Cloud-based supply chain solutions offer opportunities for large manufacturing companies with globally dispersed manufacturing facilities and supply bases to actively engage with their suppliers to streamline manufacturing procurement and purchasing functions.
High-Volume Products
This company in the residential HVAC market has several manufacturing plants spread out across the U.S. and Mexico, with the majority of their plants acting as high-volume producers, with some more vertically integrated than others. At one plant, the company was procuring materials from a global supply base, but the frequency of delivery had to be very high due to their limited space on the shop floor. They collaborated with a third-party logistics (3PL) provider who would stock this inventory and deliver a truckload of materials every hour, based on the production requirements.
This plant established a pull process between its manufacturing facility and 3PL provider. Assembly lines were triggering Kanban signals to the 3PL on actual usage in real time. The 3PL would print RFID labels based on the Kanban signals, stick them to the boxes or pallets before loading the truck, and send them to the factory floor every hour.
The plant’s receiving dock was equipped with RFID antennas which would automatically receive the truckload and update their ERP system. Interestingly, the RFID labels also carried the point-of-use location that triggered the Kanban consumption signal, allowing the material handler to deliver directly to the line. There was another pull process set up between the 3PL and suppliers that would get triggered based on shipments to the plant. For a sub set of parts, the plant was directly triggering Kanban signals to the suppliers who were executing shipments based on those demands.
Establishing this closed-loop process dramatically improved the material replenishment process in several ways. First, it helped the company to reduce their inventory by over 45 percent, as they carried just-in-time inventory at the plant floor. Second, the use of clear electronic replenishment orders sent to suppliers based on actual consumption eliminated the bullwhip effect while streamlining their delivery. This resulted in improving the supplier on-time delivery performance from 80 to 98 percent. Lastly, automation at the receiving dock triggered replenishment signals using scanners, which dramatically increased the shop floor productivity while eliminating the manual errors.
