Meeting the dynamics of planning with agility and responsiveness

At first glance, “flexible standards” sounds like a contradiction in terms. In reality, however, it is the intersection of the positive aspects of two strategies, just like the contradictory-sounding “mass customization”, for example, which combines the advantages of mass production (e.g. scaling effects) with the customer individualization that is increasingly in demand today.

The planning challenge

Hama GmbH & Co KG, headquartered in Monheim, is a wholesale company with 2,500 employees worldwide (1,500 of whom work at the Group headquarters in Monheim) at 20 locations, supplying the market with a wide range of products from the Consumer Electronics, Computer & Communication, Gaming, Photo & Video, School & Leisure Time and Home Appliance product lines. Up to 10,000 parcels leave the Monheim logistics center with a total of 70,000 pallet spaces (see Figure 2) every day. USB sticks, memory cards, Bluetooth headphones, Internet radios, selfie sticks and smartphone cases are just a small selection of the diverse product portfolio that Hama offers its customers as a brand alongside other own and partner brands with a high delivery readiness (see Figure 1).

The example articles mentioned, which are subject to strict internal technical tests and quality controls, already give an idea of the particular challenges for planning and supply chain management at Hama. A large proportion of these products are subject to extremely rapid change, either in terms of technology or fashion. To make matters worse, many of these products have long replenishment times, as they are sourced from the Far East and the supplying producers generally do not keep stocks. At the same time, Hama customers can expect short response and delivery times, even for larger quantities. In addition, the Hama customer is entitled to return significant quantities of the goods supplied by Hama to Hama even weeks later, which creates a relevant second material inflow stream that has a significant impact on quantity and inventory planning. Some examples of requirements that Hama is confronted with in planning and scheduling are

• Articles with high promotional content and special requirements
• In addition to general articles, customer- or region- and country-specific articles
• Four different freight types in procurement logistics, also combined in order items for one article
• Dynamically developing graduated prices in procurement
• Collective order (group disposition) with and without optimized container filling
• Splitting of order quantities of an article in the dimensions delivery date and freight type
• Efficient management of quantity reservations and allocations of material in supply to ensure delivery readiness versus customer
• Parking of planned orders for the careful execution of supplier inquiries with downstream approval process depending on economic criteria
• Delivery time controlling and delivery time parameterization in procurement
• Goods receipt date determined on the basis of the respective valid order phase (planned order, cargo ready, in transit)

The required system support

Hama is pursuing two essential goals with a new planning system that is precisely tailored to the diverse requirements of the Hama business model and Hama processes. On the one hand, the desired delivery readiness is to be sustainably ensured while at the same time optimizing the necessary inventories. On the other hand, efficiency and transparency in planning are to be further improved and planning reliability and quality further enhanced. Hama will solve this complex task in future with the APS software DISKOVER SCO. The planning tool, which is being developed by SCT GmbH, covers a large part of Hama’s requirements with its standard functionalities, meaning that the standard could be implemented one-to-one in large parts. In some cases, however, standard functionalities had to be adapted or extended or even completely new functionalities had to be designed and implemented. It was and is crucial for the timely achievement of objectives that standard functionalities are introduced quickly and that they exhibit stable and high-performance runtime behavior – a decisive advantage of standard software. In the second step, however, it is essential that the “standard” is flexible and responsive to necessary adaptations and enhancements so that the system processes can promptly follow the sometimes very specific requirements of the operational business model. It is therefore important to combine the standard and the customer-specific requirements in the best possible way. Following this guideline, the combination of very efficient and integrative project implementation at Hama to identify and initialize the need for adaptation and to control and monitor the implementation with the high-performance process model for software development (SCRUM) at SCT GmbH proved to be extremely effective. Hama has given the project a high priority in terms of personnel and capacity. Stakeholders from all areas of the company and the future users were closely involved in the project from the very beginning. Regular, prompt and close communication between the Hama core team, the stakeholders, the DISKOVER users, the consultancy (Abels & Kemmner) and the development department (SCT) ensured at all times that the customer’s expectations and requirements were incorporated into the implementation process at the right time and with the right priorities. To this end, the many different implementation points were combined block by block into sequential (in terms of time and content) go-live phases and fed into the development process. The methodology of the SCRUM process model in development – starting with the requirements analysis through to the final step, the installation in the productive system – ensures that the implementation of adaptations can be realized on schedule and with high performance and strict compliance with internal and external quality assurance requirements. Flexibility and responsiveness were also particularly important because some requirements changed significantly during the course of the project due to the overall complexity of the subject matter and content. A lack of adaptability in the software and / or the development methodology would inevitably lead to major disruptions and delays in such cases.

