Highlights:
- Data preparation times reduce by 90%
- Reduction in inventory by 60%
- Service levels increased to 99%
Overview
Flextronics is one of the leaders in EMS offering services end-to-end vertically integrated global supply chain services. Flextronics designs, builds, and ships complete packaged products for its OEM customers. They also provide after-market and field services to support customer end-to-end supply chain requirements. Flextronics leverages its global economies of scale in manufacturing, logistics, procurement, design, engineering, and ODM services across a wide range of products and customer segments. Flextronics operates in 30 countries with well-diversified customer market segments and business units.
Operating in a thin-margin business, Flextronics is continuously looking for innovative techniques to reduce costs and increase margins, while improving its OTD metrics.
Challenge
Flextronics had implemented Statistical KANBAN techniques for Reorder Point (ROP) in its Austin, Penang, and Zhuhai sites to optimize inventory and achieve 99% on-time service levels for its CISCO account. These techniques were based on proprietary models from FlowVision LLC, a leading consulting firm on lean and flow manufacturing. The statistical techniques, covering about 10,000 components, had significantly reduced inventory and were a success. However, since the models were implemented via spreadsheets, the entire ROP optimization process was managed manually. As a result, the process was not only resource intensive but it was also subject to errors. In addition, the cycle times for the process were 2-3 weeks, making it difficult to react in real time to changes in customer demand signals. Flextronics knew that it needed to replace the spreadsheet with an automated process.
Solution
Flextronics selected FlowVision since its Inventory Optimization Network (ION) software contained lean business rules and algorithms to help reduce inventory and increase service levels.
ION helps customers achieve the benefits of lean manufacturing methodologies, including improved demand and supply chain visibility, optimized inventory levels, and improved product delivery times.
ION combines forecast and shipment information across customers from multiple sources including ERP systems, forecasting systems, etc. The Lean Planning module applies statistical KANBAN algorithms to aggregated demand to make recommendations on inventory levels. It also has the ability to conduct what-if scenarios. The Lean Triggering module enables management by exception, where it initiates procurement triggers needed to support changing requirements. The Decision Center dashboard provides Key Performance Indicators (KPIs) to monitor entire operations in one place and provides collaboration both internally with remote operations as well as with business partners. The dashboard and alerting mechanism optimally size inventory to ensure compliance with all their ongoing supply commitments.
Deployment
At Flextronics, ION gets weekly consumption, weekly master forecast, and daily on-hand and on-order information from either SAP or Baan systems (depending on the site). It then applies embedded statistical decision rules developed by FlowVision to this information to calculate optimal inventory and reorder points for various components. The decision rules supported multiple business models:
- High-volume products with stable demand
- High-volume products with seasonal trends and end-of-quarter spikes
- Low-volume products with high mix
- Low-volume complex products that are event-driven
The B2B-hub and automated data aggregation eliminated a number of manual steps and reduced data preparation times by over 90%. The dashboard provides the various stakeholders with interactive visibility into the current status. It has also enabled them to collaboratively make decisions on an exception basis – a big improvement over a spreadsheet-based environment. As a result, there was an over 75% reduction in items reviewed.
“ION has improved our joint ability to size ROPs. Among the best features are the global settings and collaboration spaces. The global settings provide secure and highly configurable settings that allow us to customize calculations without being prone to human errors that might occur in Excel. The collaboration space provides a solid graphical representation of historical variation, outliers, and suggested ROP values which aid in the ROP setting process”, said the team leader at CISCO.
While the deployment of lean decision rules from FlowVision provided Flextronics with one-time benefits of millions of dollars in inventory reduction in their CISCO account, the ION system enabled Flextronics to operationalize and automate these spreadsheet-based decision rules and ensure sustained benefits. After deploying ION, Flextronics saw the first-time fill rate improve by over 5 percentage points and total inventory reduced by over 60% for their CISCO account. Overall benefits from the ION system included: reduced data preparation and sizing cycle times, reduced inventory holding costs thru dynamic inventory optimization, and productivity improvements.