Qmatic Supply Chain Health Check

Final Presentation
(December 21st, 2011)

Content
1. Project Outline
2. Current Situation
3. Improvement Direction by Process/Function
4. Supply Chain Structure Design based on Growth Strategy
5. KPI: Key Performance Indicator
6. Summary
7. Next Step
Appendix: Back-up Data

Project Outline

Project Schedule
W45

W46

W47

W48

Nov. 9th

W49

W51

Nov. 30th

Kick-off

Dec. 21st

Mid-term update

Final report
Dec. 6

th

Rome subsidiary visit

Macro understanding
Strategy &
business
plan

W50

Supply
chain
process

Summary
-Improvement
hypothesis
-Action plan

Qualitative analysis
SCM Level SelfAssessment
(Questionnaire)

Interviews &
discussion

Quantitative analysis
Data extraction

Data analysis

People Interviewed & Discussed

*Alphabetic order

Alistair Agnew
Anna Kalmeus
Carolina Dillner
Christian
Daniel Lind
Franco Berti (Rome)
(Logistics responsible) (Rome)
(IT responsible) (Rome)
Helene Svensson
Johnny Dahlberg
Kim Hellgren
Lena Palm

Linda Olausson
Marcus Karlsson
Martin Hallberg
Mats Jonsson
Pontus Aronsson
Stefan Persson
Sven Andersson
Thomas Sareyko (Atlanta)
Ynthia Tarantino (Atlanta)

, and others

We have deeply appreciated for all of your kind cooperation and

collaboration.
5

Current Situation

Current Physical Supply Chain Network

Delivery flow

Local
Suppliers

Sweden

Local
Wholesalers
European
Suppliers

Return flow

*Installation materials
*Traditional
Products

*Electronics
& components

Qmatic
Subsidiaries

Installation
Partners

Customers

*Barriers, etc.
*Global Products

Molndal
Warehouse
Asian
Suppliers
*Plastic moldings,
Cables & powers,
etc.

Customers

*Parts
*Products

Molndal
Plant
Qmatic

-- 131
131 suppliers
suppliers
-- 11
11 subsidiaries
subsidiaries warehouses
warehouses
-- 95
95 distributors
distributors

*Traditional
Products

Distributors

Installation
Partners

Customers

*Installation materials

Local
Suppliers

Warehouse Profile
Location
Molndal
(Sweden)

Function

Stock

Atlanta
Transfer
(US/Canada)

Storage
Items

Space

Materials, parts,
and products

(m2)

Storage
Capacity
(pallets)

Capacity
Inventory
# of Ownership
Usage
Turns
workers
*Account.
Dept.
(%)
(FTE)

1,000

1,152

75

SE1: 4.0
SE4: 7.3

2.0

Rent

Inst. materials
and products

335

250

90

6.5

2.0

Rent

Miltonkyenes
(UK)

Stock

Materials, parts, and

products, Customer
owned stock

324

417

85

6.6

1.5

Rent

Katwijk
(Holland)

Stock

Products and
parts

45

27

66

9.0

1.0

Rent

Villejuif
(France)

Prepare &
Assemble

Inst. materials
and products

30

12

75

4.7

0.1

Rent

Roma
(Italy)

Stock

Inst. materials
and products

55

30

60

5.8

0.5

Rent

Shanghai
(China)

Stock

Materials, parts,
and products

15

15

70

2.9

1.0

Rent

Materaville
(Australia)

Transfer

Materials, parts,
and products

N/A

50

70

3.2

0.3

Rent

Taastrup
(Denmark)

Transfer

Inst. materials
and products

40

N/A

50

7.5

0.5

Rent

Oslo
(Norway)

Transfer

Inst. materials
and products

80

N/A

75

5.6

0.5

Rent

Madrid
(Spain)

Stock

Material, parts
and products

110

30

50

4.4

Owned

XXXX
(Middle East)

XXX

XXX

XX

XXX

XX

4.0

XXX

Total:

5.0

*Good level is higher than 12.

