A New approach to Vendor Managed Inventory

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A New approach to Vendor Managed Inventory
Supply Chain Management
Supply Visualization V6.0
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Supply Chain Problems Result in Waste
beingGenerated in Many Ways
Gut-feel Sourcing Decisions Acquisition Cost
reduction targets missed Longer lead time to pro
duction Poor Capacity Utilization Bloated invent
ories High Obsolescence Excessive Freight Costs
Quality levels are missed Cash flows are
negatively impacted Customer shipments are missed
or delayed
Materials management is constantly in expedite
mode to ensure material availability
Extra shifts are added because no-one could find
the components that were on the trailer
The line is down because no-one knew the truck
would be late
The warehouse is half full of obsolete material
Shipments are always late, costing millions in
expedited freight
A customs hold forced an additional airfreight
shipment or missed customers delivery
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Supply Visualization
Provide a single unified visibility tool
enabling trading partners to share supply chain
information so they can deliver goods and
services at increased levels of service and at
lower costs.
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QAD Supply Visualization Infrastructure
Suppliers/Sellers
Customer/Buyer

ERP
ERP
MFGX.net Infrastructure
Non-MFG/PRO ERP System Integration
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Supply Visualization Advantages
Information Flow
Minutes
Minutes
MFGPRO/MFGX.net Application Infrastructure
Direct, real-time information access to trading
partner data Fast, reliable, easy to use , Web d
elivery and access, Enables pull-based repleni
shment - with Kanban visibility
Collaborative, peer-to-peer environments,
supports e-business solutions
Provides self-tracking of consignment inventory
Download/Upload capabilities Automated Alerting i
nfrastructure
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QAD Supply VisualizationValue Proposition
Proven Results
Reduces supply chain costs Reduce material shorta
ges Reduce premium freight charges Reduce indire
ct personnel costs Reduce inventory investment
Reduce Planning Horizons Improve On-time delivery
Reduce Expediting/de-expediting activities Avoi
d EDI Infrastructure Costs Supplier benefits R
eal-time visibility of customer inventory and
demand Avoid Costly EDI implementation Maintena
nce On-line, real-time visibility of consignment
inventories Reduce/eliminate unplanned change-ove
r Foundation for a collaborative environment
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Sample Screen Views
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Main Inventory Status View
Supplier ASN Information with Drill Down to deta
il
Supplier Consigned Inventory Balance with Transa
ction Details
Multiple user preferences Last screen saved for

Instant return access
Icons show Status Graphical data and indicate
Open Alerts
Current OH Inventory Balance And Inventory Contro
l Parameters (Min/Max/ROP) are displayed with Su
ggested Replenishment Qty
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Additional UI features
Row and Column headers can be frozen for easier n
avigation
User Defined fields available For Customer only o
r Supplier input
Graphics available for QOH performance Actual
vs Forecast
Current Forecast vs Previous
Auto-refresh with highlights To indicate changed
data
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Graphics Options Forecast/Actual comparison
Graphics available for QOH performance vs targe
t inventory levels Actual vs Forecast vs Tre
nd
Current Forecast vs Previous
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Company Policies Variable Calculations
Calculations available for Min/Max Values Orde
r Point Calculation
Auto select new added items
Auto select new added items Create Demand templat
es -
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Item Policies Variable Inventory Control
Parameters by Item
Selections available for Min/Max Values Order
Point Calculation Rounding control factors Safet
y Stock etc.
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User Defined Fields Available
User Defined Fields 9 fields - Customer Input O
nly
3 Text 3 Date 3 Numeric
User Defined Fields 9 fields Customer/Supplie
r Input
3 Text 3 Date 3 Numeric
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Multi-Item Qty Maintenance Screen
Adjust Page size for Multi-Item
Key value maintenance
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Supplier Schedule View
Supplier Release details provided
With ship schedule, Cumulative or Net releases
Icons show Schedule Status Indicate type of Sch
edule
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Purchase Order View
Suppliers to Provide Open PO status information
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Supplier Shipment Notice (ASN)
Supplier options for manual ASN creation
Or Upload from flat file. Customer can import
To MFG/PRO from SV
Icons show Status of ASNs and indicate planned
or Actual shipments
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Kanban Visualization
Kanbans in each loop are represented by colored
rectangles in the Loop Status column
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Kanban Loop Status
??? Empty KANBANs
Order Point
Safety Stock
?? Filled KANBANs
Acknowledged Kanban
?? Shipped KANBANs
Accumulate
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Key Differentiators

