Over the past few years, the German metals producer VDM Metals successfully made the challenging switch from reactive to proactive production planning. This has led to shorter production lead times and a notable improvement in service, along with a marked decrease in required inventory. It’s certainly a remarkable achievement, especially in view of VDM’s very complex production network. “Supply chain transparency has been the key to making the switch, forging the path to continuous improvement,” says Marcell Sehner.
VDM Metals is a global producer of high-performance alloys, including nickel, cobalt, and zirconium alloys. Markets include the chemical process industry, oil and gas, aerospace, electronics, automotive and energy. In Germany, VDM Metals operates one upstream facility in Unna, where the melt shop is located as well as four downstream facilities in Nord Rhein Westfalen producing bars, billets, shapes, sheets, strips, wire and welding consumables. Processes are extremely complex, involving numerous specific production stages, deploying more than 100 different alloys and producing relatively small, highly specific batches. The fact that some production stages are carried out by external partners makes the planning even more complex.
“Production planning, production execution and customer requirements are closely interrelated,” explains Marcell Sehner. “We aim at increasing our delivery performance and reducing our lead times to better fulfill our customers’ expectations. We knew that implementing a new production planning system was essential, but we also identified the need to redesign our organization from a functional to a process-oriented one.”
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This organizational change of perspective further emphasized the need for improved planning, which was increasingly challenged by a series of market developments. Marcell Sehner explains: “Global competition has increased significantly, putting pressure on resources and obliging us to reduce costs and become more efficient. This meant we needed to reduce inventory, among other things. Added to the requirements to cut lead times and boost delivery performance to improve service, it felt like a Catch-22. How could we reconcile these conflicting aims?”
The solution was to meticulously fine-tune and optimize the entire supply chain. “We knew that we could make significant improvements in coordinating and aligning the different production stages,” says Michael Schickentanz, Head of Operations Planning & Master Data Management.
“Intuitively, we sensed that there was still ‘too much air’ in the supply chain. Unfortunately, we couldn’t really put our finger on it, making it difficult to attune the different production units to accelerate throughput.”
The breakthrough came when VDM Metals met with OMP. A project was launched to model the entire value chain in the OMP solution, including all production details. A bottleneck-oriented finite capacity planning analysis showed opportunities to better align the production stages.
Michael Schickentanz explains: “For the first time, we could identify where inventory in production would rise unintentionally due to an imbalance between order backlog and plant performance. We could also predict which machines might encounter material shortages. OMP provides a transparent view giving planners the opportunity to test and evaluate alternatives. This is how we managed to cut overall lead times and reduce our work-in-process.”
Marcell Sehner, Senior Vice-President Supply Chain Management at VDM Metals
One of the biggest gaps was found at the offer stage. Schickentanz: “Before we implemented OMP, we had been estimating lead times based on past experience. Now, the delivery date calculation for inquiries as well as orders is based on a transparent material and capacity check.”
Supply chain transparency has also helped to overcome the initial resistance to the changed approach. “Some of the planners were very skeptical about this new way of working,” says Michael Schickentanz. “I know it’s natural to resist change, but now the organization can see that OMP effectively improves the production planning.
Marcell Sehner confirms: “Using the planning system is like holding up a mirror. It clearly reflects our successful as well as our less successful planning decisions. This allows us to continuously implement further improvements. As a result, confidence in the processes and the system grows, not least thanks to the strong support of our top management.”
After completing the detailed production planning project, VDM Metals went on to implement Forecasting and Sales & Operations Planning to support the company’s mid-term and budget planning. “We again had to manage some change issues,” says Michael Schickentanz. “But we’ve been able to convince the process owner by demonstrating the added value of advanced forecasting features such as comprehensive statistics, collaborative loops, graphical visualization and customizable reporting.”
Both budget forecasting and rolling monthly forecasting have been implemented in less than six months, and Sales & Operations Planning followed six months later.
VDM Metals is exploring additional opportunities to further improve the supply chain. One of the strategies being evaluated is differentiation by market. Marcell Sehner elaborates: “VDM Metals works for both the automotive industry and aerospace, but these are very different sectors. Automotive is relatively predictable, with a high degree of standardization, requiring less detailed planning than aerospace where we work within framework agreements.”
Michael Schickentanz, Head of Operations Planning & Master Data Management at VDM Metals
OMP helps companies facing complex planning challenges to excel, grow and thrive by offering the best digitized supply chain planning solution on the market.
Its Unison PlanningTM concept has a unique approach. It handles all supply chain planning challenges in a unified way, synchronizing all planning stages, horizons, functions and roles. From source to deliver. From strategic to operational planning. From leadership teams to schedulers.
Hundreds of customers run OMP’s cloud-based solution to generate more value by making informed decisions. Valued as a thought leader by experts as Gartner, OMP invests one out of every three dollars earned into innovation.