Inventory is a significant and visible asset in many companies. Money tied-up in inventory has a negative impact on

profits while stock-outs represent a serious threat to business revenue and customer satisfaction. Moreover, concrete plants often operate independently and just serve the customers within their region. A smart network, however, would allow concrete producers to tap the full potential of the entire organisation: shifting resources where required, preventing stock-outs in some locations and oversupplies in others.

When you enter the world of supply chain management (SCM) you will encounter a number of acronyms, synonyms and buzzwords. Common approaches are vendor-managed inventory (VMI) and material requirements planning (MRP). They both have three simple targets:• Materials are available for production and products are available for delivery to customers.• Material and product levels in store are as low as possible.• Purchasing, manufacturing, and delivery schedules are as accurate as possible.

VMI and MRP based on static order book information is a widely-used but too often insufficient method since it does not reflect the dynamics of the concrete

business. Production and transport plans are affected by high demand variability due to last-minute orders, cancelled or delayed jobs, long truck waiting queues, truck or plant breakdowns, etc. Inbound material haulage is less time critical, but given the heavy traffic during peak delivery hours those inbound trucks further aggravate onsite congestion problems.

Figure 1 shows a simple example of a corporation with a planned daily output of 5000m3 concrete. Based on an average of 8m3 of concrete per delivery, 625

trips to customer sites are required. To replenish the material needed for this concrete output, 500 trucks of aggregates and 54 trucks of cement will have to be dispatched to the ready-mix plants of the company (based on a standard mix with 300kg cement/m3 concrete and an average of 20t of aggregates and 28t of cement per delivery). If concrete demand drops or rises by 10 per cent, a total of 55 inbound deliveries (50 aggregates and five cement haulages) are either missing or not needed for the production process.

To break down the ‘silos’ across the entire supply chain, a new concept called ‘material replenishment process’ (MRP) offers help. It combines conventional inventory planning strategies with intelligent transport optimisation software and integrates real-time information from the road into the stock level replenishment schedule – making it more accurate.

The two basic ingredients for such a process are an existing corporate-wide enterprise resource planning (ERP) system and the integration of an intelligent optimisation software for transport planning (see panel).

IStreamlining supply by Thomas Bergmans,Dr Paul Flachskampf and Dirk Schlemper,INFORM GmbH, Germany

Maintaining adequate cement bin capacities and aggregate stockpile levels is important for any concrete producer. Inbound raw material hauling and stock level planning is often only based on order book information while outbound concrete deliveries are coordinated by means of a transport planning software based on real-time information. Combining both into a material replenishment process can streamline the entire supply chain.

SUPPLY CHAIN MANAGEMENT

JUNE 2015 INTERNATIONAL CEMENT REVIEW

The material replenishment process can optimise a concrete producer’s

transport and inventory system, making for an improved supply chain

Figure 1: inbound deliveries vs 10 per cent concrete demand variability

*Planned concrete output: 5000m3/d standard mix with 300kg cement per m3 concrete.(Based on average of 8m3 concrete, 20t aggregates and 28t cement per delivery)

Ordered vsActual demand

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SUPPLY CHAIN MANAGEMENT

INTERNATIONAL CEMENT REVIEW JUNE 2015

Material replenishment processAn ERP system forms the administrative backbone of many businesses. It is used to manage and share information throughout the entire organisation, including manufacturing and inventory data. If real-time information from the optimisation software is fed back into the ERP system, operational planning and logistics decisions can be combined into the material replenishment process (MRP). The process itself can be broken down into five steps (see Figure 2):1. The ERP system sends the current concrete order book to the optimisation software. 2. The optimisation software uses this data to generate an optimised concrete transport plan to the customers’ sites which minimises delays and maximises truck utilisation. 3. Every 5-15min this optimised plan is fed back into the ERP system to communicate the concrete demand. 4. The ERP automatically generates replenishment orders for cement and aggregates based on the optimised concrete transport plan, concrete BOM (Bill of Material) and stock levels. Orders are automatically sent back to the optimisation software.5. Based on these replenishment orders the optimisation software will then create an optimised transport plan for cement and aggregates from the quarries, depots and cement factories to the concrete plant.

For simplicity reasons Figure 2 just shows one depot, one cement plant and one ready-mix plant, but this configuration is capable of working with multiple depots, quarries, and plants.

MRP at workTo gain a better understanding of how MRP works in practice, let’s take a look again at the example in Figure 1. The preplanning function of the optimisation software allows schedulers to analyse the concrete order book, prioritise orders according to business needs and to complete all data on vehicle availability for the next day or shift. The software uses this information to calculate an optimised concrete delivery schedule and fleet configuration for the following day – incorporating the service levels selected by the scheduler. In this case a total of 625 trips to concrete customer sites will

be required. Based on the replenishment orders from the ERP system, the optimisation software will also calculate an optimised cement and aggregate delivery schedule – 1179 in total for both inbound and outbound.

Next day or shift, production and haulage operations commence as planned. As soon as an unforeseen event occurs, eg, traffic jam, ad-hoc orders or order modification, the real-time optimisation function of the software reschedules all concrete orders and deliveries within a few seconds. The ERP receives an update every 5-15min and updates the replenishment orders accordingly. All inbound deliveries are then rescheduled by the optimisation

software to avoid unnecessary traffic during peak hours, to prevent oversupplies or stock-outs, and to maximise truck fleet utilisation.

Synchronised decisionsAll plans are constantly adjusted throughout the day, giving all departments within the organisation a real-time, consolidated picture of the current demand. The MRP represents a closed-loop control system that helps making synchronised decisions, avoids risking stock-outs but still prevents excessive stock levels or wasting inbound transport productivity.

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Intelligent transport planningTransport plans for cement, aggregates and concrete usually have a limited shelf life. Due to the daily challenges, schedulers and dispatchers are forced to review and adjust their planning decisions constantly – right up to the moment before execution.

Conventional transport planning software can be a practical tool for the daily routine. It automatically copies order data from the ERP system, provides user-friendly graphical interfaces to help assigning loads to trucks, calculates schedules and trip times and visualises routes on maps. GPS telematics components can also track truck position and delivery status in real-time. But with a large truck fleet on the road, numerous production plants and delivery sites spread across a wider region, huge data volumes have to be handled to find a set of good routes. The human brain is not up to this sort of challenge. Even experienced schedulers and dispatchers are stretched to their limits, if they only work with software that does not have its own intelligence.

A giant leap forward in planning technology is the use of intelligent optimisation software packages. They are equipped with algorithms that analyse a virtually endless number of scheduling decisions in real-time and identify those that are ideal for minimising costs and maximising service quality – based on the business criteria defined. Case studies from the industry show the enormous potential: the number of trucks in use can be reduced by up to one third, empty mileage can drop by almost nine per cent and the number of loads per truck per day can increase by 45 per cent. With the right set-up, optimisation software like INFORM’s SyncroTESS has achieved a positive return on investment (ROI) within less than 12 months.

Figure 2: the material replenishment process

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