• iCM | iQM

SUPPLY CHAIN

Advantages of material requirement planning
  • Xcelpros Team
  • No Comments

Advantages of a material requirement planning system (MRP) vs. manual planning
Advantages of a material requirement planning system (MRP) vs. manual planning 700 500 Xcelpros Team

Introduction

While it wasn’t a strong consideration for chemical production in the past, today’s plants are realizing the need to know where they stand in terms of meeting their customer’s needs. Some key demands being placed on the chief financial officer by different departments include questions like.

  • Can we fulfill my customer’s regular orders on time?
  • Are we able to deliver a client’s last minute rush-order?
  • Do we have enough inventory to stay on schedule without impacting other projects?

The only way for a plant to know exactly where they stand in terms of its raw materials, packaging, production and delivery schedules is through proper planning.

The benefits of effective materials requirement planning starts with understanding each product’s formulas, which dictate the required bills of materials (BOMs) in terms of raw or previously refined ingredients along with up-to-date instructions on how to safely use them.

A manufacturing BOM is essential in designing enterprise resource planning (ERP) systems and materials requirement planning (MRP).-Investopedia

Difficulty with Conventional Methods

A conventional method of making sure you’d have all the information required to answer the CFO’s questions was by using Microsoft Excel spreadsheets for production planning. One spreadsheet might list all of the required chemicals for a specific formula from the BOM in the first column followed by others showing the quantities required for each batch and the quantities on hand. Other sections of the spreadsheet might be what is on order, which supplier is shipping it, when it is due and other similar information.

In this format however, ensuring the information on the BOM is accurate usually requires additional diligence and effort to be put forth. This could mean verifying inventories, making phone calls and sending emails when numbers in the warehouse don’t match. It might mean having one manager call another when a shipment arrives with less than the ordered quantity, or rarely, more than what was ordered.

Once the BOM is completely built out and the CFO knows what materials are available, they can schedule labor and resources to produce the products. This can be tricky when the same distillation equipment is to be used for multiple products, with downtime in manufacturing required between batches for cleaning and device maintenance.

Ideally, production teams have a planner who creates a schedule similar to the one in the image below (see Production Planning PPT slide from Xcelpros).

The Downsides to Downtime

You may have heard it before “Poor planning produces poor performance.” When it comes to business however, poor planning can also mean unexpected costs, and unexpected downtime. Downtime is often defined as time when production is scheduled to run but for some reason is not. Unplanned downtime or production stoppages however can seriously impact a businesses bottom line. These include disruptions in the form of reputational damage and customer churn by not delivering products on time. This unplanned lack of production also causes revenue losses, reduced employee productivity, reduced end-user productivity and stressed employees. Stressed employees can result in employee turnover. An HRDive brief puts the cost of replacing an employee at one-third of an employee’s annual salary or roughly $15,000 per worker.

Direct Costs of Downtime

The direct cost of downtime in production across all industries, not just chemical——varies. According to Atlassian and Garvey, downtime costs add up to

 

$247per minute for small businesses

$9,000 per minute for medium and large businesses

$260,000per hour across all businesses in a 2016 study

800 hours of downtime per year on average in manufacturing alone as cited by Garvey

Source: Atlassian & Garvey.com

Tracking Downtime in the Chemical Industry

According to an article by Accruent, unplanned downtime in the chemical industry appears in

  • Reduced production
  • Losses caused by quality issues
  • Costs for equipment repairs
  • Decreased customer satisfaction

One example cited was the quality drop off when a High-Density Polyethylene (HDPE) plant restarts. The plant can take from hours to days to produce right-first-time materials. The transitional goods are either scrapped or sold as reduced quality.

Proper Planning Produces Peak Performance

Figure: 1Production Planner’s View on Manufacturing: Planning & Execution in a Chemical Company

Features Of MRP System

Much of this downtime in manufacturing can be avoided by proper planning, especially when using a Master Plan. Managing master planning processes using software such as Microsoft Dynamics 365 Supply Chain Management can complete a number of critical tasks including

  • Calculates net requirements for the master plan based on actual current orders. This permits day-to-day inventory management.
  • Forecasts gross requirements for long-term planning of materials and production capacity.
  • Calculates net requirements across legal entities, such as different companies providing supply and demand.

The Master planning module determines the supply (materials) and capacity (resources) needs that will meet current demand (net requirements),” which includes the longest lead times.-Microsoft

The Master plan setup includes coverage settings and defining coverage rules for items.

Using a Master plan includes creating a constrained plan, handling safety stock and dealing with delays.

When used with multiple sites, the Master plan creates site schedules, site plans and coverage, the BOM version and other functions.

In terms of intercompany planning, the Master plan lets CFOs and project planners view the outbound intercompany demand and collaborate with internal supply chain customers.

Demand forecasting functions include importing historical data, generating, adjusting and approving a baseline forecast and then monitoring the forecast for accuracy.

Demand Forecasting in Microsoft Dynamics 365

Figure: 2Basic flow in Demand forecasting

Basic flow in Demand forecasting

Having an idea what to order in advance is a “top of the mind” issue for many CFOs. Microsoft Dynamics 365 Supply Chain Management can perform demand forecasting, though it requires the Microsoft Azure Machine Learning Studio, which has limited availability.

  • Predict independent demand from sales orders and dependent demand at any decoupling point
  • Customize it for industry-specific requirements
  • Visualize demand trends, confidence intervals and make forecast adjustments based
  • Remove outliers
  • Authorize the adjusted forecast for planning

Final Thoughts

Proper planning helps CFOs cut costs and reduce downtime in manufacturing at the same time. One way to ensure production facilities have enough of what they need to keep factories rolling is by using an MRP system. These systems are

  • More efficient
  • More accurate
  • Better for long-term planning

Looking to digitally transform your supply chain? Take a assessment!

Get Started Now

How do smart factories help boost your supply chain
  • Xcelpros Team
  • No Comments

How do smart factories help boost your supply chain?
How do smart factories help boost your supply chain? 700 500 Xcelpros Team

At a Glance

  • Smart factories can use technology to boost productivity and increase quality. Merging data and insights from the shop floor with the supply chain and the entire organization can uncover ways to improve operational efficiency and boost business relationships.
  • By connecting devices and sharing information, smart connected factories permit automatic optimization. The machines can adapt to changing conditions in real-time and run the entire production process without human intervention, a white paper from Deloitte states.
  • A smart factory is one where information is continuously shared between devices and resources. Sharing this information reduces waste, thereby increasing efficiency and productivity.
  • It impacts the supply chain by anticipating needs and automatically ordering materials. That in turn keeps the factory running at maximum efficiency.

The smart factory represents a leap forward from more traditional automation to a fully connected and flexible system.Source: Deloitte

Traditional factories tend to have discrete machines and production lines. Information gathered from one device stays with that device until manually uploaded into a computer network.

Smart factories eliminate the barriers between machines, using computer sensors to monitor every stage and every process, producing huge volumes of data. The information is shared vertically on the factory floor and horizontally with other departments. This method lets the company rapidly adapt to marketplace changes, expanding its offerings and encouraging innovation based on customer needs. Smart connected factories are much more than just machines knowing when to open and close valves. They integrate the entire operation—including supply chain, manufacturing, information technology (IT) and operations technology (OT)—into one unified, agile organization.

Characteristics of a smart factory

Smart factories share five characteristics. They are:

  • Connected across machines and departments
  • Optimized for reliability and predictability
  • Transparent for quick decision making and order tracking
  • Proactive for identifying potential problems before they occur and restocking materials before running out
  • Agile for quick changeovers and product modifications

Benefits of a smart factory

Important benefits of a smart factory include:

  • Using data to create pattern identification and mapping the production process. This method gains production insights and allocates resources more efficiently.
  • Identifying and logging all process problems from machine and worker input.
  • Identifying waste creation points and processes.
  • Sharing data not only with the factory floor but with sales, marketing, finance and other departments to improve overall results.
  • Mastering the smart supply chain, permitting advance ordering of critical components before running out of them and delaying production.
  • Customizing small orders, permitting small batch creation when machines are not in use on large projects.
  • Diagram an ideal state.
  • Develop a plan to make the ideal state a reality.
  • Monitor and continually adjust new processes—including educating and training employees—ensuring maximum efficiency.

How it Works

The information process begins by using machine sensors and operators to capture data points during the 7 Flows starting with the supply chain in the form of raw materials. Each of these flows is part of the Lean Manufacturing Process.

Seven Flows

The seven flows involve:

  1. 1.Raw materials
  2. 2.Work in progress
  3. 3.Finished goods
  4. 4.Operators
  5. 5.Machines
  6. 6.Information
  7. 7.Engineering

All of the flows working together tend to efficiently produce products with few defects, Kettering’s article states.

