1. Logistics & Supply Chain Management 2. Customer … · Customer Centric Reconfiguration 3....

AF Conf LOA Q415sjh92

AGENDA

1. Logistics & Supply Chain Management

2. Customer Centric Reconfiguration

3. Performance Metrics

4. Way Ahead in Logistics

5. Performance Improvements

Winning with Logistics


LOGISTICS is the work required to efficiently and cost effectivelymove and position inventory throughout a supply chain

Best use of Resources - to move, store and apply supply chain materials


Blame and Punish

Customer Service Desk

It’s Your Fault I don’t Care

Dysfunctional Workgroup

SUPPLY CHAIN MANAGEMENT – consists of teamwork and partnering to leverage strategic advantage and to improve operating efficiency

SCM Enterprise-wide Collaboration

Technology Teamwork

Talent


• SCM Scope, Accountabilities & Importance

• Common Primary Goals & Key Differences

• Generic Processes & Supply Chains


Logistics & Supply Chain Management

1.


Suppliers of Plastic Bottles

Suppliers of Plastic Bottles

Source ofWater

Source ofWater

Suppliers ofCaps, Lables, & Packaging

Suppliers ofCaps, Lables, & Packaging

DistributionOperations

DistributionOperations

RetailersRestaurants

RetailersRestaurants ConsumerConsumer

Mineral WaterProduction/

Bottling Plan

Mineral WaterProduction/

Bottling Plan

Simple Product Supply Chain – Bottled Water* We Pay $1 for a 16 ozs Bottle of Water * In the USA 128 fluid ounces = 1 gallon

* Then Eight X 16 ozs Bottles = 1 gallon * So One gallon of Bottled Water Costs $8

* One gallon of Gas Costs about $3 * Why is Bottled Water so Expensive ?

What does it take to get a Bottle of Mineral Water to the Consumer ?

Logistics

Supply Chain Management

Overhead Costs %

% Profit ?% Material Costs ? % Manufacturing Costs ? % Logistics Costs ?


Supply Chain Logistics Management – Scope & Accountabilities

Typical Operations Key Functions

PurchasingPurchasing ProductionProductionMaterials Management

Materials Management DistributionDistribution ServicesServicesDemand & Supply

PlanningDemand & Supply

Planning

Inbound Logistics Outbound Logistics

Supply Chain Management

• Transport

• Warehousing

• Freight Mgt

• Production

• Quality • Output Mgt

• DemandForecasting

• Supply Chain Inventory Mgt

• Product Life Cycle Mgt

• Supplier Relationship Management

• Buying

• Expediting

• Maintenance

• Repairs

• Spares

• Raw Materials & Parts Supply

• Production Planning &

Scheduling

• Materials Control

Where does Your Job Fit ?

• Past Improvements have mainly concentrated on Operations / Manufacturing • The Low Hanging Fruit has been Harvested – Many Techniques have been used

e.g. Industrial Engineering; Total Quality Mgt; Just In Time; Six Sigma; Lean

• Future Improvements will Focus on Enterprise-wide Supply Chain Management to Gain (cross-functions and cross-businesses) Competitive Advantage and Win

Manufacturing


Supply Chain Logistics Management - COMMON PRIMARY GOALS

High Tech RetailAutomotive/Aviation

Healthcare Pharmaceutical

Industrial & Chemical

Key Differences

Products; Customer & Supplier Relationships; Logistics Network Complexity

N o t O n e S i z e F i t s A l l

The SCM Challenge is to Match Supply & Demand

Highest Customer Service at Lowest Competitive Cost


High Tech RetailAutomotive/Aviation

Healthcare Pharmaceutical

Industrial & Chemical

Who do you Benchmark with ?

Benchmarking

Definition – A Systematic Process of Comparing Business Practices and Performance Levels to Identify Opportunities for Improvement

From your own knowledge and experience:

(b) What process does your function/operation need to improve most ?

(a) What process is your function/operation really good at doing ?


• Predictable Supply / Demand

• Manufacturing Economies of Scale

• Lowest Possible Costs

Efficient Supply Chain Responsive Supply Chain• Unpredictable Supply / Demand

• Manufacturing Flexibility

• Reduced Lead Times

Functional Products e.g. Food

- They Satisfy Basic Unchanging Needs

- Long Product Life Cycles

- Low Margins

- Stable Demand

Innovative Products e.g. High Tech

- They Have Great Variety

- Short Product Life Cycles

- High Profit Margins

- Volatile Demand

Commodity Products E x a m p l e – M a t c h i n g P r o d u c t s & S u p p l y C h a i n s

Customised Products

Are you Driven by Cost, Service or Agility ?

Cost AgilityService

PRODUCTS Drive Different Supply Chain Logistics Requirements


= Relatively Easy = Moderately Difficult = Most Difficult

Local / In-Country (Home Based / Domestic)Regional (Same Trade Regime)Global (Worldwide Sources & Destinations)

Geography

Outbound Deliveries

Repeat Orders / Loyal CustomersSpecific Orders / Fragile Customer RelationshipUnusual Requirements / New Customers

Inbound Supplies

Common Items / Mature RelationshipCompetitive Items / Developing RelationshipScarce Items / Immature Relationship

Commodity Products / Efficient Supply ChainsDefined Products / Reactive Supply ChainsCustomised Products / Agile Supply Chains

Industry Type

Static Routine Shipments (Set Routes)Uncomplicated Product Deliveries Unique Delivery Solutions to new Locations

Complexity

Key Business Differences Impacting Supply Chain Logistics Management


Netted Forecast

Demand Forecasting

ForecastNetting

Demand Planning

3 Generic Supply Chain Management Processes

1

2

Demand Fulfillment

Demand Fulfillment Order

Fulfillment

Allocations

Supply Execution

Order Promising

Order Creation

6

789

10 Order Delivery

Supply Planning

SupplyAllocation

Supply Plan

4

5

AllocationPlanningOperational

(master)Planning

Supply Planning& Constraints

3


4 Generic Logistics Supply Chains

Manufacture & Distribution

Raw Materials and /or Parts

End User Customer

DIRECT SHIPMENTS1


Manufacture Distribution Center

End User Customer

FAST FLOW MERCHANDISE 2

• Direct Ship Finished Products from Source of Supply to End User Customer• Lead Time Must Match Customer Availability Requirement (Order to Delivery)• Typically Predictable Demand with Source Closely Connected to Customers

• Last Step in Supply Chain (DC) positioned Close to Customer for Fast Delivery• Short Lead Time availability Requires Inventory Located Close to Customer• Allows Low Cost Bulk Shipments to DC then call-off Delivery to satisfy Customer


• Complex Closed Loop Supply Chain (Customer to Customer) • Repairs may include ‘Like for Like’ and / or ‘Same for Same’ Service • Various Maintenance and Repairs categories e.g. Warranty; Chargeable


Manufacture Distribution Center

End User Customer

PartsSuppliers

OEM Suppliers

CONSOLIDATION3

• Consolidate Products from Various Sources to Deliver as required by Customer• Added Value Customer Services e.g. Customisation and Prefit Staging• Last Mile Lead Time Must Achieve Customer Availability Requirement

MAINTENANCE & REPAIRS

End UserCustomer

MaintenanceRepairs

& Returns

Input

Output

SingleCustomerInterface

Manufacturing

OEM / Suppliers

Parts Suppliers

Maintenance;

Emergency;

Exchange;

Warranty;

Chargeable;

Order

4

Repair & MaintenanceOperations

+Distribution Center

4 Generic Logistics Supply Chains


Example Supply Chain Logistics Network

Manufacturing

Reverse Logistics

Outbound Logistics

Logistics Operations

Center

CUSTOMERS

Distribution

Repairs, Spares & Returns

Repair Center

Repairs & Returns

Inbound Logistics

OEMSupplier

Supplies

Sourcing

Raw Materials.

