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First Thoughts
  By Dan Gilmore - Editor-in-Chief  
     
   
  - Dec. 3, 2015 -  
     
 

Supply Chain News: Solving the August Logistics Challenge

 
 

All the way back in near the end of summer, rare First Thoughts guest columnist David Schneider laid out what we called the August Logistics Challenge.

The idea was this: Schneider described a real life client scenario he had recently grappled with. We challenged readers to come up with their ideas for solutions, and promised we would highlight the best of those and Schneider's own strategy some time later.

Well, sometime later turned out to be a lot longer than I imagined, with our First Thoughts column calendar filled up as usual, and so we are finally back here again with some follow up before the end of the year.

Gilmore Says:

Most responses focused only on sort of what is directly under transportation's control, i.e., did not expand into network design, which is understandable given how the problem was posed and some details not revealed until Schneider's answer.


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Here is the overall scenario:

A mid-sized manufacturer was dealing with rising logistics costs. That issue had led to some turnover in the transportation management team. The new, reluctant freight manager decided the right move was to call in all the carriers and scream for lower rates, telling them they would be dropped if they didn't comply.

In the end, this hardball approach combined with a tight freight market, rising driver wages, etc., led to costs going up, not down. That's when the company president called Schneider for some help.

He soon found the problem was not the rates, but the way the company managed shipping. It used a lot of expedited services, for example. When the new freight manager had called manufacturing and business line managers about this practice, most people dismissed him, saying that they had to use the expedited service because that was the nature of the company and they often had to expedite to fill orders on-time. Several said stop bugging us about this and get us lower rates.

Looking at the data, Schneider found there were lots of under 500-pound shipments, sometimes as frequent as every day, moving between branch plants. Some lanes stood out, with many expedited shipments using Forward Air and not the usual LTL carrier. One lane used Forward Air for over 40% of the shipments, naturally at a premium rate.

In fact, the two plants in this lane were only 300 miles apart. You could get LTL service the next day, for about 70% of the cost. Why so much Forward Air? What's more, on some days the shipping branch plant used both the LTL carrier and Forward Air.

Turned out about half of shipping supervisors knew the LTL transit times from their facility. Only one plant manager did. After two days of calls the picture emerged: the plants where the shipping supervisor knew the LTL transit times used Forward Air the least. The branch where the manager knew the LTL transit times used Forward Air just three times in a year.

The company had 26 locations around the country. All of the branch sites distributed the same core products, but custom mixed ingredients based on customer orders. If a plant ran low on one of the additives, the production planners called a few neighboring plants and scrounged what they needed to make a production run, so there was a lot of inventory trading and transferring. Looking at the intercompany transfers and the shipment lanes, branches did not cross-country transfer, with 90% of the transfers moving less than 750 miles.

On the order side, the company promised customers a 3-day lead-time before shipping, and shipped all orders LTL, only committing to the ship date. Orders received on Monday shipped on Thursday, so planners had three full days to get the order processed through the network. The custom formulations required some planning and sequencing in the plants, because the process included a heating and mixing process to blend the additives into the base ingredients. Mixers and kettles had to be cleaned between batches, so the planners attempted to consolidate orders for the same blends into larger batches to help reduce the cleaning and set up between batches. The planners also jockeyed orders around when they ran short of additive ingredients.

So that was the scenario at a high level, but enough to get a decent handle on the situation, What would you recommend to the company president? Here is Schneider's answer:

"Rates were not the problem at this client. They had good rates. The problem was behavior, which is much harder to change.

"The expedited service was not shipments to customers, it was shipments between the company plants. The company made custom blended products for customers, adding and mixing different ingredients to the same base mixes.

"I started talking to the production planners, the inventory planners, and the procurement folks. This group had lots of frustration over the plant to plant swapping of ingredients, and the resulting mess of the inventory balance. In this network, every plant could make every product - at least until they ran out of an additive, or ran short of a base mix.

Important question: Were there additives that went with just one base, or were the additives universal, mixed with each of the five bases? Some people knew, and others didn't. But we uncovered that about 40% of the additives were exclusive to a specific base.

