little cost, big benefits

There's something interesting about inventory visibility: Everybody wants it, many software vendors promise it, yet plenty of companies still don't have it. It isn't easy for any company to achieve, of course. But it's especially challenging for companies that have multiple suppliers, do business across borders, and cannot afford costly, time-consuming software implementations involving supply chain partners.

Grayling Industries fits all three of those categories, yet the manufacturer of asbestos-abatement supplies knows exactly what inventory is on hand at any given moment—not just in its own facilities but also in those of its top suppliers and its third-party logistics (3PL) partner. The mid-sized shipper was able to achieve this feat by getting its business partners to join it in using an on-demand inventory and warehouse management system (WMS) that makes it easy to share information across companies.

Cross-border confusion
Grayling Industries, headquartered in Alpharetta, Ga., sells protective liners for intermediate bulk containers (IBCs), bulk bags, and totes; disposal bags for asbestos; decontamination showers; and chemicals for asbestos and lead paint removal. About half of its $20 million in annual business involves custom orders, according to Carlos Rubio, Grayling's director of finance and operations.

The company serves customers from warehouses in Atlanta, Toronto, and Nijmegen, the Netherlands. Most of its products are assembled in a 60,000-square-foot, ISO-certified maquiladora in Juarez, Mexico, where more than 40 unique, custom-designed machines form polyethylene into liners, bags, and other items. About 5 percent of the polyethylene sheeting and other materials used in manufacturing comes from Asia and Europe, 15 percent is supplied from Mexico, and the balance comes from the United States, says Rubio. Materials for assembly are shipped in full trailers and ocean containers or by less-than-truckload transportation to Juarez. About 80 percent of the finished product is sold to customers in the United States, and on average, some 600 full trailer loads of finished goods cross the Rio Grande each year.

All of that back-and-forth across the border created some information gaps. One of those was a lack of real-time information on inbound shipments from suppliers. In the past, Grayling stored those shipments in its customs broker's warehouse, where shipment information was keyed in and updated only once a day. "If a truck came in later that night, we weren't aware of it until the end of the next day," Rubio says. "We were basing decisions on the inventory status at 5 p.m."

As a result, the plant sometimes did not know that material it urgently needed on the production lines was sitting in the broker's facility. Worse still, it sometimes ran out of inventory, forcing it to shut down a production line. That was bad news for a company that routinely has order backlogs and needs to keep its production lines humming. Making matters worse, purchase order and delivery information was slow to arrive, and more time was lost in rekeying and reconciling that information before Grayling's accounting system could pay suppliers.

The big switch
With responsibility for both operations and finance, Rubio understood the importance of keeping up with the pace of orders while optimizing the timing of supplier payments. To achieve both objectives, the company would need an up-to-the-minute view of inbound orders from suppliers and outbound shipments to Juarez. He decided to make two big changes in the way Grayling handled its cross-border business.

The first was to implement software that could handle several tasks, including informing suppliers of replenishment requirements; tracking inbound and outbound inventory; providing Grayling and its supply chain partners with real-time updates; and integrating with the shipper's enterprise resource planning (ERP) system. There were several software products that could fulfill Grayling's needs, but Rubio faced some constraints that narrowed the field of contenders. For one thing, the shipper could not afford a long, costly implementation. For another, the system would have to be affordable and easy for Grayling's supply chain partners—some of which were small, family-owned companies—to install and use.

The Inventory and Warehouse Management System from SmartTurn met all of Grayling's criteria. At a cost of just $500 per month and no limit on the number of users, the on-demand system was very affordable. As with other applications delivered over the Internet under the "software as a service" (SaaS) model, there would be no need for a long and costly installation, customization, or modifications to existing systems. Upgrades and maintenance would be handled at the source and become automatically available to all users at no extra cost. And because the license holder would be able to control what data external partners could access and modify, security would not be a concern.