Parts Supplier

Physical Supply Chain Logistics Networks comprise: -

Supply Locations & Inbound Transportation Modes & Connections

Manufacturing & Distribution Locations + Outbound Transportation Routes

Repairs & Returns Locations + 2-way Transportation Flows

Tier 2MaterialSupplier

Tier 1 Supplier

Manufacturing Operations

RepairsDistribution Returns

Physical Supply Chain Logistics Networks

1. Upstream Sourcing 2. Operations & Downstream Delivery 3. After Sales Services

CUSTOMERS

3

2

1

1 2

3


Logistics Complexity / Risk Matrix

Customer(Receiver)Readiness/Relationship

Supplier /ContractorReadiness/Relationship

Productand / orContractComplexity

Route;Distance;Territory

OverallDifficultyRating %

Risk ScoreperBox

PlanningTimeline

20%Row

10%Row

5%Row

New / Untested

Developing,Needs Improving

Established/Proven

High /Proven

Medium /with Some Issues

Low / Unknown

Legacy Products &CommodityServices

Low Tech Products / Special Services

Hi –Tech Products / Expert Services

Months

Weeks

Days

Home(Local)Straight - forward

Export Tradewith some PotentialProblems

NewRegion & UnknownCountry

High Risk

Low Risk

80%

35%

Medium Risk


Business Logistics Military Logistics

Shared Winning Imperatives1. Meet Customer Service Requirements

2. Optimise Resource and Asset Utilisation

3. Replace Inventory with Information

4. Drive Productivity Improvements & High ROI

5. Best SRM & Selective Outsourcing

6. Weed & Feed to Achieve Required Skills

The Same Difference?

Profit and Growth1. Service / Cost Balance

2. Eliminate Duplication / Redundancy

3. Run Lean Pipeline Inventory Levels

4. Drive Margin Improvement

5. Collaborate - Develop Alliances

6. Minimise Headcount Levels

Life and Death1. Service First

2. Be Prepared / Build in Safety Factor

3. Hold Extra Just in Case

4. Control Costs & Manage to Budgets

5. Manage Suppliers / Enforce Contracts

6. Maintain Employment Levels


Winning Imperatives

Meet Customer Service Requirements

Optimise Resource and Asset Utilisation

Replace Inventory with Information

Drive Productivity Improvements & High ROI

Best SRM and Selective Outsourcing

Weed & Feed to Achieve Required Skills

U.S. DoD and Military Services are Too Big & Difficult to Change

To close a Budget Deficit we must Raise Taxes or Reduce Services

Processes are Fixed Costs (mandated and unchangeable)

Changing Mindsets Significant Improvements

can be made in Bite Size Chunks

Do same with less by focusing on Productivity Opportunities

Processes are Variable Costs (key to continuous improvement)

XXX

Potential Public Sector Barriers

Business as Usual, Don’t Rock the Boat

State and Local Resistance to Change

Software Investment Focus is mainly on ERP’s

Budgeting Rules and Spending Windows

Complex Acquisition & Outsourcing Procedures

Civilian Workforce and Trade Union Issues

Customer Focused Performance Improvements/Process Efficiency


• The Winning Formula – Strategy & Execution

• Customer Satisfaction is Paramount !

– Always Put Customers First

• How to Think/Plan Strategically &

Execute/Deliver Operationally

Customer Centric Reconfiguration

2. Winning with Logistics


The Winning Formula

+=BusinessSuccess

SuperiorStrategy

CompetitiveExecution

Do you have Strategy to Execution Disconnects ?

A Great Strategy is Useless if it is only a Wish List

The Annual Event – Strategists Love it

Operations people Love Fire Fighting

Excellent OperationsWithout Alignment

are Wasteful


+Superior Strategy Competitive Execution

Customer Focused

OrganisationAlign Organisation Structure to Achieve and Exceed Customer Requirements

InvestmentPrioritise Financial and other Business Investmentsto Support Customer Focus

ProcessesDesign Processes and install Systems Targeted to Deliver Superior Customer Service

The Winning Formula

Service

Customer Valued

Agility

Perfect Order Delivery Expert Support, Quality,Reliability and Special Service

Competitive Low Costs for High Added Value Products and Services

Availability of best Products and Services – Speed, Flexibility and Responsiveness

Cost


What changes

have to be

made?

How should

changes

be made?

How shall we

measure

progre

ss?

Strategy

Time Line

Start with the Customer

Strategy Development - step 1

Where

are

we now?

Where do w

e

want to go?


Talk to Customers to find out What they want from Logistics

They want it NOW !

They want the BEST !

They want it FREE !

Logistics Cost Competitiveness

Cost Transparency & Value Add Services

Cost Reduction & Cost Avoidance

Cost

AgilityDelivery Speed and Responsiveness

Availability, Visibility and Flexibility

People, Process & Systems Compatibility

Perfect Order Delivery to Required Date

Dedicated Expert Logistics Leadership

Special Customised Logistics Services

Service


Customer Satisfaction (CSAT) - Integrated Approach

Identify Drivers of Satisfaction, Purchase Decisions and Loyalty

Measure Product/Service CSAT

Measure CSAT against your Competitors/Best-In-Class

Identify Issues and Business Priorities for Improvement

All Customers

Customers with Competitor and/or BIC experience

Annually

ProactiveFunctional Leadership Team

+ External Organisations

CSAT Survey / Inputs

Objective Contact Frequency

Capture Customer Priorities and Operating Requirements

Measure Customer Specific Performance Metrics

Build Partnership Relationships

Key Customer Accounts

Quarterly

ProactiveSenior Managers

Scorecards

Collect Ad-Hoc Operational Information from Customers

Capture and Respond to Customer Issues

Aggregate Data to Identify Improvement Opportunities

Customers with Contact & Experience of your Business Operations

Ongoing

Every Customer issue received

ReactiveAll Employees Interfacing with Customers

Ad- hoc Customer Feedback+ Service Issues/ Customer Complaints

Example Approaches


Best Value for Money

Easy to Do Business With

Ask How They Can Do Better & Listen

Products are Top Notch

Service is Second to None

Demonstrate That Customers Come First

Flag Issues Early – No Bad News Surprises

Experts and Leaders in Their Field

Excellent Working Relationships

We Recommend Them

What Do Your Customers Say about You?

