Planning with large retail partners improves availability, reduces costs

Introduction

Accurate forecasts are central to ImpressArt’s business model, the linchpin in its supply chain that ensures product availability through its strategic channel partners.  Jeff Wolter, CEO of ImpressArt, explains why forecasting is so important, how he came to select Smart Inventory Planning and Optimization as Impress Art’s forecasting and demand planning system, and how better forecasts are helping their business.

The Challenge

ImpressArt found its market and grew exponentially in its first decade. “At ImpressArt we eat, sleep, and breathe jewelry making and hand stamping,” says Wolter. We help creative people of all skill levels make beautiful jewelry and become creative entrepreneurs.”  These crafters and artisans purchase through three major retail chains and directly through ImpressArt’s fulfillment center.  Availability is everything.  If it’s there, they buy, if not they will go elsewhere.

As the company grew its supply chain became more complex, its product lines more diverse, with replenishment lead times from China-based factories stretching out 13 weeks or more.  Then the Covid pandemic hit – it seemed that everyone was at home, eager to make things, and demand really spiked.  Warehouse management took on a new level of urgency as the company experienced increasing inventory misalignment, stocking out in some areas, with excesses in others.

Requirements and Software Selection

The company needed a robust, adaptive forecasting and demand planning process to guide ordering and stocking of thousands of products.  ImpressArt wanted a vendor that reflected best industry practices.  Key requirements included:

• Setting optimal stocking policies and accurate forecasting. Stocking out means lost sales – buyers will go elsewhere – while overstocking consumes cash, crucial to surviving the pandemic.
• Collaborative planning with key channel partners. Michaels, Hobby Lobby, and Jo-Anne Stores drive a large share of ImpressArt’s business.  Getting a window into their requirements is crucial.
• Dealing with long and variable replenishment lead times, routinely 13 weeks but fluctuating with Covid-related supply chain delays.
• Ability to methodically forecast and secure the supply of thousands of items, automatically discovering and addressing shifts in demand patterns.
• Integrations with ERP systems of choice: forecasting is so critical that ImpressArt needed to address this first with the knowledge that it will integrate with its chosen ERP down the road.

ImpressArt wanted a vendor that reflected best industry practices.

ImpressArt Selects Smart Inventory Planning & Optimization

ImpressArt narrowed its search down to 8 vendors and concluded that Smart alone excelled across all of the best practices.  “I studied all the best practices from numerous sources and found that Smart’s approach was addressing everything,” said Wolter, “specifically better ways to develop the right policies and develop a forecast.”  He points to a few areas in particular:

• Collaborative forecasting with key customers, large retail chains: Smart made it easy to plan all items for key named accounts and enter into a dialog with each.  Getting this direct input, down to the point of sale, has proven to be enormously valuable.
• Highly visual, friendly user interface: “Data visualization matters,” said Wolter, “it impacts analysis, sets the tone.”
• More than ‘auto pilot’ planning: forecasts are easy to interpret, drill into, and adjust.
• Wolter appreciated the rich analytics – “I found the math to be a cut above. The numbers are right and enable us to generate orders accurately.  Rarely do I see something that needs modifying.”

Wolter summed it up: “Smart is helping me save time and automate the inventory planning process, which ultimately is helping me scale our business.  We now have a great inventory planning and forecasting process generating measurable value that can be plugged into whatever ERP we choose.”

Learn more about Smart Software at www.smartcorp.com.

Learn more about ImpressArt at www.impressart.com.

The Challenge

The utility employs over six thousand people to operate a highly diverse mix of electric power generation and distribution facilities comprising ten generation plants, a large regional nuclear power plant, and thousands of miles of transmission, distribution, and underground cable.  The utility offers an indispensable service, the continuous, reliable availability of electric power.  Service is paramount.  And key to this service is the availability of a myriad of service parts – over 250,000 of them – to keep its facilities running 24/7.

The utility launched a strategic Supply Chain Optimization (SCO) initiative to replace twenty-year-old legacy software.   IBM Maximo was selected to provide core procurement, inventory and warehouse management, and work and asset management.  Additional best-in-class capabilities would be added through the selection and integration of commercial off-the-shelf applications.  Chief among these was the Inventory Optimization system, comprising Forecasting / Demand Planning as well as Inventory Optimization functionality.  The utility pursued a comprehensive RFP (Request for Proposals) to drive its software selection.