Software such as Microsoft Dynamics 365 Supply Chain Management is designed with these concepts in mind.

For example, Microsoft Dynamics 365 Supply Chain Management allows factories to integrate industrial internet of things (IIoT) and artificial intelligence in the process flows.

Technical Advances Enabling Smart Connected Factories

Recent technical advances permitting the creation of smart factories include the development of:

  • Sensors collecting information, providing access to various activities and processes.
  • Using connected IIoT (Industrial Internet of Things) devices transmitting the sensor data to a database that in turn, massages the data to identify and correct inefficiencies.
  • Analyzing data as it is being collected. This permits rapid responses to changing situations, such as correcting a manufacturing defect as it occurs.
  • Employing AI (artificial intelligence) coupled with machine learning permits self-correcting when detecting errors such as closing an open door that might affect a temperature-sensitive section.
  • Relocating some IT resources to “the cloud.” Cloud Computing reduces data costs by transmitting it to a remote location where an interconnected network of computer servers processes, shares and stores data in a secure location away from the factory.
  • Running a digital version of a process in advance. By identifying and correcting potential errors and sticking points in advance, actual production is not affected.
  • Keeping data secure from outside cyber threats and attacks such as ransomware or hacks that steal data or damage or destroy critical components.

When many people think of the Internet of Things (IoT), they visualize home products such as lights that turn on and off when people enter rooms, saving electricity. Maybe they consider newer smart refrigerators that let homeowners use an app on the attached touchscreen monitor to order food items when they are running low.

The IIoT expands this connectivity from computers and the home to computers and industrial machinery. For example, it allows remote workers to monitor temperatures and automated chemical blending, ensuring the correct mixtures.

Figure: 1Functions coming together within smart factory

Functions coming together within smart factory

Why Update Now to a Smart Factory Solution?

The rapid pace of technological innovations means that the cost of making some of these updates—computing speeds and data storage, for example—has dropped. Technology is more sophisticated allowing systems not only to gather information but interpret it and automatically make adjustments.

A more complex supply chain means manufacturers must be more nimble than ever before while also adapting to constantly shifting priorities.

Merging parts of IT with parts of OT, in combination with device hardware and software such as Microsoft Dynamics 365 Supply Chain Management lets factories analyze their data now in real time for smart supply chain management.

Smart Factory Categories

Smart factories come in four categories, all based on data.

  1. 1.Available—but not accessible—data that must be organized before being transmitted.
  2. 2.Accessible data, which is organized and stored in ways that permit analysis.
  3. 3.Active data, which can be analyzed by computer software such as Microsoft Supply Chain Dynamics 365.
  4. 4.Machine-controlled modifications using solutions identified earlier, all with limited human input.

Making Factories Smart

Owners and managers may want to start with a single device, get it working the way they wish and then gradually expanding to a full production line. Companies considering updating an existing factory will need to have methods of obtaining data from the factory floor, which might require updating or replacing some machines. The cloud can help with processing and storing the information but data collection takes place locally.

Investments in other technologies—including AI, augmented reality and optical sensors—may be required to understand the data and digitize the production process.

Another important change is staffing. Even though much of the work will be automated, skilled workers are still required. This could involve realigning departments and eliminating or drastically changing individual roles.

Key Takeaways

  • Technological changes are turning the dream of smart factories into reality.
  • Smart Factories have the ability to highly automate many repetitive steps using a combination of device sensors and computer software.
  • Factory data can be used to create artificial production lines. Running them virtually lets managers spot potential problems before affecting actual production.

Get a consultation on transforming into a smart factory.

Get Started Now

REFERENCES:

An Introduction to Lean Manufacturing

supply chain challenges in chemical industry
  • Xcelpros Team
  • No Comments

Best solutions for Logistics and Transportation Challenges in the chemical industry
Best solutions for Logistics and Transportation Challenges in the chemical industry 700 500 Xcelpros Team

At a Glance

  • Chemical companies are reeling under a two-edged crisis- unprecedented fall in the price of crude oil and the upheaval brought in the global supply chain because of Covid-19.
  • Chemical companies have also faced issues like increased freight costs, excessive demand for chemical sanitizers, and changing government regulations across different geographies.
  • Mitigating costs, managing inventories, avoiding bottlenecks and rising to the challenges would be some of the top-most priorities of the executives managing chemical transportation and logistics.

Global supply chains have seen direct and ripple effects of the coronavirus or Covid-19 pandemic. The pandemic has caused operational upheavals and seen acute disturbances in logistics due to shortage of chemical raw material. Adapting to volatile market conditions in the face of a challenge shows the company’s ability to sustain growth. Determination, planning and willingness to adapt to changes are expected from the rapidly growing chemical companies.

To aid with their business continuity plans, chemical companies need to continue to reinvent their operational processes, inventory management strategies and transportation management. Supply chain challenges in the chemical industry are inevitable as every country responds differently to health and economic crises. A crisis changes the way you manage inventory, raw material procurement, monitor demand for certain chemicals, workforce procedures, freight costs, etc.

23%

of the USA’s chemical companies considered supply chain disruptions due to the coronavirus pandemic as their major concern for the coming future.

Source: PWC

Many comprehensive software applications have been developed to provide concrete solutions to mitigate the issues related to supply chain disruptions. Microsoft Dynamics 365 Supply Chain Management has been cited as the best software for supply chain management and a complete solution for distribution and logistics. Here are four primary concerns that chemical companies are facing when it comes to managing transportation and logistics:

1.Moving to Road and Railways: Transportation and logistics in the chemical industry have been heavily dependent on airways and waterways in bigger countries and across international borders. However, increased safety concerns and inflated costs make chemical companies shift to the transportation of raw material, and final products through roads and railways. The change in mode of transportation directly impacts the landing cost of the product. Inability to track accurate landing costs, end-to-end transportation tracking and scheduling are some major pain points in a chemical company.

2.On-time Delivery of Raw Material: There is a sudden and unexpected disparity in the demand for different chemicals. Demand for chemical surface cleaners, sanitizers has increased several folds across the globe (and understandably so), however majority of challenges are related to on-time delivery of material. Unpredictable transportation lead times and inability to deliver these raw materials is a big pain point in providing accurate receipt dates.

Figure: 1 High-level Disruptions in Chemical Transportation due to Covid-19 Pandemic

Transportation Management Process Flow in Dynamics 365

3.Transportation Planning and Inventory Management: A supply chain can run smoothly only when the inventories are managed well. Given the current times, chemical companies need to align their requirements and logistical arrangements with the availability of products in their respective inventories. This requires top-to-bottom visibility and high-level decision making to approve faster changes in material requirements. A major roadblock is related inefficient transportation planning to minimize delays.

4.Increased Freight Cost and Changing Regulations: With change in modes of transportation, and disruption of demand and supply pattern of chemicals worldwide, freight cost shot up by several times. Chemical companies have to deal with higher freight costs along with issues in logistics and supply chain management.

Despite all these pain points, chemical companies can reinvent their transportation and logistics operations to rise to the occasion. Here are certain measures that chemical companies can take to streamline their distribution demands:

  • Assessing the requirement based on geographies and allocating warehouses to meet those demands.
  • Labeling, stocking and categorizing chemical stock based on order priority and making them easily available for transportation.
  • Making use of serialization and bulk containers with barcodes for optimal supply and efficient tracking.
  • Appointing a special task force to manage transportation and logistics changes to optimize the supply chain and provide the single-point contact/ visibility option to all the stakeholders involved.

How Can Your Chemical Company Optimize Transportation and Logistics Operations Using Microsoft Dynamics

Microsoft Dynamics 365 provides the right features for a chemical company to manage operations, inventory and transportation. Once you get the view of your company’s transportation and chemical supply chain management in Microsoft Dynamics 365, you will be able to plan and implement optimization strategies for chemical transportation and logistics.

The information about chemicals are required to be maintained and tracked under high-level categories. Also, labeling batches, mentioning hazardous substances, barcoding containers and mentioning chemical properties is part of any chemical company’s logistics plan in Microsoft Dynamics 365 in conjunction with integrated chemical management.

Microsoft Dynamics 365 allows for complete inventory visibility through its Distributed Order Management (DOM) indicator. This allows all the stakeholders to stay on top of things, avoid bottle-necks or stock-outs during these unprecedented times.

Chemical companies can benefit from comprehensive Transportation Management module in Dynamics 365. The module is loaded with features that can let you manage your transportation and logistics while also letting you identify vendor and routing solutions for inbound and outbound orders. In these times of extreme price inflations and changing market dynamics, this module helps your chemical company cut operational costs in logistics by effectively planning inbound and outbound transportation. Highly advanced business intelligence built in the Dynamics 365 Transportation Management module helps chemical companies identify best-priced and most efficient carriers. Through this module, you can get real-time visibility of the entire order at all times.

