Finally, Boardman says that GrafTech is now standardizing on a Theory of Constraints (TOC) philosophy. "We're using the drum-buffer-rope system as a demand pull," Boardman explains, "where we set target buffer and safety-stock levels, taking a look at constraints and running the system that way." He added that the company is not using a lower-level optimization scheduling solution because of its 60-day lead times. "It runs at a pretty slow pace," he says. "There aren't a whole lot of decisions that we have to make every day." To top it off, the company is applying lean manufacturing techniques to make sure that they are keeping inventory moving through the production system as fast as possible.
As a result of these initiatives, the company has been able to cut its total inventory, from raw material through work-in-process, as well as finished goods inventory, by about 45 percent, while still maintaining a very high customer on-time delivery metric, in the range of 95 to 97 percent, according to Boardman. The demand manager says that the company has not necessarily tried to nail down a concrete dollar figure for its return on investment in these global changes, in part because the fluidity of its market segment makes it difficult to ascribe changes in inventory one way or another entirely to one influencing factor. But, he adds, "intrinsically, we just know that we're doing a much better job on our decision-making."
Keeping a Customer-Focus
For Carlsbad, Calif.-based sports equipment manufacturer K2 Inc., keeping the company's retail dealer customers happy means ensuring that its boards, bikes, skis and other gear are delivered on time. "We are totally focused on delivery to our customers," says Jeff Harley, IT applications manager of the company's K2 Sports division. "That starts with being able to tell them when we can deliver their product." And therein lies the challenge for the company, which saw its 2003 sales rise to $718.5 million from $582.2 million in 2002, primarily through acquisitions.
Interviewed by e-mail for this article, Harley outlined the company's efforts to provide its customers with reliable delivery dates for the 8,000 to 10,000 new stock-keeping units (SKUs) that K2 Sports comes out with every year. "We have been sourcing product from Asia for years so we have some vendors who ... can give us manufacturing schedules and delivery dates based on our demand," he explains. "But there are others who are challenged in this regard."
Synchronizing delivery information is also a complex undertaking, since K2 Sports orders all its SKUs for the world (including its European, Japanese and Canadian distribution arms) through the U.S. world headquarters of K2 Sports, located in Seattle, Wash. "We then direct ship to those other distribution centers from our vendors," Harley says. "That is a lot of information being tossed around, but we need that information to be made available to our [customer service representatives (CSRs)] so that they can give accurate delivery dates to our customers. By increasing the speed and accuracy of the information, we can provide to our customer service representatives the ability to quote more exact delivery dates."
K2 Sports' efforts over the past year have included identifying key metrics to help the company uncover delivery weak spots. Each step in the company's supply chain process from forecasting, design and purchase order to delivery to K2 Sports' distribution centers and, finally, end delivery to the company's customers has been identified. K2 Sports says it tracks goods by SKU, delivery date for each stage and quantity delivered, generating separate analyses for the company's different product lines. "By recording this information we will be able to identify our weaknesses and improve in those areas," says Harley.
But the company also has undertaken an initiative to automate the process by which its planners feed updates into K2 Sports' manufacturing backbone, Epicor's Avanté, a solution designed specifically for mid-market companies with complex manufacturing environments. "We have some talented people in K2 Sports' planning group," Harley says. "They are, however, managing lots of [purchase orders (POs)], with literally hundreds of lines on each PO." Because of the sheer number of POs that the planners must handle, they have found it easier to build and view the purchase orders in an Excel spreadsheet, but that forces them to spend inordinate amounts of time doing the "swivel-chair integration" necessary to get the PO information into the Avanté planning system.