"What grew out of those conversations was the idea to take all of the plants and define regions. We chose a single region where the most freight cost came from, and examined the demand and capacity of the plants in the region. Two of the plants had the capacity to make 100% of all of the variations of a single base, and cover the local demand for the rest of the product mix. We identified the two base mixes that used the exclusive additives, and moved the production of one mix to each of the plants with the capacity. Those plants made the products and shipped them directly to the customers, using the LTL rates and network already in place.

"It took a few months for all of the changes to happen. The plant managers naturally did not think that it would work. Sales was concerned that the central production would not meet the required lead times. The inventory and production planners worried about the capacity of the plants to carry the full load.

"It took some time to see the results. Plant to plant transfers of those ingredients stopped cold. Freight costs went down. More important, the inbound freight costs for the delivery of the additives went down too, as 40% of the additives moved to only two locations, not six. Lead times did change, for the better, with some customers receiving their product one day sooner. Outbound shipping costs increased a few points, but the actual cost increase was far less than the eliminated costs of the plant to plant transfers.

"Two things happened next. In the pilot region, another plant started to make all of the orders for base product #3, so there were three plants, each making one of the base mixtures for all of the regions. Again, plant to plant freight costs dropped further. However, the plant managers started talking about excess capacity. When the company moved the production around, the plants that centralized the demand got more efficient. They made bigger batches, because the bigger batches covered more customer orders.

"The company is spreading the concept to other regions of the country. If the numbers are right, the company will carve over $4 million of freight cost out of the budget, including the savings on the inbound side. And that is before the procurement folks start to negotiate new supply deals.

"In the end, what presented as a freight problem was really much more a network optimization problem."

We received more than a dozen responses to our challenge, many with excellent suggestions. Most focused only on sort of what is directly under transportation's control, i.e., did not expand into network design, which is understandable given how the problem was posed and some details not revealed until Schneider's answer.

But several responses did suggest looking at network design. The closest response to Schneider's proposal probably came from Patrick McNulty, who in part argued that "A long term solution starts with a supply chain design analysis. Branch to branch shipments are not ideal and should only happen as an exception. The design effort should answer questions such as: Do you really need 26 locations making custom product? Where should safety stock be located in the network? Could a central DC hold the raw material?"

It was really tough, but we subjectively award the top prize - and a $50 restaurant gift card - to Steve Hogg of Fraser Direct Logistics.

Very close runner-ups include Christiane Meyer (Penske Logistics), Julien Bruxelle-Fradette (Rona Home and Garden), David Armstrong (Inventory Curve), Nick Seiersen, and Ross Corthell.

We publish Hogg's response and many others in the Feedback section below.

This was fun - do you have an idea for another supply chain challenge? Let us know. Academics in our audience - the original challenge, and the suggested responses from our readers, would make a great class exercise. Let me know.

Any additional solutions to our logistics challenge? Anything else you think Schneider should have recommended? Have a new supply chain challenge we could use? Let us know your thoughts at the Feedback button (email) or section (web form) below.

 
 
 
     

Recent Feedback

Solution Winner from Original Responses

Great Challenge! I wish the whole project was mine.

Without seeing inbound raw material and finished goods delivery patterns, it’s difficult to derive a total solution but certainly as you are indicating, there are issues with material planning and with marketing.

For the former:

If each plant is going to do custom mixing, then they need to be accountable for their own BOMs. It sounds like it’s a free for all with ingredient transfers becoming so common place that they’ve lost sight of the associated costs. (This is a typical scenario. Slow and steady degradation of procedures without any checks in place. Most expensive phrase in business – “We’ve always done it that way”.) 

Secondly, there are 26 plants. Surely they don’t all need to duplicate production. They can each distribute their core non valued added product but specialized mixing and use of certain ingredients needs to be allocated to specific plants using a demand analysis. There would be less production down time, and higher volumes of each ingredient, allowing far more cost effective shipping practices, inbound and out. It would require a new logistics model but it’s just math. There is a “best solution”. The cost of longer transits would more than be made up through efficiency gains.

