The attached presentation had been presented by 2011, to increase the awareness of our sales and marketing team about the material planning, lead time, and stock out potentials.

1. NALCO SAUDI
Material Planning
Policy, Tools and Issues
Prepared by: Hasan Yousef

2. Policy implemented
at Nalco Saudi to
Control Inventory
Prepared by: Hasan Yousef

3. Current Process Overview
– SSL: Safety Stock level; is set-up in iScala, as Demand during lead-time (16 weeks)
• Demand / Consumption rate inputs of SSR are
– SSR form,
– Forecast (supersedes all SSRs),
– Bucket tool,
– iScala MRP is run and provide exceptions action list, which could be:
• Expedite,
• Release,
• Forward,
• Backward,
• Delete.
– NEW POs are made based on the iScala proposals (Expedite and Release) only
– POs are monitored “as much as possible”, to ensure supply is in-phase with demand.
Prepared by: Hasan Yousef

4. Supply-chain view
New Purchase order is raised
once the Inventory Position fails
short of the SSL
Sales and Marketing view
New purchase order is received
once the Physical Stock fails
short of the SSL
What is the SSL
Prepared by: Hasan Yousef
Supply Rate
SSL
Demand Rate
Inventory
Position
=
SOH
+
Incoming POs
–
Opened SOs

5. Forecast Input:
Yearly demand: 12 tons
Supplier Input:
Lead Time: 4 months
iScala Input:
SOH: 4.3 tons
No Opened Sales
Orders,
No Opened Purchase
Orders.
ASSUMPTION:
FLAT Consumption
Sample Date
Sample Date
Max Inventory = EOQ
Average SOH = EOQ / 2
0
1000
2000
3000
4000
5000
6000
SOH Opened Pos Inventory Position
How Demand During LT works
𝐷𝐿𝑇
Prepared by: Hasan Yousef

6. Tools used by NS
Material Planner to
Control Inventory
Prepared by: Hasan Yousef

7. NS Material Planner Tools
• iScala MRP action list report
• iScala Planning list report
• NS Shortage Report
• iSQD – Planning tool
• iSQD – Opened PO’s
• NS PO’s Tracking
• Material Simulation
• NS BOM Extractor
• Continuous review; EU export team meeting and
Web-sites (BDP Smarts, Metro Website, shipping
companies tracking web sites)
Prepared by: Hasan Yousef

8. NS Material Planning Tool
MRP Action List
Planning List / NS
Shortage Report
iSQD Planning Tool
iSQD PO’s / NS PO
Tracking
Material
Simulation / NS
BOM Extractor
Close Monitoring
• MRP exceptions / Action list will be discussed at the last part of
the presentation,
Prepared by: Hasan Yousef
• Further steps are required after converting the PO proposal to PO,
and before sending it to the supplier, as we need to MANUALLY
enter:
– Instructions to suppliers, and
– Chemical contains for customs purposes for each line after so many “tabs”

9. NS Material Planning Tool
MRP Action List
Planning List / NS
Shortage Report
iSQD Planning Tool
iSQD PO’s / NS PO
Tracking
Material
Simulation / NS
BOM Extractor
Close Monitoring
• Objective
– Providing an overview about the item demand/supply situation, and
when shortage is expected
 This tool needed to be checked for each item individually, then more
analysis is required for the RAWS to check the raw shortage effect on
the YSLD.
 Provide overview for all existing sales orders only
Prepared by: Hasan Yousef

10. NS Material Planning Tool
MRP Action List
Planning List / NS
Shortage Report
iSQD Planning Tool
iSQD PO’s / NS PO
Tracking
Material
Simulation / NS
BOM Extractor
Close Monitoring
• NS Shortage Report Objective
– Providing an overall view about the shortages affecting the existing
sales orders in term of the RAWs and there effect on the related YSLD
in a friendly manner to facilitate decision making and action plans.
– Improving the short term plan by having a clear look about what can
be produced, and what can not
 This report is provided in a weekly bases.
 Provide overview for existing sales orders required to be delivered
within 2 months.
Prepared by: Hasan Yousef

11. NS Material Planning Tool
MRP Action List
Planning List / NS
Shortage Report
iSQD Planning Tool
iSQD PO’s / NS PO
Tracking
Material
Simulation / NS
BOM Extractor
Close Monitoring
• Objective
– Providing an overall view about the items sharing the same MIN.
 A very helpful tool, that help the planner to:
• Validate MRP outputs,
• Re-label or repack from an item to another to deliver the order without delay,
• Catch easily any Qty in the QA warehouse to check its revalidation possibility
before creating new PO.
Prepared by: Hasan Yousef