Here are some of the most impactful benefits of Microsoft Dynamics 365 Transportation Management module for chemical companies:

  • Warehouse Management Efficiency
  • Enhanced Delivery Capabilities
  • Inventory Reductions
  • Real-time Supply Chain Visibility
  • Effective Customer Service
  • Set up Ad-hoc Cycle Counting Thresholds and Cycle Count Locations
  • Pre-schedule Route Planning for Efficient Transportation
  • Availability of Multi-packing Slips in Load Planning
  • Skip Trivial Freight Reconciliation Process

Every chemical company has a different shop-floor operation and needs customized production operations plans for kits and packaging (for transportation). This option is easily accessible with Microsoft Dynamics 365.

Companies can manage lot tracking, tracing of chemicals, route mapping, resource availability, and freight cost management. The system provides the option of generating individual or batch invoices.

The Transportation Management module in Dynamics 365 follows a well-vetted process flow that is dynamic and customizable, based on your transportation requirements.

Figure: 2Transportation Management Process Flow in Dynamics 365

High-level Disruptions in Chemical Transportation due to Pandemic

While it is true that the world is witnessing changes in the chemical supply chain and transportation due to the Covid-19 pandemic, companies can rise to the occasion with resilience, optimal use of resources and a systematic approach towards change in processes. There is a need for continuous innovation to stay ahead of the chemical companies’ curve to continue operations during this ‘new normal’.

Key Takeaways

  • Transportation and logistics of chemical companies are facing the ripple effects of disruption in global supply chain caused by the coronavirus pandemic.
  • While there are many challenges, chemical companies will need to reinvent their transportation management with the help of intelligent applications like Microsoft Dynamics 365. Once operations and processes are efficient, chemical companies can improve their transportation planning to ensure on-time delivery.

Reach out to us for your company’s Digital transformation.

Get Started Now

inventory management strategies
  • Xcelpros Team
  • No Comments

Top 4 Efficient Inventory Management Strategies
Top 4 Efficient Inventory Management Strategies 700 500 Xcelpros Team

At a Glance

  • Challenges of an inventory can be both daunting and persistently confusing for shippers/ suppliers; however, a strategic re-evaluation can do wonders to your inventory management.
  • Accuracy, agility, and quality seem to be the main driving factors in today’s inventory management scenario.
  • Companies need to make the necessary changes to their approach to inventory management strategies today to have a seamless supply chain and, eventually, a satisfied customer base.

As technologies and the latest strategic trends bring on a blanket change across various industries and their related subsets of functions, organizations need to adapt to these trends. Such adaptations can at first sound overwhelming, but proper planning and execution can help you in the long run. Inventory management has come a long way from being just a function related to buying, stocking, and selling. In today’s digital era, managing an inventory entails predicting stock-outs and preventing them, enhancing workflow efficiency, providing real-time information to various stakeholders, and supporting large scale productions. The unprecedented growth of the e-commerce sector has given rise to customer expectations that can be daunting to the sellers and suppliers. Today’s supply chain culture is all about being the fastest and the most accurate. Thus, both B2B and B2C markets continually look for ways to efficiently manage their inventories’ challenges.

48%

of supply chain and transportation executives say they are experiencing the need to reevaluate warehouse locations due to shifting trade patterns resulting from changes in the U.S. economy.

Source: A Report by Forbes Insight

Whether you are a manufacturer, supplier, or retailer, the road ahead to managing your inventory effectively is full of complexities as well as opportunities. Let us look at various good inventory management practices that will help you unravel these problems while tapping many efficient inventory management options.

01.Be Efficient When You Go Omnichannel

These days, the customers/consumers are empowered by various online applications, e-stores, and even physical shopping options to complete their order. As a retailer who wants to tap into these different distribution options, one needs to dive into omnichannel retailing. But this requires accurate and highly efficient management of stocks and their distribution across various channels. A complex omnichannel inventory requires a central data management system, effective track and trace mechanism, and sustainable storage options to operate seamlessly. An omnichannel store that operates both physically and online needs to purchase data and patterns for predictive analysis to preempt customer demands and stock their inventories accordingly.

Figure 1:An Omnichannel Retailer’s Inventory

An Omnichannel Retailers Inventory

02.Create an Efficient Connected Ecosystem

Long gone are the days when inventories were simply warehouses located close to the supplier base and managed as a separate function. With advanced, cutting-edge technologies, everything is connected today. Thus, to overcome the inventory management problems, you need to create an efficiently connected ecosystem where different functions work in tandem while sharing data, exchanging real-time developments, and being governed in an optimized way.

To help you manage your inventory’s problems with ease, speed, and accuracy:

  • Moving your data from legacy platforms to Cloud.
  • Implement process automation to simplify laborious manual tasks.
  • Use Artificial Intelligence and Machine Learning to preempt stock-outs.
  • Apply Advanced Analytics for accurate inventory reporting.

Figure 2:Benefits of a Connected Ecosystem for Inventory Management

Benefits of a Connected Ecosystem for Inventory Management

03.Revisit Your Warehouse Location design

In the past, inventory locations were not always well-managed and streamlined based on supply, consumption, and demand. With cumbersome planning and different modes of transportation, warehouses would ship goods to the desired locations. However, in today’s times, inventories cater to multiple channels and changing consumers’ demand patterns. This has made companies rethink their logistics strategy. Companies are setting up distribution centers closer to the customer-base to help streamline order fulfillment. Also, these distribution centers, when integrated through a common and efficient warehouse management software, can share data and prevent stock-outs.

04.Balancing the Influx of Inventory

There has always been discord between stocking up on inventory and the actual space available in shippers/suppliers’ warehouses to store the inventory. Sometimes, shippers miscalculate the future demand, while other times, they fear the increase in the price of goods. Whatever may be the scenario, this influx of inventory and the lack of actual physical space can lead to a menace for distribution centers. This can also lead to damage of goods, loss of perishable items, and a mismanaged inventory. To avoid this kind of influx, suppliers can get supply chain experts on board to use technology to their advantage. Tools and applications like MRP with AI and Advanced Analytics can accurately forecast customer demands. A good and robust software system to track the inventory items will prevent excessive purchases and stock-ups.

Inventory problems have always been the peril of supply chain management. You can be better prepared using the latest technologies with features like track and trace through LPN, a mobile supply chain, use of barcode, labeling, etc. By rethinking and replanning your supply chain process, you can proactively streamline inventory. A smooth supply chain needs to have a well-managed inventory, and taking the right steps in this direction will help you build a higher business value.

Key Takeaways

  • No two companies can have similar inventory requirements and structures; so, you need to assess your needs to optimize and manage inventory challenges.
  • A complex inventory requires stringent workforce management, change management, skill force updating, latest technologies, and application of intelligent tools to be managed seamlessly.
  • Contingency plans need to be in place for disruptions in inventory management, giving your company the ability to plan for unexpected situations.

Get Consultation For all Your Business Needs

Get Started Now

enhance supply chain planning within pharmaceutical operations banner
  • Xcelpros Team
  • No Comments

Enhance Supply Chain Planning within Pharmaceutical operations
Enhance Supply Chain Planning within Pharmaceutical operations 700 500 Xcelpros Team

Introduction

The COVID-19 pandemic has created significant changes in market dynamics, forever changing the face of the global economy. Along with the pandemic’s impact on our daily lives, there has been a ripple effect in the day-to-day operations of Pharmaceutical manufacturing. As industries around the world continue to adjust to changes, Pharmaceutical manufacturers in specific, are noticing technology, process, and infrastructure gaps that are impeding growth and sustainability. Additionally, businesses that were forced to slowdown production during the initial stages of COVID-19 and are now getting back to full momentum, are finding it difficult to manage end-to-end operations.

Pharmaceutical companies cater to a customer base that is dependent on their products to manage patient health. This requires additional efficiency in everything they do, especially for planning supply-demand. The primary objective is to not halt manufacturing, as the dependencies can impact the entire Pharma value chain. Since pharma companies are quality controlled, there is an additional time factor that comes into the picture while determining the right deadlines to produce finished product and deliver to end customers. The entire process from drug discovery to packaging for delivery is a series of collaborations within the supply chain before the final product reaches the end customer.

Roughly 66% of the surveyed were concerned that COVID-19 could result in a possible supply chain disruption for pharmaceutical products. The statistic illustrates concern levels on possible drug supply chain disruptions due to the COVID-19 pandemic as of April 7, 2020. Matej Mikulic | Statista

The Planner’s Panorama

Due to the rapid changes in the global supply chains, production planners at pharmaceutical manufacturing are now tasked with surveying inventory and operations with a new set of eyes. Organizations need to be more watchful of new safety standards related to inventory storage, retrieval, usage of material, and equipment maintenance. Tools like Visual Gantt Charts are becoming invaluable for planning and managing inventory. The ability to depict a weekly schedule of operations for different production jobs and a clear picture of resource capacity is a core requirement for any good production planner. The production planner’s prime focus is to ensure there are enough raw materials and resources (equipment or human resources) to ensure a near-to-perfect supply-demand ratio. An additional element that supports a planner is to have inventory visibility within their current warehouse and plan transfers of inventory from overflow warehouses.

