For the past seventeen years Ultriva by Upland has implemented successful supplier eKanban programs.
Within the four walls of a manufacturing plant, manual shop floor Kanban systems are common practice, yet manual supplier Kanban systems are much more rare. According to Nandu Gopalun, “There is difficulty when trying to scale a manual visual Kanban system beyond the four walls of the plant. The operational and financial benefits of supplier Kanban are so great that manufacturing firms are quickly adopting electronic supplier Kanban systems, supplier eKanban, as the answer to supplier Kanban needs.”
Ultriva customers know best after implementing the industry standard SaaS supplier portal solution.
The top benefit is the elimination of excess inventory in the supply chain. The largest documented benefit of implementing a supplier eKanban is elimination of excess inventory. Organizations that transition from push or forecast-based material replenishment to pull-based material replenishment supported by supplier eKanban systems routinely realize inventory reductions of 20 to 75%.
Gopalun added, “The best way to build trust with suppliers is to improve communication and collaboration. Traditional methods of communicating with supply chain partners such as email, phone, and fax fall into the category of open-loop processes. Supplier eKanban systems use a closed-loop process where every material replenishment transaction is tracked in real-time from the time the signal is released to a supplier until the time the materials are received. The resulting benefits include improved visibility, better collaboration, improved order fill rates, better on-time delivery performance, and lower overhead costs.”
Stock-outs are the number one cause of expediting and premium freight charges. Supplier eKanban systems improve material availability by proactively monitoring on-hand inventory and alerting the buyers/planners on potential stock-out risks. Simply put, if there are no shortages then there is no reason to expedite. Companies that deploy supplier eKanban report 90% less time expediting and reduced administrative costs by 50%.
Premium freight can increase logistics costs by 50 to150%, or more. Since supplier eKanban prevents the root causes of material availability issues, the result is less money spent on premium freight. “No one ever calls for an ambulance and asks, ‘How much?’ When a shipment needs to be expedited, this same principle seemingly holds true,” noted Greg Aimi of AMR Research. “Urgency becomes the ultimate priority, with the cost factors and other transportation metrics apparently going out the window.”
Gopalun added that in traditional supply chains suppliers have limited (if any) visibility into orders, shipments, and on-hand inventory. They rely on weekly or monthly MRP forecasts which are, more often than not, inaccurate. Supplier eKanban systems drive dramatic improvements in supplier responsiveness by providing real-time visibility of actual consumption through a supplier portal. The supplier portal provides an early-warning system with automated alerts about exceptions in supply chain processes.
Gopalun noted that one of the requirements to implementing a supplier eKanban system is to adopt standard supply chain processes. This includes using standard lot sizes, standard lead times, replenishment signals based on consumption which collectively drive variability out of the replenishment process while facilitating proper Kanban sizing. Also, the standard lot/container size improves the ability for all trading partners to adhere to 5S principles in material storage locations.