Use Customer Feedback information to determine where You Are Now & Where You Want to Go

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Common Phrases Used to Describe BEST Suppliers Example


Where

are

we now?

What changes

have to be

made?

How shall we

measure

progre

ss?

Strategy

Time Line

CSATFeedback

Strengths/Weaknesses + Opportunities/Threats

• Organisation• Investment• Processes

S W

O T

Strategy Development - step 2

How should

changes

be made?

Where do w

e

want to go?


Example Strengths/Weaknesses + Opportunities/Threats

SWOT Analysis

Strengths Weaknesses

Opportunities Threats

• Expert Knowledge of US Military/ Customer Requirements

• Beaurocratic Processes = Slow to React & Change

• Benchmark & Partner with other DoD Operations/Functions • Outsourcing Core Competences


5 P’s Logistics

VALUE

Productivity

RELIABILITY

Process

QUALITY

Performance

LOYALTY

Perception

Uniqueness to Business

Quad # 3

Quad # 2Quad # 1

Quad # 4

CompetitiveAdvantage

People

Example Logistics Core Competences & Strategy Development


VALUE

Productivity

RELIABILITY

ProcessQUALITY

Performance

LOYALTY

Perception

Quad # 3

Customised Solutions

Quad # 2

Enterprise Processes Design & Control

Quad # 1

Commodity Products & Services

Quad # 4

Logistics Leadership

5 P’s Logistics

People



Example Logistics Core Competences/Outsourcing Opportunities


• Process Design & Improvement

• Engineering & Packaging

• Process & Systems Alignment

• Order Fulfillment Applications

• Systems & Tools Requirements

PRODUCTIVITY

• Customer Wants & Needs

• Client Relationship Mgt

• Customer Metrics / Reports

• Targeted Benchmarking

• Aligned Business Development

PERCEPTION

• Warehousing & Operations

• Transportation & Services

• Freight Forwarding

• Import / Export Process

• Freight Payables & Claims

PERFORMANCE

• Project Management

• Logistics Network Design

• Service Provider Alliances/Mgt

• Planning & Support

• Optimisation

PROCESS

Example Logistics Strategy - Functional Analysis




Where

are

we now?

Where do w

e

want to go?

How should

changes

be made?

Strategy

Time Line

S W

O T

CSATFeedback


CustomerValuedMetrics

Strategy Development

• Goals• Objectives• Action Plans

How shall we

measure

progre

ss?

What changes

have to be

made?

- step 3


Briefly describes the Organisation’s fundamental purpose • Aims of Organization• Primary Customers• Value to Stakeholders

GOALS State future targets that the organisation wants to achieve

OBJECTIVES Define specific measureable action requirements

Detail steps + deliverables – Who will do What by When?ACTIONS

Specify the performance measures to monitor progressMETRICS

Simple Strategy Framework

MISSION STATEMENT


Building a Winning Strategy

GOALGOALGOAL GOAL GOAL

OBJECTIVEOBJECTIVEOBJECTIVE OBJECTIVE OBJECTIVE

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

ACTIONS

METRICS

MISSION STATEMENT


Example Strategy Outline for USAF Aircraft Maintenance

Example MISSION STATEMENT

To be the Leading Provider of Aircraft Maintenance to the USAF -

Recognized for the Safest provision of Superior Quality, Service and

Competitive Prices with a Customer Satisfaction Rating that is higher

than all other similar operations/locations.

Example GOAL

Maintenance and Logistics Operations Management that provides

‘Best in Class’ Service Value by Executing Fast Turnaround On-time

Delivery and Cost Competitiveness.


Example OBJECTIVE

Maintenance and Logistics Operations Management that provides

Measureable Service and Cost Performance, Demonstrating the

Highest Competitive Customer Service Levels/Ratings and

Stakeholder Value Recognition.

Example ACTIONS

Benchmark Customer Satisfaction and Implement an Integrated CSAT

approach + Performance Metric Steve Haynes by 1st Feb 2015

Introduce a Cost Reduction & Cost Avoidance Program + Performance

Metric approved by Financial Controller Ed Smith by 1st April 2015

Example Strategy Outline for USAF Aircraft Maintenance


Best Value for Money

Easy to Do Business With

Ask How They Can Do Better & Listen

Products are Top Notch

Service is Second to None

Demonstrate That Customers Come First

Flag Issues Early – No Bad News Surprises

Experts and Leaders in Their Field

Excellent Working Relationships

We Recommend Them

How do You Think Your Customers would Score You ?

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1 2 3 4 5 6

Step 1. - Always Start with the Customer Have a Go Be HonestWhere are You Now ?


Try to List 2 of Each - Strengths/Weaknesses + Opportunities/Threats

Strengths Weaknesses

Opportunities Threats

1

2

1

2

1

2

1

2


What changes have to be made?

How should changes be made?

How shall we measure progress?

(i) Identify the Most Important Changes to be made (ii) State How you think this Change should be made (iii) Note How Progress should be Measured

(i)

(ii)

(iii)


Where

are

we now?

Where do w

e

want to go?

What changes

have to be

made?

How should

changes

be made?

How shall we

measure

progre

ss?

Strategy

Time Line

CSATFeedback


Strategy Development

S W

O T

- step 4

• Goals• Objectives• Action Plans

CustomerValuedMetrics


Get Close to Customers to Service Their Requirements

Put Customers First in Everything You Do

Review & Agree KPI’s (Key Performance Indicators) with Customers

Ensure Strategy & Execution Alignment to Help Customers Win

Change Organisation, Investment & Processes to Match Strategy

Set Clear Goals; Objectives; Action Plans

Implement & Manage Value Add Performance Metrics

Drive Service, Agility and Cost Improvements

Collaborate Enterprise-wide with Customers & Suppliers

Orchestrate; Hold Accountable; Reward People

Summary

Customer Centric Reconfiguration


a) Metrics Maniacs or Managers ?

b) Performance Measurement – Best Metrics

c) Metrics Management Leadership

Performance Metrics

3.



In Business - What you can’t measure is not worth doing!

Metrics Must Add Value & Be Used to Improve Performance

Most Organisations suffer from Performance Measurement Overkill

We are Metrics Maniacs who struggle to see the Forest from the Trees

We are Not Good at Deciding What to Measure and How to do it

Good Performance Metrics Drive Great Results

But

PERFORMANCE MEASUREMENT

Common Problems


Customer Valued

Business Mgt

Operational

BossBoss

Performance Measurement

What Metrics?

How Many Metrics?

Who Reviews?

Are they Valuable?

Do they Help or Hinder?

Do Your Performance Metrics………….

1. Focus on the Key Business Drivers?

2. Give Direction / Point Way Forward?

3. Motivate & Help Change Behavior?

% ?

% ?

% ?PeersPeers

#?

# ?

# ?

Your TeamYour Team


Q1 Q3 Q4Q2

DELIVERED ORDERPERFORMANCE %

TIME

TARGET

FORECAST

ACTUAL

100

99

98

97

96

95

94

Performance Measurement & Management – Clarity Not Mania

• What should we Measure?

