If you want to be a vendor to government entities, you have to appear a certain way: transparent. That's especially true of your supply chain. Government buyers want visibility into everything they order from you at every stage of that process. John Minard caters to that scrutiny as CFO/COO of Propper International (www.propper.com), a St. Louis-based manufacturer of military, law enforcement and tactical clothing. As a large business, Propper must also comply with certain quota requirements related to the kinds of vendors it uses.
"If I need to use a disabled veteran business to supply buttons I need to figure out if there's somebody we do business with that meets those criteria," he says. "Those things make visibility more complex. That's on top of ensuring proper lead times for on-time delivery and that we have materials ready to meet the delivery. If there are any problems with the availability of the materials from those suppliers, we report those as well."
That means all the way up to the beginning of the supply chain. For example, one government client sources gloves from Propper, and these must not only be genuine leather, but they must also be a specific shade. Guaranteeing that supply has been a challenge thanks to a variety of external forces -- including supply and demand of cows and the drought in many regions. The quality of those hides has deteriorated. As a result, the ability to tan those hides has become a problem -- as has the ability to source in sufficient quantities with enough time to meet contract requirements.
"We've had to go back to the government, and based on that supply chain visibility, report when they can expect deliveries," Minard says. "We've been able to be proactive with the government and notify them of the issues we have. We've also had extensive dialog about pushing out deliveries, substantially increasing the cost because of the extra processing the suppliers have to do to meet the requirements. It's either that or the customer will have to change their quality standard to accept what the market is currently able to provide. That dialog still continues today. Our suppliers contact us, and we in turn notify the government and work out the delivery requirements so we're not considered late. On-time deliveries and reliability impact the next contract you get."
Sorting Customer Requirements
Fortunately, Propper also supplies outdoor/recreational retailers as well as commercial apparel retailers who support public safety and security. With this variety of business segments the company needed a scalable ERP platform to meet the requirements of big box stores as well as its own business-to-consumer website.
The company uses Infor's M3 (www.infor.com), which combines planning time sense with product data structure to look at all the component pieces of a process. This helps Propper determine what to purchase, what to manufacture, and in some cases a combination of the two to ensure when the product will be in the customer's hands.
The expectation for visibility from customers on the commercial side extends into finished goods inventory, into expected delivery times and once an order is shipped they want tracking information. Basically, they want some control in supply chain processes. The challenge is to always have product on the shelf when needed and to ship on time so the customer has it when they want it.
"When we set up the product data structures, sourcing has a longer lead time, so all of the issues of how much inventory is needed to accommodate that lead time so we don't run out of the styles, colors and sizes is all critical," Minard says. "When those time horizons hit and if there has been no action taken, there is intervention that will change the status of an item from the inception of placing an order to the ultimate delivery of product in either the end destination or in our DC. This is especially relevant for procuring from overseas, which is the longest lead time."
The government side of Propper's business is predominantly make-to-order, which comes with a different set of lead times and expectations of delivery.
"Government can be demanding and unrealistic in terms of delivery expectations, particularly if it involves specialty materials with long lead times," Minard explains. "On the commercial side you're making to stock and the requirement there is to have a fairly sophisticated forecasting process so you can predict within reason what products you need to have on the shelf. There are occasions on the commercial side where we will get a specific request for an item that has to be made to order, and that reverts back to the same model we use on the government side."
Visibility is Data Access
Where visibility is concerned, customers on Propper's commercial side want access to data about finished goods inventory. When they order they prefer going through the company's B2B website, not only for inventory visibility, but for expected delivery times and shipment tracking information.
Propper makes products in Puerto Rico, the Dominican Republic and in Haiti, and it procures products from overseas as well. Between raw material and finished goods sources, the company deals with close to 400 suppliers. These timelines are figured into the delivery and forecast for putting finished goods on store shelves and delivering to customers.
However, on the government side, to meet their bid package, Propper must meet certain specifications and select from a list of acceptable government suppliers. If it must use a button supplier run by disabled American veterans, the system can help determine if one of the companies they already do business with meets those criteria.
"Those things make visibility more complex," Minard says. "Typically we'll have to indicate to a government client our lead times. If material has to be delivered at a certain time they'll want to know if those materials have arrived on time and that we have the materials ready to meet the delivery. If there are any problems with the availability of the materials from those suppliers, we report those as well. I can't make up excuses for why we didn't deliver on time."
Although Propper has evolved into an online, real-time business, the technology it adopted has enabled it to reduce IT staff from 15 down to 5 and accounting from 45 to 6. The amount of inventory and raw materials kept on shelves has declined substantially because of the company's ability to use the product data structures.
"We have the materials on the shelf when they're needed and because this is a demand-based system if I don't have an order or a forecast that would justify buying these materials, we don't buy them," Minard says. "We don't speculate. Our manufacturing costs are lower because we have the materials when we need them, meaning shut-downs, accelerations and overtime typically don't happen. We've kept production at a fairly level keel and we're not incurring excessive costs due to poor planning or disruptions in the supply chain."
Visibility for Propper means they know their inventory turns as well as their profitability by SKU, by invoice, by customer and by sales territory. This intelligence lets them make adjustments to operations when necessary. And ultimately, greater visibility increases Propper's bottom-line margin because it can have less on the shelf while selling a lot faster.
