Balancing Act: Matching Supply to Demand
Three companies at different stages of demand-driven sophistication use greater visibility, automated data flow, and real-time alerts to preserve the delicate balance between suppliers and customers.
Supply chain professionals often find themselves walking a tightrope between demand and supply. Matching these ends to keep company means well-positioned and moving forward is no small feat. Even businesses that are successful at holding this equilibrium steady can be weighed down by increased time and labor costs.
Companies can choose from many kinds of information technology providers and solutions to achieve better symmetry. Demand-driven transformations are often marked by different stages of involvement.
Take these three examples:
Nut and dried fruit importer J.F. Braun has been using Blinco Systems' 3rdwave Food solution for six years.
Stop & Shop and Giant-Landover supermarkets are nearly two years into their experiment with Blue Sky Logistics' Insight system.
Helix Energy Solutions Group has just a few months under its belt with Oracle's ERP system.
Each company has had to overcome stumbles in order to reap the benefits of better scale. But across their respective supply chains, demand-driven, technology-enabled strategies provide a safety net as they strive to strike that perfect balance.
J.F. Braun & Sons: Supply Chain Soup to Nuts
The effort to balance supply and demand at J.F. Braun & Sons was driving Stephen O'Mara nuts—not that nuts is a bad word at the Westbury, N.Y.-based importer.
Aside from the cashews it sources from India, Vietnam, and Brazil, the company also imports other types of nuts, seeds, and dried fruits. Customers throughout North America use J.F. Braun & Sons' dried seeds and fruits in their own branded products including roasted nuts, snack mixes, and baked goods.
But this was a different kind of nuts—the state you enter when your software makes you do the same work over and over to accomplish simple tasks. That's how it was with the old IBM AS/400 system J.F. Braun was using to manage its business.
"The system was full of operational inefficiencies, such as rekeying information along multiple stops in the organization," recalls O'Mara, president of J.F. Braun.
For example, when the company ordered product from a supplier, people had to rekey information throughout the process.
"We prepared a purchase order in a Word document, then entered it into the system," he explains. "When we released the order, someone had to handwrite it and have that entered into the system. Then we keyed the information again to generate the invoice."
About six years ago, officials at J.F. Braun decided to replace this older management software with an enterprise resource planning (ERP) system that could cover all its processes, from procurement through sales and finance.
Toronto-based Blinco Systems' 3rdwave Food solution proved to be an ideal fit.
Besides cutting out redundant steps, 3rdwave helps J.F. Braun match demand to supply by allowing it to quickly determine the status of incoming goods and customer orders. This is crucial for deciding how to allocate product.
To lock in prices in a dynamic market, J.F. Braun's customers like to place orders as early as they can—often one year out. Whenever possible, J.F. Braun also buys from its own suppliers one year in advance. But the product J.F. Braun procures to fulfill long-range commitments is not always delivered to the companies that ordered it.
While Braun might hold product for customer delivery at the end of a particular month, for example, another customer might turn up wanting the same product right away.
"We deliver to the customer that has the spot need, then later in the month reallocate inventory to the original customer's requirements," O'Mara says.
By providing accurate information quickly, 3rdwave allows J.F. Braun to make these kinds of supply/demand adjustments more easily than before.
"The old system required an administrative person to run a report because not everyone had access to that information," O'Mara observes.
Now, one look at the computer screen gives sales and marketing staff the information they need to make allocation decisions.
Since J.F. Braun started using 3rdwave in 2002, it has expanded its use of the system by adding several electronic data interchange (EDI) transactions. One is a 315 transaction, which provides updates from steamship lines on the status of incoming cargo.
"Traditionally, we'd call the steamship line to get that information," O'Mara says.
Also, by making the company more efficient, 3rdwave has helped reduce overhead expenses.
"We downsized from an office of 25 people to 20," O'Mara says. "Not only can we handle more volume, but we need fewer people to do the same amount of work."
