In the April Issue of our newsletter we introduced our “Taught String Theory” which illustrates how effective data sharing can integrate the demand and supply processes of customers and suppliers—as if tied together with a taught string. We are including it here for those that do not subscribe to our newsletter.
Simply put, by your customer pulling on their supply, you are prompted (and so are your vendors) to respond immediately to each others needs. Those actions in turn adjust the slack created by manual order entry and purchase order processes, as well as MRP, keeping the “string” taught, but agile.
A Real Application
One of our DemandCaster® clients, a manufacturer of high-precision components, was unable to meet the stocking requirements of their largest customer, who had placed their supply management system on-line. The solution for our client seemed simple at first: keep all the managed items at their customers desired stocking level. But in reality, because of long lead times, and their customer’s constantly changing requirements, our client was unable to stay ahead of requirements and began managing by exception. More specifically:
- Reorder points and safety stocks were not calibrated to changing customer demand, causing their WIP to grow due to the constant starting and stopping in production.
- Stock-outs and shortages increased to nearly 50% of managed SKU's.
The first solution to address their problem was to create a series of complex spreadsheets to help them compile and analyze data. That process, however, required roughly two hours a day to prepare and was not easy to use.
Sharing Data to Improve Collaboration
Clearly our client needed a stronger tool that would help them access real-time information about their customer’s requirements.
Using DemandCaster®, we integrated our client’s customer’s shared stock availability and demand plans with the client’s ERP-system data. That connection enabled a vastly different level of collaboration between client and customer, allowing our client to:
- Carefully calibrate the replenishment plan based on the changing needs of the customer.
- Trigger replenishment orders to maintain stock at contracted levels, based on consumed stock and shared forecast data.
- Eliminate buffering of orders and lost time between the customer issuing a PO, receipt of that PO, and our client acting on it.
Application of Lean
We also implemented a lean process to reduce batch sizes and cumulative lead times, thereby increasing speed and flexibility. The information was then used in DemandCaster® to calculate optimal kanban quantities to manage the replenishment process and capacity. The current open-shop orders and subsequent planned orders were then transposed in the DemandCaster® capacity module to allow for viewing of constraints—and thus proactively manage bottlenecks either by rescheduling planned replenishment orders or increasing capacity (adding hours or outsourcing operations).
Within four months, our client dramatically improved performance across a number of key metrics:
- Reducing stock-outs and shortages to 3% of managed SKU’s
- Reducing WIP more than 50%.
- Eliminating two hours of lost time they were able to re-apply to managing the process.
- And, their customer was blown away with our clients seamless effort to integrate demand with supply.
Ease of Use and Trust are the Linchpins
Though we used DemandCaster®to illustrate the power of collaboration, in some cases spreadsheets will suffice. The key is understanding the purpose of collaboration and making it easy for your partners to engage in an open and trusting manner. If the process is too hard to manage or there is a lack of trust in the information that is provided, any hope of realizing the benefit of collaboration will be immediately lost. In most cases technology makes the process easy and minimizes inconsistencies in data. Making the collaboration process work is up to you… and your customers.
