Executive Briefings

Cannondale Bicycle Improves Inventory Control, Modeling Capability

A conversation with John Nafis, manager of the supply chain at Cannondale Bicycle Corp., headquartered in Bethel, Conn.

Cannondale is known for the light weight and heavy performance of its mountain, road racing, multisport, recreational and specialty bicycles, most of which are built on aluminum frames that are exclusively manufactured at its U.S. plant in Bedford, Pa. The company recognized in the late 1990s that the aging business process control system that it was using to run its business no longer was sufficient to meet its global inventory needs. Cannondale implemented new software from Webplan, Ottawa, Ont., which was recently named Kinaxis and more recently upgraded to Webplan's RapidResponse solution. The result has been better inventory visibility and less safety stock.

Q: How did you come to your position as supply-chain manager at Cannondale?
Nafis: I started with the company in product management in 1996 and a couple of years after that, around 1998, I became a master scheduler. This was a sort of strange transition, but the opportunity popped up when they needed some help in that area. After that, I stayed in the supply-chain side of the business, bouncing between purchasing, planning, demand planning and finally, with this job, a little of all of that.

Q: So you were working with supply-chain activities when the decision was made to implement Kinaxis?
Nafis: Yes, the company originally purchased Kinaxis in April of 1997, so I was fortunate enough to be at some of the initial meetings and I was able to learn the product from the ground up. I think we were their third customer.

Q: What were the operational drivers behind this implementation?
Nafis: Cannondale is a global company and it has a global supply chain. Our main factory is in Bedford, Pa. We weld and manufacture bicycle frames there and we also assemble final bicycles there for distribution throughout North America and Asia. In addition, we have a bicycle assembly plant in The Netherlands. We ship our frames there and they buy the other components separately for shipment throughout Europe. We also have a small assembly and distribution center in Japan and a smaller one in Australia. But every frame in the world comes out of Pennsylvania. Most of our components come from Asia, primarily Taiwan and China, though not necessarily in that order.

So we had all of the pains that you would expect from this kind of distributed supply chain, but the one that spurred Cannondale to make the purchase was the need for a new MRP [materials resource planning] package, largely because the BPC [business process control] system that the company had just wasn't up to the task. At that time, we would run an MRP plan once a week and it took the weekend to run it. When production would come in on Monday morning they would have to ask, 'Is it done yet?' So Kinaxis came in and said their application could have us running our MRP in 30 seconds, which seemed like a ridiculous number. But they loaded all the data up and I think they beat the promise by a couple of seconds. I think that simple display is really what spurred the initial purchase. I don't think anyone fully realized the potential that the product had back then. They just wanted to be able to coordinate production scheduling with demand.

At the time of that initial implementation, I think we really just duplicated a lot of the customized functionality that we had in BPCS. One thing about Kinaxis is that it is so customizable that you can duplicate your current business practices to a T. Whether your business practices are good or bad, they can be very easily modeled in Kinaxis and put into production. So a lot of the MRP functionality was just taken out and duplicated. It was a case of, "If that is what you really want, we can give it to you," and that is what we wanted at the time. We were happy with that for quite a while.

Q: And more recently you implemented RapidResponse?
Nafis: Yes. What we have evolved to with RapidResponse is a much more sophisticated, but also a much more vanilla or less customized MRP product. So instead of really trying to drive MRP with a lot of spreadsheet manipulations and things like that, we are much more pure with our forecast assumptions. This is possible because this deployment gave us a much better view of our global inventory. When we did the upgrade, we were able to consolidate our Europe and U.S. plants onto one server. With this multi-site functionality we are able, simply with a click of the mouse, to see inventory at either site. And much more importantly, we are able to share data with each other, so we not only see each other's inventory, we actually are able to share inventory.

One of the projects I am now working on will advance this concept a little further. The way it helps now is that if we run into a parts shortage situation in the U.S., for example, we can often get that part from Europe, and vice versa. We can see if one plant has excess and the other doesn't and getting it from one another is easier than ordering from a supplier.

In the future, one of the things we will be able to do with the inter-site relationships that we have built in Kinaxis is to make our own facilities the supplier of choice for certain parts. This will be helpful when we know a part is going to be phased out and we really don't want to get stuck with it in inventory. We could have Europe be the primary parts supplier for the U.S., for example, and after their inventory is depleted, only then would we go to the supplier.

Another feature that we use nearly every day is the ability to create what is called a private plan. Basically, this allows us to take a snapshot of our current MRP environment and copy it to a private environment where we can play around with it and make various changes to see what the impact would be. What would happen if a supplier is late, for example. More often than not it is playing with the forecast in some way. What if my forecast were increased by 20 percent or what if these customer orders were canceled-things like that. It is a very powerful tool because it allows us to go in and make those changes, then we simply hit save and we can see what would happen to our excess inventory or our planned order requirements or any metric that we have out there that we are interested in.

