Strengthening the supply chain links - Supply Chain report October 2009

Manufacturing & Logistics IT spoke with three well-established companies in different vertical markets to put their different yet equally well-executed supply chain improvement stories under the microscope.

The Doosan story

Doosan produces the essential materials for electronic application such as mobile phones, televisions and refrigerators. The companys main output is copper clad laminate (CCL) for Printed Circuit Boards (PCBs). Indeed, it is one of Koreas largest suppliers of raw materials for PCBs and also sells to countries such as China, Taiwan, Singapore and Indonesia. In 2007 the company sought to find an effective solution to reduce its inventory stock levels. After launching an SCM initiative soon after, it finally selected its i2 tool in May 2008. We concentrated on reducing our inventory levels of standard parts, and also looked at improving gross margin, working capital and cash flow, explained Jaegil Song, S&OM team leader at Doosan.

According to Song, Doosan selected i2 primarily based on the companys solid reputation in the Supply Chain Management (SCM) systems industry, with references worldwide. Secondly, Doosans selection was based on i2s understanding of its corporate culture. These two advantages were very important for us, said Song, adding: We also recognised the potential for us to benefit from i2s rich experience in SCM across many vertical sectors.

Longer-term planning

Doosan uses i2 Supply Chain Planner for rough-cut master planning and Sales & Operations Management (S&OM) as its demand management tool. Before using i2 S&OM, we could not make long-term demand plans; we just made a demand plan for the coming four weeks, explained Song. Since deploying the i2 S&OM solution, we are now able to plan longer-term and have greater planning visibility. Also, since the implementation of the i2 S&OP and i2 Supply Chain Planner solutions in November 2008, we have been able to manage a 13-week rolling plan. Song pointed out that, during Doosans weekly S&OM meeting, the company closely monitors actuals on a weekly basis.

Doosans weekly S&OP operation schedule begins with the acquisition of sales forecasts, defined with a cut-off time set to Monday evening. We run a process to balance demand and supply to generate a rough cut plan, said Song. Planning results and issues are then discussed with both our manufacturing and sales departments. We then review the KPI figures and compare them with the previous weeks agreements. Final target adjustments are made during the management meeting on Wednesday, where the president and executives in charge, together with our sales and manufacturing departments, review the root causes of any potential problems and analyse the possible plan-and-do gaps before adjusting and approving next weeks plan. In addition to the weekly S&OP meeting, Song explained that the company also holds a monthly S&OP meeting on the last Wednesday of each month, where it reviews a plan with a seven-month horizon. These meetings help address a number of key issues; such as inventory ownership, which had to be changed from manufacturing to sales, so that sales is more aware of the importance of inventory levels.

Song outlined some of the core benefits of the i2 S&OM solution as deployed at Doosan. It is very user-friendly, partly due to the fact that it is Excel-based, he said. A management tool usually requires a significant level of staff training before it can be used effectively; however, it took only a few hours for our team to use the S&OM solution efficiently. In addition, i2 S&OM has best-practice workflows, which have been built up to address the requirements of many important i2 customers; such as LG, GM and Toshiba. Having the opportunity to leverage such best practice scenarios proved to be very helpful for us to manage demand more effectively.

Song added that there are many business functions involved in the i2 S&OM process, meaning it is important to be able to input forecast and analyse data in various ways. The Doosan team generates a demand plan based on required quantity. Production, Sales & Inventory (PSI) analysis is then conducted across its various business functions. A specific demand plan is also made available to the team for aging inventory and last-time buy items for end-of-life products. Doosans sales team makes sales forecasts on items using all available information across various functions. The sales team manager and staff then review and approve a consensus demand plan and look at projected performance compared with the annual business plan and the monthly action plan. Song comments that i2 S&OM supports this plan generation process effectively.

He added that it is also desirable to evaluate demand uncertainties at different time horizons. The demand is managed in volume (item available in weekly buckets) for the coming two months, and can be entered by different people in different departments. There is all of the necessary information available for forecasting in S&OM on inventory, product output, and price, explained Song. We can use various unique measurements of each product group in S&OM. Our products can be sold on sheets and/or panels. There are quantity by sheet/panel and quantity by sheet, which are calculated in S&OM using primary conversion ratio. I am going to concentrate the rest of this year on reports to make our system more reliable and stable, and look to adopt the world-class best practice by making more sophisticated improvements in 2010 and 2011.

