SCORLeanSix Sigma Convergence Strategies

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SCOR/Lean/Six Sigma Convergence Strategies
Supply-Chain World Southeast Asia 2006 Conference

• Bob Ferrari, Supply Chain Program Director,
  Manufacturing Insights
• September 27 2006

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About IDC

• Founded in 1964
• Premier global market intelligence and advisory
  firm, providing
• Technology intelligence
• Industry analysis
• Market data
• Strategic and tactical guidance
• Over 775 analysts in 50 countries, including
  Singapore and mainland China
• A division of IDG, the world s leading
  technology media, research, and event company

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Manufacturing Insights
Manufacturing Insights provides benchmarks, best
practices, and business cases for leveraging
information technology to improve manufacturing
processes. This includes research on supply
chains, product development, and demand chains
for

• Discrete Manufacturing
• Automotive
• Aerospace Defense
• Industrial Equipment
• Consumer Durables
• Process Manufacturing
• Bulk Chemical
• Specialty Chemical
• Metals
• Pulp and Paper

• CPG and Retail
• Food Beverage
• Health Beauty
• Footwear / Apparel
• Household Goods
• Retail / Wholesale Distribution
• High Tech / Electronics Mfg
• Semiconductor
• Consumer Electronics
• Contract Manufacturing
• Computing Telecom

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Agenda

• Manufacturing Strategic Goals and New Economics
• The Value of Lean Sigma
• The New Supply Chain Economics
• Convergence The Fulfillment Execution System
  (FES)
• Summary Conclusions

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Observations

• Manufacturers are increasingly being driven by
  the needs for increased innovation, more
  responsive as well as agile value-streams and
  supply networks
• The speed and increasing complexity of business
  today requires the ability to make quicker, more
  informed decisions
• Lean / Six-sigma methods have value, but must be
  incorporated into an overall integration of
  strategic, tactical, and operational control loops

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Todays Strategic Goals for Manufacturers

• Innovation
• In continuous new products, business processes,
  and leveraged use of technology
• Do more with less, as well as faster
• Growth
• Geographic expansion of markets
• Finer Segmentation
• Services as well as product revenue
• Productivity
• Avoid the productivity vise
• More flexible manufacturing

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The New Economics for Technology
Innovation
Growth
Productivity
Strategic Goals
Lean calibrated control loops
SCOR process models
Lean / Six Sigma for process consistency
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From the High Performers
There have been many changes. We wanted to focus
more on technology, and we simplified our
business processes. Decision making in our
supply chain, for example, got a lot faster.
That has added agility to our organization. And
our organization has become much more
open. Jong-Yong Yun CEO, Samsung Electronics
Brilliant process management is our strategy. We
get brilliant results from average people
managing brilliant processes. We observe that
our competitors get average (or worse) results
from brilliant people managing broken
processes. A Senior Toyota Executive
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Agenda

• Manufacturing Strategic Goals and New Economics
• The Value of Lean Sigma
• The New Supply Chain Economics
• Convergence The Fulfillment Execution System
  (FES)
• Summary Conclusions

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Lean / Six-Sigma Today

• Manufacturers in one of three stages
• Implementing.
• Extending ..
• Leveraging ..
• Meanwhile, overall product, business, and
  supporting value-chain strategies are changing
  dramatically
• Desire to move toward increased demand-driven
  fulfillment
• Increased threats from lower-cost design and
  manufacturing competition in many industries
  demands increased agility
• New rules of product design, supply, and demand
  chain economics
• Need for more effective means for resolving
  external bottlenecks caused by variability
• Evidence continues to support the positive value
  of lean methods

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Lean Sigma Companies Outperform the Market
Faster Revenue Growth
Source IDC Manufacturing Insights, 2005
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Lean Sigma Companies Outperform the Market
Higher Margins
Source IDC Manufacturing Insights, 2005
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Lean Sigma Companies Outperform the Market
Lower Inventories (Inventory/Revenue)
Source IDC Manufacturing Insights, 2005
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Cross Industry Segments
Inventory as a Percentage of Total Revenues
Source IDC Manufacturing Insights, 2005
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Sustaining Benefits
Source IDC Manufacturing Insights, 2005
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IT Matters in Lean
Productivity improvement requires a combination
of best practices and IT
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Management Practices
0
2
Intensity of IT deployment
Source London School of Economics and McKinsey
study of 100 manufacturers (France, Germany, UK,
U.S.)
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Overall SCM Performance- Southeast Asia Region
Source iCognitive Annual Supply Chain Benchmark
Study, 2005
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Business Needs Are Changing
All the rules require that activities,
connections, and flow paths have built-in tests
to signal problems that make a seemingly rigid
system so flexible and adaptable to changing
circumstances
Harvard Business Review- September / October 1999
The real challenge for a company like Matsushita
is what Id call the quick in-and-out Get a
product out there earlier than rivals then
when the low-cost manufacturers come in and try
to beat them on pricing- get out
M.Y. Yoshino Harvard Business School
Professor No One Does Lean Like the Japanese
Take Matsushita. To counter low-cost rivals,
its taking efficiency to new heights Business
Week Magazine, July 10, 2006
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Agenda

