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RahulMitalSupplyChain

Maximize efficiency when engaging in supply chain planning.

By Rahul Mital

As the global marketplace expands, the need for more efficient supply chain planning and management tools follows suit. Manufacturers have to be able to match demand to supply—no matter where that supply may be located or how widespread the organization may be. To accomplish that goal requires a commitment to the planning for, integration of and continual evaluation of the latest technology available. This is where the relatively new and untested concept of global cross-pegging comes in to play. It is the next step beyond some of the most current practices when it comes to planning, scheduling, material ordering and inventory control.

To maximize the efficiency of supply chain management, it is important to use all the technology tools available, including:

  • Enterprise Resource Planning (ERP): business process management software that enables organizations to use a system of integrated applications to manage the business (i.e. planning, development, sales, manufacturing, marketing) and to automate many back-office functions. It does this via a single database, application and user interface. (webopedia.com)
  • Materials Requirement Planning (MRP): a sales forecast-based system used to schedule raw material deliveries and quantities  , using assumptions on the machine and labor units required to fulfill that sales forecast. (Investopedia.com) MRP is a subset of ERP.
  • Cross-pegging: linking demand to incoming supply (per Oracle.com). It creates a “peg chain” between a supply transaction and a demand transaction from either side of the equation. A peg prevents the incoming supply from being reserved or allocated to another demand transaction. Through data analytics or business intelligence (BI) that supplies historical, current and predictive views of business operations, global cross-pegging is the next step beyond the report generation now typically employed by those companies that do use the pegging methodology. It is using the information supplied by cross-pegging to actually execute critical decisions related to supply chain management. Cross-pegging should also be thought of as one of the techniques used in the overall planning process.

Supply Chain Mapping

In adopting these tools to their fullest extent, manufacturers need to chart a course that identifies the best available supply of materials with the agreed to due date or ship date. Then they have to reserve the materials required and identify those already in house by pegging them—in other words tying them to specific orders. Global supply chain cross-pegging helps eliminate the issuing of new purchase orders for materials needed for a customer build, thus reducing excess inventory levels and saving the company resources. It is the logical next step beyond local pegging, which treats each location for the same company as its own autonomous entity.   

Consider the local MRP for an order as the starting point. Then retrieve all of the applicable data via global cross-pegging to find the optimal solution when it comes to sourcing raw materials or parts, to meet a customer ship date with a finished product. Go beyond those preconceived boundaries in the way supply chain management is typically conducted. Global cross-pegging allows factors like transit times for materials and shipment times to be factored in. For example, it may be that another purchase order will indeed be needed to source parts if the only in-house inventory is halfway around the world, can only come by ship and would push out the promised must-have due date. This goes beyond the typical approach now employed, where cross-pegging is most often used to produce reports but does not go further in the supply chain management and ordering process to make the best possible decisions on material ordering.

Global Cross-Pegging Software Technology: A Starting Point

Oracle ERP and SAP SE offer effective and well-regarded software programs that can be used for the “base planning” functions. Yet, in many cases, customized software programming for each user will be needed to establish a true global cross-pegging system. The Oracle and SAP SE off-the-shelf products do not come with that type of logic built in. Customized software reaches beyond the imaginary and artificial local boundaries to which that large corporations often fall prey. While the upfront costs to customize a software package may require a substantial expense for programming, the return on investment (ROI) is soon evident and occurs within a relatively short period of time.

How it Works in Real Time

Before planners execute an order they should look outside of their local environment to the company’s global platform, checking if the materials or parts needed are elsewhere in the system. They can also check transit time if that inventory is in a remote location, which may be a deciding factor as to whether or not another purchase order must be issued as an alternative.

Using cross-pegging, planners are spared from having to pore over a data analytics or a BI report manually, looking for clues as to where available inventory might be found. Simply put it is the jump from local pegging to global pegging in securing the materials required for a customer order, with functions in this digitally connected world performed automatically, based on the parameters or “rules” (ship date, maximum part costs, etc.) preset upfront.

