Thomas R. Cutler
Published: Wednesday, March 23, 2016 - 14:39 It’s no surprise that multinational companies have complex global supply chains. What’s less obvious is how to simplify supply-chain processes and arrive at a lean, consistent, reliable, and cost-effective solution. One global leader, ITT Corp., has taken on this challenge with the help of Ultriva, a supply-chain solution by Upland Software, which supplies cloud-based manufacturing and supply-chain collaboration and execution solutions.
ITT creates highly engineered, customized solutions for the energy, transportation, and industrial markets, including Goulds and Bornemann pumps, KONI shock absorbers, Cannon connectors, and Enidine energy-absorption devices. Recently, ITT initiated a lean application based on the concept of kanban loops that govern material flow and replenishment processes across their extended enterprise value chains. Kanban loops are a mechanism that signal the need for inventory replenishment, an important tool in ensuring that production lines are optimally stocked with necessary parts and components. Kanban signals trigger material coordinators to deliver items in the right quantity when and where required. As product is consumed in the production process, an order for depleted inventory is placed immediately, either via a physical kanban card or electronically through a computerized electronic kanban system. Physical kanban card systems tend to work well inside the four walls of high-volume, low-mix production environments where stable customer demand, repetitive manufacturing, and line-of-sight exists. However, these systems tend to break down in high-volume, high-mix as well as low-volume, high-mix environments where variable customer demand, frequent changeovers, and limited line of sight are common. In those situations, an electronic kanban system makes more sense, says Frank Kapper, general manager of Ultriva. “Ultriva’s electronic kanban solution, also known as e-kanban, ensures that global manufacturers’ entire supply chain is constructed as a series of interconnected e-kanban loops, both internal and external,” explains Kapper. “Each loop is optimally sized based on customer demand, and material replenishment is driven by real-time consumption scans.” Examples of interconnected internal e-kanban loops include those between assembly and subassembly lines, those between production lines and supermarkets, and those between supermarkets and raw material warehouses. Examples of interconnected external e-kanban loops include those between a plant and distribution centers, and those between raw material warehouses and external suppliers. “Many manufacturing firms today still rely on open-loop manufacturing and supply-chain management (SCM) processes, where visibility into order status is limited to ERP systems that push orders to the plant floor, or generalized supplier portals that push orders to suppliers,” says Kapper. “Once released, order management takes on a life of its own, status is managed by custom-built spreadsheets, frequent visits to the shop floor, email exchanges, fax messages, and follow-up phone calls. E-kanban works best when the supporting manufacturing and SCM processes are closed-loop in design.” Ultriva closes the loop on manufacturing and supply chain processes by tightly integrating with ERP systems and by leveraging its internal workflow, business rules, and alerting engine. Routine, day-to-day manufacturing and SCM processes are supported by predefined workflows with associated business rules and automated alerting. Whenever Ultriva detects a deviation from an established workflow, alerts are automatically generated and routed to designated individuals via the browser or to their personal communication devices, delivering actionable business intelligence on potential or actual issues. “The end product of an Ultriva deployment is a multienterprise-equipped supply chain that contains as many e-kanban loops or tiers as necessary, with each node in the supply chain synchronized based on real-time consumption scans,” says Kapper. “The end results of an Ultriva deployment are right-sized inventory levels, increased on-time delivery performance, improved visibility to customer demand, reduced stock-outs, and actionable business intelligence on manufacturing and supply-chain performance.” As with most effective lean manufacturing and supply-chain initiatives, there were strong and engaged leaders who championed the work to ensure a rapid implementation schedule. Kapper shared how the ITT implementation started at one location in 2015 and quickly led to six plants across the globe, each with a different ERP system. ITT had an existing supplier portal, which was more of a website that pushed information to suppliers. ITT had planned for an enterprisewide deployment of system applications products (SAP). As part of that initiative, the company intended to replace its existing supplier portal with a collaborative one that included supply-chain execution tools. One of the company’s key considerations in selecting a supplier portal was that it had to be ERP-agnostic and could be deployed to both SAP and non-SAP plants. When ITT’s SAP implementation was delayed, the Ultriva implementation team had to revise its deployment plans to include integrating its e-kanban solution with legacy versions of QAD and LS400/AS400 systems at European plants, an older version of SAP (4.0) at the Santa Ana, California, and Nogales, Mexico, plants, and SAP ECC 6.0 at the Santa Rosa, California, plant. The ITT China plant went live with Ultriva’s lean e-kanban solution in May 2015. A month later e-kanban went live at the ITT plant in Italy. In July 2015 the solutions was live at the ITT plant in Germany, followed by the plants in Santa Ana and Nogales in August 2015. Finally, the ITT plant in Santa Rosa went live