Wayfarer Consulting, LLC

The Challenge:

Transform a small company serving the life science research community with multiple, independently managed product lines into a growth company.

The Impact:

Complete rethinking of business processes to position the company for growth.

The Outcome:

Improved customer service by increasing in-stock levels of key products from about 80% to 95%.

Background:

The original business was to buy bulk chemicals (bulk could mean 100’s of milligrams to 100’s of kilograms) then repack into sizes convenient for researchers, anything from 1 milligram to 100 kilograms.  The various pack sizes accounted for the majority of the products in the catalog.  In addition to the chemicals, there were five additional product lines for cell growth media, DNA/RNA extraction, food safety, and diagnostics (FDA regulated).

The company culture reflected management’s can-do free-wheeling style.  Employees took great pride in doing what it took to get orders out the door; if procedure got in the way of getting the order out, procedure was suspended, and everything would get cleaned up eventually.

The owner announced a new vision.  He wanted to take the basic operation for chemicals from a make-to-order to a make-to-stock model.  His goal was to position the company for growth; this meant improving inventory planning and control. 

Improve Material Planning

A simple paper-based system of customer orders yielded requests to weigh bulk material to specific pack sizes for shipment.  This paper-based system drove production.   If no stock was found, the weigh requestwas turned into a purchase request, regardless of the ordered amount and overall sales for that chemical.  Some manual planning was done to ensure stock of known high selling products.  The various product lines operated independently under one roof.  So sometimes the same exact item was ordered under different part numbers with different costs due to quantities ordered.

The initial plan for improving material planning:

• Improve inventory accuracy
• Update part masters to support MRP
• Build Bills of Material and routings for all products
• Develop forecasts for products with consistent sales
• Develop user-friendly planning interface
• Increase ERP utilization

Improve inventory accuracy

This aspect of the plan is explained in a companion case study on transforming inventory management.

Update Part Masters to support MRP

Prior to the owner’s new vision, item master data had not been set up or maintained properly, since the use of the system was minimal.  Setting key values for MRP such as make vs. buy and lead times was required.  With almost 50,000 SKUs in the system, a broad-brush approach was the only practical one.  Buy items were given a standard 1-month lead time, while manufactured items were given 3-5 days depending on the product line.  These were updated as exceptions were noted.

Key products were given a 2 or 3-month supply window.  That means that the system planned for 2 or 3 months of demand to be in stock.  This was done in lieu of safety stocks, since the process was new, and forecasting primitive at this point.  This saved considerable effort in calculating and maintain safety stock values for finished goods.

Later, other product lines’ part masters were updated with the help of data from various spreadsheets maintain by the production managers.

Build Bill of Material and Routings

The early emphasis was on the chemical repack product line.  The lent itself to a mass update, since the finished good and bulk part numbers shared a common base number.  Packaging was determined based on product weights.  There were exceptions that were updated as they occurred.  As some chemicals had different SKUs targeting different markets and price points, the next level of development was to decide which SKU should be the basis for all SKUs for that chemical based on the tightest specifications. Bills of material were updated to reflect this common base chemical. The additional benefit of more consistent purchases (and of larger quantities) aided Purchasing achieve savings and improved supply.

Later, other product lines established bills of material and routings according to their specific needs.

Develop Forecasts for Products with Consistent Sales

There was a wealth of historical sales data in the system.  Customer request dates were used to establish the order pattern, rather than ship dates which only reflected product availability. For many years, the forecasts were simple 12 month moving averages.  This allowed for forecasts where there were periods with zero demand, which was the case for most SKUs. Eventually, a forecasting package was purchased which had a method to handle intermittent demand and which could evaluate alternate models for best fit. 

The new software enabled Planning to pick up trends much more quickly. The software could track forecast errors and allowed attention to be focused quickly on the most important products.  The next step is to measure and improve forecast accuracy, engaging sales to assist with their better understanding of the markets.

Create tools where needed to improve efficiency and accuracy

The MRP outputs from the ERP were not user-friendly. The chemical business presented a unique challenge with the ability to repack ore change product numbers to meet customer needs.  There an MS ACCESS database was created as a front end for the planners.  This pulled data from the ERP system and presented all relevant information about a given chemical in one place.  This allowed the planner to make a good decision about packing from bulk, repacking, converting, or ordering new material.

Over time the functionality was extended to handle products with subassemblies and master scheduling of key manufactured products.

Increase ERP utilization

The implementation of MRP was a major step forward in utilization of the capability of the ERP system. This was preceded by implementation of work orders through the ERP system as explained in a companion case study on transforming inventory management.

With the MRP implementation came improvements in the management of requisitions through a bolted-on software platform connected directly to the ERP database (and using some of the same tables). Purchasing began to set up package quantity conversions, and default vendors to simplify ordering.

Shop floor transactions were expanded given management better visibility to status of work on the floor, while dispatch lists identified stuck orders to be resolved.

Outcome

The company culture was transformed over time as employees began to think and talk in the language of work orders, planned orders, and forecasted vs. actual demand.  Employees learned to trust the system for accurate inventory and supply status. The ERP system became a means for departments to communicate status as all departments received training in understanding the functions and inquiries available in the ERP system.