Supply Chain Forecasting and Planning to Optimize Indirect Material Spend and

Support Growth

Using Supply Chain Forecasting and Planning methodology organizations can align revenue and sales with demand for indirect material and service requirements to reduce transaction cost, increase speed and efficiency, support growth while lowering totalcost. This is particularly important for non-manufacturing companies and even traditional manufacturing companies as they move towards more service related revenue streams. This discussion will be an overview of steps companies can take to align customer demand, operational requirements and financial considerations to optimize indirect materials spend.

Bill Kohnen Supply Chain Planning and Forecast Forum Manila Philippines May 2017

Purchased Materials and Service Greater Impact in Service Economy

• Purchased Materials and Services = 50% of Revenue

• Cost of Acquiring Material and Services = 10%

•

• Materials/Services Technology and Innovation Differentiation

• Materials/Services Customer Delivery Value Creation

Alignment of Revenue and Sales with Indirect Spend Requirements Will Drive Growth and Profit

• What Do We Need• Who Do We Need• When• Process to Get• Resources Needed to Obtain

Situation

• Revenue Growth

• Headcount

• Customers

• Velocity

• Resources

• Current State Analysis

• Forecast Requirements

• Model

• Identify Gaps

• Survey Market For Solutions

• Evaluate Details of Solutions

• Implement

• Establish Measures

• Evaluate

• Adjust

• Repeat

Process

Current State Analysis• To Support Current Volume we needItem # Cost # Transactions Lead time Issues

Computers 250 250,000 12 6 weeks Deployment

Security 500 15,000 48 As Needed Transparency

Catering 100 5,000 100 Many Bills

Car Service 70 70 Late Bills

0

50

100

150

$0

$100,000

$200,000

$300,000

Computers Car Service Security Catering

Spend vs. Transactions

Spend Txns

0 1 2 3 4 5

Computers

Security

Car Service

Catering

Needed Delivery vs Actual

Actual Need

Forecast Requirements

Item # Cost # Transactions Lead time Issues

Computers 350 350,000 12 2 weeks Deployment

Security 700 25,000 48 As Needed Transparency

Catering 200 10,000 100 Many Bills

Car Service 110 70 Late Bills

Model

Identify Gaps

• Lead time times for computers

• Resources for order and pay

• Cash Planning

• Availability of Supplier Resources

Survey and Evaluate Solutions

• Consolidation of Orders and Invoices

• Add inventory for computers

• Self service process for ordering standard service

• Pre training and qualification of support staff

• Streamline payment approval process

• Establish monitoring and metrics

• Cash forecast alignment with requirements

Implement

• End Users

• Suppliers

• Corporate Finance

• Site Teams

• Systems

• Process

Establish Measures and Monitor

0

20

40

60

80

100

Q1 Q2 Q3 Q4

Transactions30% Reduction

0

5

10

15

Previous Current

Payment ApprovalsDays

Continued Monitoring of Revenue and Growth Plans

Quarter Sufficient Funds

Balance vs Forecast

Q1 Y 5%

Q2 N -10%

Q3 Y 15%

Q4 Y 5%

Quarter Supply Meets Demand

Q1 Y

Q2 Y

Q3 N

Q4 Y

0

5

10

15

Process Cost

Quarter Total Cost Savings

Q1 5%

Q2 7%

Q3 3%

Q4 7%

Adjust

• Incorporate needs for “special events” and projects beyond plans

• Format of consolidated orders

• Faster more efficient process also resulted in capacity to clear old/aging issues which once address will not be regular need

• Further segmented and review needs by type of growth based on employees and customer as they have different requirements

• Process change expanded further and automated where possible

Repeat

• Things change – market, acquisitions, turnover, new suppliers etc.

• A fast, streamlined process with little in process inventory can respond to change better with less disruption.