Current KPI (2011 Average)

PC1 Clarified order:
59.9%
*Important for direct shipment
PC2 Delivery precision manufacturing order on time:
22.7% (% orders not on time: 62.9%, % orders not done:14.5%)
*Check the relationship with production planning method
PC3 On time delivery:
93.7%
PC6 Purchase requisition in time, within 5 days:
97.8%
PC7 Supplier delivery precision:
99.3% (with 5-day window)
*Better to have one-day window

(Other) Inventory Turnover

5.0

SCM Level Self-Assessment

Objective and Overview of the Self-Assessment
In this assessment, the current state of the implementation of supply chain management will be
analyzed. The survey consists of 10 yes/no questions for each of 13 functions shown below. The total of
130 questions need to be answered by the appropriate people in your organization. It helps you to facilitate
your internal discussion to have the macro understanding of the critical areas and issues in your supply
chain.
(1) Order taking & shipping (2) Delivery (3) Product & inventory (4) Arrival of goods (5) Replenishment order and shipment
(6) Production control (7) Procurement (8) Manufacturing (9) Transportation (10) Product development (11) Customer strategy
(12) Sales & sales promotion (13) Infrastructure

Manufacturing Company

Supplier

(9) Transportation

(8) Manufacturing

(4) Arrival of goods

(7) Procurement

(3) Product/inventory
control

(1) Order taking

& shipping

(6) Production
control

Distribution Center
(5) Replenishment
order and
shipment

Parts manufacturing
company
Raw materials
manufacturing
company
Materials
manufacturing
company
Trading company

Factory

(2) Delivery

Customer

Logistics
company
(wholesales,
retail)
Manufacturing
company

(13) Infrastructure (information systems, etc.)

10

Example of Questionnaire

11

SCM Level Self-Assessment Result

Molndal
Warehouse

Upgrade

Improve

Redesign

Atlanta
Warehouse

Molndal
Factory

Product
Infra.
Dev. & Sales

10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

12

Improvement Direction
by Process/Function

Subsidiaries
Inventory
Inventory management
management standard
standard for
for all
all subsidiaries
subsidiaries
Inventory
Inventory items
items and
and their
their quantities
quantities are
are decided
decided by
by each
each subsidiary.
subsidiary. Currently
Currently they
they
manage
manage inventory
inventory only
only by
by items,
items, not
not by
by usage
usage such
such as
as for
for sales
sales and
and for
for service.
service. The
The
inventory
inventory management
management standard
standard should
should be
be defined
defined for
for all
all subsidiaries
subsidiaries to
to optimize
optimize the
the
inventory
inventory level.
level.
*Example of TO-BE

*AS-IS

Stock

Products

Installation
Materials

Non-stock
*Stock all items except for big
items such as LCD, etc.
*No standard rule for order
quantity and target inventory level

For Sales
Products

Installation
Installation
Products
Materials
Materials

Stock
Non-stock

For Service

*Separate order quantity calculation of service from sales

*Zero inventory for sales

14

Subsidiaries
Sales
Sales forecast
forecast accuracy
accuracy improvement
improvement and
and inventory
inventory visualization
visualization for
for the
the use
use of
of
production
production planning
planning
Each
Each subsidiary
subsidiary makes
makes monthly
monthly rolling
rolling sales
sales plan.
plan. The
The accuracy
accuracy of
of the
the plan
plan in
in terms
terms of
of
currency
currency in
in total
total seems
seems to
to be
be fair.
fair. The
The next
next step
step is
is to
to have
have good
good accuracy
accuracy in
in terms
terms of
of
quantity
quantity for
for each
each product
product and
and weekly
weekly timing
timing to
to be
be used
used in
in order
order to
to connect
connect itit to
to production
production
planning.
planning. The
The inventory
inventory information
information at
at subsidiaries
subsidiaries also
also should
should be
be integrated
integrated to
to the
the
production/purchasing
production/purchasing planning.
planning.
Decision
Decision guideline
guideline for
for unpacking
unpacking at
at arrival
arrival inspection
inspection based
based on
on transportation
transportation
quality
quality
Which
Which products
products should
should be
be unpacked
unpacked at
at arrival
arrival inspection
inspection depends
depends on
on subsidiaries.
subsidiaries. A
A
subsidiary
subsidiary unpacks
unpacks most
most of
of arrival
arrival products
products to
to check
check quantity
quantity and
and damage,
damage, and
and the
the other
other
subsidiary
subsidiary just
just unpacks
unpacks printers
printers for
for configuration
configuration and
and some
some installation
installation materials
materials to
to break
break
bulk
bulk shipment,
shipment, then
then most
most of
of them
them stay
stay at
at warehouse
warehouse without
without unpacking
unpacking to
to wait
wait for
for delivery
delivery
to
to customers.
customers. Unpacking/No-unpacking
Unpacking/No-unpacking decision
decision should
should be
be based
based on
on transportation
transportation
quality
quality data
data in
in each
each country.
country.