Operations gantt in batch manufacturing

Simple visual planning methods are no longer adequate to correctly manage all inventory-supply-demand processes and ensure proper movement of transactions across the company’s supply chain.

What planners need is a robust system that can track supply – demand by including a complex set of parameters such as lead times, working calendars, the capacity of equipment and capability of vendors to ship materials on a timely manner. Planners also need the ability to alert different departments of the next steps based on plans made for upcoming weeks or months. Any modern system should be able to offer required insights including the current state of batches manufactured and available equipment for future work orders.

A production planner often prefers handling the supply chain proactively rather than reactively by responding to the demands. The planner needs visibility of when the finished product will be ready, tested, and released for shipment. This type of planning helps overcome downtime and shortages in raw materials, which is a common issue in most companies. Responding quickly to changing inventory is one way for planners to be more proactive.

Process manufacturing operational efficiency

Even today, many small and medium-sized pharmaceutical companies continue to use a combination of excel sheets, inventory reports, and some old school methods when managing their supply chain. As industries continue to face changes related to the COVID-19 pandemic, only companies that have thought ahead and have invested in an automated AI-based planning system that can assess and predict future demand as well projected resource plans will be best equipped to handle their product delivery on time and in full. Companies now need a quicker and more streamlined process to take their products to market.

The Role of a Master Planning and Scheduling System

01. MPS Driven by Demand

The goal of a Master Planning and Scheduling (MPS) system is to provide suggestions to meet material requirements. If set up correctly, MPS systems respond to demand and plan supply accordingly. Demand usually comes from sales orders recorded in the Order Management system. Master planning ties Planned orders for Production or Procurement to corresponding sales orders. The supply requirements are then calculated based on settings for each item that is included in the Finished Goods Bill Of Material(BOM). The coverage settings of an item show precisely how and when to send feedback with a view of current stock levels or foreseen changes in stock levels from existing planned orders in place.

02. Planned Supply

MPS systems use algorithms for tracking the demand from sales orders, customer forecasts, safety stock levels, and calculating net-requirements for purchase and manufacturing. MPS also pulls together independent or groups of demands that trace back to the production of intermediate and raw materials to be consumed in different Manufacturing and Packout processes.

Determining the quantities required would depend on the inventory quantity setup of any single item. The requirement could be specific for a static batch size or dynamic quantities based on the demand needs. MPS systems provide planners the capability to either consolidate supplies across multiple demand orders, offering a comprehensive supply and demand management experience, or consider only the net change from the start of a full production run.

03. Lead Times

The ability to define lead times is critical to a master scheduling system. For instance, if a user enters a purchase lead time the system should account for the time it takes to receive raw materials after placing a purchase order.

I. Purchase Lead Times

Purchase lead times for a supplier can be set up based on different factors including

  • Pricing agreements
  • Time in days that a supplier can accommodate
  • Transportation time, and
  • Any other unforeseen coverage settings

Within Dynamics 365 Finance and Supply Chain, a purchase lead time found for a specific supplier and item combinations takes precedence over general settings of an item. This applies when (1) no vendor is assigned to the item, and (2) the Find trade agreements checkbox is selected via Master planning parameters form > Planned orders tab.

II. Production Lead Times

Production lead times are the details that can be configured in coverage settings; however, these values are disregarded when items are produced via routes. Routes, defined in the modern Production control modules, consider available resources (people or equipment) and their working schedule. In this situation, production lead times needed to create finished goods do not have to be specified by a user, as they are calculated automatically.

Planning for the Unknown

There are still unknowns within pharmaceutical production and operations. Without the right system, planners will struggle to retrieve the data needed to better streamline the manufacturing process. To help with this, Production Planners can benefit from valuable information like –

  • Batch production history and patterns of user behavior that show actual production lead times
  • Quality standards of work-in-process production run based on raw materials that are procured from specific suppliers
  • Quantity yields of past batches, actual scrap percentages based on changes in production routes and resources
  • Accurate actual batch costings in comparison with estimates

These additional details provide supplementary insights to help improve production, downtime planning, maintenance, and most importantly, promise dates to customers. Production planners need to be equipped with a system that presents elaborate sets of insights and actionable suggestions on how to plan/schedule production operations. A well reliable tool empowers a company to drive efficiency and growth.

An AI-ML & Analytics Centric Approach

Eventually, and soon, a standard planning system will no longer be capable for the Pharmaceutical supply chain to operate efficiently. Systems that reduce human effort, learn from history, and improve daily operations will become necessary to overcome inefficiencies. At the same time reporting possible issues and roadblocks that impact orders as well as deliveries, improves the overall plan vs actual picture. Production planners are proving to be more efficient when they have real-time and historical analytics available during the planning process to make better decisions while managing inventory and orders. A guided method of operating and reporting through actionable data can make your company a powerhouse within the industry. An intelligent and optimized planning system can help eliminate guesswork for the production planners in build a competitive edge in the market.

Final Thoughts

The supply chain within a pharmaceutical company is only as efficient as the ability of a planner to proactively coordinate supply, demand, and inventory. A robust planning system with an emphasis on analytics and guided user behavior can play a key role in building efficiency and moving shipments out the door, along with meeting the required quality standards.

Xcelpros has designed Microsoft’s offerings to enhance planning for Pharmaceutical, Chemical, or Biotech industries. For more information on Production planning and Scheduling tools within Microsoft – Schedule Demo

Maintaining an Integrated Supply Chain Key Solutions
  • Xcelpros Team
  • No Comments

Maintaining an Integrated Supply Chain: Key Solutions
Maintaining an Integrated Supply Chain: Key Solutions 700 500 Xcelpros Team

At a Glance

  • Many organizations that fail to recognize supply chain as a strategic business function, tend to not move to a digital supply chain and lose out on the benefits that come with the transformation.
  • Traditionally, manufacturing companies have treated supply chain as a transactional function, a bargaining chip to reduce price and secure on-time delivery of raw materials. The modern supply chain is viewed as a strategic asset to the organization, integrated deeply with other business functions, aimed to increase customer satisfaction.
  • Companies unable to track hidden costs across the supply chain lose track of actual costs, damaging their bottom line. Proper supply chain monitoring can save anywhere from 20-30% of distribution costs.

The Supply Chain Challenge

Supply chain management is one of the most critical elements of success for any business in today’s global market. However, its application is undermined by many companies as business leaders face challenges to control the cost of a supply chain without compromising on its efficiency. Since COVID-19 we have witnessed drastic changes in methods and methodologies for streamlining supply chain operations. It, however, doesn’t take away some key fundamentals required for healthy functioning of a company’s supply chain and inventory management.

According to the Logistics Bureau, for companies running global operations, their supply chain cost could rise as high as 90% of their total expenditure.

The Supply Chain Slowdown

The problem lies in poor strategic management. Supply chain managers are focusing on cost minimization, most of them without having detailed field knowledge of how the system works, and the result is it is impacting other areas of the process such as inventory optimization, ‘on-time delivery in full (OTDIF)’ and customer satisfaction. Trying to improve one KPI is resulting in a cost spike in other areas of operations, which can have a long-term impact on revenue.

FIGURE 1 Where Business Leaders are Falling Short

Where Business Leaders are Falling Short

A robust supply chain needs strategic alignment and planning in line with the overall business functioning. For example, in order to control cost, you need to first understand the key drivers of cost in the supply chain and most importantly how to measure the supply chain cost. While the strategy is important, establishing an integrated supply chain requires a synchronized approach to planning, execution, and application of technologies in order to create an end-to-end unified system across the entire organization.

FIGURE 2 Key Elements of an Integrated Supply Chain

Key Elements of an Integrated Supply Chain

In this article, we will touch upon some interesting facts that make an appealing case as to why the Supply Chain strategy needs to be digitally enhanced and properly integrated with other parts of the business.

Switching from Traditional to Next-Gen Digital Supply Chain

The rapidly evolving business landscape is disrupting the way companies function. Moreover, the advent of the latest technologies and growing competitive markets are driving companies to push their limits and redefine supply chain operations.

Is your business ready to embrace a digital supply chain as a key distinguishing factor for its competitive advantage?

