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1 DEFENSE LOGISTICS AGENCY AMERICA’S COMBAT LOGISTICS SUPPORT AGENCY DEFENSE LOGISTICS AGENCY AMERICA’S COMBAT LOGISTICS SUPPORT AGENCY WARFIGHTER SUPPORT.

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Presentation on theme: "1 DEFENSE LOGISTICS AGENCY AMERICA’S COMBAT LOGISTICS SUPPORT AGENCY DEFENSE LOGISTICS AGENCY AMERICA’S COMBAT LOGISTICS SUPPORT AGENCY WARFIGHTER SUPPORT."— Presentation transcript:

1 1 DEFENSE LOGISTICS AGENCY AMERICA’S COMBAT LOGISTICS SUPPORT AGENCY DEFENSE LOGISTICS AGENCY AMERICA’S COMBAT LOGISTICS SUPPORT AGENCY WARFIGHTER SUPPORT ENHANCEMENT STEWARDSHIP EXCELLENCE WORKFORCE DEVELOPMENT DLA’s Sales and Operations Planning Capability: How to Align Budgets and Purchases with Warfighter Demands Ms. Simone Reba, SES June 4, 2010

2 2 Introduce Sales & Operations Planning (S&OP) Explain how DLA uses S&OP to drive improved customer readiness Discuss how customer collaboration and DLA’s S&OP process can help all of us better serve the Warfighter Workshop Goals

3 3 FY ‘09 –Funding was $500M –Sales were $500M FY ‘10 –Funding is $450M –Forecasted Sales for FY ‘10 is $500M 3 Weapon Systems are supported: –H-60: FY ‘09 Sales $150M, FY ’10 Forecast $150M –C-130: FY ’09 Sales $250M, FY ‘10 Forecast $200M –F-18: FY ‘09 Sales $100M, FY ‘10 Forecast $150M What do you do? Scenario Funding for this FY has been cut by 10% from last year numbers while Sales are forecasted to remain flat * * This data is fictitious and is used for illustrative purposes only

4 4 Issue: Funding shortfall of $50M –Cut each Weapon System by $10%? –Fund only low dollar PRs to improve PR award rates, but limit expenditures? –First purchases in gets awarded, no awards when the money runs out? –Ignore it and hope for additional funding? How do you resolve this imbalance? for DLA, the solution is Sales & Operations Planning

5 5 S&OP is a forward looking process for managing your organization –Creates a path for resolving Supply & Demand imbalances. –Brings together expertise from Demand, Supply, and Finance areas to Define a complete picture of the issue resulting from Demand or Supply events Build a prioritized business plan that aligns enterprise objectives with workload and budgetary constraints –Review current performance and future projections –Standardizes requirements for management review Benefits of S&OP –Inputs from Demand, Supply, and Finance ensure a balanced, realistic, and sustainable solution –Standardizes the approach, including metrics, tools, formatting, etc so that more time is spent on issue analysis resolution rather than on formatting slides –Provides a method to prioritize constrained Resources, Time, and Workload –Action Plans that are directly linked to business performance metrics At DLA, business simulation utilized to enable investment/support decisions Sales and Operations Planning Background

6 6 Business Planning: -forward looking metrics Collaboration: We review these business plans with Customers and Suppliers at –Customers: Validate and adjust forecasts Examples of customer collaboration: NAVAIR: F-18, F-402, AFGLSC: C-130, KC-135 –Suppliers: manufacturing capabilities are in place and prepared Examples of Supplier Collaboration: Honeywell, Boeing, and Lockheed Martin Simulation: Used to evaluate different scenarios and their impact on the business, including OA, inventory, and readiness Performance Management: Enterprise level metrics with drill down to the detailed item level – Percent Forecast Error, Perfect Order Fulfillment, Attainment to Plan Decision Making: inputs to drive decisions on funding allocation, and performance goals How we use S&OP at DLA