12. NS Material Planning Tool
MRP Action List
Planning List / NS
Shortage Report
iSQD Planning Tool
iSQD PO’s / NS PO
Tracking
Material
Simulation / NS
BOM Extractor
Close Monitoring
• Objective
– Getting an updated status of our PO’s, and avoid last minute shortage.
 The iSQD opened POs report, is providing an indication about the late
shipment arrival, after the shipment be late.
 The PO tracker trying to catch the potential delay of the shipment
arrival in an advance stage in order to get a time for corrective actions
to take place
 iScala team is trying to integrate the concept used in NS PO tracker
into iScala.
Prepared by: Hasan Yousef

13. NS Material Planning Tool
MRP Action List
Planning List / NS
Shortage Report
iSQD Planning Tool
iSQD PO’s / NS PO
Tracking
Material
Simulation / NS
BOM Extractor
Close Monitoring
• Objective
– Getting the extracted RAWS of the YSLDs in one shoot, instead of
checking them individually in iScala, so that the following get done
faster:
• Extracting forecast to RAWS, and calculated 16 weeks demand accordingly
• Shortage Report,
• Checking material availability of a set of products in one shoot instead of
using the iScala “Mat. Avail. Test, Simulation” in multi-times
 Subjected to give wrong output due to in-homogeneously setup of
some items, as some packages are defined as “manufactured” and
other packages for the same item are defined as “Purchased”.
Prepared by: Hasan Yousef

14. NS Material Planning Tool
MRP Action List
Planning List / NS
Shortage Report
iSQD Planning Tool
iSQD PO’s / NS PO
Tracking
Material
Simulation / NS
BOM Extractor
Close Monitoring
Prepared by: Hasan Yousef
 A weekly meeting is held up with Nalco EU export team to solve any
building issue, and ensure PO’s are on track.
 Whenever required a call is made with Nalco US and/or 3rd part
suppliers.
 BDP Smarts, Metro Shipping and other shipping companies are
checked regularly to track NS Bill of Ladings.

15. Improvements
required by NS to
Control Inventory
Prepared by: Hasan Yousef

16. Terminology
MRP: MATERIAL REQUIREMENTS PLANNING
A system which uses bills of material, inventory and open order data, and master production schedule information to
calculate requirements for materials. It makes recommendations to release replenishment orders to insure availability of
materials. Further, since it is time-phased, it makes recommendations to reschedule open orders when due dates and
need dates are not in phase. Originally seen as merely a better way to order inventory, today it is thought of primarily as a
scheduling technique, i.e., a method for establishing and maintaining valid due dates on orders.
Safety Stock Level / Over-planning / Market Hedge
(1) A quantity of stock planned to be in inventory to protect against fluctuations in demand and/or supply.
(2) The average amount of stock on hand when a replenishment quantity is received.
(3) In the context of Master Production Scheduling, additional inventory and/or capacity planned as protection primarily
against forecast errors and/or short term changes in the backlog.
Order Point / Re-Order Point / Trigger Level
The inventory level at which action is taken to replenish a material. The order point is normally
calculated as forecasted usage during the replenishment lead time PLUS safety stock
ROP
includes SS
Prepared by: Hasan Yousef

17. Risk
Inventory Lead-time
Uncertainity
Customs
Delay
Demand
Uncertainity
Out-off spec material
found in NS
Expired material
arrived
Customs
clarifications
Conflict in country of
origion
Missing documents
Unforecasted
orders
Uneven consumption
rate
NG orders
Unrealistic
requested ETA
Fake confirmed
ETA
Uncontrolled
LCL orders
Safety Stock required to overcome
uncertainties
Prepared by: Hasan Yousef

18. Safety Stock required to overcome
uncertainties
Prepared by: Hasan Yousef
What IF.
• .. Material did not arrive on the
proper time due one of the
mentioned uncertainties.
• .. More than one of the
mentioned uncertainties
occurred simultaneously.

