Chemical Supply Chain
- 1. Lean E2E Supply Chain Planning Meeting the Paradigm Change in the Chemical Industry Logichem 2010, Düsseldorf Dr. Jörg Schmid, Christoph Lieth
- 2. AGENDA 1 Camelot – Thought Leader in LEAN SCM 2 21st Century Supply Chain Planning Paradigm 3 Lean Planning & Scheduling for Chemical Champions 4 Your way forward © Camelot IDPro AG 2
- 3. Camelot – Thought Leader in LEAN SCM Camelot IDPro – Your partner of choice Who we are Who we are Where we are Where we are Management Consulting from strategies to results Camelot Group Europe Established 1996 in Germany Camelot IDPro AG and the US. Now top ranking for Cologne Cologne the following industries: Mannheim (HQ) Mannheim (HQ) Munich Munich Zürich Zürich Chemicals & Basel Basel Petrochemicals Pharmaceuticals & Camelot Group USA Healthcare Camelot / /Bristlecone Camelot Bristlecone (Santa Clara, USA) (Santa Clara, USA) Camelot / /BPS Camelot BPS (Helsinki) (Helsinki) Camelot / /Profit Point Camelot Profit Point Consumer Products (Wynnewood, Philadelphia, USA) (Wynnewood, Philadelphia, USA) Camelot / /enowa Services Camelot / /Spain Camelot Spain (Barcelona) (Barcelona) Camelot / /BPS Camelot BPS (Oslo) (Oslo) Camelot enowa Services Camelot / /Trilog Camelot / /BPS (Exton, Philadelphia, USA) Camelot Trilog Camelot BPS (Exton, Philadelphia, USA) (Milan) (Budapest) Camelot Group Asia (Milan) (Budapest) Operating worldwide, with an Camelot / /Coffra Camelot Coffra (Paris) Camelot / /BPS Camelot BPS (Tallinn) (Paris) (Tallinn) international network of more Camelot / /IDPro Asia Camelot IDPro Asia (Singapore) (Singapore) than 320 consultants in Europe Camelot / /ISS Consulting Camelot ISS Consulting (Kuala Lumpur, Malaysia (Kuala Lumpur, Malaysia and 1.200 consultants within the Camelot International Group Camelot IDPro is an international consulting organization with leading expertise in the Chemical, Camelot IDPro is an international consulting organization with leading expertise in the Chemical, Pharmaceutical and Consumer Goods Industry Pharmaceutical and Consumer Goods Industry © Camelot IDPro AG 3
- 4. Camelot – Thought Leader in LEAN SCM We provide holistic consulting services along the entire Value Chain What we offer Classic Management strategic consultancy Camelot Camelot IDPro ITLab Operations Process and IT consultancy Subcontractor Process & Strategy IM / Systems Organization Camelot Core Competences Strategy & Operations Strategy Implementation Process & Value Chain Management Sourcing & Operations & Logistics & Sales & Procurement SCM Transportation Customer Service Organization & Business Transformation A full-service consultancy – with core competences in operations strategy implementation, holistic reengineering A full-service consultancy – with core competences in operations strategy implementation, holistic reengineering of Value Chains, as well as organizational alignment and business transformation. of Value Chains, as well as organizational alignment and business transformation. 5/5/2010 © Camelot IDPro AG 4 4
- 5. Camelot – Thought Leader in LEAN SCM Camelot addresses the critical value chain levers of the process industry with its key-services Management & Business Assess Design Implement Sustain Processes & Information Operational Strategy Strateg y Lean Operations x Strateg y x Service x SC Performance Organizat ion Flo w design Organizat ion Flo w design SC Strategy Development and x Strateg y x Value Chain Lean SCM Flo w Organizat ion design Excellence Processes x x Processes Assessment Processes Triangle Costs Working Capital Alignment Systems & Data x Operational Excellence Systems & Data Systems & Data SC Model Design Benchmarking Portfolio Management Opportunity Segmentation & Classification A B C SKU Management Identification X SCM Segmentation Y SC Customer Service Configuration Process Classification Z Supplier Management & Development Service Network Optimization & Process Improvement Working Capital Mgt Value Chain SC Planning Processes (S&OP) Plan Value Based Network Design Excellence Harmonization & Consolidation Source Make De liver Triangle Logistics & Transportation Mgmt. Active Asset Management Costs Working Capital SC Collaboration Advanced Inventory Management Business Transformation & Information Technology SCM APO SCM APO APO 5.0 ICH APO 5.0 ICH XI XI ALE Organization Software Evaluation BW 3.5 BW 3.5 CIF CIF R/3 4.7 R/3 4.7 Organizational Alignment R/3 4.6 R/3 4.6 Blueprinting & Implementation ALE ECC 5.0 ECC 5.0 Supplier/ Supplier/ Inter- Inter- Inter-- Inter Customer Customer company company company company Change Management SC Compliance Performance Management