Supply chain diagnostics
For Wessex Cosmetics
Carried out by: SWS www.smartwarehouse.com
Contact no: +44 (0) 7738 528 029

Table of Contents
Executive Summary .................................................................................................................... 3
Project Definition ...................................................................................................................................4
Overview .......................................................................................................................................... 4
Current Findings .......................................................................................................................... 4
Desired Solution .....................................................................................................................................8
.........................................................................................................................................................................9
Vendor Engagem ent ........................................................................................................................... 10
Inventory M anagem ent ..................................................................................................................... 11
S&OP
Project Benefits ................................................................................................................................... 12
Quality ....................................................................................................................................................... 12
Baseline ................................................................................................................................................... 12
Responsibility M atrix ......................................................................................................................... 13
Process Maps ..............................................................................................................................13
Risk ..................................................................................................................................................14
2

Executive Summ ary
This document provides an overview of key areas in the Wessex Cosmetics (WC) supply chain
and logistics operations.
During this supply chain diagnostics SWS have identified areas that require improvement and
change, in order to achieve the project goals.
WC are a profitable SME and leader in their field they have experienced significant business
growth over the last 2 years taking them from annual sales of £24m in 2006 increasing to
£28m in 2008.
This success has put significant strains on the supply chain and has created bottlenecks at
strategic points. Manual systems and processes have failed to develop adequately as the
business has grown; these areas must be enhanced for WC to maximise profitability.
Internal departments are misaligned, there is a poor communication flow, suppliers cause
regular production interruptions due to poor OTIF. Poor OTIF is not all due to suppliers WC are
major contributors providing suppliers with unreliable data.
The recommendations will allow WC to focus on core competencies.
The recomendations will focus on a pull as opposed to a push system, outsourcing some
peripheral logistics functions, which is crucial to the success of the business; the process to
outsource will follow a robust and reliable process.
Based on the findings (which have been validated) we recommend the following changes:
That WC significantly improves internal processes associated with product flow, control and
o
traceability (WC internal project).
Calculate optimum levels of all part numbers setting safety stock, reorder point, lot sizes and
o
target inventory levels in order to hold one days stock on site this one days stock will be
replenished from a local hub so a one day lead time to replenish.
Stock held a local consolidation hub will be supplier owned, will be calculated using the same
o
principles i.e. inventory calculations will apply to set optimum levels of all part numbers,
safety stock, reorder point, lot sizes and target inventory levels the suppliers will replenish
stock at the hub when a signal is send advising stock has reached the reorder point.
Visibility will be provided to suppliers, carriers and WC with the use of a password controlled
o
web application.
Management of carriers and all transport to be undertaken by the preferred provider
o
A monthly S&OP will be introduced with strategic buy in and support.
o
Key areas Current Target
Cash in inventory, raw material, component £2.1m £1m
and packaging
Inventory turns 8 24
OTIF (on time in full) inbound service 78% 98%
Transport £1.2m £960k
Other logistics costs i.e. warehousing, £275k £200k
expediting.
3

Project Definition
Analysis of data and processes reviewed on all areas throughout the Supply chain. Focusing on
key strategies cash saving and improved inventory turns. The current processes to be drafted
into desired solutions that result in a scalable logistics platform.
Overview
During a 4-week period the diagnostic assessment has been completed. SWS met with WC
departmental personnel to walk through each process discussing issues and possible changes
experienced with current practises.
Departments Covered
Senior management
•
HR
•
Sales
•
Production
•
Finance
•
IT
•
Quality
•
Purchasing
•
Logistics
•
Meetings have been conducted and current processes walked through in order to understand
current procedures, processes and any issues that surround the day-to-day operation by
department.
It was identified staff are unable concentrate on their actual day to day duties and roles due to
a great deal of ‘fire fighting’, expediting and undertaking adhoc duties which may not
necessarily be placed within the correct departments or personnel.
Processes and procedures are not followed and most of those that are documented are out of
date.
The following detail lists; by department; areas that we have identified that need reallocation
to either alternative internal department or outsourced, in order to make improvements in
service and performance, save costs and free personnel to focus on their core duties on a
daily basis.
Current Findings
Sales
A successful team and cornerstone to the continued success of WC
•
Advanced understanding of product and trends
•
Current target to pin point new sales
•
Significant sales growth within the past 2 years
•
4