Often when there are high frequencies of repeat LTL shipments, there are opportunities for dedicated milk runs which take advantage of truckload rates plus a stop charge verses single skid LTL rates. This also increases operational consistency leading to better materials practices.

 For the latter (marketing):

It sounds like there needs to be some education about the cost of the word “guarantee”. LTL service comes with none. Even if it has a consistently high on time percentage, there is no guarantee. If the customer says “I have to have it”, you are forced to use a higher priced option to achieve the exact same result. A little more communication between trading partners about specific needs is often enough to eliminate or drastically reduce premium freight costs. Getting even more proactive, negotiate larger but less frequent orders, perhaps also taking advantage of dedicated milk runs. Premium freight is a derivative of poor planning and communication, not a conscious service choice. If your delivery parameters are such that they are causing all of the above activity, then your supply chain risk level is  as perilous as your costs.

Potential savings:

It’s impossible to say without knowing the ratio between valid and non-valid transportation activity but based on the descriptions, I don’t think it’s a stretch to imply a potential reduction of 25 to 30%. There is always math to be done around the ’transportation verses inventory trade off’ but there is a lot of low hanging fruit in this case. More importantly, the result of turning your supply chain into a performing asset versus an out of control cost center is….. priceless!


Steve Hogg
Director, Supply Chain Services
Fraser Direct Logistics
Dec, 02 2015

This is one of the original soluion responses:

I found your article very interesting and see the dilemma you described: “Overall spend is high, so it must be the rates”. Far from true. Companies need to have competitive rates, no question. But this task should be done later, once the network is understood completely. There are better things to start with.

So, in your article you bring up a few insights:
 

  • Each shipment was sent on its own without consolidation
  • Placement of orders and requirements/timing for delivery were not coordinated
  • Expedites were used when “normal” mode would have sufficed
  • Implied was also that the local plants make their own decision and did not care for “corporate” involvement

Let’s start with the order process: Few plants simply produce without an order or a related production plan which is based on customer demand. While different industries have different order patterns, i.e. dynamic (daily, hourly) or more static (weekly, quarterly), there usually is either a plan or a dependable forecast of what might happen tomorrow, next week etc.

  •  One way to gather that information is to have the plants enter the shipping requirement into a common system. Portal applications usually work well and can be implemented quickly.
  • The information should contain shipping volume, weight, destination, also the required delivery date.
  •  Sophisticated portals also offer the option to “rate shop” to ensure that the cost and delivery requirements are met.
  •  But my favorite feature of a system is that it gathers shipment information for later analyses.

The next step would be to convert the orders into manageable loads:

  •  Transportation Management systems, SAAS applications have basic functionality and can combine shipments and do basic optimizations. This would ensure that there are not three different LTL orders shipped to the same destination on the same day. It would provide a lower cost and - if the person entering the shipment was honest about the need-in-plant date - even ensure delivery at the right time.
  • Later on, static optimization, using route optimization software and engineering support, can be created. Bu for now, let’s keep it simple.

Now actual load and shipment tenders to the carriers can be created. But which carriers do I use? Are my rates good?

  •  I always believe that it is best to start with the existing carriers and once patterns emerge, maybe after 2 months or so, to put lanes out to bid to see what the market is doing.
  • Data from all plants should be combined and carriers/partners be chosen based on the entire data set.

In my experience, controlling the freight payment process is controlling the network. Few companies check whether the service invoiced was actually provided as described:

  • Did the trucker actually use a tarp/flatbed/under deck space?
  • Did they wait for 5 hours before they got offloaded?
  • Did they ship 500 pounds of freight?
  • Furthermore, who authorized an expedite shipment?
  • Who authorized a certain carrier to perform the transportation (yes, we all have an uncle who owns a truck and we all want to give him business)?
  • By tying the carrier tender to payment, you control who gets paid and unauthorized carriers will not have a chance of receiving payment. Carriers learn really quickly what the process is.
  • What works even better is self-billing options. We do that in our company and our carrier base loves it and it provides us with the correct accruals for timely payments based on real events.

