Quality Digest | March 23, 2016

Complex Global Supply Chains Simplified The value of electronic kanban systems and rapid deployment by Thomas R. Cutler

It’s no surprise that multinational companies have complex global supply chains. What’s less

obvious is how to simplify supply-chain processes and arrive at a lean, consistent, reliable, and

cost-effective solution. One global leader, ITT Corp., has taken on this challenge with the help of

Ultriva, a supply-chain solution by Upland Software, which supplies cloud-based manufacturing

and supply-chain collaboration and execution solutions.

ITT creates highly engineered, customized solutions for the energy, transportation, and

industrial markets, including Goulds and Bornemann pumps, KONI shock absorbers, Cannon

connectors, and Enidine energy-absorption devices. Recently, ITT initiated a lean application

based on the concept of kanban loops that govern material flow and replenishment processes

across their extended enterprise value chains. Kanban loops are a mechanism that signal the

need for inventory replenishment, an important tool in ensuring that production lines are

optimally stocked with necessary parts and components. Kanban signals trigger material

coordinators to deliver items in the right quantity when and where required. As product is

consumed in the production process, an order for depleted inventory is placed immediately,

either via a physical kanban card or electronically through a computerized electronic kanban

system.

Physical kanban card systems tend to work well inside the four walls of high-volume, low-mix

production environments where stable customer demand, repetitive manufacturing, and line-

of-sight exists. However, these systems tend to break down in high-volume, high-mix as well as

low-volume, high-mix environments where variable customer demand, frequent changeovers,

and limited line of sight are common. In those situations, an electronic kanban system makes

more sense, says Frank Kapper, general manager of Ultriva.

“Ultriva’s electronic kanban solution, also known as e-kanban, ensures that global

manufacturers’ entire supply chain is constructed as a series of interconnected e-kanban loops,

both internal and external,” explains Kapper. “Each loop is optimally sized based on customer

demand, and material replenishment is driven by real-time consumption scans.”

Examples of interconnected internal e-kanban loops include those between assembly and

subassembly lines, those between production lines and supermarkets, and those between

supermarkets and raw material warehouses. Examples of interconnected external e-kanban

loops include those between a plant and distribution centers, and those between raw material

warehouses and external suppliers.

“Many manufacturing firms today still rely on open-loop manufacturing and supply-chain

management (SCM) processes, where visibility into order status is limited to ERP systems that

push orders to the plant floor, or generalized supplier portals that push orders to suppliers,”

says Kapper. “Once released, order management takes on a life of its own, status is managed by

custom-built spreadsheets, frequent visits to the shop floor, email exchanges, fax messages,

and follow-up phone calls. E-kanban works best when the supporting manufacturing and SCM

processes are closed-loop in design.”

Ultriva closes the loop on manufacturing and supply chain processes by tightly integrating with

ERP systems and by leveraging its internal workflow, business rules, and alerting engine.

Routine, day-to-day manufacturing and SCM processes are supported by predefined workflows

with associated business rules and automated alerting. Whenever Ultriva detects a deviation

from an established workflow, alerts are automatically generated and routed to designated

individuals via the browser or to their personal communication devices, delivering actionable

business intelligence on potential or actual issues.

“The end product of an Ultriva deployment is a multienterprise-equipped supply chain that

contains as many e-kanban loops or tiers as necessary, with each node in the supply chain

synchronized based on real-time consumption scans,” says Kapper. “The end results of an

Ultriva deployment are right-sized inventory levels, increased on-time delivery performance,

improved visibility to customer demand, reduced stock-outs, and actionable business

intelligence on manufacturing and supply-chain performance.”

Before and after scenarios

As with most effective lean manufacturing and supply-chain initiatives, there were strong and

engaged leaders who championed the work to ensure a rapid implementation schedule. Kapper

shared how the ITT implementation started at one location in 2015 and quickly led to six plants

across the globe, each with a different ERP system. ITT had an existing supplier portal, which

was more of a website that pushed information to suppliers. ITT had planned for an

enterprisewide deployment of system applications products (SAP). As part of that initiative, the

company intended to replace its existing supplier portal with a collaborative one that included

supply-chain execution tools. One of the company’s key considerations in selecting a supplier

portal was that it had to be ERP-agnostic and could be deployed to both SAP and non-SAP

plants.

When ITT’s SAP implementation was delayed, the Ultriva implementation team had to revise its

deployment plans to include integrating its e-kanban solution with legacy versions of QAD and

LS400/AS400 systems at European plants, an older version of SAP (4.0) at the Santa Ana,

California, and Nogales, Mexico, plants, and SAP ECC 6.0 at the Santa Rosa, California, plant.