15

Subsidiaries
Installation
Installation efficiency
efficiency improvement
improvement
The
The level
level of
of difficulty
difficulty for
for installation
installation has
has been
been increasing
increasing due
due to
to SW
SW complexity
complexity especially
especially
for
for the
the interface
interface between
between customers
customers servers
servers and
and Qmatic
Qmatic products
products such
such as
as security
security level
level
setting,
setting, etc.
etc. The
The installation
installation engineers
engineers need
need more
more time
time than
than before
before both
both for
for the
the initial
initial
installation
installation and
and after-sales
after-sales service.
service. ItIt would
would affect
affect customer
customer satisfaction.
satisfaction.
Visualization
Visualization of
of customer
customer claims
claims internally
internally solved
solved by
by subsidiaries
subsidiaries
There
There seem
seem to
to be
be some
some amount
amount of
of job
job for
for small
small checking/adjustment/repair
checking/adjustment/repair for
for products.
products.
These
These hidden-cost
hidden-cost operations
operations are
are not
not reported
reported to
to Qmatic
Qmatic headquarter
headquarter even
even though
though the
the
service
service department
department understands
understands the
the claims
claims mainly
mainly through
through product
product returns.
returns.
The
The subsidiaries
subsidiaries also
also keep
keep some
some safety
safety inventory
inventory to
to prepare
prepare for
for replacement,
replacement, such
such as
as
common
common printers.
printers. These
These situation
situation relating
relating to
to product
product quality
quality should
should be
be shared
shared with
with Qmatic
Qmatic
headquarter
headquarter to
to solve
solve the
the root
root causes.
causes. ItIt would
would be
be aa risk
risk for
for future
future business
business expansion.
expansion.

16

Molndal Warehouse
Speedy
Speedy registration
registration of
of material
material arrivals
arrivals
The
The arrival
arrival registration
registration to
to system
system is
is manually
manually done.
done. Sometimes
Sometimes the
the system
system shows
shows no
no
inventory
inventory even
even though
though the
the items
items have
have been
been already
already arrived
arrived from
from suppliers
suppliers due
due to
to the
the
delay
delay of
of arrival
arrival registration.
registration. ItIt becomes
becomes serious
serious problem
problem when
when the
the production
production volume
volume
increases
increases and
and the
the production
production plan
plan has
has been
been frequently
frequently changed.
changed.
Storage
Storage location
location control
control to
to reduce
reduce searching
searching time
time and
and missing
missing materials
materials
There
There are
are two
two storage
storage systems
systems currently
currently used,
used, the
the fixed
fixed location
location and
and the
the free
free location.
location.
The
The storage
storage area
area where
where the
the free
free location
location system
system is
is applied
applied seems
seems to
to have
have some
some difficulty
difficulty
to
to trace
trace the
the right
right storage
storage location
location especially
especially during
during the
the high
high inventory
inventory period
period with
with limited
limited
storage
storage capacity.
capacity. Then,
Then, itit takes
takes time
time to
to find
find the
the necessary
necessary items
items to
to be
be used.
used.
Pick-up
Pick-up truck
truck timing
timing control
control for
for higher
higher shipping
shipping space
space turnover
turnover
Due
Due to
to EXW,
EXW, Qmatic
Qmatic has
has no
no control
control the
the timing
timing of
of pick-up
pick-up trucks.
trucks. The
The shipping
shipping products
products
sometimes
sometimes stays
stays for
for couple
couple weeks
weeks at
at warehouse
warehouse just
just waiting
waiting for
for the
the pick-up
pick-up trucks.
trucks. ItIt
would
would become
become the
the space
space constraints
constraints when
when the
the number
number of
of distributors
distributors increase.
increase. Moreover,
Moreover,
the
the distributors,
distributors, in
in general,
general, do
do not
not know
know very
very well
well about
about export/import
export/import procedure,
procedure, and
and
Qmatic
Qmatic must
must support
support them
them under
under EXW.
EXW. ItIt makes
makes additional
additional manual/paper
manual/paper work
work to
to
maintain
maintain the
the good
good relationship
relationship with
with distributors.
distributors. ItIt is
is better
better to
to try
try new
new trading
trading terms
terms for
for
limited
limited scope
scope to
to see
see what
what will
will happen.
happen.
17