But how will you get the plants to play along? Budgets are often held de-centralized at the plants, allowing local decisions to interfere with the common good of the company. I found that third party service providers, Lead Logistics Provider or Control Tower operations can provide the necessary “glue” to put network together, manage carriers and costs. But more successful companies have centralized their logistics and have put into place checks and balances, even consequences for non-adherence: Requirements are understood for the entire company, authorities are distributed adequately and rate negotiations are done with the entire network in mind.

There is certainly more to it and  I could write about this all day 


Christiane Meyer
Strategic Account Executive
Penske Logistics
Dec, 02 2015

This is one of the original submissions:

What an interesting idea for a column!

As you hint, there are probably several ideas that might be rolled out over time.

The first might be to simply force the use of expedited air service for interplant transfers to be authorized by someone high enough in the organization (say the President) that only the desperate will ask. That in itself will severely reduce the airfreight premium.

The next may be to build in a charge for expedited interplant transfers for every customer order that requires it, thereby making these orders less profitable. This makes the additional cost very visible, and may lead to different behaviours in sales and in logistics – “how can we avoid that extra charge?”

Then maybe get back with carriers to see what can be done about making time-definite road services available. This builds confidence that interplant products will arrive as planned, but will also pay dividends on customer deliveries.

This short term plan might knock as much as 10% off the freight bill, through demand destruction and the use of land at 70% of the air rate for interplant transfers.

Then consider a network approach to interplant transfers. Given the frequent materials shipments, maybe a regional warehouse for low volume ingredients, with a mandate fulfill orders overnight to plants within the region. By concentrating low volume ingredients across several demand points, inventory can be better managed. By fulfilling from a regional hub, costs and availability of slow moving ingredients can be optimized.

Then maybe there is something to be done about the manufacturing strategy and scheduling. Pepsi has won awards for the use of regional mixing centres for low volumes, supplemented by local distribution for high volumes. Perhaps there are opportunities in the way the production is scheduled today, like differentiating between fast movers (shipped next day) and make-to-order (shipped next week). Perhaps regional custom mix freight can be shared with inbound raw materials replenishment.

Network design projects can be extremely lucrative, but require fairly sophisticated financial models to evaluate. My opinion would be there is probably another 10% of the freight bill available. This also allows the company to see their logistics costs very clearly, to understand the different costs-to-serve various channels and markets. Finally, customers will be very receptive to a promise of delivery, rather than a promise of shipment.

I'll be interested to see what others suggest.



Nick Seiersen
Not provided
Not provided
Dec, 02 2015

This is one of the original solution submissions:

There are a lot opportunities at this client it seems!

First step I would take is to make sure the shipping managers did not have to memorize every lane’s rate and transit time by mode. Most humans cannot memorize all that detail and then execute the “optimal” decision based on all other shipments going on at the same time. Especially when the environment is dynamic which in this case it is (build to order with 3 day lead time from order to shipment). Moving to a TMS would allow this company to make better shipping decisions based on the destination, lead time and volume / weight of shipments.

Opportunities such as consolidating smaller shipments into a multi-stop full truckload may be a better decision considering cost and service level. Doing a TMS first is likely easier given the many options to deploy (e.g., Cloud).  This just allows them to better handle the other problem of having to move ingredients all over the network to meet production needs. The high number of ingredient movements are likely attributed to deficiencies in FG forecasting, plant (FG) sourcing decisions and raw material sourcing.

If we tackle the upstream and likely more challenging issues next, we can begin to reduce the amount of ingredients that are moving between plants. Better forecasts allow plants to more likely have the ingredients they need to satisfy production. Plant sourcing decision improvement allows the right plant to make the product given where the customer is located (shipping costs based on transit time), which plant has the raw materials to satisfy the production, and what transfers may need to occur. All of that is optimized based on least cost and meeting the service levels. Lastly, if plants are regularly running low on ingredients, there may be an issue with re-order points, supplier service levels, or timely consumption reporting when used in production. The roadmap for these changes is dependent on their current processes and systems. So my next step would be further exploration.

