SC for Startups

1. Supply Chain Operations For Startups

2. Supply Chain & Sales Operations
Business Development Officer
Supply Chain Instructor
Why Am I Here
Commercial (Product Management)

3. Focus Provide Feedback Be Curious & Ask
Guidelines

4. What’s In It For You
- Determining the optimal service level to your customers.
- Providing tools to identify your product / service strength.
- Getting introduced to different methods for developing sales forecast based on your business’s
stage.
- Helping with planning your resources/investments.
- Providing hints for managing procurement.
- Providing guidance with respect to inventory management.

5. Why Supply Chain

6. Consists of
Aims to
The right
Product
The right
Time
The right
Customer
The right
Quantity
++ +To Achieve
Supplier Factory Distributor Retailer Customer
Supply Chain In Brief

7. Outline
Setting Service Level to Customers
S&OP & Demand Planning
Product Life Cycle & Forecasting
Procurement
Inventory Management
Resources

8. Service Level To Customers

9. - What’s is the optimal Service Level to your Customers (Order Fulfillment).
- More than this level you lose money, Less than it you lose customers.
- Affected by Competition, Regulation, Consumer Awareness & Targeting.
0
200
400
600
800
1000
1200
0 10 20 30 40 50 60 70 80 90 95 99 100
Service Level To Customers
Cost
Service Level

10. Service Level To Customers
- Current world setup requires business to deliver High Service Level.
- Accordingly we have cost implications for this High Service Level:
- Investment in developing better forecast to meet customers demand.
- Higher inventory levels to meet unexpected customers demand.
- Investment in logistics (Warehousing & Transportation).

11. Outline
Setting Service Level to Customers
S&OP & Demand Planning
Product Life Cycle & Forecasting
Procurement
Inventory Management
Resources

12. Demand
Commercial
Procurement
Production
Material
Planning
Logistics
Sales & Operations Planning Cycle

13. - “I think there is a world market for maybe 5 computers.”
Thomas Watson, IBM Chairman, 1943
- “We don’t like the band’s sound, and anyway guitar music is on the way out.”
Decca Record Co. on rejecting the Beatles, 1961
- “640 kB (of system memory) ought to be enough for anybody.”
Bill Gates, 1981
Demand Planning

14. - Aim of Demand Planning is to reduce error, NOT to predict 100% accurate projections.
- 3 Demand Concepts:
- Target / Business Plan.
- History / Actuals.
- Demand / Forecast.
- 3 Types of Forecasting:
- Qualitative techniques (Expert opinions, sample of users).
- Time series (Historical data & pattern changes).
- Causal models (relationships between variables / Regressions).
Demand Planning

15. Time
Qty
Forecast
Forecast should be within a
certain margin Forecast
Actual
Demand Planning

16. Outline
Setting Service Level to Customers
S&OP & Demand Planning
Product Life Cycle & Forecasting
Procurement
Inventory Management
Resources

17. Product Life Cycle & Forecasting
Phase Introduction Growth (Turning Point) Maturity
Forecasting Tools
Concept Testing, Delphi
Method, Consumer Surveys
Intention to Purchase, Data of
similar products, Brand Attitude
Time series
Functionality Time Consuming Less Time Consuming Plug & Play
Importance of Past Data Low Average High

18. TOM
Un-aided Recall
Aided Recall
Prompt Recognition
Unrecognized
Awareness
Consideration
Trial
Repurchase
Loyalty
Advocacy
Forecasting Tools For Growth Phase
Brand Attitude Survey
Status Vs Competition
Intention To Purchase Survey
Your Product Status (Turning Point)

19. Forecasting Tools For Maturity Phase
Time Series Options:
- Linear (Trend Adjusted Method).
- Random (Moving Average, Exponential Smoothing &
Naive Forecasting).
- Seasonal (Seasonal Index).