• Manufacturing Strategic Goals and New Economics
• The Value of Lean Sigma
• The New Supply Chain Economics
• Convergence The Fulfillment Execution System
  (FES)
• Summary Conclusions

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Todays Challenge in Global Supply Chains
Asset Investment
Inventory Cost
Complexity of Supply Chain
Variability of Demand
Clarity of Information
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Value Chains Are Unique

• Asset-oriented- large investments in property,
  plant, and equipment with modest variation in
  manufacturing and demand
• Brand-oriented- fast-moving, consumer focused
  that deal with modest, to constant variation in
  demand
• Engineering-oriented- complex, engineered
  products with more predictable levels of demand,
  but variation in supply and manufacturing
• Technology-oriented- rapidly changing technology
  cycles drive high levels of supply,
  manufacturing, and demand variability

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The Supply Chain is Changing .Supply Chain
Economics and IDM

• The supply chain is no longer about parts,
  trucks, warehouses, and planes..
• The supply chain is rather a dynamic network,
  that
• Can predict or anticipate customer demands
• Can quickly sense changes in demand and supply
  streams
• Can manage pull-oriented / lean, and efficient
  processes
• Can quickly respond to unplanned events or
  disruptions
• Can leverage key information and quicker
  decision-making as a substitute for inventory or
  assets

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Decision Taxonomy
Guidelines Parameters Business Rules
Strategic
Network
Policy
Context
Information
Optimization
Operational
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Decision Architecture

• Semantic information instead of relational data
• Aggregated structured data combined with
  semi-structured, or unstructured information
• External rules instead of embedded rules
• Allow the business to dynamically construct a set
  of business rules to support changing business
  conditions
• Process instead of workflow management
• Event triggers
• Running state management
• Predictive analytics
• Portable vs. proprietary information interfaces
• More intuitive and component based
• Common industry standards of document exchange

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Supply Chain Economics- Context
Improve Context, Timeliness, Speed of Decisions
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Agenda

• Manufacturing Strategic Goals and New Economics
• The Value of Lean Sigma
• The New Supply Chain Economics
• Convergence The Fulfillment Execution System
  (FES)
• Summary Conclusions

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Convergence and Alignment
Tool
Org. Level
Corporate Supply Chain Executive
Business Unit Operations
Individual Plant/Function
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The Goal- Fulfillment Execution System
Decision Control Loops
Suppliers
Customers
Operations
Supply
Demand
Joint Product Designs Replenishment Sequencing
Demand Takt Time SOP Demand-driven Fulfillment
Execution Devices / Sensor Networks

• Key Information Flows
• Product
• Assets
• Schedule
• Cost
• Quality

Decision Control Loops
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Supply Chain Decision Saddle Points
Cost

• Placement or Optimization
• Assets
• Production
• Inventory
• Transportation

• Timing, Synchronization Harmonization of
• Planning
• Business Process
• Execution

Service Levels

• Organizational Factors
• Culture
• Process discipline
• Data Readiness
• IT and Business Readiness

• Variability Factors
• Product Demand Variability / Predictability
• Span of Control / Supply Network Scope
• Velocity of Product Lifecycle
• Lead Times

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Agenda

• Manufacturing Strategic Goals and New Economics
• The Value of Lean Sigma
• The New Supply Chain Economics
• Convergence The Fulfillment Execution System
  (FES)
• Summary Conclusions

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Summary Conclusions

• Manufacturers are increasingly being driven by
  the needs for increased innovation, more
  responsive as well as agile value-streams and
  supply networks
• The speed and increasing complexity of business
  today requires the ability to make quicker, more
  informed decisions
• Lean / Six-sigma methods have value, but must be
  incorporated into an overall integration of
  strategic, tactical, and operational control
  loops
• The goal is a Fulfillment Execution System

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Time for Your Questions?
My Contact Information Bob Ferrari
bferrari_at_manufacturing-insights.com