An integrated approach to re-engineering material and logistics control

Jayne C. Lewis, Mohamed M. Naim and Denis R. Towill

Logistics Systems Dynamics Group, University of Wales, Cardiff, UK

International Journal of Physical Distribution & Logistics Management

1997, Vol. 27, No. 3/4, pp. 197-209

 

1)      Introduction

  1. a) Medium-sized firm: WMC
  2. i) 250 employees
  3. ii) Annual turnover of ₤14M

iii)     Manufactures and distributes mechanical and electrical equipment

(1)   70-75% of customers are contractors/consultants who buy quantities and repeat transactions

(2)   20-25% are one time buyers

  1. iv) Desire to improve their customer service as a competitive advantage by:

(1)   Integrating their supply chain

(2)   Maximizing efficiency

  1. v) Project:

(1)   3 year re-engineering project

(2)   Leading Team: marketing director, manufacturing director, scheduling manager and researchers

2)      Integration of the supply chain

  1. a) Benchmarked against a 4 stage model
  2. i) Stage 1: Baseline
  3. ii) Stage 2: functional integration

iii)     Stage 3: Internal integration

  1. iv) Stage 4: External integration

3)      Internal Re-Engineering

  1. a) Issues
  2. i) Address manufacturing hold-ups
  3. ii) Transform to cellular, jit manufacturing format

iii)     Utilize kanban stock system

  1. iv) Reduce lead times
  2. b) Forrester effect and Burbridge effect
  3. i) Forrester- demand amplification is linked to system structure
  4. ii) Burbridge- demand amplification is a result of a poorly detailed ordering system design

iii)     At WMC

(1)   Information is being distorted as it passes from WMC to suppliers

(2)   Resulted in both WMC and suppliers holding quantities of the same stock

4)      Inventory controls

  1. a) The old system
  2. i) Lack of communication between internal departments
  3. ii) MRPII system did not fit the new JIT manufacturing

iii)     Stock turns as low as 4/year

  1. iv) Inaccurate forecasting
  2. b) Re-engineering inventory controls
  3. i) Departments brought together to form one new department
  4. ii) MRPII system replace with MRP system for control

iii)     Excessive fluctuations in demands and inventories

(1)   Insist on frequent deliveries

(2)   Insist on small batch sizes

  1. iv) Insensitivity to changes in demand
  2. c) The supplier interface
  3. i) Current issues

(1)   Weekly reordering

(a)    Increased paperwork

(b)   Increased logistics requirements

(2)   Historical adversarial relationships with suppliers

(a)    Poor communication

(b)   Unreasonable demands

  1. ii) Improving Relationships

(1)   Researched supplier requirements and capabilities

(2)   Give more useful ordering info

(3)   Allow for planning

(4)   Educate on new procedures

(5)   Form partnerships to gain competitive advantages

iii)     Benefits to suppliers

(1)   More reliable schedules

(2)   Reduced finished goods inventories

(3)   Increased visibility of customer requirements

(4)   More accurate understanding of demand

  1. iv) Benefits to WMC

(1)   Increased/improved customer service

(2)   Reduced stocks

(3)   Increased inventory turnover

(4)   Improved delivery

(5)   Minimized risks of running out

  1. v) Responsibility

(1)   More responsibility to suppliers

(2)   Shift WMC responsibility from management to shop-floor

5)      Models

  1. a) Cardiff engineering change model
  2. i) Technology
  3. ii) Attitude

iii)     Organization

  1. b) Integrated approach
  2. i) Strategic policy

(1)   Improve company’s competitiveness through smooth material flow

  1. ii) Tactical policy

(1)   Interface with customers and suppliers

(2)   Improve information flow

(3)   Regularize order patterns

iii)     Operational policy

(1)   Synchronize orders

(2)   Small order quantities

(3)   Frequent deliveries

(4)   Minimize safety stocks

(a)    Minimum reasonable inventory (MRI) policy

6)      Conclusion

  1. a) Simple analysis with simulation can identify problems
  2. b) Reordering policies should be kept simple
  3. c) Information flow should be accurate, timely and accessible to all
  4. d) Integrate internally
  5. e) Integrate externally