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Supply Chain Monitoring

Ford Parts Supply & Logistics


Case Study
Roger Merkle
Former Manager, North American Inventory Planning Department

Ford Parts Supply & Logistics (PS&L)


Business Overview

PS&L operates a network consisting of:


>
>
>
>

198K unique part numbers, over 1M SKUs (part/location)


Wide mix of velocity, size, and value
Vehicle base - 50 million vehicles on the road, 35 model years
Logistics network - 2,000 suppliers and 5,900 authorized
dealerships
> 18 HVCs, 3 HCCs, 1 LV/LC, 1 PRC, and 1 NPD
> Service Parts - US, Canada, Mexico and direct global export

Complex logistics hubs, many containers, railcars, suppliers,


packagers, sources/destinations, and paths
High degree of magnitude and complexity

SUPPLIERS

PACKAGERS

REDISTRIB.
CENTER

REGIONAL
DISTRIBUTION

DEALERS

Ford PS&L Gearing Up for Change


Acquired and centralized
relevant data sources
New systems for forecasting, inventory planning,
DRP, electronic supplier communication and
management
Implemented Supplier
Performance Monitoring
Reduced inventory by
two thirds
Record customer service
levels
Record turn rates

Ford - Lack of Integrated Data

DISTRIBUTION
DISTRIBUTION

PURCHASING
PURCHASING

SUPPLY
SUPPLY

Low
Low purchase
purchase price
price
(High
Inventory)
Low Inventory

Reliable Suppliers
Reliable
Suppliers

(Stable
Flexibleschedules)
schedules
(Long
Short lead
lead times)
times

Low inventories
(High
inventories)
Short lead
lead times)
times
(Long
Flexible
Flexible
Transportation
Transportation

(Process-focused)
High customer
service
Stable Fixed Costs
Stable Fixed Costs
Low inventory
Low inventory
Stable Part Mix
Stable Part Mix
Stable Schedules
Stable Schedules
Low Transportation
Cost
Low Transportation
Cost

CUSTOMER
CUSTOMER
FULFILLMENT
FULFILLMENT

Voice
of
the
Voiceof
of the
customer
Voice
customer
Voice
of
the customer
customer

(High
inventories)
High
Service
Levels
(High safety stock)
Managed inventories
(High Costs)
Managed
safety
expediting,
expediting, overtime
overtime
stock
Managed Costs
expediting,
expediting, overtime
overtime

SELL

Returns
SOURCE

(MAKE)

DELIVER
RETURN

Fords Business Challenges


Ford PS&L Supply Chain Overview
PLAN

SOURCE

SUPPLIERSData
Analytical
updated
weekly, at
S
S
S bestS
S
Count - 2,000

S
S
S
S
S
S

S
S
S
S
S

S
S

Carrier

S
S

S
S
S
S
S
S

S
S
S
S
S
S
S
S

Emergency

S
S

DELIVER
REGIONAL
DISTRIB.
CENTERS

Different cultures,
processes and
practices at each
PDC
node

Reclass

Count - 8

PDC

DEALERS

Material expedited
by teams of
D people
D
D
D
at headquarters
D
Count - 5,900

D
D

x-fer

Carrier

Increasing
complex supply
Bypass /
chain including
Redirect
external
partners
Emergency
and sources as
Bypass /
well as non
Redirect
traditional
channels

PDC

Emergency

PDC

Metrics not aligned


- Data not common
PDC

Stocking PDC Consumption

PDC

S
S
S

D
D
D

* Voluminous
reports - both
paper and
electronic
* Labor-intensive
to collect
RETURN

PDC

D
D

Stocking PDC Consumption

Forecast
accuracy
PDC
and safety stock
management
RETURN

D
D
D
D
D

D
D
D
D
D

D
Little ability
toD
D
Stocking
D
D
PDC Consumption
D
prioritize which
D
D
D
Consumption
D
actions are
critical
D
D
D
to the business
D
D
D
D
D
requirements
D