A lot to do, but think about how much better off they will be in the long run!




Mike Schultz
Not provided
SAP
Dec, 02 2015

This is one of the original solution submissions:

First off, good for you for having the President’s attention…. my guess is the Transportation Manager did not for probably a host of reasons. 

 

Regarding your case study, I have more questions than answers but I’ll take the bait and offer “the first solution that comes to my mind” (your fork truck driver was a wise person and I absolutely love to tap “unofficial leaders” like that). 

 

I’m going to admit my own bias that freight is almost always a greater % of total logistics costs than inventory carrying.  That bias influences my recommendation as you will read below.

 

I recommend your client consider regionalizing distribution of raw materials to DC’s that are within one day of mixing plants.  I suggest they use contracted 3rd party public warehouses on variable cost basis so they don’t incur huge capital to make the change.  I would, however, spend some capital (or go cloud) to implement a WMS that would give them total inventory visibility even where inventory is deployed at contracted warehouses.  The WMS should be sophisticated enough to give the economic order quantities to help manage the inventory replenishment process and not let it get out of control.

 

I would also implement a TMS on a transaction cost basis that would give them electronic, rule-based tendering and carrier performance management tools.  I’d make sure the TMS had a good BI tool to give them real-time transportation data verses relying on a post audit/freight pay service for the data.  Start measuring on-time delivery in addition to on-time ship.

 

I would set about to educate the culture on Lean principles.  Clearly, the feedback the Transportation Manager received from the Branch Manager wreaks of a culture that does not embrace process flow.  It also sounds like the transportation supervisors are that in name only as well.  They probably wear many hat which is ok but freight spend is huge so managing that needs to be higher on their priority list.

 

Lastly, and again admitting my own bias, the single most brilliant thing they can do is to hire me as Vice President of Supply Chain to implement all of the above and save them millions of dollars.


Ross Corthell
Not provided
Not provided
Dec, 02 2015

This is one of the original solutions submissions:

Prepare a weekly report of the freight differential of actual versus planned costs.  This would be by shipping location, and show the air freight costs and the LTL costs for the shipments of the week, ranked highest to lowest.  Copies would be sent to the Presdient, the Plant Managers, Production Managers, and Shipping Managers for each shipping location



Craig Wanggaard
CCO
Apogee Performance, Inc.
Dec, 02 2015

This was on one the original solution submissions:

The quick solution is to align incentives. The branch manager should own freight costs and inventory. My guess is that they only own inventory costs, hence the frequent stock-outs that are alleviated with premium freight. By owning both metrics, the branch manager would be able to make the trade-off between inventory and transportation costs. 

A long term solution starts with a supply chain design analysis. Branch to branch shipments are not ideal and should only happen as an exception. The design effort should answer questions such as: Do you really need 26 locations making custom product? Where should safety stock be located in the network? Could a central DC hold the raw material? Is three day customer lead time realistic?  

Finally, after redesigning the network, implement an improved planning process that uses the forecast error to plan the right amount of safety stock, capacity and safety time to respond to customer demand in an efficient manner. 

Benefits will go beyond lower freight costs, and they should see improved customer service, lower fixed facility costs, and reduced inventory. 


Patrick McNulty
Not Provided
Not Provided
Dec, 02 2015

This is one of the original solutions submissions:

This is probably way more complex, but here are my initial thoughts: Stepping production up would speed up turnaround for orders but would add inventory, but the inventory would be ready to ship upon ordering. Faster processing of orders would allow more frequent use of LTL.

Am I close or way off?


Steve Stetler
Title Not Provided
Company Not Provided
Dec, 02 2015

This was one of the orignal solutions submissions:

At first, what this appears to be a transportation optimization mission, is in fact a production planning project. The high transportation costs are not at the root cause of the problem, it is the consequence of an inefficient planning process. In order to reduce the transportation (and other types of wastes) costs, the company needs to deploy a structured approach to production planning.