• What should we Stop Measuring?

• How do we go about doing it well?

• Establish Agreed Best Metrics to Focus on Improvement Opportunities• Conduct Productive Metrics Reviews to Improve Performance Results

• Chart Key Performance Metrics

• Show Trends & Highlight Issues

• Agree Improvement Actions

( Who? What? When?)


Performance Measures (Metrics) must have an Owner plus:

1. Definition - a clear, unambiguous Performance Measure statement

2. Formula - quantification, the mathematical calculation method

3. Chart - a table, graph or diagram showing performance

information

CALCULATION CRD =Number of Orders On-time to CRD

Total Number of Orders

Example 100% Complete On-time Delivery to match Customer Request Date (CRD)

DEFINITION

CHART

95

96

97

98

99

100

Month

% O

n T

ime

Co

mp

lete

to

CR

D

J F M A M J J A S O N D

98 97.597.2 97.3

5867

Month Total # Orders 96.7

97.5

48924953

4563

5232

4432

5867

97.9

ON-TIME DELIVERY TOCUSTOMER REQUEST DATE

JUNE

Performance Metrics - Imperatives

1

2

3


Performance Metrics

From your own knowledge and experience:

Discussion Questions

(b) Why do You consider these to be the Most Important Metrics ?

Please be prepared to discuss your inputs in class

(a) What Top 5 Metrics do You/Should You concentrate on most ?


Metrics Structure

Customer Valued

Business Mgt

Operational

Performance Measurement – PUT CUSTOMERS 1ST

Who are the Real Customers of our Products & Services?

What are the Customer’s Prioritised Requirements?

What Performance Metrics Matter Most to Customers?

Who are the Stakeholders for Business / Financial Performance?

What are the Most Important Business Drivers - External facing?

What are the Key Business Performance Metrics?

Examples

On-time Delivery

Actual Spend V Budget

Manufacturing Responsiveness Who are the Internal Clients / Customers?

What are the Main Functional Performance Measures - Internal facing?

What Operational Performance Improvement Metrics should we Use?

What Metrics?


Lagging & Leading Metrics/Indicators

OutcomeMeasuresOutcomeMeasures

Performance Drivers

Performance Drivers

Top Level Business Metrics Should Have Some Lagging & Some Leading Indicators

LEADING

Often Measure Activities or Sometimes Processes

Leading Metrics Indicate Future Events – Drivers of Business Results

Examples – CSAT; Customer Demand Forecasts; Financial Budgets

Have a Mix & Don’t Get Hung-Up on Labeling as Lagging & Leading

LAGGING

Typically Most Performance Metrics are Lagging Indicators

Lagging Metrics report what has already happened

Examples – Customer Complaints; Production Output; Financial Results


Communicate the Importance of Performance Measures to All Stakeholders

Explain Plans for Rationalising and Improving Performance Measures

Collect and Review All Existing Performance Measures

Talk to Customers to Agree & Prioritise Value Add Performance Metrics

Publish Performance Measurement Definitions, Formulae and Metrics Charts

KEY STEPS

Performance Measurement Measurement Leadership &

HOW TO DO IT Establish Agreed Best Metrics to Focus on Improvement Opportunities


Cross- Functional Performance• Order Entry Accuracy• Product Availability• Pick, Pack, Ship On-time & Accuracy • Delivered Product Quality• On-time Delivery to Customer• Documentation & Invoice Accuracy

…….an excellent example of a Cross-functional and Hierarchical Metric

‘Perfect Order Delivery’

HierarchyPERFECT ORDER comprises several

lower level Performance Measures

Perfect Order Delivery

DEFINITION100% Complete On-time Delivery to match Customer Request Date and Ship to Address with no Product Defects or Quality Issues and all Documentation correct / No Errors

FORMULAComposite of all Sub-level Metrics

CHARTShow Order Quantities Vs Timeline And Indicate any Errors.

Used to track performance and Highlight Improvement Opportunities

1

2

3

No

of

Err

ors

On Time Delivery No. of Errors

Order Entry 59 Product Available 41 Pick Pack Ship 35 Product Quality 23 On-time Delivery 12 Documentation 6

97

98

99

100

Month% O

n T

ime

Co

mp

lete

to

C R

D

173

111104

176

127 128

97.3

Month Total # Orders

97.5

48924953

4563

5232

4432

5867

97.9150

175

125

95

96

J F M A M J J A S O N D100

97.296.7

97.1

PERFECT ORDER


DefinitionsMust Have a Clear, Unambiguous Performance Measurement Definition

• On-time Customer Delivery

• Cost Reduction

• Supply Chain Response Times

?

?

?

Service

Cost

Agility

1


Example DefinitionsClear, Unambiguous Performance

Measurement Definition

• 100% Complete On-time Delivery

to Match Customer Required Date

with No Damaged, Missing or Wrong

and Full Documentation Accuracy

Service Customer Delivery

Cost • Annualised Cost Savings resulting

from Actual Change of Process or

Practice that Reduces Real $ Spend Cost

Reduction

Agility SC Response

Times

• Total SC Responsiveness to Changes

Comprises: Source; Make;

Order Fulfillment & Customer Delivery


Must Have a Formula - Quantifiable with a Mathematical Calculation

Formula


Cost Cost

Reduction

Agility

100% Complete On-time Delivery to Match Customer Required

Date with No Damaged, Missing or Wrong and

Full Documentation Accuracy

Annualised Cost Savings resulting from Actual Change of

Process or Practice that Reduces Real $ Spend

Total SC Responsiveness to Changes – Comprises:

Source; Make; Order Fulfillment; Customer Delivery

= ?

= ?

= ? SC Response

Times

2


Must Have a Formula - Quantifiable with a Mathematical Calculation

Example Formulae


Cost Cost

Reduction

Agility

100% Complete On-time Delivery to Match Customer Required Date with

No Damaged, Missing or Wrong and Full Documentation Accuracy

Annualised Cost Savings resulting from Actual Change of Process or

Practice that Reduces Real $ Spend

=Number of Orders 100% Complete On-time to CRD

Total Number of OrdersErrorsInformation

&

Cumulative Actual Savings Shown for a 12 Month Period + Itemised Listing / Ownership Ratified by the Financial Controller=

=Total Days (Added) Supply Chain Activities (Lead Times) for - Sourcing; Making; Order Fulfillment; Delivery

SC Response Times

Total SC Responsiveness to Changes – Comprises:

Source; Make; Order Fulfillment; Customer Delivery


Must be Showable as a Chart, Table, Graph or Diagram to Track Performance Trends & Improvements

