Industries which produce products especially if they are advanced or complex such as the automotive, aviation and electronic industries need to cope with a weakness: late delivery of parts. These industries produce products which contain many thousands of parts, and have to face the challenge of managing suppliers, inventory and production lines. Just like a puzzle is not complete if even one part out of a thousand is missing – so is an airplane that is missing a screw or an electronic device because that component's delivery was delayed by the supplier.
The company may find itself with a product stuck on the assembly line without being able to continue production until the arrival of the long-awaited shipment. Beyond the financial damage in such a situation, it also means that the end customer will not receive his order at the appointed time – which could harm the company's reputation, credibility and profitability.
"We realized that in order to enable Israeli companies, small, medium and large, to work with huge companies that use very clear performance indexes, it is not enough to have just quality and competitive products. In addition to that they must provide their customers with on time delivery supported by a system which will share this information with full transparency in real time says Lior Katz, CEO of "PPA – delivery assurance services" a part of the M.K Technologies Group "which specializes in advanced supply chain solutions.
The company was founded in 1985 and since then has been assisting Israeli machining suppliers to cooperate with the largest aviation and automotive companies in the world. The numerous years of activity have deepened the company's understanding and insights as to the weakness in the supply chain field.
“We understood what a supply chain is and what is the required SLA (Service Level Agreement ) That is expected of suppliers In these industries .We have come to the realization that all manufacturing industries are by nature industries that are reactive instead of proactive", adds Katz, "procurement and supply chain managers will take action when parts are not being delivered on time.
"Only when the production line has stopped, because the parts have not been delivered in a timely manner will they start chasing after the suppliers and parts. The tools at the companies' disposal make it possible to identify the problem when it occurs, but it is too late. The solutions that existed for years were not efficient enough and failed in preventing delays in supply, stopping of production lines and dissatisfaction of the end customers".
As an example, to that, Katz relates to a product in the field of traffic control that had to meet thousands of unit orders each month. A delay in the supply of ceramic capacitors which was required for the production of the units did not allow timely delivery to a large customer in the far east, which led the customer to threaten to switch to the competitors.
At "PPA – Delivery Assurance Services" it was realized a long time ago that this work method requires a change. The first significant step on the subject was already done by M.K. Technologies in the 90’s, when they established an internet-portal-based information sharing tool in which real-time updates for inventory, production data, expected supplies and deliveries are available. Thousands of suppliers worldwide use this tool today.
"We created a system that provides full transparency to customers and shows exactly what is going on in the production lines. This is how they get the confidence to do business with suppliers in Israel, after seeing that they meet the criteria of on time delivery" says Hanan Caspi, director of the supply chain in the company, who has over 25 years of experience in managing supply chains in the electronics and high-tech industries.
"This allows suppliers to be competitive in the market in which they operate and to participate in tenders where service and on time delivery are crucial parameters".
This was not the end of the mission for "PPA – Delivery Assurance Services“ he said. In fact, it was just the warm-up for the next big thing: Changing the industry from being responsive to being able to look ahead and foretell the expected shortages. "We understood that there was a need for a holistic solution, not just a specific logistical solution. Two years ago, we reached the conclusion that we can upgrade our methodology and technology and create an algorithm that predicts which suppliers and what parts will be problematic", says Lior Katz.
"Today there is a whole world of ERP and MRP tools for scheduling and managing materials, and they do what is necessary, but ultimately they are all reactive – allow for a response only when the crisis is in its full swing. In fact, these are intra-organizational tools that do not address the suppliers' side. We have created a solution that combines the algorithm and the service that accompanies it to be proactive, controlling the situation in advance by early identification and handling of the problematic components before the status turns from green or yellow to red. "
The traffic lights are not just an image. At PPA, the application built by the company, the statuses of different parts are illustrated with these colors, allowing the user to easily identify an item that is in danger of being delayed. The application analyzes information from a large number of sources and draws conclusions based on that. The algorithm weighs the data and draws a forecast, whether or not a part will arrive on time over the next three months. It relies on the supplier's supply history, the number of known parts he has in stock and production, his relevant purchase order confirmations, and finally his service index.
“We know how to quantify the level of service to an index and to weigh the parameters so that they create a focused method that can predict whether or not parts will arrive on time. There might be an item is due in two weeks and its supplier always meets the required delivery date. On the other hand, there is a required item for another two months – so the client is not dealing with it, but its supplier has an history of tardiness, a point the client is not necessarily aware of", says Caspi. "Our system will paint that item in red so that the organization will take care of it in advance".
According to Hanan Caspi, today most of the existing indexes are retroactive statistical values. "PPA – Delivery Assurance Services" changes that and anticipates ahead. "Essentially, this is a solution created by a combination of past, present and future. The system takes past data, through the communication with the supplier and the present data – and based on this predicts the future. It paints the problematic items in red and tells the user:'Here's your problem, focus on it .
'Thus, organizations as well as supply chain and procurement managers are able to predict where the future "bottleneck" will be. The system detects which parts will jam their assembly lines in advance, thus saving employees time that might have been wasted on having to recalculate a route. This solves a common problem of procurement people, who drown in information and deal with the search and solution of problems rather than preventing them in advance and enabling efficient and un interrupted work.
"What we propose to organizations is to use PPA's Services to manage the communications with the suppliers" Katz adds and suggests.Take us and use us to be sure you will get the parts on time. There is a cooperation from the suppliers' part as well, because this is a situation that everyone benefits from. Until today they have been receiving endless calls and emails and wasted their time.
"Today they deal with the bottom line: to produce and deliver products. They only have to spend a few minutes every week updating the information through our portals or representatives. PPA customers receive a system that is fully managed by us, as we are the ones who communicate with the suppliers and assure that they will cooperate in providing the updated information and data in the portal.
"The result is an easy to understand information, so that the customer can focus only on what's important and use his time efficiently, which is worth a lot of money. We give the customer a full service that enables him to proactively manage the supply chain, with an emphasis on the critical components".
PPA customers testify that it works. "I see this being reflected in our 'urgent' file. It has fewer and fewer lines. Once there is a weekly tracking from both sides, with an emphasis on potential problems – this significantly reduces the delays, "says one customer”. PPA shows impressive use of analytical tools, with the ability to change the way suppliers understand customers and identify problems in advance. This is a proactive approach that is very necessary, " says another customer.
"Our product efficiency is summed up in what we call 'the four E s'," Katz summarizes: Ensuring suppliers On Time Delivery, Enhancing suppliers traceability and visibility, Effective suppliers risks management, and effortless suppliers communication.