Aerospace distributor sorts supply chain

With the help of a Windows-based ERP system, Microsoft Access and some bespoke web-based supply chain visualisation and materials demand software development, Wesco Aircraft reckons it’s reduced its inventory levels by 70% and increased on-time delivery performance from 85% to 98.4%. And it says that’s about to go further, with the benefits being seen not only by itself, but by its suppliers. Wesco is a Huddersfield-based aerospace industry fastener stockist, distributor and service provider – not a manufacturer as such. But the lessons here for manufacturing SMEs and indeed other suppliers wrestling with costs and profitability in opaque supply chains are excellent. The firm employs around 80 people in the UK and turns over £13 million. Six years ago it was just 15 people turning over £2.5 million, and the growth has come from service provision. Matt Greaves, operations director, says that moving to third party stock management (of fasteners and related items) and providing tailored vendor managed inventory (VMI) services for companies like BAE Systems and GKN Westland – and doing it better and cheaper than anyone else – has transformed it. And its success has come not just from being service-focused, although that’s important, nor only from responding to the industry’s move to just in time (JIT) materials provision and inventory and waste reduction initiatives. It’s also come from acting as a conduit to pass benefits both to customers and back down the manufacturing and factoring supply chain. The aerospace sector is far from alone in going for cost-cutting through JIT and lean manufacturing. Direct line-side feed (DLF) has become the norm for high volume, low cost materials, with the familiar mix of minimum stock levels, bins, visual, manual and automatic triggers to get the correct materials to production line operators when they are needed. But in aerospace it’s not that trivial. As Greaves says, “Aircraft are complex, low volume, high variety devices. So they have an engineering BoM (bill of materials), but the manufacturing shop floor BoM, well … it’s a grey area. So they tended to procure against the engineering BoM, but that’s meant they bought goods they didn’t need and didn’t buy what they did need. They were writing off 15—20% of what they bought.” What they needed was to cut out the difficulties of engineering BoM MRP-driven purchase orders, and move to forecast, with ‘automatic’ call-off and delivery to the point of use. And to achieve that cheaply, and without significant stock holding and potentially write-offs on the supplier side, in turn required managing some 50,000 SKUs across multiple sites, communicating usage data, replenishment triggers and trends to Wesco and its supply chain, as well as supporting complex VMI operations. Accordingly, since Wesco was already a basic K3 (formerly Kewill) Micross for Windows (MFW) business IT user, it turned to K3 for an upgrade to the latest ERP system along with custom software to manage stock replenishment triggered by line-side bar code scanners from customers’ remote locations. (Although actually, much is still manual, with Wesco or customer staff providing faxbans, emails and calls.) “Now with our system, we front load [on demand] but then customers only call off what they actually want,” says Greaves. So although there’s still complexity in the variety, related items, rates, destinations and timing, “we can just look at usage, so we don’t need the BoMs.” And the transaction history is held within MFW, which constantly interrogates Wesco’s main Access parts and BoMs database for reconciliation, and is available to all internal users. Beyond that, “We’ve developed a web-based supply chain system that allows customers and suppliers to look at exact stock positions,” says Greaves. “They get to know requirements straight away… It gives true visibility across the supply chain – and provides paperless invoicing because delivery notes and other documents are all scanned into the system.” That was developed in Cold Fusion web programming environment and runs with Crystal Enterprise reports, covering stock on hand, average usage per part, materials aggregated and individually delivered, customer records and so on, with managers able to drill down and see part numbers, status, actions and the rest. “We started supplying fasteners under DLF but this has expanded to bearings, fittings, electrical equipment and items bought-out-to-drawing. Across the business we’re now supporting 45,000 line-side bins which equates to around 25,000 individual line items,” says Greaves. In fact, the firm now carries out around 40,000 transactions a month with the new system, 30,000 under DLF, and the MFW system manages a supply chain comprising £30 million of warehouse stock, of which £23 million is consigned from other suppliers. Total cost of Wesco’s system was around £60,000 including consultancy, training, hardware, software and infrastructure. Greaves says it’s been absolutely worth it in terms of inventory reduction, efficiency and better business – for all parties. And he believes that similar can be achieved in other sectors where stock (right or wrong) is held by various parties due to variability of production and demand and second guessing. “If we can guarantee consistency of delivery by this means we could get that three months [safety stock] down to one… There’s big money in this for manufacturers and suppliers.”