Stop & Shop and Giant-Landover: Gauging New Insight
Stop & Shop and Giant-Landover, two supermarket chains owned by Netherlands-based Royal Ahold, use the Insight system developed by Blue Sky Logistics to keep inventories in sync with demand at their respective distribution centers in Freetown, Mass., and Jessup, Md.
Now, both chains plan to tap Insight to further regulate the flow of goods to stores in New England and the Mid-Atlantic states.
Insight provides user-configurable dashboards that track supply chain performance. Just as a speedometer tells people how fast they're driving, or the gas gauge tells them when it's time to refill, the solution's "gauges" or "instruments" tell managers how much and what type of inventory to expect, for example, or how many orders have been shipped in full, in part, or not at all.
Stop & Shop currently uses Insight to draw data primarily from a warehouse management system (WMS) as well as the software that runs its automated storage and retrieval systems (AS/RS).
One of the technology's most useful gauges was developed to handle cranes that can't replenish locations until they are entirely empty. When this occurred in the past, pickers who went to a location often didn't find all the units they were looking for. They had to take what was available, then short the remainder. After the location was refilled, additional assignments had to be created to make up for the shorted merchandise.
"Reselection time is double work," says Dennis O'Connor, manager of systems support at Stop & Shop's Freetown DC. This added up to a giant waste of time and money.
So Cedar Hill, Texas-based Blue Sky Logistics developed an instrument that examines all the orders that are assigned for picking. It tallies how many cases of each product pickers will need and compares these numbers to the quantities available at pick locations.
"It flags locations that do not have enough real-time balance on hand to satisfy what will be needed in the next 10 to 15 minutes," O'Connor says.
If there isn't enough, employees who monitor this gauge go to the flagged locations, put the remaining cases aside, then trigger the crane to let more product into the locations.
"We get just-in-time replenishment and cut reselection hours in half," he adds.
Another gauge monitors the progress of loads prepared for outbound trucks. "It lists all the loads that are not closed and all the selection work against that, right down to the pallet detail level," O'Connor notes.
On the inbound side of the warehouse, one gauge tells receiving managers how much inventory to expect for the day, "how many loads, pallets, shipping units, retail units—any way you want to break it down," O'Connor says.
Another compares current orders from stores with inventory on hand and inventory due to arrive that day, spotting possible shortages. This tells inbound managers what products to unload and put away first, so they'll be available to pickers.
An "unnecessary inbound orders" gauge also compares current and inbound inventory with store demand. If it determines that the total supply will exceed upcoming need, it signals inbound managers to stall future deliveries.
O'Connor wants to refine this functionality even further. "I'd like it to connect to our mainframe system and exclude products that have upcoming sales from the list," he explains.
If stores have a special promotion coming up, demand will spike, so what looks like excessive inventory might actually be just enough.
Tracie Doyle, manager of transportation, systems, and process for Stop & Shop and Giant-Landover, also has her eye on future Insight applications. She's working with Blue Sky on gauges that will draw data from the WMS, the proprietary transportation management system (TMS), and the company's JDA Software routing system.
One instrument will compare the loads that the routing system builds against actual loads that the warehouse has shipped. Spotting discrepancies will help the company use trailers and drivers more efficiently, Doyle says.
A second function will identify orders that stores place after the day's official cutoff time. Often, such orders get into the routing system with "a bogus delivery time," Doyle says.
"There's no way we could have shipped an order to the store manager on Monday if we didn't get the order until Tuesday."
When a report card on the day's performance reaches an executive's desk, data on these late orders skews results, making it look as if the warehouse performed poorly when it didn't. A new Insight gauge will look for those late orders and, when it finds one, alert the person responsible for routing.
Helix Energy: A Deep Water Oracle
Helix Energy Solutions Group, Houston, Texas, recently began using Oracle ERP's procurement functions to better align supply and demand. For Helix, much of this demand occurs at sea, where the company sends crews to construct undersea pipelines and provide other services to energy companies.
Since the beginning of January 2008, Helix has been using Oracle in its Houston-based Deep Water group, which does subsea construction. Now, it's rolling out the ERP system to other business units.
