best-in-class planning through exceptions and re-distribution

Best-in-class planning through exceptions and re-distribution

Albert Söderberg Frankfurt October 7th 2015

COPYRIGHT © SYNCRON INTERNATIONAL AB 2015

Syncron International AB

• Senior Manager, Stockholm office

• Background from ERP and System Integration

• 12+ years of experience from Supply Chain Management (VMI, RIM, Syncron GIM software)

• Responsible for the implementation of the Volvo CE RIM program (Volvo MMI)

Automatic re-classification for evey item to always use the optimum policy

Albert Söderberg

The challenge…


Vast product range, very high costs for stand still

Example: Construction Macinery, 100+ machine models


Project Scope – Global implementation

Central WarehouseLive DealershipIn Progress

Sales volume covered, Total

90%

# dealerSites Live

# dealerSites in Progress

510 20

• Various ERP systems• Private dealer network• Each warehouse have ~20 000 SKUs


Independent Benchmark - before implementation

Regional Warehouse

Central Warehouse

Dealer

Day 399,9%

Day 399,7%

Day 299%

Day 294%

Same day (OTC)90%

Same day (OTC)60%

Spare part availability before Dealer Inventory Management

Regional Warehouse

Central Warehouse

Dealer

Competitor Syncron GIM customer

Market leader


Key drivers to initiate GIM projects

• Increase OTC (Over The Counter) fill rate.

• Improve dealer performance.

• Improve the OEM’s reputation.

• Increase customer satisfaction.

• Increase sales/market shares.

• Open up Supply Chain visibility toward dealers.

The solution:

Demand forecasting


Forecast Components

Trend

Base Forecast

Seasonal Factors

Marketknowledge


Demand types – Ensures the correct forecasting algorithm

Slow Lumpy

ErraticFast Positive Trend Negative Trend

New Dying Obsolete


Product Life Cycle Management – Automatic re-classification

t

Sale

NEW+TREND

Fast (+)

Fast/Erra

ticFast(

-)

Slow/Lumpy

Dying/Obsolete

-TREND

Replenishment planning


20% of the parts

Classification by VAU

80% of the parts

A1 € € € € A2A3A4B1 € € B2B3B4C1 €C2C3C4

80 % of turnover

20 % of turnover

VAU = Annual estimated demand * unit cost


Inventory policy - What items to keep in stock

Automatic re-classification. Items will move in/out of the stocked area as demand changes


Inventory policy parameters - When and how much to order

• Advanced buffer stock calculations

• Separate target service level for normal, slow and lumpy items

• System calculated re-order point

• Ordering according to FOQ

Automatic re-classification for every item to always use the optimum policy


Inventory policy – Simulate the impact of changes

Simulated result of a change to the policy


Target service level – Simulate the impact of changes

Simulated result of a change to the parameters


System recommended orders – For stocked items

Spend 15-30 min or use Automatic Confirmation

Exception ManagedInventory


Work Load – Inventory Manager / Planner

• ~20 000 SKUs per warehouse

• 3000-5000 stocked items (shelf locations)

• General tasks:

– Customer service (sell spare parts)

– Customer back order recovery

– Solve shipping/transportation issues

– Ensure internal logistic flow of warehouse

– Warrenty claims

– OEM buy back

– Inventory refill of stock Main task…?


New Job Description!

• Trust the recommended GIM refill order (85-90% of value and order lines)

• Monitor KPIs to ensure that GIM system delivers according to set targets

• GIM takes care of fast moving and low value items

– Supervise, but only interfere when market knowledge is at hand!

• Inventory Manager takes care of Non-stocking items (slow moving, high value)

– Spend time where it makes most effect

– Use traceable overrides - stay in control!

– Adjust forecast for future needs (campaigns, warranty programs, etc.)

– Rely on System Alerts to identify areas of interest

– Use system Auto-Confirmation of stock orders!


Summary Screen – System Alerts – KPIs – Order Overview


System Alerts: Forecast alerts – Manage by exception

Information to the user, actions taken automatically by the system


Non-stocking inventory (Risk of Run Out)

Slow movers or high value items – Use report with risk of run out within the lead time!


Risk of Run Out – Manage risk for shortages

Action: 1) Identify interesting parts2) Contact the supplier for a quick delivery or place a normal stock order order

Re-distribution(to refill stock)


Redistribution region

Redistribution - Make use of your excess stock

Item A: Rec order qty = 10

Excess stock on Item A

Redistribute Item A:10 pcs

Supplier

Stock refill:


• The base principal is that only excess stock is suggested for transfer when it comes to stock replenishment

• The “cost” of re-distribution must be considered: (Pick, Pack, Ship, + other handling)

• The Redistribution Limit can be set higher than the Excess Limit to compensate for re-distribution costs

When to re-distribute to refill stock?

