- Identified $243,000 in savings in six weeks
- Maintained critically high service levels
- Projected increase in turns from 3.5 to 9
- Results obtained with current ERP systems
- Minimal involvement of the IT department
“We can see the result that different business assumptions will have on our inventory without impacting our ERP system.”
When you are serving corporate customers in the fast-moving transportation industry, you have to be fast-moving yourself. This is even truer when your business is supplying parts and repair services to corporate vehicles that must return to service as quickly as possible. In this business environment, time is critical and customer satisfaction is directly linked to how fast you can perform. And when performance depends upon having the correct parts, you need to be certain your internal systems are up to the task. This is why the company wanted to augment their existing ERP system with improved inventory management and optimization.
Optimizing Safety Stock
Although the company has implemented an ERP solution that they are pleased with, some key business elements and performance metrics are missing. In particular, their ERP system tells them when to order but does not satisfactorily set parameters such as safety stock, order points, and line points. Furthermore, the company was concerned that they were most likely overstocking fast-moving items.
With this in mind, the Midwest auto company decided to implement the solution from TCLogic. With a multi-million dollar inventory spread throughout different locations in several states, finding a tool to help their busy staff was important. “We do not have many Buyers on our staff”, states an Operations Analyst. “Many of our Parts Managers act as Buyers, and they do not have a lot of time. That’s why we chose TCLogic’s solution, it runs quickly and provides our people with good analytical capabilities.”
Minimal IT Involvement
The company also likes the fact that they did not have to purchase any special hardware. TCLogic’s solution is completely supported by the Operations staff. Only a few staff are needed to manage it but all locations will use the results.
Because TCLogic’s solution is web native, it requires only minimal involvement from the company’s IT department. With only a small and very busy IT staff, implementation would have been delayed many months. But with help from TCLogic, data integration and process integration took only three weeks’ worth of effort spread over one and a half months.
Starting with a Few Selected Items
To begin implementation, the company chose three of their mid-west locations. Although over 54,000 SKUs are in these three locations, only 2,700 items were selected to be optimized using the solution. These 2,700 items represented almost one million dollars in On-Hand costs.
The results have been impressive. Within six weeks, a reduction in On-Hand costs from $938,000 to $695,000 was identified, resulting in a $243,000 savings. Inventory turns were projected to increase almost three fold, from 3.5 to 9.
Developing Business Rules
One of the great features of the solution is the ability to develop special business rules that can be used to better reflect the company’s business processes. In the company’s case, this included the capability of building special rules to handle engine ‘cores’, where a ‘core’ consists of two cost factors – a cost for the engine block itself and costs for ‘non-core’ items. Demand history in the ERP solution is based on ‘non-core’ items, but the solution optimizes based upon both costs. Views were also configured within the solution to show all ‘frozen items’ and the reasons they are frozen (‘frozen items’ is a special feature within the ERP system).
The company especially likes the ability to test the rules before they export data back into their ERP system. “In this way, we can see the result that different business assumptions will have on our inventory without impacting our ERP system”, comments an Operations Analyst. “That’s important because $1 items are just as critical as $500 items. If we’re out of a $1 item, it can hold up a service repair and cost us the same amount of time as a $500 item.”
Improving Service Levels and Establishing Metrics
One of the key parameters that the company uses to establish inventory levels is the targeted service level to their customers. With the solution, they are now certain that they are maintaining the minimal inventory levels to achieve their targeted service levels.
The Company also utilizes the solution to help establish key metrics for monitoring performance. They are beginning to track forecast accuracy, something their current ERP system does not do. They will also institute metrics on item availability and plan on using the solution to monitor vendor performance over time.