Most SMBs are holding back the transformation due to the fear of possible risks that could surface. Per our industry experience, it’s due to the age-old perspective in which company leadership is analyzing their supply chain. In most of the cases, we found that they are way behind the entire purview and don’t realize the true potential of a well-integrated, technologically advanced supply chain.

Traditionally, business leaders focused on pricing and product quality, but priorities today have completely shifted. Major Objectives and Key results of organizations are geared towards optimized supply chain and operations to boost businesses forward. With Industry 4.0, advanced analytics, and robotic process automation rising, companies are realizing the need for an integrated supply chain. This has become even more true as the Covid-19 crisis continues. Demand planning and fulfillment, supplier-customer relationship, customer retention, on-time delivery are some of the major expenses of a company. An efficient supply chain not only helps with cost reduction in these segments but also ensures growth, profitability, and customer satisfaction.

Top Reasons to Upgrade Your Operations with a Next-Gen Digital Supply Chain:

Shifting from a plant-level production planning to a demand-driven focus with customer-centric mindset but not compromising with the product quality

Getting rid of outdated processes and technology to match the transforming global business landscape

Reducing cost to formulate a more efficient value chain to remain cost-competitive in the market

Ability to outsource parts of your supply chain process in order to reap economic benefits and superior supply chain network design

Achieving more efficient product lifecycle management

Collaboration with stakeholders to integrate business processes for increasing visibility throughout the value chain

The Impact of Supply Chains

An integrated supply chain influences the overall functioning and improves profitability of the business. Going digital and increasing interoperability across these functions sets a business up to accelerated growth. Let us discuss a couple of key areas that are impacted by a well designed supply chain.

FIGURE 3 Upgrading the supply chain will improve your bottom line

Upgrading the supply chain will improve your bottom line

01. Supply Chain and its Impact on Customer-Centricity

When business leaders discuss improving their supply chain, their main focus is usually related to accelerating growth by cutting down costs, achieving better lead time, and ensuring on-time delivery; as all these factors contribute towards business development. What slips from their mind is what customers really care about. It all starts and ends with customer satisfaction. Delivering the right product at the right time improves your organization’s brand value and credibility to customers.

What the customer cares about is receiving quality products on the promised delivery date without having to spend too much time or effort. This can be seen in Amazon’s announcement of one-day delivery. Late and inaccurate deliveries bear a significant impact on customer loyalty.

70%

of industry professionals predict that their supply chain is going to be a key driver of improved customer satisfaction by the end of the year.

Source: Accenture

Your procurement division must understand the importance of cost-saving, but they need to be in line with the expectations of the customers and procure quality raw material for manufacturing the items. If expectations on raw material quality is not set, you could save money purchasing raw materials upfront, but end up spending more in the long run.

Let’s take a look at Kimberly-Clark’s journey to understand this better:

Kimberly-Clark is a manufacturing-focused organization that up to a few years ago did not have a supply chain division. Sandra MacQuillan, their first Supply Chain Officer, built a solid team to ensure the supply chain was focused on customer satisfaction. In the process, she integrated various functions such as procurement, quality (know more on quality management by clicking here), logistics, manufacturing, safety, etc. that are interconnected and delivered for one common goal – that is customer satisfaction.

Kimberly-Clark was able to achieve 25-30% cost savings by interconnecting various aspects of the Supply Chain, focused on better customer service, resulting in improved efficiency.

If you connect with the issues faced by Kimberly-Clark, or your supply chain is functioning in silos, it could be the best time to make a change. You can take this opportunity to update and integrate your supply chain with overall business functions and work towards a common goal like customer Satisfaction. A strongly integrated application will have the ability to incorporate holistic business functions including analytics, collaboration with notification, secure information sharing, control-based decision making using Artificial Intelligence, and more.

FIGURE 4 KPIs that are critical for supply chain monitoring

KPIs that are critical for supply chain monitoring

02. The Role of supply chain in sustaining business long term

According to the Logistics Bureau, nearly 50% of companies shut down within the first five years of operation. One critical factor contributing to these failures is an inefficient and poorly conceived supply chain. Supply chains in most organizations have evolved as a practice, rather than a well-designed process.

79%

of companies with robust and high-performing supply chains are able to outperform their average peers in terms of higher revenue growth. This fact signifies the positive implication of a connected supply chain for a business.

Source: Deloitte

5 Steps to Integrate your Supply Chain

Break down organizational silos

For an effective, integrated approach to Supply Chain Management (SCM) the organization must operate end-to-end as a unified entity.

01

Define organizational objectives

Move beyond basic business and functional unit design and metrics. Look at the organization holistically and define the objectives as a complete entity.

02

Align business processes

Take a cross-functional approach to business process design. Start at a high level and map out the supply-chain flow with the goal of creating an end-to-end mapping of the business process.

03

Design the IT architecture to support an integrated approach

Leverage a cross-functional approach to IT systems design. As much as possible, standardize the organization in terms of the applications that are used. Seek to eliminate as many disparate applications as possible in favor of a common set of applications across the business.

04

Reshape leadership and culture

For most organizations, the major roadblock in delivering an integrated approach to supply-chain management is culture change. Change of this magnitude must be driven by solid leadership. There should be strong collaboration to drive the effort to deliver an integrated supply-chain organization.

05

Final Thoughts

There is no way the importance of an integrated Supply Chain should be overstated or undermined. If you or your organization have not prioritized your supply chain efforts, it’s never too late to take the first step.

An intelligent ERP software comes with a holistic supply chain module along with advanced analytics to support the following functionality.

  • A manufacturing execution system
  • Financial and cost accounting
  • Inventory and warehouse management
  • Purchasing and planning of materials
  • Product information management
  • Sales and marketing of the products
  • Transportation and logistics management

In order to push a company forward especially post-COVID-19, a sound digital supply chain strategy would be needed.

Do not let operational inefficiencies limit your business, long-term goals

Act Now

automating supply chain
  • Xcelpros Team
  • No Comments

Automating your Supply Chain: Manage the new normal
Automating your Supply Chain: Manage the new normal 700 500 Xcelpros Team

Words can be like X-rays, if you use them properly—they’ll go through anything. You read and you’re pierced. -Albert Einstein

At a Glance

  • The outbreak of an epidemic has brought the global supply chain to a halt, pushing major global economies towards a crash of financial markets and recession. The focus at this time should be safety, recovery and cure instead of worrying about lack of essentials due to stunted supply chains.
  • There is a need to create an ecosystem of businesses that are collaborating through a well coordinated and integrated supply chain to allow more stability even in a crisis.
  • Many factors that are well thought out can contribute to a better global technological footprint where businesses across the globe can facilitate more growth and well-being of economies.

Introduction

During difficult times the world requires better ways to function without taking the entire economy down. One such event is the Coronavirus outbreak that caused a ‘slow down to shut down’ of all businesses due to the pandemic. Since the 90s when the computer technology revolution happened, we have seen various situations of slump and recession that gave rise to newer ways to function and advent of disruptive technologies changing the face of the world. Increased globalization and interdependence on different economies made the world a better place with enhanced living conditions and more opportunities to easily navigate through the world.

Figure: 1 Automated supply chain and distribution using bots, drones connected via cloud technology controlled remotely by people

Automated supply chain via cloud technology

Many disruptive technologies came to life during the last 3 decades that are now in every man’s pocket. We all know what they are. Smartphones, Internet, Direct to consumer tools, Search portals, AI, ML, BOTS, IOT,…..and the list goes on. This coronavirus pandemic however is showing us that we are not fully integrated yet. Why has the world slowed down when we have so many technological advancements and tools out there that were created to never face this situation? As such countries need to focus on safety, recovery and cure instead of worrying about not being able to supply essentials due to social distancing. This is not a case of a tsunami that has destroyed road infrastructure, it is merely a need for people to work remotely and avoid exposure, and an inability to control movement of the supply chain from the comfort of your home.

By 2023, over 30% of operational warehouse workers will be supplemented by collaborative robots.Source: Gartner, 2020 report

With this statistic, you would never really expect to see businesses or trades freeze, as operations would run smoothly with a proper collaboration.

A major blind spot has surfaced. A lack of being able to control the global supply chain seamlessly from a remote location with the press of a button. This lack is causing millions to lose their life savings in 401K plus other investments, driving to a bad economic situation. By the time the world has recovered from the pandemic, you are now dealing with an unplanned financial mess.

Added to that is an unfortunate imbalance in prices of all commodities as they are unable to handle the reaction of the slowdown impacting life of an average consumer and creating a downward spiral in the market sentiment as well as lowering the morale of people. Natural course of life is always towards moving upwards until a huge obstacle surfaces due to such incidents. The blind spot here is:

  • not being able to foresee a situation that could force us to stay isolated and is not enabling us to move things around without any hindrance.
  • of a holistic system that does not have enough integration between all the isolated systems that are in place.

