DLA`s Sales and Operations Planning Capability

Report
DEFENSE LOGISTICS AGENCY
AMERICA’S COMBAT LOGISTICS SUPPORT AGENCY
DLA’s Sales and Operations Planning Capability:
How to Align Budgets and Purchases with
Warfighter Demands
Ms. Simone Reba, SES
June 4, 2010
WARFIGHTER SUPPORT ENHANCEMENT
STEWARDSHIP EXCELLENCE
WORKFORCE DEVELOPMENT
1
Workshop Goals
• Introduce Sales & Operations Planning
(S&OP)
• Explain how DLA uses S&OP to drive
improved customer readiness
• Discuss how customer collaboration and
DLA’s S&OP process can help all of us
better serve the Warfighter
2
Scenario
Funding for this FY has been cut by 10% from last year
numbers while Sales are forecasted to remain flat *
•
FY ‘09
– Funding was $500M
– Sales were $500M
•
FY ‘10
– Funding is $450M
– Forecasted Sales for FY ‘10 is $500M
•
3 Weapon Systems are supported:
– H-60: FY ‘09 Sales $150M, FY ’10 Forecast $150M
– C-130: FY ’09 Sales $250M, FY ‘10 Forecast $200M
– F-18: FY ‘09 Sales $100M, FY ‘10 Forecast $150M
What do you do?
* This data is fictitious and is used for illustrative purposes only
3
How do you resolve this imbalance?
Issue: Funding shortfall of $50M
– Cut each Weapon System by $10%?
– Fund only low dollar PRs to improve PR
award rates, but limit expenditures?
– First purchases in gets awarded, no awards
when the money runs out?
– Ignore it and hope for additional funding?
for DLA, the solution is Sales & Operations Planning
4
Sales and Operations Planning Background
•
S&OP is a forward looking process for managing your organization
– Creates a path for resolving Supply & Demand imbalances.
– Brings together expertise from Demand, Supply, and Finance areas to
• Define a complete picture of the issue resulting from Demand or Supply events
• Build a prioritized business plan that aligns enterprise objectives with workload and
budgetary constraints
– Review current performance and future projections
– Standardizes requirements for management review
•
Benefits of S&OP
– Inputs from Demand, Supply, and Finance ensure a balanced, realistic, and
sustainable solution
– Standardizes the approach, including metrics, tools, formatting, etc so that more
time is spent on issue analysis resolution rather than on formatting slides
– Provides a method to prioritize constrained Resources, Time, and Workload
– Action Plans that are directly linked to business performance metrics
• At DLA, business simulation utilized to enable investment/support decisions
5
How we use S&OP at DLA
•
Business Planning: -forward looking metrics
•
Collaboration: We review these business plans with Customers and
Suppliers at
– Customers: Validate and adjust forecasts
•
Examples of customer collaboration: NAVAIR: F-18, F-402, AFGLSC: C-130, KC-135
– Suppliers: manufacturing capabilities are in place and prepared
•
Examples of Supplier Collaboration: Honeywell, Boeing, and Lockheed Martin
•
Simulation: Used to evaluate different scenarios and their impact on the
business, including OA, inventory, and readiness
•
Performance Management: Enterprise level metrics with drill down to the
detailed item level – Percent Forecast Error, Perfect Order Fulfillment,
Attainment to Plan
•
Decision Making: inputs to drive decisions on funding allocation, and
performance goals
6
Monthly S&OP Cycle/Construct
•
Week 1: Intelligence Gathering (finalize focus
areas for Demand Consensus and Supply
Consensus Sessions)
•
Week 2: Conduct Demand Consensus and
Supply Consensus Meetings within each Chain
•
Week 3: Conduct Enterprise S&OP Meeting
•
Week 4: Input into Demand Month End and/or
Demand Month Start processing
Agency Strategic Priorities are established at the beginning of the Fiscal
Year and inform/guide the monthly S&OP process
7
Demand-Driven S&OP Scenario
Scenario: Significant Change in Forecast for a Weapon System (F-18)
• 50% increase in projected sales over last years sales
Weapons System and Business Process offices
Weapon System Support Manager (WSSM): Collaborates with Customer and incorporates
change in Forecast
Business Process Support (BPS) Analyst: Utilizes S&OP Simulator Tool to project impact of
changes in Demand. Utilizes S&OP Metrics Tool to Review Key Metrics: Percent Forecast Error
(PFE) / Attainment to Plan (ATP) / Perfect Order Fulfillment / Over-Procurement (OP) /
StockOuts/StockLows (SO / SL)
Customer Facing
Demand Planner (DP) Collaborates with
WSSM and Customer gain Demand
Consensus.
