Category Archives: Inventory

MeRLIN Sourcing, A Platform With a Twist …

INTRODUCTION

When their founders were young men
they paced the fact’ry floors
from Vellore down to Chennai
they must have walked ’em all
cause they learned all of the problems
that plagued the Procurement side.
Those listen, look, and learn guys
sure made a lean platform.

The founders of MeRLIN, who started Rheinbrucke Consulting in 2013, started developing a stand-alone application for direct source-to-contract (and, for those who need it, source-to-pay) in 2018 using their decades of experience supporting direct manufacturing clients. MeRLIN was then frst released it to the market in 2022, after ensuring it actually solved the problems they were seeing and met the needs of the companies they were working with.

(While some companies might take it as a badge of honour to get a “minimally viable product” to market in a year, the reality is that when it comes to manufacturing enterprises, nothing you can develop in a year will actually solve more than a fraction of their problems, and unless what you deliver can integrate tightly into their existing enterprise software landscape, it won’t be adopted, or even bought. That’s why there are so many offerings in indirect [many of whom will succumb to the marketplace madness] and so few that offer true direct sourcing solutions, and fewer still that offer fully integrated source-to-contract / source-to-pay suites.)

PLATFORM SUMMARY

MeRLIN, which bills itself as a Source-to-Contract platform for Direct Material (primarily Discrete Manufacturing) Sourcing, is actually a Source-to-Pay platform where the Procure-to-Pay platform capabilities are baseline (and wouldn’t go head-to-head with best-in-class) and designed for the mid-market (and large enterprise) clients that don’t have a Procurement solution in place already (either through the ERP, AP, or a third party system). Since most larger enterprises have some form of decent P2P, MeRLIN decided to focus primarily on the critically underserved strategic sourcing marketplace in discrete manufacturing and direct sourcing and the capabilities all of the companies the founders worked with in manufacturing were universally missing.

MeRLIN was designed as a modular solution where

  • a client could license just the modules they wanted/needed,
  • common modules, and capabilities, were broken out into their own modules so their was no duplication of functionality, and
  • key modules could be augmented with additional value-added functionality not typically found in average products.

MeRLIN has all the standard modules you’d expect in a Source-to-Contract:

  • (Program &) BoM Management (Requirement for any Direct Solution)
  • Requisition Management (Intake)
  • Sourcing (Event) Management (Sourcing)
  • Supplier Management (SXM)
  • Contract Management & Contract Authoring (CLM)
  • Reports & Dashboard (Reporting & Analytics)

As well as basics for Procure-to-Pay:

  • Purchase Order Management
  • Invoice & Payment Management

But also has modules for:

  • Demand Management (Consolidation of Requirements from Requisitions, Manufacturing Programs, and MRPs)
  • Category Management (Part/BoM grouping & management)
  • Supply Chain Compliance (GSCA / LkSG)
  • Supply Management (Document & Shipment Management)

and the standard suite foundational modules of:

  • Master Data Management
  • Business Administration
  • Security Management
  • System Management

And even modules for:

  • Strategic Project Management (Project Management/Orchestration)
  • Finance Management (Budgets, Prices)

We’re not going to discuss all the modules and instead focus in on just the core Source-to-Contract modules, as they are the modules that are critical to direct sourcing and the modules that will allow you to understand the value, and potential, MeRLIN has for you.

Supplier Management

Supplier Management is designed to onboard, evaluate, approve, and manage suppliers, including their contacts, surveys, ratings, and documents. Qualification starts with a simple request based on supplier name, country, email, and unique (DUNS) identifier. Based on the supplier category, the next step will be to send the suppliers the qualification surveys and pull in the external risk information, send it to technical and risk reviewers, and if that passes, it will go off to compliance to ensure the supplier can comply with all necessary regulations the company is subject to and then, if that passes, the supplier will get a registration invite to provide all of the additional information necessary to do business with the company as well as details on additional products and services.

Supplier Management captures all of the core company information, locations, accounts, questionnaires, risk information and scores, compliance reviews, scorecards, and approvals. For each of these there are standard fields, and as many additional fields can be added by the customer organization as needed.

Compliance Management

Collects and manages the organizational policies, supplier policy statements, compliance surveys, audits, risks, scorecards, and complaints. It can accept all documents, support custom surveys, import third party data from financial and environmental (and other) risk providers, provide you with compliance scorecards, and automatically extract and centralize all “risks” from the surveys based on scores and/or responses in a risk management view.

Moreover, in full compliance with the German Supply Chain Act (GSCA, known as the LkSG within Germany), MeRLIN provides the buying organization, each of their suppliers, and their entire employee base, a unique portal where they can register complaints. They have upgraded their platform to fully support the GSCA and can also support other supply chain acts as well (and future releases will encode more out-of-the-box support, even though it can already be custom figured on a client-by-client basis to support the majority of acts out there).

