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Cut Wire in Electrical Wholesale Distribution

Electrical wholesale distributors sell a variety of products including lamps, switches, tools, and of course wire.  This presents a challenge however, because distributors buy wire from their suppliers by the spool which may be 1000, 2000 or even 5000 feet long, and sell it at any length that their customers want. 

 

This results in a situation where they may have several spools of the same kind of wire with different lengths remaining on each spool.  The challenge is to be able to match the existing partial spools in the branches with the incoming requests from customers for specific lengths.  It is also important to be able to consolidate the existing spools to an overall total for inventory purposes.

 

If a customer were to request 800 feet of wire, it would be important to know if that amount existed in a continuous run on one spool, or if the inventory amount displayed in the system was made up of multiple, shorter lengths.

 

Example:  Based on forecasted demand, and a knowledge of existing stock in inventory, a distributor decides (or his ERP system decides for him) to purchase three 1,000 foot spools of 2/0 AWG THHN 19STR CUT wire in both black and red from his supplier.  Two of these spools of each color will be stocked at Branch A and one at Branch B.  He already has several partial spools in inventory in each branch. 

 

Before his purchase, his inventory might look something like this:

 

Branch Mfg Part Nbr Inventory
Branch A 2/0 AWG BLACK THHN 19STR CUT 1670
Branch A 2/0 AWG RED THHN 19STR CUT 1206
Branch B 2/0 AWG BLACK THHN 19STR CUT 729
Branch B 2/0 AWG RED THHN 19STR CUT 684

 

With a forecasted demand of 3,000 ft. of each color, upon receipt and stocking of the delivery, the inventory might look like this:  (some inventory was consumed during lead time for the order).

 

Branch Mfg Part Nbr Inventory
Branch A 2/0 AWG BLACK THHN 19STR CUT 3111
Branch A 2/0 AWG RED THHN 19STR CUT 2712
Branch B 2/0 AWG BLACK THHN 19STR CUT 1479
Branch B 2/0 AWG RED THHN 19STR CUT 1308

 

Now, if a customer calls in to branch A and asks for price and availability of 125 feet of black wire and 125 feet of red wire, given the inventory availability information above, what would the sales agent do?  Clearly there is availability of 125 feet of each color in the local branch, so things look pretty good.  He would most likely write the order and leave the rest up to the warehouse people.  When the order gets back to the warehouse, the workers may or may not make the best decision about which spool to cut the 125 feet from – if they can even find all of the spools to choose from quickly and easily.

 

Now, let’s take a look at the actual inventory:

 

Branch

Mfg Part Nbr

Length on Spool

Branch A 2/0 AWG BLACK THHN 19STR CUT 1000
Branch A 2/0 AWG BLACK THHN 19STR CUT 1000
Branch A 2/0 AWG BLACK THHN 19STR CUT 739
Branch A 2/0 AWG BLACK THHN 19STR CUT 242
Branch A 2/0 AWG BLACK THHN 19STR CUT 130
Branch A 2/0 AWG RED THHN 19STR CUT 1000
Branch A 2/0 AWG RED THHN 19STR CUT 1000
Branch A

2/0 AWG RED THHN 19STR CUT

537

Branch A

2/0 AWG RED THHN 19STR CUT

119

Branch A

2/0 AWG RED THHN 19STR CUT

56
Branch B 2/0 AWG BLACK THHN 19STR CUT 1000
Branch B 2/0 AWG BLACK THHN 19STR CUT 497
Branch B 2/0 AWG RED THHN 19STR CUT 1000

Branch B

2/0 AWG RED THHN 19STR CUT

308

 

As you can see, there is a spool of black wire with 130 feet on it and a spool of red wire with 119 feet on it.  If the salesperson had availability to this information at the time the initial request was made, he could offer those two spools to the customer to see if it might satisfy his request.  Who knows?  Maybe the customer actually needs a little more black than red and was just asking for 125 because it was a nice round number.  Should the customer accept this offer, there are two fewer spools taking up warehouse space and no wasted remnants.  The issue of remnants is real, because some short lengths of wire are unsellable.  Unsellable inventory is a drain on profitability in nearly every way imaginable.

 

It is also important to note that the sales agent is the one who can have a discussion with the customer.  Once the order gets written, the warehouse worker does not have the ability to ask the customer if an existing spool might satisfy his request.

 

Let’s take another example from the data above.  What if a customer comes into branch A looking for a 300 ft. continuous run of red wire.  How is the best way for this request to be satisfied?  Cut it off of one of the 1000 foot spools at Branch A?  Cut it off of the 537 foot spool at Branch A?  Or sell the entire 308 foot spool from Branch B?  By selling the full spool at Branch B, it saves the warehouse staff’s time of performing the cut, and the customer might just be passing by Branch B later today anyway.

 

SAP enables this functionality through the use of the Batch Management process.  Each spool is assigned a batch number at receiving time, and the individual batches are visible in the stock overview transactions.  For materials that are batch enabled, individual batches are also visible at sales order or quote entry time.  New batches can easily be created in the case of returns or mis-cuts, and the overall inventory consumed and on hand is available for forecasting and reporting purposes.

 

By having full visibility into not only how much wire is in stock, but also how much is on each spool, electrical wholesale distributors can increase their customer service, warehouse efficiency, and profitability.

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