19. ROP and Safety Stock
Prepared by: Hasan Yousef
Mathematics
𝑅𝑂𝑃 = 𝐷𝐿𝑇. 𝐿𝑇 + 𝑧. 𝜎 𝐷 𝐿𝑇
𝑠𝑎𝑓𝑒𝑡𝑦𝑆𝑡𝑜𝑐𝑘 = 𝑧. 𝜎 𝐷 𝐿𝑇
𝑧. 𝜎 𝐷 𝐿𝑇
= Zero
𝜎 𝐷 𝐿𝑇
= 0
𝑧 = 0
𝜎 𝐷 𝐿𝑇
= Zero
• WELL KNOWN FLAT
CONSUMPTION
𝑧 = Zero
• We are providing 50% service
level
Service level z
50.00% 0
84.13% 1
97.72% 2
98.00% 2.0538
99.87% 3
100.00% Can not be achieved

20. ROP and Safety Stock
Prepared by: Hasan Yousef
𝑧 = 0

21. ROP and Safety Stock
Prepared by: Hasan Yousef
Safety Stock Set-up
Statistical
𝑠𝑎𝑓𝑒𝑡𝑦𝑆𝑡𝑜𝑐𝑘 = 𝑧. 𝜎 𝐷 𝐿𝑇
Precaution
Heuristic
Safety Stock Precautions
There is assumption the 16 weeks lead time is the worst
case, so 𝛿 𝐿𝑇 is included.
𝑅𝑂𝑃 = 𝐷𝐿𝑇 + 𝛿 𝐷 𝐿𝑇
. (𝐿𝑇 + 𝛿 𝐿𝑇)
Heuristic Safety Stock
A fixed number like, 1 bulk, 1 month consumption or so is
setup as safety stock
There is assumption the bucket tool proposal is considering
the 𝛿 𝐷 𝐿𝑇
based on the historical transactions.
Which one to be
implemented in
NALCO SAUDI

22. MRP Exceptions
required by NS to
Control Inventory
4
Prepared by: Hasan Yousef

23. Prepared by: Hasan Yousef
MRP Action List
• Objective
– Build-up a real physical stock
– Preventing the Physical Inventory, from failing
short of SSL.
• MRP Proposals
– iScala MRP proposals to achieve iScala MRP
objectives, are matching with “sales and
marketing” understanding of the SSL, not with
the “supply chain” team understanding.
• Sample Data
– As of today Sun Jan 9th, 15:00, we have 201
opened POs lines, MRP Proposals where:
MRP Action
Affected PO
lines
%age of existing
PO lines
Expedite 4
Release 0
Backward 150 75%
Foreward 6 3%
Delete 41 20%
PO was assumed to be
made by:
Today – 3 – lead-time
i.e. before 4 months
SSL
PO should be available:
today
PO should arrive by:
Today - 3

24. MRP Action List
Input Data
• Today: Dec 20th, 2010
• SSL: 19,462 kg,
• SOH: 15,984 kg
• Opened sales orders:
• 100 kg by Dec 25th, 2010
• 500 kg by Dec 30th, 2010
• Opened Purchases orders.
• 3,000 kg by Feb 14th, 2011
• EOQ = 0 for illustration purposes
iScala MRP view
• We have SHORTAGE of 3478 kg (SSL – SOH)
Immediate Actions: Raise SOH upto SSL, by:
• Forward the existing PO to reach before 3 days of
today, i.e. Dec 17th, 2010
• Expedite a new PO of: 3478 - 3000 = 478 to reach
before 3 days of today , i.e. Dec 17th, 2010
Other Actions: Create new PO’s so that “due date” be 3-
days before the confirmed delivery date of the existing
sales orders, i.e:
• Release a new PO of 100 kg to reach 3 days ahead of
the required date, i.e. by Dec 22nd, 2010.
• Release a new PO of 500 kg to reach 3 days ahead of
the required date, i.e. by Dec 27th, 2010
 Total proposed Qty of new orders = 1,078 kg
Supply-chain view
• We have EXCESS stock
(DOS = 92 days).
• Proposed order Qty: 1,078 kg
• Proposed ETA: Apr 10th, 2011
Prepared by: Hasan Yousef

25. MRP Action List
Prepared by: Hasan Yousef
iScala MRP “TUNED” output
Required Quantity:
• NEW PO is sent with a consolidated Qty of
all the “Expedite” and “Release” iScala
proposals.
Requested Delivery Date:
• A TWO months lead-time is given.
What about other actions:
• Forward, Backward and Delete proposals
are ignored.
Our response for changing order “need-by” is
not easy due to the long transit period which
could be reach 50 days in some cases.
We need to see a further step, about WHEN
THE ORDER SHOULD ARRIVE in a way
ensure supply is in-phase with demand.
The current benefit we are getting from
iScala MRP is just HOW MUCH TO BE
ORDERED…

26. Prepared by: Hasan Yousef