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Inventory Control System Paper

Words: 16452, Paragraphs: 136, Pages: 55

Paper type: Essay, Subject: Business Services

Inventory Control: Improving the Bottom Line Inventory control requires the tracking of all parts and materials purchased, products processed, and products stored and ready for shipment. Having a sophisticated tracking system alone does not improve your bottom line, it is how you use the information that your system provides. If your job responsibilities involve inventory control, you know how critical the function is to business success and the complexities involved in planning, executing and controlling your supply chain network. From a financial perspective, inventory control is no small matter.

Oftentimes, inventory is the largest asset item on a manufacturer’s or distributor’s balance sheet. As a result, there is a lot of management emphasis on keeping inventories down so they do not consume too much cash. The objectives of inventory reduction and minimization are more easily accomplished with modern inventory management processes that are working effectively. Inventory Control Problems In actual practice the vast majority of manufacturing and distribution companies suffer from lower customer service, higher costs and excessive inventories than are necessary.

Inventory control problems are usually the result of using poor processes, practices and antiquated support systems. The inventory management process is much more complex than the uninitiated understand. In fact, in many companies the inventory control department is perceived as little more than a clerical function. When this is the case, the fact is the function is probably not very effective. The likely result of this approach to inventory control is lots of material shortages, excessive inventories, high costs and poor customer service.

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For example, if a customer orders a product that requires a manufacturer to acquire 20 part numbers to assemble a product and then, only 19 of the 20 part numbers are available, you have nineteen part numbers which are excess inventory. Worse, the product can’t be shipped to create revenue and the customer is not serviced. Think for a moment about the complexities of making products that require hundreds and maybe thousands of part numbers to be available in the right quantity, at the right place and at the right time to make products to satisfy customer orders.

It is a complex network to control and a set of inventory management tasks that must be performed with precision. What Should Be Done? Too much inventory and not high enough customer service is very common, but unnecessary. There are proven methods that can help you accurately project customer demand and to calculate the inventory you will need to meet your defined level of customer service. Using the right techniques for sales forecasting and inventory management will allow you to monitor changes and respond to alerts when action needs to be taken.

The right approach to inventory control can produce dramatic benefits in customer service with lower inventory, no matter how complex your network is. Modern inventory management processes utilize new and more refined techniques that provide for dynamic optimization of inventories to maximize customer service with decreased inventory and lower costs. These improved approaches to inventory management are of major consequence to overall competitiveness where the highest level of customer service and delivered value can favorably impact market share and profits.

Understanding the Process Overall inventory control crosses a number of functions. The inventory control process can be divided into the following general categories: Demand management which covers the processes for sales and operations planning, sales forecasting and finished goods inventory deployment planning. 1. Inventory planning and ordering which is often accomplished with material requirements planning, often referred to by its acronym MRP or in a lean manufacturing environment kanban ordering is used to effect deliveries of material. . Inventory optimization systems are being advocated by some as the supply chain management mechanism that should be used to mathematically calculate where inventory should be deployed to satisfy predetermined supply chain management objectives. 3. Physical inventory control is a phrase that describes the receiving, movement, stocking and overall physical control of inventories. Effective inventory control is a vital function to help insure the success of manufacturing and distribution companies.

The effectiveness of inventory control is directly measurable by how successful a company is in providing high levels of customer service, low inventory investment, maximum throughput and low costs. Certainly, an area where management should apply a philosophy of aggressive improvement. Inventory Control: Improving the Bottom Line Inventory control requires the tracking of all parts and materials purchased, products processed, and products stored and ready for shipment.

Having a sophisticated tracking system alone does not improve your bottom line, it is how you use the information that your system provides. If your job responsibilities involve inventory control, you know how critical the function is to business success and the complexities involved in planning, executing and controlling your supply chain network. From a financial perspective, inventory control is no small matter. Oftentimes, inventory is the largest asset item on a manufacturer’s or distributor’s balance sheet.

As a result, there is a lot of management emphasis on keeping inventories down so they do not consume too much cash. The objectives of inventory reduction and minimization are more easily accomplished with modern inventory management processes that are working effectively. Inventory Control Problems In actual practice the vast majority of manufacturing and distribution companies suffer from lower customer service, higher costs and excessive inventories than are necessary.

Inventory control problems are usually the result of using poor processes, practices and antiquated support systems. The inventory management process is much more complex than the uninitiated understand. In fact, in many companies the inventory control department is perceived as little more than a clerical function. When this is the case, the fact is the function is probably not very effective. The likely result of this approach to inventory control is lots of material shortages, excessive inventories, high costs and poor customer service.

For example, if a customer orders a product that requires a manufacturer to acquire 20 part numbers to assemble a product and then, only 19 of the 20 part numbers are available, you have nineteen part numbers which are excess inventory. Worse, the product can’t be shipped to create revenue and the customer is not serviced. Think for a moment about the complexities of making products that require hundreds and maybe thousands of part numbers to be available in the right quantity, at the right place and at the right time to make products to satisfy customer orders.

It is a complex network to control and a set of inventory management tasks that must be performed with precision. What Should Be Done? Too much inventory and not high enough customer service is very common, but unnecessary. There are proven methods that can help you accurately project customer demand and to calculate the inventory you will need to meet your defined level of customer service. Using the right techniques for sales forecasting and inventory management will allow you to monitor changes and respond to alerts when action needs to be taken.

The right approach to inventory control can produce dramatic benefits in customer service with lower inventory, no matter how complex your network is. Modern inventory management processes utilize new and more refined techniques that provide for dynamic optimization of inventories to maximize customer service with decreased inventory and lower costs. These improved approaches to inventory management are of major consequence to overall competitiveness where the highest level of customer service and delivered value can favorably impact market share and profits.

Understanding the Process Overall inventory control crosses a number of functions. The inventory control process can be divided into the following general categories: Demand management which covers the processes for sales and operations planning, sales forecasting and finished goods inventory deployment planning. 1. Inventory planning and ordering which is often accomplished with material requirements planning, often referred to by its acronym MRP or in a lean manufacturing environment kanban ordering is used to effect deliveries of material. 2.

Inventory optimization systems are being advocated by some as the supply chain management mechanism that should be used to mathematically calculate where inventory should be deployed to satisfy predetermined supply chain management objectives. 3. Physical inventory control is a phrase that describes the receiving, movement, stocking and overall physical control of inventories. Effective inventory control is a vital function to help insure the success of manufacturing and distribution companies. The effectiveness of inventory control is directly measurable by how successful a company is in providing high levels of customer service, ow inventory investment, maximum throughput and low costs. Certainly, an area where management should apply a philosophy of aggressive improvement. Improving Inventory Accuracy 1. Step 1 Implement a cycle-count process in which a set percentage of inventory is counted each month. This percentage will be based on the number of times you wish to have your inventory counted annually. By counting 25 percent of inventory each month you will effectively complete three complete inventories each year. If planned and coordinated properly these cycle counts can be completed without interruption of your normal business activities. . Step 2 Enhance the effectiveness of your inventory counts by integrating the ABC inventory method, The fastest moving inventory items will be classified as “A” items. The next group of inventory items, those which are active but slightly below the fast-moving items will be classified as “B” items. Slow moving items, including obsolete inventory will be classified as “C” items. 3. Step 3 Count all “A” classification items monthly, each “B” classification every two months, and “C” classification can be counted each quarter.

This will insure the inventory items with the most turns and thus the highest probability of error will be counted most often. By counting these items more frequently errors can be identified, researched, and corrected in a timely manner, thus preventing interruption of service to your customer or production line. 4. Step 4 Develop a reporting method to record all inventory counts, their frequencies, and any variances found. Research all variances to discover the root cause of the discrepancy. These records can then be used to identify patterns or deficiencies in our system/process. Once a pattern is discovered, corrective measures can be taken to eliminate the problem/errors and increase inventory accuracy. Read more: How to Improve Inventory Management Control | eHow. com http://www. ehow. com/how_6763803_improve-inventory-management-control. html#ixzz0uuTYPREl Improving Inventory Control by Captain Larry Howard Inventory control is perhaps the single most important function within a supply support activity. Simply put, it is the process of counting and adjusting inventory levels in accordance with prescribed regulations.

Supply support activities systematically perform wall-to-wall, cyclic, and special inventories for the sole purpose of bringing stock accounting records into line with the actual physical locations of stock found in a warehouse or storage area. These inventories minimize any problems caused by undiscovered posting errors and operational gains and losses on the stock record account. The stock record officer (SRO) subsequently conducts research that either documents the reason for an adjustment or concludes that no reason could be found.

Unfortunately, this approach does little or nothing to “control” inventory. Instead of focusing on the results of cyclic counting, we should focus on eliminating inaccuracies before they occur. Here are three things that can help if you manage a supply support activity. Start by maintaining an inventory adjustment report (IAR) log that not only identifies the IAR document number with a corresponding gain or loss, but also notes the nomenclature, location, and reason for an adjustment. This will serve as a starting point for identifying trends in inventory inaccuracies by item, location, or type of error.

Second, the research conducted by the SRO must go beyond simply explaining or identifying the reason for an inaccuracy. It must extend to determining supply policy or procedural shortcomings. Third, develop an inventory schedule to supplement the required monthly 10-percent inventory. The reason for this is simple: the sooner an inventory inaccuracy is identified, the greater is the possibility of finding its true cause. Remember Pareto’s Law—a small number of items will dominate the results achieved in any situation—and prioritize your authorized stockage list (ASL) by item value; shoot for a 15-30-55-percent split.

I use the following guidelines to prioritize items for inventory— • A lines: These are the highest priority items and require monthly inventories. Criteria for this category include a value of more than $1,000. • B lines: These are items with a normal priority and should be inventoried quarterly. Criteria include a value of $100 to $999. • C lines: These are low priority items that can be inventoried semiannually. Criteria include a value of less than $100. Traditional inventory control methods do not alleviate the causes of inventory inaccuracy, they merely report on them.

