1. Operational Excellence Demand Management and Master Scheduling

2. Vas Dem MPS - 2 © The Delos Partnership 2004 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

3. Vas Dem MPS - 3 © The Delos Partnership 2004 Innovation What counts as innovation ? –New product –Change to existing product : line extension –New Manufacturing process –Change to Manufacturing Process –Regulatory change –Capital Expansion –ERP Project

4. Vas Dem MPS - 4 © The Delos Partnership 2004 Integration of Innovation Innovation carried out by many functions All innovation has impact on different areas Typical functional split –Development –Supply Chain

5. Vas Dem MPS - 5 © The Delos Partnership 2004 Integrated Business Plan Integration of Innovation InnovationSupply Chain

6. Vas Dem MPS - 6 © The Delos Partnership 2004 Innovation All share the following issues –Need Project Plan –Need Justification –Need co-ordination –Need cross project resource management –Difficult to forecast –Needs integration into all other processes

7. Vas Dem MPS - 7 © The Delos Partnership 2004 Management of Innovation Stage/Gate Process Formal Process for Managing Project Gate 0 Gate 0 Gate 1 Gate 1 Gate 2 Gate 2 Gate 3 Gate 3 Gate 4 Gate 4 Stage 0 Stage 1 Stage 2 Stage 3 Stage 4 Review Investigate Financial Case Financial Case Develop Test Launch

8. Vas Dem MPS - 8 © The Delos Partnership 2004 Overall Process for Change Control Request change to product Review impact of change Notify People who Need to know Accept or reject request Advise change agreed Notify People who Need to know

9. Vas Dem MPS - 9 © The Delos Partnership 2004 Example of Data Change Form Change Note Number :Date of Request : __/__/__Change Type : Add/Amend/Delete Originator:Effective Date: -Requested __/__/__ -Actual __/__/__ Part number : Department :BOM Attached ? : Y/N Other Related Changes : Reason for Request for change Notification given to :Tick Description of Change :Development Manufacturing Planning Financial Consequences of Change :Purchasing Quality Sales and Marketing Approved by :Date of Approval __/__/__Regulatory

10. Vas Dem MPS - 10 © The Delos Partnership 2004 Example of Data Change Form ProductionQuantity on hand:Rework and Scrap Value Quantity in WIP :Routing Change PurchasingSupplier :New Part Number New Cost :New Order Qty On order :New Safety Stock QualitySpecifications :New Lead Time Test requirements:Customer Code DevelopmentReference no,:Vendor Code BOM Change note:Batch control SalesCustomersFinancial Projection attached: Y/N Quantity on hand FinanceStandard CostData Controller : RegulatoryStandards affected

11. Vas Dem MPS - 11 © The Delos Partnership 2004 Management of Innovation Needs Management across all the projects

12. Vas Dem MPS - 12 © The Delos Partnership 2004 Integration with Supply Chain Design Purchase Intermediate Manufacture Sub-assemble Finish Distribute Cumulative Lead Time Insert New Products Here Insert New Products Here

13. Vas Dem MPS - 13 © The Delos Partnership 2004 Bill of Activity – Link with Planning Ship Make Process Validation Process Validation Develop Process Develop Process Source Product Source Product Develop Tooling Develop Tooling Source Equipment Source Equipment Design Equipment Design Equipment Lt = 2 weeks Lt = 6 weeks Source Raw Material Source Raw Material Lt = 4 weeks Lt = 10 weeks Lt = 10 weeks Lt = 6 weeks Lt = 6 weeks

14. Vas Dem MPS - 14 © The Delos Partnership 2004 Integrated Innovations Planning IDEAS COMMERCIAL SUCCESS IEP AT FAMILY LEVEL – VOLUME AND VALUE MPS AT PRODUCT LEVEL – VOLUME AND VALUE TIME MPS/MRP AT PRODUCT AND COMPONENT LEVEL – VOLUME

15. Vas Dem MPS - 15 © The Delos Partnership 2004 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

16. Vas Dem MPS - 16 © The Delos Partnership 2004 Common Reasons for Not Forecasting I can never make it 100% accurate My business has too many unforeseen peaks My business is different - you can’t forecast it I don’t know who’s responsible for it anyway It’s not in my objectives I’m measured on getting high sales - so who cares about the forecast The factory never make what I forecast anyway Nobody thanks me for it – so why bother ?

