Supply Chain Management End-to-End Demand Planning
Savage Arms Largest long gun manufacturer with centerfire operations in Westfield MA and rimfire in Lakefield Ontario. Importing shotguns from Turkey and China. Savage Range Systems is also based in Westfield and Bowtech Archery in Eugene Oregon. Steady growth over the past 10 years shipping 85,000 centerfires in 2001 to over 257,000+ in 2011. Total shipments out of Westfield in 2011 450,000+ guns. 2012 forecast is for over 380,000 centerfires, 600,000+ total. Centerfire: 2010 170,000, 2011 257,000, 2012 380,000 Hired over 100 new employees last year, currently in the process of hiring and training 50 more. 700 employees in all location. Sales this year will be about $200M.
End to End Demand Planning End to End looking at the supply chain from the consumer all the way back to the raw material supplier. Demand Planning manufacturing only the products that the consumer is buying and replenishing material in the shop only as it is being consumed.
It starts.. When a consumer takes a gun off the rack at his local gun shop or big box store and decides to take it home That sends signal through a distributors POS system or the big boxes inventory system (demand) to replenish the gun that was just purchased. For a distributor on Vendor Managed Inventory (VMI) that sends a signal to the factory to replenish, for a big box on Direct Ship an EDI order is sent to the factory to replenish At the factories Order Fulfillment Center guns are pulled out of stock or are scheduled to be assembled based on an Electronic Kanban that is sent to the assembly area As components are consumed in assembly, purchased parts are replenished based on Kanban signals sent out to the suppliers (Supplier Kanbans), manufactured parts are Pulled through the shop using both Kanbans and 2 Bin systems When raw material is consumed (steel) a Supplier Kanban is sent to the steel distributor Who in turn contacts the steel mill and tells them to Pour More Steel!
End to End Demand Planning Point of Sale (POS) Vendor Managed Inventory (VMI) Direct Ship (DS) Order Optimization Electronic Kanbans Supplier Kanbans Shop Kanbans and 2 Bin Systems
Demand Planning Process Sales and Operations Planning Monthly review of a rolling 12 month forecast MRP is used to consolidate both forecast and sold demand Access planning databases have been developed to take the output of MRP and monthly, using 90 days of demand, calculate the number of Kanbans required The actual execution is based on a signal to replenish
Point of Sale Point of Sale (POS) systems used by some of our distributors at Gun Shops send a signal to them as soon as a gun is purchased. Based on the arrangement with the individual Gun Shop, some are automatically replenished by the distributor and some require an order to be placed. In a big box like Wal Mart or Cabela s they have it set up in their inventory control systems to place an EDI order with us as soon as the sku hits a re order point.
Vendor Managed Inventory Established program 6 years ago with 8 of our largest distributors. Program is based on last 12 months of history, seasonality and projected sales growth. Daily, distributors sent in their on hand and on order balances. Every Monday, based on predetermined re order points and established lead times, orders are entered into the system. Daily, on hand balances are review for Stockouts. If a distributor is out of stock on an item, has an open order for it, and we have it in stock, it ships that day. Distributors credit the program for both increased sales and inventory turns.
Direct Ship to Stores In July 2007 Wal Mart closed their firearms distribution center and require suppliers to ship directly to their 1,700 stores that sold firearms. In order to do this Savage had to invest in and implement: EDI interfaces to our ERP Sales Order System Automated Sales Order Processing and Authorization Integrate /automate the shipping, invoicing, labeling and UPS process. Optimize the pick, pack and ship process. Nightly, Wal Mart EDI s Savage 200 to 500 orders. All orders are shipped within 24 hours. In FY 2008 Savage shipped 41,865 guns on 21,640 orders. We are now offering this service to other Big Box stores and in 2011 shipped over 92,000 small package UPS orders.
Order Optimization As the volume of product needing to be shipped increased, a new process/software functionality was required. The old process was manually intensive to select orders to process with no guidance on how to pick the order. Savage wrote a specification for functionally that: Sorted orders based on a number of different criteria Allowed soft allocation of product to a sales order Provided an optimized order pick route The new process for selecting orders can now be done in minutes vs. hours. Greatly reduced the time to pick the order.
Electronic Kanbans Program developed by Savage that: Uses the 90 day forecast to determine Kanban levels for both WIP and Finished Goods. Incorporates Sold Demand to account for when demand is greater that forecast. Monthly Kanbans are re calculated based on a 90 day forecast. Daily As guns are pulled to satisfy sales orders, the electronic Kanban database program uses; sold demand, onhand balances and the forecast to determine which Kanbans to release to assembly.
Supplier Kanbans Working with our suppliers we establish lead times, lot sizes and safety stock requirements. Based on the 90 day forecast Kanban levels are established and reviewed monthly. Cards are added or removed based on the calculations. As material is consumed in the factory the Kanban cards are sent to purchasing. Based on an agreed to schedule with the supplier, orders are placed (email releases) to replenish the material consumed. Currently 50 suppliers and over 500 items are on the Kanban replenishment program and include; components, MRO and packaging material.
Manufacturing Kanbans and 2 Bin Systems Once again Kanbans are established monthly based on the 90 day look ahead. As components are used in assembly Kanbans or Pull Signals are used to signal other areas of the shop what to manufacturer. As raw material is consumed, supplier Kanbans signal the need to replenish. When it get s back to the steel distributor they signal the mill to Pour More Steel
Benefits of End to End Demand Planning Never would have been able to meet the demand if it wasn t for demand planning. The monthly S&OP process and the recalculating of Kanbans allowed us to give our suppliers and the shop the visibility to plan for the increased demand. There has been no increase in the material planning staff while going from 300 sku s to over 500 and an increase in units of 85,000 a year to over 250,000 a year. There has been no increase in the purchasing staff during this same ramp up. Initially the supplier replenishment program resulted in inventory reductions and one time real savings of over $1M. Distributors have seen sales growth of up to 20% a year (even more in the last 3 years) and credit the VMI program with at least half of that growth because of the increased fill rates. Distributors have seen their inventory turns double making the Savage product very profitable for them to carry. Direct ship was a requirement from one retailer; Savage has now turned it around to be a competitive advantage in trying to increase sales at other retailers by offering the Direct to Store service.
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