Wholesale distributors face some of the most difficult demand and fulfillment challenges of any industry. OEMs are proliferating product and spare parts portfolios while customer expectations have become more demanding and immediate. Internet buying has squeezed margins by opening up more opportunities for customers to access competitors or even buy direct. Many firms must even compete with Amazon, an industry giant with huge distribution resources, slim margins and the ability to turn orders in hours.
Because unserved orders usually translate into lost sales that directly impact the bottom line, high customer service levels are critically important to wholesale distributors. But dealing with intermittent or ‘long-tail’ demand is ultimately challenging. They need to serve this demand in the face of seasonality, shorter product life cycles, increasing SKUs counts, obsolescence risk and offshore supplies that create longer, less flexible lead times.
Too often, saddled with inadequate planning systems, wholesalers turn to supply heroics and short-termism without inventory optimization, analytics-based service optimization, or sales and operations planning (S&OP).
They struggle to forecast volatile demand and manage inventory cost effectively.
Demand planners at educational wholesaler Connect E&C would trawl through massive spreadsheets of 16,000 active SKUs to plan their unusually seasonal demand with major peaks at the start and end of each school term. The company had no way to assess trade-offs between inventory and customer service levels, resulting in both service-compromising stock-outs and costly overstocks. The problem came into sharp relief after the company started sourcing a growing amount of supply from Asia. Though unit costs were lower, longer lead times and reduced supply chain agility were threatening service levels. The company knew their systems were no longer able to keep up with the demands in a competitive and complex environment.
Connect E&C selected ToolsGroup software for its proven ability to handle long-tail product portfolios and extreme demand volatility. They also wanted the ability to generate a probability-based forecast that could be further refined by taking a large number of market intelligence factors such as new products, promotions and end-of-life information.
Connect E&C’s implementation went live in only three months. Its ability to manage complexity dramatically improved planning effectiveness. Its ability to forecast at the order-line and SKU-Location level made it much easier to set the optimal inventory mix in the warehouse locations. Specific KPI improvements included: