Takeaways
- Create visibility for suppliers and customers
- Monitor anything that touches your inventory
- Anticipate changes in your industry and make sure your systems allow you to adapt to those changes
König Wheels has facilities on both coasts of the United States. The problem was that, even with sufficient data, there was no cohesion in its operations. In 2004 the company realized a change was necessary and decided to implement a new enterprise resource planning (ERP) system.
"We migrated from Flexware, an early ERP program," says Rick Guavera, president of König Wheels. "We used that for five or six years. We had enough data, but wanted something more robust. We're located in New York (Plainview) and California (Chino). Under the old system, even with several servers, there was no way for California to connect to our database with dial-up or even with broadband. It was causing a lot of delays. All the stuff we were doing in California was coming in summary [reports], not in detail."
After a search König, a 28-year-old subsidiary of importer/exporter Pan Mar Corp. that manufactures wheels and wheel covers for the automotive aftermarket, selected NetSuite as its Cloud-based, software-as-a-service (SaaS) ERP provider.
"NetSuite allows them to more efficiently serve their customers," says Roman Bukary, who heads manufacturing and wholesale distribution industries for NetSuite. "The CEO is in New York, the CFO is in Singapore, and they're successfully running a global wheels business. In the automotive aftermarket, it's a matter of not carrying too much excess inventory while having enough of the popular items. We're the foundation that powers König's operations."
A Vibrant Ecosystem
Bukary describes that operation as "almost like a vibrant ecosystem. It's not just machines running, but it's how long does it take to fill the order, buy raw materials, machine them and package them. They have to figure in cost, availability, time, demand, trends."
Here's the way it works. König sells, say, four wheels to a wholesaler. Now the inventory is down by four, so König knows it needs to obtain raw material and begin the procurement process to replace those four wheels. NetSuite, Bukary explains, helps König figure out which factory will fill the need. Information includes capacity of the plant, cost of manufacturing and number of machines on the factory floor.
The key is Material Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) systems for organizing the resources and inventory required for production. MRP has three stages: ensure materials are available for production and that products are available for delivery to customers; maintain the lowest possible level of inventory; and plan manufacturing activities, delivery schedules and purchasing activities. MRPII addresses operational planning in units, as well as financial planning in dollars, and has a simulation capability to answer "what-if" questions.
Now not only are König's East and West Coast offices seeing up-to-date reports, but so are its suppliers in Asia. "Another challenge we had, that NetSuite addressed, is our supply chain management," Guavera says. "Now our suppliers can see what's going on. The solution allows them to see purchase orders and other information pertinent to the business. Whether it's a product need or a [necessary] slowdown [in production], the suppliers can act accordingly.
"On our business-to-business side, customers placing orders via the Web can see their orders, what stage they're in or if there's an issue. If there is an issue, of course, we normally call them first to get it resolved."
A "Crazy" Business
The wheel business is vibrant and evolving – or, in Guavera's word, "crazy." During the early 1980s, wheel manufacturers around the world — including Japan, Germany, Brazil, Italy, France, Mexico, Australia and Taiwan — began to recognize the growth potential in the aftermarket wheel business. Today there are hundreds of manufacturers and importers engaged in the business.
"It used to be you'd take steel and mold it, pour aluminum on it," Guavera explains. "It took six months from the drawing to sample testing to production. Now, with CAD software I've seen it done in two weeks."
He says the business for these custom — and fashion sensitive — wheels is changing. "Ten years ago, they'd last four or five years. Five years ago there were unlimited designs available and fashions changed readily. Our business changed dramatically. Instead of five years, fashions lasted three or four months. Customers going into vendor-managed inventory are a huge challenge for us. We conduct random surveys of our customers: 'What will sell? What won't?' We have to get a quick snapshot."
König attacked the issue in a number of ways. For example, instead of having their custom unit create 15-20 wheel designs per year, they cut the number in half and concentrated on marketing those and gauging future demand.
"What if the customer's wrong?" Guavera says. "Say they project 1,000 but only end up taking 500. What do you do with the other 500 in six months? Say we finish in December, then we get into January and see some movement. We may deal with it then, either by ramping up or cutting back [production]."
Excess is disposed of in a number of ways. König might liquidate the excess in Eastern Europe or Russia — "they just want price," Guavera explains. "We could melt it or sell it locally as junk or scrap. Aluminum prices are high right now."
Rein in Inventory
How important is getting a handle on inventory? So important that the profit and loss statement can go from black to red in a blink.
"The biggest effect and result we're seeing on NetSuite is the lowering of stock on hand at the end of the year," Guavera explains. "It used to be that profits in the year were wiped out because we had to devalue at the end. Five or six years ago, that was the case. We'd have a great year, but we were still over-stocked by 30 or 40 percent of what was projected.
"During the past five or six years we've improved on that. Now we're down to 15-30 percent. We'll always have overstock because of the nature of the business. But we have processes in place to tell us, 'Hey, you're overstocked, or you won't fit the basis of what you're ordering.' Suppliers have a system to monitor company projections."
He says that a system that provides information from start to finish is vital for a solution. "Monitor anything that touches your inventory. That's what you go with if supply chain is what you're concerned about. That means all the data from the time you take the order up to shipping and fulfilling. That allows you to track the movement of the goods from order to delivery.
"On the supply side," he adds, "you need to track from the time you cut the purchase order to when it's received in the warehouse. You need data you can extrapolate at any time."
It all ties together, says NetSuite's Bukary. "How do you use your capital? How smart and dynamic is your supply chain? How do you intelligently service your customer? "
His answer: Invest in people enablement, partner collaboration and customer service.
Links
König Wheels www.konigwheels.com
NetSuite www.netsuite.com
