Mike Seifert, a plant manager with Nibco, a manufacturer of flow-control products such as fittings and valves, found simulation to be a valuable tool for testing his strategy and communicating the effects of changes to his colleagues.
After coming up with a new distribution strategy Nibco needed the confidence to implement it and some way of testing whether the strategy would work.
With SIMUL8 Seifert and his team created a simplified model of Nibco's supply chain with a single product line. They tested how holding inventory and releasing it at different points in the supply chain affected distribution. After plugging in historical customer service and inventory data, they could see which changes served the customer best and how they affected inventory percentages.
The simulation also helped them sell their strategy to the CEO and chairman. Rather than just telling board members about actual or proposed changes, Seifert could show them. "They can see the product moving through the simulation and the reduction in lead time, and it holds their attention much longer," he explains. "Instead of showing a bunch of static numbers, you're seeing something live within the presentation."
When the new strategy went live, actual inventory numbers ended up within 1 percent of the prediction and Nibco was able to decrease inventory by around 40 percent and cut total systems costs by 12 percent.
"We came up with the strategy," says Seifert, "but the simulation gave us the confidence to move ahead." He maintains that being able to fine-tune the project through simulation allowed Nibco to implement its strategy sooner and with fewer problems. Seifert likens this use of simulation to buying additional insurance.