For many years synchronising the supply chain has been a dream rather than a reality. Gay Sutton reports on the ECLIPS research project — led by supply chain consultancy Möbius — which aims to solve this problem and provide a reliable forecasting tool for products at the beginning and end of their lifecycle.
Today’s supply chains are continuing to evolve, becoming longer and more complex, particularly where elements of production or distribution are outsourced. But in many cases, the concept of fully centralised control is a dream rather than a reality.
Even for mature products where the demand is stable, inventory can be tied up and ‘hidden’ at the boundaries between suppliers. Finding a way to manage the entire supply chain for these mature products and eradicate these pockets of inventory could yield significant savings.
For certain products, product life cycles have also been shortening noticeably. And although there are some great solutions on the market for forecasting demand in mature products, when it comes to short lifecycle, newly introduced or end-of-life products, manufacturers simply don’t have the support and backup of an effective forecasting package — mainly because most of them project the future based on demand over the previous year or two. This leaves companies very vulnerable to fluctuations in demand and the risk of significant losses.
The ECLIPS project
In an effort to develop solutions to these two problems, supply chain consultancy Möbius embarked on a research project just over three years ago. They drew together a consortium of five partners: manufacturers Pliva-Lachema Diagnostika and Huntsman Advanced Materials; academic partner Riga Technical University; and two expert partners, the information system and data integration company LoQutus, and optimisation specialist Eurodecision.
Part-funded by the European Commission under the Sixth EU Framework Programme for Research and Technical Development, the ECLIPS project (Extended Collaborative Integrated Lifecycle Planning System) was then born. Its aim was to develop and test new tools that would enable manufacturers to better control the supply chain for mature products and forecast demand at the two extreme ends of the lifecycle.
Three years on, the project has been tested in reallife manufacturing environments and has reached its conclusion. So now, it is time to reveal the findings and share with the wider supply chain community the knowledge that has been gained.
Product forecasting — now and then
In most organisations, forecasts for the sales behaviour of new or end-of-life products are made primarily by reviewing the behaviour of similar products that have already gone through these stages. “What we have done with the ECLIPS program is to automate this thinking using artificial intelligence techniques,” explains Möbius consultant Bram Desmet. “This has resulted in tools which are applicable both for introduction of products and for end of life.” The ECLIPS consortium’s two industry partners manufacture stable mature products, and only 5% of their products are introduced new each year, so the hunt was on to find a suitable company interested in being part of the trial. Lingerie manufacturer Van de Velde was an ideal fit. Around 80% of its product range is new each season. If sales forecasts are too high the company is stuck with obsolete inventories that are difficult to resell because cheap products on the market undermine their luxury branding.
Lead times are between three and six months as fabric is cut in Belgium, sent to the Middle East for stitching and then returned to Belgium for finishing.
Therefore, if sales forecasts are too low, the company cannot respond quickly enough to meet demand and margin is lost.
Improving the forecasting is therefore businesscritical for Van de Velde and the company had been attempting to do this for some 10 years. However, during the initial stage of the project, ECLIPS failed to predict the total volumes of the product — a critical detail for Van de Velde. Further research was done using innovative clustering and identification techniques, and this delivered the desired results.
One of the interesting and valuable things to emerge from the project is that ECLIPS has also been able to predict which products will be commercially successful and which are likely to flop. “It’s clear that it is unnatural for a manager to state in a product forecast that his product was not likely to sell well,” Desmet says. “ECLIPS provides an independent assessment of a product’s potential, allowing the company to challenge its product managers and avoid the cost of significant obsolete stock.”
Mature product management — cruise control
The concept that Möbius developed to eradicate inventory build-up between the steps in the supply chains of a mature product was Multi Echelon Cyclic Planning (MECP). “We think of this as the cruise control of supply chain planning,” explains Desmet.
“We are convinced that for mature products, imposing a constraint to produce or distribute regularly and restraining the natural flexibility within the supply chain will optimise its efficiency, reduce intermediate inventories and significantly reduce overall costs.” The theory is that MECP defines the production or distribution cycles for each step in the supply chain and then synchronises those steps, creating a single regular production cycle that moves material seamlessly from end to end through the supply chain, eradicating intermediate inventories.
In practice, ECLIPS sits above the company’s ERP or APS system, downloading information from each of the systems in the supply chain to identify the cycle times at each step. It then calculates a master cycle time and loads it back into the individual systems, achieving synchronicity throughout.
The two European ECLIPS consortium manufacturing partners, Huntsman Advanced Materials and Pliva- Lachema Diagnosticka, provided access to very different manufacturing and supply chain operations. Both presented interesting challenges that made them an excellent test for the viability of the MECP tools.
Huntsman manufactures basic and specialty chemicals, and produces synthetic and formulated polymer systems for customers requiring high performance materials. These are then packaged and shipped through a global distribution system. Many of the company’s suppliers are also multinational organisations with strict security policies regarding downloading and uploading to the ERP system, and this has added an extra layer of technical complexity to the implementation.
“In addition to this, Huntsman is also constrained to batch manufacturing,” Desmet adds. “The primary question was, if we tried to enforce a certain cycle onto production or distribution, how would this conflict with the batch requirements? We therefore concluded that this would be a challenging environment to test the concept. And if it worked here, it would add value in other global batch-oriented manufacturing companies.”
Three liquid resin base products, which are differentiated into some 30 finished products, were selected for the pilot. As go-live date approached, two were dropped and replaced at a later date by two alternative products.
After a six month trial period, intermediate inventories no longer accumulated at the boundaries between steps in the supply chain, but were consumed as soon as they became available. Interestingly, the implementation also gave Huntsman’s planners some valuable insights into the flow throughout the supply chain. “Many supply chains are only managed and optimised at the first step which results in a lack of visibility throughout the supply chain and a failure to understand how the different steps relate to each other,” Desmet says. “As we started implementing MECP and began analysing products at different steps — using, for example, the simulation tool to see how we could optimise the chain of steps rather than an individual step — that insight grew.” The second manufacturer to implement the MECP tools was the small Czech company Pliva- Lachema Diagnosticka, which presented a strongly contrasting operational environment. Manufacturing was on a microscopic rather than macroscopic level and warehousing capacity was small, so it presented a very different set of challenges.
Pliva manufactures a range of quick clinical analysis products for use in surgeries and laboratories, and for self-testing purposes. Three products from the diagnostic strip product family of blood and urine testers were chosen for the pilot project, and the full supply chain from the preparation of the active components and manufacture of the strips through to warehousing and distribution was analysed and synchronised.
“After a six month trial, Pliva achieved a 20% reduction of inventory primarily due to the full reduction of intermediate stock,” Desmet says.
The implementation and pilots at both firms were all part of the development of the ECLIPS tools, and these were constantly tweaked and improved throughout the period. “The benefits we had anticipated before beginning the project have been proven in real life in two very different environments,” Desmet concludes. However, the ECLIPS software is still very much in the prototype state.
Taking the next step
Having established the validity of these two new techniques through successful pilot schemes in three manufacturing environments, Möbius is now considering its next move. “We’re currently evaluating how we will exploit the results of the project,” Desmet says. “We have gathered a considerable wealth of knowledge, and built effective analysis tooling which we can use in future work with our clients. But we are consultants, not software providers.”
Fully developing and producing the software commercially is not Möbius’s objective. However the company is considering two possible options which would ultimately bring this new capability onto the market. The first option is to partner with an IT company interested in developing the software from a prototype to finished product. The second is to provide a service, whereby customers would provide the data and Möbius would provide either the synchronised supply chain cycle or the volume forecast. Both options are currently under careful scrutiny but no decisions have yet been made.
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