20. Forecasting Tools For Maturity Phase
- Steps for building future forecast:
- Gather historical data.
- Leave the most recent part of the data.
- Apply different forecasting methods (scenarios) on older part of the data to
forecast the recent part of the date (forecasting the actual).
- Measure forecast error for each scenario.
- Select the method with the least forecast error.
- Apply the selected method to forecast the upcoming period.
- Keep on doing it regularly. Forecast improves by time.

21. Forecasting Tools For Maturity Phase

22. Forecasting Tools For Maturity Phase

23. Forecasting Tools For Maturity Phase

24. Forecasting Tools For Maturity Phase

25. SKU Forecast Orders
Absolute
Error
Forecast
Accuracy
SKU A 100 50 50 50%
SKU B 100 100 0 100%
SKU C 100 150 50 50%
Total 300 300 100 67%
KPI #1 - Forecast Accuracy
Over Forecasting
Under Forecasting

26. Forecasting Tips
- Forecast total market, then plan resources based on your product / brand target
market share.
- At least 6 points before using a statistical method.
- Use Naive forecasting for the 1st couple of points (Months / Weeks).
- Differentiate between Pipeline filling & actual customer demand.
- Data cleansing required to remove outliers & extreme external factors.

27. Forecasting Tip
Sales to Innovators Vs Sales to Imitators!!

28. Forecasting Tip For Managing P&L
- Forecast (baseline) should be sold without marketing / trade
activities.
- Difference between Business Target & Forecast is usually
supported by activities (marketing / promotions budget).
- Accordingly, build your marketing budget based on activities
needed to close the gap between Target & Forecast (Putting
branding aside).
Gross Sales 120 Mio
Trade Discounts 15 Mio
Price Off Promotions 5 Mio
Net Sales 100 Mio
Warehousing 15 Mio
Transportation 5 Mio
Raw Materials 25 Mio
Packaging Material 10 Mio
COGS “Costs of Goods Sold” 35 Mio
Marginal Contribution 45 Mio
Marketing Spend 10 Mio
Overhead 10 Mio
Profit/Loss “EBIT” 25 Mio

29. Outline
Setting Service Level to Customers
S&OP & Demand Planning
Product Life Cycle & Forecasting
Procurement
Inventory Management
Resources

30. Leverage Volumes Partnership
Non Critical Bottleneck
Sourcing Strategy

31. Factor / Supplier X Y W Z
Landed Cost 3 2 3 1
Lead Time 3 3 2 3
Minimum Order
Quantity
2 2 3 1
Capacity 2 2 2 2
Quality 1 3 3 3
Total Score 11 12 13 10
3 is best option – 1 is worst option
Total Cost Of Ownership

32. Cash Cow
Essential Client
Growing Business
IrritantLeverage
Partnership
Bottleneck
NonCritical
Your view of the supplier
SuppliersviewofYou
Suppliers Management

33. Order #
Ordered
Qty
Received
Qty
Requested
Delivery Date
Actual Delivery
Date
Quality
1 1,000 1,150 15-Apr 14-Apr Rejected
2 1,000 1,000 15-Apr 15-Apr Ok
3 1,000 1,000 15-Apr 15-Apr Ok
4 1,000 1,050 15-Apr 15-Apr Ok
5 1,000 1,000 15-Apr 17-Apr Ok
6 1,000 1,100 15-Apr 12-Apr Ok
7 1,000 1,000 15-Apr 20-Apr Ok
8 1,000 950 15-Apr 1-May Ok
9 1,000 830 15-Apr 15-Apr Ok
10 1,000 1,000 15-Apr 15-Apr Ok
KPI #2 - Supplier Service Level

34. Outline
Setting Service Level to Customers
S&OP & Demand Planning
Product Life Cycle & Forecasting
Procurement
Inventory Management
Resources

35. Types of Inventory
- Raw Materials – RM
- Maintenance, Repair & Operating Supplies – MRO
- Finished Goods – FG
Reasons for Inventory
- Decoupling Function
- Demand Variability
- Supply Inconsistency
- Price Variability / Hedging
Inventory Cost = Item Cost + Ordering Cost + Holding Cost
The Question Is: How Much To Order & When To Order?
Inventory Management