17. Vas Dem MPS - 17 © The Delos Partnership 2004 Forecasting – Definition A forecast is a formal request to the Supply Management function… From Sales and Marketing to have the product, materials and Capacity available according to the quantity and At the time that they anticipate the demand will occur from the Customer to ship the product to their premises

18. Vas Dem MPS - 18 © The Delos Partnership 2004 Forecasting Needs a Simple Process Filter Demand Execute Forecast Capture Actual C O N S E N S U S F O R E C A S T Review Commercial Plans Review Exceptional Demand Hold Demand Review Assumptions written down and agreed

19. Vas Dem MPS - 19 © The Delos Partnership 2004 The Ten Rules of Forecasting 1.A forecast is necessary for planning supply and supporting financial and business plans 2.A forecast is never going to be right 3.A forecast is wrong because the assumptions were wrong 4.Accountability for the forecast rests with Sales and Marketing 5.Forecasting needs an application of intelligence 6.More accurate forecasting comes from your customers’ customer 7.Forecasts at an aggregate level are more accurate than the detail 8.Effective management of demand is key to managing forecast inaccuracy 9.A written policy for managing flexibility is essential 10.Measuring forecast accuracy will improve the process

20. Vas Dem MPS - 20 © The Delos Partnership 2004 Forecast must be supported by Assumptions JulAugSepOctNovDecJanFebMarAprMayJun 1254145 156 170 135 145160 1345145167135180200 150 200 1256100200 300 200 134750 40 30 20 4050 NUMBERS ! ASSUMPTIONS

21. Vas Dem MPS - 21 © The Delos Partnership 2004 Sales Forecasting: Inputs New Customers New Products Pricing Initiatives Advertising And Promotions Cannibalisation Customers Own Forecast Competitors Activity External Factors

22. Vas Dem MPS - 22 © The Delos Partnership 2004 Move to Customer Centric Sales Planning Manufacturing Distance Remoteness Research & Development Planning Marketing SalesCustomer Traditional

23. Vas Dem MPS - 23 © The Delos Partnership 2004 Move to Customer Centric Sales Planning Manufacturing Research & Development Research & Development Planning Marketing Sales Customer Manufacturing Research & Development Research & Development Planning Marketing Sales Customer Manufacturing Research & Development Research & Development Planning Marketing Sales Customer

24. Vas Dem MPS - 24 © The Delos Partnership 2004 COLLABORATIVE PLANNING - PROGRESS Data Exchange Vendor Managed Inventory Co-Managed Inventory Trading Partnership Integrated Planning and Replenishment Ability to view customer data No management process Possibly available on Internet Agreed process for managing inventory (VMI) – supplier’s problem! Supplier schedules provided Agreed process for managing inventory Mutual availability of data and plans in joint systems Supplier schedules provided, and forecasts provided. Mutual sharing of long term plans Full briefing on long term strategy Joint improvement activities Joint forecast review Joint agreement on business plans and inventory strategy Joint improvement activities Time

25. Vas Dem MPS - 25 © The Delos Partnership 2004 Customer Relationship Management Strategy Customer relationship Manager Sales and Marketing System Forecast Plan Manufacturing And Purchasing ERP System Consensus Forecast

26. Vas Dem MPS - 26 © The Delos Partnership 2004 The Delos Model For Business Integration Innovation Innovation Vision Strategy Prioritisation Prioritisation Demand Support Supply

27. Vas Dem MPS - 27 © The Delos Partnership 2004 Basic Formula Item Data BOM’s And Routes Stock And Capacity Master Schedule ForecastsOrders Suppliers Factories What do they Actually Want ? What have We got ? What does it need ? What do we need to do ? What do we think they Want ?

