Implementation of the operations related improvements

Based on the given recommendations about the implementation of the solutions, four alternative implementation routes could be used to reduce the variability in the STO and goods receipt processing times. These implementation routes, solutions and the outcomes of the implementations are presented in figure 28 below.

Figure 28. Implementation and outcomes of the operations related improvements.

As can be noticed from the figure 28, the implementation route used to reduce var-iability in the STO processing times depends on the selected solutions. Regardless of the selection, all the implementation routes related to reducing variability in the STO processing times can be used to achieve the same day processing of the STOs in the purchasing department. However, based on the efficiency of the solutions and the difficulty of the implementation, the most recommended implementation route is the route number one as it maximizes the efficiency of the STO processing and the least recommended implementation route is the route number three. In order to reduce the variability in the goods receipt processing times, there is only one

rec-ommended implementation route available as all the solutions should be imple-mented in the right sequence in order to achieve the same day processing of the stock transport item shipments. As a result of the implementations, the STOs and shipments of the stock transport items could be processed during the same day which would help to eliminate the current variability in these operations. This in turn would allow to reduce the lead-time of the process by two days as currently the cycle time for each of these operations is roughly one day as can be noticed from the figure 17 of the chapter 5.3.2. As a result of this lead-time reduction, the replen-ishment lead-time of one day could be achieved for the component material types which currently have three days replenishment lead-time, and the safety stocks of the stock transport items could be further reduced. In order to illustrate the impact of this lead-time reduction on the inventory levels, the new safety stock levels were calculated for the items by using the new replenishment lead-times and comparing the further change in the inventory levels after the implementation of inventory management related improvements of the replenishment policy matrix. Hence, the A sporadic demand class items were left out from the calculations as the purpose with these items was that they could be centralized back to the supplying facilities.

In addition, the items locating in non-domestic facilities were left out from the cal-culations as well as they are not in the scope of the lead-time reduction. Otherwise same assumptions were used in the calculations as before, and the further impact of the lead-time reduction on the safety stocks and inventory is presented in figure 29.

Figure 29. Further impact of the replenishment lead-time reduction on safety stocks.

As can be noticed from the figure 29, the most radical safety stock reduction has occurred with the stock transport items under the component material type where the safety stock has reduced 25 percent. This is due the reason that most of the component material types are currently replenished with three days lead-time.

Hence, the reduction in the lead-time has been more significant than with the other material types, as the finished products are currently replenished with 23 days lead-time and the semi-finished products with 16 days lead-lead-time. Therefore, the impact of the lead-time reduction on the safety stocks of finished and semi-finished prod-ucts is only three percent. In total, the reduction of the lead-time would allow further inventory reduction potential of 49 277 € which in turn would generate following additional savings on the inventory holding costs that are presented in the table 14.

Table 14. Impact of the replenishment lead-time reduction on inventory holding costs by material type.

As can be noticed from the table 14, additional saving potential of 8 870 € in a year could be achieved by reducing the replenishment lead-time by two days. Although the savings are not as significant as the savings that could be achieved by imple-menting the inventory management related improvements of the replenishment pol-icy matrix, the lead-time reduction will allow many other benefits and opportunities that are harder to present in monetary terms. The most important benefit of the re-duced lead-times is the better responsiveness of the case company’s supply chain which would allow to react more quickly to the requirements of the customers. This critical feature of the supply chain in turn is needed to win the customer orders in the currently challenging markets and to ensure the high satisfaction of existing customers. Therefore, the increased responsiveness would help the case company to reduce the amount of lost sales and customers, and the downtime of customers’

operations by offering better material availability and faster delivery times which can be a game changers for the customer satisfaction and customer order decisions.

7 DISCUSSION AND CONCLUSIONS