NPI
WC has an excellent reputation for it’s research and development of products for
•
it’s clients
Dedicated team commit to current and new projects
•
This Department is well organised and managed
•
IT
WC ERP is not used to it full capability, in many case not set up correctly
•
Some investment was made and a project started for the internal use of scanners
•
but was abandoned
Limited expertise to utilise system further
•
Production
• Very well presented area of the factory
• Each line is organised and tidy
• Production interruptions are experienced the regular reasons are:
o Stock shortages due to failed supplier deliveries
o Lost/missing stock
o Quality issues with supplier material
• Productivity of lines being challenged to increase
• Production work to a weekly schedule that can change daily due to product
interruptions
• Line changes
• Damages and faulty items cause downtime
• Returns can sit at line side awaiting QA
• Currently implementing 5S and six sigma.
• End of day confirmation of stock built is confirmed on WC ERP to update inventory
totals
Finance
• The department stamps, pays and files invoices
• Manages payroll
• Insufficient reporting available, i.e. No historic information of credits to WC for
supplier quality issues
Purchasing
• Fire fighting every day
• Carriers are sourced and rates agreed and set up by purchasing
5

• The transport is booked by purchasing
• No current record of Supplier OTIF (with the exception of Kanban suppliers)
• Long and rigid process for re ordering Inventory
• Complicated order process
• No S&OP Process
• No clear visibility of transport costs for Inventory sold as delivered.
• No time to have regular supplier meetings
Warehouse
• A manual paper system and XLS is the current warehouse management tool
• This conflicts with the WC ERP Inventory levels
• High levels of stock adjustments regularly happen
• Stock lost between warehouse and factory
• Poor communication across departments
• Stock is split across multiple warehouses
• Some suppliers are pushing inventory into the factory long before the stock is
required to arrive
• Regular weekend overtime is scheduled to prepare kits
• Products that arrive with visible quality issues are not dealt with in a strict SCAR
(supplier corrective action) despite being regularly reported by the warehouse
personnel
Quality
• Formal SCAR process not being followed
• Processes are documented for ISO
• Backlogs can occur with parts requiring testing and rejected parts at production line
side
• A high level of supplier quality defects that need to be managed
• Poor quality of supplier products causes a significant amount of production
interruptions
• There are High quality standards for WC finished goods
Kitting
• Stock shortages
• Missing bins
• Poor communication for material handlers to line side
• Manual process inadequate controls and traceability
6

Kanban
• Freedom to change stock levels
• Team places orders from suppliers
• Manual system for stock in locations
• All kanban suppliers are providing poor inbound OTIF
Despatch
• Despatch arrange transport for finished goods deliveries
• Locate and pick finished goods
The items listed above are some of the key drivers that have influenced the recommendations
made in this proposal.
7

Desired Solution
8

9

Vendor Engagement
10

Inventory M anagement
WC will maintain one day’s stock of all categories of SKU’s on site this will occupy 4,000 sq ft
Simulations will be completed on a regular basis using historical actual usage information to
ensure the optimisation of inventory levels held on site and at the local consolidation hub.
Vendor engagement process to begin with selected suppliers.
During this phase existing replenishement parameters are reviewed and amended following
discussion, simulations and agreement.
WC will have complete visibility of all owned inventory in the local consolidation hub via a
password controlled web site
The algorithms used to calulate the optimum stock levels are designed to ensure the right stock
is in the right place to meet the customer OTIF requirement while minimising inventory costs and
maximising profit at the plant, the model enables the management team to have more control
and flexiblity.
S&OP
Sales and Operations planning meetings (S&OP) to take place each month
OTIF for each supplier to be agreed managed and communicated at S&OP
The S&OP document will include data such as, service metrics, forecast trends and inventory
analysis, NPI and product phase out
The planning process is described as the S&OP process, which is essentially a number of key
steps:
1. 3. 4. 5.
2.
Produce S&OP Review Agree &
Send S&OP
except- distribute
Forecast pack Meeting
ions targets
11