The goal should be to achieve 100-percent inventory accuracy by eliminating the possibility of inaccuracy in the first place. Inventory errors cost money, time, and effort and will continue to occur until internal supply processes are examined in detail and revised procedures are put in place as preventive measures. Inventory control. If you’re like most shop owners, that seems like a contradiction in terms. It doesn’t have to though. You can control your inventory rather than the other way around. What does inventory mean to you?

Does it mean after-hours projects, such as extra paperwork or heated conversations with your bookkeeper over cost vs. markup vs. profitability? If you answered “yes,” inventory probably also means “piles of money” on the shelf. Inventory is money on the shelf. National averages for a typical shop range from $10,000 to $20,000 worth of inventory and 30 percent of that inventory is dead! A 21-month study conducted recently on what shop owners sell and what they stock, revealed that 11 percent of shop owners sell spark plugs but don’t stock them, while 18 percent stock spark plugs but don’t have what they need.

What is the purpose of inventory? Many shop owners think it’s there to facilitate shop operation by reducing rack time and increasing gross profit. In reality, however, inventory exists to improve your level of service. How? The right amount of the right part numbers will provide you with what you need when you need it, without enormous stress on your operating capital. Consider the following two methods of inventory control. Last In First Out (LIFO) means that when there is more than one of a given part number, you sell the last one received, first. The rationale being that the newest is probably the most expensive.

First In First Out (FIFO) means that when there is more than one of a given part number, you sell the one you’ve had the longest, first. The rationale? To keep your stock rotating. Whether you use LIFO or FIFO, the actual transfers are only taking place on paper. The old dusty part may be pulled off the shelf, but it’s the new expensive one that’s reduced from inventory. Ask your bookkeeper which is the correct method for your business. Why should you even consider these inventory control methods listed above? Take a moment to compare the value of your inventory to the value of some piece of your equipment.

When you purchased the expensive piece of equipment, you probably considered various things. You probably shopped for the best price and considered return on investment. If the equipment wouldn’t pay for itself, you probably would not have purchased it. After the purchase, you monitored your investment to maximize its use and, therefore, its return. All the same rules apply to your inventory investment. There are some fundamental differences, however, between your inventory investment and your capital investments. Your equipment is depreciable, while your inventory is taxable.

Your capital investments happen suddenly, while your inventory value creeps up gradually. At some point, most shop owners end up with a large inventory investment on which they pay taxes, yet rarely do they monitor or control it properly. Face it, it’s a time-consuming process in an industry that holds time at such a premium that you charge for it in six-minute increments. So what to do? Some think the best inventory is none at all. Inventory interferes with your productivity. How much time do you spend counting it, ordering and receiving it, tracking incorrect orders, stocking shelves and tracking returns?

How much energy goes into protecting it? How often do you give something away? Inventory Calculations When was the last time your parts percentage figures were at the level you require for profitability? There are two calculations that are often overlooked when determining inventory profitability. The first is cost-to-order, the second is cost-to-keep. The factors involved in cost-to-order are time and money. Time to calculate order quantities and time to do paperwork, time to receive it, stock it, correct errors and then time to track them, and money to pay someone to do it all.

To determine your cost-to-order, you first must learn how much: • time is actually spent deciding what to order; • time it takes to do the paperwork; • time it takes to check in and stock the order; • you pay the individual(s) that actually perform each step. If the inventory value of the order received is $100, and if you sell parts at a 45 percent margin, you’d sell that $100 for $182. The formula here is: selling price = cost of goods (in this case, $100) divided by the result of 1. 00 minus the margin (. 45 in this example).

If your cost-to-order is $10, what happens to the selling price? If it remains the same, you just lost money. (The cost of goods remains at $100, but the cost to order = $10. A $110 investment would gross $200. 20 on a 45 percent margin). You just lost $18. 20. There is also a calculation called cost-to-keep. Space does not permit a lengthy discussion, but the important point to consider is how much it costs to buy inventory based on how long you own it, as well as how much return on investment you could get on that dollar if it wasn’t on the shelf. You must also factor in cost-of-obsolescence.

For example, if it costs you 10 percent to keep something on the shelf, and you receive a 5 percent quantity discount, maybe you shouldn’t buy it. The lowest price is not always the best price. If gaining control of your inventory sounds like the impossible dream, it’s not. My recommendation is to look into just-in-time inventory. This means that you order on a regular basis and purchase only when you need to replenish what has been sold since the last order. Just-in-time inventory means you must have short inventory order cycles and accurate tracking to determine what and how much inventory to stock. It is an attainable goal.

Seven Steps To Improve Inventory Control The following seven steps can help you improve your inventory control, improve your level of service and improve your bottom line. Step One Determine which items are your real movers. To accomplish this, you must first determine what represents “dead” inventory in your store. Be realistic. Don’t forget about that shelf of dealer parts tucked away in the back. A good way to measure dead inventory is to evaluate inventory turns. Turns equal cost of goods sold (COGS) divided by inventory value. Calculate COGS on your inventory as a whole, then recalculate on specific lines such s belts or hoses. You may be surprised by the result. Your computer system should be able to provide accurate purchase data by line. If not, speak with your bookkeeper about supplying the proper information. Step Two Turn dust into dollars. You must get rid of what’s not moving. If you multiply your gross profit percent by what you can recover by turning it in, for example, 50 cents on the dollar, 30 cents on the dollar, etc. , you’ll arrive at the amount of reinvestment capital available to you. It’s important that you don’t get trapped by thinking about what you paid for it vs. what you can get for it now.

Inventory turns can be increased by either selling more parts, or by reducing inventory value. If inventory turns increase, so does your bottom line, guaranteed. Step Three Analyze your business profile. It’s important to consider what you have in stock vs. what types of repairs you perform. Do you do lots of brake repairs? Stock lots of brake parts? Do you ever have to order parts when doing a brake repair? How is the level of your service affected by having brake parts in inventory? Is it working? If not, why stock it? Step Four Determine what and how much to stock. Who makes the ordering decisions in your shop?

Does he/she consider seasonal items? Do you utilize replenishment ordering, or do you order to stock levels? If you use the latter, who determines the stock levels? Determining what to stock (and how much) is similar to determining your dead inventory. The difference is how much inventory do you really need? Again, your computer should be able to tell you what is selling and which items produce the greatest gross profits. If the gross profit percent is low on a given item, sales have to be high. But, if gross profit percent is high, you can get away with selling fewer of that item.

Remember the goal you want to maximize your level of service. If stocking an item doesn’t help you reach that goal, don’t stock it. Step Five Monitor sales for profitability. It’s easy to fall into the we-sell-lotsa-em, we-better-stock-lotsa-“em” trap. It’s a trap because high sales volume doesn’t necessarily equate to high profitability. If you’re losing money each time you sell one, you can’t make it up in volume. A better consideration would be to determine where the profit lies and unload everything that isn’t profitable. Gross profit per line item is one measure. How much it costs to wait for parts is another.

Most of this information is available from your computer (or your bookkeeper from information you’re already providing him/her). Remember, a 1 percent increase in gross profit equals a 1 percent increase in net profit, if the volume remains constant. Step Six Establish daily ordering. This step is nearly self-explanatory. Once you’ve determined what the movers are, gotten rid of the dead inventory, and determined what and how much to stock based on the types of repairs you perform (and the profitability), then you’re ready to order and receive parts daily to replenish yesterday’s sales.

If you’re automated, it won’t be a problem. If not, it’s still doable. Step Seven Buy smart. When selecting a supplier, realize that prices are so competitive and deliveries are so good that you do have choices. It’s important to evaluate what you can get from your supplier other than parts. For example, will your suppliers analyze your purchases and returns on an item level? What are your return privileges? What percent can be sent back “no questions asked”? Will they clean up your inventory? How often? Many of these important issues are overlooked when choosing a supplier.

Five Rules To Live By Here are five rules to live by while operating your shop. Post them prominently in your office next to your phone. They, too, will help you improve your bottom line. • Don’t stock anything you can get in an hour or less. • Never promise a job in less than an hour. • Never buy anything that can’t be returned (unless the customer pays up front). • Do a physical inventory at least once a year. Return anything that’s still here. • Compute margins and turns. There are dangers in trying to stay caught up with parts proliferation. That job belongs to the jobber, not you.

Your job is to monitor your inventory and make smart choices. With the “hot shot” delivery capabilities available nationwide these days, there’s no need to stock anything that doesn’t sell quickly and for the right profit percentage. Inventory control is vital for any business, particularly in retail and wholesale industries. Knowing when to reorder so you can meet ongoing customer demand was once left to guess work on the part of the owner. But these days, thankfully, point of sale software can give you all the information you need to make the best judgment call.

Not only that, but by maintaining a strict control over this process you can automate your entire inventory control strategy to ensure that your cash flow is maximised to your benefit, rather than your detriment. Here are seven tips you can neutralise to improve your inventory control with the help of point of sale software. 1. Analyse Your Sales. When you know what your customers are ordering on a regular basis you have a clear indication of what items to stock. Use these numbers to set your reordering levels and check the trends every day. . Automatic Purchases. Use software to automatically produce purchase orders when stock level alerts are generated. This way the purchase orders can be sent or transmitted to your suppliers immediately. 3. Special Orders. Your point-of-sale software can be used to track special orders that fall outside your automatic system. Set up a reminder to check the status of special orders every day. 4. Track Lost Sales. Make sure that you record each time a customer declines to proceed with the sale because you don’t have sufficient stock.

This will alert you to the need to adjust your reorder levels. 5. Track Your Top Sellers. Your bestselling items are your bread and butter, so you want to make sure of two things. First, that you have sufficient stock. But, secondly and perhaps more importantly, you do not have too much stock. By holding too much inventory in one particular item you are locking up your cash, so make sure that you reorder only as regularly as you need to by maintaining minimum stock. 6. Check Stock Receipts. Make sure your warehouse staff check each receipt against the purchase order.