We have seen glimpses of hightech warehouses with inventory arranged on pallets, controlled by bots that receive an order and move them to packaging areas. But taking the vision further, imagine the following scenario:

Figure: 2 Fully integrated warehouse operations monitored and managed via off site operators

Fully integrated warehouse operations

A hightech warehouse with functions such as inventory management, packaging and shipping, fully handled by bots controlled through a device by a warehouse operator, shipment load planning done through a bot, and shipment automatically scheduled once the transportation planner firms the plan. A truck that is in-transit can be monitored by the planner. All of this is achievable through integrated technology that can manage the supply chain at every point of operation.

By 2022, application integrations delivered with robotic process automation (RPA) will grow by 40% year over year.Source: Gartner, 2020 report

Figure: 3 Moving supply chain through various touch points without a breakdown

Moving supply chain through various touch points without a breakdown

This is just one use case of moving material from one point to another. There is a lot more importance given now than ever to automate operations within the warehouse. During an unforeseen situation, operations should still run without jeapordizing customer orders.

Where is the integrated technology?

With all the advancements in technology, a larger number of people still saw the required changes in digitization as a total unnecessary spend. Very few players would have foreseen the need to automate their business operations and integrate them into an overall supply chain. You would often see technologically advanced companies thrive even in difficult market conditions.

What are the success factors to build a strong ecosystem that can lower the possibility of a breakdown in supply chains?

  • Thought leadership that encourages adaptability and technology centricity. This is a repeated message given to businesses through many sources that educate leaders, helping them to make the correct decision. A general shift in thought process would help companies move the economy along with their own well-being towards a greater picture of a business process revolution.
  • A smart supply chain and end consumer planning mechanism to suggest the right actions. Businesses at different levels of the value chain need to quickly make business decisions to move their operations forward.
  • A unified platform that can track operations and notify the status of an operation to relevant personnel at various touch points in the overall supply chain, ensuring continuity in the process and avoiding a breakdown.
  • Connected devices through IOT that can pass on signals to automatically perform the next step in the process via a controlled signal from the warehouse operator or supervisor.
  • Indicators set for different thresholds on the devices that are automated to gather information early on and proactively handle any issues or problems that could surface.
  • Advanced analytics that are more geared towards how the individual business is trending in comparison to how the entire value chain is functioning, basically a business that is part of the value chain has to be in sync with the overall supply chain.
  • Integrated technology that enhances the ability to understand the market situation, assess and recommend the business users to make various business decisions such as stocking up inventory, optimizing spend and scale up or scale down of business initiatives.

Two planners controlling the movement of product remotely using connected technologies.

If larger and midsize companies are progressing towards adopting versatile technologies, smaller businesses that want to emulate the larger market leaders would need adoption of similar platforms.

Figure: 4 Two planners controlling the movement of product remotely using connected technologies.

Two planners controlling the movement of product remotely using connected technologies

Obviously the 7 points listed above are not the only factors that can boost trends to the next generation supply chain, but emphasising and being aware of the above can definitely help you decide if you have invested in the right tools that will propel your business forward. The trend would be geared towards better integration of all technological elements, be it collaboration, process automation, connectivity, analytics and recommendations through artificial intelligence ultimately controlled by a person. This infrastructure should cater to small businesses who especially are more spend conscious and may hesitate to do the right thing due to a fear of draining cash.

Intelligent process is not a buzzword, but a necessity to move your business forward and help the world economy be more stable.

Key Takeaways

  • It is high time that life is controlled through a remote set of connected devices under the control of real people.
  • Man is still the master of a fully connected and well integrated technology that enhances the ability to collaborate and communicate with each other.
  • The objective is to make it easy on the individual or business encouraging them to make the decision in favor of business continuity and overall economic development.

Reach out to us for your company’s Digital transformation

Get Started Now

REFERENCES

Why Specialty Chemical Distributors Need to Raise Their Game 

on time delivery in operations part 2
  • Xcelpros Team
  • No Comments

On-Time Delivery (OTD) KPI Your Most Important Metric In Operations Management
On-Time Delivery (OTD) KPI Your Most Important Metric In Operations Management 700 500 Xcelpros Team

At a Glance

  • Per Harvard Business Review, US corporations lose half of their customers every five years on an average, unable to meet their demands and needs on-time.
  • An industry report* showed that on-time delivery motivates 72% of customers to repeat purchase from the same seller.
  • The most important step towards achieving optimal on-time delivery metrics involves solving operational issues at the grass root level.
  • Organizing a well-structured Daily Operational Meeting (DOM) not only increases productivity but also improves customer service.
  • 61% customers in the United States reported that they would even prefer paying to receive their purchases on the day they order, per Logistics Bureau.
  • Implementing a modern ERP solution will streamline your business processes, meet customer requirements and ensure on-time delivery.

In Part 1 of this series, we brought out the challenges like lack of communication across departments and inefficient business processes that hinder the on-time delivery of products.

As discussed in the prior blog, a few Key Performance Indicators (KPIs) that are critical in measuring delivery performance in logistics and supply chain operations are:

  • On-Time Delivery (OTD) or On-Time Performance (OTP)
  • Delivery in Full (DIF)
  • Delivery in Full On-Time (DIFOT), On-Time Delivery in Full (OTDIF) or even On-Time in Full (OTIF)
  • Cost as a percentage of sales
  • Inventory Turns (days)

Consistent problems with OTD not only affect your business and its reputation, but also customer relations and company’s supply chain. On-Time Delivery in Full (OTDIF) can be impacted due to a variety of reasons. To name a few:

  • Bad forecasts
  • Supplier delays
  • Quality delays
  • Product rejections
  • Other technical and operational issues such as ineffective Material Resource Planning (MRP) system and outdated ERP system.

Per McKinsey, poor service levels cost the US CPG industry a staggering $24 billion dollars a year. –McKinsey

Steps like identifying the root cause of late deliveries and prioritizing to avoid them coupled with an effective plan to get rid of such problems help your organization increase your on-time delivery metrics and productivity.

  • Kroger, the grocery giant, is known to fine suppliers $500 for each order that is delayed by 2 days or more.
  • Walmart has been very stringent on its delayed receipts from its suppliers. It has charged suppliers upto 3% of the purchase price for every order delivered that has not been delivered on time – early, late or partial.

-McKinsey & Company

In this part, we will highlight the remedial measures that need to be taken to enhance DIFOT metrics.

Since bringing in a crop always starts with harvesting the “low-hanging fruit”, I decided to get my team together to discuss the challenges that we faced to know where to begin. In considering the lack of solid processes, planning and communication challenges, I instituted daily operations meetings. What followed wasn’t rocket science, but pure magic.

What is Daily Operations Meeting (DOM)?

An operations meeting is conducted to discuss and review the process, progress and performance of the team, evaluate the pre-defined goals in key performance indicator, identify and analyze the issues and come up with a corrective plan to improve the overall operational performance.

01. Organizing the Daily Operations Meeting

You might think, “It’s just a meeting – how complicated could organizing it be?” Who should attend, who should document the meetings, what are the ground rules, what will be the structure/flow of the meetings, and what will be the frequency? These questions must be answered and you will only get one chance to encourage buy-in from the team.

Organizing a daily operations meeting can be quite tricky and complicated. You need to plan in advance the following factors:

  • Plan the target audience/attendees for the meeting and clearly define who will attend the meeting.
  • Plan the documentation process and define who will maintain the minutes of the meeting.
  • Define the ground rules.
  • Organize the structure / flow of the meeting and its frequency.

I decided to start with a core team that consisted of the Customer Service Manager, Supply Chain/Procurement Manager, Director of Operations, Quality Manager and Engineering/Maintenance Manager and added Operations Supervisors and VP; sales later.

I scheduled these recurring daily meetings and asked my Customer Service Manager to document the meetings with minutes that would be placed on a shared directory. I established some ground rules intended to get everyone to participate with one common goal: an improved OTD percentage.

02. Structured Operations Meeting

An effective operations meeting must have a properly organized predefined structure to achieve the purpose of the meeting – an improved OTD percentage. We should plan the agenda of the meeting in advance, prioritize the problems as to which issue to be addressed first, what comes next and must strictly adhere to the structured agenda.

There had not been an Operations Meeting in more than two years and the team was skeptical that this would provide value. Instead, they saw it as another thing to steal the valuable time. I began with expressing the ground rules:

  • Be professional;
  • Recognize we have a common goal;
  • Recognize that passion drives energy that can be perceived as hostile, but that is intended to drive positive change and comes from an honest place;
  • Trust each other;
  • It’s not a blame game; and
  • No finger-pointing.

Amazing OTD Improvement

The structure of our meeting started with an analysis of past due orders and expected receipt dates. We evaluated and came up with solutions to control past due orders and to accelerate receipt.

