When building a supply chain system for parts, companies contemplating ERP package implementation face various problems. Supply chains of components are considered easier than the supply chain of products, but in reality, product supply chains face different challenges than parts supply chains, and at the functional level 1 of the fit gap, even if it is judged to be a fit, there are many cases that you fall into a no-fit situation and eventually you are forced to respond with unscheduled customization.
ERP originally developed from production management MRP (material requirements planning) and developed as a system for efficiently managing the overall enterprise resources, so it features very good functionality with regards to the supply chains of products. However with respect to the supply chains of maintenance parts the ERP vendor is relegated to low priority in terms of function development, as evidenced by the lack of specialized functions.
So, what are the requirements and functions specific to the supply chain of parts that are difficult to realize in ERP? First, let’s look at the parts of the maintenance parts planning system.
In terms of understanding products supply chain and maintenance parts supply chain planning, there are big differences based on your starting point. If you are starting from the product supply chain aspect, for demand, you need to think in terms of customer needs, and the marketing/sales division supported by the operations division is the base. However, in the case of the supply chain of maintenance parts, things are based on the failure of products rather than the customer because maintenance parts are needed only after the product is broken. It is extremely difficult to predict when products in the possession of customers will break, and which parts will be needed. In the case of products, it is possible to predict to some extent with a certain degree of accuracy from the degree of progress of pipeline and pipeline of sales, accuracy of order confirmation, etc. In the case of maintenance parts, you have to generate statistics from statistics to make predictions. Or you have to predict the required numbers from the volume of products shipped to the market (installation base) in the past and the failure rate of past parts, but this is not easy – it’s like weather forecasting.
In addition, in the case of parts used in product manufacturing, it is possible to determine the required quantity of parts in “subordinate” fashion to the forecasting of the production quantity, and with JIT, procuring the required quantities when necessary there are no inventory problems. (Of course, sudden economic downturns, etc, are a different matter, but nonetheless…) However, to the ‘hard-to-hit-target’ aspect of maintenance parts, as mentioned above, the response of maintaining surplus stocks goes without saying. When planning inventory for maintenance parts, the degree to which immediate delivery of replacement parts requested by the customer when it fails is an important KPI. The reality is that many companies are carrying out service business with high parts inventory in order to meet this KPI. Even considering the difficulty in making accurate forecasts, it behooves to think about how to improve the accuracy of forecasts and when forecasts have been clearly inaccurate, plans need to be considered with a view to what level of inventory is safest. In this respect, the thinking differs significantly from products supply chain thinking, and it is easy to tell from this point whether product supply chain specialized ERP fits or not.
Also, in the case of planning for maintenance parts, compatibility information on parts is important as an input for the plan. A feature of maintenance parts is the continuous emergence of new compatible parts , sometimes in a one to one compatibility, and sometimes in a one to many or many to one relationship.. If you do not incorporate this aspect, you risk not being able to deplete old stocks of compatible parts successfully, and you end up with excessive inventory. In ERP, there are many things that the compatible parts master itself is not designed to have as well. As with the one-to-many or many-to-one relationships mentioned earlier, there are many ERPs that cannot well define the relationship of compatible parts. What is the relationship of compatible parts? If a new compatible part occurs, whether the frontward compatible part and the backward compatible parts are completely compatible (both can be treated as exactly the same part) , Or whether backward compatibility is acceptable but forward or not, or vice versa. It is necessary to define the relationships, and there are actually many ERPs that can not well define such a relationship. About compatibility of products,When new compatibilities arise, whether forward compatible and backward compatible parts are fully compatible (and can therefore back- and forward-compatible products are essentially the same parts) or whether forward compatible products can be used but backward compatible products cannot, or the other way around, parts’ compatibility relationships need to be defined, and there are actually many ERPs that cannot define these kinds of relationships.
This problem will greatly influence not only the planning system aspect but also the executing system (order receiving – reserving – shipping – procurement). In the case of executing systems, if we allocate parts based on orders from customers, if inventory of old parts is not used , it will cause stale obsolete inventory, so the mechanism of allocation with compatibility taken into account will become necessary. For example, if the compatibility chain is defined as A → B → C → D, and the part ordered is D, implementation must be upon an appropriate grasp of the inventory of the previous compatible parts A, B, C. ERP does not have a mechanism that makes allowance for such compatibility. In addition, there is a global inventory hub, and allocation that takes into consideration not only order hubs, but global hubs, must be used to allocate reserves.
Trying to implement ERP from planning to execution for the supply chain of maintenance parts is simply inviting trouble. Of course while customization and add-ons can help, if you do not estimate the introduction and development costs, the project will not proceed according to the budget, and in some cases the project itself may collapse.
Because SYNCHRON is a vendor specializing in maintenance parts, we offer “Inventory Management” specialized in supply chain planning of maintenance parts and an “Order Management” solution to execute planned content, and thus we provide solutions that feature readiness for the requirements specific to the parts supply chain mentioned above. In order to meet the above requirements, instead of implementation that replaces with ERP from the existing core system, our solution also offers overlaying ERP over the existing system. Or, when replacing an existing system with ERP, by using our solution on top of this ERP, it is possible to implement the maintenance parts supply chain without customizing ERP.
If you as a company are thinking of replacing ERP due to the limits of your existing system, but feel uncertain about the feasibility of the maintenance parts supply chain implementation, we highly recommend giving SYNCHRON a shot.
SHARE THIS POST