local needs, global solution

Local needs, Global solution

Business Turnaround Business Turnaround of of

Baby Products Manufacturer in ThailandBaby Products Manufacturer in ThailandPartha BhattacharyyaPartha Bhattacharyya

Director, Enterprise ConsultingDirector, Enterprise ConsultingJSG Co., Ltd. , ThailandJSG Co., Ltd. , Thailand

[email protected]

SCOR Users Seminar, Denver CO, 27SCOR Users Seminar, Denver CO, 27thth Sep 2006 Sep 2006

SCOR In Action

© JSG Co., Ltd.

Nexus System ResourcesLocal needs, Global solution 2

Royal Industries (Thailand) Public Company Limited (RI) is a 37-year old Baby Products manufacturer in Thailand, with 800 employees

RI exports 90% of its own brand and OEM products to EU and US, and has Tier 1 capabilities for Product Development.

In January 2006, RI was facing imminent threat of closure due to financial instability and operational interruptions from internal and external factors in its supply chain.

A New RI Management Team took charge with strong focus on Financial and Operational turnaround. The RI Team prepared itself for the challenge.

JSG was appointed Consultant for IT and Business Process Improvement for RI

JSG performed a 3-month Business Consulting exercise analyzing, improving and measuring the related business & operating processes…..

Introduction & Background


Contents

Strategic Issues Summary

Vision of Rapid Supply Chain Process Optimizer

The RSCPO Concept & Methodology

Prototype Demonstration

Recommendations: Strategic Topics Summary

Progress of Implementation

Benefits Realized so far…

Conclusion


Financial Issues Summary

• Highly leveraged state, AP>>>AR

• Long order to cash lead time (80 days)

• Non cooperation of suppliers & vendors (due to AP)

• Delayed & incomplete shipment (Supplier non-delivery, QC

rejections)

• Quality related issues (Tooling, Lack of visibility of RM

standards, manufacturing defects)

• Inadequate capacity utilization (Lack of proper scheduling)

• High supply chain cost (Lack of Bargaining Power due to

poor cash-flow)

• Improper Product Costing data


Customer Issues Summary

• Fail to deliver on time to the customer

• Fail to the deliver the correct quantity

• High rejection on quality

• Lack of full Tier I capability (Engineering, Tooling)

• Lack of Marketing and new product development

capability

• Lack of KPI on customer satisfaction


• Lack of visibility of operational cost (material, MFG, labor, overhead)

• Cost of non delivery from vendor • Insufficient in-house injection capacity for components• No customer order visibility till shipment plan• Inadequate capacity utilization• Inadequate raw material availability on time• Obsolete production scheduling legacy system• High machine down time• High non value added activities• High accumulation of semi-FG/ FG inventory• High defects/ rejects and scraps• 80% wasted time consumed by the follow up actions as a

result of error and problem

Operations Issues Summary


• Undefined Roles & Responsibility• Adhoc assignment of the right people to the right job• Inadequate resource capacity and capability utilization• Lack of resource development planning • Lack of resource management planning• Lack of ability to rotate worker in the production line• Lack of ability to develop internal resource to fulfill the

requirement• High turn over of skilled and good people• Low resource productivity as a result of high non value

added activities• Lack of the accountability of business process owner• Lack of skilled resources for the right job

Human Resources Issues Summary


Contents








Conclusion


Rapid Supply Chain Process Optimizer (RSCPO) Vision

SCOR based innovative tool and methodology to analyze SCOR based innovative tool and methodology to analyze each Supply Chain node ‘Asset’, consisting of:each Supply Chain node ‘Asset’, consisting of:

• Business Processes (Processing Inventory into Throughput)Business Processes (Processing Inventory into Throughput)• Systems (Machines, application software)Systems (Machines, application software)• PeoplePeople

Apply SCOR Best Practices and KPIs to each Asset to Apply SCOR Best Practices and KPIs to each Asset to optimize:optimize:• Asset Utilization & Effectiveness, for SystemsAsset Utilization & Effectiveness, for Systems• Asset Efficiency, for Throughput and InventoryAsset Efficiency, for Throughput and Inventory• Asset Integration, with other Assets. In addition, SCOR Asset Integration, with other Assets. In addition, SCOR KPIs for each individual Asset is linked to overall Supply KPIs for each individual Asset is linked to overall Supply Chain KPIsChain KPIs

This approach enables visibility, flexibility and This approach enables visibility, flexibility and manageability of the supply chain Assets and benefits all manageability of the supply chain Assets and benefits all stakeholders by imparting industry best practices in stakeholders by imparting industry best practices in improved business processes to achieve ready ROI improved business processes to achieve ready ROI


Bridging the Disconnect: RSCPOVision, Mission

Business Goals, Scorecards

KPI’s

Business Process Optimization

Best Practices

Business Blueprint

The DisconnectRSCPO

(using SCOR andIndustry

Best Practices)

‘Rapid Supply Chain Process Optimizer’ methodology, provides an automated link between performance measurement criteria and business process improvement applying SCOR best practices. A SAP template-based solution can be configured downstream to achieve ‘Proof of Concept’ of implementing key processes.