Businesses that automatically assume that the correct product has been shipped to them are making a big mistake. Before entering a stock receipt into the system, if you sure that it is completely accurate and in accordance with your purchase order. 7. Make Seasonal Adjustments. Many stock items will have sales trends that follow seasonal patterns. Nobody wants to stock overcoats during summer! Your POS software can be used to highlight spending patterns on items during different seasons or times of the year, so you can easily stay on top of your stock levels and order in advance of your anticipated seasonal needs.

There are many more ways that you will find the usual point of sale software to keep track of your inventory because each business has its own individual idiosyncrasies. The amount of data you have at your fingertips will enable you to keep control of your cash loss at the same time ensuring that you will be able to anticipate the spending patterns of your customers. |Neotechnology Business Systems is a boutique software developer of new and emerging technologies. Our business software is | |created with the end user in mind, born from consultation with businesses covering all the industries we service.

It is designed| |to be used by business professionals, not IT gurus, and achieve quality business results. For more information or to view our | |products, visit POS | 70+ Cost Reduction and Productivity Improvement Ideas [pic] < Back to 70+ Cost Reduction and Productivity Improvement Ideas Forecasting & Inventory Management – Reduce Inventory Costs through Inventory Strategies 17 inventory management ideas to help reduce inventory costs and improve management of forecasting and inventory pic]F. Curtis Barry & Company collected the following inventory cost saving strategies through years of working with multichannel companies to: improve the management of the inventory assets; enhance planning, forecasting and analysis; devise inventory strategy recommendations tailored to the unique needs of the business; modify organizational structure to be more efficient; and to implement more effective forecasting and inventory management systems. We’ve addressed issues of inventory cost savings and cost reduction with companies large and small.

Some of our clients include Chadwick’s, Brylane, Charming Shoppes, The Art Institute of Chicago, Gardener’s Supply, PetEdge, Bare Necessities, Frederick’s of Hollywood, Highlights For Children, LifeWay Christian Resources. If you’re looking for call center cost savings ideas or a Warehouse strategy we have those ideas as well. Need inventory management ideas that address your organization’s unique situation? We can help. Contact Jeff Barry by phone at (804) 740-8743, by e-mail at [email protected] com, or through our Request Information Form. 1. Benchmarking

Have you developed the necessary metrics for initial customer order fill rates, final fill, inventory turnover, gross margin, lost margin from liquidation, age of inventory, etc.? In turn have these become performance objectives for the Inventory Control Buyers? Contact us if we can help your company with an independent internal benchmarking study. 2. Streamline process Assess the processes of seasonal planning, weekly forecasting, end-of-season analysis for your multichannel business. Streamline how the Inventory Control buyers perform their work and manage inventory.

Process improvement should improve planning and forecasting accuracy, and lead to improvement in customer initial order fill rate and turnover. 3. Know your vendors What are your vendors’ pain points (space, cash, capacity)? What are their strengths? Understand these thoroughly to gain maximum leverage. Should you reduce the number of vendors you purchase from to get more leverage? 4. Establish a vendor scorecard Involve Merchandising, Inventory Control, Fulfillment and Accounting and set up a vendor scorecard to evaluate vendors.

This should include sales, margin, on-time delivery, significant problems, etc. Review it several times a year with the vendors. You may even want to take it a step further and set up a vendor recognition program for the top vendors. 5. Visit your top 20 vendors now This strengthens relationships. Include at least the Merchant and Inventory Control Buyer. Involve vendor’s senior management as well as yours. Have an agenda about your company’s direction, needs and expectations. 6. Manage your vendors Insist on costs, terms, and conditions with vendors that make sense for your company.

It is your responsibility to look out for your interests, theirs to look out for theirs! Develop vendor compliance and charge back policies to enforce compliance. 7. Negotiate terms Arrange and pay 2%10Net60 with all domestic vendors. 8. Provide limitless access to information systems Inventory Control Buyers must have laptops and VPN access to all tools. This pays for itself quickly and frequently. 9. Invest in systems Provide Inventory Control Buyers easy, efficient, accurate, and timely access to data. Ongoing training, report requests, modification requests should be a management priority.

This group spends more money than any other. Support them! See more on Inventory Management Systems Implementation Strategies. 10. Invest in inventory control staff The Inventory Control Department manages the largest balance sheet asset in the company. Hire and retain strong people, provide them tools, have high expectations of them, then reward their solid performance well. Should you have a different organizational structure? 11. Consistent forecasting philosophy Be sure all categories and SKUs are forecast using consistent methodology that fits your organization.

Challenge it often. 12. Review, recite, and retain key data IC Buyers MUST know their category and vendor inventory levels, turns, SKU count, and GM $ and %. More importantly, understand the impact of their actions to these metrics and to the business. 13. Clear a day’s-work-in-a-day Ensure timely and accurate data across the organization by demanding all receipts, put away, invoices, PO acknowledgments, orders, (all business transactions) are posted daily. 14. Renegotiate (always) New PO’s for in-season replenishment of items selling over forecast are due better costs.

Ask early and assertively for RTV and/or mark down money for poor performers. 15. Liquidation Is your company aggressive enough in identifying potential overstocks and putting them into one of 15 different methods used in multichannel companies? Reduce slow selling stock as close to in-season as possible to gain a higher cost recovery. 16. Inbound freight Have a qualified consultant perform a freight audit to see what additional savings can be gained. Join a freight consortium to maximize savings. Learn more about how an analysis can help with freight cost reduction. 7. Importing Imported products now represent 50% to 70% of all products in many companies and they give a considerably higher initial mark up and maintained margin. Is your staff managing this inventory effectively? They require longer lead times and higher vendor minimums, which can lead to higher inventories and slower turnover. These Inventory Cost Saving Strategies Are Just the Beginning. . If you are struggling with reducing inventory costs at your company, contact us. Our team can help your organization with tailored forecasting and inventory strategies.

Call (804) 740-8743 to get started. < Back to 70+ Cost Reduction and Productivity Improvement Ideas An Inventory Assessment with Quick ROI… Inventory, most likely the largest asset on your balance sheets. Managing it efficiently can be the difference between profitability and serious customer service issues. Companies rely on the experience of F. Curtis Barry & Company to assess their processes and develop sound inventory strategies. Our clients often need an outside expert to quickly come in, assess how they are managing inventory and to make actionable recommendations.

Our assessment provides high value for low cost and is performed quickly. Our assessments are aggressive, a few days onsite followed up with a management summary report with the recommendations and feedback that allow you to take action quickly. Here is what we will review in the assessment: • Key inventory benchmarks like fill rates, backorders, aging, etc. • Current inventory management processes • Understand the current organizational structure • Liquidation procedures and strategies • Inbound freight management • Processes for imported inventory • Inventory planning procedures Vendor scorecards and vendor performance • Vendor compliance procedures • Current software applications and reporting Freightliner Realizing that they were missing revenue opportunities and jeopardizing customer service by not having the right parts in stock at their dealer locations, Freightliner executives knew they needed to implement a third-party inventory management solution. Through Internet-enabled collaboration powered by i2 solutions, Freightliner has improved inventory turn rates and service levels, increased inventory revenue, and decreased working capital investment.

For businesses that rely heavily on transportation and logistics to service their customers, on-time delivery is crucial to success. A truck breaking down before it can deliver a shipment can lead to disaster. Quickly obtaining a repair part can mean the difference between preserving customer satisfaction and profit margins—or losing both. Knowing this dynamic well, Freightliner, North America’s leading manufacturer of medium- and heavy-duty diesel trucks and specialized chassis, dedicates itself to supporting its customers everywhere that its trucks impact its customers’ businesses.

Freightliner, whose customers include FedEx and UPS, provides parts, service, and customer support functions 24 hours a day, seven days a week at many dealer locations. Freightliner dealers were missing some sales opportunities—and jeopardizing their own customer service levels—because they didn’t always have the right parts in stock when customers needed them. “The vehicles that we manufacture are predominantly made of components that are available to the industry, so there are any number of channels for buying a service part to repair or maintain a vehicle,” said John Hayden, Manager, Parts Materials for Freightliner. We noticed that there were many revenue opportunities that our dealers were missing out on because they didn’t have the right parts in stock. And when you’re running a commercial vehicle, availability of service parts is premier in order to keep your vehicle on the road and in service. ” This problem stemmed from the fact that Freightliner was using a basic, homegrown, computer-managed inventory program, whose capabilities the company had quickly outgrown. “Given the size of the problem that we were trying to solve, developing our own programs was no longer a viable option,” Hayden said. We have more than 1,000 franchised dealers in North America, and each of these dealers carries from 10,000 to 15,000 part numbers, so we are talking about 10–15 million SKUs that we would have to manage on a daily basis. ” Faced with this challenge, Freightliner recognized the need to implement an advanced inventory management solution that would help its dealers stock the right parts, at the right place, at the right time, to service customer needs. Why i2? Freightliner knew it needed to find an inventory management solution that could handle its tremendous number of SKUs. We were looking for an efficient and highly productive tool,” Hayden said. “We needed the kind of functionality that could handle our breadth of inventory without requiring us to hire an army of inventory analysts to get the job done. ” Starting with a list of more than 30 solutions providers, Freightliner conducted a thorough analysis and benchmarking process to arrive at three companies. After performing a feature-by-feature comparison of the three solutions providers, i2 Service Parts Planner™ and i2 Demand Planner,™ from the i2 Six version of i2 Service and Parts Management™ (SPM), emerged as the best solutions for Freightliner’s needs. We chose Service Parts Planner and Demand Planner to solve our problem because there were several key differentiators,” Hayden said. “We found that the other two finalists couldn’t scale to the size of the problem that we had, so that was obviously a big differentiator. The second thing was the ability to use the tool effectively. Compared to some of the approaches that the others were offering, we felt like i2 solutions were much more intuitive and provided our analysts with the ability to understand what needed to be done and how to get the job done. i2 Service and Parts Management is designed to enable enterprises to maximize the utilization of parts, people, budgets, and facilities so that they can attain key performance objectives, such as high customer service, market leadership, low operating costs, and profitability. i2’s Contribution Within a six-month timeframe, Freightliner completed the configuration, design, integration, and pilot mode of i2 solutions. “I’m extremely satisfied with the way our solution came together very quickly,” Hayden said.