The second big change was to shift responsibility for the storage and handling of inbound and outbound shipments to a 3PL that could be more flexible and responsive than the customs broker. The manufacturer chose Prologistics, a small 3PL in El Paso, Texas, that specializes in U.S.-Mexico trade. Prologistics had been handling some of Grayling's shipments, and Rubio was pleased with the 3PL's service quality and fees. The one drawback was that the small business had no WMS and relied on paper documents and physical inspections. But once Prologistics agreed to use SmartTurn's system (a condition of getting Grayling's business), the relationship took off.

On time, every time
Within a couple of weeks, SmartTurn had completed planning, configuration, and deployment of the inventory and WMS system for both Prologistics and Grayling. The partners then brought Grayling's two largest suppliers into the loop at no cost to them, other than the time required for training.

Now, those suppliers are responsible for managing inventory; they can log into the system and see purchase order requirements as well as inventory in Prologistics' warehouse. Based on that information, they plan their production to ensure that the warehouse always has 90 days' worth of inventory on hand (the facility holds the material on a consignment basis). When the suppliers ship the consignment orders, they enter complete details directly into the system. Once the shipments arrive at the warehouse, Prologistics updates SmartTurn and holds the material until the assembly plant just across the border needs it. "When they request it, we pull out the orders for them," explains Luis Gijón, an operations agent for Prologistics. The 3PL updates the inventory status as soon as a trailer leaves the warehouse, so that the maquiladora and Grayling's headquarters both know exactly which items are en route.

That real-time information on exactly what is in the pipeline—and exactly where it is—has improved the cost and service picture for shipper, supplier, and 3PL alike. For example, Prologistics now can immediately respond to unanticipated situations. "If something is hot and [Grayling] needs it urgently ... as soon as it arrives, we put it in the system and they know immediately how many pallets and boxes, so they can do the customs paperwork right away," Gijón says. And there's no more searching through piles of papers when the customer has questions: "We can give them an answer in a couple of seconds," he reports. Prologistics also has been able to attract several new customers because it can use the software to manage their inventory at no additional cost to them.

From Rubio's perspective, one of the most important benefits of the new system is that materials needed in Juarez now arrive on a just-intime basis, yet the assembly line is never caught short. "The information is so accurate, we've been able to completely eliminate line stoppages. We have not had one this year," he says.

Rubio also reports that Grayling has been able to improve its cash flow. With the new software, he now has an accurate, up-to-the-minute view of exactly what was pulled and when—information that lets accounting determine the optimum time to pay suppliers.

Before the inventory and warehouse system was in place,Grayling paid its suppliers after weekly or monthly reports wended their way to accounts payable and were verified. Under the consignment arrangement with its top suppliers, the company pays only for what it pulls from the warehouse. "Now I have 90 days' inventory that's not on my books, plus an additional 45 days after it's pulled to pay, so I get 135 days before I have to pay," Rubio explains. What's in it for the suppliers? They can run 90 days' worth of products they custom manufacture for Grayling, rather than changing over production lines on short notice. That cut production costs so much that Grayling asked for—and got—price discounts, he notes.

For other suppliers, Grayling can now reconcile purchase orders and shipment bills of lading promptly, which allows it to take full advantage of early-payment discounts. This is no small matter: Before the system was in place, Grayling was missing out on about $40,000 a month in trade discounts, Rubio says. The manufacturer has also used the SmartTurn system to improve the timeliness and accuracy of its customs documentation for imports from Asia and Europe. These temporary imports are stored in bond in El Paso, and Grayling pays duties on them only when they reenter the United States as part of finished products. U.S. regulations set a limit of 180 days for the round trip; importers that miss the cutoff pay double duties. That's no longer a worry for Grayling, and the manufacturer can quickly produce audit-ready data if questions should arise.

Rubio is more than happy with the improvements the real-time system has produced for Grayling Industries, but he's equally pleased that his company's smallbusiness partners are sharing in the benefits. "Times are so tough," he says. "We wanted to know that we could reduce costs and make it a win-win for everyone."