Effective inventory management is a critical element of supply chain success. To meet demand and minimize costs, an increasing number of manufacturing companies are pursuing a hybrid production approach that combines make-to-stock (MTS) and make-to-order (MTO) strategies. Although this hybrid production paradigm – which merges MTS (utilizing demand forecasts to determine levels of production and inventory) and MTO (manufacturing an end product only after a customer places an order) methodologies – seems sensible in theory, it is challenging in practice as it requires superior supply chain visibility and agility.
Çelik Halat – International leading manufacturer of steel wire and ropes, industrial galvanized wires, industrial spring wires, bead wires, and concrete beams with an annual production capacity of approximately 45,000 tons and an export network extending to more than 40 countries – adopted this hybrid production approach, and was consequently experiencing difficulties in managing its internal supply chain.
Operating in this hybrid MTS/MTO manufacturing environment, the planning team at Çelik Halat was struggling to generate feasible schedules that would harmonize the two dramatically different production strategies and enable the company to lower costs while raising on-time delivery rates and customer satisfaction.
The crux of Çelik Halat’s planning problem was the difficulty in maintaining optimal inventory levels at its manufacturing facilities, given its mixed production system. MTO production does not require inventory to be held as goods are produced to order and adapted to meet individual consumer specifications, while MTS production necessitates that a certain amount of inventory always be kept to meet forecasted customer demand.
Equipped with only pre-set inventory policies, Çelik Halat’s planners were unable to effectively manage inventory levels and were constantly facing surpluses and shortfalls – and corresponding spikes in inventory and production costs. In order to be able to precisely determine how much intermediate product inventory had to be kept ready for current and potential orders and to be able to create production plans that optimized inventory management, the planning team needed to gain visibility over Çelik Halat’s internal supply chain. Additionally, Çelik Halat’s planning team was also unable to accurately determine due-dates for potential orders and achieve on-time deliveries for existing orders. This was resulting in suboptimal customer satisfaction levels. To satisfy these business requirements and improve its overall supply chain agility and profitability, Çelik Halat needed to implement a platform which would provide the optimization of decision making process.
Çelik Halat selected ICRON to provide an Optimized Decision Making solution that would enable the steel wire and rope manufacturer to generate plans that optimized its production and inventory management processes. ICRON adapted its powerful and flexible Optimized Decision Making platform to suit Çelik Halat’s specific needs, and seamlessly integrated the new solution with Çelik Halat’s existing ERP ecosystem. With ICRON’s Optimized Decision Making solution, Çelik Halat’s planners gained:
- Greatly enhanced visibility and control over their entire internal supply chain.
- The capability to devise production schedules that harmonize the MTO and MTS processes and optimize resource utilization, inventory management, and overall manufacturing performance– and thereby reduce operating and inventory costs.
- The ability to conduct what-if analysis to compare various scenarios and develop long-term plans.
- The capability to determine reliable due dates for future orders and accurately track current orders in production to increase the company’s on-time delivery rate and customer satisfaction levels. The implementation of ICRON’s Optimized Decision Making solution at Çelik Halat was a part of a broader initiative undertaken by the manufacturing firm to boost its efficiency, which resulted in an increase of its net income from 10% to 15%.