For more than 80 years, Seco Tools has delivered a diverse portfolio of tools and services around the world. Best known for milling cutters for the general machining industry, the pressure the company faces to maintain high service levels continually grows. To complicate matters, they must be able to provide the right consumable product at the right time to customers on all four corners of the globe.
Seco Tools manufactures cutting tools made of steel, tungsten carbide and cobalt. The tools are based on industry standards which allows each customer to select their supplier. If a tool cannot be supplied when it is needed it is very easy for the customer to secure a new supplier. The burden is now on Seco Tools to deliver any of its 50,000 SKUs anywhere in the world within 24 – 48 hours.
Historically, customers held their own inventory. They kept a supply of products on hand at every site. This became an expensive proposition for the industry, which gave way to placing the responsibility (and cost) back on the manufacturer to hold inventory and deliver it when needed. At first manufacturers held stock in-country. This created a vast and costly distribution network for manufacturers such as Seco Tools. As competition increased and margins thinned, manufacturers had to turn to a more streamlined distribution approach that would still ensure quick delivery of each item.
As part of this shift, Seco Tools now operates four distribution centers around the world (Netherlands, Troy, MI US, Singapore, and Shanghai). From these four locations the company serves approximately 60 countries. The key is the ability for Seco Tools to provide the same level of service through fewer distribution points.
Supply Chain Planning Overhaul
Three years ago Seco Tools investigated solutions for stock optimization. During this process, the company realized it needed more than stock optimization—it required a complete supply chain planning overhaul. According to Lars Liljeqvist, VP Logistics, Purchasing and Quality, Seco Tools, “We saw an opportunity to improve our stock availability and lower our inventory value at the same time. We also realized this would be more than a software implementation. In order to succeed, we needed to change our processes and way of working.”
Seco Tools required new software to support the new processes and they started to evaluate potential partners. Many of the vendors only offered software. Seco Tools recognized they also needed help with their process change. “Logility was unique. The team met with us and started to discuss how we could improve—the supply chain processes and organization. We walked through the process and covered both the tangible and intangible benefits. Then we talked about how software could help enable this transformation,” Lars continued.
Previously the company’s forecasting operated at a very high level (for example the product/family). To be truly efficient, Seco Tools needed to forecast at the item level by stock location to help its 12 production facilities better plan their manufacturing requirements. “We must make sure we produce and stock only what we need,” Lars commented.
Seco Tools recently completed the first phase of its implementation of its new processes and Logility Voyager Solutions. Within the first week, a couple of days in fact, the team noticed a drastic improvement in visibility across the global business which will help further improve forecast accuracy.
“We have a target to achieve a 97% net stock availability and we can already see with Logility we will be able to achieve this number,” Lars said. Seco Tools is also aiming to reduce inventory up to 20% thanks to the greater forecast accuracy. In a competitive industry manufacturing precisely machined tools, a reduction like this can add up quickly.
Lars continued, “The implementation was on time and the visibility we now have gives us new understanding. We’re asking questions we never would have thought to consider before Logility. The combination of an excellent supply chain team, improved processes and new software has shown us just how much potential there is for improvement. It is quite remarkable.”
As I talk to customers and practitioners from all corners of the supply chain world, I find that Inventory Optimization has different meanings between companies, departments and even people within the same organization. It is described as everything from simple inventory management techniques all the way to advanced multi-echelon inventory optimization.
Here’s a common “what’s wrong with this picture?” scenario: in many supply chain organizations, sub-SKU forecasting (the task of translating high-level forecasts into specific quantities by size, color, configuration, region, etc.) falls on the shoulders of the sourcing and supply functions, rather than the demand planners. Why? The simple answer—it has always been this way. Does that make it right?
Ever wonder where analyst data comes from? The best research requires input from supply chain experts like you!
Get your voice heard and share your insights on how Sales and Operations Planning (S&OP) is conducted at your company. Lora Cecere, founder of Supply Chain Insights, has kicked off research for the report, "How S&OP Drives Agility."[..]
The 70% Enigma
I recently read a roundup of all the research Gartner Group has published around sales and operations planning. I’m struck by the fact the research points to 70% of companies are at a maturity level of 2 or lower even after 30 years of S&OP chest beating by the supply chain industry.
If you're reading this, chances are you've either lived through a supply chain solution implementation project, you're considering one, or perhaps you've lived through a less-than-successful project and are simply curious.
Can young, smart, driven supply chain students and their professors teach us anything about the future of supply chain?
Recently I went to the MIT Media Lab Building for an event co-hosted by the local chapter of CSCMP and MIT Center for Transportation and Logistics.
There were two things going on. The first was a MIT Supply Chain Student Poster Session and Networking Night. Two big rooms were lined with the logistics projects from graduate students of MIT’s Logistics programs. The students themselves were on hand to explain their projects, interact and answer questions.
Ann Grackin and Bill McBeath of ChainLink Research recently published an article on Caribou Coffee’s supply chain. They spoke with Karen Francois, senior director of strategic sourcing at Caribou, to learn about the coffee retailer’s supply chain challenges and how the company reshaped its processes and turned to technology to help enable its success.
The supply chain and software industries have several high-profile awards and distinctions. We, along with our customers, have been fortunate to win many over the years. There is another award program that is very special to us, our SAILS Award.
A few years back I started supplementing my penchant for marathons and triathlons with mountain bike riding. A mountain bike is a specially designed bicycle that you take out into the wild to traverse all sorts of rugged and crazy terrain.
I’m only an amateur, at best, but like every new endeavor it’s fun to learn something new and it’s fun to draw parallels to different disciplines.