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Right part, right place, right time: easy to say, tough to achieve. Back in early 2002, Silicon Graphics Inc. (SGI) was looking to replace an outmoded distribution requirements planning system. "We needed to position our materials around the world, to efficiently and effectively utilize that material and not have any excess deployed," recalls logistics materials manager Kipp Hooper.
Born in 1982 as a maker of computer terminals for 3D graphics display, SGI has grown into a producer of high-performance servers and storage systems for a variety of uses. Customers hail from automotive, aerospace, defense, pharmaceuticals, and a wide range of other industries. But SGI's success is tied as much to after-sales service as to the quality of its original hardware. Inventories must be deployed in such a way to address customers' immediate needs, without creating a drag on the company's balance sheet.
A review of several candidates led to the choice of Baxter Planning Systems, based in Austin, Tex., as provider of new software for SGI's service supply chain. The goal, says Hooper, was to meet corporate goals for reducing gross inventory each year, while maintaining high order-fill rates. The vendor's system allowed SGI to set targets for stocking levels, then achieve the best distribution of parts at each location.
The software suite known as Prophet by Baxter gave SGI multiple options for stocking parts-ranging from batteries to full-sized monitors-across its network. In the past, such decisions were driven mostly by requests from engineers in the field. "They love having lots of inventory around," says Hooper. Now, the company had an analytical tool that could take a broader view of the network and make decisions that balanced service and cost.
With Prophet's help, SGI scrutinized its existing service contracts, then set inventory levels to meet the requirements of each. In the process, many parts that had been stocked in the field were returned to the distribution center at headquarters in Sunnyvale, Calif., or placed in hub locations. Over a period of five years, SGI was able to reduce its storage locations from around 200 to the present level of 170.
At first, says Hooper, field engineers were nervous about losing instant access to key parts. Gradually, they became comfortable with the new distribution scheme, which took into account the differing response times built into SGI's various contracts. Same-day agreements required inventory to be kept as close to the customer as possible. Next-day allowed for storage in one of three SGI distribution hubs around the world-Brussels for Europe, the Middle East and Africa; Singapore for Asia-Pacific; and Louisville, Ky., for North and South America-supported by reliable transportation arrangements.
SGI hopes to call on Baxter for additional capabilities. The current system consists of middleware that links new-product introductions and end-of-life programs. Baxter is now developing functionality on the new-product side, which could help SGI to spec out new items and create a "cradle-to-grave" system from a logistics standpoint. Says Hooper: "Those are the things that would make a really great product."
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