Requirements and Smart Software Selection

Vendors were asked to respond to a broad array of functional requirements, in writing and then – by invitation – demonstrate in-person utilizing customer data.  Forecasting and Demand Planning, Inventory Optimization, and Reporting and Analytics were all considered in depth.  The requirements lists are long, but a few critical capabilities were especially important:

• Leverage proven, built-in statistical analytics that automatically model demand and produce accurate results across all demand types;
• Model and balance service level-driven inventory policies, across multiple locations and at multiple levels of aggregation, to produce optimal inventory stocking policies;
• Effectively plan for intermittent demand, most critical for spare parts planning;
• Effectively scale to automatically address planning requirements for over 250,000 discrete items;
• Easy to learn, use, and collaborate;
• Demonstrated ability to integrate with customers’ enterprise / supply chain management systems of choice.

Smart was selected for its performance across all of these categories.  There were, of course, some standouts.  First, during the live demonstration, Smart invited a member of the evaluation team to drive Smart Inventory Optimization.  Within a few minutes they were able to log in over the Internet, assess inventory performance of select items, identify items that were overstocked, and target optimal service levels that showed significant opportunity for inventory reduction.  This was a compelling exercise in usability.

Second, Smart’s unique treatment of intermittent demand, a patented, peer reviewed and field proven methodology, demonstrated effective and accurate service level planning, consistently achieving planned service levels on the most unpredictable parts.

And third, Smart’s demonstrated experience establishing automated integrations with our customers’ enterprise systems of choice established confidence that we would support the utility’s software solution architecture and integrate with Maximo.

Results to date

Implementation of Smart Inventory Planning & Optimization was accomplished within 90 days of project start.  Over the ensuing six months, Smart IP&O enabled the adjustment of stocking parameters for several thousand items, resulting in inventory reductions of $9.0 million while sustaining target service levels.  Significant additional savings – and improvement in service levels for critical spares – are anticipated in the coming year as stocks for additional facilities are brought into the system.

Learn more about Smart Software at www.smartcorp.com.

Introduction

Seneca Companies, an industry leader in automotive petroleum services, offers a broad range of service station design, construction, service, comprehensive containment and dispensing solutions.  Seneca Fuel Systems serves the US Midwest, Southern and Mountain regions with a highly skilled staff of 75 field technicians charged with keeping client fuel stations up and running.

Seneca Fuel operates a central warehouse in Des Moines and 5 additional stocking locations to ensure rapid availability of critical parts.  We spoke recently with Dan Miller, Purchasing Manager for Seneca Fuel, who explained Seneca’s inventory planning challenges and how Smart Software has helped.

The Challenge

Keeping fuel systems up and running is crucial to Seneca clients.  Down-time means lost revenue and potentially lost customers.  Seneca dispatches locally based service technicians equipped with essential parts with the goal of a 90% first visit fix rate.  If they don’t have what they need on hand, they must be able to secure what’s necessary from a nearby warehouse in a matter of hours.

The stocking challenge is immediately apparent:  which parts to carry in the van, in what quantity, and what to carry in the warehouses to supply them, ensuring maximum service performance while minimizing inventory investment.

When Seneca and Smart began working together, Seneca treated all techs the same with respect to inventory policy.  A standard list of parts was supplied to each van, with an approximate of $35K per van.  However, clients were not all the same and vary across geographic service areas.  Service stations in Southern Illinois, for example, tended to be smaller and require different parts than counterparts in Denver.  This increased the likelihood that some parts would stock out in some vans, while others might sit untouched for years.  There was a section in the central warehouse dubbed “zero turns,” for items that just didn’t move, which grew to a value of $400K.

“Something needed to change,” said Miller.  “We needed the ability to stock to the specific needs of the local tech, resupply them in a timely way from our warehouses, and equip the warehouses to play backstop for any other unusual requirements that van stock wouldn’t cover.”  Compounding this challenge was the highly sporadic, intermittent nature of service part demand.  “Traditional forecasting didn’t help,” explained Miller.  “We see periods of zero demand with seemingly random, unpredictable spikes.  We needed a methodology that would enable us to plan for this.”

