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A Materials Planning Case Study, Part 2

UK-based Gremlin Electronics (named changed for confidentiality) is one of Europe's leading electronics companies. The company has implemented a software solution on top of its ERP system to increase its product availability for shipment while reducing costs such as stock and storage, airfreight, late penalties, and inevitable depreciation and scrapping. In Part 1 of this case study, we discussed Gremlin's challenges.

Gremlin manages a portfolio of 3,000 active products while phasing another 600 items in or out at the same time. Using a software called Diskover Sco, Gremlin ran simulated “what if” scenarios to set performance parameters across its supply chain. The company discovered that, since the behavior of items changes over time, the demand planning and material parameters have to be item-specific. A planning and master data rule set was then specified and tested. The system automatically executes this rule set, enabling a rational and reliable monthly master data and parameter update for the whole range of items.

For forecasting demand, the system integrates data from statistics as well as from the sales team into a so-called “consensus forecast.” Together with current stock levels, purchase orders, order requisitions, and customer orders, this consensus forecast is the basis for the nocturnal MRP run as well as regular MRP net-change runs over the day.

Gremlin's main customers are wholesalers and retailers that run frequent marketing and sales campaigns. These campaigns, or “exceptions,” require large volumes of product to be shipped to the customer only once. Sales staff can compile such exception plans in Excel and send them via email to the Diskover service. The system processes the data automatically and returns an acknowledgement email to the sender.

Each time marketing or sales campaign information is sent to the system, it automatically emails a note to the responsible strategic purchasers of the campaign’s items, signalling which items are part of the campaign. Material planners are also automatically informed of the scheduled campaign and the items for which stock levels are below the required campaign volumes. If an item is out of stock, the material planner can easily switch to the item’s material planning screen by double-clicking and taking appropriate action.

With the help of alert screens and automatic material planning directions, the material planners manage their daily work, addressing:

  • Material shortage during replenishment time
  • Current stock outs
  • Undercuts of safety stock during replenishment time
  • Current undercuts of safety stock
  • Items with currently higher demand than forecasted backlogs of orders

The combined shipment optimization (CSO) function of Diskover permits aggregated order sizes of different items according to criteria specified by the material planner. This helps to achieve a combined minimal order quantity or fill a sea container in a way that keeps resulting stock coverage as low as possible.

Parameters such as required replenishment quantity, minimum order value, shipping units, and capacity or weight of the container are factors used by the system to calculate the best combination of order lot sizes. Ultimately, Gremlin increased its delivery availability and stock turnover while inventory decreased. These developments have been sustained.

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