Q: So you could use that feature to plan promotions, for example?
Nafis: Absolutely. You can model things like changes in the price of a component, what would happen if lead times were extended, what if lead times were cut, what if purchase orders were late or early-any variable that you can think of modeling in your supply chain.

I also have found that this capability is very powerful from a development standpoint. If you are interested in a new way of doing business, a new business process, it enables you to model that process on the fly, without hurting the business. We do that often. It is a way to be creative, to take risks in your process plan and see what the outcomes would be without hurting anything.

Q: Have you tracked it to see if the modeled results are what you actually get when you make a change?
Nafis: It is, without a doubt. The results are real.

Q: Have you found other uses of the tool that you did not anticipate?
Nafis: We use it a lot for reporting purposes. We currently don't have a highly sophisticated enterprise planning system and Kinaxis is a great reporting tool.

And one of the great things about it is that you can create these reports on demand-if the executive group wants to see what would happen to our purchases if our future order book was eroded by 20 percent or if our forecast was raised by 10 percent, for example. We get that kind of request a lot. Someone can just come up and ask you and you can run the report at that second and give them an answer.

Another thing that may seem small but that has been very helpful to us is the ability to automatically send e-mails, whether it is sending spreadsheets to a supplier or data to a server. This is a function called the Alert Manager. Whether it's for reporting purposes or something that we build into a business practice by e-mailing it to a server and having it feed another system, this is a useful function.

Q: What data are you using as inputs to Kinaxis?
Nafis: Our BPC system is still running in the background and collecting data. It is archaic but it serves a purpose in terms of shop floor control and inventory control. About every three hours it kicks out flat files: all of our inventory transactions, all the firm planned orders, work orders, any transactional type data is kicked out as flat files. Another system kicks out independent demand tables or customer order information and the sales forecast comes as a spreadsheet. This is the raw data that we feed into Kinaxis. So we have our forecast, customer demand, work orders, and different plant orders as the input tables. Then there are probably 20 or so tables on the output side.

Q: Have you quantified any results?
Nafis: We haven't really because we have had the software for so long. We have been living with the system since '97. But I can say that everyone's eyes are more focused on inventory because the information is so readily available. And while I can't put a dollar value on our inventory reduction, it definitely is significant.

Q: What is the key lesson that you learned in this project?
Nafis: When upgrading software, think about upgrading your business processes at the same time. Take a hard look at the way you are running your business. Sometimes the way the software is put together represents best practice and makes a lot of sense.

Cannondale is known for the light weight and heavy performance of its mountain, road racing, multisport, recreational and specialty bicycles, most of which are built on aluminum frames that are exclusively manufactured at its U.S. plant in Bedford, Pa. The company recognized in the late 1990s that the aging business process control system that it was using to run its business no longer was sufficient to meet its global inventory needs. Cannondale implemented new software from Webplan, Ottawa, Ont., which was recently named Kinaxis and more recently upgraded to Webplan's RapidResponse solution. The result has been better inventory visibility and less safety stock.

Q: How did you come to your position as supply-chain manager at Cannondale?
Nafis: I started with the company in product management in 1996 and a couple of years after that, around 1998, I became a master scheduler. This was a sort of strange transition, but the opportunity popped up when they needed some help in that area. After that, I stayed in the supply-chain side of the business, bouncing between purchasing, planning, demand planning and finally, with this job, a little of all of that.

Q: So you were working with supply-chain activities when the decision was made to implement Kinaxis?
Nafis: Yes, the company originally purchased Kinaxis in April of 1997, so I was fortunate enough to be at some of the initial meetings and I was able to learn the product from the ground up. I think we were their third customer.

Q: What were the operational drivers behind this implementation?
Nafis: Cannondale is a global company and it has a global supply chain. Our main factory is in Bedford, Pa. We weld and manufacture bicycle frames there and we also assemble final bicycles there for distribution throughout North America and Asia. In addition, we have a bicycle assembly plant in The Netherlands. We ship our frames there and they buy the other components separately for shipment throughout Europe. We also have a small assembly and distribution center in Japan and a smaller one in Australia. But every frame in the world comes out of Pennsylvania. Most of our components come from Asia, primarily Taiwan and China, though not necessarily in that order.

So we had all of the pains that you would expect from this kind of distributed supply chain, but the one that spurred Cannondale to make the purchase was the need for a new MRP [materials resource planning] package, largely because the BPC [business process control] system that the company had just wasn't up to the task. At that time, we would run an MRP plan once a week and it took the weekend to run it. When production would come in on Monday morning they would have to ask, 'Is it done yet?' So Kinaxis came in and said their application could have us running our MRP in 30 seconds, which seemed like a ridiculous number. But they loaded all the data up and I think they beat the promise by a couple of seconds. I think that simple display is really what spurred the initial purchase. I don't think anyone fully realized the potential that the product had back then. They just wanted to be able to coordinate production scheduling with demand.