Deliverable KPIs

In terms of managed KPI results, Song reports that Doosans global inventory was 1.4 million sheets in week 20 of this year. This was a drop of 40 per cent compared with week 24 of last year, while raw material inventory dropped by 48 per cent from 539, or 53.9 billion KRW to 22.6 billion KRW; which is approximately a 15 million Euro reduction. The finishing (goods fulfilment rate in the warehouse on a weekly basis), which was fluctuating between 80 to 90 per cent at the early stages, is currently capped at around 99 per cent, and the inventory clearance rate within four weeks in the warehouse has improved from 80 to 98.5 per cent. We started to work on the sales capability index only recently, so it has not been improved significantly and shows a steady forecast accuracy error at around 30 per cent therefore, we need to work hard to make progress in this area, added Song.

The future

Doosan now plans to expand weekly S&OP to new business segments that were not part of the original scope for this year. Song points out that the decision to do this was made in order to increase customer satisfaction and early warning capabilities, as well as to enable more sophisticated and advanced operations in the near future.

The Wolseley UK story

Wolseley UK is the UK operating company of Wolseley plc, the global distributor of heating and plumbing products. It is a leading supplier of builders products to the professional market. The company first purchased its Infor Demand Planning software solution back in December 1999. In terms of Wolseleys previous ordering structure, Andrew Dawson, supply chain systems manager, Wolseley UK and Ireland, explains that each DC had its own team of inventory planners and they used an ordering system based on a 12 week rolling average weekly sale to produce orders. In 1999 we began looking for a replacement system and invited a number of vendors to tender for the business, he said. After considering all options, Wolseley decided that the MerciaLincs Demand Planning (now Infor Demand Planning) solution offered the most suitable system. Dawson cites the key reasons behind choosing the system as:

• It was a specialist solution.
• Met Wolseleys criteria, including improved productivity and customer service.
• Ran on existing hardware.
• Had good references.
• Had a good client list.
• Was British based.
• Was value for money.
• The people and approach.

Wolseley UKs National Distribution Centre is in Leamington Spa. It also has three regional DCs in Bedfordshire, Worcestershire and Yorkshire. The Infor Demand Planning system is used specifically for replenishment orders into the companys DCs. Dawson provided the detail: The system forecasts our requirements based mainly on historical demand; including seasonal trends. On a day-to-day basis, our planners review forecasts to determine proof of quality. They extract order information from the system, which are calculated based on parameters such as lead time, order cycles and safety stock levels and determine whether we order stock daily, weekly or fortnightly based on availability from our suppliers, DC capacity and anticipated customer demand. Each planner is responsible for ordering goods from a pre-determined group of suppliers.

Standardising the process

Implementation of Infor Demand Planning commenced in February 1999, with the system going live in May 2000. The Demand Planning system originally went live at our Plumb Center business in the UK, Dawson pointed out. However, Wolseley is a large organisation, with brands such as Plumb Center, Build Center, Parts Center, Pipe Center, Drain Center, Climate Center, etc. And over the intervening years, each of these brands has also embraced the Infor solution. Over the past two years, we have worked to centralise and coordinate a standardised process between the brands and it has now been adopted by all our brands in the UK and Ireland. We have also standardised our training regime across all the brands. As a result of this standardisation, the key benefits weve seen include improved management of inventory levels and improvements in inventory availability. Weve achieved this using a coordinated ABC inventory classification methodology.

Customised training

Infor provides comprehensive documentation for training, and training has been a key part of Dawsons role since he joined Wolseley in 2007. Essentially, we have taken the Infor training literature and customised it to make it more specific to the Wolseley business, he pointed out. So, a trainee planner at Wolseley can pick up the training manual and learn how to operate the system quicker than reading a more generalised manual.

Dawson added that, although he joined Wolseley only two years ago, his experience with the Infor Demand Planning system goes back to 2000, which was around the same time that Wolseley first purchased the package. I was working for a company in Australia that implemented the same system at around the same time, he explained. Indeed, one of the reasons I joined Wolseley in the UK was because of my previous experience with the same Demand Planning software package.

Dawson also pointed out that Wolseley has a very good relationship with Infor in terms of ongoing support, and Wolseley observed a continuity of reliable service and support after Infor acquired the Mercia Supply Chain Planning solution range from Finmatica in 2005. We regularly speak with our Infor account manager with regard to ensuring we are kept up to date with available enhancements and upgrades, he said. Wolseley has a monthly operational meeting, which normally includes a member of the Infor support team to offer extra advice and guidance.

Further enhancements

In terms of future plans, Dawson comments that Wolseley is constantly looking at new ways to enhance its use of the Infor Demand Planning system. Some of this activity revolves around internal changes, such as the development of interfaces with Wolseleys own ERP system.

The Life Technologies Corporation story

Life Technologies Corporation, a global biotechnology tools company, was created from the merger of Invitrogen Corporation and Applied Biosystems Inc in November 2008. Life Technologies partnered with Infosys to transform its legacy e-commerce platform supporting invitrogen.com in April 2008. The company wanted an agile, scalable and adaptable system to facilitate efficient transaction processes. Infosys implemented a comprehensive, standardised and scalable e-commerce solution based on the Comergent platform (now Sterling Commerce Multi-Channel Selling Suite). The e-commerce solution improved usability, provided effective merchandising channels and improved purchase and conversion processes. It also helped realise cost savings by reducing call centre costs through the introduction of customer self-service features.

