March 27th, 2015 Presented at the Demand Driven World Conference Houston, TX SATUERCA INTRODUCTION ACTIRO ESTAMCAL MECANIFRAN MARKET PRODUCTS  Founded in 1967 PRODUCTION PROCESS DDMRP  Horizontal forging (parts between 50g and 2kg) Machining  Focused on the automotive supply sector RESULTS  2 factories located in Spain and 1 in Romania 135 workers 15,000 m2 between the 3 factories 2  Certificates ISO 9001 ISO 14001 Quality Management Standard Environmental Management Standard INTRODUCTION MARKET PRODUCTS PRODUCTION PROCESS DDMRP  ISO/TS 16949 OSHAS 18001 Quality in Automotive Sector Occupational Health and Safety Management RESULTS 3 SALES (units) INTRODUCTION MARKET 70,000,000 54,153,346 60,000,000 60,297,075 46,503,914 50,000,000 39 million € PRODUCTS 40,000,000 PRODUCTION PROCESS DDMRP RESULTS 35 million € 30,000,000 SALES 31 million € 20,000,000 10,000,000 0 2012 2013 2014 4  Market PORTUGAL 1.3% ROMANIA 2,2% CHINA 0.2% OTHERS 2,0% UK 0,8% By country SPAIN 10,4% ITALY 1,4% USA 5,1% INTRODUCTION MARKET GERMANY 31,7% PRODUCTS PRODUCTION PROCESS FRANCE 44,8% DDMRP RESULTS Main Customers 5  Our products INTRODUCTION MARKET Gears Clutch Bodies Cams PRODUCTS PRODUCTION PROCESS Nuts DDMRP RESULTS Bearings 6  Our products INTRODUCTION MARKET PRODUCTS Bearings Gears Clutch bodies PRODUCTION PROCESS DDMRP RESULTS Special Nuts Cams 7  Our products INTRODUCTION MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS 8 Hot and semi-hot forging of a variety of steel pieces INTRODUCTION  Fully integrated manufacturing process from raw material to finished product MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS 9  Production facilities INTRODUCTION MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS  Horizontal forging  Heat treatments: Annealing, Quenching and tempering, Isotermal annealing, Normalized  Shot blasting  Automatic 100% inspection (2D and 3D)  Surface treatments  Machining  Technical characteristics  Forging Temperature 1.200 ºC / 100 to 150 parts per minute  Lead Time 5-10 days  Raw Material: steel round bars from 19mm to 55mm, 23.000 Tn / year 60 references  400 finished products 10  Why DDMRP? PLANNING  Critical process Situation description INTRODUCTION MARKET PRODUCTS • • • Customer forecast/orders varying even on due date Delays of raw material deliveries Daily consumption from consignment stocks  Necessities • PRODUCTION PROCESS DDMRP RESULTS Methodology to manage this information on a daily basis: • Stock levels • Detection of new Work Orders (WO) requirements • New raw material purchase requirements • Which raw material Open Supply orders need to be controlled • In Process WO that need to be expedited  Planning history • • • Until 2012, planning was dependant on a single person’s analysis From 2012 to 2013 use of Excel September 2013 until present day: DDMRP Methodology applied along with Replenishment +)software 11  Changing to DDMRP INTRODUCTION MARKET 1st- Strategic Inventory Positioning 2nd- Buffer profiles and Level Determination 3rd- Dynamic Buffers 4th- Demand-Driven Planning 5th- Execution PRODUCTS PRODUCTION PROCESS DDMRP RESULTS DEMAND ANALYSIS  Change in the way DEMAND is understood  Forecast/Orders beyond a reliable horizon are no longer taken into account   Only committed orders (date and quantity) are considered DEMAND 12  CUSTOMER BEHAVIOUR  CUSTOMER “A” INTRODUCTION MARKET • • • • • Daily forecast for subsequent 3 months Daily consumption - Real orders only one day in advance Forecast precision - Quite good LT = 10 days Raw material and finished product buffers PRODUCTS PRODUCTION PROCESS DDMRP RESULTS  CUSTOMER “B” Forging and Machining • • • • • Weekly forecats for subsequent 6 months Consignment stock - daily consumption Forecast precision - Bad LT = 20 days Spike orders 13  CUSTOMER BEHAVIOUR  CUSTOMER “C” INTRODUCTION MARKET • • • • • Weekly forecast for subsequent 9 months Weekly consumption Forecast precision - only the first week is reliable LT = 15 days 150 references PRODUCTS PRODUCTION PROCESS DDMRP RESULTS  CUSTOMER “D” • Enough time available to fulfill the demand from the moment the order is placed. Raw material is procured and manufactured to order . 