28. Vas Dem MPS - 28 © The Delos Partnership 2004 Master Production Scheduling MRP and CRP without a Master Schedule leads to Chaos at the speed of light Use Firm Planned Orders to control the plan Master Scheduling software identifies imbalance and recommends action

29. Vas Dem MPS - 29 © The Delos Partnership 2004 Master Schedule

30. Vas Dem MPS - 30 © The Delos Partnership 2004 12345 as MPS Item

31. Vas Dem MPS - 31 © The Delos Partnership 2004 Customer profile Customer Demand Customer A 2500 per month Customer B 1250 per month Customer C 500 per month Customers D.. 750 per month

32. Vas Dem MPS - 32 © The Delos Partnership 2004 Forecast Consumption

33. Vas Dem MPS - 33 © The Delos Partnership 2004 Master Schedule - ATP

34. Vas Dem MPS - 34 © The Delos Partnership 2004 Master Scheduling Management Horizon PLAN MANAGE EXECUTE Cumulative Lead Time Add or subtract To capacity Strong Link to Global Sales and Operations Planning Process Capacity and Materials “firm” Release Orders Firm Planned Orders

35. Vas Dem MPS - 35 © The Delos Partnership 2004 Abnormal Demand - Workshop

36. Vas Dem MPS - 36 © The Delos Partnership 2004 All incoming customer orders should be screened (evaluated) for normal/abnormal demand characteristics. Abnormal Demand

37. Vas Dem MPS - 37 © The Delos Partnership 2004 Identifying Abnormal Demands Individual Customer Order –Demand Source Customer Market Sector Trade Sector Export vs UK –Quantity Size Of Order –For that customer [e.g. > 10 for customer Y] –For any customer [e.g. > 5 for any other than X] % Of Forecast Cumulative Demand –Track Variances to date in week or month Keep it simple !

38. Vas Dem MPS - 38 © The Delos Partnership 2004 Each abnormal order must be coded with an abnormal demand flag so that the planning system will not consume the forecast. This can be done through the order entry system or after the fact when the demand resides in the planning system – but before the Master Schedule is recalculated! Software requirement

39. Vas Dem MPS - 39 © The Delos Partnership 2004 Process to Manage Demand Check if Forecast is normal If normal – promise it Recalculate Available to Promise Consume the Forecast Recalculate PAB If abnormal 1.Check if any is normal 2.Promise normal part of Forecast Recalculate Available to Promise Consume the Forecast Recalculate PAB For remaining abnormal demand lDetermine agreeable promise date lAdvise customer lAgree any risks to other customers lRecalculate Available to Promise lConsume the Forecast lRecalculate PAB lReview action messages in MPS

40. Vas Dem MPS - 40 © The Delos Partnership 2004 Abnormal Demand Policy Company needs to have a policy that states the process and mechanism for identifying and dealing with abnormal demands Accountability needs to be established with Sales and Marketing - the originators of the Forecast ! Abnormal Demand Policy

41. Vas Dem MPS - 41 © The Delos Partnership 2004 Ways to Manage Abnormal Demand Safety Capacity Safety Stock Manage the Product Range Reduce Lead Times Redesign the Product Sell something else!

42. Vas Dem MPS - 42 © The Delos Partnership 2004 Safety Stock - Effect Planned projected available stock calculated not to Go below Safety Stock

43. Vas Dem MPS - 43 © The Delos Partnership 2004 Time Fences Demand Time Fence –Controls when forecasts disappear Material Time Fence –Controls when Planned orders become firm orders Capacity Time Fence –Indicates where capacity is an issue for increasing demand

44. Vas Dem MPS - 44 © The Delos Partnership 2004 Workshop 1.What are the rules on changes to the schedule ? 2.What would be the right time fences in the business ? 3.How will they be reflected in the system ?

45. Vas Dem MPS - 45 © The Delos Partnership 2004 Master Scheduler Strategy Sales Forecasts Customer Orders Manufacturing Plan Purchasing Plan MRP System Balanced Plan Master Scheduler

46. Vas Dem MPS - 46 © The Delos Partnership 2004 Master Scheduler GeneralManager ProgrammeManagers CustomerServices FactoryManagers SupplierManagers Engineers Quality Finance

47. Vas Dem MPS - 47 © The Delos Partnership 2004 MPS Job Description ? 5 Years experience on Shop Floor 5 Years experience in Purchasing 5 Years in Programme Management 5 Years in Engineering 5 Years in Finance 5 Years in Customer Service BA in Engineering, MBA in Business Studies …. 30 years old ….. £ 1,000 per month

48. Vas Dem MPS - 48 © The Delos Partnership 2004 Workshop What do other functions need to do to make the MPS job easier ? How well do other functions understand what needs to be done ? Where is particular work required ?