Process Core Group

[Guest]

Thank you so much for the SCOR workshop that I attended on Wednesday, it was very enlightening, I learnt a lot and also realized that what I really ‘knew’ about SCOR was based on my experience in the environment and other studies and how I was able to apply the logic etc.

I require a typical inventory approach [for optimization and rationalization] for a freight/railway/transportation company.

If you do have something available where this has been done using the SCOR methodology or can direct me to where I can find it on the net I would appreciate it.

Patricia

[Caspar Hunsche]

Patricia,

Here's how you could organize your project (not knowing your company, organization or complexity of supply chains). I recommend 5 distinct phases:

1. Scope (select metrics and understand goals)
   
2. Capture (collect data and supply chains)
   
3. Analyze (analyze and brainstorm solutions)
   
4. Design (document solutions and migration)
   
5. Deploy (plan and launch the change)

Find inventory optimization specifics for each phase below.

1a. Select the metrics and understand the goals. If you haven't already done so; this is where you define your problem in terms of metrics. For example: Rather then saying "we need to reduce inventory", you need to translate that to very specific metrics and target levels. E.g. For A parts X days of supply, for B parts Y days of supply, for all others Z days of supply. I am not sure what inventory you carry. My first thought is that you have capacity (your transportation 'production' assets) and maybe replacement parts to service, maintain and repair these assets. You'll have to do this with your supply chain leadership.

1b. Collect inventory data and identify the key issue areas. This is all about prioritization. Identify the key supply chains, products and report their inventory levels (compared to the goals from step 1a). The rationale about selecting the biggest problem product is that if you solve that you solve a large part of your problem, and you'll find many of your learnings maybe transferable to other products. Thus getting the biggest result without trying so solve all problems in one enormous exercise. You will most likely select a set of products within one of your business units. Make sure you retain the knowledge on how the data is collected, you'll want to make this into standard reporting (in case you don't already have this).

For the selected products, you will need to collect process knowledge. (i.e. what causes inventory build-up).

2a. Drill down to locations and item numbers. This is about where inventory occurs and understanding which products within the group of products have the biggest problems. This basic reporting/number crunching. Hopefully your systems will allow you to slice and dice the inventory numbers in different ways. In the next step you will use these to map out the processes that generate inventory.

2b. Describe the processes that create inventory and consume inventory: Plan, Source, Make, Deliver and Return. Walk through the processes related to planning (forecasting anticipated demand for the product), sourcing (this is the process of calling of and receiving products from vendors) and the order taking and delivery of products (this is the process of receiving orders and fulfilling those from inventory). In the next step you'll analyze your findings.

Next review your learnings

3a. Analyze the processes. Carefully review how the current processes may generate excessive inventory (or shortages for that matter). Examples of issues that may cause inventory (or shortages) are:

• Temporarily invisible inventory (may cause double-ordering)
  
• Inventory (temporarily) reported in two locations (may cause delayed ordering)
  
• Large number of inventory adjustments (ups and downs)
  
• Fixed plans (once send as planned demand, you have to take it)
  
• Plans not communicated (lack of visibility to expected demand drops, promotions or discontinuation plans)
  
• Plans too often communicated (incorporating demand swings and inaccuracies)
  
• Products not reserved (upon order booking)
  
• Products not released (after order cancellation)
  
• Lack of alignment of inventory management with what is sold (sell what you have, buy/make what you need - in your business this maybe communication of major upgrades, overhaul, etc)
  
• Wrongly categorized products (non critical high value parts in stock, critical parts special ordered).

3b. Brainstorm and prioritize solutions. For each of the findings identify how you would solve the problem. Consider information sharing (communication), information access (visibility), automation, best practices, product reclassification, etc. Best practices may give you things like CPFR, VMI, etc. Evaluate (read guestimate) the impact, effort, risk and alternatives of your solutions. Select top 10-25 that balance out to highest impact, least risk and effort.

Next you need to develop the detailed solution.

4. Document your future processes, automation and rules. In order for the process to change you need to be able to instruct people on either how they need to do their work different, how the software tool should work (in case of automation), how the rules change, or how the classification needs to change (and equally important: why). Without going through a proper walkthrough of the future process, the actors, the rules and automation your change will be slow, different than expected, or not happen at all. Finally obtain agreement for each of the changes.

Finally you need to prepare how you will reach this new desired process and make sure it happens as you designed it.

5a. Create a project/change management plan. Determine how you will role out the changes, who needs to drive, participate, approve, teach, learn, and be informed on the project, create timelines with dependencies to other projects, obtain budgets, staff the project, prioritize resources and launch the project(s). Consider that you may have to sell of existing inventories to lower the inventories to desired levels faster.

5b. Monitor change. Monitor the projects and make sure deliverables are in line with the design you created in step 4. Measure the inventory levels at the beginning, during and after completion of the projects. Once you see results of your projects, evaluate whether the projects can be expanded into other products/business units. Start at step 1b. and find the new worst performer.
_________________
Caspar Hunsche
caspar.hunsche@pcor.com