Abstract: Logistics managers have to cope with
the dilemma to provide an optimum service level towards the client
on the one hand and to minimise the total logistics cost on the
other hand. This job requires an optimum transparent view along
the whole supply chain both on the actual stock and on the demand
situation. Several partners are concerned which in case of SMEs
moreover work often with heterogeneous ERP environments. Within
the NETSTOCK project, this problem is overcome by installing
a web based stock control system. A web based Logistics Server
is implemented which models the whole production and distribution
network on a virtual level. For a given customers demand, both
quantities and time are monitored and checked against the customers
requirements. This solution allows the partners to increase the
internal efficiency and the service level towards the client.
Logistics managers have to
cope with the dilemma to provide an optimum service level towards
the client on the one hand and to minimise the total logistics
cost on the other hand. This job requires an optimum transparent
view along the whole supply chain which is not always easy in
the case of several partners: The required quantities from the
sales department change often over time, the own production has
to be co-ordinated and the supplier stocks are not necessarily
transparent for a solid and reliable planning result. In particular,
this problem gets more difficult if several partners would like
to co-operate but work on different EPR environments. This is
the typical case of SMEs which represent some 95% of all European
manufacturing companies and where the complex, big and expensive
well known systems as BAAN or SAP do not have yet a strong market
The project NETSTOCK is exactly
focussing on this gap. NETSTOCK intends the international hands-on
network wide adoption of an existing leading edge graphic orientated
web-based Logistic Data Warehouse tool for stock control and
service level optimisation. The highlights of such a toll which
convince the SME managers with its efficiency are:
- unique self developed ergonomic
- Meta-Repository, multidimensional
data views, relational Database;
- User extendable web-based
stock analysis and Enterprise Resource Planning (ERP) method
pool using the portfolio-technique.
This shows that the functionality
of this tool depends strongly on the dynamic integration with
the hosting environment (ERP) in a company. In the current situation,
it is used only in one company on a local level with interfaces
to one proprietary hosting application. This generates benefits
for one company only whereas supplementary benefits could be
achieved by using the tool in a networked organisation being
implemented on a virtual level.
This requires two main technological
- Integration of the tool on
each companies level with the heterogeneous hosting applications
(ERP systems) which are different in particular across the SMEs
landscape (requirement of a dynamic standardised interface);
- Linkage of the local applications
to a dynamic network (requirement of a network base like WWW
and a set of dynamic information exchange and decision rules).
2. Conceptual development
of logistics flow optimisation
Looking into the historical
development, the classical planning and operational processes
inside a company were taking place within the different departments.
The first step was to integrate the different databases of the
department into one single database to which the access was possible
from the department's side but which supervises the integrity
of the data.
The modern supply chain management
is considering not only the company internal departments but
integrates the partners alongside the logistics chain. It is
certainly necessary to open the information access to the partners
but this situation will open up new potentials for optimisation
which were not accessible with independent solutions on each
individual company level without any direct connection.
Based on a conjoint co-operative
approach it will be possible to reach the following objectives
for an increased cost efficiency:
- Reduction of stock sold outs;
- Reduction of stock level;
- Reduction of planning overhead;
- Improved service level;
- Improved Key Account relationship;
- Optimised lot sizes;
- Improved controlling instruments;
3. Solution by network architecture
with bus strategy
Looking into the complexity
of the partners information exchange, it is necessary to define
an efficient method to link the partners systems together. The
conventional Coupling Strategy is the classical way of exchanging
data, i.e. via EDI. In particular in automotive industry, a defined
set of standard messages is used to exchange data between industry,
supplier and logistics service provider: VDA on German level,
ODETTE on European level. The connection on system level is done
peer-to-peer, with a direct high capacity telecommunication link
between the partners. This means for a network of several partners
that the number of connections increases as a quadratic function.
An alternative solution which was followed up within the NETSTOCK
project is the use of a bus strategy where the partners systems
are linked via a commonly defined XML interface to a bus system
which enables the information transfer to the Logistics Server.
This concept allows also to
cope with the problem of heterogeneous ERP systems in particular
within the segment of SMEs.
