Commercial Metals Company is using SAP Global Available-to-Promise (GATP) to help bring order to the chaos that its different locations competing for inventory was having on its supply chain.
SAP GATP is the SAP Supply Chain Management (SCM) module that allows companies to aggregate demand from different sources into one central location in SAP ERP. In short, when orders are placed, it checks to see when the product can be delivered, depending on whether the product will have to come out of production or from stock.
As the once tiny Irving, Texas-based Commercial Metals Company (CMC) grew and acquired companies, it expanded into a loose network of business units, namely, its internal network of roughly 40 metal fabrication shops that sell steel products to construction companies for specific products.
Those so-called “fab shops” would compete against each other, often buying steel from wherever they could get the best deal -- regardless of whether it was from one of the company’s internal steel mills. That meant that inventory was often up for grabs, going to whichever shop got its order in first.
“What you had was a company that had grown, and everybody still ran things independently of each other,” said Nick Gagliano, head of e-commerce sales for CMC. “It was ‘take everything you can get.’ ”
Since it was founded in 1915, CMC has made money by recycling metal and turning it into raw rebar and other kinds of industrial-grade steel, which it sells to its fabrication shops, as well as to external customers, including those in its vendor-managed inventory (VMI) network.
In 2008, the company replaced the Ross ERP that its steel mills were running, as well as the multitude of customized ERP systems that the fabrication shops were using, with SAP ECC 6.0 and SAP GATP. Now all those units operate off of the same supply chain, according to the company.
Implementing GATP in its U.S. and international operations has meant that CMC's fabrication shops are no longer duplicating work when it comes to logistics and especially inventory management.
GATP also allows the company to allocate inventory among different customers before they get their order, according to Taylor Lindsey, a supply and demand planner for CMC.
“You’re essentially allocating a forecast,” Lindsey said. “You’re saying ‘We believe that out of this block, either what we produce in stock or what’s going to come out of production, a certain percentage is going to go to this group of customers, and another percentage is going to go to another group.”
That also allows the company to protect inventory for priority VMI customers as well as better react to unforeseen changes in demand if needed.
“So we can say, ‘We know this; we see this coming. Is there some way that we can shift this schedule, take some of this out of this product family and put more in this product family," Gagliano said. “Keeping it in the right place and not sending it downstream to everybody who says they want it.”
VMI is a technique for electronically connecting trading partners to facilitate planning and execution of supply chain processes and can involve one-to-one relationships or a larger network. In VMI, the manufacturer -- not the customer -- manages the customer’s inventory.
SAP GATP change management
The overall implementation coincided with organizational changes that included dividing up North America into three separate regions, something that has further helped communication among the mills and the shops, Gagliano said.
Getting people to adopt the new SAP system took some work. Many were used to taking a narrower view of the company and were skeptical that some of the things they needed could be done in SAP, Gagliano said. Having key figures in the company that championed the system helped smooth the transition, he said.
“There’s a lot of pride within each location to perform at an optimal level. Some of that pride had to be changed a little bit, to take more pride in our overall strategy, versus just pulling for your location,” he said.
Since then, the company has continued to perform at a more optimal level, Gagliano said, though he couldn’t put a price tag on the financial benefits of implementing GATP.
“We know that we’re making strides in the right directions because our inventories are where they need to be,” he said, “and we’re having more of the right inventory available for the right customers.”