Uses Customer Intelligence to create
Accurate Forecast
Utilizes S&OP Metrics Tool to improve
forecast accuracy
Supplier Facing
Supply Planner works with DP & WSSM to
develop Supply Consensus and incorporate
market conditions/constraints
Acquisition Specialist determines workload
prioritization (Purchase Requisitions)
8
S&OP Action Plan for the F-18
Trigger Event: F-18 Maintenance overhaul program ramping up from 10 to 15 aircraft per month.
Action 1: Weapon System Support Manager (WSSM): Collaborates with Customer on necessary
Forecast updates
Action 2: Business Process Support (BPS) Analysts simulate impact of changes in Demand.
Review Key Metrics: Percent Forecast Error (PFE) / Attainment to Plan (ATP) / Perfect
Order Fulfillment / Over-Procurement (OP) / StockOuts/StockLows (SO / SL)
Action 3: Demand Consensus determines that the forecast is reliable and level 1 priority Placed at the top of the priority list for Demand.
Action 4: Supply Consensus determines that funding support for the C-130 will have to be
reprioritized in order to support this F-18 project. DLA works with the C-130 customer to
evaluate moving their requirements to the next fiscal year and/or reducing safety stock
levels.
Action 5: The Project Quad Chart and the results of Supply and Demand Consensus are
presented at the Aviation Internal S&OP Meeting for Command approval of the F-18
project.
9
F-18 Project Quad Chart
Aviation Demand Chain Issues
Path Forward
• Issue w/supportability of F-18 Overhaul Program
• Short-Term
• Monitor PR/contracts for SO/SL (ongoing always)
• 150 healthy NSNs ( ( 4 PRs pending award and 31 PO s)
• Production will ramp up to 15 aircraft per month (180/yr)
• 150 critical items
-100% replacement items (100) + Safety critical Items (50)
-High supportability for 150 items will allow 15/mo overhaul rate
Supply Chain Outstanding Issues
• Long-Term
• Continue to collaborate with suppliers to ensure they
have the production capacity to meet these requirements
S&OP Approval Date 18 Jun 09
Short-Term : Issued SC email 8 Jul 09
• Obligation Authority required to support this $150M, $50M increase
over previous year
• OA will need to come from the C-130 platform to support this
Impacts
Key Performance Indicators
• Positive…Health improvement monthly on NSNs due to getting
PR awarded and early deliveries .
Customer Service
Critical OTOF: 81.85% ; POF 65.57%
Forecasting Accuracy
Critical Abs PFE 24.5 Dec-Feb 10; Critical DPA 59.7%
FY 2010 Projections
Execution
Forecasts
Critical ATP 68.5% (Feb 10)
Aviation
Land
Maritime
C&E
Red – Baseline / Current
44/11
0/0
5/1
1/0
Yellow – Baseline / Current
54/21
1/1
5/1
0/0
QA: 2009-009
Ob Authority
PRs
Results Oct
09-Sep10
$150,000,000
Net Cash Flow
Supportability
Original Estimate
to date
N/A
N/A
$50,000,000
25
OPR: Bill Smith
10
Before and After S&OP
Before S&OP
After S&OP
• Collaboration may or may not
have occurred
• Collaboration occurs early and
the details are reviewed with
the customer
• Impacts of additional demand
would not have been simulated
and analyzed to determine
supportability
• System would have had a
delayed reaction once the
increased demand is realized
– resulting in backorders
• Simulation is performed to
determine impacts on funding,
workload and supportability
• Information is loaded into the
system to adjust forecasts in
anticipation of the demand
• Funding constraints may have
been pushed off rather than
addressed up front
• Funding constraints are
resolved early in the fiscal year
and/or at the beginning of a
project
• All needs impacted
• Focus on most important
needs
11
S&OP – Before and After
Demand Shift
Demand Shift
Demand
Before
Forecast
S&OP can adjust forecasts to reflect increases/decreases in demand
Before
After
Ob $
Before
After
Inaccurate forecasts will result in poorly timed buys in large quantities and will
likely lead to overprocurements. Note, S&OP helps level the Ob $.