Besides implementing Oracle to manage functions such as procurement, human resources, finances, and project management, Helix has linked the ERP system to its new NS 5 fleet management system from ABS Nautical Systems. This solution manages maintenance on vessels that Helix sends to rigs at sea. For users, the interface is seamless.
"They create a requisition, hit a button, and the request is delivered to the Oracle system automatically. My group takes the order and fills demand," says Brent Shinall, vice president of global supply chain at Helix.
Helix also allows its third-party logistics provider, the Dutch company Legero, to perform transactions in Oracle. Helix employees can look into the 3PL's system to track and trace their orders.
The offshore energy development company is implementing Oracle as part of an initiative to transition from a patchwork of acquired businesses into a unified enterprise. Helix's diverse business units have been using a variety of management systems, many of which are based on outdated technology. The move to Oracle aims to bring them all onto the same platform.
"Just going through the implementation brought all our supply chain groups together to start talking about common processes and procedures," Shinall says.
The groups are also realizing opportunities to analyze spending across the corporation and, in turn, consolidate purchases.
"Our Well Operations group in Aberdeen, Scotland, might be going out for bid on a contract, and we might be doing the same in Houston," Shinall says. "If we consolidate these efforts through Oracle, we can leverage that volume and negotiate a more favorable deal."
For the Deep Water group, one of the biggest benefits Oracle has provided is full supply chain visibility. "Once we receive a requisition, we have visibility throughout the supply chain until that product or service gets delivered," Shinall says.
The purchase order number functions like a tracking number. "By inputting the PO number, users can see their orders. They know what's in the pipeline, what has been ordered, what has been received, even what's in a staging area at the warehouse," Shinall says.
This is important because a vessel that is out on a project doesn't return to port for fresh supplies on a regular schedule.
"It might have a break in a project and want to come into port. We then have 24 hours to ship the goods that are consolidated in the warehouse," he adds. "Before the Oracle implementation, we didn't know what was in the warehouse. Now we know exactly what products are staged and ready to go out to the Gulf when the ship is ready for it."
By providing visibility, Oracle makes supply chain operations more efficient, cutting the time it takes to deliver product to satisfy demand, Shinall says.
Oracle has made one supply chain process slower, but even that represents an improvement. In the past, the company's purchasing systems didn't include any mechanisms for approving purchases.
"We got approvals outside the system," says Shinall. "Now we have hierarchies, so every PO has to be approved at some level. It's slower to work through the approval process, which is good. We have executives who are responsible for their budgets; so now we have visibility to how much money is being spent."
The Psychology of Change
At J.F. Braun, although the new processes were clearly more efficient than the old ones, managers had a hard time getting users to adapt when they made the switch in 2002.
"We ran in a parallel state for an extended time," says O'Mara.
In hindsight, this was a mistake. Employees who had been using the old system for years were reluctant to make a change; they didn't trust that the new solution was giving them accurate information, so they continued to use the old software.
"The psychological change was the biggest challenge," O'Mara says. "We finally had to bite the bullet and stop using the other system."
The human factor also posed a challenge when Stop & Shop introduced Insight. "Sometimes we're our own worst enemy," O'Connor notes.
Only a few years earlier, the company moved from an old DC using a paper-based picking system to a facility with state-of-the-art technology and equipment. For many DC workers, this barrage of new technology came as a shock.
Once officials explained how the gauges would reduce labor and make their jobs easier, employees grew more willing to try it, O'Connor says.
For Helix, the greatest test lay in trying to aggregate processes in what used to be a highly decentralized company. This alignment was crucial because of the way data flows from one module to another in the integrated Oracle suite.
To help all the departments function smoothly on a common platform, Helix had to get business units to standardize their processes and decide on best practices.
Unfortunately, the company didn't complete all that work before it brought Oracle online in Houston. "We did it a little backwards," Shinall says. "We waited until we had a problem, fixed the process, then documented it."
Other companies going through a similar implementation should standardize and document their processes first, he recommends.
"Technology can be an enabler if you define its path and invest the resources to make it successful," Shinall adds. "You can't just plug a disk into a computer and walk away."