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Abstract

Configure-to-order (CTO) is one of the common market interaction strategies for suppliers. In
CTO, the customer configures the product where bill of materials, drawings and working plans

are elaborated automatically. Traditionally, the Order Penetration Point (OPP) is set early
which induces high costs of stock and long delivery times. For assuring short delivery times and
low levels of stock, the supply chain should be triggered according to the customer demand.

The paper presents and applied research project performed by a German medium-sized
windows and doors production company, where a new oriented production system was
developed and implemented. The main objective of the holistic production system is to allow a
Just-in-Time (JIT) production of windows and doors with short operating cost. It is based on the
CONstant Work In Progress (CONWIP) approach needed for assuring short delivery times.
More in detail, it presents an approach for medium and short-term production planning
needed for triggering JIT the first and second-tier supply chain. As a result, the paper presents
design guidelines for production systems with short delivery times in CTO-market interaction
strategy.

1. Introduction

Traditionally, in Construction Supply Chains (CSCs) the Material Requirement Planning (MRP) is
done centrally within the Enterprise Resource Planning (ERP) System of the first tier supplier.
In Fig. 1 a schematically view of the traditional CSC planning is shown. For a practical
understanding, the customer represents a construction site, the first tier supplier a window
manufacturer and the second tier supplies PVC profiles. In construction, project orders are
common, where as soon as the supplier has been selected and the contract with the customer
signed, the total amount of finished goods and the delivery time is registered in the ERP
system of the first-tier supplier. Project orders mean in the case, that a once submitted order
contains the complete amount of finished goods. Furthermore, the delivery date is based on
the initial construction schedule where variations on-site are not considered. Based on this
schedule the ERP system triggers the manufacturing process by preparing working plans and
cutting lists, as well as it creates orders to be placed at second tier suppliers for delivering the
needed materials. As a result, two major factors create high and uncontrolled levels of Work-
in-Progress (WIP) and as a result long lead times: 1) big batch sizes are moved throughout the
supply chain, 2) schedule deviations on-site lead to an overfilling of intermediate buffers.

Based on the state of the art analysis described in section two, a new production system with
short delivery times and low levels of finished goods is presented in section three. Its practical
implementation within a CTO construction supplier is described in section four and the
practical impact of the case study implementation is presented in section five. Finally, section
sic depicts future activities in research and practice.

5. Impact of the approach

By comparing the lead time incorporating the previously mentioned optimization strategies
with the originally process, a decrease of 77% for standard windows is reached (from 30 days
to 7 days). Furthermore, considering the lead time of customized windows a decrease of
around 45% can be obtained (from 40 days to 22 days). As one can immediately recognize in
Fig. 9, the major potential in the further lead time reduction lays within the second tier
supplies, like special profiles or special glass panes.
6. Conclusion and outlook

In traditional supply chains, the OPP is set too early which induces long delivery times and high
levels of finished goods inventories. Considering CSC, the delivery time should be equal or less
the window of predictability on-site. Focusing on MTO supply chains, engineering and planning
processes take a big share of the overall delivery time. By reducing the delivery time
throughout the supply chain and assuring a reliable information of the customer demand a JIT
production and delivery can be obtained.

This paper focuses mainly on first tier suppliers. The future work consists of integrating
second- and third tier suppliers. By using key components of Industry 4.0, like CPS and IoT the
functionalities of Virtualization, Decentralization and Real-Time capability can be
obtained. The future research activities will be extended to customer oriented Supply Chain
Management (SCM) systems in MTO market interaction strategies.

References

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