Orchestr8 engaged with a new client in March 2015 who had a requirement to maintain or improve service levels whilst demonstrating areas of potential inventory improvements across their European distribution network. The challenge was that this was at a time where the business was experiencing an increase in demand across their product range.
The network consisted of a manufacturing facility which supplied products to a central distribution centre, who in turned supplied many local warehouses and distribution centres across Europe. The planning team in the DC were responsible for managing inventory levels in each of the local warehouses and local DC’s as well as the Central DC. Orders were placed on the factory by the Central DC planning team using replenishment lead-times of eight weeks for re-supply to the Central DC then one week for distribution from there onwards.
The situation when assessed, demonstrated that the aggregate inventory levels across the network were not too excessive. The service levels to their customers were also at an acceptable level. It transpired that one of the main issues was order instability in the factory, the result of a combination of increasing business requirements and customer demand changes.
Orchestr8’s DDMRP software was implemented.
Every item was analysed as part of the segmentation process in order to understand they demand volatility of each SKU. Rules were defined, again at each location which allowed DDMPR Buffers to be calculated. This not only created buffer levels, but also allowed us to assess where the inventory on hand plus open supply was in relation to them. From this, it could be seen that some items had more stock on hand plus supply than the buffer required, and some items had less. Our initial observations showed that the inventory levels in the local warehouses and local DCs to be lower that they needed to be, whereas the inventory levels in the Central DC were slightly higher. A simulation of this allowed us to assess how long the ‘inventory re-alignment’ would take, giving an idea of how quickly the inventory levels would be stabilised and aligned to the desired service level requirements.
With this knowledge, the rules and policies were created and the process finalised.
The process designed was a weekly review of order requirements; the system generated planning workbench clearly indicated which items were required to be ordered. Replenishment orders were created to supply the local warehouses and DCs from the Central DC, and replenishment orders were created to supply the Central DC from the manufacturing plant. All orders were aligned to the agreed order multiples and replenishment lead-times.
As expected, we witnessed many orders transferring inventory from the Central DC to maintain the DDMRP Buffers further down the network. There were also fewer requirements for the Central DC. This itself provided a welcome bit of respite for the factory in what was a very busy period.
This continued for some weeks until the realignment had completed. The inventory on hand plus the open supply were now at levels expected of the DDMRP buffer levels.
Each month, the DDMRP buffers were revisited as part of the Sales & Operations Planning Process, the Orchestr8 application automatically recalculates the revised DDMRP Buffer levels using the latest ADU’s from the latest forecast and demand variability from the historical usage data. This process, including reviewing the revised Buffer levels for c. 200 SKUs is completed in less than four hours. Once the revised DDMRP Buffers have been saved, they will now be the driving force within the replenishment process until the following month.
To summarise the benefits for this project, the following results were achieved between six and twelve months after deployment of DDMRP: