Discover how Satuerca Group enhanced their inventory management and production efficiency using DDMRP, leading to substantial reductions in lead times & stock levels.
This case study was written by the Demand Driven Institute.
Most often, inventory management methods are dictated by the principles of the IT system a company uses. Typically, this is the MRP, which became widespread in the 1980s. Most MRPs today are outdated, as they have not changed much since their inception.
Since 2012, the DDMRP methodology has been gaining popularity. This is an innovative technique that focuses on real demand. DDMRP helps a company:
Xabier Tudanca, Director of Purchasing and Logistics at the Satuerca Group (SAT), presented his experiences with DDMRP and Intuiflow at the Demand Driven World Conference. This conference focused on Supply Chain Management in manufacturing and distribution companies.
In this article, we’ll review the specific production processes that SAT relies on, why the company needed a new inventory planning tool, and what it has achieved with DDMRP.
SAT was founded in 1967 and now is currently engaged in horizontal forging (parts between 50 g-2 kg) and machining. Product range includes bearings, gears, clutch bodies, cams and special nuts. The company’s main customers are Renault, Volkswagen, and other well-known automotive businesses.
Hot and semi-hot forging of a variety of steel pieces takes place in the SAT factories. Two of these factories are in Spain and one is in Romania. Factories have a fully integrated manufacturing process from raw material to finished product.
The distribution of SAT products covers countries across Europe and the United States.
SAT’s production facilities include:
Technical characteristics encompass:
The company’s sales for 2012 amounted to 31 million Euro. For 2013, sales rose to 35 million Euro, and in 2014, 39 million Euro. From year to year, SAT’s top management faced a situation where customer forecasts/orders were varying even on the due date. There were delays and shortages of raw material deliveries, over stocks of finished products.
The company needed an inventory management tool that would manage this information on a daily basis:
Until 2012, planning was dependent on a single managers’ analysis, then from 2012 to 2013 Excel was used. Since 2013 until present day the company’s top management has decided to manage inventory using the DDMRP methodology.
After analyzing the demand and the frequency with which it occurs, SAT set the following tasks:
To execute this Demand Driven transformation, SAT took the following steps:
Strategic inventory positioning involves the process of placing production stocks at strategic locations in the supply chain, from raw materials to finished products. At this stage, it is possible to achieve a lead-time reduction, as well as to replace all data based on an inaccurate forecast.
Demand driven buffers help protect supply chain flow against variability and uncertainty. Profiles are divided:
Level determination involves setting the level of replenished parts in the buffer. During the implementation, the following levels were established:
Buffers are updated automatically, at least once a day (without management intervention), as well as routinely (with changes in seasonality, promotion, and others).
The Planning Managers must be aware of any extraordinary product change in order to be able to indicate such changes in the buffer parameters. In addition to this, they must review the behavior of the buffers periodically whether readjustments are necessary.
Based on demand-driven planning, managers have a clear vision of demand and quantity of production.
For planners, it is important to track purchase orders that require special monitoring. SAT processes 60 different raw materials. At this point of the project, the control of the supply of six goods was required, plus seven in the near future. Thus, the manager’s focus was on 18% of SKU.
To develop the most effective strategy for working with customers, these items were divided into four groups, with individual parameters:
CUSTOMER “A”
CUSTOMER “B” Forging and Machining
CUSTOMER “C”
CUSTOMER “D”
Since September 2013, the company has been using the DDMRP methodology and Intuiflow to manage inventory. Working with Intuiflow, the company achieved:
The best results were achieved by customer B group.
Let’s talk about the customer B group problems before DDMRP implementation:
Bad forecasts meant that stock was out of control, what was needed was out of stock and the forged parts were no longer required. Both factories had urgent orders requiring immediate response at the same time as the implementation.
It was decided to make a 3-week forecast in advance (instead of 6 months) to start the process of manufacturing forged parts. Now, two weeks later, when the forged parts are delivered to Mecanifran, a new forecast tells us whether the new materials will be required for the next process.
Customer B group results:
“DDMRP has improved the management of both information and material flows in production. The Intuiflow system made our work easier thanks to its simplicity and speed of reaction” – says Xabier Tudanca.
Intuiflow was implemented at SAT by CMG Consultores. Read the full case study.
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