Then we looked at open work orders for the day/week and discussed any quality and maintenance needs that would create bottlenecks or delays. We discussed solutions to challenges that were brought to light and immediately determined that we needed to revise some processes and SOPs and, most importantly, work together.

03. How Our Team Improved – The Rapid Result

When the first major problem was brought to light in one of our meetings, the finger-pointing started (old habits are hard to break). But, over time the team realized that we were in this together, learned to be honest with each other and, most importantly, to be accountable for our own actions.

Within 90-days, our TEAM improved OTD from 76% to 98%. The biggest driver for this positive change was improved COMMUNICATION.

Insights to quickly help you improve your On-Time Delivery plan

Having discussed the challenges faced during OTD and the solutions to overcome such challenges, we will be taking it a step further and provide a winning a formula for actualization of our organizational goals.

formula for actualization of our organizational goals

Sharing success and acknowledgment of failure is motivational when success and continuous improvement are realized throughout an organization. It’s amazing what simple recurring operations meeting can produce.

01. Reliance on Systems and Team Members (Trust)

Improved demand forecasts and a systematic approach to surveying suppliers so that lead times can be updated to reflect current realities, along with a meticulous review of demand history and ongoing updates of safety stock levels, is the first step to convincing a team to increase its reliance on technology planning tools. This reliance will enable on-hand material availability and provide clear vision of customer requirements for improved production planning, including optimized machine utilization and labor resource availability. The more we rely on our systems, the more we improve and isolate opportunities for further improvement. As we gained more and more reliance on our systems and processes, we saw our OTD percentage increasing rapidly.

02. Improved Training Programs (Communication & Goal Congruence)

Heightened communication within the environment brought training deficiencies bubbling to the surface quickly. They were countered with focused training programs- ones that promoted improved safety, quality, operational efficiency and productivity. As issues were vetted in our operations meetings, we worked with our Human Resources team to implement improved training and saw an immediate correlation to reduced scrap and safety-related instances.

03. Updated Processes and SOPs (Goal Congruence)

With predictability and consistency as key goals, we moved beyond “form over substance” and updated our processes to reflect our true intentions. The new processes were streamlined and optimized which eliminated costly effort that our customers were not willing to pay for. Perhaps, the most significant contribution was the update of Standard Operating Procedures (“SOPS”). Improved operator training and accurate SOPs allowed us to reduce errors and produce product with high quality & purities and improved stability and consistency, which provided a roadmap for identifying issues in a real-time fashion so that immediate actions could be taken to rectify issues, delivering consistent results.

While harvesting low-hanging fruit is rewarding, true achievement comes to those that can stretch for the real treasure in the higher branches.

Make your product easier to buy than your competition, or you will find your customers buying from them, not you.” -Mark Cuban

ERP Helps You Achieve On-Time Delivery (OTD) KPI

If you are using spreadsheets to keep track of your supply chain, it’s time for you to switch to automation as manual processing is cumbersome and error prone, costing you millions. Deploying a modern ERP system can boost your supply chain efficiency: from better inventory control, to faster delivery of goods, to improved productivity.

A good modern-day ERP ensures stronger supplier relationships, streamlined shipping operations, and better customer communication through reliable lead, opportunity and quote tracking. The software offers fundamental benefits such as reduced lead-time, on-time shipments and reduction in cycle-time. Reduced lead-time is a critical parameter as non-availability of an item can create issues such as missing delivery schedule and losing customers to your competition.

The real-time data analytics helps you to better manage inventory levels and order fulfilment rates.

Per a global supply chain survey, data analytics will help grow DIFOT to 96% or above, which is at least 7% higher than the industry average.

Improved Supply ChainCompanies with a modern ERP get a 360-degree view of the customer. This holistic view of the customer relationships and their effectivity helps you to better serve customers. You can offer a tailored service to each customer, prioritize your best customers, and automate allocations, fulfillment and discounts for your “A” customers. Improved shipping operations give you the scope for reliable order tracking and shipping notifications.

ERP has really helped with a better distribution of information across the internal teams within our company.

Success Story

One of our clients, a US-based manufacturing company initiated an upgrade of their existing ERP software. The upgrade was imperative as the system was hurting overall profitability and enterprise-wise efficiencies. There was a lack of visibility of data, most communication was manual, inventory was all over the place, resources & human capital was untracked from a costing perspective etc. Within 6 months of upgrading their ERP system to a modern cloud-based system, their on-time delivery improved by 28% as the system was able to track each step of the operation with enhanced visibility of inventory and supply chain.

Key Takeaways

  • Finally, most companies manage OTD not just as a single date but instead to a range of dates – missed (X) or expected (Y) dates.
  • A structured operations meeting lead by a strong leader can do wonders to OTIF. Resolving operational issues at a micro level is essential.
  • An effective ERP software solution helps drive efficiencies across the board.
  • A metric that drives customer satisfaction will drive long-term customer retention and revenue for your organization.
on time delivery in operations part 1
  • Xcelpros Team
  • No Comments

On-Time Delivery (OTD) KPI Your Most Important Metric In Operations
On-Time Delivery (OTD) KPI Your Most Important Metric In Operations 700 500 Xcelpros Team

At a Glance

  • On-time delivery (OTD) is a key metric to measure delivery performance and supply chain efficiency in your organization.
  • This article talks of a real-life transformation of OTD in a chemical company from 76% to 90%+.
  • Your ‘A’ customers contribute to more than 70% of your company’s revenue and meeting their sales order demand is critical for customer retention.
  • Improvement of OTD requires optimization of processes across multiple departments in the organization.
  • Prime reasons behind late product delivery – lack of real-time data-driven insights, planning, monitoring, and operational efficiency.
  • Technology and integrated tools play a pivotal role in the monitoring / increase of OTD.
  • The OTD percentage is a holistic measure of operational performance.

On-time Delivery – Industry Disruptors

Amazon has been a major disruptor in the industry and changed consumer perception by delivering shipments within the promised 2 days. The operational efficiencies required to run Amazon’s distribution centers is no joke. Other retail giants have now been forced to follow suit and meet the high standards set by Amazon. The expectation of on-time delivery is now more than ever before in traditional industries such as chemical, pharmaceutical and distribution.

Here are a few KPIs that are critical to measure delivery performance in Logistics and Supply Chain operations –

  • On-time Delivery (OTD) also referred to as On-time Performance (OTP), Shipped-on-Time (SOT) or Delivery on Time (DOT)
  • DIF – Delivery in Full
  • DIFOT – Delivery In Full on Time
  • Inventory Turns (days)
  • Costs as a percentage of sales

This article contains real-life experiences of a general manager and executive of a chemical company. We will discuss the key contributors to on-time delivery and how by starting with a low percentage of OTD you can achieve significant gains over time.

The realization

  • You are responsible for managing operations and see some glaring issues. However, you are not able to pinpoint the precise problem or where to even start. You request Key Performance Indicator data (“KPI”) from different departments.
  • As you begin your review, you notice a lack of focus – i.e., there are several KPIs, all being portrayed as having an equal value. One logistics KPI stands out: The On-time Delivery (“OTD”) percentage within the company is only 76%. Upon reflection, you realize efficiency can be enhanced by managing operations with this single measure.
  • In this blog, we will elaborate why OTD is so important. This single KPI can drive tangible value for your customer and totally change how customers perceive you. Our next blog in the same series expands on the problem/opportunity you inherited, the steps you can take to produce rapid positive results and finally the result achieved.

Sales Order OTD

What is OTD?

OTD is a metric used to assess the ability of a business in fulfilling the shipment order within the period of promised delivery date.

On-time Delivery (OTD) – The Logistics KPI Defined

The On-time delivery performance refers to the ratio of customer order lines shipped on or before the requested delivery date / customer promised date versus the total number of order lines. This is usually expressed as a percentage and can be calculated for several measurement periods.

Figure 1:The procedure of order fulfillment to ensure on-time delivery (OTD)

The procedure of order fulfillment to ensure on-time delivery (OTD)

What is required to Deliver On-time?

  1. 1.You have forecasted estimated demand, ran MRP and ordered materials. You create a purchase order for the required materials.
  2. 2.The materials are received, recorded and put into your raw material stores area.
  3. 3.An order has been received, you check available inventory, determine that you can produce the order and promise your customer delivery on a specific date.
  4. 4.You create a work order and issue it to production.
  5. 5.The materials are correctly picked, moved to the production area and produced.
  6. 6.Inventory is yielded and quality confirms that the produced inventory meets product specifications.
  7. 7.Inventory is put-away to the finished good-storage location.
  8. 8.Per customer promised date, inventory is picked and delivered to the shipping dock where proper shipping documentation is prepared. In chemical or pharmaceutical companies, shipping documentation typically includes other documentation such as Certificate of Analysis (COA), SDS etc.
  9. 9.The delivery is scheduled, the truck arrives to take the finished goods away and the delivery arrives on-time and undamaged.
  10. 10.You just executed the perfect On-time Delivery and, most importantly, your customer is happy that you met their expectations.

