my plumbing supply case

8/11/2019 My Plumbing Supply Case

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TEXAS A&M UNIVERSITY

My Plumbing Supply

Connecting the Supply Chain

Natalie Boyd, Jason Martin, John Stansbury & Oracio Valenzuela

4/13/2014


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My Plumbing Supply (MPS) has been a model business expanding into the market leader

of its industry for the US and Canada. Through their rapid expansion they reached most of the

market segment, but did not have a strong presence in the Northwest. The opportunity to acquire

the third largest plumbing supply store presented itself in the late 1990s. Northwest Plumbing

had a strong presence in the Northwest region and had an additional manufacturing plant in

Seattle which would lead to increased production capacity and greater opportunities. The rapid

expansion of MPS led to the firm having a very fast paced environment. The rapid growth and

changing environment can lead to a lack of focus on key business items. MPS has had time to

slow down and evaluate their performance and weigh their options going forward.

The focus of this study will be tracking orders to get clean data on the items that become

back ordered and never sold. The ERP system should be capable of maximizing efficiency,

create cost saving opportunities, and to define the reorder point strategy for MPS. The evaluation

of these items will be critical for MPS to continuously improve, continue to grow its market

share, and grow its customer relationship with its customers.

My Plumbing supply had issues with data tracking which led to lost sales opportunities in

some cases. The direct effect of the undocumented data was backorders; when they occurred

they could not be differentiated in the ERP system which led to greater problems. The Back

orders led to incorrect forecasting because the customer may have desired a product in a certain

period but negotiated for delivery at a later date due to inventory availability at MPS(E-

Distribution). Forecasting at MPS is done by previous years sales and therefore skewed if the

numbers are overstated. Segregation of the sales data into categories such as back orders will

greatly benefit the firm; the data can be used to for analysis on why an item is not readily

available when it should be. Tracking the data from back orders and the reason that they


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occurred can help management make decisions that will eliminate or reduce the risks associated

with the backlog of orders.

Back orders can be tracked using general reasons in separate categories in order to help

measure actual demand surges due to the customer. One way to have effective backorders

without wasted efforts is to, Add backorder constraints for changing demand priorities,

(Enhancing). If thresholds are set for when a backorder is acceptable then the company can

receive the benefits of still possibly making the sale. Consistently track the backorders so that the

data is beneficial for the firms future use. Thebreakout of the backorder categories will be

crucial in order to manage the different variables involved with the demand pattern, it will help

define the actual demand when used properly. A process must be developed to keep the data

tracking consistent, once the parameters have been defined, it will be easy to know which data is

useful and how to use it to improve the companies performance and customer relationship.

Data tracking is crucial to the firm, in order to properly keep track of the data and

properly interpreting it comes through the use of your ERP system. ERP systems can vary

greatly depending on what they are used for among different firms. When new markets or

opportunities present themselves a business must always debate on implementing a completely

new ERP system or using a bolt-on for these new business ventures. Forecasting and inventory

planning are two of the most important areas of the business and the impact that poor planning

has on these areas can sink a business. Bolt-on upgrade can be very beneficial if the current ERP

system is compatible with it. The pros to having a bolt-on is that it is cheaper than starting over

from scratch, they also are specifically tuned to uniquely interpret the data that is captured

because incorporate numerous features that are considered best practices (Charles). They are


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added to provide increased functionality and efficiency to the enterprise system as part of a

continuous improvement strategy/program, helping create a culture to support growth (Charles).

However there are also negatives associated with the bolt-ons such as the unknowns.

They could not be completely compatible with the ERP system which can create disconnects and

wasted efforts if there is not a workaround. Another concern is the set of available bolt-ons is

extensive; and one issue of concern is the value/benefit these different types of software provide

to a firm, there has to be a way to measure the short and long term benefits of the

implementation and this is not always available to track (Charles). If the company is not

considering getting bolt-ons then they are looking to get a new ERP system all together that

captures the requirements that are required. One of the benefits of a new ERP system is that you

are getting the latest technology available. You can choose the options and features you want to

implement since you are revamping the whole process. Another benefit is that you can reinvent

some of your wasteful processes by changing how they are done with the help of the installation

of the new system. Depending on you industry a new ERP systems may fit some

organizations better than others leading to greater benefits (Thomas). One of the cons with ERP

systems is that they are highly standardized systems. They typically employ a single logical

database for the entire enterprise (Thomas). They are also very pricey and use many company

resources and also typically very time consuming for a firm because all processes must be

mapped out and programmed into the system.

The best option for MPS to implement would be using bolt-on for enhancements in

forecasting and inventory planning because they have already shown great advancements with

their current systems. The problem they face is deciphering the data, so they need to focus on

getting software to help them track the data with more integrity. The company is looking to


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better serve their customers by having a forecasting system that will help them meet demand

without carrying too much inventory. Bolt-ons can be utilized at any time with fewer resources

and since they are used for specific reasons tasks they are the better choice for MPS.

Forecasting demand is crucial to a business and no firm can consistently get it right all

the time, so they carry inventory to eliminate the risk of losing a sale. With the inventory strategy

comes the question of which type of reorder strategy will be used for the company. Static reorder

points are simplistic and do not change, they are set so that when inventory reaches a set number

you reorder and wait for the items to sell until you reach your reorder point again. They are

beneficial when you have a smooth constant demand because it is easy to forecast when you will

need more inventory to service your customers.

The benefits of a dynamic reorder point are the cost savings associated with inventory

levels for seasonal items. The relationship that is formed with the customer while studying their

buying habits so that you can better serve them and change your reorder point level according to

the demand that they are producing. The best option for My Plumbing Supply at this point would

be a dynamic reorder point because of the seasonality of the demand. There is no need for them

to maintain the same reorder point year around if the demand changes, they need to further study

the demand of the customer and carry order at higher levels when the demand is climbing

upward and lower their order point when demand is slowing. The implementation of the dynamic

order point will force them to continuously improve and find ways to clean up their data

collection and use the information that is available to make decisions that keep MPS an industry

leader along with growing their customer base.


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Resources

Charles A. Watts, Vincent A. Mabert, Nathan Hartman, (2008) "Supply chain bolt-ons:

investment and usage by manufacturers", International Journal of Operations & Production

Management, Vol. 28 Iss: 12, pp.1219 - 1243

Edistribution. F. Barry Lawrence. Daniel F. Jennings. Brian E. Reynolds. Copyright 2003 by

South-Western, a division of Thompson Learning.

Enhancing mathematical programming models to account for demand priorities increasing as a

function of delivery date. R. John Milne, Chi-Tai Wang Journal of Industrial and Production

Engineering Vol. 31, Iss. 1, 2014

Thomas F. Gattiker, Dale L. Goodhue, Understanding the local-level costs and benefits of ERPthrough organizational information processing theory, Information & Management, Volume 41,

Issue 4, March 2004, Pages 431-443, ISSN 0378-7206

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