Increases service levels and reduces inventory with improved planning
ChallengesPrior to using SO99+, Thule’s forecasting process was first based on Excel and later on decentralized demand planning. To obtain better forecasts, the process was centralized but this brought too much manual work and a lack of connection between service and inventory. The planners at Thule were overwhelmed with the amount of manual labor that they had to invest in the forecasting process, while it did not result in accurate forecasts. They were fighting with slow-moving items with intermittent demand and a difficult to forecast seasonal spikes. Thus, Thule wanted to implement a more automated forecasting process combined with an application that supports a more efficient and accurate demand planning process.
ResultsService level increased by more than 20 points, from 75% to 95+% Outdoor segment average inventory reduced by more than $2 million Workload reduced by 75%
Project & Objectives
The solution to these problems was implementing ToolsGroup SO99+ as well as a new process implemented by Optilon. The new solution covers Thule’s biggest product segment – Outdoor.
The project objectives were:
- Reduce inventory of finished products
- Increase service level to customers
- Implement a more efficient planning process for forecasts and safety stocks
- Improve forecast accuracy
Thule’s Outdoor segment called upon Optilon to implement an automated forecasting system that delivered a more efficient and accurate demand planning process.
Thule’s Demand Planner, Michael Wolfsteiner, explained the uniqueness of the solution, based on ToolsGroup’s SO99+ software, “Traditional demand planning considers demand history in terms of quantity only, ignoring customer order lines. ToolsGroup’s SO99+ on the other hand analyzes the demand history both in terms of quantity and customer order lines, in order to better model the shape of the demand. The close connection between desired service level and inventory level is very positive.”
The solution included inventory optimization. Thule‘s old safety stock routine was based on a seasonally dependent coverage rate (e.g., number of days’ average demand). The new optimization instead starts from an aggregated service level target and defines service levels for each SKU, taking advantage of a wide variety of variables, such as demand variation, average demand, order frequency, costs and lead time. It modifies service and coverage to maximize the overall use of the capital within a pre-defined “service group”. Minimum service levels are set for business critical items.
The system also included rough cut planning to identify requirements to pre-build stock due to capacity limitations. The actual replenishment is still done in the ERP system.
We’ve managed to centralize and automate our forecasting process. We’ve also reduced average inventory for the Outdoor segment by $2 million and increased the service level to customers by over 20%
Michael Wolfsteiner, Demand Planner, Thule
Results & Benefits
The project has resulted in a common, more efficient and accurate demand planning process within the Outdoor segment. The new solution with SO99+ means forecasts and safety stock levels in the ERP are automatically updated every week based on optimizations in SO99+. Thule‘s old safety stock routine was based on a defined seasonal dependent coverage rate (setting number of days’ average demand). SO99+ instead starts from an aggregated service level target; the optimizer defines service levels for each SKU to reach the aggregated service level target using an objective function.
The optimization in SO99+ leads to distinct deviation in service and coverage within a service level group to maximize the overall use of the capital.
The project have helped Thule reach the following KPIs:
- Service level increased by more than 20 points, from 75% to 95+%
- Outdoor segment average inventory was reduced by more than $2 million
- Workload reduced by 75%
- Managed to centralize and automate the forecasting process.
Thule is a premium brand used globally for a wide assortment of products with a focus on solving the problem of how to bring equipment with you when using a car (roof racks, bike and water sport carriers, roof boxes). The company was founded in Sweden in 1942 and now operates in 17 countries. Annual turnover is 5.7 Billion SEK and the number of employees is 3,100. Thule is divided into four product segments; Outdoor, Towing, Bags and New ventures.↓ Download PDF