Data Quality Vision, M ission, Corporate Strategy Sustainability KPI EBIT Key Stra te gy upda te ROI / ROCE Performance EVA Indicators Define & cascad e Stra te gic le arnin g o bje cti ves Strategic & fe edba ck Planning Strate gic Business Planning Strategy moni to ring action pl ann ing Sales Master Data Management (Process & Organization) BPI CM Business Unit Ta rget v lue s a Costs Risk Management Performance Indicators COGS Performance Measu rement Operational Detai led op eration al pl ann ing Planning PPI Process Pl an executi on Forecast Accuracy Process Performance optimizati on Cycle times Business Performance Management Indicators Data Quality Evaluation & Improvement Activity costs Strategy to results… Strategy to results… and and …Innovation to solution! …Innovation to solution! © Camelot IDPro AG 5
- 6. Camelot – Thought Leader in LEAN SCM We have a profound industry expertise with strong focus on the process industry Where we work Management Classic strategic consultancy Strategic and process consultancy Camelot IDPro Operations Process and IT consultancy Subcontractor Strategy Process & Org. IM / Systems Implementation Camelot IDPro AG - -aafully committed partner to make effective and efficient Value Chain Management for Camelot IDPro AG fully committed partner to make effective and efficient Value Chain Management for the Process Industry happen. Strategy to results. Innovations to solutions. the Process Industry happen. Strategy to results. Innovations to solutions. © Camelot IDPro AG 6
- 7. AGENDA 1 Camelot – Thought Leader in LEAN SCM 2 21st Century Supply Chain Planning Paradigm 3 Lean Planning & Scheduling for Chemical Champions 4 Your way forward © Camelot IDPro AG 7
- 8. 21st Century Supply Chain Planning Paradigm Lean Planning and Scheduling Lean Thinking How do Lean Principles shape planning and scheduling processes? Processes Processes LPS Organization Organization • Easy planning concept • Low inventory levels Modern production • Stable cap. utilization Current challenges in systems • Reduced lead times the chemical industry • Less planning effort What are the How can the planning requirements of Lean approach Manufacturing to an dramatically increase appropriate planning Information Information customer service and Systems Systems approach? reduce working capital and costs? © Camelot IDPro AG 8
- 9. 21st Century Supply Chain Planning Paradigm Classic forecast-based planning often ends in the planning loop trap Forecast Forecast Lead time required required Lead time Forecast deviation The longer the forecast horizon, the higher the forecast error Longer lead time ε Planning t Loop Trap LPS Impact of forecast deviation • Safety stock required • Short term production adjustments • Variability of capacity utilization Think lean and avoid the planning loop trap Think lean and avoid the planning loop trap © Camelot IDPro AG 9
- 10. 21st Century Supply Chain Planning Paradigm Classic planning approach Forecast Consumption Production Inventory Customer n Inventory Capacity utilizatio In classic planning, demand variations are translated into production In classic planning, demand variations are translated into production while inventories are hardly utilized and kept untouched while inventories are hardly utilized and kept untouched © Camelot IDPro AG 10
- 11. 21st Century Supply Chain Planning Paradigm Lean Planning & Scheduling Consumption trigger Order Consumption Production Inventory Customer n Inventory Capacity utilizatio LPS actively uses inventories to manage demand variability while keeping capacity utilization constant LPS actively uses inventories to manage demand variability while keeping capacity utilization constant © Camelot IDPro AG 11
- 12. 21st Century Supply Chain Planning Paradigm Pro LPS: Paradigm change je ct E xam ple Stock is target (Classic planning) Capacity is target (LPS) 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 Period: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Period: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Consumption Make Capacity usage Inventory Consumption Make Capacity usage Inventory Main Characteristics: Main Characteristics: • Asset reacts to demand variability • Inventories address demand variability • Floating production quantities • Repetitive production cycles • Inventory is hardly touched • Inventory actively used • Sub-optimal capacity utilization • Stable capacity utilization The lean planning & scheduling approach has clear benefits for not too volatile high-volume products The lean planning & scheduling approach has clear benefits for not too volatile high-volume products © Camelot IDPro AG 12
