SKL Group is a big developer, manufacturer, and distributor of plumbing and home goods.
Company Overview:
- 18 years in the market
- 3 manufacturing facilities
- 6 warehouses and 2 distribution centers
- 17,000 – total warehouse area in square meters
- Two proprietary brands – IDDIS and Milardo
Inventory Management Specifics
Some products have long lead times for deliveries (4-6 months), which significantly complicates planning. Additionally, several items experience irregular and infrequent demand, which is difficult to forecast using traditional methods.
Background for Implementation
Since 2014, the company has been using two separate software solutions: one for demand forecasting and another for order generation. These programs were interconnected through manual uploads/downloads of Excel files. Additionally, the aggregate forecast for the company was calculated, but it did not align with the forecasts for individual warehouses.
As time passed, the process grew more complex with forecasts being made for separate sales channels. However, the task became more labor-intensive since it was impossible to completely move away from Excel under existing conditions. Integration with the accounting system also had to be done manually, and there was no option to automate it.
All these processes were time-consuming and relatively inefficient, leading to excess inventory and stock shortages. In 2020, with the transition to a new ERP system, the company faced the need to select a new solution. Neither the capabilities of the existing setup nor those of the new ERP system met the company's needs and logistical processes.
"We were looking for software that would automate calculations and free us from a significant amount of manual labor. We needed a system capable of gathering all data from the ERP and other sources, linking them together, and calculating orders," said the head of the procurement department at SKL Group.
Solution Selection
Four options were considered in total. The head of the procurement department outlined three primary reasons for choosing Forecast NOW!:
1. An Off-the-Shelf Solution with Proven Inventory Calculation Logic: Some vendors primarily offered customized solutions tailored to our processes. In contrast, I was looking for an off-the-shelf solution with established logic that could be quickly configured to match our operations. Our challenges are similar to those faced by other trading companies, so I wanted to leverage existing, proven solutions.
2. Understandable Functionality: Despite the complexity of the models, we could understand how the program calculated forecasts, how it dealt with new products, how it computed forecasts for specific items, what data were used at various stages, and why we received the outputs that we did. In other solutions, especially those based on neural networks, it felt like a black box. We received a number as output, but they couldn't explain how it was generated. We needed a transparent program that would simplify our work.
3. Alignment with Our Inventory Management Specifics: Forecast NOW! met our requirements by shifting the focus from making demand forecasts a primary, month-long company-wide process to something more streamlined. Previously, our forecasting process was labor-intensive and not always accurate, leading to shortages and overstocking. With Forecast NOW!, I saw the opportunity to integrate all processes into one and immediately calculate the final order. The emphasis was mainly on the inventory that should be in the warehouses and its proper distribution for cost-saving. It effectively married our financial and logistical processes.
Implementation and Usage
In August 2021, after obtaining the license and installing the software, employee training began. The primary requirement was for the staff to understand the program's operating principle and calculation logic. This phase lasted until November 2021. By the end of the year, data exchange between Forecast NOW! and the ERP system was fully automated.
Starting in January 2022, the program underwent testing using the company's data. By March, forecasting began in Forecast NOW!, and by April, inventory balancing and replenishments for the warehouses and two distribution centers were underway. Initially, calculations were compared between the old methodology and the new solution, but by the end of May, about 60% of the orders were being calculated in Forecast NOW!
Managers responsible for restocking the warehouses noted that they did not want to go back to the old system, as it required a lot of manual work. Previously, calculating the needs for a single warehouse and coordinating all of it took about a day. Now, calculations for all six warehouses take about 10 minutes, freeing up time for analysis and decision-making.
"Our employees embraced the program very well. They saw how our challenges could be addressed using its functional modules even before the implementation began, when we all took Forecast NOW!'s inventory management course together," said the head of the procurement department at SKL Group.
Results of Software Usage
- Order calculation time was reduced by a factor of 24. Previously, it took four people one working day each to calculate orders once a month. Now, the calculation and analysis of these same orders take just one hour.
- Time spent on promotion verification was reduced by a factor of 16, from 2 days to 1 hour. Earlier, to evaluate the feasibility of including a list of products in a promotion, manual checks on suppliers were required, and information from multiple sources had to be gathered. The entire process took about two days. Now, it’s sufficient to upload the data into the software, which automatically performs the calculations for the specified period.
- Time spent on demand forecasting by product categories was reduced by a factor of 16. Previously, each manager would independently forecast their respective product categories. Four procurement department managers were involved, and the forecasting took four working days. Now, one person accomplishes it in just one working day.
- The time for calculating inventory replenishments for warehouses was reduced by a factor of 18, from 1.5 hours for one warehouse to 30 minutes for six warehouses.
- Time spent on inventory management efficiency analysis was cut by a factor of 8, from 2 days to just 2 hours.
- Data loading is now fully automated. Previously, one person had to spend an hour a day doing this manually.
- Employees now have more time to analyze inventory, market conditions, trends, and their work. Previously, there was little time for this. One of the employees even transitioned to a project manager role, without the need for additional hiring.
"In my opinion, for a trading company with multiple warehouses and a wide product range, Forecast NOW! is a perfect fit. The software has proven effective in dealing with both short and long supply chains," said the head of the procurement department at SKL Group.