To ensure that its network of franchised dealers has the right parts in stock, Freightliner uses Service Parts Planner and Demand Planner to create an Internet-enabled connection between the company and each of its dealers. The Web interface provides Freightliner with a more intuitive system—its previous legacy system was character-based and employed outdated technology. Freightliner’s analysts now make decisions based on thought flow rather than on a predetermined script. “We have created what we call a ‘value web of information’ with each of our 1,000 dealer locations,” Hayden said. On a daily basis, our dealers provide us with their inventory stocking levels and their sales history for the day, which we feed into the i2 Six engine to create a replenishment plan and suggested replenishment orders for the dealers. On a monthly basis, we do an inventory plan and a forecast plan. ” Service Parts Planner and Demand Planner help Freightliner to determine the best forecast plan with its “pick best” capability, which runs through the various forecasting algorithms.

Using the forecast data, i2 solutions set the stocking levels, determining the optimal minimal stocking level and the optimal reorder quantity to ensure the most effective deployment of working capital. At its distribution center level, Freightliner manages inventory with a legacy ERP system; at the dealer level, each dealer has its own legacy inventory management system. i2 solutions connect these systems through the use of the TMAPI database. “We’re able to pull the information from the dealer’s inventory system, and stage it in the TMAPI database with information pulled from the Freightliner legacy system,” Hayden said. We then feed the combined information into the planning and replenishment engine to get the results. Then we go back again into the TMAPI station database, back down to the dealer’s inventory replenishment system. ” Freightliner’s Results Within three months of going live with i2 solutions, Freightliner began to see significant improvements in its key performance indicators. “Just a few months in to the implementation of i2 solutions, we have already seen dramatic improvements in both turn rate and service level, and inventory revenue is also going up, with a decrease in working capital investment at the dealer level,” Hayden said. We’re very pleased with what we’ve seen. ” Service Parts Planner and Demand Planner are helping Freightliner to increase its dealers’ revenue and to make the dealers’ businesses stronger and more competitive in their marketplaces, which has a direct impact on Freightliner’s customer service and revenue. As a result, i2 solutions have opened new revenue streams for Freightliner. “Eighty percent of our vehicle components are available from other sources, which is also true of our competition,” Hayden said. So we’re seeing that, because our dealers have a higher level of availability, not only for our direct customers, but also for competitors’ vehicles, the competitors are more often coming to the Freightliner dealer for parts. They know that the dealer can take care of them and get them back on the road quickly. We’re seeing that there are opportunities to win more market share and potentially get a new truck customer. ” i2 solutions are also enabling Freightliner to make more intelligent business decisions at a higher velocity and lower cost. We’re now able to get the job done quicker, which allows us to manage more working capital with fewer internal Freightliner resources and less of a manpower investment,” Hayden said. “With the intuitiveness of the i2 Six Web interface, our inventory analysts use the solution to drill down and find any exceptions, and they can quickly make the necessary adjustments to correct the issue. “ Given the rapid success it has already achieved, Freightliner anticipates i2 solutions playing an expanded role in the company’s near future. “As we move forward and continue to develop the use f the i2 Six technology, we’re certainly going to be integrating the technology to manage our distribution center inventory more effectively,” Hayden said. “We’re also going to be exploiting the opportunity to engage in collaboration with our suppliers. I’m already in communication with a number of our suppliers, and they’re very excited about having access to our retail-level demand to help them better understand our needs as we move forward. I see this as a good opportunity for us to further optimize our capital investment. ” [pic] At a Glance Challenges 1.

Capitalize on revenue opportunities and improve customer service by stocking the right parts 2. Identify inventory management solution that could manage up to 15 million SKUs 3. Enable increased collaboration among Freightliner and its dealers and suppliers Solutions 1. Determine best forecast plan using “pick best” capability 2. Connect company’s legacy ERP system with dealers’ legacy inventory management systems 3. Create an Internet-enabled connection between the company and each of its dealers Results 1. Improved inventory turn rates and service levels 2. Increased inventory revenue 3. Decreased working capital investment

Company Description Freightliner LLC, headquartered in Portland, Ore. , produces and markets commercial vehicles in classes 3–8 and is a member of the DaimlerChrysler group, the world’s largest commercial vehicle manufacturer. Freightliner’s brands include Freightliner, American LaFrance, Thomas Built Buses, Western Star, and Sterling. SCL Articles view all Incitec Pivot Fertilisers adds speed and accuracy to supply chain planning Improving Supply Chain Responsiveness at Altera The Supply Chain Leader Virtual Roundtable: Inventory Optimization 22 results: showing 1 – 3 view all results Top of Form [pic][pic][pic] Bottom of Form pic] Texas Instruments With manufacturing operations all over the world, Texas Instruments (TI) needed a process for managing its inventory more effectively. Because of the nature of the semiconductor industry, TI faced several challenges in its supply chain, including long lead times, short product life cycles and inadequate customer service levels. TI has more than 55,000 stock keeping units (SKUs) and processes upwards of 145,000 orders each month. Because there are multiple stages in the semiconductor supply chain, there are several places where inventory could be held to produce the necessary finished goods. We have a capacity-constrained model, and our major challenge is the fact that we are governed largely by the laws of physics,” said Ken Bean, director of business support systems at TI. The manufacture of semiconductors can take several days, and depending on the product, that process can incorporate anywhere from 6 to 36 levels of complexity. Based on the varying manufacturing cycle times and often short product life cycles, TI needed an inventory optimization solution that could provide the flexibility required for its complex supply chain. There were multiple reasons why TI kept substantial amounts of inventory on hand.

First, varied product manufacturing cycle times lead to supply chain variability. In addition, TI was unable to consistently develop accurate demand forecasts. The company also had a financial incentive to build up certain inventory. For example, even though a specific product may have low demand, combining that group with a larger manufacturing lot made it more economical to build the product. As a result, TI was trying to determine the best way to make the most effective use of the inventory it was carrying. “You want to optimize the amount of good inventory that you have and diminish the amount of bad inventory that you have,” Bean said.

To solve this problem, TI sought to implement an integrated sales and operations planning (S&OP) process that would focus on both demand management and inventory management. Why i2? A long-time i2 customer, TI first started using i2 Supply Chain Planner™ in the late 1990s as it was looking to improve its custom supply chain solutions. More recently, TI has implemented i2 Demand Planner,™ i2 Demand Manager,™ i2 Transportation Manager™ and i2 Master Data Management. ™ Because of its previous successes, TI looked to i2 to help further improve its supply chain processes through the implementation of i2 Inventory Optimization. i2’s Contribution TI found i2 Inventory Optimization to be a very flexible tool that allowed it to quickly change its inventory strategy. i2 Inventory Optimization features various segmentation rules that can be applied across all products. “All products are not necessarily created equal; you may have certain products on which you wish to carry more inventory than others,” Bean said. By using i2 Inventory Optimization to evaluate several different sensitivity analyses—essentially “what-if” scenarios—TI was able to choose the best one and move it into production almost immediately.

One business unit in particular had a goal of improving its customer service performance, thereby increasing its overall market share. The business unit decided to segment its products based on shipment volume. The products with the highest volume would maintain higher inventory at the product distribution center and those with the lowest volume would be strictly built to order. i2 Inventory Optimization is used to calculate the quantity of each product required at each of the inventory staging locations. A second strategy implemented by TI was to segment products by profit margin and revenue.

The company was able to divide products into classes ranging from those with the highest margin and highest revenue to those which yielded the lowest margin and the lowest revenue. Once the inventory targets were optimized, TI prioritized the budget toward the inventory with the highest margin, allocating the remainder to its other products based on segmentation level. TI was able to achieve an approximately 40 percent gain in margin with this inventory strategy. Although the business unit also adopted additional methods to improve margin, Bean said that the manager of this organization indicated here was no way TI could have realized this kind of gain without the use of i2 Inventory Optimization. TI has now had i2 Inventory Optimization in place for several years, and continues to constantly review and revise its processes and strategies based on changes within its internal and external environments. “That is a continuous improvement cycle that I would encourage every company to do, and this tool has some features that essentially lend itself to operating in that fashion,” Bean said. Texas Instruments’ Results

By using i2 Inventory Optimization, TI is able to manage a larger portfolio with a smaller amount of people and effort. Utilizing the segmentation attributes, one business unit, which has over 20,000 SKUs, was able to reduce the number of materials it had to manage. In addition, one person is able to manage the entire portfolio in approximately 30 minutes a week. “We are pleased with the results of our strategy to position the inventory ahead of demand so that we are able to meet the needs and timeframes of our customers. This has been instrumental in our market share gains over the last five years. —Kevin March Senior Vice President and Chief Financial Officer The ultimate goal of TI’s shipment-volume-based inventory strategy was to improve the inventory mix against customer demand, and in the end, to gain market share through improved customer service. Through the implementation of this new strategy, the business unit utilizing this strategy was able to improve customer service levels by 25 percent. Another method that TI used to measure the results of this strategy was to observe the on-time delivery of customer orders.

If TI was not able to deliver the order on the requested delivery date, it looked at when the order was actually delivered and the gap between the requested and actual delivery dates. With the new product segmentation in place and i2 Inventory Optimization providing the required data, TI was able to improve on-time delivery of customer orders. With the help of i2 solutions, TI can run its entire operating plans several times a week. In a given situation, the company can realign its supply chain, if necessary, in about 72 hours.