 

Here is the rationale behind this.

Topic

Curent Situation & Challenges

Future Situation

Benefits

 

# 1

Many inter-plants material transfers, with many expedited shipments

Considering the short lead times, the production planning process should take into consideration the material availability before processing the orders. While this can be done using the current production planning process (plant by plant), greater optimizations could be achieved using a global approach, such as a Planning and Control Tower. Using this approach, the production planning and monitoring is performed centrally for several plants. This allows for global optimizations of the use of time and resources that cannot be achieved by using a plant by plant local optimization approach.

Building a Control Tower in production planning and monitoring can help leverage the use of efficient and specialized planning software, processes, and skilled employees. This brings benefits that can be both cost effective (if some headcount can be transferred from local plant to central planning) and added efficiency (if superior planning can help bring a better service and added business).

 

Orders are transferred to other plants

 

Reduction of specialized raw material exchange for customization due to improved order dispatching to a plant where the material is available.

 

Plants are processing orders for which they do not have all the required material

 

# 2

Plants are using orders grouping (campaigning) to improve the equipment utilization and reduce machine setup time.

Orders campaigning is an efficient way to avoid setups in a production cycle. However, they sometimes create delays in the production flow which, in turn, create the need for order expediting (at extra cost). Using a central planning approach, orders could be grouped more easily (only if it brings a benefit) because more orders are to be planned at the same time.

Combined with the use of efficient planning and monitoring tools (software) and processes, orders campaigning can bring production savings without necessary adding extra expediting cost.

 

Campaigning orders can also create delays in the production process, which in turn can create extra shipment costs that will offset the campaigning benefits.

 

# 3

Inappropriate use of Air Forward and lack of knowledge regarding the benefits of this service against LTL.

Communication and procedures at local plant level to choose the most appropriate transportation mode

Better use of the Air Forward, if still needed would translate in a transportation costs reduction between plants. Furthermore, is combined with a central planning approach, it would be possible for the production planner to know in advance (given its global visibility on the production schedule) that there will be a need for a quick  shipment, which can reduce the costs.

 

Implementation roadmap

 

The first step would be to explain the concept to the top management and get their buy-in. This is crucial for the rest of the activities because local manager and production planners will react to any change of this type.

Then, probably with some external support, a proof of concept of the Control of Tower should be created using a handful of plants. The idea is to determine if benefits can be achieve by measuring key metrics, namely production, inventory and transportation costs. After validation and refinement, the approach can be deployed.

 






Julien Bruxelle-Fradette
Manager - Supply Chain Solutions
RONA Home and Garden
Dec, 02 2015

This was one of the original solution submissions:

One of the things I’ve found over the years is that when organizations have supply chain problems, they usually have more than one issue or condition, and that the issues feed on and support each other.  These problems can be grouped into four general categories: cultural, organizational, strategic and tactical.  In this organization, I see issues that can be placed into each of these categories.

Key observations

  • While the freight cost issue is front and center, it appears that the freight manager quit of our frustration and had been faced with the accountability without authority problem.  The freight manager seems to have been accountable for freight costs but had no authority to drive behaviors to manage the actual shipping.
  • ·Performance information is available, but not shared/distributed on a timely basis.  This seems to have been captured and maintained by the freight manager.
  •  Given the disparity and lack of transportation knowledge between the managers and shipping supervisors it appears that the plants operate independently.
  • Evidence of a training need for basic traffic/transportation knowledge.
  • Customer service to the stated shipping standard of a 3-day lead-time was not indicated to be an issue.  But it appears there are lots of inefficiencies in plant operations to meet the lead-times.
  • There is no evidence of a defined supply chain strategy.
  • ·Given that it was the company president that called, that suggests an opportunity for top-management involvement and commitment to implement improvements.

 

X-Chart

One of the tools I use is the X-Chart.  The X-Chart can serve as a living document and be adapted as situations change.

  • Major goals and objectives are listed on the top. 
  •  General strategies and guiding principles are listed on the right.  These are the things we should always commit to do.
  •  Specific actions and tactics to achieve the goals are listed on the bottom.
  • ·And related metrics are listed on the left.
  • ·Major interactions are highlighted in the corners.