Classic ERP Roadmap

1 2 3 4 5

Project Preparation

Business Blueprint Realization

Final Preparation

Go-live and Support

0

BPR / Best Practice


RSCPO Replaces the First Two Phases

1 2 3 4 5

Project Preparation


Final Preparation

Go-live and Support

0

BPR / Best Practice


RSCPO : The New Phase 1

1 2 3 4 5


Final Preparation

Go-live and Support

RSCPO


Contents








Conclusion


Overview of RSCPO Methodology

Measure ‘As-Is’ Process Model

Measure ‘As-Is’ Process Model

2

Build ‘As-Is’ Process Model

Build ‘As-Is’ Process Model

1

Identify Best Practices from SCOR


3 Derive ‘To Be’ Process Model

Derive ‘To Be’ Process Model

4 Business Blueprint from Process Change Form

Business Blueprint from Process Change Form

5

Business Goals and Target KPI’sBusiness Goals and Target KPI’s0


Target KPI’sTarget KPI’s0 Management defines Business Goals. Using SCOR and

ASAP database, RSCPO enables quick selection of relevant performance attributes and target KPIs.

Business Goals and Target KPIs


Build ‘As Is’ Process Model


1RSCPO provides SCOR-standard templates and process segments, which can be dragged and dropped to build ‘as is’ process model

Analyze process diagrams for each Asset in the Supply Chain



RSCPO helps to measure performance of the different Assets in the supply chain. User can use a spreadsheet, or can interface to Simulation Software for faster simulation

Measure ‘As Is’ Process Model

Measure ‘As Is’ Process Model

2

Measure Performance

SupplierA

SupplierB

MFGC

DCD

SCCustomer

Days of Supply

Cycle Time

Simulate Asset Efficiencies

Days of Supply

Cycle Time

or

Process Measurement & Benchmarking


Identify Relevant Best Practices

RSCPO shows list of SCOR Best Practices and KPIs that can improve business process and measure performance. User selects the ones that are most suitable.



3


The ‘To Be’ Model is drawn after identifying the required Best Practices. The same is then translated into a simple high-level process diagram, with mapping to relevant SCOR elements



4

High level Process Map with SCOR elements


SupplierA

SupplierB

MFGC

DCD

SCCustomer

Link Assets


The Process Change Form generated by RSCPO is used to prepare the Business Blueprint, containing the “To-be” process. This is mapped to SAP or other ERP systems

Use Process Change Form generated by RSCPO to prepare Business Blueprint

Use Process Change Form generated by RSCPO to prepare Business Blueprint

5

Create SCOR Process Change Form A listing of each process element in the supply chain with the change that has been identified, estimated benefits (in relation to the metrics to improve) and cost of implementing the change.

Prepare Business Blueprint


Contents








Conclusion


RI managed two basic value chains • Own brand Products• OEM Products

Value Chains

Own brand products

OEM-products

•Product BOM

planning •ATP, order

confirmation•Supplier

collaboration•Channel

inventory

visibility, VMI

•Supply visibility•Supplier

collaboration•Quick update

of demand

changes•Demand-

supply

management

•Production

flexibility•Short mfg

turnaround

time

•Bundling

services, supply

synchronization

merge-in-transit• order visibility,

delivery reliability•wide delivery

network

Su

pp

ly Ch

ain

Cap

ability

Req

uirem

ents

RI co

ord

inated

pro

cesses

PLAN SOURCE MAKE DELIVER

PLAN SOURCE MAKE DELIVER

RI managed processes


Contents Strategic Issues Summary







Conclusion


Recommendations: Strategic Topics Summary Reduce cycle times

• Dispute between departments and with suppliers• Setup In-house injection capacity for components

Improve cash-flow by improved planning

Challenge current supply chain structure to optimize cost, service and cycle time

Where Make-To-Stock is required, implement proper MTS planning systems to

avoid manual transactions

Improve integration with suppliers through collaborative planning, forecasting and replenishment

Improve integration with channel customers to smooth demand, improve availability, and reduce channel’s working capital

Improve forecasting and fulfillment processes to avoid ad-hoc processes

Implement pull-fulfillment both with end consumers and channel partners based on

market required lead times and cost requirements


Reduce cycle times Analysis indicated that RI was operating with longer cycle times than key Analysis indicated that RI was operating with longer cycle times than key

competitors in several parts of the supply chaincompetitors in several parts of the supply chain

• Disagreements between different parts of RI on the ability to ship on time.

