CSCMP shortlists Lennox Industries with ToolsGroup for prestigious Supply Chain Innovation Award

Disruptive business outcomes resulted from 3-year team effort to transform processes and technology

Boston – September 17, 2015 — Lennox Industries, a leading provider of climate control solutions for residential and commercial heating, cooling, filtration and refrigeration (collectively known as HVAC systems) is honored to have been chosen as a finalist for CSCMP’s Supply Chain Innovation Award. Innovations submitted to the judging panel include a move to a hub-and-spoke distribution model, an ‘outside-in’ forecasting process, and a single end-to-end demand model. Process changes were supported by ToolsGroup’s machine learning-enhanced SO99+ software running over a reengineered SAP backbone as well as new warehouse and transportation management systems. Winners will be announced during the closing session of CSCMP’s Annual Conference on Wednesday, September 30, 2015.

Lennox’s supply chain team rolled out these innovations over three years to support Lennox’s business strategy and supply chain transformation. This effort supported positive revenue and market share numbers. Benefits measured to date include:

• Reduction in inventory approaching 20%, despite a 250% increase in physical locations
• Improved service levels by about 20%, with a roughly 15% increase in fill rate
• Reduced distribution costs as a percentage of sales by more than 15%
• Increased inventory turnover by more than 20% since 2011
• Reduced response time: improved the capability for same day delivery to 40%, and increased orders that can be delivered the next morning from 35% to 98%

Lennox’s supply chain team achieved these dramatic improvements while expanding their supply chain network from two national distribution centers serving 66 retail stores to a hub-and-spoke model with nine regional centers that currently serve 170+ stores.

Taming planning complexity and the ‘long tail’

Lennox customers rely on HVAC systems to be fixed urgently, so large assortments of parts and products must be available for immediate pickup and same or next-day delivery to locations nationwide. This high service level poses a major supply chain challenge, since demand for HVAC products and parts are highly seasonal and literally as unpredictable as the weather. This results in a classic long-tail business where a majority of the SKUs have intermittent demand.

ToolsGroup SO99+ uses advanced analytic techniques to accurately model and forecast demand in Lennox’s complex and unpredictable business environment, then applies machine learning to fine-tune the analysis and further distinguish between ‘signal’ and ‘noise’. This unique approach uses a single system and demand model to plan intermittent demand for both finished goods and parts. It also delivers end-to-end visibility across the entire supply chain, from stores to manufacturing plants to upstream suppliers. All activities are synchronized to a common demand signal driven by detailed, bottom-up forecasts for every SKU at every location.

According to Keith Nash, VP Supply Chain Logistics at Lennox International, “There’s lots of buzz in supply chain circles about ‘gee-whiz’ gadgetry like delivery drones. However, just being able to physically deliver products to customers quickly doesn’t mean much unless the right items are in the right place at the right time at the right cost. The planning and demand modeling innovations our team developed prove that it’s possible to get closer to customers and exceed their expectations in a way that is both operationally efficient and economically practical.”

About Lennox International

Lennox International Inc. (NYSE:LII) is a leading provider of climate control solutions. The Company designs, produces and market a variety of products for the heating, ventilation, air conditioning and refrigeration (HVACR) markets. The Organization operates in three segments.

Residential Heating & Cooling products and services include heat pumps, air conditioners, furnaces, packaged HVAC systems, indoor air quality, controls and replacement parts.

Commercial Heating & Cooling products and services include applied systems and air conditioning equipment, unitary heating, controls, installation and service of commercial heating and cooling equipment. Refrigeration products include condensing systems, unit coolers, fluid coolers, air cooled condensers, air handlers, process chillers, controls, compressorized racks, supermarket display cases and units.

About CSCMP

Since 1963, the Council of Supply Chain Management Professionals (CSCMP) has been the leading worldwide professional association dedicated to education, research, and the advancement of the supply chain management profession. With more than 9,000 members globally, representing business, government, and academia from 62 countries, CSCMP members are the leading practitioners and authorities in the fields of logistics and supply chain management.