Chart

95

96

97

98

99

100

Month

% O

n T

ime

Co

mp

lete

to

CR

D

% On Time Deliveries No. of Errors


Perfect Delivery

98

CRD Calculation Example

CRD =# Orders on time to CRD

Total Number of Orders

June Example5694

5867% On Time to CRD = X100

On Time to CRD = 97.1%

173 Errors

5867 Month Total # Orders

No

of

Err

ors

110

120

130

140

150

160

170

180

100

Forecast

171

111104

173

127 128

97.1

ERROR ANALYSIS

Order Entry 46

Product Available 37

Pick Pack Ship 19

Product Quality 16

On-time Delivery 21

Documentation 34

97.2 97.3

97.1

96.7

97.5

48924953

4563

5232

4432

5867

97.9

Example SERVICE Chart

173

3


Cost Reduction Actual v. Forecast

Example COST Improvement Chart

Actual CR Forecast CR

0

200

400

600

800

1000

1200

1400

1600

1800


$K

Cu

mu

lati

ve S

avin

gs

$K

JUNE Monthly CR $K SavingsNew CR Introductions Switch 25% Small Parcel Deliveries from FedEx & UPS to US Post Service = $14K CR Phase Outs MRP Software Application Upgrade = ( $37K)

Cost ReductionAnnualised Cost savings resulting from an actual change of process or practice that reduces real $ spend

e.g. Transportation Mode – New Route

select Surface versus Air to deliver on-

time but save shipment costs

e.g. Reusable Packaging - Total current

disposable packaging versus new

reusable design including return

handling and transport costs = CR.

Cost AvoidanceAnnualised theoretical saving gained by doing something differently from the normal method of operation thus avoiding costs

AF Conf LOA Q415sjh92Q1 TIME

Total Working Days (Added) Supply Chain Activities (Lead Times) for : Sourcing Materials; Making; Order Fulfillment; Delivery

Q2 Q3 Q4

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

Forecast

SOURCE

ORDERFILL

MAKE

TOTAL SCRT(half scale)

1512

11055

28

20

60

15

113

12

26

Example AGILITY Chart

60 123

20

15

28

Metrics Must Identify Activities Included & Excluded in each Area: Source; Make; Order Fill; Deliver

Must Explain Actions & Issues for Supply Chain Response / Lead Time Reductions in each area :

Source; Make; Order Fill; Deliverye.g. MAKE Quarter 1. = Manufacturing Re-layout to Eliminate Bottlenecks & Downtime (34 to 30 days)

Supply Chain Response Times

(34 to 30 Days)

15

30

10

20

30

40

50

60

70

80

90

100

120

130

150

140

110

160

TOTAL SCRT

(half scale)80

WORKING

DAYS

145

ACTUALDAYS

DELIVER


Most Performance Measurers are Internal/Department Facing…………….........

These Measures May Actually Prove to be Dysfunctional by Attempting to

Improve Departmental Performance at the Expense of Other Activities

COST

AGILITY

SERVICE

MissingElements

Beware ‘Bad’ (Stovepipe) Performance Metrics

Lowest Cost Procurement Contracts Volume Cost Breaks; Batch Ordering; Unit Price Reductions

MATERIALS PURCHASING

Supplier Cost Reductions Achieved Contract Flexibility Pricing V

MANUFACTURING Production Labour Efficiency Headcount Levels; Labour Rates; Absenteeism Actual Hours Worked & Standard Hours Mfg ResponsivenessV

DISTRIBUTION

Highest Product Availability for Customer Service Funded Inventory Levels; Shelf Availability; No Stock Outs

Greater than 98% Order Fill Rate V Inventory Holding Costs

Department ObjectiveDriversPerformance Metric

Examples

Conflict Problem


SCOR Model – Common Metrics Definitions for SCM

Supply Chain Council Inc.

Supply Chain Operations Reference (SCOR) Model

Suppliers’Supplier

SupplierYour

Company CustomerCustomer’sCustomer

K e y P r o c e s s S t e p s

PLAN

SOURCE

MAKE

DELIVER

SERVICE

SCOR Process reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross-functional framework

Benchmarking Best Practices Analysis

Process Reference Model

Business Process Reengineering


SJH Recommended Definitions

• 100% Complete On-time Delivery to match Customer Request Date and Ship to Address

• Total Order Availability to Pick, Pack and Ship

• Perfect Order Fulfillment includes On-time Delivery, Documentation and No Damaged items

• Number of Days / Hours from Order Receipt to Available to Ship Complete

• SCR Comprises – Cumulative Source / Make times; Planning; Order Fulfillment and Customer Delivery

• Number of Days / Hours to Upside and/or Downside Production Output by 20%

• Total Operations, Admin’ and Sales Costs

• Total SCM Costs including all aspects of Purchasing, Production and Logistics (to be stated)

• Additional Chargeable Customer Services eg. Value Add Product / Order Customisation

• Total Processing Costs for Warranty / Returns includes all Materials, Production and Overheads

• Net Inventory Days + Days Sales Outstanding - Accounts Payable Days

• Inventory Days of Supply = 365 / Inventory Turns

• Asset Turns = Annual Sales $ / Total Assets $

SCOR Level 1 Metric

• Delivery Performance

• Fill Rates

• Perfect Order Fulfillment

• Order Fulfillment Lead Times

• Supply Chain Response Times

• Production Flexibility

• Cost of Goods Sold

• Total SCM Costs

• Value Add Productivity

• Warranty / Returns Processing Costs

• Cash-to-Cash Cycle Time

• Inventory Days of Supply

• Asset Turns

Performance Metrics Definitions

SERVICE

AGILITY

COST


Cheer Leader Coach

Reward and Assist

0

50

100

150

Q1

MFG $K SPEND

FORECAST

ACTUAL

Bear Pit Killer

Punish the Innocent

Q2 Q3

What are your Reviews like ?

Most Metrics do Not Align with the Business Strategy & Key Drivers

Too Often we Fail to Share Metrics with Stakeholders and Customers

Many Metrics are Never Reviewed/Used to Improve Performance

PERFORMANCE LEADERSHIP

Common Problems


Establish New Hierarchy of Performance Metrics and Management Reviews

Optimise the Number of Metrics Produced, Sent and Reviewed at all levels

Use Performance Metrics to Focus on Key Activities & to Change Behaviour

Implement Collaborative Reviews to Monitor and Improve Performance

Benchmark Your Business Processes and Metrics against the ‘Best In Class’