From standard to flexible customer solution

Hama has adapted and extended the standard functionality of DISKOVER SCO in many ways to ensure that the solution meets the requirements of the Hama business model in the best possible way. Here are three examples of the many other adaptations that have resulted in a significant improvement for Hama in terms of planning quality and planning effort.

Collective order / group disposition

The collective order is a very important and frequently used business transaction for Hama. For this reason, a number of adjustments have been made to the standard system to make the process even more efficient and user-friendly. In the standard system, the collective order is used to bundle the orders for a combination of articles on the basis of MRP groups in such a way that the available transport capacity, e.g. containers or trucks, is used as efficiently as possible. This is the case, for example, if a maximum weight or volume is to be observed or if the transport unit is to be filled to this weight or volume in a range-oriented manner. Various minimum and maximum conditions, e.g. order value or minimum order quantities, are observed. The following adjustments, for example, have now been made based on this standard:

• Conversion of the central collective purchase order functionality of the MRP group system from material to sources of supply, which at Hama consist of supplier name, supplier number and freight type
• Scaled prices, if available, are now also displayed in the collective order result.
• New fields “Container filling” and “Supplier type” support the control of the assignment of collective order functionality to articles.
• Change in the observance of restrictions that define the framework conditions when creating the collective order
• Separate display of the pallet quantity and the number of pallets at the order items
• alternative entry options for the collective order:
  • Collective order via disposition group
  • Free collective order for any article
  • linked collective order with start via an article and offer of the dispo groups to which it belongs
• Checkbox for defining the transfer of the header or item date in the order
• Warning for items that lack master data information for the collective order, e.g. weight, if this is a restriction
• Free combination of planned orders into a total order (without container replenishment)

As with a number of other changes, the adjustments to the collective order also showed that the additional customer benefits were also a gain for the software. For this reason, various changes were incorporated into the new product standard, which was thus able to take another step forward.

Delivery time monitoring and parameterization

In the standard version, DISKOVER SCO takes various time components from the leading ERP system in procurement, which are then assigned to the sources of supply of a material. These components include delivery time, lead time, transportation time and safety time. In addition, a goods receipt processing time can also be assigned to the article. If there is a lack of these parameters in the ERP system, they can also be assigned in DISKOVER SCO, e.g. via the rules that run automatically every night. From the very beginning, however, Hama pursued the approach of being able to parameterize the sometimes very high replenishment times even more precisely and in a more differentiated manner in order to enable a further leap in planning accuracy. The adaptation of the standard consisted of breaking down the existing time components into finer sections and increasing the accuracy of the time components by evaluating the actual times. For example, the delivery time in external procurement was divided into the components production time (of the supplier), transport time to the port, transport time from the port and safety time to the transport time. Furthermore, not only the article-supplier combination should play a role here, but also the combination of article, supplier and freight type. This requirement is obvious when comparing the duration of “by air” and “by sea” procurement, especially for items from the Far East. A very sophisticated multi-stage calculation of actual delivery times depending on the various freight types was therefore designed and implemented, the results of which are used for delivery time parameterization and thus for the automatic and permanent optimal setting of all time components. An example of this is the multi-stage calculation of the transport time from the port. In the first step, the system checks whether there is a sufficient database in the form of a sufficient number of orders for a particular item to make a meaningful calculation. If this is the case, the time is calculated using the median at the level of the supplier, the freight type (in this case “by sea”) and the port of departure. If this is not possible because the information on the port of departure is missing, the calculation is carried out at supplier and freight type level. If this does not work either, the next stage is the calculation with the combination of supplier country and freight type. There are further calculations which, for example, consider the combination of supplier country and article type if the required detailed information is missing. It goes without saying that, for example, new items are treated differently and various calendars are taken into account. As a result, Hama is now in a position to optimally parameterize all time components at any time through very fine delivery time monitoring and to use deviation analyses (target/actual comparisons) for supplier discussions. In addition, the fine decomposition of the procurement time sequence enables a correspondingly fine tracking of open orders by identifying the individual phases of the order from the time of ordering to goods receipt in DISKOVER SCO, thus greatly increasing the transparency of the respective receipt elements and thus the current supply situation.

