TEXAS A&M UNIVERSITY

My Plumbing Supply
Connecting the Supply Chain

Natalie Boyd, Jason Martin, John Stansbury & Oracio Valenzuela
4/13/2014





My Plumbing Supply (MPS) has been a model business expanding into the market leader
of its industry for the US and Canada. Through their rapid expansion they reached most of the
market segment, but did not have a strong presence in the Northwest. The opportunity to acquire
the third largest plumbing supply store presented itself in the late 1990s. Northwest Plumbing
had a strong presence in the Northwest region and had an additional manufacturing plant in
Seattle which would lead to increased production capacity and greater opportunities. The rapid
expansion of MPS led to the firm having a very fast paced environment. The rapid growth and
changing environment can lead to a lack of focus on key business items. MPS has had time to
slow down and evaluate their performance and weigh their options going forward.
The focus of this study will be tracking orders to get clean data on the items that become
back ordered and never sold. The ERP system should be capable of maximizing efficiency,
create cost saving opportunities, and to define the reorder point strategy for MPS. The evaluation
of these items will be critical for MPS to continuously improve, continue to grow its market
share, and grow its customer relationship with its customers.
My Plumbing supply had issues with data tracking which led to lost sales opportunities in
some cases. The direct effect of the undocumented data was backorders; when they occurred
they could not be differentiated in the ERP system which led to greater problems. The Back
orders led to incorrect forecasting because the customer may have desired a product in a certain
period but negotiated for delivery at a later date due to inventory availability at MPS (E-
Distribution). Forecasting at MPS is done by previous years sales and therefore skewed if the
numbers are overstated. Segregation of the sales data into categories such as back orders will
greatly benefit the firm; the data can be used to for analysis on why an item is not readily
available when it should be. Tracking the data from back orders and the reason that they
occurred can help management make decisions that will eliminate or reduce the risks associated
with the backlog of orders.
Back orders can be tracked using general reasons in separate categories in order to help
measure actual demand surges due to the customer. One way to have effective backorders
without wasted efforts is to, Add backorder constraints for changing demand priorities,
(Enhancing). If thresholds are set for when a backorder is acceptable then the company can
receive the benefits of still possibly making the sale. Consistently track the backorders so that the
data is beneficial for the firms future use. The breakout of the backorder categories will be
crucial in order to manage the different variables involved with the demand pattern, it will help
define the actual demand when used properly. A process must be developed to keep the data
tracking consistent, once the parameters have been defined, it will be easy to know which data is
useful and how to use it to improve the companies performance and customer relationship.
Data tracking is crucial to the firm, in order to properly keep track of the data and
properly interpreting it comes through the use of your ERP system. ERP systems can vary
greatly depending on what they are used for among different firms. When new markets or
opportunities present themselves a business must always debate on implementing a completely
new ERP system or using a bolt-on for these new business ventures. Forecasting and inventory
planning are two of the most important areas of the business and the impact that poor planning
has on these areas can sink a business. Bolt-on upgrade can be very beneficial if the current ERP
system is compatible with it. The pros to having a bolt-on is that it is cheaper than starting over
from scratch, they also are specifically tuned to uniquely interpret the data that is captured
because incorporate numerous features that are considered best practices (Charles). They are
added to provide increased functionality and efficiency to the enterprise system as part of a
continuous improvement strategy/program, helping create a culture to support growth (Charles).
However there are also negatives associated with the bolt-ons such as the unknowns.
They could not be completely compatible with the ERP system which can create disconnects and
wasted efforts if there is not a workaround. Another concern is the set of available bolt-ons is
extensive; and one issue of concern is the value/benefit these different types of software provide
to a firm, there has to be a way to measure the short and long term benefits of the
implementation and this is not always available to track (Charles). If the company is not
considering getting bolt-ons then they are looking to get a new ERP system all together that
captures the requirements that are required. One of the benefits of a new ERP system is that you
are getting the latest technology available. You can choose the options and features you want to
implement since you are revamping the whole process. Another benefit is that you can reinvent
some of your wasteful processes by changing how they are done with the help of the installation
of the new system. Depending on you industry a new ERP systems may fit some
organizations better than others leading to greater benefits (Thomas). One of the cons with ERP
systems is that they are highly standardized systems. They typically employ a single logical
database for the entire enterprise (Thomas). They are also very pricey and use many company
resources and also typically very time consuming for a firm because all processes must be
mapped out and programmed into the system.
The best option for MPS to implement would be using bolt-on for enhancements in
forecasting and inventory planning because they have already shown great advancements with
their current systems. The problem they face is deciphering the data, so they need to focus on
getting software to help them track the data with more integrity. The company is looking to
better serve their customers by having a forecasting system that will help them meet demand
without carrying too much inventory. Bolt-ons can be utilized at any time with fewer resources
and since they are used for specific reasons tasks they are the better choice for MPS.
Forecasting demand is crucial to a business and no firm can consistently get it right all
the time, so they carry inventory to eliminate the risk of losing a sale. With the inventory strategy
comes the question of which type of reorder strategy will be used for the company. Static reorder
points are simplistic and do not change, they are set so that when inventory reaches a set number
you reorder and wait for the items to sell until you reach your reorder point again. They are
beneficial when you have a smooth constant demand because it is easy to forecast when you will
need more inventory to service your customers.
The benefits of a dynamic reorder point are the cost savings associated with inventory
levels for seasonal items. The relationship that is formed with the customer while studying their
buying habits so that you can better serve them and change your reorder point level according to
the demand that they are producing. The best option for My Plumbing Supply at this point would
be a dynamic reorder point because of the seasonality of the demand. There is no need for them
to maintain the same reorder point year around if the demand changes, they need to further study
the demand of the customer and carry order at higher levels when the demand is climbing
upward and lower their order point when demand is slowing. The implementation of the dynamic
order point will force them to continuously improve and find ways to clean up their data
collection and use the information that is available to make decisions that keep MPS an industry
leader along with growing their customer base.


Resources
Charles A. Watts, Vincent A. Mabert, Nathan Hartman, (2008) "Supply chain bolt-ons:
investment and usage by manufacturers", International Journal of Operations & Production
Management, Vol. 28 Iss: 12, pp.1219 - 1243

Edistribution. F. Barry Lawrence. Daniel F. Jennings. Brian E. Reynolds. Copyright 2003 by
South-Western, a division of Thompson Learning.

Enhancing mathematical programming models to account for demand priorities increasing as a
function of delivery date. R. John Milne, Chi-Tai Wang Journal of Industrial and Production
Engineering Vol. 31, Iss. 1, 2014

Thomas F. Gattiker, Dale L. Goodhue, Understanding the local-level costs and benefits of ERP
through organizational information processing theory, Information & Management, Volume 41,
Issue 4, March 2004, Pages 431-443, ISSN 0378-7206