Master of Business Administration Executive
Faculty / School
School of Business Studies (SBS)
Year of Award
Dr. Muhammad Wasif, Visiting Faculty, Department of Management
MBA Executive Research Project
The material demand in the utility sector has always been an “Input to Farm” model. The complexity of material usage and material overlapping among different projects, the demand modulation has been a difficult ask, as it has to be an integrated approach between all stake holders in line with the leadership direction and within the constraint parameters.
Many steps have been taken to reduce the working complexity and to ease up the decision making for the demand adjustment in previous years and the overall consumption hit rate has also improved, this includes:
- Separation of plants for different users
- Categorization of items as per value and usage
- Individual demand strategy for different item category
- Budget based consumption control
Due to complexities of external factors and lack of planning accuracy, the material management has become a constant issue in the distribution.
For this reason, we have identified issues and analyzed it from different angles and discussed it with different stakeholders through interviews and questionnaire along with 3 years data analysis.
In this study, it is highlighted that in order to have management control over demand visibility and allocation, an integrated system-based tool has to be implemented, which will allow all stakeholders to have a common direction and visibility as well as be more responsibility.
Further it’s suggested that different approaches for different projects should be adopted and should not be limited to item categories. Accordingly, we have categorized projects into two main categories:
- Trend based projects.
- Target based projects.
The approach for the “Trend based Projects” (continuous YoY basis and have historic assessments) are to be managed separately with ROL (Reorder Level) approach. Automated consolidated demand generation with safety stock to reduce the unavailability and should have auto triggering mechanism, which can give us the category wise inventory days policy to monitor and control with .( e.g A- Category 45 Days, B-Category 60 Days & C-Category 90 Days) with the demand processing method like for A- Category 6 Month Rolling basis can used whereas for B-Category the rolling ROL method can be used and for C-Category which is low value intermittent items and as per required basis so the Manual MR can be used for it.
The “Target-Based projects” is to be set upon by the management direction and have to be managed differently through management review and inventory policies. The demand review can be further focused on the item category and can be managed differently.
We can have a simulator to assess the project’s categorization and its impact on the business.
For example, if we take CM (Corrective Maintenance) and FMR (Faulty Material Requirement) as a Trend-based projects and we have all other as Target based project with inventory policy of 60 days running inventory by value and plot it for 3 years against the actual results it was evident that the inventory can be reduced and more realistic level can be achieved ( can be seen in Chapter 5) .
As is evident from the data of the last 3 years assessment domain, the results would be significant with working efficiency and improvement in Material gap.
The Process improvement for the C-Control Approach can be derived form the implementation of S&OP Process with slight adjustment in the KRA’s for the alignment in the utility sector. This will allow the coordination and the prioritization of the projects and the relevant items as per supply chain constraints to meet the business strategy as well as for the reduction in Material Gap and reduction in stake holders noise.
One other aspect in increasing the material availability aspect is to implement the Dynamic Safety Stock Concept for the items on a consolidated basis, or project Category basis (Trend based / Target Based Projects), which will allow to handle any surge in sudden items due to conditions or due to ground reality change / prioritization of the project. The impact will be taken upon the safety stock and the demand pattern will not be affected due to the material availability gap.
The general formula for the Dynamic Safety Stock is as below.
Dynamic Safety Stock = Rolling Avg of Lead Time Period X Coverage Profile.
This will allow a robust and accountable Demand Management System for the Utility Sector.
So having a defined Material management strategy for the projects will give the flexibility and the coordinator control required in the utility sector.
Anwar, K., Shams, S., & Karim, K. (2023). Dynamic demand planning in utility sector: KE material planning overview (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/research-projects-emba/565
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