The fact that Hama also carries out this refinement and automatic determination of the time components for the internal supplier “Production” is almost superfluous.

Planned order status and release workflow

As part of the MRP run, DISKOVER SCO generates planned orders / order proposals as standard, which the planner then checks with regard to quantity and date, adjusts if necessary and then commits. Firming means that this planned order is no longer changed by the system and that it is ready to be uploaded to the ERP system. This standard functionality does not go far enough for Hama. For a variety of reasons, an order proposal may only undergo changes after a considerable delay and only then be processed in the ERP. One example of these reasons is supplier inquiries. Hama has more than one active source of supply for various items and, in addition to attributes such as delivery reliability and quality, price naturally also plays a role when selecting a supplier for an order. Orders, which usually consist of several items, are therefore requested from different suppliers. This process of inquiry with subsequent feedback and processing of the responses usually takes longer than one day. As a result, the planned orders, which would otherwise be discarded and recalculated by the MRP run during the night, have to be “parked”, so to speak. Hama has now taken this process into account through an adaptation and, building on this, has also incorporated an automatic check of various economic criteria, which is supported by DISKOVER SCO in the sense of a workflow. Each planned order (PLO = Planned Order) now has the additional attributes “PLO status” (e.g. supplier request), “PLO upload status Y/N” and “PLO release Y/N” in addition to the “fixed Y/N” indicator. The first two new attributes control the planning management of an article and the transfer to the ERP system. The latter in turn depends on the PLO release status. For this purpose, if the PLO status has been set to “planning checked”, the system checks the value of the order and the order item, the statistical stock range of the order item, the statistical and planning range of the item at the time of ordering and the range of the item after receipt of the ordered quantity. If these key figures are within the permissible corridor, which can be parameterized flexibly, the PLO release automatically changes to Yes. If at least one of the criteria leaves the permissible range, the PLO release remains at No and thus also the PLO upload status. In a DISKOVER SCO report, these cases can be displayed, checked and, if necessary, released after modification.

Hama and looking ahead

By implementing a flexible DISKOVER SCO standard, Hama has been able to further improve planning efficiency, transparency and quality. At the same time, however, Hama is constantly striving to identify further opportunities for improvement and to make these available on the system side where necessary. The topic of flexible standards, which, like the planning processes themselves, must be agile and responsive to the dynamics of market and customer requirements, will be a close and constant companion for the future. Initial further conceptual approaches are being developed, for example, in the thematic area of:

• Multi-site order management (network or cross-site planning)
• Sales forecast module for creating and tracking business planning
• Planning use of POS (point of sale) data to increase forecast quality and reduce the above-mentioned return effects as a second relevant material inflow stream
• Implementation of a disposition cockpit approach to further increase transparency and support decision-making

The “flexible standard”: not a contradiction in terms, but an essential requirement for efficient and high-performance system support, without which, given the speed and rate of change of today’s market requirements, you could quickly find yourself sidelined.

By Dipl.-Kfm. Armin Klüttgen