Bigger Isn't Always Better

Continued

Reduce Expenses, Increase Profits

Key to the success of Sennheiser electronic GmbH & Co. KG is the business systems it creates to react quickly to market changes. The designer and manufacturer of audio equipment for recording-industry professionals and consumers employs 1,900 people at its Wedemark, Germany, headquarters and at facilities around the world. As it competes against larger electronics giants, Sennheiser is constantly seeking new business-process efficiencies to stay profitable. "The environment is changing rapidly, and speed and flexibility have become the essence of what it takes to be successful in this business," says Volker Bartels, president of manufacturing and logistics.

Agility is especially important in the consumer segment of the audio market, where retail-chain customers expect fast delivery and minimal errors. "In the old days, small retail stores might order 10 headphones here and 10 there, and the orders would come a month in advance," Bartels recalls. "This is no longer true with the industry consolidations that are going on."

Instead, the large chains now enter 10,000-item orders and request three-day deliveries. "To be precise, that's a delivery in three days between 9:00 a.m. and 9:15 a.m. because that's when people will be on the loading docks," Bartels says. "The big customers now expect a level of service that is possible only with a good ERP [enterprise resource planning] system in place."

JD Edwards EnterpriseOne 8.11 now manages Sennheiser's German factories, its production facility in Ireland, and the sales subsidiaries in Germany, Scandinavia, and the U.K. The company is rolling out the suite to the remaining production and sales subsidiaries in the U.S., Europe, and Asia. In addition to the core Manufacturing, Financial Management, Order Management, and Supply Chain Execution modules, Sennheiser is implementing Vendor-Managed Inventory, which will enable automatic deliveries from suppliers. This means Sennheiser's production plants will keep only enough inventory on hand to meet immediate production needs, and receive a consistent flow of replacement materials dictated by order rates. "We'll tie up a limited amount of money in inventory so we're not paying for a lot of stock that's just sitting there," Bartels explains.

To measure the performance of its manufacturing operations, Sennheiser tracks its requested and confirmed delivery rates. Key performance indicators like this are just one measure of success. "In both of these parameters, we score in the high 90 percent levels," Bartels says. He adds that inventory efficiencies have significantly reduced expenses. "We used to carry about 200 days of supply, and we're now down to about 90 days. Just the difference in interest expense is a significant number," Bartels says.

A Comprehensive Solution

Symmons is using its applications muscle to avoid demand surprises and the "fire drills" that resulted because the production lines were set up to produce forecasted demand rather than the orders that were actually being received. Inventories bulked up with unneeded materials. "We had plenty of the wrong stuff but not enough of what our customers were actually ordering," Romanowicz recalls.

The problem centered around schedules that had little relevance to demand flow. "Some of the departments in manufacturing just weren't getting visibility fast enough to know what was needed," Romanowicz says. "We saw work-in-progress [WIP] inventory building up and products that didn't go out the door for months. At the same time, some of the machines that we needed for quick deliveries were unavailable because they were running other jobs."