12
12
High-Level Program Budget Review Process
1. Develop Senior Leader Strategy
–
Target Performance Levels
–
Synchronize with Strategic Planning
2. Obtain workload projections
3. Develop Materiel and Operational resource
requirements
4. Determine Affordability
5. Rate/Rank Proposed Investments
6. Develop Enterprise Proposal
13
How’s S&OP Going at DLA?
Successes
•
•
•
Full transparency – ensures outcomes
are aligned with Strategy
Single, defined set of priorities – all
singing (working) from the same sheet
of music
Financials linked to Strategy
–
–
•
Forces PROACTIVITY
–
•
•
Streamlines complex Budget
formulation process
Provides execution accountability
Greater partnership with Customers
improving information sharing
Simulation capability details potential
impacts of alternative Strategies, and
ensures informed decisions
Senior-most Leadership ‘buy-in’
Challenges
•
•
•
•
•
•
Obtaining ‘actionable’ Demand
intel…very difficult for Military Services
to predict future contingencies
Full ‘buy in’ – S&OP is still perceived
by some as a meeting requirement
vice a cadence for business
Maintaining FUTURE focus…much
easier to measure the past than to
manage the future
When making tradeoff decisions,
deciding what NOT to do
Meeting preparation…timeliness of
input, cross-organization consistency
Tools/Tracking
14
S&OP Take Aways
• Effective, proactive business model to balance supply & demand
– Forward looking business plans/budgets utilizing customer forecasts
– Balanced supply and financial constraints against requirement
• Facilitates collaboration between DLA and Services
– Reduced forecast error to achieve more accurate budgets
– Prioritize customer needs to ensure Warfighter support
– Improve cost to serve by reducing excess inventory
• Rapid decision making supported by business simulation
– Projected business impact (budgets, workload, inventory) of actions
enables executives to make quicker, more effective decisions
• Alignment of S&OP with enterprise performance reviews
– Measure impact of S&OP decisions on business performance goals
– Identify opportunities and actions to improve top priority initiatives
15
Backup
16
Real Results at DLA’s Aviation
Supply Center
Nov 2009: Training provided to WSSMs on the application of the Sales and Operations Planning
(S&OP) Tool. This provided the ability to conduct monthly reviews on their top Percent Forecast
Error (PFE) NIIN Drivers and validate future forecasts on NIINs
Nov 2009: Aviation Demand Chain’s previous 12 month’s demand value was $3.0 Billion and the
next 12 months forecasts were 3.4 Billion. The difference between our actual demand and
future forecast was approximately $400 Million.
Dec 2009: The WSSMs began monthly validations of forecasts on the NIINs that were the drivers
on their platforms for the increased forecasts.
Mar 2010: Aviation Demand Chain’s previous 12 month’s demand value was $2.8 Billion and
the next 12 months forecasts were 3. 0 Billion. The difference between our actual demand and
future forecast is approximately $200 Million.
This represents a 400 million reduction in forecasts over a 4 month period since Aviation
Demand Chain WSSMs began focusing on Demand Consensus.
17
Real Results (cont.)
• Some specific Platforms examples are;
– H-47 WSSM identified approximately 50 NIINs that had invalid
Special Program Requirements (SPRs). The WSSM
collaborated with the customer to have these cancelled or
adjusted. This resulted in $12.8 Million in reductions to forecasts.
– TF-34 WSSM has reduced forecasts $34.8 Million since Nov 09.
This was the result of collaboration with the customer to cancel
unneeded SPRs and reduction of overforecasted DFUs
– In Feb 10, the F-15 WSSM identified one NSN that had $23
million invalid forecast due to erroneous provisioning (SSR)
requirements. WSSM collaborated with customer and had these
removed
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