KPMG helped a spin-off automotive components manufacturer develop a supply chain strategy to optimize inventory and reduce costs.
As a spin-off, this client needed to set up its own independent global supply chain incorporating hundreds of plants and thousands of suppliers. Bringing together all these elements to support future growth would not be easy. Demand/supply planning was very decentralized and hampered at the plant level by a lack of standardized processes. Suppliers had many different faces to the organization, making the coordinated planning of suppliers, capacities, and constraints very difficult.
There was also no way to understand performance holistically across separate supply chain functions. Inventory and total landed costs could not be adequately managed, and information latency coupled with “bullwhipped” variations in demand resulted in significant upstream inefficiencies. In addition, IT infrastructures and systems were limited in their ability to support enterprise-wide planning and execution.
We developed an integrated planning vision based on a supply chain “control tower” approach that aligns demand and supply to optimize inventory, reduce costs, and improve service. In support of this vision, we created a detailed operating model with baseline processes and procedures, baseline requirements for operational data, new roles and process flows, tools and techniques for planning, and better ways to validate benefit drivers and assumptions.
To implement this operating model, we then developed a pilot planning program to establish “control towers” designed to support:
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We developed a detailed operating model backed by the design and implementation of a planning pilot program for implementing the model. To support integrated demand/supply planning, the operating model specifies that a center of excellence (CoE) will own a single approach to planning. A centralized view of demand will cascade demand requirements to plants and suppliers, including demand from all internal/external customers. Instead of supply plans being created at each plant, supply will be created centrally at the CoE and then disseminated to the supply base.
To improve visibility into capacity, capacity utilization data for plants and suppliers will be stored and managed by the CoE, including data at the plant-level view as well as the process-level view across the region. Inventory positioning strategy will be defined at the network level and include ways to evaluate tradeoffs. An integrated approach to sales and operations will leverage leading practices to provide a macro view of constraints, capacity, and requirements. Master data formats will be standardized and managed by the CoE.
The planning pilot program is based on a pilot framework that describes roles, scope, team members, and timelines for the program. At the time this story was written, we were training members of the pilot team on new processes, tools, and techniques. We were also monitoring pilot performance and modifying processes and procedures to develop a planning gold standard for the client. In addition, we were developing key business and technology requirements to assist with systems selection and scaling.
An overarching vision is critical. Point solutions, disparate systems, and processes need to be properly integrated and managed in a consistent fashion, backed by regular reviews and enhancements that support the company’s strategic business goals.
Value starts with data master data management, data cleansing, data normalization, and improved data gathering techniques serve as the foundation of demand/supply planning improvement. Accurate, timely, and comprehensive data increases the potential of greater business value from demand/supply planning and the supply chain as a whole.
Improving demand/supply planning is more than a matter of implementing tools and techniques. These are necessary but not sufficient. Improvement is a journey in structuring and restructuring the entire planning and operational organization.
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