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1 © 2012TOCICO. All rights reserved.
TOCICO 2012 Conference
Implementing Replenishment in a
Hi-Tech Environment
– A Teledyne DALSA Case Study –
long lead times high mix
low volume high variability
Presented By: Paul Balmforth, Teledyne DALSA
Duncan Patrick, CMS Montera Inc.
June 5, 2012
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Objectives
Share what we learned about TOC Replenishment and how we advanced this great solution
Share some of our detailed
methodologies and
approaches
Share some of our
implementation insights
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Contents
An Overview of Teledyne
DALSA
8 Messages to Share
Summary and
Discussion
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Teledyne DALSA - EveryWhereYouLook
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Teledyne DALSA
• Leverage image sensor design (CCD+CMOS) and our own CCD wafer foundry
• Depth of technology and breadth of product offering
• Provide a total package of vision components (sensors, cameras, imaging processing and software to tie it all together)
• Unique proficiency in developing custom products
Secure supply of silicon wafers
Image Sensors
Digital Cameras
Frame Grabbers
Image Processing Software
We are the digital imaging industry’s only completely vertically integrated supplier, offering “Silicon to Smart Cameras”
Smart Cameras
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
About Teledyne DALSA
DWO Manufacturing - 185 employees, generated $140m sales revenue in 2011.
Organised into 4 self contained business units (“Value Streams”) KPI driven. Formal monthly reviews against GOPs.
• Frame Grabbers, approx. 45,000 units in 2011. ASP $500 to $2,000. 50 products.
• Standard Product Cameras, approx. 40,000 units in 2011. ASP $500 to $15,000. 350 Products.
• Standard Product Sensors , approx. 75,000 units in 2011. ASP $100 to $2,000. 150 Products.
• ASCFO and semi custom, approx. 1,000 units in 2011. ASP $2,000 to $300,000. 50 products
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Teledyne DALSA TOC Journey
Q4, 2009
TOC Operations
Training
Q1, 2010
TOC Application Assessment
Q2, 2010
TOC Executive Training
Q3, 2010
DBR Pilot in Sensor Value
Stream
Q1, 2011
CDR Design in Camera
Value Stream
Q2, 2011
CDR & DBR Full Scale
Rollout
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Results – Then and Now
Key Performance Measures Then (Jan 2011)
Customer Lead Time
Median
% Orders Shipped in 2 days
% Orders Shipped < 1 week
% Orders Shipped in < 3 weeks
12 Days
10%
22%
40%
On-Time Delivery to Customers 85%
RM Part Availability 65%
FG Availability 62%
FG Inventory Turns (replenished) n/a
Now (Mar 2012)
6 Days
19%
38%
76%
97%
97%+
97%+
10X
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
16 Weeks, Large MOQ
8 to 16 Weeks, Medium MOQ
Manufacturing Lead Time – 3 to 10 Days
TeledyneDALSA
4 to 8 weeks, Large MOQ
10 to 12 Weeks, Large MOQ
Printed Circuit Board Assemblies
Metal Work
Other Hardware
Sensor - Wafers
Sensor - Glass & Package
Customer tolerance time is significantly shorter than Total Supply Time
Customer Lead Time Request – 1 -2 wks
Customers
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Characteristics
Demand can be highly variable – more than 10x
Demand is often low volume but repetitive
High number of finished goods and RM parts
Ongoing technical revisions make Product Life Cycle of RM Parts much shorter than Finished Goods
Some very long supplier lead times and large MOQs relative to demand
Unpredictable and potentially very large yield loss on Wafers
Ongoing management pressure to increase inventory turns
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
16 Weeks, Large MOQ
8 to 16 Weeks, Medium MOQ
Manufacturing Lead Time – 3 to 10 Days
TDALSA
4 to 8 weeks, Large MOQ
10 to 12 Weeks, Large MOQ
PCBA
Metal Work
Other Hardware
Sensor - Wafers
Sensor - Glass & Package
Implemented CDR and DBR
Customer Lead Time Request – 1-2 wks
Customers
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Top 8 Messages to Share
8. Get the Necessary Buy In for the Cultural Change
7. Abandoning the Forecast is a Leap of Faith
6. Reducing Supplier Lead Times means helping Suppliers establish their own strategic Stock Buffers
5. Size Stock Buffers to better handle Long Lead Times and Large MOQs
4. The timing of the orders in the buffer is not less important than the total amount in the buffer
3. Waiting for Inventory to stay ‘too long’ in the red zone is ‘too late’ to re-size for LLT items
2. Align Buying Structure to be more Sales Focused vs. Supply Focused
1. Implement a Replenishment Policy Matrix – Item and Order
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Message #8
Get the Necessary Buy In for the Cultural Change
Established Self Managed Value Streams with a focus on clear metrics and goals, exposed problems demonstrating the need for step function change in performance
Introduced TOC principles to key influencers in Teledyne DALSA, showing the need for change and the possibilities with TOC
Introduced TOC to every person in Manufacturing via “The Goal” movie sessions with stop/go and questions.
