Lighten up: Recessionary times call for business intelligence-based insight to lean supply chain performance

Maintaining a lean supply chain during flush economic times isn't exactly easy, but staying lean during a recession times is tougher by far. In recent years, many companies could count on steadily growing demand, but the downturn has sent demand patterns plummeting in many industries, necessitating nimble short-term balancing of the supply picture against current demand in an effort to stay lean.


Maintaining a lean supply chain during flush economic times isn't exactly easy, but staying lean during a recession times is tougher by far. In recent years, many companies could count on steadily growing demand, but the downturn has sent demand patterns plummeting in many industries, necessitating nimble short-term balancing of the supply picture against current demand in an effort to stay lean.

"The challenges with lean are more pronounced with the current economy," says Rick Jeffcoat, an application analyst with Hubbell , an Orange, Conn.-based manufacturer of electrical, power system, wiring, and lighting products. "When we started to see the downturn in housing starts last year, our forecasts were no longer relevant because the demand patterns had changed so drastically."

To keep the supply chain lean for its Hubbell Lighting division based in Greenville, S.C., says Jeffcoat, Hubbell is using supply chain decision-support and event-management software from Kinaxis to adjust short-term supply execution to current demand.

The Kinaxis RapidResponse package, says Jeffcoat, takes longer-term supply and material plans generated by the company's ERP system and analyzes them against current requirements, taking into account the cross-dependencies among parts, multiple suppliers for parts, and the latest demand requirements. The system also has an event-management component that allows Hubbell Lighting to alert suppliers to necessary changes in the supply plan.

"We are using the tool to more expeditiously identify what the current requirements should be on the supply side," says Jeffcoat. "We communicate back with suppliers using automated email that indicates which particular parts are needed today versus what we placed earlier."

Under lean manufacturing methods, actual demand, or a drawdown on a small buffer of finished goods, triggers the flow of materials via the use of pull signals. While many manufacturers have successfully implemented lean methods at the plant level, few have fully synchronized their operations with external suppliers.

But harsh economic times are forcing manufacturers and their partners to bridge the gap between planning and execution to achieve lean supply chains. To this end, diverse software packages are being used, from ERP suites that support Web services ( see sidebar ), to business intelligence (BI) software that can comb ERP and other data to analyze supplier performance and risk.

Further still are solutions for decision-support that allow rapid adjustment of supply and demand plans, or sales & operations planning (S&OP) modules.

Rebalancing supply

Kerry Zuber, a director for Kinaxis, sees manufacturers scrambling to realign supply plans with demand. This often involves taking material plans and supplier data from an ERP system and analyzing that data in a decision-support tool against the latest demand picture.

"This downturn has been so radical that it is forcing companies to look more frequently at adjustments to both their forecasts and the rightsizing of their supply chains," Zuber points out.

At Hubbell Lighting, for instance, material plans and supplier data are held in an SAP ERP system, while the supply readjustment insights are made using RapidResponse. While the ERP system is effective at inventory management and material planning, explains Jeffcoat, the material planning logic in the ERP system tends to focus on part and item-level data rather than the fuller range of cross-dependencies that RapidResponse can examine, such as which orders are affected by changes to supply plans, and if there are multiple suppliers for a part, which ones need alerts.

In the past, says Jeffcoat, Hubbell planners tried pulling ERP data into other tools like Excel to examine material planning exceptions and make adjustments, but that analysis still left planners with the need to communicate changes to suppliers.

"While you may be able to examine supply order data with other tools, you've still got another step to conduct the communication and collaboration," he says. "Kinaxis ties those decision-support and collaboration functions together."

The lean supply chain goal underscored with RapidResponse, says Jeffcoat, ensures that Hubbell's suppliers don't build up components that won't be needed if demand suddenly subsides. The potential danger without this analysis is a buildup of excess inventory because suppliers only have rigid component orders generated by traditional material planning that drives plans around longest lead-time items.

"We need to get the message out to our suppliers that they shouldn't be consuming their resources building items A and B for us when what we really need from them are items C and D," says Jeffcoat.

RapidResponse also is used to support order promising "what-ifs?" such as comparing current orders to inventory on hand or projected supply. Since the RapidResponse engine also holds forecast, order, and supply data, output from the solution is useful for Hubbell Lighting's S&OP process.

But the main use of the software, Jeffcoat says, is to support a leaner, just-in-time supply chain. "In these times, we need to be very conscious of what our supply signals are driving us to do with inventory," he says.