Transportation
Ship
Ship export
export rate
rate increase
increase based
based on
on customer
customer expectations
expectations for
for delivery
delivery lead-time
lead-time
According
According to
to the
the interviews
interviews with
with the
the area
area sales
sales mangers,
mangers, the
the delivery
delivery lead
lead time
time to
to
customers
customers for
for the
the initial
initial installation
installation seems
seems not
not to
to be
be important.
important. On
On the
the other
other hand,
hand, the
the
service
service lead
lead time
time after
after sales
sales seems
seems to
to be
be more
more important.
important. IfIf itit is
is true,
true, the
the ship
ship export
export can
can
be
be used
used more
more for
for the
the initial
initial installation.
installation.

Traceability
Traceability with
with transportation
transportation companies
companies
UPS
UPS and
and Kuehne
Kuehne &
& Nagel
Nagel have
have good
good system
system for
for traceability.
traceability. Leman
Leman seems
seems to
to have
have some
some
areas
areas for
for improvement.
improvement.

18

Molndal Factory
Production
Production planning
planning method
method and
and production
production method
method adjustment
adjustment
Current
Current production
production planning
planning method
method basically
basically follows
follows On-demand
On-demand Scheduling:
Scheduling: OnOndemand
demand Scheduling
Scheduling has
has no
no certain
certain period
period before
before fixing
fixing the
the schedule.
schedule. When
When aa process
process
finishes
finishes the
the current
current work
work order,
order, then
then the
the next
next order
order to
to be
be processes
processes is
is chosen
chosen from
from the
the
orders
orders on
on hands
hands according
according to
to the
the priority
priority rule.
rule. ItIt is
is suitable
suitable when
when there
there are
are aa lot
lot op
op excess
excess
production
production capacity.
capacity. However,
However, when
when the
the production
production volume
volume goes
goes up
up and
and the
the production
production
capacity
capacity becomes
becomes limited,
limited, one
one change
change of
of production
production plan
plan affects
affects many
many other
other schedule.
schedule.
Then,
Then, the
the schedule
schedule changes
changes become
become more
more difficult,
difficult, and
and itit is
is hard
hard to
to confirm
confirm the
the delivery
delivery
date
date to
to customers,
customers, then,
then, the
the on-time
on-time delivery
delivery rate
rate to
to customers
customers goes
goes down.
down.

Periodic
Periodic Load
Load Pile
Pile Scheduling
Scheduling vs.
vs. On-demand
On-demand Scheduling
Scheduling

Type 1: Periodic Load Pile Scheduling: Periodic Load Pile Scheduling keeps orders for a certain
period of time before fixing the schedule. According to the priority rule, the work sequence is determined,
and the schedule is finalized.
Type 2: On-demand Scheduling: On-demand Scheduling has no certain period before fixing the
schedule. When a process finishes the current work order, then the next order to be processes is chosen
from the orders on hands according to the priority rule.

19

Periodic Load Pile Scheduling

FIX!
FIX!
*Making the next week
schedule every Thursday

NO!
NO!