The ITT China plant went live with Ultriva’s lean e-kanban solution in May 2015. A month later

e-kanban went live at the ITT plant in Italy. In July 2015 the solutions was live at the ITT plant in

Germany, followed by the plants in Santa Ana and Nogales in August 2015. Finally, the ITT plant

in Santa Rosa went live in September 2015.

Scott Stickles, senior software consultant at Ultriva, supervised these implementations and

noted that ITT looked at the new version of its existing portal and SAP’s supplier portal, and

confirmed that neither solution could match the features, intuitive user interface, and flexibility

of Ultriva. Speedy deployment and comprehensive. out-of-the-box feature sets were the

determining factors.

ITT is also planning to deploy Ultriva’s request for quote (RFQ) and quality management system

(QMS) systems in later phases of the rollout.

Before the e-kanban

supply-chain portal

After the e-kanban

supply-chain portal

Kanban Very little kanban was used. Most

parts were on MRP-driven

replenishment or supplier-driven

MIN-MAX replenishment.

Ultriva’s collaborative supply portal

(CSP) solution added MRP forecast,

discrete purchasing,

andkanban replenishment to ITT’s

material replenishment methods. ITT

gained better visibility, and suppliers

were able to print labels and implement

scanning at the receiving dock. ITT also

uses an inventory optimization tool

(IOT) to identify which parts are best

suited for kanbanand to optimally

size kanbanloops.

Vendor-managed

inventory (VMI)

Suppliers were carrying inventory on

behalf of ITT at their locations based

on forecasts. They were shipping

according to the on-hand and in-

VMI suppliers now get planned-demand

data through the portal and are able to

provide VMI inventory levels back to

ITT. This visibility provides ITT

transit data provided in the forecast

file.

planners and suppliers with the

actionable business intelligence they

need to better plan for, coordinate, and

execute day-to-day material and

production operations.

Call-off ITT was releasing material-

replenishment orders to suppliers

based on the planned demand

provided in the forecast files. As

demand changed, suppliers were

forced to adjust production and

shipping schedules, which often

resulted in their having excess or

insufficient inventory on hand.

ITT now uses a “call-off” feature that

waits for firm orders before releasing

material-replenishment orders to

suppliers. This feature helped eliminate

the bullwhip effect at suppliers,

resulting in improved order fill rates

and more stable inventory levels.

Discrete orders Some ITT plants were using a website

to upload discrete orders. Suppliers

would log-in to the website to

download purchase orders, which

then had to be tracked in

spreadsheets due to frequent changes.

ITT buyers lacked real-time visibility

into the status of these orders,

resulting in frequent emails and

phone calls with suppliers. The end

result was a significant amount of

nonvalue-added time for both the

buyer and supplier.

All six ITT plants now use the supplier

portal to receive standardized material-

replenishment alerts; PDF copies of

purchase orders are attached,

regardless of order type. Orders are

tracked as closed-loop processes from

the time the order is released through

its arrival at a plant. Order recalls and

reschedules are managed as closed-loop

workflows, allowing for improved

collaboration and execution between

buyers and suppliers whenever

production schedules change.

Consignment Some ITT plants were using

consignment, which allowed suppliers

to keep inventory at these plants. It

was the supplier’s responsibility to

perform daily visual checks to

The demand-driven solution allows ITT

to tag a part as a consignment. These

parts are treated differently: Inventory

data aren’t updated via ERP until a part

is issued or used in production. It also

compared active and planned orders;

on-hand consigned inventory ensured

they could meet customer demand.

provides information to suppliers about

inventory and quantities consumed at

ITT in real time. Suppliers located

around the globe can now manage

consigned inventory for ITT and quickly

generate invoices for the material

consumed.

Addressing volatile demand and fluctuating inventory

Manufacturers are being squeezed by two complex market trends: Customer demand is

increasingly volatile, and suppliers are less willing to carry extra inventory to serve customers’

fluctuating needs. To successfully address this dilemma, manufacturers must shift from using

forecast-based planning systems to consumption-based replenishment systems.

In most manufacturing companies, the supply chain is still controlled by MRP and ERP systems

that use forecasted or planned demand to establish material requirements. Every MRP run

generates changes in material requirements that led to whiplashes across the supply chain. The

costly and serious ripple effects of these ever-changing requirements include stock-outs,

shortages, bloated inventory levels, costly expediting, and missed or late customer shipments.

Addressing the challenge of inaccurate planning is a top quality-control issue among global

corporations. Driven by lean initiative teams, the interest in collaborative supply portals (CSP) is

rapidly expanding. Using a simple platform for accessing standardized material demands,

acknowledging receipt of orders, and viewing shipment information offers real-time visibility

and collaboration between supply partners. Planners, buyers, and suppliers see a single version

of truth and can respond effectively and immediately to unexpected changes in demand. A

demand-driven solution also ensures that product quality need not be compromised.