There is Lot Control and then there is Lot Control within Order Fulfillment… way different

We have a customer that sells yarn and related products. It is a nice business, a straightforward business. They sell direct in a B2B model and through an e-Commerce website.  As I said, it is a straightforward and common model.

The interesting thing about selling yarn and, as it turns out, a lot of other products is the tricky little process of order fulfillment.  The process is not the standard FIFO (first in/ first out) model. It is a little more complicated.

Here’s why: Let’s say you wanted to make a sweater and you wanted it to be French Blue.  When selecting the yarn to use, you couldn’t just pick any French Blue yarn. All French Blue yarn should be the same, but that isn’t the case. During the manufacturing process the yarn was made against a specific dye-lot. Each run of French Blue yarn is very close to the same, but not exactly the same.  So, if you make a French Blue sweater from different dye lots, it will have different shades of French Blue.

There are many products, and therefore businesses, that share this problem. Paint, wallpaper and textiles all come to mind.

Inventory systems have had lot control features in them for as long as I can remember and from a macro perspective they seem to solve this problem.  When the warehouse personnel pick the products they just need to make sure they pick from the same lot. Seems easy enough, right?  But let’s peel the onion on this problem a little.

Let’s start in sales, seeing as though that is where we see the problem first. A customer calls and wants a specific quantity of product, but it needs to be from the same lot because of color, date of manufacture, etc.  Do you have the quantity to fulfill the order within the same lot number?

Say you have the inventory all in one lot number.  Great… now how do you book the order? The first step is to ensure the inventory is properly allocated and the available-to-promise information is updated accurately. But you can’t allocate based on FIFO, you need to allocate by the lot number and the quantity to cover the order.  Then you need to pick the customer’s order by lot number and then, of course, relieve the inventory exactly the way you picked it.

Sounds like there are a lot of people dependent processes required to get everything perfect. The order fulfillment process has to be perfect for customer satisfaction, to ensure the accuracy of your inventory and for the accounting of cost of goods sold.  Makes you nervous doesn’t it?

In other words, you are overriding a typical FIFO rule with an Allocate by Lot Number rule. ABLN? Ok, let’s not create another acronym but if ABLN catches on it started here.  For fun I Google’d ABLN… turns out to be a Brazilian consulting company. So this may not get legs and run.

In our quest to simplify supply chain operations we have added the ABLN ( Allocate by Lot Number) functionality across the entire application, to ensure perfect allocation, picking, inventory relief and cost of goods sold. We have even added that lot number to the invoice.  Our customers are using this and their customers now have perfectly colored French Blue sweaters.

-MF

Sustainability in the Supply Chain

Interesting week this week for some reason (stars aligning, who knows) the word sustainability came up a lot this week culminating in a nice meeting with a very cool non-profit. Typically when I hear about sustainability in the supply chain it’s about by-products, or product content, reusable packaging etc… All great for all of us and our planet no doubt, and so it’s a shame that we have to legislate some level of compliance, but that is another rant.My week this week included a meeting with a very nice woman who works at a Non-Profit organization. Their mission is to keep as much building supplies out of land-fills as possible.  They send deconstruction crews out to harvest building supplies then they sell these products. Their vision is to be able to sell through an e-commerce site (I knew the Internet was going to catch on) and through a walk-in warehouse. They work with some at-risk people and all in all it was just nice to understand their mission and the operating model they execute. It is a model they would like to replicate.Because they are a non-profit they wanted a Cloud Computing solution because they simply do not have the skill sets and funds to keep an information system up and running. They have 136,000 square feet of inventory but let’s think about the model – everything is reclaimed. There is no common inventory product SKU’s. Everything is different. Traditional inventory or warehouse management systems really don’t like this. They prefer common product SKU’s with standard logistics information. Geez, even all our inventory systems are built to support buying new stuff, warehousing new stuff and then replacing the consumed new stuff with more new stuff.

I’m not really sure how they found us, whether looking for Cloud computing, Inventory Management or e-Commerce order fulfillment, just glad they did.

So what’s the secret to a solution? Think about serial number tracking… tracking a unique unit of one.  Yes, so we can manage a  set of reclaimed interior french doors with full glass doors in varnished wood.  They need to be categorized and cataloged but they are not a standard SKU. When we built our application we deployed a condition code (i.e. New, Used, etc) to help define inventory to support customers that have the same product in stock with the same SKU but different condition codes.  Then they could answer a pretty basic question… how much of a certain product did they have in stock by entering one SKU.

We are thinking we can use these in combination to solve the problem – to generate a smart serial number / product ID and share this as a common ID to the rest of the business systems. This is critical, especially when you consider the model…

Sell on the Internet  = e-Commerce solution
Walk in Sales (retail) = Point of Sales solution
Customer Management = Customer Relationship Management CRM
Warehouse, Order Management, Procurement = Well that would be us of course

All sharing units of one.  All the applications working together in a simple contiguous business model which should be straight forward but it’s not. I’m looking forward to working on this problem.

If you have any ideas or comments I’d love to hear from you. We should help these people with their mission.

-MF