7 7 Monthly S&OP Cycle/Construct Week 1: Intelligence Gathering (finalize focus areas for Demand Consensus and Supply Consensus Sessions) Week 2: Conduct Demand Consensus and Supply Consensus Meetings within each Chain Week 3: Conduct Enterprise S&OP Meeting Week 4: Input into Demand Month End and/or Demand Month Start processing Agency Strategic Priorities are established at the beginning of the Fiscal Year and inform/guide the monthly S&OP process

8 8 Demand-Driven S&OP Scenario Weapons System and Business Process offices Weapon System Support Manager (WSSM): Collaborates with Customer and incorporates change in Forecast Business Process Support (BPS) Analyst: Utilizes S&OP Simulator Tool to project impact of changes in Demand. Utilizes S&OP Metrics Tool to Review Key Metrics: Percent Forecast Error (PFE) / Attainment to Plan (ATP) / Perfect Order Fulfillment / Over-Procurement (OP) / StockOuts/StockLows (SO / SL) Supplier Facing Supply Planner works with DP & WSSM to develop Supply Consensus and incorporate market conditions/constraints Acquisition Specialist determines workload prioritization (Purchase Requisitions) Customer Facing Demand Planner (DP) Collaborates with WSSM and Customer gain Demand Consensus. Uses Customer Intelligence to create Accurate Forecast Utilizes S&OP Metrics Tool to improve forecast accuracy Scenario: Significant Change in Forecast for a Weapon System (F-18) 50% increase in projected sales over last years sales

9 9 Trigger Event: F-18 Maintenance overhaul program ramping up from 10 to 15 aircraft per month. Action 1: Weapon System Support Manager (WSSM): Collaborates with Customer on necessary Forecast updates Action 2: Business Process Support (BPS) Analysts simulate impact of changes in Demand. Review Key Metrics: Percent Forecast Error (PFE) / Attainment to Plan (ATP) / Perfect Order Fulfillment / Over-Procurement (OP) / StockOuts/StockLows (SO / SL) Action 3: Demand Consensus determines that the forecast is reliable and level 1 priority - Placed at the top of the priority list for Demand. Action 4: Supply Consensus determines that funding support for the C-130 will have to be reprioritized in order to support this F-18 project. DLA works with the C-130 customer to evaluate moving their requirements to the next fiscal year and/or reducing safety stock levels. Action 5: The Project Quad Chart and the results of Supply and Demand Consensus are presented at the Aviation Internal S&OP Meeting for Command approval of the F-18 project. S&OP Action Plan for the F-18

10 10 F-18 Project Quad Chart Aviation Demand Chain Issues Issue w/supportability of F-18 Overhaul Program Production will ramp up to 15 aircraft per month (180/yr) 150 critical items -100% replacement items (100) + Safety critical Items (50) -High supportability for 150 items will allow 15/mo overhaul rate Supply Chain Outstanding Issues Obligation Authority required to support this $150M, $50M increase over previous year OA will need to come from the C-130 platform to support this Path Forward Short-Term Monitor PR/contracts for SO/SL (ongoing always) 150 healthy NSNs ( ( 4 PRs pending award and 31 PO s) Long-Term Continue to collaborate with suppliers to ensure they have the production capacity to meet these requirements S&OP Approval Date 18 Jun 09 Short-Term : Issued SC 8 Jul 09 Key Performance Indicators Customer Service Critical OTOF: 81.85% ; POF 65.57% Forecasting Accuracy Critical Abs PFE 24.5 Dec-Feb 10; Critical DPA 59.7% Execution Critical ATP 68.5% (Feb 10) Impacts Positive…Health improvement monthly on NSNs due to getting PR awarded and early deliveries. QA: OPR: Bill Smith SupportabilityAviationLandMaritimeC&E Red – Baseline / Current44/110/05/11/0 Yellow – Baseline / Current54/211/15/10/0 FY 2010 Projections Original Estimate to date Results Oct 09-Sep10 Forecasts$150,000,000 Net Cash FlowN/A Ob Authority$50,000,000 PRs25

