IEWC Uses Supply Chain Guru Inventory Optimization to Fine-Tune Inventory Strategy
IEWC is a premier global provider of total connectivity solutions for sub-assemblers, OEMs and the broadcast and communications industries. An SAP user, the company had been using a third-party tool along with spreadsheets as its primary inventory planning tool. This solution was problematic as the spreadsheet model was cumbersome to run, contained only simple formulas based on demand changes, and did not support a sustainable inventory optimization process. The company needed a faster, more accurate way to coordinate form and function of inventory across the supply chain—determine how much inventory should be stocked in which warehouses around the globe for timely execution of orders. IEWC knew that a solution enabling a holistic view of inventory could drive a sustainable, repeatable inventory planning process and give planners a better grasp on inventory as well as other areas in the supply chain.
The company evaluated inventory optimization tools and selected LLamasoft® Supply Chain Guru® for its unified inventory and network optimization and simulation platform, simplified user interface and output visualization and reporting.
Inventory planning is centralized to the main warehouse in the Midwest, which supplies all downstream U.S. distribution centers (DCs) and a Texas hub supplies all Mexico DCs. Replenishment frequency is dependent on cost and demand variances based on historical data. In order to establish Supply Chain Guru as its inventory planning tool, the IEWC analyst used Supply Chain Guru to model the entire distribution network, including around 25,000 SKUs.
A repeatable monthly process of determining inventory settings and parameters was established. The refreshed Supply Chain Guru inventory model is run every month for the rolling previous six months, considering the business’ inventory and service goals. The model safety stock recommendations are compared with current settings in SAP. Around 30 percent of stocking items are automatically updated based directly on Supply Chain Guru inventory recommendations and pushed into SAP.There are about 10 percent of stocking items that have outlier demand classifications; for these items planners review Supply Chain Guru inventory policy recommendations and, considering lead time, inventory parameters and policies and percent and dollar cost differences to determine whether to adjust reorder points in SAP. Over 60 percent of stocked items are within 10 percent of the Supply Chain Guru output summary.
Planners analyze stock-outs at the SKU level. Every 60 days they compare in-stock percentages in SAP to actuals along with Supply Chain Guru recommendations to evaluate accuracy and make any necessary process adjustments.
Compared to its previous spreadsheet solution which required several days’ work, the new Supply Chain Guru inventory model is much quicker to run, requiring less than a day to refresh with new data and get a new monthly inventory policy summary. The LLamasoft solution also provides a more dynamic approach to inventory planning with a multi-echelon view—IEWC now has a much more accurate and complete view of optimal inventory levels and locations using sophisticated optimization algorithms. Previously, spreadsheets provided only very basic demand calculations and lead time and much of the inventory adjustments were at the discretion of the planner instead of based on a systematic process.
Using the Supply Chain Guru-generated inventory recommendations, in-stock percentage is strong, and service levels are at or above targets. IEWC planners also use model outputs to help guide daily purchases. For high-dollar items that come up for order each day, model recommendations are used to determine whether to approve the purchase or whether it can be delayed.
The model can also help planners determine changes to stocking strategy. Based on how many customers and orders have been placed for an item in the past six-month demand period, planners can determine which to flip to a stocked item, or conversely, which could be removed from stocking items list.
Moving forward, IEWC will continue to use parameters and service settings in Supply Chain Guru to drive inventory, and build upon success to support more strategic and tactical decisions with modeling technology, including running more what-if scenarios to answer wider supply chain questions across the business.
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