Requisition

Requisitions can be used as traditional requisitions for purchase orders against existing contracts for goods and services normally used by the company or as intake requests for sourcing. When they are used as intake requests, they go to a central management screen where the buyer can group them by material, bill of material, and/or category to identify sourcing event requirements and then create a sourcing event off of a bundle of them.

Sourcing

Sourcing is primarily RFX based, but auctions are supported as well off of base RFQs. A sourcing event can be kicked off from one or more requisitions, a category, a BoM, or an event template, which can consist of one or more RFIs, questionnaires, and line-items with custom price breakdowns in the RFQ. Associated with the RFQ can be the suppliers, addendums, budgets, stakeholders, terms and conditions, contract template, event schedule, and ongoing Q&A.

In addition to being able to review bids by total cost per unit and evaluation score (by the relevant stakeholders), the application also supports automatic award recommendation by criteria which can include target award by supplier, range of suppliers to split the award between, minimum and maximum shares, and preferred supplier status.

Contract “Authoring” & Management

The platform is primarily “signature” and “execution” management, as authoring is simply the packing up of contract templates, terms and conditions, specifications, and associated addendums for agreement by electronic signature. The electronic signature capability is compliant with USA regulations and most European regulations for private enterprise contracts. Once the contract is signed, the platform can manage the project timeline, stakeholders, documents, events, milestones, and obligations. In addition, the user can define alerts against any event, milestone, document, obligation or other entity on status change or due date.

Reporting & Dashboards

Reporting and Analysis in MeRLIN is through widget-based dashboards that summarize any data of interest in the system. Right now there are hundreds to select from in the reporting library, with more being added as needed. For each of the built in reports and dashboards (on suppliers, spend, process, etc.), the user can apply multiple filter options and save the configuration to their liking. There is no Do-It-Yourself (DiY) widget report builder yet, but more DiY analytics enhancement is on the roadmap.

Strategic Project Management

This is MeRLIN‘s built in project management capability where a user can define and instantiate RFX templates, supplier onboarding workflows, contracting processes from award specifications, procurement processes, and even entire Source-to-Procure projects which collect all of the necessary templates and workflows together. In addition, leadership is provided with a high level overview of sourcing projects.

Master Data Management

All of the system master data templates can be altered by the user including, but not limited to, currencies and conversions, items, locations, plants, prices, suppliers, contract metadata and milestones, and other key items. The customer can control it’s master data and master data identifiers.

Business Administration

All of the templates in the system can be managed and customized in the business administration section including, but not limited to supplier onboarding, qualification, evaluation, and audit questionnaires, product and item templates, requisitions, RFQs, purchase orders, contract terms, contracts, statements of work, email, and workflow templates.

Bill of Materials Manager

A key aspect of Direct Sourcing is managing the Bill of Materials. In the Merlin platform, that can be done through the BOM Manager, which unlike basic direct sourcing platforms, can maintain as many versions of a Bill Of Materials as the organization wants to maintain (for correlation with historical sourcing and procurement and cost estimates during new product design and/or product modification).

These versions can be uploaded from the ERP (or your PLM of choice with custom integration) or created in the BOM Manager, and this creation can be from scratch or from a previous BoM version which can be copied and modified as needed.

The best part of MeRLIN‘s BOM manager is its built-in ability to allow for easy should-cost analysis during NPD and BOM (re)design. Once a BOM has been uploaded or created, the user can click a button to “cost” and it will automatically find prices for every component in the BOM for which it has a price from a contract (first), catalog/commitment (second), or quote (third). Then, the user can push the remaining items to the Demand Management module for quick quote (or import into the internal catalog from a connected source) or simply create a place holder item (with an estimated cost). They can then return to the BOM Manager and re”cost” the BOM to get a complete cost estimate, which can be compared against the cost of all prior BoM versions (that were costed). This allows the organization to understand the costs associated with BOM changes over time (independent of supplier or distributor pricing changes). Gone are the days where you have to use a completely separate application to do BOM cost estimation.

Finally, the next update to the BOM Manager will allow for the user to enter a cost estimate directly in the BOM manager for materials/parts not yet quoted for even quicker price estimates, and those estimates will be clearly marked as internal estimates only.

Other Capabilities

We’re not going to discuss the procurement modules as they are not MeRLIN‘s focus (but we will assure you that they cover the foundations if you don’t have P2P and need it), demand management as you know what forecasting should do, category management (and category strategy management) as that is rather self explanatory, or finance management, as budget and price management is also straight forward.