The X-Chart I developed for this organization is shown below and serves a guide for discussion with the president.



Discussion with the president:

 

Short-term actions:

  • Inter-plant freight costs are out of control
  • Organization needs to establish clear responsibility and accountability for freight costs.  Is it the branch managers?  Is it the freight manager? Is it both?
  • ·Reporting of inter-plant freight costs by lane and mode needs to be implemented on a timely basis.  The departed freight manager seems to have had that information, but there was no distribution, visibility or action taken based on the information.
  • ·Person assigned to the freight manager role needs to have a passion and desire for the position along with the support to drive the necessary changes.
  • Basic training need to be provided to all 26 branch managers and shipping supervisors on the basic traffic concepts including: small shipments are more costly than larger shipments, premium mode carriers are more costly than LTL and concepts of transit times related to distance. In addition, actual transit times by mode between plants are readily available.
  •  Based on information developed by prior transportation manager, it would seem that an inter-plant routing guide could be prepared and distributed in short order.
  • ·Clear direction provided to plants to consolidate daily inter-plant shipments.  This might be as simple as awareness and manual consolidation by the shipping supervisors.

Next actions 

It appears that a key driver for the inter-plant shipments is the need to move additives from one plant to another.   Better planning, deployment and procurement of raw material additives unique to each plant would eliminate the need for much of the inter-plant shipping.

One situation I have seen in the past is that organizations tend to operate with a job shop mentality ­– that each order they will receive from a customer is a “one-off” order and not be repeated.  In fact, customers tend to order the same things over and over, so with some analysis and planning, the unique additives and their respective volumes used be each plant should be able to be determined.

With that in mind:

  •  Analyze additive usage by plant and by customer.
  • ·Use that information to re-evaluate stocking points, procurement and deployment of additives


By improving the balance of additive inventory, production planners should have an easier job to improve batch sizing, production runs and manufacturing effectiveness resulting in higher service and lower costs.

Longer-term actions

With 26 locations, chances are that locations have different manufacturing competencies.  Yet, it appears that each location had developed a “local” customer base that they strive to serve.  Once the short-term and next step actions have been taken, the organization has an opportunity to look at how best to serve the customer base from its 26 (the number could change) locations by evaluating plant capabilities tied to enterprise wide customer needs.  And that would service as a good starting point to the development of a supply chain strategy.  


David Armstrong
President
Inventory Curve
Dec, 03 2015

New Comments from Challenge Creator David Schneider after Reviewing the Submissions:

Wow - great responses.

The Control Tower approach is great for highly structured organizations, with complex systems and discipline.  However, they are hard to implement without systems, and when combined with “organic” organizations where the management process is localized and the culture is not top down, almost impossible to launch without bloodshed.  Been there, done that, got the scars from the fun.

 Many of the responses recognize, like David Armstrong, that there was no clear Supply Chain strategy.  In reality there was a supply chain strategy, but the strategy, developed when the company had 3 locations, no longer fit the 26 plant solution.  What made things more complex was that a sales agent in Chicago, working with a customer in Nashville, could put together an order that shipped out of the Seattle plant going to a customer site in Salt Lake City.  The systems did not control allocation, it was first come, first served, but sales could horse trade.  The sales agents planned the orders, and they sometimes would take the extra step of working the details and letting the logistics team know what they created as a plan.

Something that is missed by so many, but is an often heard complaint, is the time to think through and develop the plans.  Just in the time I attempted to write this message I was interrupted 7 times, so that I spent more time on the interruptions and conversations than I did writing this message.  It is so easy to see the problems, but so hard to do something strategic when your role is at best tactical.  We expect company presidents to be thinking nothing but the strategic, but they are in the tactical much more, some as much as 90% of their time.  That was the case with this company president, as he was drawn into tactical discussion by his staff, by the customers, and his own behavior.  



David Schneider
President
David K. Schneider & Associates
Dec, 03 2015


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