1. MSc. Supply Chain Consulting Project
Improving ESB Networks’ Inventory Management Processes
Rob MacDonald, Sean Prenderville, Mohamed Faizal Batcha & Yashpal Morey
Company Analysis
Market Analysis
• Competing electricity suppliers:
• Wholesale market competition has increased, due to ongoing
regulations since 2000
• Malaysian electricity suppliers Tenaga Nasional Berhad were researched
as a “best practice” company in the industry
Issue Analysis
• 9,000 SKUs (3,000 active at any time)
• Inaccurate forecast of materials
• Too much manual intervention interrupting SAP automation
• Information gaps
Current inventory process
Recommendations
Short term: Improved usage of excel
Step 1: Step 2:
Step 3:
Step 4:
• Founded in 1927 with the passing of the
Electricity Supply Act
• Sole provider of electricity distribution
system in the Republic of Ireland
• Maintenance of 235,000 transformers,
160,000km of LV/MV/HV cables
• Operating profit of €780m in 2013
(€365m increase from 2012)
• Employs 7,490 people across Ireland
Random work
programme
orders
Wide range of
lead times
Unpredictable
inventory levels
630
600 604
467
395
420
0
100
200
300
400
500
600
700
2008 2009 2010 2011 2012 2013
CapitalSpend(€million)
Year
ESB Network's Capital Expenditure
Project
1
Project
2
Project
3
Project
4
SAP
Project 1
BOM
Project 2
BOM
Project 3
BOM
Project 4
BOM
Usage
Factor
Projected
Demand/
Forecast
Project list
by the
project
owner and
designer
Project key
in by
project
owner in
SAP
Project
BOM
extract from
SAP by
Material
Manager to
Excel
Usage factor from pervious
usage history and demand
projected by project then
communicated to supplier
IWM MM
Classification of inventory: Quantitative methods
Judgmental forecasting:
Review of forecast error
• Improved accuracy by calculating a more
accurate smoothing constant
Form group
First
predictions
Final
predictions
Group's
judgment
recorded
• Seasonal
regression:
• Exponential
smoothing:
0
2000
4000
6000
8000
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Demand
Time Period
Demand
Seasonally Adjusted
Forecasted Values
Regression Forecast
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Long term:
1. SAP utilization
 MM module
 ABC – inventory optimization
2. Supplier development programme
1. Top management support
2. Long term commitment
3. Strategic goals
4. Effective communication
5. Supplier evaluation
6. Strategic supplier objectives
7. Trust
1. Supplier performance
improvement
2. Buyer-supplier
relations
improvement
3. Buyer competitive
advantage
improvement