KEY STEPS

Performance Measurement Measurement Leadership &

HOW TO DO IT Conduct Supportive Metrics Reviews to Improve Performance Results


Distribution Center Metrics

16. Demand Forecast Accuracy

17. Warehouse Carbon Footprint Reduction

18. On-time Delivery to Customer

19. DRP (Distribution Req’ts Plan) % Accuracy

20. Short Shipments %

21. Order Fill Rate %

22. Overtime Hours worked

23. Facility Running Cost Reductions

24. Direct / Indirect Ratio

25. Capital Equipment Utilisation %

26. Supplier Receipt to Put-away Time

27. Inventory Turns & Days of Supply

28. Inventory Obsolescence / Write Off Value

29. Employee Training Days Completed

30. Accident Reports & Prevention Actions

1. Warehouse Space % Utilisation

2. Finished Goods Inventory Levels

3. Supplier Quality – On Time & Defects %

4. Delivery Promise Date Efficacy

5. Order Receipt, Validation & Entry Time

6. Inventory Accuracy – Audit Counts

7. Order Entry Accuracy

8. Supplier On-time Delivery

9. Warehousing – Pick-to-Ship Cycle Time

10. Item Fill Rate per Order

11. Resource Utilisation V Budget

12. # of Complaints and % Resolved Time

13. 100% Complete On-time Ship Date

14. # of Customer Complaints

15. Total Warehousing Costs V Budget

Select Best 101. Warehouse Space % Utilisation

2. Finished Goods Inventory Levels

3. Supplier Quality – On Time & Defects %

4. Delivery Promise Date Efficacy

5. Order Receipt, Validation & Entry Time

6. Inventory Accuracy – Audit Counts

7. Order Entry Accuracy

8. Supplier On-time Delivery

9. Warehousing – Pick-to-Ship Cycle Time

10. Item Fill Rate per Order

11. Resource Utilisation V Budget

12. # of Complaints and % Resolved Time

13. 100% Complete On-time Ship Date

14. # of Customer Complaints

15. Total Warehousing Costs V Budget

16. Demand Forecast Accuracy

17. Warehouse Carbon Footprint Reduction

18. On-time Delivery to Customer

19. DRP (Distribution Req’ts Plan) % Accuracy

20. Short Shipments %

21. Order Fill Rate %

22. Overtime Hours worked

23. Facility Running Cost Reductions

24. Direct / Indirect Ratio

25. Capital Equipment Utilisation %

26. Supplier Receipt to Put-away Time

27. Inventory Turns & Days of Supply

28. Inventory Obsolescence / Write Off Value

29. Employee Training Days Completed

30. Accident Reports & Prevention Actions


a) Balancing Demand & Supply

b) Outsourcing Partnerships

c) SCM Software Systems

Big Issues & Lessons Learned

4.

In Your Operation Do you have Customer Service problems and/or High Inventory levels ?

In Your Experience Are we good at Outsourcing ? - Do we Outsource Too Much or Too Little ?

In Your Opinion How would you Rate Your Supply Chain Software Information Systems ?



How to get Closer to Balanced Demand & Supply

Visibility – Clear View of Information and Operations Up and Down the Extended Supply Chain

Planning – Demand & Supply Optimisation comprehending Enterprise-wide Requirements and Constraints

Collaboration – Cooperation with Supply Chain Partners to Share Information and Synchronise Actions

Control – Measure and Manage Business Performance Across the Extended Supply Chain

Operations – Supply Chain Operations Designed to Maximise Customer Service & Minimise Inventory Levels

a

SU

PP

LIE

RS

S & O P

Consensus Demand Forecasting Committed Agile Supply Planning

Lessons Learned

CU

ST

OM

ER

SUpstream Commitments Downstream Service


End to end Collaboration

Share & Agree Forecasts

Reduce Lead & Cycle Times

Review & F/c Product Groups

Standardize & Modularize

Postponement

Countermeasures Distribution

ordersSupplier orders

BullwhipManufacturing

ordersCustomer

orders

Demand Forecastinga Lessons Learned

MUST HAVE

Qualitative Demand Forecasting Process

Quantitative Demand PlanningCalculations

Demand Information Analysis

• Customer Requirements

• Expert Inputs

• Product Life Cycle Information

Forecast Modeling Techniques

• Expectations; Trends; Seasonality

• Time Series; Moving Averages

• Exponential Smoothing


Increased Real-time Information Visibility + Allows Synchronised SC activities Minimum Pipeline Inventory Improves Turns with Less Obsolescence Risk

Build to Forecast = Economies of Scale / Linear Resource Utilisation Simple Buy / Sell Relationships and Handoffs throughout the Supply Chain

Supply Chain Design & Inventory Positioning a Lessons Learned

Flexible MfgSupplier

Make to Order

ConsumerFinishedGoods

Inventory

RawMaterial

ConsumerFinishedGoods

Inventory

Batch MfgSupplier

RawMaterial

Make to Stock

Inventory Carrying Costs (typically in Commercial Businesses = 20% per year) Money tied up in Inventory e.g. Cost of Capital & Opportunity Cost of Money Storage & Handling Costs e.g. Labor; Space; Utilities; Insurance; Taxes Cost of Deterioration & Obsolescence Write off and Disposal

Standardize & Modularize

where Possible

Use ABC Inventory Analysis

Reduce Lead Times

& Cycle Times

Review & Forecast in

Product Groups

Think Postponement Customization


We Like Working With Them

Demanding But Fair & They Pay On Time

Help Us Do Things Better

Share Information Openly – Not Secretive

Long Term Agreements

Don’t Blame Us When Things Go Wrong

Treat Us as Equals, Experts, Partners

Very Professional Great Relationships

Involve Us in Designing Future Products

We Trust Them

• Best Value for Money

• Easy to Do Business With

• Ask How They Can Do Better & Listen

• Products are Top Notch

• Service is Second to None

• Demonstrate that Customers Come First

• Flag Issues Early – No Bad Surprises

• Experts and Leaders in Their Field

• Excellent Working Relationships

• We Recommend Them

What Customers SayAbout Their Best Suppliers

What Supplier Partners SayAbout Their Customers

a Demand / Supply Collaboration Lessons Learned

What would your Suppliers Say about You?


5 P’s Logistics

Outsourcedto 3rd PartyLogistics Service Providers

3 PLOutsourcedLogisticsManagementto 3PL or Consultants

4 PL Retain LogisticsExpertise In-house to orchestrate Hands-on Logistics Services

5 PL

Business E

volutio

n

In-HouseLogistics

VALUEProductivity

RELIABILITYProcess

QUALITYPerformance

LOYALTYPerception

Value Added


Logistics Outsourcing

Productivity Perception

ProcessPerformance

DoD Specifics

DoD Solutions Log’s Leadership

BIC 3PL Services

Outsource Products & Services that Others can Provide Better

Keep Core Competences & Develop Cerebral Functions & Skills

b Lessons Learned


Outsourcing Experience

100

90

80

70

60 1 2 3

Expectations

CostReductionExpectation

15%

Service ImprovementExpectation

10%

Time

Gains

%years

Dun & Bradstreet - GLOBAL OUTSOURCING SURVEY

1000 Companies Survey - More than 50% had Renegotiated the contract mid term

25% had terminated their Outsourced Contract before the due date

Firms are finding it Very Difficult to Take Back Outsourced activities

b Lessons Learned

Outsource Products & Services that Others can Provide Better Keep Core Competences & Develop Cerebral Functions & Skills


Outsourcing Experience

Main Reasons Why Outsource Relationships Fail

•Oversell; Deal Confusion; Poor Planning; Handover Issues

•Trying to Replicate In-house Model and Micro-Managing Outsource Company

•Metrics Misalignment and Communications Problems

•Clash between Low Cost (Economies of Scale) & High Service (Flexibility)

Service ImprovementExpectation100

90

80

70

60 1 2 3

Reality

Time

Gains

%years

5%

X5%CostReductionExpectation

Service / CostImprovementReality

Service ImprovementExpectation

b Lessons Learned

WINNERS Differentiate between Core Competencesand Outsourcing Opportunities


2. Internal Business Integration • Cross-functional Processes & Actions• Integrated Performance Measures• Inter-department Teamwork

3. External Partnership Cooperation• Joint Business Processes & Objectives• Linked Performance Measures• Cross-Business Project Work

4. Enterprise-wide Collaboration• Enterprise-wide Aligned Processes• Shared Strategy & Execution Metrics• Joint Decision Making & Risk Taking

Organisation Readiness for Outsourcing Partnerships

1. Stand Alone Functional Focus• Discrete Departmental Processes• Functional Performance Measures• Resources Dedicated to Department

O r

g a

n i s

a t

i o n

M

a t

u r i

t y

Outsourcing Partnerships

Must be Ready at Level 3 or 4to be Successful

b Lessons Learned

BEWARE !

