Reducing Inventory

From: Line 56 News
Nov. 22, 2002

Knowles Electronics manages its supply chain with Oracle, dropping inventory by $1 million a month; putting star employees on technology implementation teams

by Demir Barlas, Line56

Knowles Electronics -- a specialist in hearing aids, industrial engine controls, automotive components, and acoustic and infrared technology -- was, until recently, a prisoner of old mainframe technology.

According to Randy Kjell, the company's IT director, Knowles' systems were between 10 and 20 years old.

Knowles' global demand manager, Dave Flies, explains why the aged technology and lack of centralized infrastructure resulted in inefficient processes. "Every location had its own system, e-mail, and spreadsheets. You'd get the order in [HQ] Chicago, put it in the system, fax the P.O. to Malaysia, then they'd send demand to China. It was a cumbersome process, and it was difficult to manage capacity."

Towards the end of 2000, Knowles made a decision to use supply chain management (SCM) to get its various locations on the same page. The goal was to reduce inventory, improve visibility between divisions, and speed up cycle times so as to improve customer satisfaction.

With these criteria in mind, Knowles went on its vendor search. "We narrowed it down to Oracle, SAP, and J.D. Edwards," Kjell recalls. "We wanted advanced processes and multi-currency, multi-language support."

Knowles ended up going with Oracle, beginning implementation in January 2001. By this time, Knowles had been sold on more than just SCM, and ended up tapping Oracle for other enterprise applications including financials, purchasing, HR, and engineering.

It was a lot to take on, and the company knew it. But Knowles had a plan to make the implementation run smoothly.

"We pulled 15 people from our eight sites to dedicate to this process," Kjell recalls. "We said to the GMs, 'We want your best people.' We then matched them up with Oracle consultants to do the business flows and design structure." Knowles made sure that other operations employees worked carefully with the internal Oracle team. Meanwhile, Kjell says, leadership was not a problem, as the Oracle implementation was receiving "tremendous support and indeed pushing" from senior management.

Knowles handled its change management challenge through its leading employees. "People inside the organization who were now experts trained everyone else on the modules."

Knowles made sure that the first sites to go live were headquarters in Chicago and a location in England. Then "We sent a team to China and Malaysia," says Kjell. Tackling the implementation in this order, and leveraging the abilities of 'star' employees, made it possible for all Knowles sites to be up on all Oracle modules by the summer of 2001, mere months after beginning the process.

Knowles' results have been impressive: the company has been reducing inventory by $1 million a month over the past half year, and customer satisfaction rates are up as well now that demand is getting met faster.

"We can adjust on-hand balances and safety stock on a worldwide basis in a matter of minutes by going into Oracle," Kjell concludes. "We can see the inventory now."

And that's key for the company as a whole, says Flies. "Inventory levels and better inventory use go right to competitive advantage."

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