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Stephen Crane Director S&OP Flavors Division NA September 13-14, 2012

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Presentation on theme: "Stephen Crane Director S&OP Flavors Division NA September 13-14, 2012"— Presentation transcript:

1 Stephen Crane Director S&OP Flavors Division NA September 13-14, 2012
The Power of Metrics in Achieving Supply Chain Excellence (Firmenich Case Study) Sales & Operations Planning Summit - Boston, MA Stephen Crane Director S&OP Flavors Division NA September 13-14, 2012

2 Agenda Who is Firmenich Evolution of S&OP S&OP Process Hierarchy Role of Performance Metrics Eight Steps to Success KPI Scorecard Benefit Examples FLAVORS

3 Over 117 Years of Success Firmenich FLAVORS
Founded by Charles Firmenich in 1895 Largest Privately Owned Company in Fragrance & Flavor Industry Headquartered in Geneva Switzerland Divisions: Perfumery, Flavors, Ingredients Company Foundation 1895 in Geneva, Switzerland Global Sales 2.78 Billion Swiss Francs Average Growth per year: 7% Number of Employees: 6,000 Global presence: Over 64 Countries Manufacturing Worldwide: 22 Plant Sites R&D  Centers: Geneva, Princeton, Shanghai R&D  Awards: 35 awards including a Nobel Prize Patents: 1,400 Annual Investment in R&D Around 10% FLAVORS

4 Firmenich ERP Platform
SAP R/3 Single Instance Initial NA Go-Live December 2009 (Princeton) Global Implementation Completed in December 2011 APO (Advanced Planner & Optimizer) v4.1 Deployed Demand Planning (DP) and Supply Network Planning (SNP) modules Implemented standardized processes for S&OP, Demand Planning, Supply Planning Performance Management (KPI Scorecard) S&OP implementation started in 2008 Standardized KPI Metrics for plant sites, regions, and global business FLAVORS

5 Firmenich Roadmap To S&OP Excellence
Competitive Advantage Scenario Planning Network Optimization Supply Chain Automation Benchmark Performance Now focusing on these aspects of the process Profitable Growth Focus on Costs & Productivity Cost-To-Serve Customer Segmentation Product Portfolio Management Complexity Reduction Continuous Improvement Execute the Plan Executive S&OP Align all Functions to One Plan Integrate NPI into S&OP Regional Independence Align Demand w/Finance Identify Plan Gaps & Actions Link Planning w/Execution The Fundamentals Demand Supply Inventory Service Improve Planning KPI Scorecards Creating a Competitive Advantage for Firmenich and our Customers FLAVORS

6 Enterprise Process Blueprint Level 1 Process
Business Strategy & Portfolios S Supply Chain KPIs To Measure Improvement Competency Center Sales S&OP (Planning) Innovation Purchasing Operations Customer Care Customers Quality HR Finance HS&E Technology Master Data FLAVORS

7 S&OP Monthly Process Level 2 Process
Production Planning Sales & Operations Planning Procurement Planning Demand Planning (How much could we sell?) Balance Demand & Supply (Do they match?) Issue Supply Chain Plans (Can we execute plans?) Inventory Planning Supply Planning (How much can we supply? Logistics Planning Financial Projections S&OP provides outputs to, and needs Input from many other processes FLAVORS

8 S&OP Detailed Process Steps Level 3 Process
Demand Planning Balance Supply With Demand Approve & Communicate Supply Chain Plans Gather & Maintain Data Complete CVC Realignments Sales History Loaded into APO Make Historical Sales Adjustments Generate Demand KPIs Correct Demand Master Data Monthly S&OP Meeting Executive S&OP Inventory Planning Finalize & Approve Supply Plan Create Unconstrained Demand Plan Review SC KPIs Review Business Strategy & Objectives Statistical Forecast is Generated Make Stat Forecast Adjustments Upload/Enter Customer Forecasts ACM Forecast Validation Hold Key Customer Demand Reviews Set MOH and Write-off Targets Correct Supply Master Data Review Revenue & Cost Projections Review Demand & Supply Plans Determine Monthly MOH Deviations Develop Supply Options & Proposals Calculate Long Term Forecast Copy Forecasts to Final Forecast Demand Planner Makes Final Forecast Adjustments Final Forecast is Copied to BW Publish Unconstrained Demand Plan Review Major Supply Chain Issues Review Financial Projections vs. Budget Generate Inventory Optimization KPIs Determine Financial Impact of Supply Options Supply Network Planning Modify Supply Chain Plans Review Major Supply Chain Risks Review Service Improvements Needed Present Options For Approval Gather & Maintain Data – Define Supply Capability Forecast Passes From DP to SNP SNP Heuristics Runs Extract Data From SNP Generate Month Supply Plans Define/Update Resource Capacities Agree to Supply Plan Actions Review Capital & Resource Requests Optimize Planning Parameters Publish Approved Supply Plan Publish Meeting Minutes Publish Decisions and Minutes Identify Supply Imbalances or Shortages Generate Supply Planning KPIs Review Supply Alerts Hold Pre-S&OP Supply Reviews w/Sites Finalize Product Transfers for DP & CC Complete Monthly Provisioning & Obsolesce

