tocico 2012 conference implementing replenishment in a …...tocico 2012 conference implementing...

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.


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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Contents

An Overview of Teledyne

DALSA

8 Messages to Share

Summary and

Discussion

4



Teledyne DALSA - EveryWhereYouLook

EverwhereYouLook_720p.mp4.mpg

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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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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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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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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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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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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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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

11

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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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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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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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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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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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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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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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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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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

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n

Pir

an

ha 2

Oth

er

Sp

yd

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2

Sp

yd

er

3

Sir

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Min

erv

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un

t M

an

ag

er

1

Bu

ye

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Su

pp

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r A

cco

un

t M

an

ag

er

2

Bu

ye

r 3

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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

21



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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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



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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