“Don’t give away the keys to the

Kingdom


Supply Chain Information Systems (SCIS)c Lessons Learned

Supply Chain Systems automate the flow of information enterprise-wide to help optimise the planning, sourcing, manufacturing and delivery of

materials

A p p l i c a t i o n s A p p l i c a t i o n s

Forecasting Purchasing Order Mgt Manufacturing Finance Distribution Service

D a t a W a r e h o u s e s

D a t a I n t e g r i t y D a t a I n t e g r i t y D a t a I n t e g r i t y D a t a I n t e g r i t y D a t a I n t e g r i t y D a t a I n t e g r i t y

Manufacturing Distribution Customer End User Supplier

Information Technology is Not a Solution it is Only an Enabler

Suppliers Your Business Customers

We Must Improve the Processes & Streamline the Supply Chain Network


Months Weeks Days HoursYear + Real-time

Strategic Planning• Capacity Planning

• Strategic Alliances

• Network Design

Operational Planning• MRP (Material Planning)

• Demand/Supply Planning

• Enterprise Master Plan

Execution

• Response to ATP

• Order Entry & Allocation

• Order Fulfillment

SCM Software Overview

Strategic Operational Tactical

Supply Chain Business Development Plans

• Demand & Supply Plans • Logistics Networks• Strategic Sourcing• Capacity & Production• Modeling & Analyticse.g. IBM; JDA Software

Day-to-Day Processes& Activities

• Warehouse Management• Transportation & Delivery • Inventory Management• Order Entry & Fullfilment• Reverse Logistsicse.g. RedPrairie; Roadnet

SCM Software Solutions ‘Best of Breed’

Enterprise Resource Planning (ERP)

Systems

e.g. SAP; Oracle

c Lessons Learned


SqSystems HexApps

Process1. Map Your Actual /

Required Process

2. Select Best Fit

Software

3. Align Your Process to

Match Selected Software

OctTools

OctTools

KEY STEPS

Process Refuse User Customisations

Matching Processes & Software Systems/Applications/Tools

c Lessons Learned


Processes, Systems & Tools – Implementation Experience

• Communicate Strategy to all Stakeholders and Gain unambiguous Agreement

• Establish the Foundation with Data Integrity

• Complete mapping to Match User Specification against System Capability

• Select Reputable Supplier with Best Fit Software Solution and validate Feasibility

• Align Processes with System Capability and Refuse User Customisations!

• Pilot Introduction to Prove Functionality and Build In-house Expertise.

• Use Project Management techniques to Plan, Coordinate and Control.

Golden Rules

SCM Systemsc

/2 FUNCTIONALITY – Half what you expected

*2 TIME – Takes twice the planned time to implement

*2 COST – Costs twice the amount budgeted

Lessons Learned


a) Lean Six Sigma Overview

b) Basic Process Improvement Tools

c) Case Study

Performance Improvement

5.



Comparing Lean & Six Sigma

ProgramTheory

Key Steps

Focus

Six SigmaReduce Variation1. Define2. Measure3. Analyse4. Improve5. Control

Problem Focused

LeanImprove Speed & Value1. Identify Value2. Identify Value Stream 3. Flow4. Pull5. Perfection

Flow Focused

Assumptions • A Problem Exists• Figures & Numbers are Valued• System Output Improves if

Process Variation is Reduced

• Waste Removal will Improve Business Performance

• Many Small Improvements are the best way forward

Primary Effect

Secondary Effects

Criticisms

• Uniform Process Output

• Improved Quality• Less Waste• Fast Throughput• Less Inventory

• Processes Improved Independently

• Reduced Flow Time

• Less Variation• Uniform Output• Less Inventory• Improved Quality

• Statistical System Analysis Low Valued

Techniques


What does the Customer want?

What are we doing wrong right now?

How do we measure our success?

How well are we meeting the Customer’s needs right now?

What is going wrong?

What is the data telling us about our process variation?

What can we change to more completely satisfy the Customer?

Test and implement process changes

Maintain improvements by measuring process performance

DMAIC The Six Sigma Problem-Solving Model

Shortening the time between the customer order and delivery

Increasing the reliability of a process, product, or service to meet customer expectations

Lean Six Sigma

Define Measure Analyze ControlImprove

Techniques

Improve Service; Cost; Agility –> Target Process Cycle Times & Operations Lead Times


Tied to most Quality Improvement Approaches including Lean/Six Sigma

Relatively simple and easy to use by workers at all levels

Focused on facts and data, not opinion

Facilitate creative problem solving

• Process Map

• Check Sheet

• Histogram

• Fishbone Diagram

• Pareto Chart

• Scatter Diagram

• Control Chart

Basic Process Improvement Tools


Process Flow Chart

Check Sheet

Histogram

Fishbone Diagram

Pareto Chart

Scatter Diagram

Control Chart

Basic Process Improvement Tools

Process Quality Tool

• Define, Control

• Measure, Analyze

• Measure, Analyze

• Analyze

• Analyze

• Analyze, Improve

• Control

Maps Process Steps

Observed Process Data Collection

Shows Frequency Distributions

Cause and Effect Brainstorm Problems

Bar Chart showing Biggest Issues 1st

Collects pairs of data to study relationship

Plots Process against Upper & Lower Limits

DMAIC ApplicationCharts Typical Use


Process Flow Charts

Value of Process Flow Mapping

Identifies the sequence of activities or flow of materials and information in a process

Provides a picture of the steps needed to accomplish a task

Helps people understand the process

Sets the foundation for identifying critical to quality (CTQ) issues – selecting measurements, identifying root causes, identifying non-value added steps, reducing variation

DelayMove

ActivityProcessStep orActivity

Start or FinishPoint

Yes/NoDecision

Point

Input or

Output(Materials or Data)

DocumentCreated

Inspection

Mapping Symbols

Useful Rules Identify the entity that is the focal point (e.g. the customer, an order) Set clear boundaries including starting and ending points Keep it simple


Examine each delay symbol • What causes the delay?• How long is it?• How can we reduce the delay or

impact?

Review each activity symbol • Is it unnecessary or redundant?• What is the value relative to cost?• Can we prevent errors?