Why is OTD Important?

  • On time delivery drives better collaboration with your customers, ensures reliability of delivery and most importantly customer loyalty.
  • Customers expect you to meet the promised delivery date. It is important to set the right expectations with your customers and meet them. If you can’t meet your customer’s expectation and deliver on time then they will find a supplier who can.
  • Consistent problems with on-time delivery will not only disrupt your business or result in loss of reputation but will also affect many other areas of a company’s supply chain and can irreparably damage customer relationship and long-term success.

How to deliver on time?

  • Understand and track the late delivery reasons, analyse the various factors that contribute to late delivery and identify the root cause.
  • After identifying the root cause and the issues in late delivery, prioritize the issues and focus on the actionable steps to success.
  • Develop a plan and implement it.
  • Monitor results and revise the plan accordingly.

Reasons for late deliveries

With that in mind, think about all the things that can go wrong. The occurrence of any one of the following errors will result in late delivery. Most companies use a Customer Relationship Management (“CRM”) system to track and resolve customer complaints. If you are a pharmaceutical customer, the emphasis on quality is significantly higher therefore imperative to manage these inefficiencies a lot closer.

  • Bad forecasts
  • Sales over-promising
  • Incorrect lead-times and safety stock levels
  • Purchase order errors
  • Supplier delays
  • Inventory inaccuracy
  • Receiving data entry and put-away errors
  • Production picking errors
  • Bad standard operating procedures (“SOPs”)
  • Production operator errors
  • Maintenance and equipment related issues
  • Quality delays
  • Product rejections
  • Material handling put-away errors
  • Shipping department picking and packing errors
  • Shipping documentation inaccuracy
  • Delivery scheduling and late pickup
  • Damage in transit and late delivery, etc.
  • Customer changing orders constantly without a proper procedure in place
  • Customer’s inability to handle products received in full – This could be due to lack of storage space, personnel or any other intrinsic reasons etc.

The OTD percentage is a holistic measure of operational performance. It measures an organization’s ability to manage its supply chain in a predictable manner. If you live up to the promises you make, you create value for your customer.

METRICS THAT MATTER IN ON-TIME DELIVERY

Success Story 1

One of our clients, a US-based chemical firm lacked the inventory management software and barcode to line out its full inventory of warehouse and manufacturing facility. To provide an effective solution, Xcelpros designed a new bar code scanning technology for the company along with durable, custom labels to improve data capturing and enhance operational efficiency with an ‘integrated material requirement planning system’.

It took us three weeks to give a closure to the entire label installation process without causing any disruption to the live operational environment. We successfully lined-out the warehouse, and the results were great.

  • Eliminating manual data transcription reduced the scope of error
  • Automating the procedure helped to minimize the time in materials management
  • Limiting the frequency of materials-related changes in the production schedule

The chemical company now functions at close to 95% on-time delivery, a 30% increase in operational efficiency—with a 20% reduction in inventory.

DISTRIBUTION OF WAREHOUSE OPERATING COST

Success Story 2

We had to come up with a technological solution for arranging on-time delivery at multiple distribution centers for a client. Managing this complex grid of network to successfully manufacture and deliver the products on time demanded continuous monitoring of production facilities, logistics hubs and consolidation points.

We came up with a supply chain visibility model using advanced analytics to track the order status in the supply chain. We developed a dashboard and reorganized the orders with a clustering approach as per source, delivery destination, stock keeping units (SKUs) etc so that the status of the each individual product is tracked. Following this methodology gave our client a complete visibility on their product status and delivery performance. The real-time data generated better insight across the supply chain, and corrective measures were taken on an immediate basis to manage the impact of late delivery.

ANALYSIS OF INSUFFICIENT LEAD TIME GIVEN TO THE SUPPLIER

Figure 4 depicts the analysis of insufficient lead time given to the supplier. The root cause of this insufficient lead time is the delay and long-stretched process – from the material requirement planning (MRP) to purchase request (PR), to purchase order (PO).

ANALYSIS FOR SUPPLIER DELAY

Figure 5 analyzes the key reasons behind supplier delay, which need to be addressed. It pinpoints “no tracking control” to be the prime reason that causes supplier delay.

One of the major concerns here is how to keep a track of MRP-PO-PR conversion if you don’t have any component for tracking control. This lack of monitoring brings operational inefficiency due to which there has been a gap between the agreed time and the actual time of delivering the components. They are found to be the major bottlenecks in achieving OTR and thus OTD.

The solution is to develop and design a lean live tracking (LLT) system for the ease of monitoring with very low manual intervention. It aids to bridge the gap between PO releases to suppliers and production completion.

Focus on what matters!

Why you should care about your business processes?So, having determined that the On-time Delivery (“OTD”) KPI is the best holistic operational performance measure, I needed to understand how it was possible that we were only satisfying customers only 76% of the time. I conducted a detailed review of every major supply chain and operational process within the company. I found that were quite a few systems and business processes that were inefficient and needed improvement.

Areas that Needed Improvement

  • Over promise by sales team on delivery time – Our problems started with sales promising customers a delivery date without any conversation with the Customer Service department. Sales and Operations teams struggled to meet the demand dates leading to a ripple effect downstream. Lack of clear policies and standard lead-times for both make-to-stock (MTS) and make-to-order (MTO) products was the first domino to fall.
  • Training – Poor training served to maintain our ISO certification, but was more formed than substance, and it caused issues in virtually every functional area of our business. An emphasis on training is critical for Organization’s success and its most effective when imparted on the job.
  • Standard Operating Procedures (“SOPs”) – Outdated and incorrect SOPs resulted in inconsistent management of inventory and transactional errors. In fact, incorrect SOPs resulted in higher levels of scrap and out-of-spec products that were being rejected by the quality department. The process to main
  • Communication – The lack of communication with shipping department led to shipping document inaccuracy, late pickup and packing errors. And negligence of shipping department further led to damage in transit.
  • Transparency in process – Moreover, the lack of visibility to downtime and other operational delays further negatively impacted our ability to deliver on-time. These shortcomings drove a lack of consistency, repeatability and predictability.

Little Faith in Company’s Material Requirements Planning System – Lack of a sophisticated ERP

  • A failure to maintain proper and timely planning parameters (lead times and safety stock levels) coupled with inaccurate sales forecasts resulted in production planning and procurement managers abandoning the company’s Material Requirements Planning (“MRP”) system and instead managing operations using “Tribal Knowledge” and gut instincts.
  • Managing chemical operations using spreadsheets and gut instincts lead to other problems. The procurement manager approved purchase requests to buy material significantly in excess of what is required to meet the demand. This lead to a huge amount of capital being stuck due to this excess inventory.
  • This same mentality existed in the production department, where rather than relying on SOPs, products were being manufactured from memory which led to production errors, inventory inaccuracy, poor quality and product rejections.
  • This, of course, resulted in operators marching to the beat of their own drum and many variations in the products being delivered to quality for review.

Lack of Communication Between Associates

  • When I considered the lack of well-defined business processes and faith in our systems, I began to believe that 76% On-time Delivery wasn’t bad – How did we deliver anything on-time?
  • It seemed like every order had a problem, causing a late delivery and an investigation always resulted in some culprit who was responsible for acting on their own and making assumptions, rather than following a prescribed, repeatable and consistent process.
  • This promoted an environment that lacked trust, promoted finger-pointing and made it hard to communicate and act like a team.

Considering Root Cause Analysis (RCA) as a critical factor

  • Whenever a failure or deviation occurs, there should be a proper infrastructure in place so that RCA can be done efficiently in an optimal duration.
  • There should be a way to backtrack how the incident happened and capture the information i.e. in case of hardware failure there should be logs, archives, backups. There should be a way to capture and backtrack all business metrics responsible for the incident. Like a plane crash investigation, we should be able to backtrack and find what happened before seconds to disaster.

Goal

These are just a few opportunities that need improvement. Most of these can be addressed by virtue of a system / technology that connects the business processes within various departments / functions in the company.

Continued in Part 2..

Start Your Digital Transformation Journey with Assessment

Schedule Call

Thinking
Unlimited!

There is no box! We believe in the limitless possibilities of human potential powered by technology.

Subscribe Now

Chicago

4580 Weaver Parkway, Suite 202 Warrenville, IL 60555

Phone: 630-869-0901

Bangalore

V4 Complex 2nd Floor, Krishna Kamala Enclave, Uttarahalli Hobli, Bangalore, Karnataka 560061

Search Services, Industries, Insights, and Products