- 13. 21st Century Supply Chain Planning Paradigm Lean SCM & LPS principles and benefits Benefits of LPS at a glance: • Simplified planning E2E • Planning is reduced to few segmentation & parameters synchronization Tactical • Less planning effort parameter No forecast trigger • Stable asset usage driven LPS • Smaller batches & shorter lead times • Repetitive production patterns with Leveled Consumption stable make quantities capacity utilization Pull • Learning effects Active use of inventories • Quality improvement • Easier supply chain collaboration • More transparency facilitates E2E SC coordination To adopt lean thinking in planning, various principles need to be followed to realize aawide range of benefits To adopt lean thinking in planning, various principles need to be followed to realize wide range of benefits © Camelot IDPro AG 13
- 14. AGENDA 1 Camelot – Thought Leader in LEAN SCM 2 21st Century Supply Chain Planning Paradigm 3 Lean Planning & Scheduling for Chemical Champions 4 Your way forward © Camelot IDPro AG 14
- 15. Lean Planning & Scheduling for Chemical Champions Lean SCM & Global LPS S&OP Intermediates Finished Bulks Finished Goods DC Customer Strategic Segmentation Tactical E2E SC Planning Monitoring SC Configuration Parameterization WIP WIP FGI F E A RW L G H D E B Variability high Make to order Campaign cycle L K J A I F C Planning D time Production Form. Comp. Pack Make to B Cards medium forecast C A IRL / RW / Kanban Flow low F F N O A A A M B E E L low medium high K C Volume Working Stock J D D D I B B E Other Cycle Time Stock WIP WIP H FGI IRL C C G F Safety Stock Demand Safety Stock Supply Form. Comp. Pack Policy Stock Renewal The LPS process is an end-to-end methodology, The LPS process is an end-to-end methodology, enabling the coordination and organization of the entire supply chain in an efficient and lean way enabling the coordination and organization of the entire supply chain in an efficient and lean way © Camelot IDPro AG 15
- 16. Lean Planning & Scheduling for Chemical Champions Define decoupling points and allocate inventory within the global supply chain Customer Mid Term Order Forecast Customer Order Regional Long Lead Raw Consolidated FG Operation FG Inner Distribution Time Materials Intermediates Pack Centre Materials Milling & Working Stock Other Cycle Time Stock IM Working Stock Other Cycle Time Stock Working Stock Other Cycle Time Stock Outer Pack Working Stock Other Cycle Time Stock Safety Stock Demand Safety Stock Demand Synthesis Inner Safety Stock Demand Safety Stock Demand Short Lead Safety Stock Supply Production Safety Stock Supply Safety Stock Supply To Order Safety Stock Supply Policy Stock Policy Stock Packing Policy Stock Policy Stock Time Materials FIFO Push Call Off Signal Pull Signal Consolidated Pull Signal Replenishment Order • Inventory in the regional distribution centres is replenished in line with actual consumption • Postponement of outer packaging enables optimization of FG inventory • Decoupling inventories for intermediates stage reduces the planning complexity • To minimize the “bullwhip effect”, the actual customer demand is communicated using consumption pull Transparency and clarity in the E2E value streams regarding lead times, decoupling and inventory Transparency and clarity in the E2E value streams regarding lead times, decoupling and inventory tactics is key tactics is key © Camelot IDPro AG 16
- 17. Lean Planning & Scheduling for Chemical Champions Segment the portfolio to determine the best fitting supply mode Variability Make to order high Campaign Planning Make to forecast medium IRL / RW / Kanban Flow low low medium high Volume The inventory and decoupling tactics as well as the supply mode set the framework for E2E lean planning The inventory and decoupling tactics as well as the supply mode set the framework for E2E lean planning © Camelot IDPro AG 17
- 18. Lean Planning & Scheduling for Chemical Champions Supply mode simulation ^ / ^ d Variability MTO Variability MTO MTF MTF RW Flow Volume Volume OEE Service-level Cost OEE Service-level Cost Best supply modes Simulation based analysis supports the optimal segmentation and allocation of supply modes regarding Simulation based analysis supports the optimal segmentation and allocation of supply modes regarding KPI trade-offs KPI trade-offs © Camelot IDPro AG 18