The Case for Cross-Pegging

Cross-pegging is the best way of utilizing existing inventories. It consumes excess inventory and prevents the piling up of excess stock. In competitive business environments where profit margins are especially thin, keeping unused inventory off the shelf is made easier with global supply chain cross-pegging. This methodology checks for excess inventory anywhere in the world (and automatically) when all the relative departments are tied together via a custom software package built on a reliable base program. Key Performance Indicators (KPI) that can be programmed include material costs if sourced locally versus the base costs to make or buy material or a part is already inventoried somewhere else within the organization. That is where shipping and transit costs may become a factor. The customized software could factor in shipping costs, customs fees, tariffs and other variables.

Global cross-pegging means taking the next step beyond running large, cumbersome, time consuming reports on a daily basis, then having to sit down and analyze that data manually. Cross-pegging allows for more visibility within the company on specific orders, which can also enhance corporate communication. It combines multiple resources into one connected, cohesive software system—in other words, one tool to do everything. Current ERP software packages that use a system of integrated applications to manage the business simply do not take the last step to true global cross-pegging. Asking an Oracle or an SAP SE to make the necessary changes to their planning software programs may be years away from happening and will only occur if they see a sizable market for it. That typically means software customization is the only option at this point.

Global Sourcing, Global Planning

Global supply chain cross-pegging systems provide important benefits. They streamline operations and result in lower maintenance costs. These tools save larger companies millions of dollars a year by consuming excess inventory, reducing the man hours spent producing and analyzing reports, and fostering ease of operation that can reduce the overall cost of doing business (overhead). For companies that are spending millions of dollars on data collection and business intelligence already, key players involved in the decision making chain can find the information they need in one place. No longer are they forced to search in multiple locations to find the information required.  

Second, global sourcing and planning streamlines inventory management. When excess inventory gnaws away at the bottom line, the automatic decision making that comes with global cross-pegging is a viable option. It serves as the company’s backbone and foundation, not only for increased profitability but as a leg up on the competition. In this scenario, ordinary planners become true global planners when they employ global sourcing and supply chain cross-pegging, identifying the parts or materials they need, assigning it to work orders and tying it all to due dates.

Not Yet There

Even the largest multinational companies that would benefit the most from global supply chain cross-pegging have not made the jump. Taking it from the reporting level to the “execution level” is that next step. Cross-pegging works best for large manufacturing companies and major distribution systems, where extensive parts ordering and operations scattered across the country or across several continents are the norm. For smaller firms, the upfront cost to develop a custom software package on top of the base program may not produce a suitable return on investment in a short enough time period versus the overall volume of business.

Yet, cross-pegging deserves thorough consideration and evaluation. It’s an out-of-the-box solution because it is one tool that can perform multiple functions based on rules set in place during the upfront planning process. At its core, it is simply a better way to reduce excess inventory, adhere to promised due dates, improve interdepartmental coordination/communication and enhance the bottom line.

Rahul Mital is a project and supply chain management specialist currently working in the oil and gas industry along the Texas Gulf Coast. He also has a background as a solutions architect and is well versed in Oracle applications. For questions or comments, please contact via email at: rm_erp@yahoo.com.

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WASHINGTON

The Pool of RCRA Universal Waste May Get Bigger

By Lynn L. Bergeson

On March 16, 2018, the U.S. Environmental Protection Agency (EPA) proposed to add hazardous waste aerosol cans to the category of “universal wastes” regulated under the federal Resource Conservation and Recovery Act (RCRA) regulations, codified at Title 40 of the C.F.R., Part 273. 83 Fed. Reg. 11654. According to EPA, this action would benefit the many manufacturing facilities and others that generate and manage large quantities of hazardous waste aerosol cans.

WomenMfg

At one Pennsylvania manufacturer, women play important roles and find success with tangible results.

By Susan Towers

A recent study by Deloitte found that women constitute one of U.S. manufacturing’s largest pools of untapped talent. Women made up about 47 percent of the U.S. labor force in 2016, but accounted for a small portion of manufacturing jobs. Underrepresentation of females in manufacturing may be due in part to the perception that jobs in the industry are “too difficult” or “too dirty” for women. At Miller Welding and Machine Co. (MWM), a strategic metal fabrication partner for original equipment manufacturers (OEMs), in Brookville, Pa., women are a vital part of the workforce. Female employees put their skills to use, whether on the shop floor or in the C-suite. While they work in various roles, these women all agree on one thing: anyone can have a successful career in manufacturing, regardless of gender.

