Is it possible to reduce the inventory value by 10 million in 3 months while improve customerservice
PromoSoft's customers are medium-sized companies with large inventories there the core business consists of storage and distribution. Over the past ten years, With the SOLO system, we have digitized and automated warehouse management and the purchasing process of more than a hundred companies. Before our customers decided to integrate SOLO with their business systems, and often eliminate time-consuming manual excel routines, many struggled with similar challenges.
Person dependent purchases with subjective purchasing decisions, uncertainty in demand, difficulties in optimizing stock levels and customer service, swings between stock shortages interspersed with overstocking of certain items, lack of inventory control as well as a lot of capital tied up in excessive stocks. These challenges have warehousing companies have basically always struggled with.
Other challenges have arisen in recent years as a result the pandemic, component shortages and disruptions in global supply chains. One effect is major fluctuations in demand and a greatly increased uncertainty in demand and how it must be calculable. In our previous blog text, we told you how SOLO can help to capture demand variations and make it easier for purchasing departments manage this uncertainty and act to optimize inventory levels.
See the warehouse as shelves with stacks of bills instead of products!
In this text, we will focus on a couple of challenges that with SOLO can is turned into something positive that contributes to developing the core business, and lift profitability. One of these is how stock values can be lowered and reduce the capital commitment while maintaining service levels or improve.
A well-balanced inventory is a prerequisite for a company to be able to keep one service level that corresponds to customer requirements. A stock can tie up a lot of capital and optimized warehouse management can therefore have a major impact on profitability. One however, optimization is difficult when inventory control is based on qualified guesses, or information from business systems that do not have a functionality adapted for warehouse management. At the same time, in troubled economic times, it can be absolutely necessary for many companies to streamline operations and lower inventory values in order to free up capital, and to do so while maintaining customer service levels.
Professor Sunil Chopra at the Kellog School of Management in the US has put it this way here: See the warehouse as shelves with stacks of banknotes instead of products. By reduce the number of banknote bundles on the shelves, the capital instead becomes available and can then used to pay debts, run the everyday business or invested in other ways.
A company that has done just that is Promosoft's customer Schenker Dedicated Services (SDS).
Total control with the SOLO Dashboard
Schenker Dedicated Services AB has a department for home distribution, HDHC – Home Distribution Health Cared, which is responsible for delivery of healthcare products for patients on behalf of municipalities and county councils. The department is also responsible for purchasing and a stock range of 1,300 items. The task for SOLO was to replace a system with limited functionality and also time-consuming manual Excel routines.
Promosoft helped Schenker set parameters, classify articles, set key figures and to provide SOLO. with information that made it possible to optimise the inventory. All statistics are presented in an easy-to-understand manner in the SOLO Dashboard which gives full control over the stock situation, customer service and stock turnover rate. Key figures can be broken down into groupings such as A items and the service level can be displayed both in real time and historically.
SOLO freed up a lot of capital and also a lot of time
Schenker's expanded investment in SOLO quickly paid off. After three months the inventory value had been reduced from SEK 24 to 16 million at the same time as the customers felt that a very good customer service had become even better. The company currently has one delivery reliability of over 99%.
Three important experiences from the project with Schenker are; It can happen quickly lower the stock value, is not as complex as many people think, and that extra bonus gives SOLO's automation big time savings for the buyers. Schenker appreciates that you saved half a working day per purchase order. The time gain occurs when SOLO automatically produces purchase proposals and buyers avoid many manual steps tasks and checks of purchasing documents. It is an impressive time saving, and the freed up time can be spent on strategic work instead operational tasks at a detailed level.
Automation turns buyers into growth engines
A lot of manual work is a common situation for buyers on many trading companies where you have excel as a tool and business systems without it functionality required to optimize inventory management and purchasing routines. It complicates the purchasing work in companies that have a positive but not extreme rapid development, and the manual routines can become a really tough challenge i fast growing company.
When a business enters a strong growth phase, you can suddenly realize that the purchasing work takes far too much time. Time is often not enough to do things in excel. Control is getting worse, as are decisions about stock management and purchasing. The capital tie-up increases and it can quickly become messy in the supply chain, while customer service deteriorates. For the company management in growth companies is it is therefore important to review and question old purchasing routines.
At Promosoft, we have seen many times the effect of an automation and digitization with SOLO. Our estimate is that a company with two buyers can easily handle a tenfold increase in turnover before the need arises of more buyers. This also means that buyers who have support from SOLO and can work more strategically without exaggeration can be seen as a strong contributor growth engines.
But, what is it then that gives the buyers the capacity to cope with such a powerful one turnover increase. One of the keys is to parameterize a lot of it operational work with the help of SOLO. A new assortment or a completely new warehouse can then be added without requiring particularly much additional work. More about what parameter setting is and we will return to all its advantages in the next section blog text!