- 19. Lean Planning Scheduling for Chemical Champions Forecast and product Segmentation and life cycle management Renewal SC planning modes Optimization of tactical SC parameters Network planning and capacity l Controlling alignment Rhythm Whee lanning hain P upply C G lobal S ment RW Attain l Scheduling Rhythm Whee IRL Pull CTR el Desig n Rhythm Whe make skip CI Order PO time - Rhythm e nc - Seque RW As-Is ior - Behav ity - Capac usage esign ed RW As-D RW As-Designed The rhythm wheel process is an integral part of global lean SCM The rhythm wheel process is an integral part of global lean SCM © Camelot IDPro AG 19
- 20. Lean Planning Scheduling for Chemical Champions Value Chain Inter- Finished Finished mediates bulks goods DC Customer Supply Modes Rhythm Wheel Design F MTO A • Allocate products on the E wheel • Define optimal sequence Kanban D • Define production quantities B based on reference demand IRL C • Define planned cycle time RW upper / lower boundary • KPI-based evaluation (utilization, service level, Flow Rhythm Wheel OEE, etc.) leveled asset The better the production levelling, the higher the performance of the production system The better the production levelling, the higher the performance of the production system © Camelot IDPro AG 20
- 21. Lean Planning Scheduling for Chemical Champions Value Chain Inter- Finished Finished mediates bulks goods DC Customer Supply Modes Rhythm Wheel Scheduling Current Inventory IRL ? F MAKE MTO A E D I nventory B Current Inventory IRL ? Kanban C SKIP R eplenishment L evel IRL Working Stock RW Other Cycle Stock Safety Stock Demand Safety Stock Supply Policy Stock Flow Rhythm Wheel leveled asset Stock The production decisions are based on aasimple rule and purely consumption pull driven The production decisions are based on simple rule and purely consumption pull driven © Camelot IDPro AG 21
- 22. Lean Planning Scheduling for Chemical Champions Value Chain Inter- Finished Finished mediates bulks goods DC Customer Supply Modes Rhythm Wheel Scheduling 12d F MTO VMI A E Cycle time D B Kanban C 8d IRL IRL Working Stock RW Other Cycle Stock Demand Safety Stock Demand Safety Stock Supply Policy Stock Flow Rhythm Wheel leveled asset Stock Cutting of outliers moves variability of response from production to inventory Cutting of outliers moves variability of response from production to inventory © Camelot IDPro AG 22
- 23. Lean Planning Scheduling for Chemical Champions Value Chain Inter- Finished Finished mediates bulks goods DC Customer Supply Modes Lean KPIs Rhythm Time Attainment (RTA) • Tracks cycle length over time Process Behavior Chart RTA MTO VMI F 12 • Evaluates the difference between E A 10 the planned and actual cycle time 8 D 0 1 2 3 4 5 6 7 • Shows variations in capacity C B cycles Kanban utilization Run To Target (RTT) IRL qty RTT Quantities RW • Shows required and actual 30 Total production quantities in every cycle 20 orders Total qty • Tracks order fulfillment 10 0 1 2 3 4 5 6 7 Flow • Evaluates the efficiency of the cycles chosen cycle length boundaries Measurable and comprehensible KPIs enable effective planning process management Measurable and comprehensible KPIs enable effective planning process management © Camelot IDPro AG 23
- 24. Lean Planning Scheduling for Chemical Champions E2E Supply Chain synchronization with LPS F F F A A A E E E D B D C D B B C C Intermediates Finished Finished DC Customer Bulk Goods IRL tmax Calibrate synchronization RW Working Stock F via parameter setting Other Cycle Stock Cycle A length E API Safety Stock Demand tmin D C B Safety Stock Supply Policy Stock The configuration of the few LPS parameters enables the synchronization of the global supply chain The configuration of the few LPS parameters enables the synchronization of the global supply chain © Camelot IDPro AG 24
- 25. Lean Planning Scheduling for Chemical Champions E2E Supply Chain synchronization with LPS SC response SC response tmax tmin = tmax F F A A E E D D tmin C B C B Trade-off Flexible response Smooth SC ? E F A ? E F A ? E F A Variability D D B D B C C B C Intermediates Finished Bulk Finished Goods Volume Adjust the parameters and balance response and flexibility to synchronize your supply chain Adjust the parameters and balance response and flexibility to synchronize your supply chain © Camelot IDPro AG 25
- 26. Lean Planning Scheduling for Chemical Champions Lean Planning process aligned organization Process Performance • Total Total Configuration • SC cost-to-serve cost-to-serve Strategic SCM Board • SC Continuity Continuity • Responsiveness • Responsiveness Segmentation • Total Total Global Tactical SC Planning Inventories • Inventories Committee • Capacity util. Capacity util. • Service level • Service level Parameterization SOP/ Renewal Site Site Tactical Site Tactical • Inventories Planning Planning • Capacity util. E2E LPS Department Department • Service level • RTA, RTT,… Execution Execution • Process stability Process stability Monitoring • Equipment avail. Teams Teams Equipment avail. LPS enables an agile planning organisation with clearly defined roles and responsibilities LPS enables an agile planning organisation with clearly defined roles and responsibilities © Camelot IDPro AG 26
