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© 2014 Quintiq. All rights reserved. Quintiq is a registered mark of Quintiq Holding B.V.
Australian Grain Industry Conference 2014
Lessons from other industries for a competitive value chain
Lee Hochberg
Senior Advisor: Integrated Supply Chain Planning and Optimisation
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Session objectives
Highlight the level and depth of complexity in grain supply chains
Articulate some key supply chain principles and lessons learned from other related industries
What does dynamic grain supply chain management look like
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Grain Value Chain: Why is this so complex
Crop & market forecasting
Trading activities
Stock management
Fumigation planning
Accumulation planning
Rail & road logistics
Port logistics
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• Low margin, high volume…every dollar counts
• Global environment, regional approach
• Export markets very dynamic
• Logistics costs are rising, service questionable
• Quality arbitrage is critical
• Blending is dynamic and often imprecise
• Global competition is fierce…and growing
• Consolidation of players globally
Bulk Commodity Strategic Challenges
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• Non-standardized processes
• Spreadsheets everywhere
• Lack of visibility/understanding of knock on effect for upstream/downstream activities
• “Silo” rather than “whole of business” thinking
• Significant constraints and business rules
• Dynamic environment with push/pull factors
• Process and event variability
• DYNAMIC ENVIRONMENT & COMPLEXITY
Operational Challenges
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Operational planning: Typical solution
© 2014 Quintiq. All rights reserved. Quintiq is a registered mark of Quintiq Holding B.V.
Let’s simplify:
Lessons from bulk commodity & complex value chain sectors
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3 simple questions
1. What is the cost of a wrong/ineffective decision?
o To your business?
o To your customer?
2. What can your business and customer gain from a “right” decision?
3. What does your business need to make a “good” (optimal) decision?
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Past performance does not predict future outcomes
Systems of record
NOW FUTURE
Past Performance
Future Performance
ERP MES MISSING PIECE
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Optimize your Future
Systems of record
NOW FUTURE
Past Performance
Future Performance
ERP MES SUPPLY CHAIN PLANNING &
OPTIMIZATION
Results
Best
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Your business is an economy
The wealth and resources of a BUSINESS, especially in
terms of the production and consumption of goods
and services.
1. Your business is an economy
2. Everything is connected
3. Small changes can have significant impact
4. Foresight puts you in a winning position
Key points
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Competitors also seek advantages
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor Competitor
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Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor
Competitor Competitor
ERP, S&OP, CI are no longer a differentiator
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Value Chain Solution Map…do you have the right direction?
Strategic (years)
Tactical (months)
Operational plan (weeks/days)
Operational execution
(day)
Post-operational analysis
Demand Planning/Trading
Crop & Demand forecasting/
Demand planning
Contract & Spot Selling
Management
Short Term Trading
Contract & Commercial
Planned vs. scheduled vs. actual analysis
reporting
Grain Management
Crop Management &
Farmer Relationships
Farmer and Product Contracts
Grain Allocations/ Fumigation
Planning
Accumulation/ Blending Planning
Infrastructure CAPEX Planning Infrastructure
building & maintenance
Infrastructure scheduling
Work execution
Logistics Management
Commercial Logistics Planning
Long term planning
Logistics scheduling
Operational execution
Act Plan Do Check
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Vertical & Horizontal Integration across the Value Chain
Tactical Planning Horizon
Strategic Planning Horizon
Operational Scheduling Horizon
Demand Planning Crop & Market Forecasting Trading Activities Grain Management/Blending Logistics Management
Supply Planning Production
Planning Grain Inventory
Planning
Scenario Based Strategic Planning
Road and Rail Scheduling
Port & Vessel Scheduling
Accumulation Optimization
Fumigation Planning & Scheduling
Logistics Planning
Task Scheduling/ Disruption
Management
Farm Client Management
Crop & Market Demand Forecast
Op
tim
isati
on
Inte
grat
ion
Visualization & Propagation
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Integrated supply chain visualisation linked to KPIs
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Another example
Scheduled maintenance Set maintenance dates Car maintenance dates
Set washes Certificate of readiness
Equipment register Sets Cars
Fleet availability
Faults
Actual timetable (inc
NDD)
Running out list (external)
Call-in list (external)
Maintenance tasks
Available consists
Input
Running in list
Assign consists to maintenance or
unavailable
Unavailable consists
Planned allocations of consists on runs