That thing called risk

Another form of decision support for lean supply chains takes aim at supplier performance. BI software is helping Vicor Corp. with such monitoring and analysis. The Cognos BI platform from IBM also has event-management capability that supports aspects of lean supply execution.

Vicor, an Andover, Mass.-based maker of power-conversion components, uses the Cognos 8 suite for supplier performance tracking, analyzing supplier risk, and proactively reviewing yield variances on upcoming production plans, according to Joe Jeffery, Vicor's director of manufacturing systems.

The BI suite's event-management and alerting functionality even combs inventory and material management characteristics in Vicor's ERP system—such as minimum inventory levels being neared—and sends alerts to suppliers.

"It reacts to those [characteristics] selectively and then sends out email bursts to suppliers upstream where they need it," says Jeffery.

Vicor uses the PeopleSoft ERP suite from Oracle Corp . to generate materials plans, and a manufacturing execution system (MES) to handle production execution. But the BI suite plays an active role on the shop floor as well, due to manufacturing metrics and key performance indicators that track production performance, drawing on data from the MES and ERP.

Another set of BI functionality analyzes upcoming production runs being planned in ERP. It looks at all the items that will be built, and compares standard yield data for the items with a rolling 13 months of actual yield data.

The yield graphics in this "Production Planning BI" tool visually display which planned items have exhibited stronger variances in the recent past. The visuals help engineers pinpoint process steps that may require troubleshooting.

"You don't want any surprises when you get to the shop floor to build things," says Jeffery.

With the tough economy truly showing itself in late 2008, Vicor began using the BI software to do supplier risk assessments.

"We have an awful lot of suppliers for raw materials, and in lean times, we must ensure we are not sole-sourced with a supplier that may go belly up," Jeffery says.

The BI suite also is used for scorecards on supplier performance, such as which suppliers offer the shortest lead times, and best adhere to lead-time promises. These decision-support tools, says Jeffery, were built by business system analysts at Vicor using IBM Cognos 8, rather than being custom-coded by developers.

While the BI solutions were relatively simple to build, their core benefit is helping Vicor meet its supply chain requirements with minimal stock, and avoid surprises that lead to waste.

"When you didn't order enough materials ... or you ordered too much," Jeffery concludes, "you know that either case is just awful from a lean perspective."

Lead with lean: SOA-based ERP smooths assembly-partner interaction

The extent to which ERP can support lean is the subject of constant scrutiny, from its support for kanban inventory management to its focus on pull scheduling. But when it comes to collaboration with partners, the openness of an ERP suite can impact its ability to support lean.

Value Plastics , a Fort Collins, Colo.-based manufacturer of tubing connectors, moved from disjointed legacy systems to an integrated ERP package back in 2002. Now the manufacturer is benefiting from the ability to easily select and share information and processes with partners.

According to John Gibson, VP of IT, that move to software from

But as Value Plastics upgraded to a version of the IFS suite with a service-oriented architecture (SOA), it started phasing in extensions that expose real-time ERP data outside the enterprise—particularly to an assembly partner in Mexico, as well as customers.

The Web services created by Gibson and his staff expose what Gibson calls "slices" of ERP functionality to partners via a secure Web site. These slices enable the partners to work as one without forcing adoption of entirely new systems, or resorting to workarounds like rekeying data.

"We didn't want to build entirely different processes to maintain what was, to us, a new relationship and a new data stream from [the assembly partner]," says Gibson. "But we needed that data stream to have all the same types of things we would do here: scrap quantities, scrap causes, parts on hand, throughput rates."

In particular, Value Plastics wrote a Web service that extends functionality from the IFS Shop Order module. The user interface is accessed by the partner via an extranet site that uses Secure Socket Layer technology with encryption for security. Using this site, the partner can see what needs to be built, and via its Web user interface, personnel enter needed data about scrap reasons and completed component counts. The site also contains Web services that expose small slices of IFS functionality for inventory moves and customer order management. The partner then can generate pick lists and handle direct shipments of certain finished goods.

Gibson says the Web services were relatively simple to write, though Value Plastics and the assembly partner needed to test the inputs and outputs, and create the user interface for assembly workers.

"They didn't have to learn a new system," Gibson says. "The interface is very forms-based and, in many ways, mimics their current systems."

Overall, concludes Gibson, SOA-based ERP supports lean via an accurate, open flow of information.

"Our partners can see what's headed their way, and they can plan their production runs accordingly," he says. "Conversely, as they complete shop orders, we get real-time information so we know exactly what we have down there for the next manufacturing run. We don't under- or overproduce, or under- or overbuy components. The information is good for everyone. You don't end up with inventory sitting around that you don't need."

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Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
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Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

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