20

Periodic Load Pile Scheduling vs. On-demand Scheduling

Periodic Load Pile Scheduling

On time
production
& delivery

Equipment
utilization

On-demand Scheduling

Start and end timing of

production are fixed for a certain
period of time.
Easy to confirm delivery date to
customers
Increase of on-time delivery rate
Easy for procurement planning
Once the schedule is fixed, new
orders are not allocated to the fixed
period.
-The planned capacity utilization rate
for the period does not increase very
much even though there is some
available capacity to be filled with
recent orders.

The schedule of each order is

affected by other orders whenever
they arrive.
-Frequent schedule changes
-Hard to confirm the delivery date to
customers

The orders are continuously allocated

to the schedule to eliminate waiting
time in production process.
-Increase of equipment utilization rate

Notes
Notes

Minor
Minor schedule
schedule adjustments
adjustments happen
happen even
even
during
the
fixed
period.
during the fixed period.

Capacity
Capacity and
and load
load balance
balance adjustments
adjustments are
are
roughly
done.
roughly done.

Selection
Selection
guide
guide

--Similar
Similar production
production procedures
procedures for
for most
most
orders
(
Relatively
easy
to
balance
orders ( Relatively easy to balance
between
between capacity
capacity and
and load)
load)

-Different
-Different production
production procedures
procedures depending
depending
on
on orders
orders

Not an either-or choice

21

Molndal Factory
Daily
Daily production
production progress
progress monitoring
monitoring
The
The start
start and
and the
the end
end day
day of
of each
each production
production order
order (production
(production period)
period) are
are specified.
specified. The
The
next
next step
step is
is to
to monitor
monitor the
the progress
progress during
during the
the day
day to
to take
take quick
quick recovery
recovery actions
actions ifif there
there
is
is aa gap
gap between
between planned
planned volume
volume and
and completed
completed volume.
volume. ItIt is
is especially
especially important
important for
for the
the
labor
labor intensive
intensive process
process after
after SMT
SMT to
to visualize
visualize the
the targeted
targeted quantity
quantity to
to be
be completed,
completed, for
for
example,
example, by
by 10:00,
10:00, by
by 12:00,
12:00, by
by 15:00,
15:00, etc.
etc. to
to maintain
maintain work
work speed.
speed.
Productivity
Productivity management
management in
in addition
addition to
to quality
quality management
management
Quality
Quality problems
problems are
are monitored
monitored and
and cross-functionally
cross-functionally shared
shared to
to be
be solved.
solved. The
The next
next step
step
is
is to
to strengthen
strengthen the
the productivity
productivity management
management for
for the
the maximum
maximum use
use of
of capacity
capacity to
to get
get
ready
ready for
for the
the production
production volume
volume increase.
increase.
Progress
Monitoring
Quality
Management

Productivity
Management

Standard time
setting for labor
intensive
operation
22

Supplier
Drawing-base
Drawing-base suppliers
suppliers improvement
improvement
36.0%
36.0% of
of total
total purchasing
purchasing cost
cost comes
comes from
from Drawing-base
Drawing-base suppliers,
suppliers, which
which consists
consists of
of
23.7%
23.7% of
of total
total number
number of
of suppliers.
suppliers. Most
Most of
of them
them are
are not
not only-one
only-one suppliers.
suppliers. ItIt is
is always
always
important
important to
to try
try to
to reduce
reduce this
this type
type of
of suppliers
suppliers in
in order
order to
to reduce
reduce both
both of
of purchasing
purchasing cost
cost
and
and man
man hours
hours for
for drawings.
drawings.
Daily
Daily supplier
supplier OTD
OTD (On
(On Time
Time Delivery)
Delivery) check
check and
and feedback
feedback
Current
Current KPI
KPI allows
allows 5-day
5-day window
window (N-1
(N-1 to
to N+3)
N+3) to
to be
be on-time.
on-time. ItIt is
is better
better to
to have
have just
just 1-day
1-day
window
window to
to upgrade
upgrade the
the efficiency.
efficiency. Also,
Also, the
the immediate
immediate feedback
feedback to
to supplier
supplier in
in case
case of
of any
any
discrepancy
discrepancy between
between planned
planned arrival
arrival and
and actual
actual arrival
arrival is
is important
important to
to facilitate
facilitate actions
actions in
in
suppliers.
suppliers.
AS-IS
Would like to be
TO-BE

