Supply Chain Blog

Supply Chain: A top 10 Supply Chain faux pas!

Posted by Dave Jordan on Thu, Jun 28, 2018

I have just had one of those mornings. I missed the alarm and the 10-minute snooze and from then on everything went downhill. Jumped in the shower for a brief cleanse but then I realised there was no soap, not even a sliver. So, soaking wet I get out, but can I find anything remotely soapy? There was no time to waste so the Charles and Di souvenir tablet had to be sacrificed.

Obviously, it was quite a few years old and completely lacking in perfume but if I could generate a foam that would do the trick. I actually found myself apologising to the princess as I showered! Finally clean, I quickly sprayed shaving foam under my arms, brusupply chain exec tipical problemsshed my teeth with some really vile tasting skin cream and I was set to face the world. Well, I would have been if I hadn’t managed to put my Polo shirt on inside out.

I know students turn their underwear inside out to get a few days extra wear but I’ve started to put shirts on inside out. I was in a Birmingham Vodafone shop with the heiress when she leaned closer and told me what I had done. I just took the shirt off and put it back on again proving that you’re never too old to embarrass your daughter!

Only shoes left before a rushed mobile breakfast before finally getting on my way. How knotted can a shoelace get. There are only 2 ends about 40cm apart, yet they get into knots a Rubik’s Cube genius could not release within 48 hours.

Does that sound rather like your Supply Chain?  The 2 ends may well be continents apart but some of the supply knots companies get themselves into are incredible. Here is a list of top 10 totally terrible Supply Chain knots we have seen in the last 12 months alone. As ever, no names, no pack drill!

  1. A snacks company tried to sort out their Supply Chain challenges using internal resources and ended up disbanding the SC structure.
  2. A well-known DIY retailer “found” over 1000 pallets of product that were on the books but had expired.
  3. A regional Brewer boasted of a cutting-edge S&OP implementation when in reality staff were just going through the motions as Sales colleagues had become disengaged.
  4. An African FMCG business had over-stocked the distributor network so much that they could stop manufacturing for 4 months without any impact on sell-out.
  5. A global agri-business outsourced their logistics operations to the cheapest tender quote and quickly paid for this with severe out of stocks.
  6. A new ERP will solve all of our problems said a Printing CEO. After paying a huge price for a vanilla deployment they are now shelling out again to actually have an ERP that fits their needs.
  7. An Eastern European tobacco company opened more warehouses than were actually required and as is the rule, they were quickly filled with unnecessary working capital.
  8. A direct supplier to the motor industry was carrying Eur 2.5M of spare parts for vehicles that are no longer in production.
  9. A Brewer invested heavily in their RTM network with proven success only to mimic a later competitive move and see sales collapse during the peak season.
  10. A garage forecourt operator allocated Supply Chain activities to the Sales Department and soon realised very different skills were required for success.

All relatively easily avoidable if only some expert advice had been sought. Some of these problems make my disastrous morning seem like a walk in the park.

Image courtesy of imagerymajestic at freedigtalphotos.net

Tags: Spare Parts, FMCG, Supply Chain, Logistics Service Provider, Inventory Management & Stock Control, Dave Jordan, Route to Market

7 Top Tips for Spare Parts Management in Factories

Posted by Dave Jordan on Mon, Jun 04, 2018

Well, I find it strange anyway. Some very large companies spend countless hours and cash in finding and securing a third party logistic provider (3PLP) to take great care of their finished goods assets. The performance of the chosen 3PLP is then measured and monitored very closely using a suite of KPIs, e.g. damages and losses are recorded and usually debited to the 3PLP under the contract terms. A 3PLP is charged with “storing your stuff” as safely and cost effectively as possible and providing easy picking for dispatch.

I often wonder why some blue chip companies fail to adopt similar warehousing and logistics principles in the operation of in-house engineering stores. Depending on the industry, the value of the components can be several millions of Euros. If you do not pay attention to this area then the same things happen as they do with finished goods warehouses, including:

1. Shrinkage or more accurately, theft! Your spare parts stores will be helping to repair private cars, replenish home tool-boxes and raise personal funds through the sale of stolen goods. This might seem harsh but I have seen it first-hand and continue to in large organisations.

Bottling line resized 6002. Important parts are not in the right place. If you do not have clearly labelled storage bins you can stop production lines very quickly losing valuable operating time. At the end of the day an idle line can probably lead to more lost sales than a badly picked finished goods pallet.

3. Spare parts not replenished. If stock control is not rigorous then you will go out of stock on important items just when you need them. Sod’s Law dictates that they will also be the parts with lengthy lead times.

