Supply chain planning: Infor outruns the lion
There’s an old joke about two guys confronted by an angry lion while on a safari.
“What are we going to do?” the first one asks.
“I’m going to run,” the second one says.
“You can’t outrun a lion?” the first one says.
“I don’t have to outrun the lion,” the other one says. “I just have to outrun you.”
In business today, everyone is being chased by a supply chain lion: we all have to manage costs, production and inventory while still meeting customer demands in a tough sales environment. But, since most businesses are being chased by the same lion, the job is to outrun the competition. “Users want to improve supply chain efficiency and productivity in terms of trade, inventory and resource utilization, while optimizing and streamlining their supply bases,” is the way Gartner put it in their September Magic Quadrant for Supply Chain Planning For Process Automation.
Outrunning the lion is the tag that Infor is using for its suite of supply chain planning applications, according to Alan Lindsay, senior product manager. Infor’s position is that supply chain planning, one of the applications that has continued to grow in the recession, is at a crossroads. Over the last 18 months, supply chain planning evolved as a cost-saving application for companies focused on cutting costs and minimizing inventory. In the future, companies will be looking for opportunity as the economy returns but demand remains variable. They also recognize that if they can do a better job of planning, they might outrun the competition and take a leadership position. “Demand planning will become a competitive weapon,” Lindsay says. He and Infor believe that it will transition to a top-line revenue driver, as companies increasingly try to align their production and their inventories with their customer’s demands.
That has certainly been the case for Quality Bicycle Products, a Minnesota-based distributor of bicycle components and parts. The rest of us may be stuck in a recession, but QPB has consistently experienced 15-to-20% growth in recent years.
That drove the need for a planning system to get better control of inventory, according to Brian Johnson, QBP’s inventory planning manager. “The reordering system in our ERP system didn’t keep up with the long lead times we need for some parts,” says Johnson. “If we could get product in 15 days, it was great, but we have 60 day lead times on product from overseas. People in our organization had to keep track of their orders on spread sheets.”
Instead, QBP wanted a planning system that would allow them to forecast demand for each product line over the next year, release purchase orders against the forecast and replan as the year unfolds. In 2007, the distributor began implementation of forecasting and replenishment applications to use with its biggest 25 vendors.
One of the first goals was to use the plan generated by the system to set appropriate safety stock levels for the top selling SKU’s while still meeting service levels. That goal has been met. “When we first implemented, we reduced our safety stock by $900,000,” says Johnson. “We were also able to maintain higher fill rates for orders, meaning that we had the product we needed to fill an order in stock for a longer period into the season.”
Now, Johnson says, QBP is reinvesting those savings into additional products that it can offer its customers, and widen the lead over the competition. “We’ve gone from 36,000 SKUs to 45,000 SKUs,” he says, “and we’re getting five turns of inventory this year, which is better than we’ve done in the past.”
QBP is in the process of integrating its planning capabilities with its warehouse operations. For instance, the company wants to give the warehouse better visibility into incoming shipments. That will allow receiving to more effectively plan its labor requirements. “I can see us going to 80,000 SKUs without appreciably adding to labor in the warehouse,” Johnson says.
That, of course, allows QBP to outrun – or out-bike – the lion.