At the time of that initial implementation, I think we really just duplicated a lot of the customized functionality that we had in BPCS. One thing about Kinaxis is that it is so customizable that you can duplicate your current business practices to a T. Whether your business practices are good or bad, they can be very easily modeled in Kinaxis and put into production. So a lot of the MRP functionality was just taken out and duplicated. It was a case of, "If that is what you really want, we can give it to you," and that is what we wanted at the time. We were happy with that for quite a while.

Q: And more recently you implemented RapidResponse?
Nafis: Yes. What we have evolved to with RapidResponse is a much more sophisticated, but also a much more vanilla or less customized MRP product. So instead of really trying to drive MRP with a lot of spreadsheet manipulations and things like that, we are much more pure with our forecast assumptions. This is possible because this deployment gave us a much better view of our global inventory. When we did the upgrade, we were able to consolidate our Europe and U.S. plants onto one server. With this multi-site functionality we are able, simply with a click of the mouse, to see inventory at either site. And much more importantly, we are able to share data with each other, so we not only see each other's inventory, we actually are able to share inventory.

One of the projects I am now working on will advance this concept a little further. The way it helps now is that if we run into a parts shortage situation in the U.S., for example, we can often get that part from Europe, and vice versa. We can see if one plant has excess and the other doesn't and getting it from one another is easier than ordering from a supplier.

In the future, one of the things we will be able to do with the inter-site relationships that we have built in Kinaxis is to make our own facilities the supplier of choice for certain parts. This will be helpful when we know a part is going to be phased out and we really don't want to get stuck with it in inventory. We could have Europe be the primary parts supplier for the U.S., for example, and after their inventory is depleted, only then would we go to the supplier.

Another feature that we use nearly every day is the ability to create what is called a private plan. Basically, this allows us to take a snapshot of our current MRP environment and copy it to a private environment where we can play around with it and make various changes to see what the impact would be. What would happen if a supplier is late, for example. More often than not it is playing with the forecast in some way. What if my forecast were increased by 20 percent or what if these customer orders were canceled-things like that. It is a very powerful tool because it allows us to go in and make those changes, then we simply hit save and we can see what would happen to our excess inventory or our planned order requirements or any metric that we have out there that we are interested in.

Q: So you could use that feature to plan promotions, for example?
Nafis: Absolutely. You can model things like changes in the price of a component, what would happen if lead times were extended, what if lead times were cut, what if purchase orders were late or early-any variable that you can think of modeling in your supply chain.

I also have found that this capability is very powerful from a development standpoint. If you are interested in a new way of doing business, a new business process, it enables you to model that process on the fly, without hurting the business. We do that often. It is a way to be creative, to take risks in your process plan and see what the outcomes would be without hurting anything.

Q: Have you tracked it to see if the modeled results are what you actually get when you make a change?
Nafis: It is, without a doubt. The results are real.

Q: Have you found other uses of the tool that you did not anticipate?
Nafis: We use it a lot for reporting purposes. We currently don't have a highly sophisticated enterprise planning system and Kinaxis is a great reporting tool.

And one of the great things about it is that you can create these reports on demand-if the executive group wants to see what would happen to our purchases if our future order book was eroded by 20 percent or if our forecast was raised by 10 percent, for example. We get that kind of request a lot. Someone can just come up and ask you and you can run the report at that second and give them an answer.

Another thing that may seem small but that has been very helpful to us is the ability to automatically send e-mails, whether it is sending spreadsheets to a supplier or data to a server. This is a function called the Alert Manager. Whether it's for reporting purposes or something that we build into a business practice by e-mailing it to a server and having it feed another system, this is a useful function.

Q: What data are you using as inputs to Kinaxis?
Nafis: Our BPC system is still running in the background and collecting data. It is archaic but it serves a purpose in terms of shop floor control and inventory control. About every three hours it kicks out flat files: all of our inventory transactions, all the firm planned orders, work orders, any transactional type data is kicked out as flat files. Another system kicks out independent demand tables or customer order information and the sales forecast comes as a spreadsheet. This is the raw data that we feed into Kinaxis. So we have our forecast, customer demand, work orders, and different plant orders as the input tables. Then there are probably 20 or so tables on the output side.

Q: Have you quantified any results?
Nafis: We haven't really because we have had the software for so long. We have been living with the system since '97. But I can say that everyone's eyes are more focused on inventory because the information is so readily available. And while I can't put a dollar value on our inventory reduction, it definitely is significant.

Q: What is the key lesson that you learned in this project?
Nafis: When upgrading software, think about upgrading your business processes at the same time. Take a hard look at the way you are running your business. Sometimes the way the software is put together represents best practice and makes a lot of sense.