9 Definitions: Metrics, KPIs & Measurement
Metric – “a standard of measurement” Inches, feet, meters Value of inventory Key Performance Indicator – a metric that is important to understanding past, present, or future business performance Braking Distance Inventory Turns Measurement – the value derived from applying the metric Braking Distance of a car traveling 50 MPH is 82 feet Inventory turns 6 times per year FLAVORS

10 What Drives Functional Metrics?
If it moves, measure it If it is easy to measure, report it My boss decided it was a good thing to measure If it went wrong once years ago, but we still measure it Just in case we ever get asked This way we know everything FLAVORS

11 Performance Measurement & Strategic Alignment
FLAVORS

12 Role of Performance Metrics
To provide a quantified definition of what is important and how the organization is performing. To ensure alignment between strategic, tactical, and operational goals & objectives. To facilitate a cross-functional view of relative importance among individual, team, and functional goals & objectives. To motivate the organization towards continuous improvement. To provide a means to link individual and organization performance to reward systems. “You cannot improve what you do not measure” FLAVORS

13 Eight Steps to Measurement Success
Plan: Create a development plan for metrics with timeframes and milestones Scope: Focus on a few metrics that really matter providing the most balanced view of end-to-end supply chain performance Process: Define clear ownership, roles, responsibilities, and structure Culture: Proactively address organizational resistance Communication: Create a balanced scorecard to track historical data and for easy organizational communication Tools: Invest in the tools that will make it reliable and repeatable Turn Data into Action: Hold weekly/monthly scorecard reviews to monitor progress, prioritize corrective actions, and engage the organization Power Through Process: Institutionalize your measurement program through a business process to “make it sticky” FLAVORS

14 12 Key Metrics To Maximize Supply Chain Performance
Forecast Accuracy (Demand Planning) Supply Plan Accuracy (Supply Planning) On Time Shipping Rate Fill Rate Perfect Order Fulfillment Capacity Utilization Inventory Days of Supply Freight Bill Accuracy Freight Cost per Unit Cash to Cash Cycle Time COGS % of Revenue Revenue Forecast Accuracy Largest Profit Drivers “Without a yardstick, there is no measurement. And without measurement, there is no control.” FLAVORS

15 Metric Profile Develop a Detailed KPI Profile For Each Metric
Balanced Scorecard Perspective: Select the perspective – Financial, Customer, Growth, or Internal Frequency: How often is this metric reviewed? Hourly, Daily, Monthly, Quarterly, etc. Business Process Category: What business process should be measured ? Customer Service, Inventory, Forecasting, Production, or Procurement Level of Detail: What level of information is available? By product, business, country, customer, customer segment, etc. Owner: Who is accountable for the result of this KPI? Document name and function Calculation: Document the formula and any special components – average count, mean absolute deviation, percentages, differences, etc. Data Coordinator: Who is responsible for gathering data for KPI? Document name and function Baseline Data: What year, month, or other time period was used as the baseline? Data Source: Where does the information come from? BW, SAP, Financial systems. What is measured? What are primary components? Fit into one sentence Tolerance: What is the allowable error to target? Data Availability: When is the data available for updating? Purpose: Why do we measure this KPI? What is the desired outcome? Comments: Include possibility of automating data collection, issues around gathering the data, potential resources for the information. Include any other information that tells the user more about the KPI FLAVORS

16 Separate Tabs For Each Plant
S&OP Scorecard Example Increases Visibility of Performance to Organization Separate Tabs For Each Plant FLAVORS

17 KPI Benefits Over Last 2 Years Communicate Successes Along the Way
Forecast Accuracy increased by 250% Supply Planning Accuracy increased by 30% Customer On Time Delivery increased by 26% Inventory MOH decreased by 53% Supply Chain Costs decreased by 15% Order MOQ Compliance increased by 8% Supplier On Time Delivery increased by 20% Total Recordable Cases (TRC) decreased by 46% Lost Time Cases decreased by 87% FLAVORS

18 Questions? Thank you for participating! Stephen P. Crane, CSCP
Director S&OP Flavors NA Firmenich FLAVORS


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