supply chain segmentation & analytics
TRANSCRIPT
Supply Chain Segmentation & Analytics -Moving from Theory to Implementation
Meet the Presenters
Dr. Gerhard Plenert – Consultant and AuthorDr.GerhardPlenert hasbeenhelpingorganizationsexecuteoperationalandsupplychaintransformationsformorethantwentyyears.HewasatenuredfullprofessoratCaliforniaStateUniversity,Chico,andaprofessoratBYUProvo,BYUHawaii,theUniversityofMalaysia,andtheUniversityofSanDiego.Hehasworkedforthelargestcompaniesintheworld,includingcompanieslikeAramco,Microsoft,Cisco,HP,Johnson andJohnson, Shell,Apple,Ford,Nike,Google,Cisco,andRollsRoyce.
Chris Gordon – VP North America at AIMMSChrishasworkedinsupplychainconsultingandoperationsacrossEurope,theUSandIndiaformorethan25years.He’sdrivendozensofsupplychaininitiativeswithaheavyfocusonleveraginganalyticalevidencetopromotemajorbusinesschange.
Objectives
• Share a consumable definition of Supply Chain Segmentation
• Provide a step-by-step guide to achieving segmentation value
• Share a series of examples to increase initiative speed and time to value
• Share where supply chain segmentation can go next with leading edge use of optimization
• An opportunity to engage in this ongoing dialogue with the presenters and your industry peers
What is Supply Chain Segmentation (SCS)?
SCS is about Differentiating Groupings by:• Region / Location• Volumes• Product Characteristics• Etc.
What is Supply Chain Segmentation (SCS)?
• SCS finds common Characteristics within the differentiated groupings
• SCS identifies optimal methodologies around each group
SCS – How it works
3-ProngedApproachtoMaximizeReturnonAvailability
B – ReduceCost• Production• Logistics• Warehousing• Inventoryholdingcost• PlanningMisalignments• Technology• Obsolescence
A – ManageProductLifecycleStages• Launch/Newproductintroduction
• Active– Growth• Stable- Maturity• Declining• End-Of-Life C – IncreaseBenefits
• Revenue• Margin• EstablishYourselfasthePreferredSupplier
• MarketShare• CompetitorSubstitutionAvoidance
• EaseofDoingBusiness• EconomiesofScale
DeclineMaturityGrowthIntroduction
NewProduct– PhaseIn
Deman
d
PlanningHorizon
Identify the Life Cycle Stages of the Product
EndofLifeProduct–PhaseOut
ROA
B
A
C
Identify cost drivers that impact return on availability
Cost of Availability
High Medium LowMinimizeCost
ROA
B
A
C
CostDrivers ImpactoftheDriver AttributesLifecyclelength Productavaiability/obsolesence Long Medium Short
Volatility Levelofinventorybuffering Low Medium High
ProductCustomization Interdependencies/stockouts Low Medium High
ProductCriticality Customeroperationalshutdowns Low Medium High
Geography/Location Pipelinelength/inventorystaging Onshore Nearshore Farshore
ProductTurnaround ShelfLife/inventorylevels Fast Medium Slow
GrossMargin Risk/profitability High Medium Low
Seasonality Inventorybuildup/planning Heavy Medium None
ChannelHazards Planning/inventorycosts High Medium Low
Identify the customer segments that drive benefits
Segments Definition
Tier-1High-prioritycustomerswithstrategic/criticalimportancetoourcompany(The20%ofthecustomersthatmakeup80%ofourbusiness)
Tier-2 MediumprioritycustomerswhodeservethenextbestlevelofSupplychainsupport
Tier-3
Low-priority customerswhoarerelativelyatthelowestlevelinthehierarchy(Themajorityofourcustomers,around50to60%,whomakeuponlyabout20%ofourbusiness)
ROA
B
A
C
Segmentation tailored to your key business drivers
AttributeImpact