The Solution

Seneca Companies turned to Smart Software and its cloud-based solution, Smart Inventory Planning and Optimization.  Smart IP&O is an integrated suite of native web applications for collaborative demand planning, inventory optimization and supply chain analytics.  Running on the Amazon AWS cloud, Smart IP&O serves automatically receives daily transactional data from their JD Edwards ERP system, models customer demand and inventory performance, and returns optimal inventory policies to JDE to drive replenishment.

“Smart IP&O integrated easily with Seneca’s enterprise systems, and enabled us to model stocking requirements for each technical rep and service area,” said Miller.  “Implementation was quick and user training effective, producing initial results within 6-8 week of project start.”

A key capability has been Smart’s unique approach to planning for intermittent demand, the highly variable, seemingly random and unforecastable consumption most common with service parts.  This has enabled inventory planning to move from educated guesswork to service level-driven modeling.

Results

“Smart IP&O enabled us to model demand at each stocking location and, using service level-driven planning, determine how much to stock to achieve the service level we require.  By running and comparing different scenarios we can easily define and update optimal stocking policies for each tech support rep and stockrooms.”

The software has provided field technicians with evidence they did not have before, showing them their actual consumption, frequency of part use, and rationale for stocking policies, using 90% as the targeted service level norm.  Field technicians have embraced its use, with significant results:  “Zero Turns” inventory has dropped from $400K to under $100K, “First Fix Rate” exceeds 90%, and total inventory investment has decreased by more than 25%, from $11 million to $ 8 million.

Learn more about Seneca Companies at https://www.senecaco.com/.

Learn more about Smart Software at www.smartcorp.com.

Introduction

The Kratos Space group within National Security technology innovator Kratos Defense & Security Solutions, Inc., produces COTS software and component products for space communications, tailored products for individual customers, as well as complete satellite and terrestrial ground segment solutions.  Theirs is a highly demanding market often requiring engineered-to-order systems with exceptional performance and rapid delivery cycles.  Kirk Smith, Vice President of Business Systems Innovation, sat down with us to explain how parts management and planning has become central to their operational excellence, supporting numerous custom projects per year.

The Challenge:  

Engineering-to-order in Kratos’ world means that traditional finished goods forecasting won’t help you plan for the future.  In the tailored marketplace, the past does not provide a usable forecast for the future, even within the Space group’s focused technology areas. You just don’t know ahead of time everything your next tailored system customer is going to request.  This is problematic for the company’s contract manufacturers (CMs) that produce key lower level assemblies – they can’t know what to expect, and without some advice will have no ability to pre-order and stock requisite component parts.  Short forecast horizons and long component lead times makes competitive bidding for new projects difficult, where time to delivery is crucial.

Leveraging a competitive advantage

“With tailored and custom solutions, the Number 1 reason we win is that we solve very challenging problems for our customers,” says Smith.  But a close second is a strategic advantage – the ability to deliver those tailored systems quickly.  Kratos has an array of previously designed and engineered building blocks (chassis and board level assemblies) that can be applied to newly designed solutions.  This speeds design, but because these building blocks are tailored for each customer, stocking them for future sales is problematic – there are many variants.  If Kratos could find a way to effectively forecast their board and component level requirements, they would be able to reduce end-to-end production time, minimize part shortages that delay delivery, and prevent excesses that create obsolete inventory.

The Solution: 

Kratos pursued a hybrid planning approach, combining sales planning by its business development team with statistical forecasting from Smart Software.  Smith explained the process:

Part 1 – Annual forecast at the CM built assembly level:

• Use Smart to produce a rolling 12-month assembly level forecast for the CM.
• Compare this with the Business Development Opportunity Forecast
• Merge the insights from Smart with the Opportunity Forecast
• Provide resulting adjusted assembly forecast to the CM for revenue and capacity planning.

Part 2 – Provide component level forecasts to Contract Manufacturers:

• Feed assembly level forecast into the ERP Bill of Material function, exploding component level demand for all parts.
• Aggregating demand by part number, generate component level forecasts.
• Provide forecasts to CM procurement to enable them to determine when to buy ahead or increase orders to capture volume price breaks. When they see an opportunity, they contact Kratos, get permission, and increase buys – with the effect of driving down material cost and lead times.
• Also, providing annual forecasts reduces buy-back pressure from the CMs – Kratos is obligated to buy back unused components, but now the CMs can see opportunity at the component level and the value of retaining stocks.