Daily

KPI calculation to
review
performance
Cause clarification
and action

Cause clarification
and action

Day 2

Monthl
y

KPI calculation to
review
performance
Send alarm to
suppliers

Day 2

Check the
difference in
quantity between
plan
actual
Sendand
alarm
to
suppliers

Register the
quantity received
Check the
difference in
quantity between
plan
actual
Sendand
alarm
to
suppliers

Day 1

Example

Register the
quantity received

Day 1

Register the
quantity received

KPI calculation to
review
performance
Check the progress
of actions

23

Supply Chain Structure Design

based on Growth Strategy

Strategies & Impact on Supply Chain

Growth strategy
1. Growing subsidiaries 510% p.a
Main markets
Expanding into new
sector
Minor market
2. Growing distributors
business
Adding 2 partners per
region per quarter
Developing distr.

Growing in established SC
E.g. Japan entering new sectors

Added volume
More customers
Mix change

New partners, new customers

New partner integration model in
place
Adding volume in many SCchannels adds complexity

Volume
Expanded SC
New flows
Moderate impact on SC

3. Expanding SAM
business
Licenses
Service agreement
Insurance
4. Global products
web Commerce
Retail

Mainly adds sales revenue not

adding HW
SW added to HW at production
SW updated and expanded at
customer
Q-guide (and more to come)
Barriers
Tickets

Download
Separate sales and distribution

Sourced from original plant?

New SC?

5. Bolt on products
People counter business acquired
Installation time
6. SW/HW mix 50/50
Functionality adding customer
value by SW
7. Systems Integrators
and adjacent business

SI may produce big intermittent

enterprise orders to a limited SC

Big volume fluctuation

Capacity limitation

25

Key Factors for Supply Chain Structure Design

*Key items from growth strategy
Volume
Volume
increase
increase

Customer
Customer
increase
increase

Product
Product &&
parts
parts variety
variety
increase
increase

SW
SW complexity
complexity
increase
increase

SAM
SAM
expansion
expansion

Global
Global
products
products
expansion
expansion

*Current key functions

at subsidiaries

Selling

Configuration

Quality
Assurance
Hidden

Delivery
Assortment

End User
Delivery

Installation

Service

Sales (1st installation)

(Connected)

*Must be done at subsidiaries

*Critical functions to achieve growth strategy

Process
Process improvement
improvement for
for the
the critical
critical functions
functions
Process
Process improvement
improvement and
and work
work location
location optimization
optimization for
for the
the other
other functions
functions
26

Key Concept & Direction for Structure

Key Concept for Qmatic Supply Chain Reformation
Decrease sales/1st installation cost to absorb the future increase of service cost
Service cost will increase due to the following aspects;
SW complexity increase (ex. Difficult for customers server interface)
SAM sales expansion
Increase of hidden small operations at subsidiaries for quality assurance
Direction
1. No inventory for sales/1st installation, only service inventory at subsidiaries
2. Visualize hidden small operations at subsidiaries, and solve the root causes.
3. Increase the direct shipment from Molndal to customers to reduce the touch points at
subsidiaries.
Make the direct shipment rule.
Based on customer locations for cost minimum
Based on customer types for product acceptance reliability at customers
Based on the size of order (big customers, big installation, etc.)
Others

27

Touch Points Analysis

Products

Delivery & Install (Advanced products): 20%, Shipping: 10%

Tickets

Suppliers

Unloading

Molndal
Plant

Warehouse

-Signboard texts
-Cables
-FP-texts
-Wall brackets
-Display mounting, etc.