14 1st- Strategic Inventory Positioning Raw material, semi-finished products, finished products INTRODUCTION OBJECTIVE: • Lead Time reduction • Reduce the “noise” which comes from customers’ bad forecasts or providers’ delivery problems MARKET 2nd- Buffer profiles and Level Determination PRODUCTS PRODUCTION PROCESS DDMRP RESULTS 15 BUFFER EXAMPLE RZ -- 5 working days YZ -- 5 working days GZ – Production batch (monthly) R+ Alert – 10 days M11M A 35,503 PART BUFFER DOES NOT MEAN THAT THERE WILL BE 35,503 PARTS ON HAND 16 17 4th- Demand-Driven Planning - Does a new WO have to be placed? - Does a new PO have to be placed? • Daily info vs Weekly info • Fast realization of whether there is a new need INTRODUCTION MARKET Raw Material new Purchase Orders? PRODUCTS PRODUCTION PROCESS DDMRP RESULTS 18 4th- Demand-Driven Planning Production new Work Orders? INTRODUCTION MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS 19 5th- Execution  Which PO need to be followed up? INTRODUCTION MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS  We have around 60 raw material SKUs  6 Raw Material SKUs need urgent follow up and 7 in the short term  Focus on 18% of SKU´s 20 5th- Execution  Which WO to be monitored? INTRODUCTION MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS 21 3th- Dynamic Buffer Adjustments INTRODUCTION • The Planning Manager should know of any extraordinary changes to products so as to be able to indicate such changes in the buffer parameters. • In addition to this, they must review the behaviour of the buffers periodically to be aware of whether readjustments are necessary MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS 22 INITIAL REQUIREMENTS • Part and Inventory data must be correct and updated • DEMAND has to be filtered INTRODUCTION MARKET PRODUCTS RESULTS  Reduction in production planning changes  Machine capacity improved PRODUCTION PROCESS  Production for one week is planned DDMRP  Daily information updated vs Weekly information updated Improved reaction to changes RESULTS  Facilities are used more efficiently maintaining same service levels (98+%)  Regulation of the stock levels - stock is available for all production requirements  Customer B is the best example 23 BEFORE CUSTOMER B INTRODUCTION MARKET PRODUCTS  The forecast for the next three weeks was the input to start the forging process  2 weeks later, when the forged parts were delivered to Mecanifran, a new forecast would tell us whether they were then required for the next process. PRODUCTION PROCESS RESULTS:  Bad forecasts meant that stock was out of control, what was needed wasn’t available and the forged parts were no longer required DDMRP  Urgencies in both factories RESULTS 24 NOW CUSTOMER B INTRODUCTION MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS RESULTS:  Buffers controlled in every strategic position  LT reduction of 50% (from 20 to 10 days)  Stock reduction ( 3,700,000 parts to 2,700,000 parts 35% in three months)  No more urgencies, the distortion that bad forecasts produced has been eliminated  Machine Capacity has increased by using them for what is really needed 25 26 CUSTOMER B 445945 PART 27 28 CAMS 13% OF TOTAL PRODUCTION AVERAGE STOCK 175 TN DDMRP TARGET: 184 TN ADU 9,228 (3/16/2015) RAW MATERIAL STOCK (2 WEEKS) = 92TN MATERIAL IN PROCESS (2 WEEKS) = 92TN TOTAL = 184 TN 29 30 BECOMING DDMRP INTRODUCTION MARKET PRODUCTS PRODUCTION PROCESS DDMRP RESULTS 31 THANK YOU XABIER TUDANCA Purchasing and Logistics Responsible GRUPO SATUERCA