Quality
Supplier Corrective Action Reports (SCAR) process to be implemented for management of
suppliers to the local consolidation hub.
Set up OTIF measurements:
On time delivery – Time of arrival as scheduled
o
In full delivery – By part numbers expected and any stock shortages or over’s
o
Date/day of arrival as scheduled
o
Baseline
The following baseline will allow measurement of the success of the overall project and ongoing
management targets.
Key areas Current Target Saving/improvement
Cash in inventory, raw material, £2.1m £1m £1.1m /48% improvement
component and packaging
Inventory turns 8 24 77% improvement
OTIF (on time in full) inbound service 78% 98% 20% improvement
Transport £1.1m £960k £ 140k /13% improvement
Other logistics costs i.e. warehousing, £275k £200k £75k /27% improvement
expediting.
Project Benefits
Cash savings
•
Improved inventory turns and stock reductions
•
Outbound service improvements
•
Inbound service improvements
•
Increased supplier service
•
Improved visibility and communication
•
Time to focus on core business
•
Other benefits the values currently are not fully quantified
The savings potential for the complete recommendations can be measured a number of
ways, in addition to the baselines set in the savings.
Headcount reduction
•
12

Improved outbound service level
•
Improved relationships with suppliers
•
Reduction in rejected stock and quality issues
•
Reduction is production downtime
•
Reduced stock adjustments (+ and -)
•
De hire of MHE equipment
•
Warehouse charges of a shared facility rather than dedicated site, reducing rent,
•
rates, utilities, vehicles therefore variable as opposed to fixed logistics costs.
Responsibility M atrix
Steering Committee Process Management
Relationship management Daily Vendor Management
o o
Meets quarterly Daily operational performance
o o
Ultimate escalation point Identifies issues for resolution
o o
Contract owner Meets weekly
o o
Meets monthly during implementation Daily operational interface
o o
Business Management Implementation
Local relationship management Interim team
o o
Owns processes Owns delivery of the implementation
o o
plan
Owns business performance
o
Reports to Commercial team monthly
o
Resolves operational issues
o
Meets weekly
o
Meets monthly
o
Process M aps
WC will create and manage a MOP document (Master Operating Procedure) this
document will list account overview, contact details of all parties involved, detailed
documented procedures and processes.
Some of the key areas that SWS are recommending some change have been
documented as process maps.
The processes documented and as follows
Overview of the complete desired process
•
13

Inventory Calculations
•
Inventory Management of Raw Materials
•
Inventory Management Call off Process
•
Raw Materials receiving process
•
Implementation Phase
The next stage:
WC to make the decision to move forward
The baselines detailed in this document need to be agreed.
Cost and charges going forward need to be agreed
Any new supplier or 3rd party contract/LA to be drafted
Project plan finalised and agreed
Project Team allocated
Risk Benefits
A Risk Management Process is a method by which risks to the project (e.g. to the scope,
deliverables, timescales or resources) are formally identified, quantified and managed
during the execution of the project. The process entails completing a number of actions
to reduce the likelihood of occurrence and the severity of impact of each risk.
A Risk Management Process is used to ensure that every risk is formally:
Identified
•
Quantified
•
Monitored
•
Avoided, transferred or mitigated
•
Risks to the project are:
No improvement in controls and procedures at WC
•
Poor communication with suppliers
•
Poor communication internally at WC
•
Lack of time and resource
•
Project team not allocated
•
14