Additionally, they do sales and operations planning on a monthly frequency, and make the required updates as a result. TI’s strategy of positioning inventory ahead of demand has allowed it to improve its service levels and grow its business over the past five years. “Essentially what you’re doing is prioritizing your portfolio in terms of ways that make sense to achieve your business goals,” Bean said. Download the Adobe PDF version of this Case Study [pic] Challenges 1. Gain market share through improved customer service 2. Improve portfolio profit margin 3. Make effective use of existing inventory Solutions 1.

Create an integrated S&OP process 2. Improve forecast accuracy 3. Segment products based on shipment volume, margin, and revenue Results 1. Increased profit margins by 40% 2. Improved customer service performance by 25% 3. Reduced the gap between requested delivery date and actual delivery date Company Description Headquartered in Dallas, Texas Instruments provides pioneering semiconductor technologies which allow its customers to create the most advanced electronics. A global semiconductor company, TI innovates through manufacturing, design and sales operations in more than 25 countries. TI has annual revenue of $12. billion and employs about 29,500 people worldwide. SCL Articles view all Recession-Resistant Demand Management Strategies and Tactics – Supply Chain Strategy 7 Principles of Supply Chain Agility Outsourcing Supply Chain Analytics Can Improve Business Results 118 results: showing 1 – 3 view all results Top of Form [pic][pic][pic] Bottom of Form For more than nine decades, the Cooper Tire and Rubber Company has provided the world’s motorists with a full line of tires and rubber products. The company has maintained a simple distribution goal: positioning the right product in the right place, at the right time, at the owest possible cost. But achieving that goal wasn’t so simple, given that Cooper’s 25-year-old legacy replenishment mainframe system ran just once a week. Every Monday morning, inventory planners would receive a new report that reflected customer orders and available inventory. “You could see that there was a problem with generating reports only on a weekly basis,” says Bob Sager, Cooper’s manager of supply chain research and design. “If we received a customer order on Monday, and the customer service representative did not come over to the replenishment area to inform our planners of the order, hey were unaware of it until the next week. ” In addition, Cooper faced increasing complexity in its product offering. The company was constantly adding more SKUs, and warehousing more SKUs in additional locations. As that complexity grew, many believed that to provide the same level of customer service, higher levels of inventory would be required. It was evident that new processes and tools were needed to remedy the situation. Distribution and replenishment planning With several i2 solutions already implemented, including those that addressed transportation management and advanced planning and scheduling, Cooper

Tire was confident that i2 had both the solution and the resources necessary to help the company achieve its goals for distribution and replenishment planning. “The world that we were moving into was one that I dreamed of, but had never experienced,” says Tim Rupright, Cooper’s inventory planning administrator. “The i2 consultants really had the ability to understand our business, to communicate what we needed to do, and to train us on what the system was capable of doing. ” Today, i2 Distribution and Replenishment Planner (DRP) serves as Cooper’s daily execution system, executing replanning functions every night.

The solution is used to plan the movement of inventory across the company’s entire North American distribution network. After using this system for approximately six months, the Cooper/i2 team took a hard look at what was and wasn’t working. The team began a continuous improvement project aimed at fine-tuning the system, evaluating the utilization of existing tools and processes, identifying 15 areas of improvement and developing an action plan for those improvements, all of which focused on improving fill rates and inventory turns. Cooper has realized a sizable reduction in finished-goods inventory and outside torage costs with the system. “The management at Cooper views DRP as a competitive weapon,” Sager says. “The whole idea around the daily rebalance of supply to demand makes us more competitive because we can handle complexity and be more responsive to customer demand. In the past, if something happened yesterday, we weren’t able to respond to it today. We can now. ” 22 Supply Chain Leader / October 2007 Cooper Tire Rolls Out New Systems CASE STUDY “In the past, if something happened yesterday, we weren’t able to respond to it today. We can now. ” – Bob Sager Supply Chain Leader / October 2007 23 for Better Demand Fulfillment

Master data management Shortly after deciding to implement DRP, Cooper also realized it needed a better mechanism for maintaining its legacy mainframe information, as well as the new information that was required for the new i2 planning systems. “We had a choice to build our own infrastructure, or to go with i2 Master Data Management, and we chose i2 MDM,” Sager says. “We use i2 MDM to store, maintain and clean the data that we send out to our planning systems. ” In the past, making adjustments to the replenishmentsystem data required users to go to many sources, and changes were often manual and done by the information echnology department. i2 MDM serves as a single source across multiple systems, where changes can be made at any scale by the user. It enables Cooper’s planners to manipulate criteria to change behavior in DRP based on business needs. “I have difficulty envisioning DRP functioning without MDM,” says Rupright. “We can use MDM to make adjustments to the replenishment system, and the results are visible the next day. It’s an iterative process that is pretty amazing. ” Distributed inventory management In addition to having redundant versions of its master data, Cooper also maintained five versions of inventory n its mainframe (which corresponded to the systems that used inventory). As a result, the company faced challenges in achieving one accurate picture of inventory. This situation was exacerbated by the fact that inventory was also valued in differing units of measure—by the pound or by the unit. “The mainframe lost its transaction detail after two weeks, and this made it very difficult to go back and determine why an issue happened without having detailed data,” says Craig Durliat, Cooper‘s manager of operation accounting. “In addition, the system was very North American-focused, and, as we started growing, e needed a more global footprint of the inventory. ” To tackle these challenges, Cooper Tire implemented i2 Distributed Inventory Management (IMx) to help get its inventory system off the 30-year-old legacy inventory mainframe and assimilate into IMx all of its ties to order management, finance and the other integrated supply chain processes. IBM served as Cooper’s systems integrator on this project. “The IBM team came on board and really helped manage the inventory management project—not just the implementation of the IMx software. All inventory processes were looked at and either redesigned or redeveloped,” Durliat says. And that part of the IBM partnership, plus the experience of i2’s resources on the supply chain side, were critical to the success of the project. ” Cooper Tire uses IMx to post inventory, sales and production activity every day. The system enables the company not just to look at units, but also to validate the dollar value of those units. “That ability helps us determine whether we have good control over our inventory, from a unit standpoint and a trend standpoint, as well as from a financial perspective, which is very important in this world of Sarbanes-Oxley,” Durliat says. End-to-end visibility

Through its IMx implementation, Cooper not only has a single, real time, accurate view of actual inventory today, but also a projected inventory view—positioning the company to support demand fulfillment. Increased visibility into inventory enables Cooper to quickly determine the cause of inventory problems and to implement processes that can prevent the same problems from occurring again. By integrating all instances of inventory onto the IMx system, Cooper has removed approximately 400 programs and 100 jobs from its mainframe, and it has reduced the number of inventory reports from 140 to 50. As users, we are much more self-sufficient with inventory transactions through IMx,” Durliat says. “It’s easy to access the data, the detailed transactions are there and analysis is simplified. ” Having an integrated and flexible supply chain has allowed Cooper to improve its response to demand— ultimately better serving the end consumer and improving the company’s bottom line. “The initial implementations got us part way there, but it was the continuous-improvement activities and increased planner experience that produced the biggest returns and allowed us to achieve our stated goals,” Sager says. — Lauren Bossers

Overview of Six Sigma Systems projects. Six Sigma Systems, Inc. experience: The individuals who make up the Six Sigma Systems team have successfully implemented six sigma and lean manufacturing programs worldwide across many different industries and corporate cultures. Companies such as Xerox, American Standard, Whirlpool, Special Devices, Unisource/Georgia Pacific and Wyeth have achieved performance improvements with the help of Six Sigma Systems. The experience and insight we have gained enable us to rapidly and effectively introduce this methodology into your organization so you can achieve maximum results.

Six Sigma Systems has established kanban systems and reorganized product flow at various manufacturers. Six Sigma has developed new cell layouts, work instructions, and data collection plan. Six Sigma Systems used experimentation and measurement system assessment to understand defects at a manufacturer of automotive components. • Implemented a six sigma and lean manufacturing program for Fortune 50 company. • Generated a ROI of greater than 700% for our clients. • Helped clients improve hundreds of business processes, for example: o Increased yield on avionics component. Savings: $4,000,000. Reduced cycle time on high tech abrasive process. Savings: $2,800,000. o Reduced inventory by 50% in entire product delivery chain while improving service level by 20%. o Reduced defects in paperwork process for government required paperwork. Results: $1,500,000 increase cash flow. o Improved cash conversation cycle time. • Provided project leadership, technical and implementation assistance on several mission critical projects with savings in excess of $20M+. • Completed project assignments for smaller organizations. A typical process improvement expert will generate $500,000 of savings in 6-9 months.

A group of 24 employees can generate $12,000,000 of savings in your organization in that time period. Six Sigma System, Inc. results: The experts of Six Sigma Systems have a proven track record of success. Across many industries and many types of projects, Six Sigma Systems team members have delivered results such as these: • A $2 M reduction in inventory for one product line. • A $3. 5 M savings through improved quality of critical component. • A $11 M gain from inventory reduction, cycle time reduction and increased sales. BACK TO TOP [pic]

Inventory management case study: Preface: Just like any investment in business, inventory needs to serve the purpose of maximizing profit. However, in many cases inventory has turned into a major cash flow constraint thus making it necessary to optimize inventory using analytical and statistical methods in an integrated approach. One of the biggest challenges in optimizing inventory is the fact that it is merely an output of many inter-organizational processes. All too often organizations attempt to lower inventory using non-analytical approaches which lower service levels.

Although counterintuitive, it in fact is possible to reduce inventory while improving service levels simultaneously using our proven inventory management methodology. Our inventory management methodology attacks inventory from two directions: • Optimizing inventory levels while viewing the existing order fulfillment process as a given constraint • Changing the fundamental order fulfillment process across the entire system Most clients find this two-step approach of significant value. During the first step cash can be made available quickly and success is immediately generated.

