In 2010 Telstra issued a tender for the redesign and restructuring of their Spares Inventory Supply Chain Network which comprised some 300,000 equipment installations, with an installed equipment base of 17 million units serviced by around 6,700 stocking locations in 3,976 field stores. The problem was multi-faceted and challenging. Firstly, the nature of movement of the spares inventory was extremely slow; approximately 68,000 failures per annum in an installed base of 17 million units – 0.4%. Secondly, approximately 90% of the field store spares had never recorded a failure, and consequently had no usage history.
Three of the largest logistics providers responded to the tender and were given the challenge of proving they had the tools and intellectual capacity necessary for the task.
CEVA Logistics was one of the responders and already had an established capability with CAST, the Network Optimisation application from Barloworld Supply Chain Software (SCS). A successful CAST modelling exercise determined an optimal network design consisting of around 400 Field Stores across the four regions – Central, Southern, Northern and Western.
With the network design in place, attention shifted to optimising the inventory within it. Marcus Carmont, General Manager: Business Development at CEVA turned to Barloworld SCS for assistance with this complex inventory challenge. It later transpired that a key factor in CEVA’s ultimate success in winning the tender was its ability to meet both the network optimisation and the multi-echelon inventory level and flow optimisation challenges through partnering with Barloworld SCS.
Barloworld SCS proposed deploying CINO to address the challenge. CINO combines Optimised Sourcing and Routing techniques with Multi-Echelon Inventory Optimisation. A model of the end to end supply chain is defined and then CINO uses advanced mathematical modelling algorithms and statistical analysis to consider purchase, transport and handling costs, lead times and all relevant capacities and constraints. It then determines cost optimised plans to satisfy service level targets for forecast demand at each customer location.
A 16 month paid proof of concept was undertaken at Telstra to confirm that CINO could manage the two complex inventory optimisation requirements. Firstly the problem of optimising inventory flow and stocking levels in the new network and secondly optimising the redeployment of the existing inventory to bring it in line with the new policies.
Sophisticated optimisation algorithms were developed and proof tested with Telstra, enabling them to optimise inventory levels using usage history where it exists or predicted failure rates for products where no usage history is available.
Following completion of the successful CINO proof of concept, Telstra authorised full implementation and integration as an element of their SAP implementation project. When SAP goes live in 2013, CINO will be fully integrated with SPS, the SAP Spares Management Module.
In the interim CINO is being actively used by Telstra in a pre-SAP environment to manage tactical inventory optimisation and the inventory balancing redeployment process. Two CINO super-users have been trained in all aspects of modelling with CINO in the Telstra environment. CEVA Logistics are managing the physical redeployment of inventory based on flow recommendations from CINO.
Barloworld SCS’s CINO and CAST applications have played a key role in the transformation of Telstra’s supply chain network and continue to be fundamental to the drive to improve service levels and operating efficiencies.
NOTES TO EDITORS
“Barloworld Supply Chain Software develops flexibly deployed software solutions,
to enable clients to solve scalable & complex supply chain planning challenges,
at the Supply Chain Design, Deployment and Execution level,
supported by proven methodologies & processes,
and international domain experts in Supply Chain Network & Inventory performance”
Barloworld Supply Chain Software is a leading global supply chain planning company, providing expertise, tools and solutions to help companies optimise their network and inventory performance.
It has over 20 years’ experience in supply chain planning, with more than 400 software installations across over 600 international clients, supported from offices in the UK, France, USA, South Africa, U.A.E, China and partners worldwide.
Barloworld Supply Chain Software provides planning software and methodologies to support supply chain efficiency and continuous performance improvement. It offers global solutions in: Supply chain network design, Demand planning and forecasting, Inventory management, Inventory strategy & Integrated demand and supply planning.
Barloworld Supply Chain Software is part of the Logistics arm of Barloworld Plc, a South African multinational with over 18,600 employees and a turnover of more than $7.2 billion.
For further information please visit www.barloworldscs.com
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