S
S

D
D

CENTER

S
S
Highly
Reactive
S
S
S
S
focus
Son
S
S
S
backorders
and
S
S
S
blameS assessment
S
S
S

High levels of
processing time
variability NATIONAL
PARTS
DEPOT
+
Forecast error over
supply chain process
Reclass
Bypass
=
High safety stock
PACKAGERS
PARTS
levels REDISTRIBUTION
Count -7
Carrier
(MAKE) / DELIVER

D
D
D
D
D
D
D

RETURN

D
D
D
D
D
D
D

Fords Requirements

Culture Change

Model-based analytics

Closed-loop issue management

Comprehensive visibility

Support segmentation

> Enable lean performance of existing


systems
> No disruption to existing operations

Prediction
> Support intelligent, proactive
analysis vs. reactive
> Predict impact of current plan
within lead time for resolution

Prioritization
> Drive data to lowest actionable level
in organization
> Identify high-impact opportunities
> Combine forecasted and actual
demand levels
> Manage material velocity based
upon any desired variable of
prioritization
> Manage escalation

> Adapt to any supply chain, any level


of data availability
> Calculate metrics across white
spaces where data availability is
poor
> Combine varying sources of data
> Support analysis of current
operating business systems
> Manage variability in real time w/
feedback to analysts / source
systems
> Manage approval process for
recommended changes

> Identify segments and processes


with biggest problems
> Locate specific material throughout
the supply chain
> Assess historical performance

Build vs. Buy Decision


Why not custom?

> Integrated solution (data acquisition, data model, analysis,


prediction, ad-hoc OLAP capability, security, alerting, administration)
> Investment in complex algorithm development
> Speed of implementation (rapid ROI)
> Proven business value
> Teradata Supply Chain Intelligence (SCI) provides Standard KPIs,
Reports & Alerts
> SCI Based on Industry Standards & Best Practices

Technology Benefits
>
>
>
>
>
>

Scalable database architecture


Operational use of analytics
Expandable and configurable data model and analytics
Reduced Support Costs
Multiple database repository support
Developed Exception Management System
(alerting, escalation, message broadcasting)

Ford purchased Supply Chain Intelligence (SCI) from


Teradata, a division of NCR

SCI Creates Actionable Information

Process the analytic results into actionable information in the


format and level appropriate for the operation
Provide analytic results for 4 distinct audiences:
> Management - personalized for responsibility
Performance metrics and trends for product, processes (including alerts
themselves) and lines of business.

> Analysts
Performance metrics identifying exceptions and outliers.
Predictive performance and opportunities based upon statistics.
Specific reports that address points of interest
Recalls, missing, new product, new processes, new facilities etc.

> Operations
Reactive alerts (standards) events that exceed standard
Proactive alerts (critical) product to be re-prioritized to prevent an issue

> Partners
Late shipment reports, trend analyses

Solution Example

Fords Three-Pronged Solution

SCI Modeling & Segmentation


Supply Chain Modeling
Utilize daily product position
and business requirements
snapshot
Re-calculate projected
quantities and time via models.
Projected customer service
levels via variability analysis
Comparison to expected
aggregated Demand by family,
SKU, path

FORD SUPPLY CHAIN EXAMPLE: PS&L Operation


Demand

SUPPLIERS

SUPPLIERS

(Count: 2,000)

CUSTOMERS

PACKAGERS
(Count: 7)

REDISTRIB.
CENTER
(Count: 1)

REGIONAL
DISTRIBUTION
(Count: 10)

DEALERS

(Count: 5,900)

Detailed analysis of segment or


aggregate performance by
time, yield, capacity,
constraints, .
Model management at segment
levels include:
o Segment lead time
o Yield
o Split/merge/path selection
Long term highly accurate
forecasts not required
Track and tune standards over
time

