In 2015, the Shell Lubricant supply chain organisation was attempting to improve its inventory management. The Shell Lubricant Supply Chain organization is a global leader in finished lubricants who sells around 5 billion liters of lubricants annually all around the world with a supply chain planning workforce of around 400 people. They manufacture and distribute 3000 finished good SKU’s which are sold to distributors and retailers around the world.
In 2015, there was a drop in oil prices and the company wanted to improve its already efficient supply chain to decrease its inventory even more. Shell Corp. then began to look at DDMRP as a possible way forward in achieving this goal.
This is a process of overhauling its MTS strategy. Make To Stock means forecasting demand and creating a seamless supply of Make To Stock Products to provide fast response to customers while reducing any wastage of inventory. A demand-driven Make To Stock Process reduces unnecessary expenditure.
This particular case study is a great example of how I work and the processes behind a large scale Demand Driven transformation.
At the time, I was a partner at SmartChain, the company Shell hired in order to help them optimize their already efficient global supply chain. We commenced on a 6-month operation in simulation, business case development, and project planning for a global Demand Driven Operating Model. At the end of 6 months, we developed a template model and deployed at one location to test the system in a live set-up. The company greatly appreciated the results of this pilot and immediately initiated a 3-year plan to roll out the new Demand Driven model across the entire global organisation.
The initial phase consisted of gathering information through studies and research to show the company the potential for improvement that a Demand-Driven Operation would bring. We were also required to showcase this transformation in the form of a financial business case that would convince the top management of its efficiency. This was done by presenting simulations of three geographical areas–North America, Europe, and Asia. These simulations were each performed based on their respective geographical business specifics.
The simulation showed that indeed, as predicted by my team, there was a significant potential for work capital reduction (estimated at a minimum of 20%) and great potential for cost savings of up to 9 figure savings.
After this we calculated the cost of deployment, making sure to include every expense possible, for the entire global organisation. Based on these findings and the estimated cost of deployment we developed various approaches for deployment of the Demand Driven Model. The various approaches ranged from aggressive to the most cautious, calculating their ROI’s simultaneously. After due consideration of the pros and cons of the different strategies, we settled on one that involved the development of a global process template, followed by the appropriate DDI-compliant DDMRP software tool. In this case, the tool was Orchestr8. Now the next step was to implement it at a pilot site.
The pilot site was a manufacturing plant in the EMEA region and its immediate regional distribution network. Deploying the new DDMRP strategy of supply chain management, we placed buffers for incoming raw materials and finished goods within this network. This pilot went live in October 2017, after 6 months of work.
By 2018, we had collected our learning and assessments from our pilot and had begun the global deployment in 3 parallel streams–one per geographical region. Each stream consisted of one DDMRP consultant supported by one Orchestr8 consultant and an internal regional multifunctional team that had received deep training by us in Demand Driven methodology. The training included training in DDL, DDP, and the Demand Driven Beer Game. This entire program was coordinated by a global program management team that was supported by one external consultant for each region.
In each region, the deployment was executed location by location on a very tight schedule using standard deployment methodology. The program management team focused on coordination, aligning designs, and most importantly, ensuring that the same problem was not being solved multiple times. Special attention was directed towards the metrics and KPI system to ensure that the new ways of working were indeed sticking and that planners and staff would execute as per the requirements generated by the DDMRP software.
Throughout this process, Education on DDMRP methodology was prioritized. The first step taken before deployment at every location was a 2-day DDP training of the entire planning team followed by a supply chain mapping workshop. In total, more than 300 personnel were DDP and DDL trained.
The result of the transformation to a DDMRP was as predicted by us. With the initial results proving accurate, it was time for us to withdraw our teams. After almost 3-years our team of consultants was phased out during the last phase of deployment in the first half of 2019. This was done only after ensuring that the internal teams were self-sufficient and well trained in methodology, software tools, and the deployment process. This entire process was successfully executed in accordance with projected timelines and within budget.
Now, the company has reduced its inventory significantly and has greater savings. Not only inventory was stabilized, but the new supply chain turns out to be highly resilient to disruptions. They continue to experience high customer satisfaction despite major disruptions to the supply chain.