They opened a distribution center on the West Coast to shorten delivery times for its increasing customer base in the western U.S. The company needed to determine the best mix of SKUs and stocking levels for the new warehouse.
- Fully implemented solution within 3 months.
- Service levels increased to a target of 96.5%.
- Inventory investment remained level despite a 20% increase in sales.
- New warehouse opened with several hundred thousand dollars less investment in inventory than initially planned.
“We wanted high service levels right out of the box. But we didn’t want to over-invest in inventory to get there. TCLogic has a powerful tool for expansion planning and helped us choose the right inventory solutions.”
Managing Inventory Growth
“The nature of our business is that our customers need an extremely high fill rate on their critical items as well as quick delivery,” says the Chief Financial Officer. “By responding to our customers’ needs and providing excellent service, our SKU’s increased from 4,000 to 8,000 over a two-year period and our sales increased at an exponential rate. With this growth, the inventory management capabilities of our ERP system needed to be enhanced. In particular, we wanted a complementary software package to enable us to more precisely manage under-stock and over-stock items.”
Resolving the Issue Quickly
With the Company outgrowing its inventory planning capabilities, it was at risk of reduced service levels. And over-stock situations could further increase working capital investment. The company wanted a solution that fit its distribution-intensive business. The Company also wanted a software system that could be implemented quickly, that its planners would find easy to use and therefore be able to improve inventory optimization quickly. TCLogic met these needs with an implementation completed within 3 months.
Analytical Tools Provide High Visibility into Inventory Data
“We are impressed with the visibility the solution gives us into our data so we can get our arms around our inventory. It eliminates the guesswork.” says the CFO. “Purchasing is the primary user of the system and it enables us to keep moving closer and closer to a 100% service level. We can analyze demand spikes, something we couldn’t do before. Purchasing can also better manage the large number of slow moving items we stock. And the solution enables me to separately analyze our inventory from financial and investment perspectives.”
Rapid Implementation with Software as a Service (SaaS)
For the first six months of use TCLogic hosted the solution, made easy since it was developed as a web native application. Subsequently, the moved the application on-sight. As fully web enabled, the data and analytical views are available from any company location via the Internet.
New Warehouse and Set Stocking Levels
During the prior two years the Midwestern Company had consistently gained market share in the western part of the country. However the shipping time to the West Coast from the central US was between 4 and 6 days, so sales in that part of the country were mostly non-critical items.
The market penetration in the West justified the addition of a warehouse to carry time-sensitive critical items to customers in 13 western states. When the warehouse opened, it was essential to avoid disappointing existing customers ordering critical items from the company for the first time. But they did not want to borrow more than necessary to fund the stocking of the new warehouse.
Using segmented demand history managed by the solution, the company determined that it should stock only about one third of its total SKUs in the new facility. The Company was also able to set stocking levels below original estimates, thus investing several hundred thousand dollars less than would have been chosen without using the analytical capabilities of the solution.