Shared the vision across the company
Implemented Pilot DBR, winning the “Team of the Year”
Ensured my team and I “Walked the Talk” to keep TOC as the only path
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Message #7
Abandoning the Forecast is a Leap of Faith
The forecast was a “crutch” for operations, all hiring, material purchases, facility expansion was related to the forecast
High backlog was seen as a positive measure of business health
• The “JR” rule had stood unchallenged for 20 years, multiply starting backlog by 2.5 and you have the Q billings
• Post CDR and DBR we have two quarters at 4.7 and 4.1 multiples of the starting backlog
Forecast accuracy at the part number level was an impediment to Manufacturing
Typical accuracy of the forecast was 15%, leading to ordering the wrong material and building the wrong product
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Message #6
Reducing Supplier Lead Times means helping Suppliers
establish their own strategic Stock Buffers
TD PCBA
PCBA Supplier
Component Suppliers
• 40 PCBA
16 weeks SLT $3M On-Order
• Avge - 50 components / PCBA
• Max 120 components • Total - 700 components • 2 week Mfg. LT
1 to 40 weeks SLT
TD PCBA
PCBA Supplier
Component Suppliers
SLT < 6 wks
• 40 PCBA
8 weeks SLT $1.5M On-Order
• 300 Components with SLT>6 wks
• 60 Components unique to TD
Then
Now
EXAMPLE
Component Suppliers
SLT > 6 wks
Purchase to Order
Purchase to Stock
$300K potential liability
• Inventory Liability savings moving from 16 wks to 8 wks • $1.5M savings less $300K potential liability
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Message #5
Size Stock Buffers to better handle Long Lead Times
and Large MOQs
AC across SLTV
MC across OLT
MC-AC across SLT
MOQ
½ MC across OLT
Demand Driven MOQ Driven
½ MC across OLT
AC across SLT AC across SLT
• Definitions
− Supply Constraints
− OLT Order Lead Time
− SLT Supply Lead Time
− SLTV Supply Lead Time Variability
− MOQ Minimum Order Quantity
− Demand
− AC Average Consumption
− MC Maximum Consumption
MC
ac
ros
s S
LT
• The size of the zones change according to the demand variability and lead time structure
• The bigger the OLT or MOQ, the bigger the yellow zone
• The longer the SLT, the bigger the green zone
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Message #4
The timing of the orders in the buffer is not less
important than the total amount in the buffer
• Having enough on order to keep the Buffer full is not sufficient – you need to have visibility of PO frequency and timing in the pipeline
• Supply Pipeline Health
On Order Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8
Then 72
Now 24 24 24
OLT = 1 week; MOQ = 24; SLT = 8 weeks; AC = 12 / wk
On Order Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8
Then 50
Now 10 10 10 10 10 10
OLT = 1 week; MOQ = 1; SLT = 6 weeks; AC = 10 / wk
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Supply Pipeline Health
• The purpose of Supply Pipeline Health is to have visibility into the nature and structure of the On Order Supply
ABC 3476
ABC 3476
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Message #3
Waiting for Inventory to stay ‘too long’ in the red zone
is ‘too late’ to re-size for LLT items
Long Lead Time RM Resizing
• Consideration - Actual AC measurement – 60d, 120d, 180d
− Chose to use 60d to 120d for Increases and 180d for decreases
Actual RM AC :
Buffered RM AC
Actual
RM AC : FG AC
Notes
Increase if > by 120% Approx. Equal Use Actual AC
> First confirm if
Inventory Adjustment
or unexpected Yield
< First confirm if FG
stock reduction
Decrease if < 50% Approx. Equal Only go half way
> See above
< See above
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Message #2
Align Buying Structure to be more Sales Focused vs.