A few simple principles loaned from big scale warehousing will help:

  1. Operate some sort of stock management system. This can be done on Excel with some discipline but specifically designed software packages are available. You need to know where each spare part is located just like in a finished goods warehouse.
  2. Carry out cycle and annual stock counting. Keep a close eye on your high value and production-critical items by counting them on a rotating basis. Do not wait for a year-end count to reveal a gaping hole in your stock value.
  3. Carry out an ageing analysis. Many large stores are full of spares for machines that were last running when “Shep was a pup”. They are of no use to you yet they sit on a shelf and on your books as working capital. Any materials with specific shelf lives also need regular checking to ensure you are not holding something which is at best useless or at worst dangerous!
  4. Secondary store for critical items. Items of high value or those which will stop production can be held in a “store within a store”, e.g. a wire cage with 2 locks. Access to these items requires a more senior employee to be present at issuance, e.g. maintenance manager.
  5. Operate some relevant KPIs. These do not have to be wide ranging or difficult to calculate, e.g. ageing, stock rotation, shrinkage etc. An important KPI can be the value of your spares as a % of the operation asset value. Do you know yours?
  6. Order and stock only what you need. Avoid the temptation to buy in bulk as the price is keener. If you are able to calculate a forecast plus some safety stock then you can minimise your inventory and your working capital. Also, ensure that spares purchasing and receipt are spilt responsibilities or you may find you are buying items you do not actually use in the factory..………
  7. Restrict access to the spare parts stores. If you allow anyone to wander in and remove items then your stock control will be out of control, no doubt. If you require access to spares on a 24 hour basis then ensure the facility is staffed appropriately at all times. Leaving the stores unmanned and the door open should be a disciplinary offence.

When looking at factory operating efficiency people will often focus only on the production line and RM/PM supply. Take a look at how you manage spare parts and you may be able to influence your level of efficiency from an unexpected source close to home.

Image credit: Hi.WTC

Tags: Logistics Service Provider, Dave Jordan, KPI, Logistics Management, Inventory Management & Stock Control, Manufacturing Footprint, Spare Parts

Supply Chain Analytics drives dramatic spare parts inventory reduction

Posted by Dave Jordan on Thu, May 31, 2018

What business would I like to run or even own? If you had a choice what would it be? A huge global FMCG player or a niche craft brewery in Bourton-on-the-Water? What about starting a pottery in your own home as per the ages old Barclays TV ad? If I had a choice I would buy the company that makes Allen Keys for IKEA.

Every single item you buy contains an Allen Key. Cupboards, shelves, beds, kitchens, chairs. I think you even get an Allen Key when you buy their 4-packs of fresh salmon! How many Allen Keys do they “sell” in a year? The number must be in the millions worldwide; surely, it’s time for a key return initiative?

SUPPLY_CHAIN_ANALYTICS_SPARE_PARTS_INVENTORYAnyway, not all the keys are the same size as IKEA also uses a huge number of different bolts, fixings, screws and nuts and taking their success into account that is quite some inventory. I know IKEA uses a lot of third party manufacturers, but this means huge spare parts inventories are scattered across the globe. I wonder how they manage? I suspect they use some form of Supply Chain Analytics and being IKEA, the package is probably called something like Levy Pupus (it’s an anagram).

While this is not IKEA, I do have an example of how Analytics unlocked working capital and made a significant difference to 1 company with a large spare parts inventory.

The Challenge

This engineering business sold components require for new-build constructions as well as ensuring spare parts availability for subsequent repairs and maintenance. Demand signal profiles were different for each stream and with large differences between individual components, inevitably this was difficult to manage. However, supporting both business streams at high service levels was a USP of the company and therefore vital for success. Perhaps inevitably, the operation was struggling to keep inventory levels under tight control.

The Solution

Analytics was used to segment the demand between the new construction and ongoing spare parts businesses. The team then used SupplyVue to further segment demand for spares into multiple similar granular boxes and analyse the flow of parts through the chain. This analysis reset the replenishment policies and parameters and the resulting inventory availability and stock levels. The analysis revealed inconsistent and poorly matched supply and inventory parameter settings across the portfolio. This provided a significant opportunity to establish a coherent and more appropriate set of policies for each spares segment.

The Impact

1. Pockets of gross excess inventory were identified, and the analysis indicated an 80% inventory reduction was achievable. This resulted in dramatically reduced working capital, lower storage charges AND better service.

2. In addition, the application of more repetitive based replenishment methods and parameters created a much more predictable and smoother demand signal for in-house manufacturing and 3rd party suppliers.

This may be a little more complicated than my desired IKEA key supply business, but it needed a powerful analytics tool to really understand what was going on in a complicated operation.  Analytics can be a once off diagnosis or you can purchase a licence and embed something like SupplyVue into your routine business management.

Why not try a free of charge Supply Chain Health Check?

Image courtesy of hadkhanong at freedigitalphotos.net

Tags: Spare Parts, Supply Chain Analytics, CEO, Inventory Management & Stock Control