September 2007 | Case Studies | I.T. Toolkit

Arrow Hits Replenishment Target

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Arrow aims at One Network's platform to recharge its automated replenishment program, and hits the customer service bull's eye.

Arrow Electronics aims at the heart of its customers' needs. Rather than wait until manufacturers place orders for new product, the Melville, N.Y.-based electronic components distributor discovers what customers require almost before they know it themselves.

Since 1995, Arrow has offered the Customer Automated Replenishment System (CARES) to monitor the inventory of certain components at customer sites. As soon as a part runs low, the system triggers a fresh shipment.

Last year, Arrow moved CARES to a new platform, developed by One Network Enterprises, Dallas. As a result of that move, CARES now is easier to implement and maintain, and it provides additional functions. The enhanced technology also opens the door to new applications for Arrow in the future.

Since its inception, CARES has run on a computer in each customer's manufacturing plant. The software hadn't had a major upgrade in years, and it didn't provide all the functions Arrow wanted. Also, officials at Arrow no longer wanted to ask customers to load the software on their own computers.

"We wanted to convert to a system customers could access over the Internet," says Robert Martin, Arrow's director of supply chain solutions.

Arrow had considered building a new system in-house. But officials ultimately decided they could reach their goals faster and more economically if they called in help.

"Rather than starting from scratch, we wanted a vendor that had already developed the software," Martin says.

One Network Stands Out

Narrowing down an initial list of 15 contenders through an extensive procurement process, Arrow targeted One Network. The solution's cost and quality, and One Network's personnel, were deciding factors, Martin says.

One Network also stood out because its solution offered many functions that Arrow wouldn't use right away, but might want to tap in the future. "Many other systems we considered were more narrowly defined," Martin notes.

Building a network to manage replenishment and other supply chain functions was not a novel prospect for One Network. Founded in 2002, the software vendor has created several electronic communities that automate transactions and allow collaboration among trading partners.

In the retail sector, for example, One Network operates a community that manages inbound transportation for about 25 percent of the food transported in the United States.

"One Network manages the inbound transportation and schedules distribution with buyers - retailers - and carriers," says Greg Brady, chairman and chief operating officer of One Network.

The system automatically tenders loads to carriers and schedules pickups and dropoffs, including loading dock appointments. Companies with supermarket operations on this network include Safeway, Kroger, Publix, Hannaford, and Food Lion.

One Network also operates a network that the U.S. Department of Defense uses to replenish ammunition for the Marine Corps, Brady adds.

Customers use CARES in connection with either a kanban or min/max replenishment technique.

In a kanban system, an assembly worker takes parts from a bin until it's empty. Then the worker scans a bar code on the empty bin, and starts pulling from a backup bin. The scan prompts CARES to transmit an order for a new bin-load of parts to take the backup position.

In the case of min/max, the system keeps track of how many parts a worker uses, and when inventory falls below a certain mark - say, 100 parts - it triggers a replenishment.

After the contract was signed in early 2006, One Network officials got to work defining Arrow's requirements. System development took about six months, and the system has been up and running for about one year.

An Easy Move

Migrating customers from the old platform to the new one was easy. "Because the system is Web-based, almost all the implementation can be done remotely," Martin explains.

Arrow gave each customer a bar-code scanner and a password for accessing the network via the Web. It also uploaded data such as part numbers, bin quantities, and bin sizes, and it set permissions for different users, giving them access only to the screens they are allowed to view.

Operators use handheld scanners to keep track of inventory as they work. Periodically, they insert the scanners into holsters to upload the saved data to the network.

The network now accommodates 325 companies, including Arrow, and about 60 original equipment manufacturers and other suppliers that serve those OEMs. Arrow has always allowed its customers to use CARES with other suppliers, including competing electronics distributors, as well as vendors in other markets.

"Customers can use the system for their nuts and bolts supplier or their plastic supplier," Martin notes.

As more OEMs bring in more suppliers, participation on the new network has snowballed. "The more suppliers on the network, the more OEMs say, 'Why would I do anything else? All my suppliers are already on this system,'" Brady says.

Besides eliminating the need to install and maintain software locally, the move to One Network provides Arrow with several other advantages.

"First, the system gives all supply chain partners access to critical information, such as inventory levels and actual demand, at any time via the Internet," Martin says.

In addition, it supports new functions, such as the ability to use the system for multiple manufacturing locations and multiple manufacturing cells within one location.

CARES on the One Network platform also is also suited to the global manufacturing environment because it supports multiple currencies and languages.

For Arrow, one big benefit stems from the fact that One Network has automated some of its processes.

"Orders are automatically fed into our system upon receipt," Martin says. "We don't have to ask somebody to create a sales order manually. The system has increased efficiency for us, as well as for our customers."

In the future, Arrow plans to use One Network to gain further visibility into the supply chain. "We want to anticipate problems proactively, rather than waiting until a customer needs a part and we don't have it," Martin explains.

Officials at Arrow are starting to discuss new ways they might put One Network to work. In the long term, Arrow might use the network to address the needs of a broad segment of its customer base.

"More immediately, we're thinking about how we can apply the software specifically to our most sophisticated customer's complex supply chain issues," Martin says.

One goal might be to gain a more complete view of parts consumption, both by Arrow's customers and, in turn, by their customers.

"We could see when customers sell the end product that contained our components, and gain visibility into how those components move through their manufacturing process, as well as through their logistics channels," Martin says. "And we could get inventory information as well.

"This visibility would allow Arrow to do a better job managing their inventory pipeline, to make sure we meet their demands, and that they won't run out of parts," he adds. "Then, conceivably, we could take that back to our suppliers, so they could get visibility to certain customers."

From the way it targeted the One Network solution, it's clear that Arrow CARES about its customers.

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