What This Article Covers

• Background on Arena Solutions
• Arena’s New Arena Demand Product
• The Connection to MRP
• Forecast Generation
• How Arena Demand Fits Within the Supply Chain Solution Architecture

What This Article Covers

• Supply Chain Collaboration, Supplier Collaboration, Demand Collaboration, Forecasting, Contract Manufacturer, Subcontractor, OEM, MRP, Outsourcing

Background on Arena Solutions

Arena Solutions has for most of its existence been defined as a PLM / PDM software vendor. Over the past 10 years they have developed the highest scoring collaborative application that has ever been reviewed by SCM Focus. This application allows outsourcing OEMs to collaborate with contract manufacturers and subcontractors all over the world. Users outside of the OEM can be easily setup and can easily provide information back to the OEM related to pricing, bids, feedback on technical specifications, etc.. Arena’s PLM product has been so impressive that we wrote a book on it titled Bill of Materials in Excel, ERP, Planning and PLM/BMMS Software. It has been apparent to us at SCM Focus that this collaborative application could be used for more than BOM collaboration. Arena seems to have figured this out as well, and they have introduced a new product called Arena Demand.

Arena’s New Arena Demand Product

Arena Demand builds off of Arena PLM by doing the following:

In the new Demand world, you enter manufacturing forecasts for assemblies and components, and get the exact material demands for those forecasts, across your entire product portfolio. Output the results for use in supplier negotiations, and know exactly how much you need. Demand analyses can be saved for rerunning or editing at any time. – Arena PLM Fall ‘13

Because Arena Demand has all of the information for the assemblies and components in its system, it is a simple matter to aggregate the demand for all assemblies and components as long as the forecasts are entered into the system.

Here we can see that the demand for the GPS EveryRoad US Model 300 per quarter. The planning horizon can be switch to monthly.

After the project build numbers are created, the next step is the hit the Calculate button. The results are shown in a preview mode onscreen.

The Connection to MRP

If a company outsources its manufacturing, as many OEMs in the high-tech industry do, it is not absolutely necessary to have an MRP system. MRP systems are necessary if one needs to do the following:

1. Explode the Bill of Materials
2. Inventory Netting
3. Inventory Planning
4. Purchase Order Creation
5. Production Order Creation
6. Create Stock Transfers

The following functions of MRP is used by companies that outsource manufacturing.

1. Explode the Bill of Materials: No
2. Inventory Netting: Yes
3. Inventory Planning: Yes
4. Purchase Order Creation: Yes – but only at the finished good level.
5. Production Order Creation: No
6. Create Stock Transfers: Yes

The following is used by companies that outsource both manufacturing and distribution.

1. Explode the Bill of Materials: No
2. Inventory Netting: No
3. Inventory Planning: No
4. Purchase Order Creation: Yes – but only at the finished good level.
5. Production Order Creation: No
6. Create Stock Transfers: No

Obviously the further one moves away from manufacturing and distribution the less one needs MRP. Instead MRP and DRP are run by the OEM’s outsourced partners. Arena Solutions is presenting Arena Demand as a way for OEMs to follow a lightweight supply chain planning approach.

How Arena Demand Fits Within the Supply Chain Solution Architecture

With Arena Demand, Arena Solutions is providing a solution which can provide basic planning to OEMs that outsource their manufacturing, and in many cases their distribution as well. MRP, and other supply planning methods are considered standard applications for companies to own, but they have their own overhead. ERP systems in particular have proven to be very expensive to maintain – although this experience is mostly form Tier 1 and Tier 2 ERP vendors. There are in fact a number of smaller inexpensive ERP vendors that offer lower costs albeit with more limited functionality, but these applications are not yet widely purchased. Arena can approach OEMs with a simple solution for both their demand planning and supplier / contract manufacturers / subcontractor for its collaboration needs. Arena Demand will create an export file, which can then be sent to suppliers/contact manufacturers – but our bet is that in the next release, Arena Demand will allow suppliers / contract manufacturers / subcontractors to review the forecast within Arena Demand and to respond with their ability to meet demand within the application. The OEM will then be able to have multiple suppliers / contract manufacturers / subcontractors responding and confirm back to the supply chain collaboration partner of its choice. This is shown in the graphic below.

This is a future predicted state of Arena Demand by SCM Focus. This is not the current state of Arena Demand is not approved by Arena Solutions as a future state. However, if enough clients show interest, we are convinced they will build something similar to this. 

Forecast Generation

Of course, an important question is “how is the forecast generated.” This of course can be created with any number of applications. Most forecasting applications make forecast far more difficult than it needs to be and are poor choices for smaller OEMs trying to keep their costs down. However, using a spreadsheet to create forecasts is not a very good solution either. However, there are some very good small forecasting applications from smaller vendors that can help populate the forecast data in Arena Demand – but because of the advice given by consulting companies and IT analysts it can be difficult for OEM to know what this software is. It is most important that the forecasting application be easy to use — but the market for forecasting applications has quite a few difficult to use forecasting applications — so the advice on receives in this area is quite important.

After that point, the contract manufacturer can perform all production planning. The open question would be who would perform supply planning – and the answer to this question would depend upon whether the OEM had also outsourced its supply planning/distribution. Many years of experience on this topic demonstrate to us that all manner of supply chain planning is not performed particularly well by most companies and that it can make good sense to outsource these capabilities. This diverges into a different topics which is how companies can outsource their MRP, DRP, forecasting and supply chain planning generally and this topic is covered in this article. However, there is little doubt that or smaller OEM’s implementing ERP, and advanced planning systems can be daunting task — and it may be not entirely necessary if they can rely upon other parties. Arena Demand combined with Arena PLM is an inexpensive entry point to companies that want this low overhead and high collaborative capabilities.

Conclusion

This is one example of how Arena Solutions is growing its footprint. Also new are Arena Projects and Arena Exchange. These are the first generation of these products, and Arena will adjust them and improve them as they receive feedback from customers.