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Creating competitive advantage through lean, mean and effective inventory management

Inventory Optimisation? Company's are frustrated. ERP systems haven't delivered.
The people within organisations aren't empowered.

Now Barloworld Optimus introduces a new approach that has enabled over 400 companies to optimise their inventory quickly, easily and cost effectively. 


Do you remember the days of stockpiling raw materials, loading up the shop floor with work-in-process, cramming your warehouses and distribution networks with finished goods…all in the name of creating a competitive advantage through higher service levels?

Today, effective companies understand that these service levels are a given, and competitive advantage now rests in being able to interpret and react to the ever-changing demands of your customers. In short, success rests on lean, mean and effective inventories.

The Inventory Straitjacket

Many senior executives pinpoint excessive inventory levels as a major concern, tying up funds that could be better spent on new product introductions, expanded marketing and sales, modernisation, reengineering, expansion programmes, new acquisitions and debt reduction. However, even though inventories are under constant analysis and manipulation, permanent inventory reduction opportunities go largely untapped.

The Data Dilemma

A major reason for this is the massive volume and complexity of data that must be managed and interpreted by the inventory manager on an ongoing basis. Often, the user chooses to “take the default”, “leave it to the system” or globally update with a “one rule fits all” rule of thumb.

This results in the system (rather than management) controlling the business inventory strategy using sub-optimal policy settings.

What about Spreadsheet Systems?

Because of the complexity of updating the basic inventory management data within ERP systems, many companies manipulate their data at a line-item level using Excel spreadsheets or Access databases. While this offers a greater degree of flexibility than your core transactional system, we at Barloworld Optimus have never found such a system that:

  • Takes into account all the different inventory management variables and handles the multiple complex relationships that exist between them
  • Provides the basic what-if capabilities that allow you to understand the twelve-month future effect of a given policy before it is implemented
  • Provides the necessary global visibility, flexibility and exception reporting capabilities needed to take your inventory optimisation to the next level.

A Dual Solution

So what do you do to regain control of your inventory? How do you ensure that the next time you spend money on inventory you buy the right product at the right time? No matter how efficient your operations are, if you don't get this right your entire supply chain will be suboptimal.

At Barloworld Optimus, we have learnt that the solution is twofold.

The first step in to ensure that the base inventory management data within the ERP system is correct. Secondly, you need to implement a methodology, supported by appropriate inventory management tools, that maintains the integrity of this data on an ongoing basis.

What Base Information within the ERP System Needs to be Maintained?

In a utopian, zero-inventory world the customer would arrive just as the part was released from the shop floor or delivered by the supplier. This assumes the ability to accurately forecast demand and provide a reliable supply. Unfortunately, customers and suppliers are variables usually outside the total control of the company. To service customers effectively, the concept of safety stock was developed. Two other variables apply: cycle stock which is driven by minimum order quantities, plant set-up times or container loads; and length of lead times, which are controlled by production or the suppliers.

For management to regain control of their inventory, it is vital that these variables are managed on an individual line item basis. In our experience, they are poorly maintained by most companies. Forecasting processes are weak, lead times are not updated, safety stocks are set using rule of thumb and the effect of a different replenishment strategy through cycle stocks is not understood.

If you want to get your inventory right, there are six key questions to consider when generating new replenishment orders for every single SKU within every single location:

  • How accurate is the forecast?
  • How reliable is the supply?
  • What is the length of lead time?
  • How often do you place orders?
  • When you buy, how much do you buy?
  • What target service levels do you want to achieve?

If you don't have the appropriate software tools and methodologies in place, you'll never be able to answer these questions. At best, you'll have to rely on a broad brushstroke “rule of thumb” or take the system defaults.

At Barloworld Optimus, we've spent 15 years developing the software tools and methodologies that put you back in the driving seat where inventory management is concerned. We ensure that management is focusing their attention on those items that will give them the biggest results with the least amount of effort in the shortest timeframe.

People Power

As sophisticated as today's software systems may be, they are still no substitute for the insights of the human mind when presented with the relevant data. Our approach uses software where appropriate, but mainly acts as a decision support system for highly complex problems.

Users are encouraged to hold sales, inventory and operations planning (SIOP) meetings where the exception messages relating to the high profile parts are resolved. The system is key in areas where improving forecasting, supplier performance or base data can be introduced.

Real Results

What can you expect from implementing the Barloworld Optimus software tools and methodology? If the brief is to reduce inventory while holding service levels static, you can expect a 35% reduction in inventory investment, on average. If you want to increase service levels, your savings should be around 20% on inventory plus a similar financial benefit in terms of customer satisfaction and increased sales.

Investing in the Future

Providing top-notch customer service and enhancing profits are critical to the success of your company. Attaining them requires both specialised know-how and a commitment to act. We can provide the former - it's up to you and your organisation to commit to action.


Contact details:

Frank Gesoff, GM – Sales and Marketing
Barloworld Optimus UK Ltd, 1 Rotten Row Barns, 1957 Warwick Road, Knowle, Solihull B93 0DX
Tel: +44 (0)870 442 2352
Fax: +44 (0)870 442 2351
E-mail: frankg@barloworldoptimus.co.uk

About Barloworld Optimus UK:

Barloworld Optimus Ltd is a division of the logistics arm of Barloworld Ltd, a multinational corporation with 25,000 employees and a turnover of more than $6bn.

The Barloworld Optimus Inventory Optimisation Solution, Optimiza, allows clients to integrate best practice inventory management methodologies with world-class decision support tools.
 

 

Contact

For more information about The National Computing Centre and our services, please contact us at the details below:

Email: info@ncc.co.uk
Telephone: +44 (0)870 908 8767
Fax: +44 (0)870 134 0931

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