Step two is used to generate breakthrough business results and provide a robust order fulfillment process that will be able to perform at lower inventory levels while providing extraordinary service levels. Case: A major US corporation identifies a cash flow problem. Further analysis reveals that inventory levels are high and turns are below most major competitors. In addition a technology change and a proliferation of models amplify the issue. The corporate goal is a reduction of inventory across the order fulfillment process in excess of 50% with no negative impact on service levels.

Customer feedback reveals that a key to customer satisfaction is on time delivery and any deviation from promised dates has a negative impact on customer satisfaction. Course of action: A baseline of the existing order fulfillment process is conducted. It quickly highlights some key leverage points in the order fulfillment process. Furthermore it becomes apparent that much of the current inventory is present due to internally generated variation versus customer driven order variation. Following the baseline activity various process changes are modeled to verify their impact on inventory levels and service levels.

Real world constraints are taken into account prior to deciding on the appropriate changes. Simulations are conducted to verify the appropriateness of the analytical models using actual process data. As a result the following changes are made to accomplish the goals. • Implementation of a Pull System for the order fulfillment process. This pull system spans from supplier through manufacturing, logistics to the customer. The previous order fulfillment process was managed via an MRPII system. • Determination of inventory levels using economic and statistical methods in an integrated approach. Implementation of appropriate inventory management models to minimize cost given various real world conditions in the supply chain (flow production, batch production, re-manufactured parts inflow etc. ). • Revision of the planning process to support the order fulfillment process. • Training of analysts to determine the appropriateness of forecast models. • Reduction of internally generated variation through o Organizational changes to reduce tampering. o Application of statistical methods. Management of the new process is significantly less resource intensive than the original process.

Changes in volume are easily accomplished due to the simplicity of the new order fulfillment process. Inventory is reduced and service levels to customers are improved. Results: Inventory reduction post full implementation: > $20,000,000 SWOT Analysis Toys “R” Us Strengths. • Toys “R” Us has in excess of 1500 superstores in the United States and Worldwide. It also owns the baby brand, Babies R Us which adds another 200 + stores. Toys “R” Us also markets successfully on the Web (in collaboration with Amazon. com). It has a huge distribution network that benefits from advanced logistical systems.

Having so much shelf space means that the company has a strong bargaining position when it comes to buying prices from manufacturers. It turned over more than $11 billion in 2005. • The company sells many different product ranges. There are benefits and disadvantages to this. However, a key strength is that the company has a diversified portfolio of products, which means that while some ranges are underperforming, others are out performing. As long as technology allows them to spot successes and then to focus upon them, they have a competitive strength. [pic][pic][pic]Opportunities. There are opportunities for joint ventures and strategic alliances. Toys “R” Us works closely with Amazon. com and its baby products category. This not only plays to the strengths of both companies, but also provides opportunities. Amazon is strong at the online part of the business, creating the web site, warehousing products and delivering them to customers. Toys “R” Us will use its buying power, but ultimately carries the inventory risk (i. e. if it doesn’t sell, its money is tied up in physical stock). • Toys “R” Us is a good neighbour. For example, in 2005 it went out of its way to help the Louisiana victims of hurricane Katrina.

Toys “R” Us donated six trucks full of toys and baby supplies including diapers, wipes, and formula, as well as batteries and water to multiple locations that were housing evacuees. Babies “R” Us has also donated over 17 pallets of baby and children’s clothing to the national charity Kids In Distressed Situations (KIDS). Such associations will help to sustain its brand with key consumers. • As with many of the brands considered by MarektingTeacher. com’s FREE SWOT analyses, the International market is very important to Toys “R” Us. The citizens of emerging nations such as China and India are getting wealthier and better educated.

Consumers have more disposable income and leisure time, and both of these could increase over coming years. The types of goods and services retailed by the company could be marketed more aggressively overseas. Toys “R” Us could look out for strategic partners, or indeed go it alone. Threats. • There is strong competitive rivalry in the toy market, not only form Wal-Mart, but also from KB Toys and Target. The toy brand is often not associated with the retailer. So if a particular kid’s toy has grabbed the imagination and the spending power of its target consumer, any retail outlet is as good as another.

Differentiation is difficult, and toy retailers often have to compete on price, range or availability. • Let’s face it today China and similar low cost manufacturing paradises are where toys are made. Low manufacturing costs are important if margins are to be retained. The problem, and potential weakness, is that countries and trading communities tend to impose quotas and tariffs in order to protect local manufacturing. All countries do it. However, Toy R Us could potentially be left without the toys people want to buy if embargoes are implemented on countries such as China. Case Study Abstract

The focus of this case study is the supply chain of the world’s largest retailer, Wal-Mart. Wal-Mart in recent years has struggled with its supply chain. The big question is: Will Wal-Mart be able to revive the competitive advantage it had in the past with its efficient supply chain? This case discusses the supply chain management practices of Wal-Mart over the years. A brief of Wal-Mart’s past distribution, logistics and inventory management processes is covered. The use of innovative Information Technology (IT) practices to enable the supply chain is discussed and highlighted.

The benefits or competitive advantage Wal-Mart derived over the years from its supply chain management practices is also covered. Table of Contents 1. Introduction – Can Wal-Mart sustain its Supply Chain Advantage? 2. Wal-Mart in US Retail Market 3. Wal-Mart – Company Background 4. Wal-Mart – Timeline 5. Wal-Mart: Quick Facts (Revenues, Total Employees and Stores, Competitors, Major Brands/Labels, Business/Growth Strategy) 6. MANAGING THE SUPPLY CHAIN – THE WAL-MART WAY 7. Pricing and Procurement Strategy 8. Supply Chain Integration through Product/Process Knowledge Sharing 9. Supply Chain Partnerships 10.

Distribution Strategy 11. Logistics Management 12. Cross Docking 13. Inventory Management 14. Store Formats 15. Wal-Mart – International operating formats 16. Related Reading 17. Questions for discussion 18. View sample pages of this case study Case Study Keywords: Wal-Mart, Supply Chain Management, Retailing Strategy Case Study, Logistics and Distribution, IT enabled supply chain, Information Technology, Supply Chain Partnerships, supply chain integration, information sharing, inventory management, retail store formats, cross docking, pricing and procurement, Sam Walton, discount stores, walmart. com. Case Questions for Discussion . Wal-Mart’s focus on supply chain management is responsible for its leadership in the retail industry. Discuss the distribution and logistics practices adopted by Wal-Mart. How far has Wal-Mart’s supply chain contributed to its competitive advantage? Explain. 2. Companies that have significant buyer power and are very focused on exerting price pressure on their suppliers rather than seeking increased profitability through business process innovations. Support this statement with examples/best practices from your own field. 3. Wal-Mart has always used innovative information technology tools to supplement its supply chain.

In a few words, explain how use of IT tools/enabled processes have benefited Wal-Mart. How has IT impacted you/your department? 4. What steps can Wal-Mart take in order to revive/sustain its supply chain advantage? 5. Wal-Mart invited its major suppliers to develop profitable supply chain partnerships. Discuss how good/bad is sharing knowledge/critical information with vendors/suppliers or even customers? 6. “It’s not a sale; it’s a great price you can count on every day to make your dollar go further at Wal-Mart. ”, as quoted in the article, “Pricing Philosophy,” posted on www. walmart. com. Comment.

Home > Business > Case studies > Jones Soda Company Jones Soda Company • Sunday, January 25, 2009, 6:50 • Case studies • 5,986 views • 1 comment [pic][pic] [pic] Share [pic] [pic][pic][pic][pic][pic][pic]Executive Summary Over the past two years, Jones Soda Company has successfully acquired strategic alliances with various companies in order to provide deeper and more diverse market exposure. Some of these companies include Barnes & Noble, Panera Bread, and Starbucks. Since Jones does not deal in multimillion dollar advertising campaigns, this is their best way to promote their brand.

By offering their wide assortment of beverages in stores and restaurants, Jones has been able to sell more to the consumer than would be at all possible on their own. In order to best continue on this route to success, the current recommendation is to acquire a strategic alliance with Applebee’s. The New Age beverage industry is relatively new and is showing lots of growth despite an overcrowded market. It is clear from analyzing the EFE Matrix that Jones is well positioned as a provider of energy drinks, premium juice, and premium soda to succeed in its industry.

They have been able to accomplish this largely due to their many strengths, as listed in the IFE Matrix. Jones’ culture and allows them to generate and maintain consumer interest and demand for their products. A SWOT analysis of the IFE and EFE revealed two strategies that would benefit Jones; they could either form a strategic alliance with Applebee’s or develop strong relationships with their distributors. Further evaluation using a QSPM Matrix revealed that further strategic alliances would be the strongest course of action.

In moving forward with this strategy, Jones will gain a larger competitive advantage against other companies in their industry as well as increase their market share. Applebee’s is more of a family dining experience that Panera Bread or Starbucks, and would serve as an additional outlet to a wider variety of consumers. By utilizing their experience in forging past strategic alliances, Jones is fully capable of working with Applebee’s in this endeavor. I. Background Jones started out as Urban Juice and Soda Company Ltd. in 1987 by founder and president, Peter van Stolk.

They originally served solely as a distributor of what they called unique alternative beverages. This included various brands such as Fresh Arizona Iced Tea, Pik’t Juice, and Thomas Kemper Soda. Jones became a popular full line beverage distributor in 1994. With the experience they had gained, Jones decided to develop and sell their own products. They began with WAZU Natural Spring Water in 1995 and followed up the next year with the first six flavors of Jones Premium Soda. Jones introduced their first energy drink, WhoopAss, in 2000 and followed up in 2001 with the first line of Jones Juice.

Jones products can be recognized by their award winning packaging. All of their beverages are sold in clear glass bottles with black and white labels featuring constantly changing pictures sent in by loyal customers. To deliver their products to the public, Jones began with what they call an “alternative distribution strategy. ”  They put their Jones coolers in unique venues such as fashion outlets, piercing and tattoo parlors, skate parks, and surf shops. Their marketing relied on word of mouth and Jones Pro Riders Team, a group of sponsored extreme athletes who promote the brand.

Over the last few years, Jones has acquired successful strategic alliances with various stores and restaurants to distribute their products. Refer to appendix 1 for a detailed timeline of events in Jones history. II. Goal and Mission Jones mission statement, which is shown in appendix 2, is printed on the back label of every bottle they produce. And while it does not seem like something you normally hear from a company, they mean every word. Their approach is to be simple, fun, and honest. Everything in Jones reflects these ideas. One of their company mottos, “Run with the little guy… Create some change” illustrates this point.

They want to be seen as the everyman who just happens to make good sodas. It can be seen in the witty quotes and unique pictures on each bottle, the fact that they avoid conventional advertising, and their ever changing flavors. Jones hopes to sell much more than quality beverages; they want to provide the consumer with a memorable experience with every bottle. Of course one of their ultimate goals, as is mentioned clearly in the mission statement, is to make lots of money. Their way of reaching this goal is to appeal to people by distinguishing themselves in the aforementioned methods. III.

Industry Analysis Because of powerhouses like Coca Cola, PepsiCo, and Cadbury Schweppes, the beverage industry on the whole has been stagnant for years. These oligopolies, along with many other beverage companies, have flooded the market with their products to the point where shelf space is difficult to acquire. Despite this fact, the New Age beverage industry has managed to flourish. While the overall beverage industry remains flat lined, this new industry has seen an average of 37 percent increases in sales for private label soft drinks over the past two years and 31 percent increase for energy drinks.

Jones and many of the other New Age beverage companies do not directly compete for the business of Coca Cola or PepsiCo. These newer products are considered a higher class of drinks, and as a result are paid for at a higher price. IV. EFE Matrix Jones’ EFE Matrix, found in appendix 3, shows that their external environment will allow them to grow steadily. It also demonstrates how well they are taking advantage of this situation. Sales of flavored juices, energy drinks, and private label soft drinks have increased by at least 30 percent in each segment over the past two years and are showing no signs of a decline.

Casual dining restaurants have shown an increase in business as well, which would further increase Jones’ sales with the acquisition of the Applebee’s strategic alliance. Jones is effectively responding to their industry’s threats as well. They have gone around the issues of a flooded market and limited shelf space by offering their products in unconventional locations as well as stores like Barnes & Noble, Panera Bread, and Starbucks. These alliances have allowed Jones to enjoy the benefits of many more sales than they could make on their own. V. IFE Matrix Jones’ IFE shows that they performed at an average level.

This is because they take full advantage of their strengths, but have done little to conquer their weaknesses. As was explained previously, Jones is great at generating and keeping the interest of their customers. Their direct to retail distribution strategy through their strategic alliances brings in phenomenal amounts of revenue. Including the customer in the design and production decisions also ensures consumer growth and loyalty as well. Jones’ internal problems mainly lie within the distribution of their product. They rely heavily on independent distributors and therefore have no strong, long term relationships with these distributors.

As a result, Jones incurs high variable costs and runs in to difficulties with marketing and expanding. More details of the IFE Matrix can be found in appendix 4. VI. SWOT Matrix Utilizing the SWOT Analysis in appendix 5, the external factors were compared with the internal factors. The result was five possible strategies that were developed to take improve of Jones’ situation. The three strategies that deemed most feasible includes expanding Jones Juice and WhoopAss product lines, forging long term relationships with distributors, and acquiring a strategic alliance with Applebee’s.

Currently, demand for energy drinks and private label juice is on the rise. Introducing more products to cater to this demand could be profitable but may also prove to be risky. Forging long term relationships with distributors is definitely a strategy that Jones should look into, but may not be possible due to low funds. Strategic alliances have been very successful in past efforts and bring in added revenue. Adding Applebee’s to Jones’ ever growing list of alliances would provide a gateway for many other casual dining restaurants to sell Jones products. [pic][pic][pic]VII. QSPM Matrix

Since the strategic alliance with Applebee’s and creating long term relationships with distributors seemed to be the most viable strategies, they were entered into the QSPM Matrix in appendix 6 for analysis. There were three factors that ultimately led to the decision to go forward with the strategic alliance. The first was the fact that business for casual dining establishments has been on the rise. This would translate into a rise in sales through Applebee’s restaurants. Second, because of limited shelf space in supermarkets and convenience stores, Jones must find alternative outlets for their products.

The simplest solution is to continue selling where they are successful, namely stores and restaurants like Barnes & Noble, Panera Bread, Starbucks restaurants and in the future, Applebee’s. VIII. Culture Jones’ most significant asset is the strong culture that is expressed throughout their company. Through it they are able to differentiate themselves from other companies while drawing in a loyal and ever increasing consumer base. By including their customers on nearly every aspect of the process, they are also able to more accurately predict demand for products before ever making them.

Jones promotes the ideas of change, fun, honesty, and simplicity and this can be seen in every aspect of their business. Through their promotion of the Jones Pro Riders and Jones Emerging Riders extreme athlete team, along with appearances on shows like Monster Garage, they get their name out in the community as more than just a beverage company. Jones has come to have a counter culture following because of their high consumer interaction. Their website is littered with homemade commercials, essays, and message boards submitted by loyal fans. IX. Implementation

Implementing this new strategy should be fairly quick and easy since Jones has dealt with entering strategic alliances with food chains numerous times in the past. Over the course of the coming year, Jones will introduce six Jones Premium Sodas and four Jones Juices to Applebee’s restaurants across the nation. They will start with a few chains in each region and increase periodically based on sales performance. Flavors will be chosen based upon consumer opinions from each region as submitted to the Jones website. In order to create a continued interest in the brand, new flavors will be added to the menu periodically.

As is practiced at Panera Bread eateries, each bottle sold at Applebee’s will feature customized labels as submitted by Applebee’s employees. As an added incentive to purchase Jones products, and to further establish the brand as premium private label beverages, a small menu of alcoholic drinks made with Jones products will be listed and pictured on tabletop menu highlights. These drinks will go along the same lines as “rum and coke” or “red bull and vodka” concoctions, which tend to be popular. By introducing these new mixed drinks, Jones could possibly boost non-restaurant sales from those wishing to make these drinks in their homes.

X. Control The success of the Applebee’s endeavor will be kept in control much like that of the other alliances. Jones employees will visit various restaurant locations unannounced to check inventory levels and corresponding sales. Depending on how well a given flavor is moving, Jones may choose to replace it with another flavor. New beverages will be introduced periodically anyway to keep up consumer interest. The Jones employees will also make sure the table top menu highlights are prominently displayed on each table.

Since nearly all of the production and distribution processes are outsourced, there is little Jones can do to enforce control over these areas. XI. Competitive Analysis Though they got a later start in selling their own beverages than most other companies in their industry, Jones is swiftly catching up and has the momentum to surpass the competition. They have been able to take advantage of the uniqueness of their product to differentiate from others. Some of Jones’ biggest competitors include Arizona Iced Tea, Snapple, Sobe, and Henson’s Natural Beverages.

Their weakest area, as compared with these other companies, is their lack of any long term relationships with distributors. This leads to inaccurate production estimates and inventory problems, which the competitors are able to avoid. Another advantage the competitors have over Jones is capital. Since Jones has such a low capital, they are more limited in their options than Snapple or Sobe. IT spices up Nirula’s operations With multinationals like McDonald’s, Pizza Hut and Domino’s gaining ground in the Indian food and beverage (F&B) industry, Indian players have had to overhaul operations to sustain themselves among international players.

SHIPRA ARORA finds out how Nirula’s, the long-familiar local fast food joint, plans to use IT to add flavour to its processes reports. “We are conducting the (e-commerce) business on a no-profit-no-loss basis. The idea is to cater to demand from our customers who have enough faith in our brand. ” For Nirula’s, a name synonymous with the genesis of the fast food culture in the country, one way to sustain itself among the top players today has been judicious usage of information technology to the extent that IT has become an integral part of the company’s business vision.

Today IT helps the company in managing operations spread across 52 outlets in 28 locations and six production units located in Okhla in Delhi and Noida. | | |According to Devendra | |Singh, the key IT | |policy at Nirula’s is | |using requirement-based| |technology initiatives | |rather than deploying | |technology for | |technology’s sake | The emergence of an IT culture at Nirula’s dates back to 1984, when the advantages of automation were still not so well known, especially so in the F&B industry.

According to Devendra Singh, systems executive, Nirula’s Corner House, the driving force behind the early adoption of IT within the company’s business processes has been its managing director, Deepak Nirula. And he continues to lead the constant evolution of automation to drive the company up the value chain. When Nirula returned home after studying in the US, he had already envisioned the role IT would play in his company, and went on to implement that vision across the organisation. This led to the formation of a small IT team, comprising just two people at that time.

This team, under the supervision of Nirula and his Canadian friend, built the entire framework, guideline structure and IT policy for Nirula’s. Thus, laying the groundwork for Nirula’s foray into IT. Early systems – DOS based When scouting for software applications best suited for their kind of business, the team couldn’t find any noteworthy applications available in this fledgling user segment. So the company undertook development of the software applications in-house. Some applications were also outsourced to other software development companies. All of these were based on the DOS platform.

The company chose to use PC-based systems against mainframe-based systems, in tune with the its futuristic IT vision. “Even during the early 1980s we had an inkling that it would be the PC-based systems that would flourish,” Singh explains. | | |Nirula’s business model spans across three areas fast food, | |restaurants and backward integrated production units | The front-end (point-of-sales), critical for any F&B industry, was the first segment to be computerised within the organisation, as it is the point of contact for customers.