Results: 

Over the past three years this approach has allowed Kratos to reduce material cost. Moreover, Kratos is able to work with its Contract Manufacturers to reduce stockout risk and achieve shorter delivery commitments.  While dealing with components with up to six month lead times, they are able to confidently propose and achieve customer delivery dates.

Jon Good, General Manager at contract manufacturer NeoTech, shared their experience.  “We use the Smart forecast provided by Kratos’ Space group to assist in taking advantage of price breaks on material at higher quantities that wouldn’t otherwise be visible in our current business model.  This enables us to reduce material cost which translates into reduced pricing to Kratos in the long run.”

Good added that another use is to predict probable material consumption over a longer period of time than would be visible only on open orders.  “This enables us to more realistically understand our inventory on hand position in terms of excess.  These two benefits allow NEOTech to make smarter decisions related to purchasing and inventory management while at the same time saving days and weeks in the front end of the process and delivering the end product to Kratos as rapidly as possible.”

Looking forward, Smith sees even greater opportunity to team with Kratos Space CMs to streamline their supply chain and associated costs.  “The bottom line,” says Smith, “is that we are now able to more effectively communicate with our CM partners, despite the lack of forecastability in our business, and simultaneously reduce material cost and shorten lead times.”

Introduction

BC Transit’s vision statement is to be Your Best Transportation Solution. BC Transit accomplishes this by transporting 57 million annual passenger trips in over 130 communities across British Columbia.  Transit is becoming a key part of the solution for many of the complex challenges that communities face across the province, such as climate change, affordability and congestion, and as a result transit service is expanding quickly (9 per cent growth in the past five years). Delivery of this service in a safe and timely manner is paramount. BC Transit’s fleet of 1,185 buses require regular maintenance and rapid repairs to ensure they are as effective and efficient as possible.  Having the right part in the right place at the right time is essential.  Eric Nelson, Director of Supply Services, discussed the challenges of meeting this responsibility and how their use of Smart Software technology is helping make BC Transit the best transportation solution.

The Challenge:  

BC Transit was preparing to centralize warehouse operations around a new central distribution center, just as the organization was preparing to upgrade to a new version of its JD Edwards Enterprise Resource Planning (ERP) system.  They needed to determine the right stocking levels to serve the entire BC Transit network with 35 active branch plants under an aggressive timeline.  In a matter of weeks, the transition would begin to their new ERP and wholesale system updates would be barred.

This was no small matter as BC Transit manages 30,000 discrete skus. Space in the new consolidated Provincial Distribution Centre would be at a premium, and parts planning was a highly manual, qualitative process.  Reorder points were set manually, based on weekly requisitions and the buyers’ knowledge and judgement.  The move to the new CDC model would require setting optimal reorder points for all stocked parts.  The existing process would not be able to do this – there were just too many parts.

Compounding the challenge was the highly intermittent nature of BC Transit parts demand.  Rather than following a routine, easily forecastable pattern, service parts often experience highly sporadic, seemingly random demand.  Qualitative methods and intuition would not ensure the 95% service level that BC Transit required.  The organization needed a better solution.

The Solution: 

BC Transit turned to Smart Software.  Nelson was aware of Smart’s work with other transit systems and was drawn to Smart Inventory Planning & Optimization for a number of reasons:

• Service level-driven planning methodology with probabilistic modeling, enabling ‘what if’ scenario development. and cost vs. performance trade-offs;
• Proven ability to plan for intermittent demand, demonstrated across multiple transit customers;
• Cloud-based suite of web applications, providing anywhere access and eliminating the need for IT infrastructure; and
• Automated data integration and analytics, providing the continuous flow of data from and the return of optimal Min/Max drivers to JD Edwards to drive replenishment.

Smart and BC Transit worked through an accelerated implementation process to get their initial system up and running within two months.  BC Transit was able to establish stocking policies to get the new warehouse and central distribution system up and running.  Once initial policies were set, they used the first year of operations to monitor and refine reorder points.

“The big change,” says Nelson, “was to shift from the qualitative, manual establishment of reorder points to a highly automated system of setting Min/Max values for all active parts.”

Year 1 focused on getting the process working and relating the new capabilities to overall supply chain operations.  The experience established confidence in the system.  Their enhanced planning process now treats new items manually until they experience three incidents of demand.  At that point the demanded parts transition into production planning and are included in the routine, monthly automated process.  Plans are now underway to push Min/Max planning out to the 28 regional transportation systems and all 35 stocking locations.