11 11 Before and After S&OP Before S&OP Collaboration may or may not have occurred Impacts of additional demand would not have been simulated and analyzed to determine supportability System would have had a delayed reaction once the increased demand is realized – resulting in backorders Funding constraints may have been pushed off rather than addressed up front All needs impacted After S&OP Collaboration occurs early and the details are reviewed with the customer Simulation is performed to determine impacts on funding, workload and supportability Information is loaded into the system to adjust forecasts in anticipation of the demand Funding constraints are resolved early in the fiscal year and/or at the beginning of a project Focus on most important needs

12 12 Forecast S&OP – Before and After Demand Ob $ Demand Shift Inaccurate forecasts will result in poorly timed buys in large quantities and will likely lead to overprocurements. Note, S&OP helps level the Ob $. S&OP can adjust forecasts to reflect increases/decreases in demand

13 13 1.Develop Senior Leader Strategy –Target Performance Levels –Synchronize with Strategic Planning 2.Obtain workload projections 3.Develop Materiel and Operational resource requirements 4.Determine Affordability 5.Rate/Rank Proposed Investments 6.Develop Enterprise Proposal High-Level Program Budget Review Process

14 14 How’s S&OP Going at DLA? Successes Full transparency – ensures outcomes are aligned with Strategy Single, defined set of priorities – all singing (working) from the same sheet of music Financials linked to Strategy –Streamlines complex Budget formulation process –Provides execution accountability Forces PROACTIVITY –Greater partnership with Customers improving information sharing Simulation capability details potential impacts of alternative Strategies, and ensures informed decisions Senior-most Leadership ‘buy-in’ Challenges Obtaining ‘actionable’ Demand intel…very difficult for Military Services to predict future contingencies Full ‘buy in’ – S&OP is still perceived by some as a meeting requirement vice a cadence for business Maintaining FUTURE focus…much easier to measure the past than to manage the future When making tradeoff decisions, deciding what NOT to do Meeting preparation…timeliness of input, cross-organization consistency Tools/Tracking

15 15 Effective, proactive business model to balance supply & demand –Forward looking business plans/budgets utilizing customer forecasts –Balanced supply and financial constraints against requirement Facilitates collaboration between DLA and Services –Reduced forecast error to achieve more accurate budgets –Prioritize customer needs to ensure Warfighter support –Improve cost to serve by reducing excess inventory Rapid decision making supported by business simulation –Projected business impact (budgets, workload, inventory) of actions enables executives to make quicker, more effective decisions Alignment of S&OP with enterprise performance reviews –Measure impact of S&OP decisions on business performance goals –Identify opportunities and actions to improve top priority initiatives S&OP Take Aways

16 16 Backup

17 17 Real Results at DLA’s Aviation Supply Center Nov 2009: Training provided to WSSMs on the application of the Sales and Operations Planning (S&OP) Tool. This provided the ability to conduct monthly reviews on their top Percent Forecast Error (PFE) NIIN Drivers and validate future forecasts on NIINs Nov 2009: Aviation Demand Chain’s previous 12 month’s demand value was $3.0 Billion and the next 12 months forecasts were 3.4 Billion. The difference between our actual demand and future forecast was approximately $400 Million. Dec 2009: The WSSMs began monthly validations of forecasts on the NIINs that were the drivers on their platforms for the increased forecasts. Mar 2010: Aviation Demand Chain’s previous 12 month’s demand value was $2.8 Billion and the next 12 months forecasts were 3. 0 Billion. The difference between our actual demand and future forecast is approximately $200 Million. This represents a 400 million reduction in forecasts over a 4 month period since Aviation Demand Chain WSSMs began focusing on Demand Consensus.

18 18 Some specific Platforms examples are; –H-47 WSSM identified approximately 50 NIINs that had invalid Special Program Requirements (SPRs). The WSSM collaborated with the customer to have these cancelled or adjusted. This resulted in $12.8 Million in reductions to forecasts. –TF-34 WSSM has reduced forecasts $34.8 Million since Nov 09. This was the result of collaboration with the customer to cancel unneeded SPRs and reduction of overforecasted DFUs –In Feb 10, the F-15 WSSM identified one NSN that had $23 million invalid forecast due to erroneous provisioning (SSR) requirements. WSSM collaborated with customer and had these removed Real Results (cont.)


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