Boston — May 23, 2003 — Supply chain optimization specialist Optiant this week released a new solution designed to help manufacturers who make and store products in the same facilities tackle the challenge of how to balance production efficiency and inventory levels.
Optiant said its PowerChain Echelon solution, based on the provider's optimization technology, is intended to help manufacturers meet customer demand, reduce exposure to excess inventory and minimize overall operational costs.
Until now, the solution provider said, manufacturers with shared production and warehousing facilities have struggled with the dilemma of how much and when to produce a particular batch based on capacity constraints, seasonality issues and fluctuating customer demand. Key stakeholders evaluated customer demand, set-up time, throughput, changeover and inventory carrying costs, often using flawed rules-of-thumb and previous experience to determine production strategies.
PowerChain Echelon takes the approach of tying a dollar value to each operational element and optimizing within realistic constraints to deliver quantifiable intelligence that supply chain stakeholders can use to weigh tradeoffs and to make decisions that meet business goals.
"The right batch and lot sizes are critical to profits and flexibility, from the Fortune 500 to million-dollar privately held operations," said Julie Fraser, a principal at manufacturing and supply chain analyst and consulting firm Industry Directions. "Current [advance planning and scheduling (APS)] and lot sizing solutions may help, but [they] do not fully factor in supply chain costs and uncertainties as they create batch and lot sizes."
Fraser added that PowerChain Echelon could help companies find the elusive balance between efficiency, inventory levels and cycle times.
According to Optiant, PowerChain's 'what if' analysis enables manufacturers to evaluate the effects of real-world variability to optimize production and inventory levels and meet customer demand within the physical and cost constraints of a particular facility. To help key stakeholders identify and implement the best possible policies, the software is designed to calculate safety stocks, reorder points and standard lot sizes; minimize total production and inventory costs; and satisfy services levels, plant capacity and warehouse capacity constraints.
The solution also incorporates the effect of demand and demand variability, throughput and throughput variability, planning and queue times on required safety stock, and it performs sensitivity analysis to determine key parameters that affect resulting costs
"When a manufacturer is constrained by capacity, optimizing batch sizes becomes critical," said Jim Lawton, vice president of marketing at Boston-based Optiant. "By helping manufacturers better understand the effect of decisions on overall costs and performance, Optiant is providing the information needed to create effective supply chain and inventory policies."
Optiant says that a building-materials manufacturer already is using PowerChain Echelon to optimize one of its most popular product lines. The company uses the same facility for all varieties of specific building materials, making it time consuming and costly to switch lines between runs for the various colors, textures and finishes.
Due in large part to these challenges, the manufacturer initially sought to save money by producing a large quantity of a single type of material. Unfortunately, this strategy led to a warehouse full of inventory and new risk on the balance sheet. By using PowerChain Echelon, the manufacturer has doubled inventory turns and reduced inventory costs by over $2.5 million, according to Optiant, and the company said it is now rolling out the solution to three additional facilities.