in September 2015. Scott Stickles, senior software consultant at Ultriva, supervised these implementations and noted that ITT looked at the new version of its existing portal and SAP’s supplier portal, and confirmed that neither solution could match the features, intuitive user interface, and flexibility of Ultriva. Speedy deployment and comprehensive. out-of-the-box feature sets were the determining factors. ITT is also planning to deploy Ultriva’s request for quote (RFQ) and quality management system (QMS) systems in later phases of the rollout. Before the e-kanban After the e-kanban Kanban Very little kanban was used. Most parts were on MRP-driven replenishment or supplier-driven MIN-MAX replenishment. Ultriva’s collaborative supply portal (CSP) solution added MRP forecast, discrete purchasing, and kanban replenishment to ITT’s material replenishment methods. ITT gained better visibility, and suppliers were able to print labels and implement scanning at the receiving dock. ITT also uses an inventory optimization tool (IOT) to identify which parts are best suited for kanban and to optimally size kanban loops. Vendor-managed inventory (VMI) Suppliers were carrying inventory on behalf of ITT at their locations based on forecasts. They were shipping according to the on-hand and in-transit data provided in the forecast file. VMI suppliers now get planned-demand data through the portal and are able to provide VMI inventory levels back to ITT. This visibility provides ITT planners and suppliers with the actionable business intelligence they need to better plan for, coordinate, and execute day-to-day material and production operations. Call-off ITT was releasing material-replenishment orders to suppliers based on the planned demand provided in the forecast files. As demand changed, suppliers were forced to adjust production and shipping schedules, which often resulted in their having excess or insufficient inventory on hand. ITT now uses a “call-off” feature that waits for firm orders before releasing material-replenishment orders to suppliers. This feature helped eliminate the bullwhip effect at suppliers, resulting in improved order fill rates and more stable inventory levels. Discrete orders Some ITT plants were using a website to upload discrete orders. Suppliers would log-in to the website to download purchase orders, which then had to be tracked in spreadsheets due to frequent changes. ITT buyers lacked real-time visibility into the status of these orders, resulting in frequent emails and phone calls with suppliers. The end result was a significant amount of nonvalue-added time for both the buyer and supplier. All six ITT plants now use the supplier portal to receive standardized material-replenishment alerts; PDF copies of purchase orders are attached, regardless of order type. Orders are tracked as closed-loop processes from the time the order is released through its arrival at a plant. Order recalls and reschedules are managed as closed-loop workflows, allowing for improved collaboration and execution between buyers and suppliers whenever production schedules change. Consignment Some ITT plants were using consignment, which allowed suppliers to keep inventory at these plants. It was the supplier’s responsibility to perform daily visual checks to compared active and planned orders; on-hand consigned inventory ensured they could meet customer demand. The demand-driven solution allows ITT to tag a part as a consignment. These parts are treated differently: Inventory data aren’t updated via ERP until a part is issued or used in production. It also provides information to suppliers about inventory and quantities consumed at ITT in real time. Suppliers located around the globe can now manage consigned inventory for ITT and quickly generate invoices for the material consumed. Manufacturers are being squeezed by two complex market trends: Customer demand is increasingly volatile, and suppliers are less willing to carry extra inventory to serve customers’ fluctuating needs. To successfully address this dilemma, manufacturers must shift from using forecast-based planning systems to consumption-based replenishment systems. In most manufacturing companies, the supply chain is still controlled by MRP and ERP systems that use forecasted or planned demand to establish material requirements. Every MRP run generates changes in material requirements that led to whiplashes across the supply chain. The costly and serious ripple effects of these ever-changing requirements include stock-outs, shortages, bloated inventory levels, costly expediting, and missed or late customer shipments. Addressing the challenge of inaccurate planning is a top quality-control issue among global corporations. Driven by lean initiative teams, the interest in collaborative supply portals (CSP) is rapidly expanding. Using a simple platform for accessing standardized material demands, acknowledging receipt of orders, and viewing shipment information offers real-time visibility and collaboration between supply partners. Planners, buyers, and suppliers see a single version of truth and can respond effectively and immediately to unexpected changes in demand. A demand-driven solution also ensures that product quality need not be compromised. Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler Inc., celebrating its 21st year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 1,000 feature articles annually regarding the manufacturing sector. More than 4,500 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com.
Management Complex Global Supply Chains Simplified
The value of electronic kanban systems and rapid deployment
Before and after scenarios
supply-chain portal
supply-chain portal
Addressing volatile demand and fluctuating inventory
About The Author
Thomas R. Cutler
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