Faced with growing global complexity and increasing demand volatility, Kennametal set out to improve its supply chain maturity, increase data integration and improve its bottom line as outlined in a recent case study published on Kinaxis.com. According to Kennametal, what was required for supply chain success was finding new ways to connect data, process and people. As Jochen Kraetschmer, Manager of Global S&OP at Kennametal, explains in the case study, driving the decision to change was the impact of market demands on Kennametal’s revenue. Inventory levels were bloated, customer satisfaction levels were low and a very high SKU count and complex supply base across all continents meant it was a challenge to keep data connected and processes optimized. Complexity overlaid nearly every aspect of the global manufacturer’s operations. So how could Kennametal overcome it?
The answer noted Kraetschmer lay in connecting the data dots and fueling systematic collaboration. The Kennametal case study shows standing in the way was an excessive use of spreadsheets, heavy reliance on non-integrated middleware and a swarm of disconnected processes. Kraetschmer said achieving success meant identifying existing process gaps, recognizing ineffective tools and focusing on two key areas: sales and operations planning (S&OP) and cross-functional visibility. From an S&OP perspective, Kennametal struggled with integration between supply chain planning and stakeholder processes (i.e. sales, finance, etc.). In terms of visibility, without a single platform to provide end-to-end planning, the ability to see the complete picture was spotty at best.
Planning for success
Knowing change doesn’t happen overnight, Kraetschmer and the Kennametal team devised a phased approach to improve its supply chain maturity. Step one was breaking down the S&OP processes and rebuilding it over the course of nearly seven months to improve collaboration between sales, marketing and operations, and to align to the financial forecast. Next came the implementation of subsequent planning processes – which took another year to get in place. Kennametal expanded its processes to include:
- Rough cut capacity planning
- Plant loading
- Supplier collaboration
- Rebalancing of inventory
- Safety stock calculations
- ABC stratification
The final step, which the case study explains is still currently in progress, addresses the integration of demand planning, including statistical forecasting and life cycle planning. It also includes component planning, deployment and constrained capacity planning.
Integrating data, process and people
Integrating its data and connecting people in the end-to-end process has pushed participating functions toward a collaborative approach at Kennametal explained Kraetschmer. But to generate sustainable process outcomes, Kennametal sought continuous training and education for its team to ensure success. The company has standardized its processes with an emphasis on the overall business objectives, created a more demand-driven supply chain, refined tradeoff decision-making and adopted a customer-centric mindset. It’s now moving toward implementing longer-term planning horizons and is well on its way to achieving a higher level of supply chain maturity.
The case study shows Kennametal has improved forecast accuracy in the 3-to-6 month timeframe by 30-50%, which has contributed to significant reductions to inventory. Kraetschmer said scenario simulation and improved collaboration helped drive alignment between groups like supply and demand planning, and marketing and sales. This has enabled Kennametal to mature its S&OP processes even further, delivering value in transparency, data integration and end-to-end supply chain visibility. It’s also resulted in minimized forecast bias, removing a culture of uncertainty and shifting it from reactive to proactive. Ultimately, Kennametal’s supply chain maturity success boiled down to trust in its data and technology. Interested in learning more about Kennametal’s quest for supply chain integration? Check out our recent case study.