In the first part of this article we looked at how Rapid Customer Response usesideas taken from Efficient Consumer Response (ECR), to help manufacturers gain acompetitive advantage. In this article we consider what steps manufacturers need totake in order to achieve the benefits of rapid customer response such as greatercompetitiveness through a combination of high quality customer service and lower costs. Inessence the key to this is to implement a suitable business control system.
Achieving Rapid Customer Response
The key to strengthening the supply network is sharing information about customerdemands and products. A good way to improve this communication requires the implementationof ERP systems and technologies. Distribution and production oriented elements in theenterprise must clearly understand one another’s goals. They must implement systems tosynchronize and align these goals for the enterprise’s overall benefit.
A number of tools can be deployed to run a successful rapidresponse project. Formerly, suppliers and distributors could attain competitive advantageby implementing one or two leading edge technologies or methodologies. In today’sbusiness climate, real sustainable advantage is found by implementing technological toolsmore imaginatively. The business software components (ERP) can be summarized as follows:
Forecasting and Planning
In the past, manufacturers functioned without closely integrating the different objectives and activities of their businesses. Marketing, sales and logistics functions followed independent plans. Performance measurements were only loosely aligned and rarely supportive of one another. The customer service oriented businesses of the 1990s, however, have discarded this discredited operational style. Enterprises who wish to survive and flourish recognize that they must have world-class inventory, forecasting, and planning systems. And these systems must also respond to the constant changes in the marketplace, and be integrated with both internal production functions and external supply chain partners. The ability of manufacturers to link planning information with their suppliers is critical.
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Effective inventory control is fundamental to the implementation of rapid response. Inventory inaccuracies and weak transaction controls do not provide against world-class customer service. They also compromise the integrity of the total business database essential for delivering outstanding customer service.
ERP Business System Software
Software tools are essential to the provision of world-class customer service. Fully integrated manufacturing and distribution systems software, electronic data interchange (EDI), warehouse management software, and back office support systems provide the supply chain oriented enterprise with the building blocks for high quality service levels.
The following core business functions are supported by best-of-breed ERP software.
- product replenishment sourcing
- product introduction
- product change management
- product run out
- product configuration
- product and process definition
- product and process costing
- item/facility configuration
- demand management
- production planning- enterprise wide/ multi-plant /intra-plant
- inter and intra plant network supply and demand
- plant and line /cell scheduling
- material management
- production performance analysis
- financial reporting
All these functions can positively influence customer service if they are fully integrated into the total business system.
Product Data Management
Product introduction and the management of change should be fully integrated. Any problem with or change to a product should be communicable to all relevant business functions using the integrated database.
Product and process definitions allow the accurate calculation of lead times, capacity requirements, and material requirements. This information is used in planning and scheduling systems to accurately calculate availability dates, times, and capacity requirements.
This allows the product to be associated with the particular facility where it is made or procured. Different definitions for an item may be necessary.
Sourcing rules help to define the sourcing strategy for an item based on its production or purchasing profile. Increasingly companies source on a national or global level.
Demand Management and Forecasting
The forecasting system must be able to calculate daily forecasts. The forecasting techniques must include trending, smoothing, and seasonality calculations to develop the optimum forecast. Techniques to blend actual demand (independent or dependent) with forecasts are also desirable.
MPS and MRP
Demand can be planned with MPS – master production scheduling (MPS) and MRP. To be able to respond to continuous demand change, the planning applications must have the following features that allow short-term planning and direct route deployment of product. It should be bucket-less. This permits planning and supply action to occur at a daily level.
Net Change MPS and MRP
In fast response companies, MPS and MRP must be regenerated as often as possible. Running the process, many times a week or a day requires significant computer power. Replanning only those items that have had a transaction posted against them (since the last run) will significantly reduce processing time. This enables timely recalculation of requirements, supply response, and adjusted plant floor schedules. In addition, new generation, client-based planning systems will further reduce run times. This will be done to the point where MRP can be run as a continuous function. This will give companies unprecedented planning support.
The main advantage of using MPS and MRP is the ability it confers on planners to view short- and long-term demand and supply requirements. This time-phasing mechanism makes them ideal tools for implementing rapid customer response with all suppliers. A typical deployment of the ERP system is as follows:
Sales and marketing maintain forecasts. They review trends and seasonality. Then they smooth calculations, and enter in variables, such as promotions. After demand review, MPS/MRP is run. If the business has multiple production facilities (multi-plant) or products that can be multi-sourced (made on several lines or purchased), this can be built into leading edge planning systems. Sourcing rules determine where product will be made dependent on such variables as resource availability and logistics costs.
If a distribution requirements planning system is deployed as well, customer demand can be forecasted and replenished at the distribution centre (DC) or satellite warehouse level. MPS and MRP incorporate the ensuing replenishment orders as demands on manufacturing facilities. By passing schedules of requirements back up the supply chain from point of sale back to the manufacturer, the system will streamline inventory, transportation, warehouse and buying management by keeping all channel partners in sync through DRP/MPS/MRP system schedule integration.
The purchasing function must be closely integrated with planning to deploy the optimum buying program. Changes to the production program must be communicated seamlessly to the suppliers.
Plant and Line Scheduling
The detailed execution of the production program at line or cell level must both reflect the MPS/MRP schedule and influence those schedules. This is because the plant floor schedule can cause the delivery plan to be amended. Equally, adjustments to the plant schedule may cause the material requirements to change. This will require the purchasing system to communicate the changes to suppliers or (via inter-plant MPS/MRP) to sister plants from where components are sourced.
The task of materials management in a fast reaction environment is to ensure the material flow is in sync with the flow of product out of the facility, line, or cell. The level of control varies but the task is essentially identical. It calls for highly integrated planning, scheduling, inventory, and purchasing systems.
Production Performance Analysis
Constant review of production performance is vital. It allows managers to ensure that established standards are met or identifies standards that require change. It also tracks variances in cost between planned standards and actual incurred costs. All plant efficiencies can be monitored.
A fully defined transaction database should capture all relevant production and inventory movements in terms of quantity, time, cost, and relevant analysis codes. These postings are then available for performance analysis and posting to the financial system. In this way, the Financial Reporting function can establish profitability.
The Benefits of Rapid Customer Response
The main benefits are enhanced marketplace competitiveness through a combination ofhigh quality customer service and lower costs. This allows prices to be competitive whilemaintaining good margins. Costs are decreased by improving throughput time, loweringsupply chain buffer stocks, and optimally utilizing production resources. It is clear thatthese benefits can be attained most readily by the effective deployment of high functionintegrated business planning and enterprise resource planning (ERP) software.