Stock level

Redistribution Limit

Re-order pointSafety stock

Excess Limit

No! √ √


• Re-distribution order line value (€) limit can be set to prevent low value items to be redistributed

• When re-distribution is allowed, all quantity above Excess Limit is available for re-distribution

• Re-distribution orders can be exported back to warehouse ERP for execution

• Examples with up to 30% of the refill order value can be re-distributed

When to re-distribute to refill stock?

Stock level

Redistribution Limit

Re-order pointSafety stock

Excess LimitMinimum: €20

No! √No!


• One redistribution order of 5 will be created, supplied from the Prio 1 warehouse.

• One redistribution order of 2 will be created, supplied from the Prio 2 warehouse.

• The pending order of 8 will remain but the OQ will be set to 0.

• Set up priority between re-distributing warehouses, geographical boundaries?

• Multiple re-distribution regions can be set up

• Re-distribute if: 100% from one WH / 100% from many WHs / <100% is accepted

• Inventory Balancing functionality can be run as mandatory or as recommendations.

Redistribution region

OEM

Excess = 4

OQ = 8UOQ = 7

Excess = 5 Excess = 6

Prio 1

Prio 3

Prio 25 2

Example:

Re-distribution – Excess transfer rules


Redistribution – when handled on pending orders screen

Redistribution possibility from other warehouse - redistribution order suggested automatically


Redistribution – Specific redistribution screen

Pop-up with detailed info

Re-distribution(back order recovery)


Back order recovery (Supply Chain Visibility)

• Not only using excess stock

• Helps identify any available inventory, search by region or geographical area

• Cost for re-distribution less important (machine down)

– Lead time compared with normal supplier lead time

• Best practice report:

– When wharehouse have back order/stock out:

– GIM database info can generate a report where the items are available (and with excess) in the supply chain

• Redistribution of stock

• Re-direct customers to the located stock


Global visibility – Regional perspective

Easy access to all stock in the supply chain

Re-distribution(Warehouse buy back)


Buy back – Advanced return program for excess stock

• Excess buy back: Any item which currently fulfills buy back criteria

– Stock balance > buy back limit*

– Current supplier has enabled buy back

• Refill buy back: Only items refilled by Syncron GIM to the recommended qty

– No refill within refill buy back period

– Valid system refill order has been confirmed and exported

– The item has its own or transferred buy back rights

– If redistribution can be made, the buy back order will be blocked

• Both types will be suggested for either buy back or scrap

*Buy Back Limit = Excess limit + (Buy Back Factor* * Estimate of Demand)


Excess buy back

Recommended and confirmed buy back

Buy back limit for the item Stock balance


Refill buy back

Recommended and confirmed buy back

Buy back rights for the item Total buy back rights

Results!


Independent Benchmark – 2 years after implementation

Regional Warehouse

Central Warehouse

Dealer

Day 399,9%

Day 399,9%

Day 299%

Day 294%

Same day (OTC)90%

Same day (OTC)91-93%

Spare part availability after Dealer Inventory Management

Regional Warehouse

Central Warehouse

Dealer

Competitor Syncron GIM customer

New market leader onspare part availability!


Results

• Over 500 warehouse locations connected, 121 dealers in 53 countries

• Higher service degrees. No exception!

• Less capital tied up in dealer inventory and increased inventory turn rates

• Less manual work on stocking orders (<30 min) – more time for customer relations

• Increased market shares

• Unified KPI definitions and calculations in whole dealer network

• Less emergency orders towards central warehouses

• Reduced air shipment (equivalent to 20 000 cars/year)


Experiences from GIM projects

• It is possible to implement in large scale and with a lot of different DMS systems and interfaces.- Within scheduled time and on budget!

• It is possible to achieve very quick results and improvements, even at end customer level.

– Availability after one lead time Stock level within 3-6 months

• Make sure all projects are tied to reasonable business terms for the dealer.

– Price / fees for the system?

– Promised performance from system / supplier responsibilities

• Use easy model for establishing business case (where to implement?)

• Pay attention to local and regional differences (problems and needs)

• A good understanding for the Customer’s business is vital

• Data quality is the single most important component to succeed

Thank you!

best-in-class planning through exceptions and re-distribution

Software