Arrival check
De-palletizing
Unpacking
Storing
Picking

Subsidiaries

X
X
X

Assorting

Packing

Palletizing

Temporary placement

Shipping check

Loading

Installing
Total Touch Points4

21

Separating by
customers from
combined pallets

13

End
Customers

X
X

X
X

Printers

Installation
Partners

Configuration

70%

<Atlanta>
-Printers for
configuration
-Inst. materials
only for breaking
bulk
-Others are nonunpacked
<Rome>
- Everything for
checking quantity
and damage

X
X
X
X
X
X
X
11

36

4
28

Touch Points Examples at Subsidiaries

De-palletizing
The products for multiple customers are palletized on one pallet at Molndal plant.
Subsidiaries need to separate them by customer to prepare for picking.
Unpacking
Printers need to be unpacked for configuration.
Installation materials are shipped with bulk from Molndal warehouse. Subsidiaries
need to unpack them to pick up necessary quantities for the orders.
(Ex. Bulk size)
- Wall brackets: 10 pz
- Display mounting: 50 pz
- Sign boards: 70 pz
As described in the previous page, Italy basically unpacks everything to check
quantities and defects. The problems are found once a year, very rare. On the other
hand, US unpacks only printers and bulk shipments of installation materials. Most
of items stay without unpacking to wait for customer delivery.
Picking
Installation materials from Molndal warehouse and locally purchased are picked up
according to the order.

29

Touch Points Simulation for Direct Shipment

Molndal

Installation
Partners

End
Customers

Unloading

Arrival check

De-palletizing

Suppliers

Plant

Warehouse

Unpacking

X
X

Storing

Picking

Configuration

Assorting

Packing

Palletizing

*To be
analyzed

Temporary placement

Shipping check

Loading

Installing

X
Total Touch Points5

11

24

4
30

Physical Flow for Direct Shipment

*Example of TO-BE
For Sales

For Service

Installation
Installation
Products
Products
Materials
Materials

Stock
Non-stock

Inventory management
at subsidiaries
(from page 14)

Local
Suppliers

Selling products
(big & heavy)

Replenishing
service items

*Separate order quantity calculation of service from sales

*Zero inventory for sales

Replenishing service
items

Molndal

Service
inventory

Service
delivery

Subsidiaries
- Selling products
- Selling inst. materials

Product
through

Customers

Direct
Direct shipment
shipment rule
rule
- Selling products
- Selling inst. materials
31

Structure Modeling
AS-IS

Model X

Subsidiaries

Subsidiaries

Installation
Partners

HQ
(Sweden)

Customers

Sales &
Communication flow

*Service
materials only

Installation
Partners

Local
Suppliers

HQ
(Sweden)

Sales
Sales &
& delivery
delivery combined
combined structure
structure

Customers

Local
Suppliers

Sales
Sales &
& delivery
delivery separated
separated structure
structure

Sales
Sales and
and service
service inventory
inventory at
at
warehouses
warehouses

Multiple
Multiple customer
customer delivery
delivery routes
routes from
from
Molndal
and
warehouses
Molndal and warehouses

Direct
Direct shipment
shipment rule
rule
Service
Service inventory
inventory only
only at
at warehouses
warehouses

Sales
Sales products
products through
through

Configuration
Configuration at
at subsidiaries
subsidiaries

Configuration
Configuration at
at Molndal
Molndal

-- Lower
Lower subsidiaries
subsidiaries operation
operation
-- Higher
Higher headquarter
headquarter operation
operation
-- Lower
Lower total
total transportation
transportation cost
cost
by
by direct
direct shipment
shipment rule
rule

Challenges
Challenges

Single
Single customer
customer delivery
delivery route
route from
from
warehouses
warehouses

Differences
Differences

Physical flow

-- Fix
Fix installation
installation material
material specification
specification during
during quotation
quotation
-- Palletize
by
order,
not
by
product,
at
plant

Palletize by order, not by product, at plant Kitting

Kitting
-- Order
Order quantity
quantity assortment
assortment for
for installation
installation materials
materials at
at
plant
plant instead
instead of
of bulk
bulk shipment
shipment
-- Centralization
Centralization of
of configuration
configuration at
at Molndal
Molndal
-- Minimize
local
purchasing
Minimize local purchasing
32

Structure Evolution
Cust.
Sub.

HQ

Cust.
*DSR

Sub.