Unbalanced and improperly scheduled Procurement, Production, Assembly &

Packing capacities resulting in incomplete shipment

• Longer cycle time caused by material shortages, peaks in demand, quality issues.

• Material shortages and demand peaks should be addressed by implementing

improved planning systems and planning on a collaborative basis, more frequently

with suppliers.

Requires implementation of an advanced planning system such as SAP

Requires involving suppliers in the planning cycle

Requires giving suppliers earliest possible warning of demand changes

Requires direct planning relationship between engineering, sales and suppliers.

Need “Available to promise” functionality in the advanced planning system


Reduce cycle times Long cycle times are already built into the process because of built times, Long cycle times are already built into the process because of built times,

ship times and material procurement timesship times and material procurement times• Either accept long lead times or hold inventory depending on the product range.

Where inventory is held, a proper make-to-stock planning system should be used with updates to reflect changes in actual demand at the production centers.

• The existing supply chain structure should be challenged to see if shipment can be achieved at short notice to reduce final assembly and delivery lead times.

• Adopting a postponement strategy means that inventory could be held as module level, not at finished goods level, thereby reducing overall inventory holding for any given cycle time

It is possible to hold product in module form or in semi-finished state so as to reduce the number of SKUs when compared with finished goods. The demand for modules and semi-finished goods should be smoother and more predictable therefore reducing the requirements for very short cycle times.

• Issues raised during the workshop included: out source production to a supplier which has lower overhead or is already

outsourcing for other people so that they can afford to have more production capacity at short notice

simplify the product range so that final assembly is less complex


Improve integration with channel customers Channel customers currently serve their customers either through holding Channel customers currently serve their customers either through holding

inventory or by ordering from RI as customers place orders on theminventory or by ordering from RI as customers place orders on them• When customers hold inventory they run the risk of obsolescence, and higher costs• When they order from RI, they run the risk that the lead times they offer are too long for

their customers and they run the risk of losing customers• Collaborative planning, forecasting and replenishment (CPFR) process for main channel

customers. Requires visibility of the customer’s sales out plus their inventory, normally achieved

through an internet-based communications system linked to the customer’s in-house management system.

In return RI undertakes to maintain superior levels of product availability at the customer level whilst maintaining low levels of inventory

Forecasting is a collaborative process between RI and the channel customer• This approach has many benefits:

improves product availability at the channel customer and therefore increases sales reduces working capital in the channel customer’s business, making RI products

easier to sell provides RI with better intelligence of end sales and therefore increases forecast

accuracy smoother demand flow & reduces the peak loading on supply chain volumes & costs allows proactive marketing of incentives based on sell out rather than sell in


Implement new forecasting & demand fulfillment processes If the supply chain structure is optimized in terms of work centers, assembly If the supply chain structure is optimized in terms of work centers, assembly

centers, inventory holding and lead times, new forecasting and demand centers, inventory holding and lead times, new forecasting and demand fulfillment processes should be introducedfulfillment processes should be introduced

• Existing separation between forecasting, planning and fulfillment identified

• Need capability to forecast at multiple levels and to allow orders to consume the

forecast according to business rules

• Reduce the level of manual processes and work-around solutions, making the

business smoother and easier to manage

• Better planning to enable rapid fulfillment at short notice as the orders come in

• If it is necessary to hold inventory because of cycle time constraints, the planning

system should manage the replenishment of the inventory so that the cost of

holding inventory, service levels, manufacturing and distribution efficiencies are

all optimized

• Link planning system to suppliers’ systems so as to reduce overall planning cycle

time and to allow more frequent planning


Implement new pull-fulfillment strategies Pull-fulfillment strategies both for end customers and for channel customersPull-fulfillment strategies both for end customers and for channel customers

• Service level expectations: Currently a blanket 60 days is given, but is this right?

Is this what all customers are demanding? What is the optimum time? Define

target lead times by product group by market/customer group.

• Implement pull-fulfillment approach for the end customer market based on the

right balance of cost and service, closer to the markets within cost constraints

• Implement pull-fulfillment approach for channel customers. If cycle times are

short enough, channel customers may be able to eliminate inventory.

