Building a new supply chain

Supply Chain Solutions' CEO Les Brand and co-founder Jim Ward honed their skills in just-in-time/just-in-sequence manufacturing with Saturn and Dell.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 1/1/2006

Supply Chain Solutions, a third-party logistics (3PL) provider serving office furniture manufacturers in Grand Rapids, Mich. was founded in 2001 with a simple mission: to streamline the flow of inbound raw materials from North American suppliers to Steelcase--a leading office furniture manufacturer.

Supply Chain Solutions’ CEO Les Brand and co-founder Jim Ward honed their skills in just-in-time/just-in-sequence manufacturing working with Saturn and Dell. Now, they use those practices to service the furniture industry.

“We started with a very simple crossdock system in a small distribution center near one of Steelcase’s manufacturing plants,” Brand says. “From there, we worked with the supply base to forward position inventory in the service center that could be delivered based on demand signals given to us by the manufacturers.”

The 3PL receives parts, components and raw materials from Steelcase’s suppliers. Products are then stored and staged for delivery just-in-time and just-in-sequence when needed by the plant. To make it work, Supply Chain Solutions relies on a warehouse management system (Provia Software, 877-776-8421) to direct associates on the floor and monitor inventory levels for reorder points.

Since the original pilot, Supply Chain Solutions has opened seven distribution centers serving Steelcase and Haworth, another office furniture manufacturer. The facilities, which measure between 100,000 and 150,000 square feet, are designed for quick turnaround. Staging lanes for plant delivery are emptied seven to nine times a shift.

While some products are stored on shelves, most of the inventory remains in a distribution center for less than a day. For that reason, Supply Chain Solutions relies heavily on information technology, like its warehouse management system (WMS). Materials handling is limited to lift trucks, pallet jacks, simple rack and floor storage.

Supply Chain Solutions didn’t stop with just delivering product to the plant. The team convinced Steelcase and Haworth to collaborate on the delivery of the parts they purchase from common suppliers, reducing the number of loads coming into a Supply Chain Solutions’ distribution center and ultimately reducing transportation costs for both manufacturers.

“The collaboration alone has reduced transportation costs by 30 to 35% for all the participating OEM’s,” says Brand. “Haworth tells us that for every dollar they spend on our activity, they’re saving four dollars in logistics and handling costs.”

Getting going

In 2001, when Supply Chain Solutions began operations, Steelcase operated like most traditional manufacturers. Sales orders from customers went into a manufacturing planning system. Based on the orders and manufacturing schedule, purchase orders were sent to suppliers for the parts needed to produce those orders.

Seventy percent of Steelcase’s orders were short cycle orders, allowing just 10 to 12 days between receiving and manufacturing. The system allowed suppliers five days to manufacture and deliver their products. That meant inventory sat at a Steelcase plant for four days prior to production.

Supply Chain Solutions replaced that model with a load control center (LCC) that supports inbound service centers. The two coordinate the delivery of parts.

The LCC is the information management piece of the puzzle for several inbound service centers. The LCC includes several different applications to consolidate and optimize information about orders at each inbound service center. An inbound service center is the materials handling piece, the distribution center where inventory from suppliers is consolidated, sequenced and then shipped to various plants.

Pulling orders

The first step when Supply Chain Solutions engages a customer like Steelcase is to request a file transmission of all outstanding purchase orders to the supply base. That information goes into an order repository where the orders are put into a standardized format that is sent to associates working on the floor of the distribution centers. Associates are provided with purchase order numbers, the items that have to be pulled, and the time frame in which they have to be pulled to meet delivery pickups.

The actual workflow is managed by the warehouse management system. Since inventory does not typically stay in the facility for long, many items are stored on the floor and some in racks. Most picking is done with pallet jacks or lift trucks. Picks are confirmed by scanning a bar code label.

In addition to managing work, the WMS is also monitoring inventory levels. When stock dips below the reorder point, an e-mail is automatically sent to notify the supplier to replenish that item. Automatic notifications are also sent to the furniture manufacturer’s purchasing and planning departments.

When deliveries are received at the inbound service center, a similar process takes place. Pallets are unloaded immediately with lift trucks. An associate scans a bar code with a purchase order number into the system. The system cross-references the order repository to determine whether the product will be placed into inventory or sent to a staging lane to be crossdocked to a manufacturing facility later that day.

Collaboration

With Steelcase onboard, Supply Chain Solutions began providing a similar service to other manufacturers, including Haworth.

Because both manufacturers had the same suppliers or suppliers located within close proximity to both for many parts and materials, Brand says there was some room for consolidation of the process. “You had two trailers following each other down the road to our facility and both were half full,” says Brand.

Supply Chain Solutions managers proposed that they take charge of inbound transportation, combining the two orders on one truck to save both manufacturers money. “We did a pilot, and after the pilot showed quite a bit of success, we expanded the concept out to multiple regions across the U.S.,” says Brand.

To coordinate that consolidation activity, Supply Chain Solutions created a supplier portal that receives orders from Steelcase and Haworth. When a supplier logs into the system, they acknowledge that they have an order by creating an advance pickup request (APR) in the system.

The APR sends an automated signal to Supply Chain Solutions’ transportation management system, which plans the pick-up in coordination with all the other activity in the transportation network. Once a pickup is planned with a carrier, information is sent back to the supplier to prepare for pickup.

When the carrier picks up at the supplier’s facility, they click off the APR. In turn, an advance shipping notification is sent to Supply Chain Solution’s WMS system to prepare for receipt.

When the purchase order is scanned at the inbound service center, the system determines not only whether the inventory is going into storage or to a staging lane, but it also allocates that inventory by customer.

Although Steelcase and Haworth are collaborating on deliveries the inbound service centers, shipments to their plants are segregated.

Next steps

Now that Supply Chain Solutions has optimized the delivery of parts to the plant, the 3PL is working with its customers to optimize other areas of the supply chain. Included in its seven facilities is a West Coast center that pre-positions inventory from Asia for delivery to the Midwest. Another center is handling the return, refurbishment and reshipment of office furniture that has come off lease.

In the future, the 3PL expects to do assembly of components that are now assembled at the plant and to sequence the delivery of finished goods to large office complexes.

Brand even has plans to play a role in the design and purchase of materials that are common to all manufacturing customers, like protective dunnage for filing cabinets.

“The idea is that we could systemize the inventory and bring it into one large service center that could service multiple plants and customers rather than have multiple smaller service centers,” says Brand. “There you could really start to leverage scale.”