Sub.
HQ

For service

Cust.

- Selling products go
through the regional
warehouses.
- Only service items are
stocked at regional
warehouses.

2. Direct shipment rule (Model X)

Sub.
HQ

For service

All
AllRegions
Regions

Cust.

*Direct Shipment Rule (DSR)

Region
Region CC

Cust.

1. Selling product through with current structure

All
AllRegions
Regions

Region
RegionBB

Volume
Small region /
Close to Sweden

For sales
For service

Region
RegionAA

- Each region selects the optimum model in its region.

4. Regional production
Sub.

Region
RegionZZ

Cust.
Assembly
Factory

HQ

Sub.

- Direct shipment can

be done based on the
direct shipment rule.
- Direct shipment to
customers or installation
partners

Region
RegionAA

Cust.
Sub.

Region
RegionBB

Cust.
*DSR

Sub.

Region
Region CC

Cust.

Volume

Volume
Small region /
Close to Sweden

HQ

Cust.

- Selling products are

stocked at regional
warehouses and
delivered from there.

Sub.

Big region / Far from

Sweden

Sub.

All
AllRegions
Regions

Big region / Far from

Sweden

3. Regional differentiation

0. AS-IS

33

KPI: Key Performance Indicators

Recommended KPI: Equipment Productivity

Utilization
Rate

Stop Loss

Performance
Rate

Overall Equipment
Efficiency
Quality
Rate

KPI

Total Load Time

Actual Work Time
Net Work Time
Value Add
Work Time
Quality Loss

Rework / Repair
Scrap

Planned:
Company event
Set up change
Preventive maintenance
Unplanned:
Lack of materials,
component
Lack of worker
Machine breakdown
Blocked line etc.
Speed Loss

Low performance
Idling
Micro stoppage etc.

35

Recommended KPI: Direct Labor Productivity

Stop Loss

Overall Employee
Efficiency
Operation
Rate
Utilization
Rate

KPI

Employed Man Hour

Operated Man Hour
Standard Time
Man Hour
New Standard Time
Man Hour
Method Loss

Bad product design

Bad line/station layout (many
walk)
Bad work method (many jig
change)
No automation
No mechanization etc.

Planned:
Company event
Set up change
PM
Unplanned:
Lack of material, component
Blocked line
Tool/Jig breakdown etc.
Organization Loss

Line balance
Lack of worker

Performance Loss

Variation of worker
competence
(unskilled
operation/sabotage)
Quality Loss
Rework / Repair
Scrap
36

Other Recommended KPI

Transportation unit cost
Transportation cost per kg
- Inbound and outbound
- By region, by mode of transportation, and by transportation company
Order size
Order kg per order
- By subsidiary and by distributor
Sales forecasting accuracy (for production planning)
Actual quantity sold / Planed quantity sold
- By sales office and by sales person
- By product
- Not currency but quantity
- Equal judgment weight for shortage and surplus
Indirect labour productivity
Indirect man hours per order
- Indirect man hours for order taking and shipping

37

KPI Examples for Manufacturers (1/2)

38

KPI Examples for Manufacturers (2/2)

39

Summary

Action Items
1. Supply chain ABC (Activity Based Costing)
2. Detailed cost simulation for network structure
with modal shift
3. Detailed analysis for subsidiaries operation

8. Warehouse improvement
-

Arrival check method and OTD monitoring

from suppliers

Arrival registration method

Inventory management system

Storage location control

Warehouse operation

Traceability improvement

Demand forecasting and sales planning

Hidden quality assurance work

Installation process

4. Macro analysis for distributors operation

5. Direct shipment trial (Italy? TIM?)
6. EXW stop trial
7. Factory improvement
-

9. Product/part variety reduction (on going)

10. Product development process with
supplier coordination (modification and EOL)
11. KPI installation
12. Organization for supply chain
management (SCM division?)

Productivity management system and

productivity improvement

Daily progress monitoring

Production planning method adjustment

41

Next Step

Next Step
1. Priority setting for action items
2. Project team organization for each action item
3. Implementation planning for each action item
4. Implementation

43