• To implement a pull-fulfillment approach, the customer interface should be linked

in to “Available to promise” and order tracking functionality, since reliability of

lead time is frequently as important, if not more important, as quoted lead time.

• The “available to promise” system should be updated of changes made to supply

allocation to customers, & immediately notify changes to agreed delivery dates.









Conclusion


Conduct Focus Group workshopConduct Focus

Group workshop

List and Classify the current issues and concerns

List and Classify the current issues and concerns

As-is KPIAs-is KPI

Prioritise the change action needs

Identify Business Opportunities &

Recommend Solutions

Identify the change action needsIdentify the change action needs

Assess an Issue Status Identify Opportunities

Review Enterprise Business

Analysis and Validation

BusinessBusiness

System & processesSystem & processes

Business Issue & Root Cause Analysis

Business Issue & Root Cause Analysis

System Issue & Root Cause Analysis

System Issue & Root Cause Analysis

Objectives:

Strategy WorkshopStrategy

Workshop

Business Process Improvement Workshop Road Map

Transition plan


Business Process Improvement workshop plan

Week 1 Week 2 Week 5 Week 6

Review Enterprise Business

Analysis and Validation

Recommendation

Business Process Assessment Week 8

Key Supply Chain Process RI Initiative Ref No. Reviews Phase Analysis Phase

In-house Production & Capacity Planning 8,11, 13,14 9 & 12 Jun 06 22 June, 18 July 06

Order to Cash 5,17,18,19 13 & 14 Jun 06 26 June, 19 July 06

Procurement to Pay 6,7,9,12 15 & 16 Jun 06 28 June, 14 July 06

Accounting Cycle & Closing process 10,20 19-Jun-06 20-July-06

Demand Management & Operation Planning

3, 4, 15,16 20 & 21Jun 06 25,27 July, 1Aug 06


Item Issues

Impacted process cycle

O2C P2PProductio

n

Demand &

PlanningAccountin

g

1Delay work completion led late response &

submission

2High rework, revised, duplicated work, manual work, reconciliation, cancellation, unnecessary work

3Wasted time, high unnecessary cost, high defect &

rejection

4Inconsistent quantity, quality of work, product,

services

5Take long lead time, unpredictable expected date &

time

6 Communication, human, work error

7Incorrect information and or unreliable information (Low accuracy and untimely info.)

8Lack of visibility, traceability, reliability, transparency both of internal & external process cycle

9

Insufficient or inadequate quality, capability, capacity of

resource (skilled people, machine, equipment, system,

working environment)

10 Cannot achieve the target or hit the KPI

11High turnover (lose skilled people then get unskilled

people)

Process cycle team are impacted by respective issue

Finding of Common Issues


Item Root Cause

Cause occurred in the process cycle

O2C P2PProductio

n

Demand &

PlanningAccountin

g

1

People related (inactive, uncommitted, unresponsive, high turn over of skilled resource, human error,communication error, unskilled people)

2Unclear, criteria, policy and direction and or lack ofownership of decision maker

3

Lacking of good system support, non-integrated system,

No any support tool, system provided to the people

4

People are not strictly follow the process, policy and procedure and lack of the internal control and audit

process

5

Complexity of work (high dependency, constraint) pressure

from external factor

6

Old/traditional management style led no strategic and KPI

measurement

7

Inadequate assign and manage the people on the job and

Inadequate well manage the employee salary package,

benefit and motivation program

8

Internal capacity resource constraints, old machine, people,

low reliability of machine, people, unskilled, low skilled, no

people/knowledge development, no machine maintenance

9Unbalance workload, lack of tool to support workload management

10

Business process are not well designed and are not update

to support new requirement/issue

Analysis of Common Root Cause


Item Issues

Root Cause Type

PeopleProces

sSyste

m Policy

Organization &

Com. Cultur

e

1Delay work completion led late response &

submission

2High rework, revised, duplicated work, manual work, reconciliation, cancellation, unnecessary work

3Wasted time, high unnecessary cost, high defect &

rejection

4Inconsistent quantity, quality of work, product,

services

5Take long lead time, unpredictable expected date &

time

6 Communication, human, work error

7Incorrect information and or unreliable information (Low accuracy and untimely info.)