Results: 

“We could not have consolidated central distribution into one facility without Smart,” says Nelson.  “During the transition we discovered a need for 3,000 additional SKUs.  There just wouldn’t have been room.  It is difficult to put a monetary value on this.”

Using Smart IP&O, BC Transit was able to internalize the impact of centralizing all external shipments.  They were able to consolidate demand for all regional transit systems and foresee required stocking levels.  Nelson added, “we did not see any instance of incorrect forecasts.  And we were able to set policies effectively for parts with exceptionally sparse demand.”

BC Transit values its newfound ability to forecast the financial impact of stocking decisions.  They are able to balance capacity against criticality and the cost of inventory.  They have been able to reduce the number of orders, determine optimal order quantities, and deal with variability of lead time – especially long lead times.  “Smart IP&O has enabled us to utilize service level as a driving KPI, essentially risk adjusting our inventory to address the criticality of not running out, and to deal with the thorny challenges of seasonal and intermittent demand.   It is helping us keep our buses on the road, so we can be the best transportation solution for our partners across British Columbia.”

Introduction

Rose Brand is North America’s largest provider of theatrical fabrics, fabrications and production supplies for the entertainment, event and display industries.  If you’ve been to a play or musical, you’ve probably seen their products.  Product availability is crucial to the company’s success, and the company strives to achieve same day shipping from its east and west coast distribution centers. This is a tall order when offering thousands of discrete items.  Doug Harvey, Director of Operations, sat down with us to explain how Rose Brand delivers, and how Smart Software helps.

The Challenge:  

“Having the product in stock is everything,” explains Harvey. “Rose Brand customers know what they want and usually want it now. If a requested item is not in stock, there is a good chance Rose Brand will lose that order and several more, and the customer may not come back.”   The array of products is wide and complex – over 10,000 skus, many offered in 5, 10, even 30 colors.  And it’s gotten more complex.  The company recently acquired a manufacturer of curtain tracks and motors.  Lots more parts.

Accelerating growth strained a procurement process that relied heavily on buyers’ domain knowledge and gut feel.  Many of their stocked items experience highly sporadic, intermittent demand that staff were ill-equipped to plan.  Determining when to order was based on rudimentary spreadsheet models that required extensive manual adjustment, so much so that most items – particularly the thousands of slow movers – were not actively planned.  The lack of a methodical planning process, combined with the criticality that they not stock out, resulted in overstocks, stockouts, and strained limited warehouse space.

The Solution: 

Rose Brand selected demand and inventory planning software from Smart Software as the foundation for a methodical planning process.  This enabled them to effectively implement Min/Max inventory planning, setting optimal Minimum On-Hand values and order quantities.  Two capabilities in particular made a big difference.  First, the ability to conduct service level-driven planning made it possible to risk adjust inventory.  Some critical items cannot be allowed to stock out, and so are be run at very high service levels.  A 1% risk of stocking out might be acceptable. Others that are less critical can tolerate lower service levels.  This risk adjustment of inventory, and achieving required service levels, reduces inventory and improves service levels.

Second, the software included Smart’s unique methodology for planning intermittent demand.  This method, invented and patented by Smart, probabilistically models lead time demand and establishes the requisite Min or reorder point corresponding to the desired service level.  Items with this sort of demand profile can now be effectively planned.  Way better than knee-jerk or wild guess adjustments to random stockouts.

In addition to providing effective inventory policy drivers, SmartForecasts enabled staff to consider and model what-if scenarios.  For example, Rose Brand purchases 1.5 containers from a vendor every 4 weeks.  If their supplier could deliver in 3 weeks, how much inventory – and warehouse space – would that save?  Half a container.  A lot.

Results: 

Rose Brand reduced inventory at the outset, and as its business grew, managed slow inventory growth as sales increased 50%.  A crucial factor in that growth has been the company’s ability to respond to customers’ increasing insistence on immediate availability.  SmartForecasts has enabled the company to effectively plan all of its thousands of stocked products, and has provided the planning framework for the company’s growing infrastructure.  This included the addition of its West Coast warehouse, and the inclusion of a newly acquired division in 2018.

“Rose Brand has undergone tremendous change and growth since its founding in 1921,” says Harvey.  “Smart Software has brought capabilities that help us meet accelerating demand and expectations, and we look forward to pushing this envelope together in coming years.”