EmployeeEngage

Mobile Tech Is Key to Solving Manufacturing Sector’s Employee Engagement Crisis

By Bulent Osman

The words “manufacturing” and “innovation” are almost synonymous. A report from McKinsey Global Institute describes this important sector as “a vital source of innovation and competitiveness, making outsized contributions to research and development,” noting that the industry contributes disproportionately to innovation when compared to all other sectors.

Yet despite this emphasis on pursuing leading-edge R&D and advanced technologies when making products, manufacturers are not ahead of the curve when it comes to optimization of employee engagement solutions. This is evidenced by the fact that in an industry that would logically be linked with the excitement of continuous development, manufacturing workers instead rank lowest of all U.S. industries when it comes to employee engagement, with just one-quarter of workers feeling engaged according to 2017 figures from Gallup. This disheartening stat puts the manufacturing industry on the lowest rung possible as the least-engaged occupation in the most recent State of the American Workplace report.

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TechIntro2

Mexican University Innovation Leads to International Partnerships

By Juan Terrazas 

When people hear “manufacturing in Mexico” many immediately and unfortunately think cheap labor.  But in Baja California, manufacturing sectors can boast of qualified labor, which has evolved significantly in the past decade. Going from the early 1900s where industry in the area consisted of recreation and commerce, to the 1930s where the region experienced industrialization attempts before moving to the then traditional maquiladora or factories in the 1960s, and then to Asian consumer electronics in the 1990s. But since the 2010s, labor has advanced in sector specialization and tech automation in Cali-Baja, a binational megaregion – which combines Southern California and Baja California.

In the midst of the renegotiation of the North American Free Trade Agreement (NAFTA) and President Trump’s recent tariff proposals, a university in Mexico, CETYS, is working on continued collaboration with manufacturing industries and building global relationships from both an education and an industrial perspective.

INFRASTRUCTURE

Electrification and The Next Generation of American Manufacturing

By Baskar Vairamohan

Since the Great Recession, American manufacturing has seen slow, but sustained growth. A hockey stick graph shows the steep declines after 2008 with consistent — yet restrained — growth in manufacturing in the subsequent years. Data from the U.S. Bureau of Labor Statistics show the sector is adding jobs at a faster rate than almost any other part of the economy in recent months.

What is driving these changes, especially in such a turbulent economic environment, is unclear. With pending changes to international trade norms, widely discussed but yet to be proposed government-funded infrastructure investment programs, and the recent overhaul of U.S. tax codes, there is substantial uncertainty in segments of the economy impacting manufacturing. While some of these changes, such as those to the tax code, will lead to investment in this space, others provide more questions than answers.

CybersecurityGDPR

How the European Union’s New Cybersecurity Measure Will Impact Your American Manufacturing Business

By Dan Messeloff and Emily Knight

As concerns about cybersecurity and data privacy weigh more and more heavily on the minds of corporate executives in manufacturing companies around the United States, the European Union has initiated expansive new efforts to protect its citizens from cybersecurity risks.  The EU’s initiative – the General Data Protection Regulation (GDPR) – might ordinarily be viewed with passing interest from American companies, but the reach of the GDPR is actually far broader than any cybersecurity measure ever seen before in either the European Union or in the United States.  More importantly, as a result of the reach of the GDPR, millions of American companies may unknowingly be at risk of violating the new law and thus subject to significant monetary penalties.  The good news is, whatever your level of interaction with companies and/or individuals in the EU, there are measures you can take to comply with the GDPR.

EXCLUSIVE INTRO

Airgas is making major strides in helping its customers become more competitive by addressing efficiencies in their welding operations.

By Staci Davidson, Managing Editor, Knighthouse Media

With more than 1 million customers, Airgas is known for its quality of service, as well as the quality of its products. The company is the nation’s leading single-source supplier of gases, welding equipment and supplies, and safety products. Airgas is known nationally with more than 950 retail locations, but it goes beyond retail service to ensure customers have what they need.

About 10 years ago, Airgas realized customers wanted a greater level of technical expertise for their operations, and so the company implemented a way to apply cost-measuring analysis to customers’ welding programs. Called “Unlocking the Hidden Cost of Welding,” Airgas educates customers how labor impacts welding costs; how gas and other welding inputs effect quality and penetration; and how customers can trim 20 percent or more from their operating costs without capital investments. Airgas developed a curriculum based on industry needs to train Welding Specialists and to help our customers compete in their respective industries.

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