8Lack of visibility, traceability, reliability, transparency both of internal & external process cycle

9

Insufficient or inadequate quality, capability, capacity of

resource (skilled people, machine, equipment, system,

working environment)

10 Cannot achieve the target or hit the KPI

11High turnover (lose skilled people then get unskilled

people)

Root cause type led by respective issue

Cause Type Analysis of Common Issues


Lose opportunity of cashLose opportunity of cash as a result of long order to cash lead time as a result of long order to cash lead time Lose sales opportunitiesLose sales opportunities as a result of delay, incomplete, incorrect as a result of delay, incomplete, incorrect

delivery delivery Sales declineSales decline led by the decrease of customer satisfaction led by the decrease of customer satisfaction Less profitabilityLess profitability as a result of higher cost and under customer as a result of higher cost and under customer

claim situationclaim situation UncompetitiveUncompetitive in the market as a result of high operation cost in the market as a result of high operation cost Capital Lock upCapital Lock up from the high accumulate inventory investment from the high accumulate inventory investment Lose customer loyalty Lose customer loyalty Lose market coverage and shareLose market coverage and share Lose capital utilization opportunityLose capital utilization opportunity Lose product and company creditability, image and reputationLose product and company creditability, image and reputation Lose opportunity of business expansion or new market/product Lose opportunity of business expansion or new market/product

penetrationpenetration Poor business performance and low shared holder valuePoor business performance and low shared holder value Barrier to achieve “Market Leader” positionBarrier to achieve “Market Leader” position

Key Business Impact Caused by the issues









Conclusion


Issue List

Process Improvements Implemented

Plan: Demand management and forecasting process Demand management and forecasting process (New)(New) Sales & operation planning Sales & operation planning (New)(New) Pricing Pricing

Source:Source: Procurement processProcurement process Replenishment planning both of RI and RI’s business partnerReplenishment planning both of RI and RI’s business partner Credit & collection process (cash in & cash out)Credit & collection process (cash in & cash out)

Make:Make: New Product Introduction process (NPI) New Product Introduction process (NPI) Master Production Scheduling process Master Production Scheduling process (New)(New) Manufacturing Resource Planning process Manufacturing Resource Planning process (New)(New) Production execution and sales operation execution alignmentProduction execution and sales operation execution alignment

Deliver:Deliver: Order and product allocation management processOrder and product allocation management process Shipping and transportation thru billing processShipping and transportation thru billing process


Issue List


Order to Cash cycle time of 35 days (down from 80 days)Order to Cash cycle time of 35 days (down from 80 days) Production volume more than doubled, without addl cash-injection for Production volume more than doubled, without addl cash-injection for

RMRM Sales Revenues up from $0.9m to $1.6m per month, better cash-flowSales Revenues up from $0.9m to $1.6m per month, better cash-flow 90% On-time delivery (shipping)90% On-time delivery (shipping) 50% reduction of FG Inventory through Sales ($3m)50% reduction of FG Inventory through Sales ($3m) 100% reduction in obsolete semi FG Inventory through scrap sales100% reduction in obsolete semi FG Inventory through scrap sales JIT Procurement of Silicone and Pigments (Supplier collaboration)JIT Procurement of Silicone and Pigments (Supplier collaboration) Acquired 50% in-house injection capacityAcquired 50% in-house injection capacity Reduction of Suppliers’ AP by 70% (currently at 45 days)Reduction of Suppliers’ AP by 70% (currently at 45 days) Individual Project Teams dedicated for each Customer Group from Individual Project Teams dedicated for each Customer Group from

Sales Order through Delivery ProcessesSales Order through Delivery Processes Recruitment of Engineering and Tooling team Recruitment of Engineering and Tooling team Implementing New SAP systemImplementing New SAP system Financial Restructuring with Private Equity in progressFinancial Restructuring with Private Equity in progress









Conclusion


ConclusionSupply chain and related strategic opportunities were utilized RI’s operational Supply chain and related strategic opportunities were utilized RI’s operational

performance. performance. • Potential to restructure the supply chain

-Pull manufacturing, streamline inventory holding-BTO/BTS balance-lead-time reduction

• Policy and process changes-Emphasis and support for forecasting, demand management, and customer management-Fulfillment policies consistent with forecasted demand and to allocation-Sharing information and collaboration with channel partners and key suppliers-Product management strategy and clear supply strategy-Monthly inventory planning

• System changes-Application of SAP to enable collaboration effort, ATP, and other constraint planning requirements

• Stakeholder commitment and KPI-KPIs that holistically measure and are aligned to corporate targets


For further information:For further information:Contact Us: Contact Us:

www.jsg.co.thwww.jsg.co.th

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Flourish!

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Thank You

local needs, global solution

Documents

lack of visibility

quality lack

activities lack

time high

customer issues summary

tooling lack of marketing

financial issues summary

result of high