CostDrivers ImpactoftheDriver Low High
Lifecyclelength Productavaiability/obsolesence
Volatility Levelofinventory buffering
ProductCustomization Interdependencies /stockouts
ProductCriticality Customeroperationalshutdowns
Geography/Location Pipeline length/inventorystaging
ProductTurnaround ShelfLife/inventorylevels
GrossMargin Risk/profitability
Seasonality Inventorybuildup /planning
ChannelHazards Planning/inventorycosts
Example – Segmentation Matrix to maximize return on availability
Life
cycl
e S
tage
Co
st o
f Ava
ilabi
lity Tier 1 Customers Tier 2 Customers Tier 3 Customers
Laun
ch Low
Med
High
Act
ive
Low
Med
High
End
of L
ife
Low
Med
High
Life
cycl
e S
tage
Co
st o
f Ava
ilabi
lity Tier 1 Customers Tier 2 Customers Tier 3 Customers
Availability Lead Time SC Business Model Availability Lead Time SC Business
Model Availability Lead Time SC Business Model
Laun
ch Low High 5 Days Custom Medium 25 Days Agile Medium 30 Days Agile
Med High 5 Days Custom Medium 30 Days Agile Low 35 Days Efficient
High High 5 Days Custom Medium 35 Days Efficient Low 40 Days Efficient
Act
ive
Low High 10 Days Efficient High 25 Days Efficient High 30 Days Efficient
Med High 10 Days Efficient High 25 Days Efficient Medium 30 Days Efficient
High High 30 Days Agile Medium 30 Days Efficient Low 35 Days Efficient
End
of L
ife
Low High 15 Days Efficient Medium 35 Days Efficient Low 40 Days Efficient
Med High 35 Days Agile Low 40 Days Efficient Low 45 Days Efficient
High High 40 Days Agile Low 45 Days Efficient Low 50 Days Efficient
Example – Segmentation Matrix to maximize return on availability
Life
cycl
e S
tage
Co
st o
f Ava
ilabi
lity Tier 1 Customers Tier 2 Customers Tier 3 Customers
Availability Lead Time SC Business Model Availability Lead Time SC Business
Model Availability Lead Time SC Business Model
Laun
ch Low High 5 Days Custom Medium 25 Days Agile Medium 30 Days Agile
Med High 5 Days Custom Medium 30 Days Agile Low 35 Days Efficient
High High 5 Days Custom Medium 35 Days Efficient Low 40 Days Efficient
Act
ive
Low High 10 Days Efficient High 25 Days Efficient High 30 Days Efficient
Med High 10 Days Efficient High 25 Days Efficient Medium 30 Days Efficient
High High 30 Days Agile Medium 30 Days Efficient Low 35 Days Efficient
End
of L
ife
Low High 15 Days Efficient Medium 35 Days Efficient Low 40 Days Efficient
Med High 35 Days Agile Low 40 Days Efficient Low 45 Days Efficient
High High 40 Days Agile Low 45 Days Efficient Low 50 Days Efficient
Example – Segmentation Matrix to maximize return on availability
Example – Segmentation Matrix to maximize return on availability - Aerospace
Life
cycl
e S
tage
Co
st o
f Ava
ilabi
lity Tier 1 Suppliers Tier 2 Suppliers Tier 3 Suppliers
Criticality Lead Time SC Business Model Criticality Lead Time SC Business
Model Criticality Lead Time SC Business Model
Laun
ch Low High 120 Days Custom Medium 120 Days Efficient Medium 120 Days Efficient
Med High 120 Days Custom Medium 120 Days Efficient Low 120 Days Efficient
High High 120 Days Custom Medium 120 Days Efficient Low 120 Days Efficient
Act
ive
Low High 10 Days Efficient High 20 Days Efficient Low 30 Days Efficient
Med High 10 Days Agile High 20 Days Efficient Medium 30 Days Efficient
High High 10 Days Agile Medium 20 Days Agile Low 30 Days Efficient
End
of L
ife
Low High 20 Days Efficient Low 30 Days Efficient Low 40 Days Efficient
Med High 30 Days Efficient Low 40 Days Efficient Low 45 Days Efficient