36. - Safety Stock = Service Level Factor * Mean Absolute Deviation
- Forecast Error: As it goes up, SS increase
- Service Level To Customers: As it goes up, SS increases
- SSL: As it goes up, SS decreases
Demand
20
25
22
18
24
20
18
17 18 19 20 21 22 23 24 25 26
Average
Safety Stock

37. - Service Level is the agreed upon number of out of stocks / missed orders
Service Level Factor

38. 3250
2000 1750 1738 1732 1736
1750
1850 2000
0
500
1000
1500
2000
2500
3000
3500
100 200 300 320 346 370 400 500 600
Ordering Cost Holding Cost Total Cost
Yearly Demand 6000 Tons
Holding Cost Per Unit 5 EGP
Ordering Cost Per Order 50 EGP
Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Case 9
Q Tons 100 200 300 320 346 370 400 500 600
Ordering Cost 3000 1500 1000 938 866 811 750 600 500
Holding Cost 250 500 750 800 866 925 1000 1250 1500
Total Cost 3250 2000 1750 1738 1732 1736 1750 1850 2000
Economic Order Quantity – How Much

39. EOQ = (2 * Order Cost * Demand ) / Holding Cost
Economic Order Quantity

40. - ROP is demand during supplier lead time + Safety Stock
Re Ordering Point - When

41. SKU Forecast Stock DOH
SKU A 100 50 0.5
SKU B 100 100 1
SKU C 100 200 2
Total 300 350 1.17
KPI #3 - Days On Hand (Stocks Vs Demand)
SKU: Stock Keeping Unit

42. SKU Forecast Shipped Shortage
Order
Fulfillment
SKU A 100 80 20 80%
SKU B 100 100 0 100%
SKU C 100 20 80 20%
Total 300 200 100 66%
KPI #4 - Order Fulfillment (Shipped Vs Demand)
SKU: Stock Keeping Unit

43. Outline
Setting Service Level to Customers
S&OP & Demand Planning
Product Life Cycle & Forecasting
Procurement
Inventory Management
Resources

44. Material for Certificates
- CPIM
- CIPS
Websites:
- APICS
- Gartner
- Supply Chain Brain
- Supply Chain Management Review
Best Sellers
- Designing and Managing the Supply Chain by David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi
- Essentials of Supply Chain Management by Michael H. Hugos
- Logistics and Supply Chain Management by Martin Christopher
- Logistics Management and Strategy: Competing through the Supply Chain by Alan Harrison and Remko Van Hoek
- Purchasing and Supply Chain Management by Robert Monczka, Robert Handfield, Larry Giunipero and James Patterson
- Purchasing and Supply Chain Management: Analysis, Strategy, Planning and Practice by Arjan J. Van Weele
- Strategic Supply Chain Management: The Five Core Disciplines for Top Performance by Shoshanah Cohen and Joseph Roussel
- Supply Chain Logistics Management by Donald Bowersox, David Closs and M. Bixby Cooper
- Supply Chain Management, Strategy, Planning and Operation by Sunil Chopra and Peter Meindl
- The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage by Yossi Sheffi
Resources

45. Case Fill Rate Lean Six Sigma Consensus Demand Forecast
Availability S&OP Supplier Service Level
Demand Outliers Lead Time Forecast Accuracy
Days of Supply Utilization End to End Process
MRP Tender Capacity Planning
ERP Capex Inventory Turn Over
ABC Analysis Backhaul Minimum Order Quantity
SKU Optimization Change Over Vendor Managed Inventory
Bullwhip Effect Pareto Chart Inco Terms
Key Words / Mind Refresher

46. Contact Details
- LinkedIn: Yahia Arafa
- Email: yahia.arafa@careeradvancers.net
- Mobile: 002 0100 789 8227