REDISTRIBUTION
CENTER

Allocation

Segment

INTERVALS

Ship to In-Yard

REGIONAL
DISTRIBUTION

In-Yard to
Receipt

Receipt to
Stock-Keep

Critical Alerts In Yard

Critical Alerts In Yard

Over Standard Alerts

Inventory Visibility

SCI From Two To Eight Opportunities


To Avoid Back Orders

Change
Ship
Date

None

SUPPLIERS

PACKAGERS

Change
Ship
Date

1. Receive
2.Process

1.Normal/
Critical
REDISTRIB.
CENTER
1.Receive
2.Stockkeep
3.Normal/
Critical

None
REGIONAL
DISTRIBUTION
1.Receive
2.Stockkeep

DEALERS

Standards Management

Parameter
ParameterManagement
Managementscores
scores
actual cycle time vs. the current
actual cycle time vs. the current
model
modelparameter
parametertotodetect
detect
segments
segmentswith
withaapoor
poorfit.
fit.

The
Theactual
actualcycle
cycletime
timefor
forthis
this
O/D pair averages over 6
O/D pair averages over 6
days,
days,so
sothe
theassumptions
assumptions
for
segment
cycle
for segment cycletime
timeare
are
not
notmodeled
modeledproperly.
properly.

For
Forthe
theshipments
shipmentsthrough
throughthis
this
segment,
segment,the
theaverage
averagecycle
cycletime
timeisis
compared to the standard.
compared to the standard.

The
Thecurrent
currentmodel
modeldoes
does take
takeaverage
average
segment
segmentvariability
variabilityinto
intoaccount.
account.Now
Now
actual
variability
can
be
incorporated
actual variability can be incorporated
into
intothe
themodel
modeltotodrive
driveaccurate
accuratesafety
safety
stock
stock

Drilling
Drillinginto
intothe
thedetailed
detaileddata
datafor
for
each
segment
supports
outlier
each segment supports outlier
identification and users can evaluate
identification and users can evaluate
how
howwell
wellthe
themodel
modelfits
fitseach
each
segment
within
the
supply
chain.
segment within the supply chain.

New
Newmodel
modelparameter
parameterevaluated
evaluated
for
fit
with
actual
shipment
for fit with actual shipment
transaction
transactioncycle
cycletimes
times

Histogram shows the


Histogram shows the
distribution of shipment
distribution of shipment
cycle times as a
cycle times as a
percentage of the total
percentage of the total
shipments
shipments

All
Alldetailed
detaileddata
datasupporting
supportingthe
the
evaluation
is
available
in
the
drill.
evaluation is available in the drill.

0
2 NEW PDCs (location unknown)

3 NEW PDCs (location unknown)

ADDITIONAL USERS

2 NEW PDCs (location unknown)

ADDITIONAL USERS

NEW PDC (location unknown)

ADDITIONAL USERS

ADDITIONAL USERS

CHICAGO

SAN FRANCISCO

MEMPHIS

ATLANTA, DALLAS

DETROIT, LA, KANSAS CITY

PLANNERS

ANALYSTS

Ford: Growth in User Base


FORD USER COUNTS - ACTUALS THROUGH PROJECTIONS

350

300

250

200
Running
Web User Count

150
Running
Alert Us er Count

100

50

Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Apr-02 Jun-02 Oct-02 Apr-03 Aug-03 Feb-04 Sep-04

Ford ROI
Benefits:

The SCI Solution gives Ford the ability to


predict and prevent potential back orders not just react
Powerful Analysis of Every SKU, Every
Day on hundreds of millions of dollars of
inventory
Daily metrics and historical trending that
allow reality-based planning to be linked
with execution management
All members of the network now perform as
a synchronized team!

Reduced Inventories

Improved Customer
Service levels

Less overtime,
expediting, and
special handling

Higher margins

No new data sources


required

Results:

10% One-Time and


Recurring Reductions
in Inventory

20% Back Order


Reduction

25-30% Reduced
referrals

30% Cycle Time


Reduction

Savings in first 6 months alone was five times the cost of the system.

Thank You for your Attention

Email:
ramerkle@comcast.net