- 27. Lean Planning Scheduling for Chemical Champions IT landscape for lean supply chain planning scheduling Reporting Planning System Global Components SOP MDM Demand Planning LEAN parameter planning and EAI optimization … Network Planning LEAN planning methods configuration Master Planning Monitoring Lean planning Fine Planning Scheduling methods application The Lean Planning IT implementation extends organically the existing landscape and enables full leverage The Lean Planning IT implementation extends organically the existing landscape and enables full leverage of common components of common components © Camelot IDPro AG 27
- 28. AGENDA 1 Camelot – Thought Leader in LEAN SCM 2 21st Century Supply Chain Planning Paradigm 3 Lean Planning Scheduling for Chemical Champions 4 Your way forward © Camelot IDPro AG 28
- 29. Lean Planning Scheduling (LPS) – Your way forward Summary Benefits of LPS at a glance: • Simplified planning E2E • Planning is reduced to few segmentation parameters synchronization Tactical • Less planning effort parameter No forecast trigger • Stable asset usage driven LPS • Smaller batches shorter lead times • Repetitive production patterns with Leveled Consumption stable make quantities capacity utilization Pull • Learning effects Active use of inventories • Quality improvement • Easier supply chain collaboration • More transparency facilitates E2E SC coordination Adopting lean thinking in planning, various principles need to be followed to realize aawide range of benefits Adopting lean thinking in planning, various principles need to be followed to realize wide range of benefits © Camelot IDPro AG 29
- 30. Lean Planning Scheduling (LPS) – Your way forward The journey to world class end-to-en value chain management Supply Chain Configuration Lean Supply Chain Planning Lean Scheduling Procurement Production Inventory Distribution Demand Planning Planning Planning Planning Planning Planning Organization Change Management Monitoring Reporting Data IT Execution Source Make Warehousing Deliver Invoice Vendor Lean Lean Integration Manufacturing Lean Logistics Administration Supply Chain Configuration Benefits do not need to occur in area of implementation, but will materialise in the end-to-end process 5/5/2010 © Camelot IDPro AG 30
- 31. Lean Planning Scheduling (LPS) – Your way forward Camelot offers the full toolset for lean SCM achieving operational excellence Appr- oach Respect the Waste Customer first individual elimination Princi- ples Continuous Standar- Takt Flow Pull Improvement dization Simulation VSM Event Lean Planning Parameter- Segmentation (Value Stream Management Scheduling Mapping) optimization 5S Visualization KPIs Kaizen DMAIC (problem solving) Tools Leveled Flow IRL Perfect Plant Kanban Rhythm Wheel (Inventory (Shop-Floor Design Target Setting) Integration) OEE SMED Flexibility / JiS / JiT PCO (Overall Equipment (Single Minute Complexity (Just in (Process Centric Effectiveness) Exchange of Dies) Design Sequence / Time) Organization) TPM VMI / SMI SOP and Data Quality (Total Productive Gemba (Vendor / supplier Parameter Maintenance) Management mgd inventory) Renewal All tools contribute to the overall approach and principles on the journey to lean SCM 5/5/2010 © Camelot IDPro AG 31
- 32. Lean Planning Scheduling (LPS) – Your way forward As Lean Thought Leader we continuously explore the topic further Multi-Stage LPS : • SC topology optimization • Global parameter optimization Prof. Thonemann • Synchronization of lean planning Universität Mannheim, Seminar für SCM und Management Science instruments over entire SC RW cycle length RW cycle length RW cycle length T T T • Analytical multi-stage variation analysis t t t Global service level Linkage: LPS and other areas: Prof. Pfohl • Root-cause analysis of Technische Universität Darmstadt, Fachgebiet Unternehmensführung u. Logistik deviations • Mapping to financial KPIs • Collaboration business models Required IRL across the value chain • Organizational deployment Prof. Fleischmann Universität Mannheim, Lehrstuhl für ABWL und Logistik LPS Tools: • ERP / APS extensions • Cloud computing • Advanced planning methods • Simultaneous optimization Prof. Rehof Fraunhofer Institut für Software und engines Systemtechnik ISST © Camelot IDPro AG 32
- 33. Thank you for your attention!