Manage stocks efficiently
If you have thousands of items in your range, you need software-supported planning. However, IT systems do not automatically provide the optimum parameters for scheduling, but merely provide the necessary tools. In many places, however, there is a lack of time and expertise to continuously adjust the scheduling parameters. Herth + Buss therefore decided to use an external service provider. The result is remarkable: within six months, the inventory range was reduced by around 25 percent and subsequently maintained. The delivery readiness level rose to 99% in the same period and led to sales growth of around 10%.
The Heusenstamm-based company Herth + Buss sells automotive spare parts in the two product ranges HB Autoelektrik (spare parts in the field of automotive electrics) and Nipparts (wear parts for Japanese vehicles). The product range comprises a total of approx. 16,000 parts. An important competitive feature of customer order processing is that goods ordered by 5 p.m. are delivered by overnight express and are available to the customer the next day. The company therefore has a central warehousing function in the supply chain for both the customer and the supplier. However, due to significant fluctuations in demand and long replenishment times for goods from the Far East, this entails a not inconsiderable inventory risk. For this reason, it was initially decided to have the scheduling checked and optimized by an external specialist. In a second step, strategic planning was separated from day-to-day business. Today, the strategic scheduling parameters are updated every three months by the external service provider Abels & Kemmner from Herzogenrath near Aachen.
Initial parameter optimization
The first project to review and optimize scheduling was carried out using a combined approach of methodical article structuring and process selection as well as workshop-based process analysis and optimization.
Together with the company, the product range was divided into product classes according to sales significance (ABC) and demand behavior (XYZ). This required comprehensive data collection.
Why systematic article analysis
An article that begins its life cycle as a CZ article (low sales relevance, sporadic) may develop further into a BY or even AX article (medium to high sales relevance, regular demand), falls off again, comes back to life and at some point becomes a CZ article again as its life cycle draws to a close. It is obvious that an AX article must be planned and scheduled differently than a CZ article. Therefore, the current positioning of all articles must be permanently determined via the article structuring. As a result, the planning and scheduling procedures must be adapted accordingly.
The data quality must be checked when collecting the data. Comprehensive discussions on data interpretation were therefore particularly important. For example, what is actually entered in the “Requested delivery date” field? Is this the current date entered by the system or the delivery date actually requested by the customer? How should the “confirmed delivery date” be interpreted? Is it fixed or, as one company found out, is it adjusted and updated in the weekly net change, which of course results in a fantastic actual delivery readiness level, taking confirmed delivery dates into account?
After interpreting the data, suitable replenishment procedures were then determined for the individual item classes, taking into account the available functionality of the merchandise management system, and the parameter constellations required for each item class and the expected stock levels were simulated for various degrees of readiness for delivery. In particular, distribution-free methods were also used.
Why distribution-free procedures
Many of the calculation methods commonly used for inventory planning in ERP systems (mean value, exponential smoothing, MAD…) assume a normally distributed stock issue without taking the actual stock issue distribution into account. In practice, however, the distribution of stock issues varies greatly. In a study carried out at RWTH Aachen University, the proportion of normal distribution observed was only around 5%. A relatively large proportion of the observed statistical outflow distributions (approx. 25%), on the other hand, could not be assigned to any of the theoretical distribution types investigated. In these cases, so-called distribution-free disposition procedures must be applied.
Together with the dispatchers and the management, appropriate delivery readiness levels were finally defined for each article class and the resulting parameters for each article were transferred to the merchandise management system.
Parallel to this mathematical-analytical work, a project team examined the process of order processing and designed the future organizational process and use of tools. In addition, the results of the analysis were regularly presented to the project team and article specifics and possible process variants were discussed. Training the dispatchers in the relevant procedures concluded the first phase of the project.
Regular external inspection
Since the Herth + Buss dispatchers hardly have the time in their day-to-day business to repeatedly carry out item-specific optimizations for 16,000 items, the decision was made to outsource this task as well.
The continuous analysis is currently carried out at quarterly intervals. The historical data for the previous quarter is read from the SAP/R3 PPS system and transferred to Abels & Kemmner on a data carrier. The required disposition parameters are then calculated simulatively according to article groups. Strategic planning is completed when the results are fed into the PPS system.
The continuous adjustment of the parameters led to a significant increase in efficiency in scheduling. In addition, by outsourcing parameter optimization, the in-house schedulers are freed from complicated calculation procedures and therefore have more time to devote to the often hectic day-to-day business. This shows that outsourcing scheduling optimization makes economic sense.
