Big data in the material handling industry: From supply chain to fulfillment

How data moves through an organization.

By Mike Bacidore, chief editor

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Big data is everywhere. Material handling professionals have witnessed a slow, almost trepid, movement into systems and software that yield levels of visibility into the equipment, processes, and products that comprise a facility’s material handling function. From the supply chain and inventory management all the way through the manufacturing process and continuing into distribution and fulfillment, increased profitability can be mined from the information that’s available.

Right-sized inventory

Dynisco, a plastics extrusion processing company with a very complex supply

 lead kevin dailida
 Kevin Dailida

chain, is a division of Roper Industries. Dynisco implemented the SyncKanban system from Synchrono to simplify its inventory replenishment and to right-size its on-hand inventory. Through this system, Dynisco has been able to track data to monitor various KPIs, including active velocity and demand variation, and to capture pull signals to help forecasting.

“Dynisco started inquiring about an electronic e-kanban system in February 2011,” explains Kevin Dailida, senior director of global supply chain and operations at Dynisco. “Prior to working at Dynisco, both John Biagioni, our president, and I were familiar with and had implemented an electronic kanban system at our prior employer. We saw positive results with the implementation of that system so we figured we would try to apply the same methodology at Dynisco.”

Dailida and Biagioni wanted to implement an e-kanban system to achieve a few objectives. “We understood that we had excess inventory, which we wanted to manage better,” says Dailida. “We are measured on our ability to control and utilize our cash appropriately; therefore excess inventory impacts the ability to invest in our business if the cash is tied up in slow-moving inventory. Alternatively, in some cases we did not always have the right number of parts at the right time, causing shortages, again tied to the ability to manage our cash flow. Therefore from a holistic standpoint we wanted to right-size our inventory in an effort to maximize our cash management from an operations standpoint.”

Dynisco also wanted to minimize the redundant transactions that the supply-chain group was performing and utilize its people in a higher-level capacity. “SyncKanban has the ability to perform the same, repetitive transactions that a buyer does,” explains Dailida. “In a lot of cases we order many of the same parts over and over again creating a lot of redundant activities. E-kanban enabled a pull signal to go directly to the supplier, eliminating the need for the purchasing transaction. At a higher level, the supply-chain group is still responsible for managing the inventory, but now they can manage the exceptions rather than the day-to-day normal transactions. It’s the exceptions that usually create the problems.”

One other benefit to implementing e-kanban was that it created the ability to track key suppliers from a delivery standpoint. “Prior to the implementation of the system, it was very difficult to measure supplier delivery performance,” says Dailida. “With the implementation of e-kanban, this has become much simpler. We can monitor our key suppliers’ performance and even drill down to specific parts that may be problematic. Again this comes back to having our supply-chain team perform analysis and manage the exceptions versus performing keystrokes.”

Dynisco has seven facilities worldwide, four in the United States and one each in Germany, China, and Malaysia, and six of them currently use SyncKanban. “As part of the SyncKanban implementation, we decided we wanted to integrate our existing Avante MRP system with the e-kanban systems,” explains Dailida. “Having two separate systems created redundancy relating to the receiving activities in addition to the potential for errors. We linked the two systems together in order to connect receiving information, as well as blanket purchase-order information. Accounting uses the Avante system as its plan-of-record system, so we wanted to make sure we didn’t create discrepancies.”

The review and interpretation of data is extremely important when implementing any kind of system (Figure 1). “The data must be reviewed, understood, and acted upon in such a way that it will not negatively impact the business,” says Dailida. “The SyncKanban system uses algorithms to evaluate inventory sizing based on the transactions or pulls that take place in the system. As history is built, the data becomes more and more aligned with the actual business patterns. Dynisco uses the kanban suggestion tool as one of the key pieces of information to properly adjust inventory levels. We evaluate the data anywhere between monthly and quarterly and make the appropriate adjustments. For example, if we evaluated the kanban suggestion information on a weekly basis and adjusted the sizes according to the suggested model, we would most likely send ripples through our supply chain, creating problems for our suppliers. The goal in right-sizing is to find a level of stability that flows back through the entire supply chain, minimizing the need for wasteful activities such as expediting or overproduction. If we don’t evaluate the information at the appropriate frequency, then we may end up with excess inventory, lower turns, and cash that we can’t convert into revenue.”

big data1
Figure 1. As history is built, the data becomes more aligned with actual business patterns, and inventory levels can be adjusted properly. Real-time visibility of material flow in a complex environment will show what can and will go wrong. (Source: Synchrono)

As it relates to the e-kanban solution, Dynisco’s two biggest KPIs are inventory turns and inventory dollars. “Not every part is suitable for e-kanban or kanban in general,” explains Dailida. “We evaluate our top 80% of spend and look for opportunities where our ordering patterns are repetitive. We utilize a plan for every part model and then track the volume of parts that are on the e-kanban system. We have also used our Avante system to flag parts that are on the e-kanban program, have potential, or are not good candidates, so the percent of e-kanban parts as it relates to the total volume of purchased parts is another metric that we are formulating and monitoring.”

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