Product comparison analysis

The decision to source the Comergent e-commerce solution (now Sterling Commerce multi-channel selling suite) in 2007 was based on the outcome of product comparison analysis Invitrogen undertook a few years earlier. To support the complex platform implementation we sought the services of a company that had both proven experience in the installation and customisation of e-commerce solutions as well as a reputation for reliability, said Christian Wip, Life Technologies IT director, e-business. This criterion narrowed the field down to a few key players in the market, and Infosys was chosen as one of the key implementation partners on the basis of its experience in the field of implementing e-commerce packaged design applications and the strong partner relationship with Sterling Commerce. Wip added that Infosys proven expertise in a number of other IT-related areas also opened up the possibility for future projects. In addition, Infosys was one of the most cost-competitive solutions and service providers on the market. The newly implemented Sterling Commerce e-commerce solution for invitrogen.com went live in June of this year.

Training strategy

Life Technologies undertook staff training for the e-commerce system in-house. Wip pointed out that the companys in-house technical writers wrote the user manuals containing frequently asked questions and quick reference guides. These manuals were used to train our customer service reps and in-house users and supporters of the e-commerce system, he explained.

Importance of e-commerce

E-Commerce is a critical channel for Life Technologies. Although we can take orders by phone and fax and have a dedicated customer service department for this task the majority of the orders we receive come via the Internet from customers in North America, plus a significant number in Europe and Asia Pacific as well, said Wip. So, from a sales channel perspective, the Web is key.

Technical changes and enhancements

Wip continued: With our upgraded e-commerce system, Infosys has helped us to introduce new and improved functionality, much of which has resulted in a brand new and enhanced user experience on the customer-facing side. We have also transitioned to a new technology platform that we feel is much more scalable for the future growth of our company. We run the Comergent system on Linux as our platform, with Apache Tomcat as our web servers. We use Oracle as our database and all the code is written in Java J2SE, so we believe we are using state-of-the-art, best-of-breed technology.

Improvements for the customer and customer feedback

With the help of Infosys, we have introduced an on-screen survey window that appears each time a customer places an order. We leverage constructive customer recommendations to make the customer shopping experience as enjoyable and convenient as possible, said Wip. One example of an area that has been very well received by our customers is in our custom configured goods. We sell several products that comprise multiple parts that need to be individually selected in order to arrive at the end product. The configuration engine is one of the new features of our latest e-commerce solution, and is very different compared to the legacy platform. Although some customers had become used to the old system, overall we have received a good response as customers are now able to configure products in a more efficient manner.

Wip added that another enhancement enables customers to see what is in their shopping cart more quickly. So, rather than customers having to visit a separate page to view the basket, they now immediately view a summary of the basket via drop-down each time an item is added, he explained. This means one less click for the customer and further speeds up the transaction.

Wip also pointed out that Life Technologies has a real-time interface to its Oracle E1 ERP systems, so when customers log onto the website they see not only real-time pricing but also real-time availability. They therefore know immediately whether a product is in stock or whether its on back-order, he said, adding: The reason customers are required to log in is because we are a large company with distribution centres around the world. So, based on the location of our customers, we can check the availability of a product within their particular region. Most of our stocked products are received by customers within 24 to 48 hours. Although the basic capability of allowing customers to determine stock availability hasnt changed, our latest e-commerce upgrade improved the messaging around this availability function. Therefore, its now easier for customers to see whether a product is available for immediate shipment.

Looking ahead

Because the Internet is evolving quickly Life Technologies is always planning to further enhance its e-commerce system and is actively working with Infosys on the next set of enhancements. We always want to offer new products, new capabilities, enhanced functionality and generally leverage the latest capabilities that the web offers, commented Wip. This is a very fast-moving landscape, so we will be in a continuous enhancement cycle for the foreseeable future. For example, one of the things that our usability studies and customer studies have found is that search functionality is very important, particularly for companies like ours with very large catalogues. We sell almost 50,000 catalogue products and around 8 million genomic products that can be ordered through the web. When the product offering gets this extensive, navigating down the hierarchy is just not realistic. Search capabilities have evolved considerably over the past few years and we are actively working on the next generation to optimise the overall user experience. In addition, the ability for us to recommend products to our customers that we feel might assist them in their experiments and processes will be further enhanced in an effort to optimise the discovery process. Giving scientists that shop on our invitrogen.com website additional recommendations around complementary products to complete their experiments is high on our priority list.