-M Quarter Review P-Q-D-C-S-M Year Review P-Q-D-C-S-M P-D-C-A

20 © Competitive Capabilities International Integrative Improvement System Example: Full TRACC implementation and support 20 AM on shop floor Downtime trend

21 © Competitive Capabilities International Integrative Improvement System Kellogg LatAm – TRACC Results Strong Correlation between TRACC maturity and OEE 21 Practice Maturity

22 © Competitive Capabilities International Integrative Improvement System Kellogg LatAm – TRACC Results Strong Correlation between TRACC maturity and Plant Performance 22

23 © Competitive Capabilities International Integrative Improvement System TRACC Practice Maturity Practice Maturity Improvement

24 © Competitive Capabilities International Integrative Improvement System Improvement Potential 95%55%30% Processing Packaging 37% 45%45% 84% 87% 90% 55% 92% 65% OEE Maturity of Practices

25 © Competitive Capabilities International Integrative Improvement System Improvement Potential 4%12% % 6.0%6.0% 5.4% 5.0%5.0% Waste Maturity of Practices

26 © Competitive Capabilities International Integrative Improvement System Kellogg Australia – Botany Plant TRACC Manufacturing Practices Overview

27 © Competitive Capabilities International Integrative Improvement System Kellogg Australia – Botany Pilot Plant OEE analysis

28 © Competitive Capabilities International Integrative Improvement System The evolution from traditional CI to Integrative Improvement Systems No Continuous Improvement No Continuous Improvement Plans or structure 3. Functional Excellence Structured implementation approach within the functions (Systemic) Functional 5. Learning Network Integrative Improvement deployed across network Culture of Innovation and Sharing of Know How Entire Global Network 2. Expert Based Implementation approach based on the capability of the local expert Project 4. Integrative Improvement System Codified and integrated implementation (Strategic, Systemic and Situational) Process 70% of companies are between Stage 2 and 2.5 Companies below Stage 4 are unlikely to successfully replicate the long-term performance culture exhibited by the likes of Toyota & P & G

29 © Competitive Capabilities International Integrative Improvement System Enabling Execution The pursuit towards operational excellence to date has been characterized by functional improvements and project based methodologies such as Six Sigma and Lean. Functional excellence and pockets of Lean do not create the organization capability required to step change operational competence, particularly when applied to complex global companies. There are just too many intricate process interdependencies across the end to end supply chain. The challenge for organizations is to manage and coordinate a sequenced and prioritized set of inter related actions across multiple functions, departments and the global network to execute strategy. Insight ………“to improve everything”…… 29

30 © Competitive Capabilities International Integrative Improvement System Integrative Improvement across a global network requires a codified set of prioritized and sequenced work. VISION A company needs to provide a prioritized, holistic and integrated set of work packages that allows each and every part of the organization to execute the many pieces of work in a synchronized way that transforms the entire organization towards process based excellence “……everything must improve……”

31 © Competitive Capabilities International Integrative Improvement System Integrative Improvement across a global network requires a codified set of prioritized and sequenced work. VISION A company needs to provide a prioritized, holistic and integrated set of work packages that allows each and every part of the organization to execute the many pieces of work in a synchronized way that transforms the entire organization towards process based excellence “……everything must improve……” KWS Basics KWS Advanced KEY

32 © Competitive Capabilities International Integrative Improvement System Relevance for Industrial Engineers? Plant managers will be motivating change and accountability for each of the process based teams. Decision making and priorities are facilitated by the existence of a structured approach for developing improvement in each of the critical process areas. Metrics and benchmarks can be used to guide the teams from the changes in levels of maturity ratings to important process measures such as OEE. Regional and central headquarters staff will facilitate the development of standardized definitions and performance measures, sharing of best practices and tracking KPI’s. Plants that have achieved the greatest success and the greatest relative improvement will be recognized and rewarded. 32


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