High High 40 Days Efficient Low 50 Days Efficient Low 50 Days Efficient
1
6
2
4
3
5
Example – Segmentation Matrix to maximize return on availability - Pharmaceutical
Life
cycl
e S
tage
Co
st o
f Ava
ilabi
lity Tier 1 Customer Tier 2 Customer Tier 3 Customer
ShippingCriticality Lead Time SC Business
Model Shipping
Criticality Lead Time SC Business Model
Shipping Criticality Lead Time SC Business
Model
Laun
ch Low Low 2 Days Custom Low 2 Days Efficient Low 3 Days Efficient
Med Medium 2 Days Custom Medium 2 Days Efficient Medium 3 Days Efficient
High High 1 Day Custom High 1 Day Efficient High 1 Day Efficient
Act
ive
Low Low 2 Days Efficient Low 2 Days Efficient Low 3 Days Efficient
Med Medium 2 Days Efficient Medium 2 Days Efficient Medium 3 Days Efficient
High High 1 Day Efficient High 1 Day Efficient High 1 Day Efficient
End
of L
ife
Low Low 2 Days Efficient Low 2 Days Efficient Low 3 Days Efficient
Med Medium 2 Days Efficient Medium 2 Days Efficient Medium 3 Days Efficient
High High 1 Day Efficient High 1 Day Efficient High 1 Day Efficient
1
2
4
3
Example – Segmentation Matrix to maximize return on availability – Hi Tech
Life
cycl
e S
tage
Co
st o
f Ava
ilabi
lity Tier 1 Customer Tier 2 Customer Tier 3 Customer
Product Availability
Safety Stock /
Inventory Buffering
Levels
SC Business Model
Product Availability
Safety Stock /
Inventory Buffering
Levels
SC Business Model
Product Availability
Safety Stock /
Inventory Buffering
Levels
SC Business Model
Laun
ch Low High Max Custom High Max Custom High Medium Custom
Med High Max Custom High Max Custom High Medium Custom
High High Max Custom High Max Custom High Medium Custom
Act
ive
Low High Medium Agile High Medium Agile High Medium Agile
Med High Medium Agile High Medium Agile High Medium Agile
High High Medium Agile High Medium Agile High Medium Agile
End
of L
ife
Low Low Minimum Efficient Low Minimum Efficient Low Minimum Efficient
Med Low Minimum Efficient Low Minimum Efficient Low Minimum Efficient
High Low Minimum Efficient Low Minimum Efficient Low Minimum Efficient
1
2
4
3
SupplyChainCharacteristicsHighTechSegmentationExample
1 2 3 4
Forecast S&OP
TimeSeriesAssociative
Productio
nPlanningand
Scheduling
S&OPATPCTPDemandPullEOQBTS/MTSBOO/MTOMin/MaxOIL2-BinROP
Operatio
nal
Processes VMI
LSSJITSS
Automat
ion
Levels Manual
ShopFloorMES
Metrics
MotivationInventoryOperatingCostsCustomerQuality
SCS Characteristics Mapping Example – High Tech
SupplyChainCharacteristicsAerospaceSegmentationExample
1 2 3 4 5 6
Targets
PlanningCadence Bi-Weekly Bi-Weekly Weekly Bi-Weekly Bi-Weekly OnDemand%ofSKUs 15% 40% 5% 15% 20% 5%%ofRevenue 20% 50% 3% 10% 15% 2%%ofInventory 15% 40% 5% 15% 20% 5%%ofPlanningEffort 50% 5% 10% 20% 5% 10%TouchLevelofPlanners
High Low Low Medium Low Low
SCS Goal Mapping Example - Aerospace
Operational Strategic
Ope
nLoop
Closed
Loop
Tactical
Semi-A
utom
ated
Today–Segmentationasastrategic
tool
Tomorrow–AutomatedSegmentFlagging
Tomorrow–DeployableSegment
Prescriptions
Tomorrow–Segment
OpportunityCosts
AIMMS is being used by leading companies to gain a competitive edge
4timeco-winneroftheFranzEdelmanaward
Trustedbyleadingcompanies:Withaward-winningresults:
Thank You!
• If you have any questions, please contact the presenters:
Dr. Gerhard Plenert, [email protected]
Chris GordonVP North America, [email protected]
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425-458-4024 [email protected]