Supply chain design parameters

Supply chain design objectives 5.4.1.1

The supply chain redesign objectives were to gain an in-depth understanding of the R & T supply chain in order to identify improvement opportunities that will enable the business.

• Enable R&T supply chain to ensure the business can function optimally. • Develop supply chain strategy for R&T

• Enable an effective and efficient supply chain.

• Ensure sufficient inventory levels to support the business needs. • Optimise investments in inventory.

• Identifying critical products to the business.

• Conform to statutory requirements and align to group guidelines.

• Safety regulations in handling, storage and transportation of chemical and hazardous products.

• Identify Supply Chain risk areas.

The integrated supply chain shown in Figure 39 was included in the scope. Inbound, outbound and other supply chain related activities will be used to understand and identify possible improvements.

85 Figure 39: Integrated generic supply chain

Source: Gebhardt, Buis & Ratsibe (2013:4)

Approach followed: 5.4.1.2

Firstly the supply chain strategies were derived from the business strategy. Because of the unique and dynamic environment of all the different areas in R&T it was decided to create supply chain strategies based on the different business areas. Three supply chain strategies were created, a reliable on for the production area, a flexible on for the labs, due to nature of their work, and an agile supply chain for the fuels research business. Because of the extremely vague objectives that were given, a series of interviews was needed to be scheduled with key stakeholders to understand the current challenges and to compile a list of all challenges in R&T supply chain to be addressed throughout the project. The information gathering phase took three weeks in which multiple interviews were conducted with all key stakeholders and a list of all problems experienced were compiled. (Gebhardt, Buis & Ratsibe 2013:6)

Interviews were conducted with senior management, middle management and their subordinates. This helped to compile a detailed list of what the real challenges and the perceived challenges are. Questions were formulated in order to understand the as-is situation, the previous operating model before a redesign done in 2008 left the business in a

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bad state and also what the desired outcome should look like. Individual interviews as well as group interviews were done to stimulate conversations and to be able to get into the real problem. The group interviews were split into sessions with middle management and separate sessions for their subordinates. This was done as the information received from initial discussions, where middle management and their subordinates were present, was very superficial and the real issues were not being addressed. One-on-one interviews were mainly done with senior management. All the issues were captured and then grouped according to supply chain streams. The root cause analysis were done whereby the results were prioritised to ensure that the key issues be addressed first. After prioritising the root causes to these problems, a list of possible improvements were identified and divided into different streams for the project. The streams that came out of the project were business processes, master data, procurement, inventory, planning and logistics. The different streams were then staggered in order to execute them as efficiently and effectively as possible. (Gebhardt, Buis & Ratsibe 2013:8)

5.4.1.2.1 Master data

Then a data analysis was done on the previous financial year’s ERP data in order to gain more insight into what exactly each of the streams’ deliverables should be. Problems found were very poor quality data due to the lack of little or no master data; material -, service - and vendor masters not existing. Transactional data were also very poor due to; the lack of training of the end users on how to work on SAP, not understanding the business processes, not understanding the procure to pay process, KPIs in performance agreements not ensuring optimal data quality etc. This prompted the master data stream to investigate and improve the material -, service – and vendor masters through cataloguing. (Gebhardt, Buis & Ratsibe 2013:10)

5.4.1.2.2 Warehousing/Inventory

What was found from the data analysis, after looking at all reservations, from the previous financial year with regards to inventory, high level of stock-outs occurring when reservations are placed against items from a shared service warehouse. This was happening because the

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relevant stock levels were incorrect due to the business having stock in decentralised stores which functioned outside the ERP system. Also a system issues were discovered between the different SAP instances, causing a delay of 48 hours after reservation is placed before it reserving the stock on the other SAP instance. After the interviews, with the operational teams, a lot of decentralised stores were found containing similar inventory to than that from the shared services stores but no visibility of the stock were available due to stock being kept outside SAP. The inventory team were then tasked to look at all items in the stores and identify critical items to business as well as all redundant items. They will then sell off all redundant items and take the rest of the decentralised inventory back up in inventory, moving the common items found in the shared services stores back to those stores. (Gebhardt, Buis & Ratsibe 2013:11)

5.4.1.2.3 Planning/Procurement

A disturbing discovery was made that there does not exist any form of planning on the short medium or long term. This means that from operational to strategic levels no planning occurred which made it clear why so many problems exist. The number of people creating purchase requisions (PR) was also alarming sitting at 159. The purchasing stream was then tasked to come up with an idea to optimise the purchasing. Business process had to be relooked in order to align with all the improvements. Possible contract benefits were identified to the amount of R25 million. (Gebhardt, Buis & Ratsibe 2013:11)

5.4.2 Improvements implemented from each stream