Running out list
Call in list
Import ROL (Automated)
Assign consists to runs
Decision
Output
Action
Call in set
Add required flag
Imported CIL (automated)
Consist available Road records
on RIL
Required consist
Out of scope
Schedule maintenance
Plan yard
Yard plan Maintenance
schedule
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Static vs dynamic value chain modelling and management
Planning
• Production capacity
• Strategic throughput
Scheduling
• Synchronising VC activities
• Production commitment
Propagation
• Dynamic re-planning
• Handling variation & disruptions
Op
tim
isat
ion
Vis
ual
isat
ion
Dynamic value chain modelling, planning, scheduling & execution management
Static
Inte
grat
ion
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Control working capital Increase throughput and profit
Raise customer satisfaction
• Port Kembla Coal Terminal: Increased yard use by 10%
• DB Schenker Rail increased train punctuality by over 12%
• Wallenius Wilhelmsen Logistics increased vessel space utilisation by 2%
• DHL eliminated ad hoc tours: Increasing utilisation and reducing energy costs
• Alunorf has reduced stock by 33%, increased output by 44% and improved delivery
performance from 40% to 90%
Supply chain thinking, methodology and tools: Not just a fad
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Background
Meneba is a leading European supplier of high-quality grain-derived products for processing in food and non-food applications. As a highly innovative and solution-driven company, Meneba supplies products for a wide variety of food applications from baby foods and breakfast drinks to bakery products and soups and sauces. Over the last decade Meneba has expanded its flour milling activities with other grain processing techniques such as pre-gelatinization. Together with the production of highly purified dietary wheat fibers, Meneba exploits the widest functionality of grains in many food applications. This makes Meneba the largest and most extensive supplier of grain-derived and flour products in Europe.
Meneba – The Netherlands
Solution
The solution enables combinatorial optimization of different corn types, taking into account the very strict quality aspects, variable cost prices, availability of the many raw materials and specific restrictions in the production process. The solution also interfaces with the JD Edwards ERP system.
Benefits
• Significantly faster decision making process with regard to the types of corn that must be blended and the way in which the end product is produced.
• Ability to determine the lowest cost price across the board.
• Most optimal stock utilization.
• Better control over the production process through tight integration of APS and ERP.
“Our production processes are highly dynamic, so that it is not easy to calculate the precise return on investment that the Quintiq system has offered us. However, based on our experience we can say that our investment in Quintiq has made a substantial contribution to our bottom line.”
Douwe van Dijk, Manager Quality and Food Safety Meneba
Quintiq Scheduler (Live since 2003)
© 2014 Quintiq. All rights reserved. Quintiq is a registered mark of Quintiq Holding B.V.
Supply chain best practice principles
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8 Fundamental Supply Chain best practice principles
1. Cost reduction is NOT the primary focus of supply chain performance
2. Silo vs. Supply chain focus
3. Static vs. Dynamic approach
4. Effective upstream and downstream integration & visualisation
5. KPIs linked to supply chain and customer satisfaction performance
6. Balancing of Trade-Off Objectives/KPIs
7. Influencing of (and negotiating with) suppliers across the value chain
8. Effective responsiveness to variation & disruptions
© 2014 Quintiq. All rights reserved. Quintiq is a registered mark of Quintiq Holding B.V.
Lee Hochberg
(LinkedIn)
0400 248 425
Questions?
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Planning decision tree example
Equipment register
Scheduled maintenance
Fleet availability
Timetable
Late STNs
Running out list (external)
Faults Call-in list (external)
Transponder data
Ops/TC/Depot Transpositions and updates
Fleet availability
Input
Actual timetable
Update timetable
Assign consists to
runs
Planned allocation of consists on
runs
Running in list (internal and
external)
Running out list
Call-in list/ schedule
Update allocation Current
allocation of consists
Transposition requests
Reallocate consist
Rebalance network
Decision
Output
Action
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KPIs
• All KPIs compete with each other:
o Therefore, decisions will always have trade-offs
o There’s NO “right” answer
o Decisions are contingent on the situation
o How do you align your people with these situations?
• Silo vs Supply Chain KPIs:
o Counter-intuitive solutions often appear
o Implementing supply chain KPIs requires culture change...
o ...and changes in performance metrics and behaviours
o Leading Supply Chain organisations invest in integrated supply chain management systems...not just ERP
• Business and Customer KPIs:
o Balancing is hard...but critical
o Therefore, you need to have a 100% fit
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How optimisation fits in a Supply Chain Solution Landscape
Scenario
Integrated Supply Chain
Visualisation
Model
Optimisation
Propagation