by Konrad Ernst1, Dr. Bernd Reineke
Melting tanks for glass cannot be switched on or off “at the drop of a hat”. Even the downstream production steps cannot be converted “on demand” at short notice. Nevertheless, it is possible to keep stocks of finished products low and at the same time achieve a high level of delivery readiness of over 95% without having to fiddle with delivery dates or significantly change the production process. This was demonstrated by a joint project team from Abels & Kemmner and SCHOTT-Rohrglas.
Every industry has its own specialties in logistics and production. One of the world’s leading manufacturers of specialty glass tubing is no exception: SCHOTT-Rohrglas GmbH. As a process manufacturer, SCHOTT-Rohrglas has special requirements for inventory management. The continuous production process is characterized by high set-up costs, high energy costs and the highest demands on process and product quality. There are strict limits to flexibility in terms of batch sizes and capacity utilization. The production sequence of the articles, which are divided into 16 product groups, is also subject to strict technological rules that offer little scope for different planning scenarios. Fluctuations in sales therefore have a direct impact on delivery readiness and stock levels: When sales increase, the capacity limits are quickly reached, which can immediately lead to an impairment of delivery readiness for items with low stock levels. Falling sales cause an increase in inventories due to the continuous production process. The melting capacity of the tanks can only be reduced at considerable expense in terms of time and money. On the other hand, these production capacities may not be available when sales pick up again.
SCHOTT-Rohrglas therefore commissioned Abels & Kemmner to set up a systematic inventory and delivery readiness management system with the aim of achieving the target delivery readiness levels and reducing inventories to a level in line with the market, taking into account the technological constraints. The approach chosen was Abels & Kemmner’s process system, proven in many supply chain projects, with a bottleneck analysis and article structuring according to ABC and XYZ codes, a conception phase tailored to the use case with simulation of the planning and scheduling processes in question and subsequent implementation in the operational business processes.
The project team consisted of representatives from logistics, work preparation, sales and dispatch, supported by consultants from Abels & Kemmner with industry and project experience. In the first step, the business processes of order processing, scheduling, production planning and dispatch were analyzed and initial potential for improvement was identified and documented. During a workshop, the project team members discussed this potential in more detail and developed the fields of action relevant to the development of systematic delivery readiness and inventory management for the further course of the project. As a result of the bottleneck analysis, initial objectives for future processes and the SAP R/3 system in use were available in addition to the specific potential for improvement.
The most important fields of action
The bottleneck analysis resulted in the following main areas of action in order to link the value creation processes much more closely to market demand and thus reduce capital-binding and sometimes – due to indeterminable demand – high-risk finished inventories.
- Optimizing scheduling support in SAP
- Development of rolling sales planning
- Integration of the new production and capacity planning into the new planning process
- Design and optimization of order processing
Parallel to the business process analysis, an article structuring according to ABC and XYZ criteria was carried out. The result of this analysis can be summarized as follows:
- High-turnover items (AB) with consistent consumption (XY) make up only a small proportion (3%) of all items
- These items account for only 28% of the total stock, while over 70% of the stock is made up of items that only flow out irregularly and account for a small proportion of sales
- More than half of the items did not move at all during the period under review, but account for a not inconsiderable proportion of the inventory volume
The results of the ABC/XYZ analysis led to the conclusion that the planning and scheduling processes used did not meet the requirements of technology and engineering on the one hand and market requirements on the other. For this reason, the planning processes in the second phase of the project, the conception phase, were in the foreground.
Determining stockpiling strategies
First, the stockpiling strategies were defined using the ABC/XYZ criteria. As only the AB/XY articles are regularly consumed and, due to the high proportion of sales, also quickly flow out of the warehouse again, it was decided to stockpile these articles in future. AB/Z and C/XY articles that are ordered by several customers and are therefore of strategic importance should also be produced to stock in future. All other items are only to be produced to order (see Fig. xy).
Requirements for work preparation and production control
All items that are not in stock may only be produced in the required quantities; no stock may be built up, even if there is excess capacity. These are only to be used for items in stock. If the inventory range of stocked items reaches twice the replenishment time, it should be checked to what extent maintenance-related downtimes can be extended in order to avoid excessive stock build-up in any case. Work preparation and production control in particular are now responsible for implementing and complying with these rules.
Simulation of planning and scheduling processes with DISKOVER
The DISKOVER inventory management and simulation tool from Abels & Kemmner was used to control and determine the average stock levels and safety stock levels of stock items. For this task, it was decided to initially examine only one type of glass, namely DURAN, which is used for technical glass, in order to gain initial experience with a small number of articles and to be able to verify the procedure for the remaining types of glass.
Duran products are manufactured periodically, as the tools are changed in a specific sequence at the exit of the melting tank. These tools can only ever produce certain diameter and wall thickness ranges, meaning that an article can only ever be produced when the tool is in use again. To bridge this time interval, items in stock must be stocked at a correspondingly high level; this period is called the stocking time (see Figure 3) and is one of the main MRP input variables for the simulation.
In the simulation with DISKOVER, various planning and scheduling procedures are calculated for each item on the basis of historical data in order to obtain the best procedure with the optimum parameters. Further input variables for the simulation are the desired target delivery readiness levels, batch sizes and replenishment times. The achievable savings potential can be determined on the basis of the simulated average inventories and the simulated delivery readiness levels.
As with all simulation projects, various scenarios were defined to determine the influence of different input variables and processes. Since SCHOTT-Rohrglas uses SAP, a special scenario was calculated in which only planning and scheduling procedures were used that are also provided by SAP in order to determine the optimization possibilities both with and without further software investments.
The results of the simulation runs with and without additional DISKOVER features showed that inventories can be reduced by almost half with the use of new planning and scheduling procedures (see Fig. 4). In all scenarios, the degree of delivery readiness was significantly improved to an average value of around 95%. For SCHOTT-Rohrglas, the simulation result of the SAP process was particularly pleasing: here, too, the inventory can be reduced by a good 50%, with an average simulated delivery readiness level of approx. 93% being achieved. An additional investment in DISKOVER for daily scheduling is therefore only necessary if the degree of delivery readiness is to be further increased under the given parameters.
Demand-oriented production also possible in the process industry
In summary, it can be said that even in the process industry, which is characterized by technological and process-related boundary conditions with very limited flexibility, considerable savings can be achieved through intelligent planning and scheduling procedures as well as demand-oriented stockpiling strategies. Project members and the management of SCHOTT-Rohrglas were extremely impressed by the level of potential. We are currently working on the rapid implementation of the results in order to more than meet the targets set in the current financial year.
1 Konrad Ernst is Head of Logistics/Informatics at SCHOTT-Rohrglas GmbH