Investigate each decision • Does this step require an actual decision?

• If it is a checking activity, can it be automated or eliminated?

• Is it redundant?

Look for any loops • Would we need to repeat these activities if we had no failures?

• What are the costs for this loop?• Can this loop be eliminated? How?

Potential Improvement Opportunities


In Teams take 20 minutes to Map the Process

What is the focal point of the mapping effort? What are the boundaries of the process map? What detail is missing from this simple example?

Do the best you can to identify the major steps

Do not be overly concerned with using the “right” symbols

Calculate Min, Max and Average cycle time for the entire process

Note times and error rates against the corresponding process steps

Determine which steps Add Value and which steps do Not Add Value

Calculate the “cumulative” error rate

Process Flow Chart Mapping Exercise


Example – ORDER FULFILLMENT PROCESS

Customer Orders Part from Logistics Order Management (email or phone).

1% lost in communication

Order Pending Action (sits in “in box” around 2 hours (up to 4) until Work Order Raised.

Work Order emailed to Inventory Control to check stock availability and allocations.

Order sits in Inventory Clerk’s in-box until processed (0 - 2 hours). Process time 5 minutes.

Inventory Control Releases Order to Distribution Center if stock is available. If not Inventory Control notifies Logistics Order Management and provides estimated part availability date. (Supplier Lead Time?)

Logistics Order Management notifies Customer accordingly.

If stock is available pick list is prepared and held for stores worker. (0 – 1 hour)

Stores worker picks & packs order (average = 20 minutes)

Order waits for Inspection (average = 30 minutes)

Inspector takes 5 minutes to check order. Still, 1 out of 200 are wrong

Order released and prepared for shipment.

Transport collects order for delivery to Customer (1 - 3 hours)


• Helps Team Explore Possible Causes of the identified Problem (Effect)

• Framework for Brainstorming Root Causes under Main Categories (bones)

Effect e.g. Poor Cycle Time

Manpower Methods

Machines Materials

Fishbone Diagram – Cause and Effect

• For each bone drive down to root cause by asking “WHY” …. ……… (usually about 3 Levels to get at the real root cause)

• Each time there may be many reasons Why – you are looking for the primary “Why”

• Root Cause is an identified reason for contributing to the defect/problem

• Write down your ideas and Circle the Primary Whys on the diagram

• Primary Whys are the Root Cause that you prove-out with statistical tests

Problem Statement


Example Fishbone Diagram – Gas Mileage

Effect

Manpower Methods

Machines Materials

Poor Gas Mileage

Drives Too Fast

Always Late ImpatienceNo Awareness

Poor Maintenance

No $

In Car Temp & Climate

Windows Always Open

Over Use of Heat /Cool

Fuel Mix Too Rich

Carburetor Adjustment

Maintenance Issue

No Training

Poor Driving Habits

Over Use of Brake &

Accelerator

Wrong Tire Pressures

Tires Need Attention

Unbalanced Tires Don’t Know

Recommended Octane

Wrong Octane Gas

No Owners ManualLubrication Issue

No Oil Change

No $ Wrong Oil

No Clock

No Instruction

Final Why? = Root Cause


Define the Problem Statement EFFECT Draw a Fishbone Diagram using 4 categories

Manpower; Methods; Machines; Materials Use the Case Study issues described and your own

hypothesis to Identify Potential Root Causes

Case Study – Maintenance Turnaround On-time Delivery

Read through the Case Study

Put your teams choices for the top 6 root causes on a check sheet Randomly assign each of the 6 a number (1-6) Use a dice to generate 50 “observations” and plot them on your

check sheet Draw a Pareto Diagram of the data on the check sheet Prepare to present top 3 causes + recommended improvements

In Teams take 40 minutes to draw the Fishbone Diagram


88

Operations View• Too often Maintenance delays cause Operations readiness problems.

• Maintenance parts shortages are an ongoing issue.

• Maintenance keeps asking us to predict our requirements – they don’t appear to understand Operations difficulties and complexity.

• Maintenance always claim to be understaffed to meet our requirements.

• We frequently get bad news surprises from Maintenance (e.g. Your job is more difficult than expected so there will be a cost increase/time delay).

• Planned Maintenance should be matched against Operations requirements Not visa versa.

• Maintenance records are not as accurate as they need to be.

• Turnaround times are unreliable unless jobs are on the urgent list.

• The time it takes to repair and the types of corrective actions can be very different from one job to another even when discrepancies are similar.

• Maintenance don’t seem to understand that we are the Customers and they should try to do everything possible to meet our requirements.



89

Maintenance View• Operations always want everything immediately - they don’t understand that

we have limited resources and equipment.

• Inventory levels are impossible to plan without a robust workload forecast.

• Maintenance staff are constantly re-prioritising work to suit Operations changes but nobody is interested in the disruption/difficulty this causes.

• Maintenance personnel should receive more credit and time for multi-skilled training.

• We have to share some specialised tools and this causes delays.

• High skilled Maintenance Engineers often have to undertake unskilled work.

• Operations constantly keep changing their planned maintenance schedules.

• The Maintenance high workload pressure and changes cause mislaid and lost parts throughout the Maintenance and Logistics Departments.

• Inventory stock levels and records are hard to match and frequently incorrect because of constant work fluctuations.

• Too often urgent supplier purchase orders have to be placed for critical parts and we have to pay premiums for fast production and delivery.



90

Finance & Admin View• Maintenance costs are out of control – way above budget.

• Maintenance staff work too much overtime and it is questionable if this is necessary or productive.

• Overall Inventory levels are very high but we still have too many shortages.

• The ongoing conflict between Maintenance and Operations is unproductive.

• Perhaps we should outsource more of our Maintenance to Aircraft Manufacturers - this should be investigated.

• Maintenance administration processes should be streamlined and automated.

• Poor Maintenance workload forecasts cause excessive overspend costs.

• Maintenance has a skills profiling gap that needs to be resolved as soon as possible.

• We are often in conflict with our parts suppliers because they typically require longer lead times to deliver on-time at standard cost.

• We should benchmark our Maintenance activities against other similar Military and Commercial to identify improvement opportunities.



4 or 5 6 or 7 8 or 9 10 or 11 12

1 2 3 4 5 6

2 or 3DICE ROLL

CAUSE

DESCRIPTION

Fishbone Diagram – Check Sheet Team Name


Performance Improvement

Summary

Supply Chain ManagementImperatives

Ensure Your Strategy & Execution Focuses on Best …Service Cost Agility

Talk to Customers and Align Your Business to Match Their Requirements

Collaborate & Link with Customers + Partner & Work with Suppliers

Lead by Example & Inspire others to Teamwork & Help Make Improvements

Map Your Supply Chain Processes & Implement Improvement Opportunities

Use Your Time to Best Advantage – Must Do Should do Could do

Establish Key Performance Metrics (to give Direction & Change Behaviour)

Concentrate on Reducing Process Cycle Times & Operations Lead Times

1. Logistics & Supply Chain Management 2. Customer … · Customer Centric Reconfiguration 3....

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