The Full Picture

The platform is quite deep in all core areas and one could write pages about each module and its deep capabilities, but hopefully this is enough to convey the facts that

  • the MeRLIN platform was designed from the ground up to support direct and discrete sourcing,
  • has the capability to support these projects from inception to contract signing through the very last order against the award, and
  • goes beyond just raw sourcing capability to related capabilities of supplier risk, compliance, and execution (tracking the order to the delivery and qualification)

CONCLUSION

Given the relative lack of true direct and discrete sourcing platforms in the mid-market, MeRLIN is a platform you should definitely be aware of. If you’re in direct manufacturing, automotive, aerospace, and related industries, you might want to check them out today.


It’s for discrete wizards,
it’s a platform with a twist.
A discrete wizard
needs a tech assist …

When Managing Supply, Don’t Forget …

… sometimes supply comes from within the four (virtual) walls of your business. This is one fact that is overlooked by many S2P suites which are setup to acquire external goods and services (and, specifically, finished goods and services that typically fall into indirect categories.

When we are talking about MRO, the goods and services you need might be in a storage room in another building. If we are talking about consumables, like what you might need for a new hire, everything you need might be one floor down, left behind by another hire who, after the probation period, didn’t work out.

Inventory and Asset Management are key to successful Supply Management, and to successful Procurement. One should NOT buy what one does not need. This is the other form of demand management — which is two parts. The curbing of need for consumables (less paper for the printer, less usb drives when there are secure network share folders, etc.), and the re-use of what you have. Laptops or cell phones less than 6 months old should never go unused or reassigned. Expensive MRO replacement parts can often be couriered from site to site for $40 — why spend $5000 ordering another 4-pack to fix the production line and have your minimum “3” on hand when another facility still has 8 in storage.

When you are upgrading your e-Pro / P2P / S2P system, keep this in mind. Either find one that includes inventory management or integrates with an inventory management system, and you’ll save a lot.

But to truly win, make sure it supports end-to-end asset management. It’s not just expensive hardware that often collects dust in storage closets, is also expensive assets. Like expensive snowblowers that are bought, put in the basement, forgot about when the business gets a new, better, facilities contractor and the internal maintenance team doesn’t have to do it anymore instead of being sold or sent to another facility. Expensive 3-D software licenses that are not transferred to another engineer, and then bought again 6 months later when a new hire needs them. Patent or other IP library that could be licensed by sales to a partner for extra revenue. Etc. This last part is key. Not only are unused assets costing the company money (because thy were bought to fulfill a need, which is not being met by them, but costing the company money if they can be licensed, rented, or, in the case their value becomes limited, sold.

So when you are upgrading your e-Pro / P2P / S2P system, keep this in mind too. Make sure it’s inventory and asset management or integrates with an inventory and asset management, and you will not only save a lot, but help the organization generate value.

What’s the right level of safety stock?

Severe weather events and transportation disrupting natural disasters are on the rise, and the only thing that we can be sure of is they are going to keep coming fast and furious in the near future. We don’t know when, where, or what extent the impact will have, but we know it’s coming.

The resulting disruptions to your supply chain will last days, weeks, or months. And if the part of your supply chain that is disrupted is one supplying a critical component that is sole-sourced or in a supply shortage, any and all products it is used in will be in jeopardy once the inventory runs out. As a result, JiT inventory is becoming a thing of the past. However, too much inventory on hand is NOT a good thing. You want a balance between JiT and everything you need for the planned production run. And that balance could be anywhere from a few extra days (for inventory that can be obtained from another source on short notice) to a a few months (for something otherwise hard to get).

But how do you figure out the right stock levels? It’s not just rarity. After all, stock costs money and ties up working capital … capital that likely has better uses. After all, early supplier payments can bring cost reductions. Investments can bring recurring cast. R&D can develop new, more profitable, products for sale. And so on.

So how do you determine the right level of safety stock? Expand the working capital optimization model to allow for a variable disruption cost based upon variable stock levels, each of which has an associated investment cost (in the form of tied up working capital), and determine the stock levels from the investment that optimizes working capital.

Again, the right level of safety stock falls out of working capital optimization.

Demand Control: Reduce, Reuse, Recycle, Redefinition and … Requisition Everything!

