From Low Gear to Supplier of the Year
Vendor-managed inventory system produces superior customer satisfaction
by Lisa Anderson
Reprinted from "APICS - the Performance Advantage", October, 2004
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CHALLENGE: Achieve heightened customer service levels and more efficient processes.
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PRODUCT SOLUTION: Prescient's vendor-managed inventory planning and forecasting system.
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FACILITIES: San Dimas, California
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OPERATION: Manufactures, markets, and distributes adult incontinence products.
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The Challenge
Like so many businesses, PaperPak recently underwent a dizzying series of mergers and acquisitions. The upheaval finally culminated in 2000, when the company acquired a division of Procter & Gamble. Soon after, PaperPak spun off its other divisions and found itself in start-up mode.
PaperPak manufactures, markets, and distributes adult incontinence products, such as Ultima, Confidence, and the top-selling Attends brand. The company supplies a full range of briefs, underpads, pads, pants, and skin care products - about 300 stockkeeping units - to hospitals, nursing homes, and home-care networks. Headquartered in San Dimas, California, the $160 million operation maintains manufacturing and distribution centers in North Carolina and California and three distribution centers in Canada.
Although PaperPak used Prescient for a few years prior to the mergers and acquisitions, it switched to another software vendor during that timeframe because it was used by Procter & Gamble for its supply chain planning. However, it wasn't long before PaperPak realized that the software required too much support and offered too little functionality. That realization hit home when the company's number-one customer, Cardinal Healthcare, wanted to continue with the rollout of a vendor-managed inventory (VMI) relationship. PaperPak accepted the challenge.
"We needed to support our customer with VMI," says Lisa Anderson, PaperPak's Vice President of Product Supply. The results with the Procter & Gamble software were less than satisfactory, so the company decided to take a second look at Prescient.
The Solution
Anderson says, compared to its competitors, Prescient offered a more attractive price tag combined with high levels of functionality and flexibility. Prescient helped PaperPak adapt to Cardinal's standards, which meant getting a real-time view of demand, optimizing pallets and truckloads, bringing down inventory, and increasing service levels. Specifically, PaperPak needed to improve inventory days on hand from 5 to 10 and service performance from the low 90s to 98-99 percent satisfaction.
The implementation went smoothly; Prescient sent a two-person team to PaperPak's headquarters to train company planners, set up pyramids, and make the charts that would help PaperPak manage its supply chain more efficiently. With Prescient, the company's supply chain software and services would incorporate greater visibility into real-time demand and point-of-sale information, delivering more accurate demand, replenishment, and production plans to ensure higher service levels without the financial burden of excess inventory.
PaperPak can receive the customer's electronic data interchange transactions for each Cardinal location, create a forecast for each site, and then generate orders to Cardinal. This system enables the planners to see orders in transit and view and handle backorder issues. And it provides inventory and service metrics for Cardinal distribution centers. In essence, it helps pare down activity levels, get the right data, and make well-informed forecasting and replenishment decisions.
In addition to supporting VMI, PaperPak uses Prescient for in-house forecasting. The planners forecast weekly and employ the forecast in the development of monthly and yearly budgets. "We know our business, but Prescient has the trends and statistical formulas," Anderson says. With those formulas, PaperPak has better forecasts - and that means fewer changeovers, improved manufacturing efficiencies, increase inventory turns, and heightened service levels.
The Results
Cardinal created an award system, based on a scorecard of metrics, which included its VMI initiatives. Prior to implementing Prescient, PaperPak was off the awards map. But with Prescient, PaperPak went from Bronze to Silver to Gold for its superior performance and was even recently named Supplier of the Year. Anderson says that Prescient provided a critical tool, which allowed PaperPak to move to a preferred status with its largest customer and win significant awards.
Specifically, PaperPak was able to cut inventory levels by up to 50 percent, stabilize lead time, reduce the number of backorders and out-of-stocks, improve deployment planning, and lower freight costs. By providing the ability to create truckloads while supplying the customer with optimal service and inventory, the software also enabled PaperPak to move from mostly less-than truckload shipments to multiple-stop truckload shipments.
"We looked at the big guys, but they weren't appropriate," Anderson says. "They cost too much money and required too much support. Prescient gave us the best functionality, the best forecast data, and the most flexibility for the price."
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