Supply Focused
Commodity PCBAs
Bu
ye
r 1
PCBA Suppliers
Commodity Wafers /
Packages / Glass
W / P / G Suppliers
Commodity Metalwork / Hardware
MW / HW Suppliers
Sales Forecast to Production Forecast into MRP
Camera Families
Ge
nie
Fa
lco
n
Pir
an
ha 2
Oth
er
Sp
yd
er
2
Sp
yd
er
3
Sir
ius
Min
erv
a
Rig
el
Su
pp
lie
r A
cco
un
t M
an
ag
er
1
Bu
ye
r 2
Su
pp
lie
r A
cco
un
t M
an
ag
er
2
Bu
ye
r 3
Su
pp
lie
r A
cco
un
t M
an
ag
er
3
THEN
Commodity PCBAs
PCBA Suppliers
Commodity Wafers /
Packages / Glass
W / P / G Suppliers
Commodity Metalwork / Hardware
MW / HW Suppliers
Replenish Stock Buffers
Camera Families
Ge
nie
Fa
lco
n
Pir
an
ha 2
Oth
er
Sp
yd
er
2
Sp
yd
er
3
Sir
ius
Min
erv
a
Rig
el
Supplier Account
Manager 1
Supplier Account
Manager 2
Camera Family Group
A Buyer 1
Supplier Account
Manager 3
Camera Family Group
B Buyer 2
Camera Family Group
C Buyer 3
NOW
- Buying to ensure complete camera supply
- Much easier to ensure alignment between RMSB and FGSB
- Better suited to re-size RM Parts as demand changes for FG parts
- Helps buyer to better understand the product and market to make better decisions
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Message #1
Implement a Replenishment Policy Matrix – Item and Order
• The Replenishment Policy should not only be ITEM specific – it should also be ORDER specific
− Typically, customers were willing to wait for larger orders (>6)
• MTS Lead Times offered at 1 week or less
• MTO Lead Times offered at 2 weeks plus
Parts – PTS Parts – PTF
FG - MTS A: <=6 per Tx
B: All
FG - MTO
C: All A: >6 per Tx
45% of Volume
50% of Volume 5% of Volume
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© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Summary - 8 Messages to Share
8. Get the Necessary Buy In for the Cultural Change
7. Abandoning the Forecast is a Leap of Faith
6. Reducing Supplier Lead Times means helping Suppliers establish their own strategic Stock Buffers
5. Size Stock Buffers to better handle Long Lead Times and Large MOQs
4. The timing of the orders in the buffer is not less important than the total amount in the buffer
3. Waiting for Inventory to stay ‘too long’ in the red zone is ‘too late’ to re-size for LLT items
2. Align Buying Structure to be more Sales Focused vs. Supply Focused
1. Implement a Replenishment Policy Matrix – Item and Order
23
© 2012 TOCICO. All rights reserved.
TOCICO 2012 Conference
Presenter Bios
Paul Balmforth, BSc • Paul Balmforth is Vice President of
Teledyne DALSA Digital Imaging where he is focused on exploiting competitive technical product design advantages to maximize profit through innovative manufacturing processes.
• Prior to Teledyne DALSA, Paul successfully implemented DBR into Seagate Microelectronics, where he held the position of Director of Process Engineering. Paul was first exposed to “The Goal” as a Staff Process Engineer at National Semiconductor.
• Paul holds a Bachelor of Science (Honours) from Lancaster University.
Duncan Patrick, MBA, CMC • Duncan Patrick is an Executive with CMS
Montera Inc. where he is working with clients to assist them design and implement Theory of Constraints based solutions focused on accelerating project execution, optimizing production execution and synchronizing inventory replenishment.
• Prior to CMS Montera, Duncan was a member of the senior leadership team of an industrial distributor, consulting manager at Ernst & Young, and Landman with Husky Oil.
• Duncan holds an MBA degree from the Richard Ivey School of Business, Western University and a Bachelor of Commerce degree (with distinction) from The University of Calgary. Duncan is certified by the Theory of Constraints International Certification Organization in all aspects of TOC. Duncan is also a Certified Management Consultant from the CAMC.
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