Part of good cost avoidance in Procurement is good demand management — reducing the consumption, and expenditure, on MRO, T&E, one-time buys for events, etc. We’ve covered the classic techniques in the past, which include:

Reduce: which can be accomplished by accurately predicting needs (and reducing waste) based on past use and current trends (and not maintaining volume levels on toner cartridges for a printer line being phased out)

Reuse: which can take the form of repurposing old equipment (as old developer workstations are probably just as powerful as the business user desktops used in the rest of the organization) or simply collecting unused/discarded collateral at an event and using it again next time

Recycle: where MRO inventory can be replenished by breaking down equipment (like workstations, production lines, etc.) that go out of service and harvesting still working parts that can be used in other equipment

Redefinition: where it’s not a need for more paper, but a need for second / bigger monitors so that people don’t need to print invoices / documents still submitted as (scans of) handwritten documents that can’t be OCR’d or that aren’t in a format the OCR recognizes or for tablets that allow executives to access their reports on the go

but a new type of demand management is popping up in the Procurement world, and it’s called:

Requisition Everything: where you have to literally submit a requisition to the procurement system so that all demand, and consumption, is tracked (and you can be visually guilted to control demand or utilization if you are consuming significantly more of a resource than your peer).

Now, this probably sounds very onerous to you and not worth it, but it all comes down to the implementation and user experience. At Coupa inspire, one company described an innovative method that they used to track and control demand on the factory floor (where workers would forget where they put their gloves, or realize they left them in the lunch room, and just go to the closest supply room or where workers would store extra tools or parts at their desks, just in case, leading to low stock signals and unnecessary ordering). They installed vending machines and when a worker needed something, they needed to go to the machine and punch in their id and slot number. Nothing was restricted (and no limits were placed), but every “requisition” was sent to the central Procurement system which not only updated MRO inventory but also tracked who used what, and allowed Procurement, and departments, to understand usage patterns better. This simple process reduced demand as it instilled the notion of cost consciousness and responsibility in the workers (who knew that their usage patterns could be analyzed and if they consumed considerably more than their peers, it would show), and didn’t really add any time or complexity to the process (as all the workers had to do was punch a few buttons) — especially since this process insured that the workers always knew where the stock was (which wouldn’t happen if it was moved around on the shelves).

Moreover, this technique is not limited to what fits in a vending machine — one could also use cheap RFID tags for larger items (of sufficient value) that would automatically be requisitioned when the tag left the store room (and be assigned to the right person using the employee record obtained from the entry control system when the person swipes their key card).

And, with micro-budgeting, it can be used to insure departments don’t go over their allotted new-hire budget unnoticed. New hire equipment can be kept in the secure storeroom, automatically tracked when retrieved, and automated re-orders made if stock gets too low. Plus, reusable equipment can be returned on employee departure, residual amortization amounts credited back to the micro-budget, and employees / departments who opt to use recycled equipment can be charged a deep discount against their micro-budget (and, more importantly, rewarded at annual recognition events as reuse stats can be tracked).

Now that almost everything can be automated, it might just be the time for Requisition Everything as the new method of employee-based demand management and cost control. Thoughts?

Organizational Sustentation 59: Warehouse Management

This warehouse frightens me … still
Has me tied up in knots …

Dave Matthews Band

And, as per our damnation post, if your warehouse doesn’t frighten you, obviously you haven’t taken a really good look at it. The warehouse is responsible for inventory, and inventory is very costly … even when it is well managed. Many studies of inventory (carrying) costs have estimated inventory costs to be 25% of the value of the average inventory level (or more). That’s huge!

But this is not the only reason the warehouse is a damnation. It is also a damnation because the warehouse controls:

  • product availability

    and can take their time unloading product, packing product, shipping product, etc.

  • the final quality check

    and if they get lax, and don’t independently test the spinach, your company could be blamed for the next salmonella outbreak that is actually the fault of your supplier

  • overhead costs

    inventory, operations, etc.

So what can you do? Let’s start with the obvious:

JiT (Just in Time) Inventory

The less excess inventory on hand, the less inventory carrying cost, the less inventory for the warehouse to lose or damage, and the less overhead cost to consider.

VMI (Vendor Managed Inventory)

Sometimes your vendor can manage inventory better than you can, and if their revenue is dependent on good management, they are very incented to manage it well.

But that’s just the start. You can also:

Get (a) Lean (assessment).

Identify the inefficiencies, and make sure something is done about them to keep efficiency up and overhead costs down. Make sure the organization is focused on lean transformation and continual process improvement.

Get external audits (on operations and inbound product).

Not only to keep the warehouse in check but to help them identify areas for improvement.

Get the Warehouse Training.

It’s not only Procurement that never has enough in the training budget, it’s the warehouse too. Management thinks that because it’s a manual job, it’s a low skill job and little training is required. Maybe, but considering that lean, six sigma, and kanban processes can greatly improve efficiency and minimize costs, it doesn’t hurt to make sure that the processes, and the labour implementing them, have all the knowledge they need to be as efficient and effective as possible.