Of these, the billing application that catered to Nirula’s front-end operations (with electronic cash registers being used in some of the outlets), was developed first. The billing software was included for restaurants, pastry shops, waiter service restaurants, bars and home delivery, and included sales analysis and inventory management at the restaurant level as well. It had an interface with a customer display unit, weighing scale, etc. The front office management system on DOS included modules like front office billing for hotels, back office integration hotel related accounting modules linked to the corporate financial management system.

This enabled the company to provide better and easier service to its customers. The IT team then took to the automation of the back-end operations starting with the F&B department. Core to the food-related industry, operations in this department are of top-most priority in terms of automation. The key applications developed to facilitate back-end automation included recipe management (as recipe forms the core of F&B) and costing systems, inventory control, purchase management system and sales analysis.

This was followed by the automation of accounts and then the payroll system. Weaknesses of early systems The team soon realised that the applications served only basic requirements at Nirula’s and were not efficient in terms of functionality. Singh also notes that since the applications were not tightly integrated, islands of information were created within the organisation. “It was like patching together disparate information. However, with growing needs and information requirements it was becoming increasingly difficult to do any more patching,” he adds.

The need for a totally integrated system, coupled with the fact that the original idea on which existing software applications were based, had changed, warranted the need for re-designing the entire IT system within Nirula’s. New systems – Windows Around the year 1998 having resolved to refurbish operations based on latest technology the company was on the lookout for readymade solutions in the market. This time around, though the market had matured a little in terms of IT awareness, there was still no solution to match Nirula’s requirements. Nirula’s business model is very unique, spanning across three areas, namely, fast food, restaurants and backward integrated production units (where ingredients like cheese, confectionery and pizza bases are developed in-house). Thus, making it difficult for a single solution to cater to all the distinct requirements,” explains Singh. Once again the company decided to go in for in-house development and outsourcing of development work. MS SQL was chosen as the back-end server with Visual Basic as the front-end system using Crystal Reports for all reporting purposes. The first module to be developed in-house was the payroll and HR module.

Following this, the team started working on the F&B module, which was deployed in April 2001. The F&B control system provides for modules like sales analysis system, consolidated sales reports and MIS reports, inventory management system inventory tracking, management and variance control, recipe management and costing system. The recipe management system, Singh notes, helps in maintaining a balance between sales and inventory. Explicating the system’s functioning, he points out that at any point of time the system has stored the recipe of each of the items. This helps in tracking the use of the raw materials.

For instance, the sales at the end of the day are checked as to whether they tally with the volume and value of raw materials used on the basis of the recipe. This prevents the misuse of raw materials. The Enterprise business intelligence system (BIS), like a data mining system, works on a central warehouse. This software, which was deployed in March 2002, carries out various kinds of sales analysis. For instance, if there is a change in the rates of one of the raw materials like milk, the system scientifically calculates its effect on the change in the finished item’s pricing, like ice cream.

Once stabilised, the company plans to evolve analysis of its production system using this software. | | |Nirula’s e-Commerce initiative fetches around Rs 1. 5 lakh| |per month. The figure is expected to double over the next| |one year | Nirula’s recently implemented production planning and management applications includes modules like planning, management, inventory management system, quality management, recipe management system, route/van management, sales management and machinery management.

The aim is to achieve proper planning, management and control of the production systems. Every restaurant maintains a daily sales forecast based on the historical sales data of that day during the same period last year. Based on this, the software arrives at the prospective sale for each day. At the end of the day, the system calculates the closing balance and goods-in-hand, and taking into account the prospective sales for the next day generates an order information. This is uploaded and transferred to the company’s FTP site. Similar information from all the outlets is generated and gathers at the server in the factory.

Here the system consolidates all the information and production is scheduled accordingly. A consolidated production chart is then made, which allots assignments to each of the production floors. The software also has various recipes along with the ingredients and their volumes required for the corresponding production volumes. Then the system sends the requisition notes to the raw material store and its copy to the production floors. According to Singh, the entire process is tracked in batches. This enables the company to track down the supervisor, ingredients, supplier, etc. of a particular batch in case there is any deficiency.

The system further has add-on modules like quality control, maintenance and management of machinery. Other applications that have been deployed include financial management. The financial management application comprises accounting and financial management system, back office integration hotel-related accounting modules linked to the corporate financial management system. The payroll and HR management application provides for a payroll system, human resource management system, leave management system, loan and staff advance management system, staff medical reimbursements register and PF trust management. Bottlenecks Changing the systems

The migration from DOS to MS SQL was no cakewalk for the IT department, which had a tough time building new systems right from scratch. Transposing data from the old system to the new format posed a huge bottleneck. The team was faced with a challenging task of pulling the data from the legacy system and transferring it into the new format, as there were many new fields in the latter, which the legacy system did not have. Furthermore, the earlier system was DBMS (Data) as opposed to the new RDBMS one. Though SQL provides for data transforming service, the team still had to unite programs for manipulating the data on the DOS system as well.

In order to tackle this situation, the team evolved a strategy which worked backwards. Starting with the implementation of the new system from April 1, 2001 onwards, the team first migrated the previous year’s data onto the new system. “The previous year’s data is very critical for the company in doing sales analysis. So, in order to avoid any hampering of work, we first decided to migrate data of the year 2000,” explains Singh. This way the team worked backward to cover all the legacy data. Hardware & OS At present Nirula’s has established a robust hardware infrastructure that comprises seven servers (Another three are in the pipeline).

The company has two e-mail servers with another mail server to be added soon. While the mail server in Okhla is running on Windows XP Pro operating system with VPOP 3 (Virtual Pop 3) software, the one located at the head office in Connaught Circus is based on Windows 2000 and POP3. The rest of the servers use Windows 2000 while one works on Windows NT. Nirula’s is adding another server for its production department and one replication server. While the company had been buying Compaq servers so far, it is now planning to go in for HP for its new requirements.

According to Singh, the company has a policy of having no centralised server for security and efficiency reasons. “Our idea is to give each department its separate server though small so that even if one goes down, the entire set up does not come to a halt,” says Singh. Further, all the servers are interlinked, making for a secure hardware contingency plan. As far as the delivery of technology and vendor preference is concerned, Singh says that Nirula’s evaluates it on time tested factors like reliability, market feedback, after-sales support and pricing thereby, precluding any risk. |Putting IT on the menu | Advantages on the production | |side | |Better control over production | |process | |Efficient planning of stock | |Advantages in sales and | |marketing | |Aggressive sales promotion | |Easy tracking of fast-selling | |and slow-moving food items | |Forecast prospective sales | |figures during certain seasons | |Advantages for the customers | |B2C engine provides features | |like membership, managing | |address book to its customers, | |etc. | |Enables customer to determine | |the status of his order and | delivery on a real-time basis | E-Commerce (B2C) Though not a huge one, Nirula’s B2C e-commerce set-up has been one of the pioneering initiatives in this field in the country. In fact, the Limca Book of Records has termed it as the first B2C initiative in India, a fact which the company itself wasn’t aware of until Singh happened to accidentally come across it in the record book. Currently, Nirula’s is doing around Rs 1. 5 lakh worth of business in this segment per month, which is expected to double over the next one year. Starting from selling only a few products online, Nirula’s today sells about 325 of its products online.

According to Singh, this initiative was largely started because of demand from customers and is expected to gain further prominence. “We are basically conducting the business on a no-profit-no-loss basis. The idea is to cater to the demand from our customers who have enough faith in our brand,” adds Singh. Nirula’s receives a lot of orders from NRIs who want to send stuff to their relatives in India. And topping the list of hot selling items are ice creams, chocolate cakes and hot chocolate fudge. The company even delivers on the date and time specified provided the order has been placed at least 36 hours in advance.

The company leverages on its comprehensive logistics infrastructure for home delivery. The key B2C engine, (accessible on www. nirulas. com), being used by the company, provides features like membership, managing address book to its customers, etc. The customer can also track the status of his order and delivery on a real-time basis. Connectivity Nirula’s connectivity infrastructure involves a hybrid model using varied technologies as per the requirements of different locations. The 128 Kbps Spectranet cable modem connectivity provides for 99 percent up time.

For the Okhla- and Noida-based production units, the company has taken a 128 Kbps link from Dishnet. For its various outlets, the IT team has secured dial-up connectivity from various regional ISPs. According to Singh, the requirements of the various restaurants and fast food outlets did not justify having 24-hour online connectivity. “For these outlets the connectivity with the head office and production units are required only during certain period of time,” he explains. For instance, the outlets need connectivity to upload the sales data or to download rate changes, information on new items, billing data and inventory update.

Considering the requirements, the company’s management feels that an online system would not be of much use as the uploading of sales data and the checking of the inventory control, happens only at the end of the work day. “It doesn’t make sense to have an online inventory system because whatever time the data reaches the production units it will be consolidated and analysed only at the end of the day,” explains Singh. The flip side of having online billing data on a server became evident during a crash, when the entire operation came to a standstill.

And considering the influx of customers at the outlets, it was difficult for the company to manage the billing process manually. So, a disjointed system was the best bet. Benefits With the production planning and control systems in place, Nirula’s now enjoys better control over its production processes and derives more efficiency from its planning process. Overall, the system has delivered indirect benefits like control over receivables and better inventory control. “This is very critical in our kind of operations, especially since our inventory consists of perishable food items that can go bad,” explains Singh.

From the sales point of view, the system has enabled the company to plan out sales promotions in a more effective way and execute them faster, as well as derive significant information relating to fast-selling and slow-moving items. The sales analysis system now makes it possible to predict sales during certain seasons. “It is difficult to point out the tangible benefits derived out of automation. However, these intangible gains, ultimately convert into tangible ROI over a period of time,” says Singh. According to Singh, the key IT policy at Nirula’s is going in for need-based

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