4. Logistics flow optimisation
The whole system was designed
to optimise the logistics flow alongside the supply chain. Within
the system architecture, the following characteristics are realised:
The export module couples the
user application systems (called ERP or legacy systems) with
the logistics server.
All data flows of the enterprises involved are stored in the
central Logistics Database.
The Agent Quantity is controlling
the fact that the stocks within the network are minimised and
that no lack of goods will occur.
The Agent Date monitors the schedules alongside the Supply Chain.
It detects urgent orders and announces these to the responsible
All inconsistencies in relation to dates or quantities are stored
in a mailbox and are transferred to the attached legacy systems.
The Net Navigator serves as a central user interface for tracing
and showing the logistics flow system.
Within the following paragraphs,
a detailed example is given in which the data inside the virtual
network is processed.
The clients demand C1 and C2
are requested via the dealer. Linked to the clients demand is
a requested time (date) for delivery. The stock level S1 is compared
against the demand C1+C2 and induces a transport quantity T1
for the logistics service provider. To fill up the stock again,
a material quantity of M1 is deduced which is broken down according
to the materials requirements planning into Ma from the stock
of components and Mb for parts to be purchased. The quantity
Ma is compared to the stock level S2 from the companies stock.
Mb which is needed as purchased parts from a supplier; it is
transformed to an order O1 by the purchase department. On the
first tier supplier level, a further order O2 is needed to be
sent to the second tier supplier level.
5. Scheduling information
For the purpose of integrated
control, a Time Window for each flow is constructed. Before the
earliest date, no handling is possible, since the material is
missing. After the latest date no date is allowed to be scheduled,
since otherwise the customers requested date would not be achieved.
The real date for the connected legacy system must be positioned
between these two dates.
The Agent Date now reacts in
- If the earliest date is positioned
behind the latest date, an error message is placed within the
- If the real date falls outside
of the Time Window, a warning appears.
The customer orders are checked
for availability and feasibility before the confirmation is dispatched.
Forecasts and merchandising schemes are checked for bottlenecks
before they are fixed, and excessive stocks and capacity lacks
become visible, as long as possibilities for their removal exist.
6. Expected impacts - efficiency
The implementation of the NETSTOCK
solution described above is expected to have several advantages
compared to expensive and complex modules of large ERP systems:
- Small coupling effort for
the heterogeneous systems involved;
- Retaining of the optimised
legacy systems with which the employees are
used to work;
- Integrated network planning
that achieves smaller stocks and shorter turn-around times;
- Retaining of the global date
and the quantity consistency within the network;
- Network wide graphic controlling
of the four logistics targets;
- Reduction of material and
date buffers in the entire supply network;
- Potential for a gentle migration
over several years of the legacy systems to progressive IT solutions.
The NETSTOCK demonstrates the
benefits of an advanced integrated stock control and service
level optimisation software for manufacturing and distributing
SMEs based on the WWW. These benefits (i.e. reduced capital tied
up, reduced assortment, better liquidity and service level, etc.)
enhance the competitiveness of the European SME and raises the
stock turn over.
The NETSTOCK application will
consist of an implementation of a dynamic interface between proprietary
hosting environments (ERP systems) and a dynamic networked stock
control application for SMEs which deliver and supply each other
and which exchange relevant stock data via the World Wide Web.
NETSTOCK will introduce a standardised software technology such
as Web Technology with high practical impact so that anywhere
in the world SME´s employees and partners could get information
about available stocks at any time. By this way, it will show
SMEs the benefits of an optimised customer service level and
of an efficient stock reduction by improving the overall Material
Requirement Planning (MRP).
The results of these activities
will be a set of stock control solutions covering different aspects
as well as application areas. These applications will act as
a showcase for the European manufacturing and distributing industry
(mechanical, electrical, electronic, etc.) and therefore stimulate
the wider adoption of innovative software technologies in user
sectors. The successful project will not only result in cost
reductions for the users inside the project, moreover it will
enable them to accelerate the deliveries and displace competitors
abroad. Thus making this trial application of strategic importance
for the represented industries.