• Publish detailed Supplier Schedules/Projected
  Requirements
  
• Publish discrete Purchase Orders
• Enable collaborative supplier PO Acknowledgment
• Enable collaborative schedule forecast response
• Provide detailed cumulative order management
  information
  
• Provide supplier with Consignment inventory
  visibility
  
• Publish consigned inventory transaction history
• Provide highly configurable screens
• Buyer administration of suppliers
• Provide easy-to-use upload tables for supplier
  data entry
  

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Cost Saving Examples
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Inventory Cost Reduction

• Safety Stock reduced
• Reduced replenishment schedule transmission time
• More reliable supplier forecast
• Planning horizon reduced
• Supply problems identified earlier
• Improved on-time deliveries
• Less expediting/de-expediting activities
• Example
• Average On-hand Component Raw Inventory
  5,000,000
  
• Inventory carrying costs _at_ 15
• Expense Reduction from Inventory reduction of 30
  
  
• 225,000

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Freight Costs Potential Reductions
Potential Reductions/Cost Avoidance
Calculate Number of Premium/Air Freight
Shipments Calculate Cost per Shipment Calculate
downtime occurrences and duration directly
resulting from parts shortages
Percent related to supplier shipments that missed
required ship dates Percent related to shipment
s that left suppliers on time but did not arrive
on time (delayed in transit at some point )
Example Airfreight Shipment Cost per occurre
nce 2,500 Occurrences per year X 8 20,000
Induced line stoppage Typical cost 5,000 p
er incident (6 per year per plant). Total cost
per year per plant 30,000
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Reduce Acquisition costs by Lowering Supplier
Expenses

• Supplier Cost reduction
• Reduced FG buffer stocks
• Better capacity utilization
• Less unplanned change-over and overtime
• Reduced demand volatility
• Avoid EDI implementation and maintenance costs
• Example Annual material spend (including
  freight) 25,000,000
  
• 1 net reduction in acquisition
  cost (as a result of supplier price
  reduction and/or improved supplier
  relationships)
• Cost savings 250,000
• 250 Suppliers at an average of 10,000 per
  achievable through

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Other Buyer Cost Saving Opportunities

• Production stoppage due to Inventory Stock-out or
  late delivery, Costs may be idle machine and/or
  labor time, cost of lost/late sale etc.
  
• Example Average cost per incident 15,000
• Number of incidents per year 8
• Cost avoidance savings 120,000
• Admin Cost savings, Labor and overhead reductions
  as a result of reduced expedite costs and manual
  procurement activity reduction
  
• Example Number of material buyers/planners/exped
  itors 5
  
• Average salary/overhead per employee
  75,000
  
• Staff Reduction or redirection of activity
  result 20 or 1 FTE
  
• Cost saving 75,000

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EDI - Typical Implementation Operating Costs
Typical Supplier traditional EDI costs
One time set-up Costs EDI Translator package so
ftware 25,000 Set up, Trans sets (830,862,856
,850) Testing etc. 9,150 TOTAL 34,150 (o
ver 5 yrs 6,830 per year) Annual recurring C
osts Mailbox Rent Trans Maintenance 1,720
Character Charges (VAN)(_at_ 12 c per KC) 2,500
TOTAL 4,220 TOTAL 11,050 QAD
SV Costs One time set-up Costs XML Message
handler 0 Standard BOD set up (830,862,8
56,850 equiv) 2,000 TOTAL 2,000 (over 5
years 400 per year) Annual Recurring Costs
SV Service Fee (existing Fees) 0 SVI Imp
lementation Costs 0 TOTAL 0
TOTAL 0 Savings per year to suppli
er 11,050
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The Value of SV..

• Exchange accurate information between trading
  partners to optimize production, capacity and
  minimize cost
  
• Provide real time visibility into inventory /
  schedule changes/shipments
  
• Improve production and transportation utilization
  Fewer expedites
  
• Provide critical information on shipment events
  as they occur
  
• Manage by Exception Use technology to Alert to
  unplanned or out-of-tolerance events.
  
• Accelerate cash- to-cash cycle
• Anticipate and manage potential breakdowns in
  plans and schedules.
  
• Free up valuable resources, people, cash,
  capacity
  

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Thank You for your participation!