The Business Challenge
With the ongoing changes in the market environment and the fluctuating demands, retailers are increasingly being challenged by tasks such as demand management, store inventory allocation, and order fulfillment. Most retailers and manufacturers today face similar challenges and one among them revolves around buffer inventory management. This is especially true for paints and adhesive manufacturers as the increasingly unpredictable buying habits of consumers can adversely impact their demand forecasting accuracy, which, in turn, affects their buffer inventory levels.
Inefficiencies in your safety-stock calculation approach can lead to inventory stockouts across distribution centers. Get in Touch with our analytics experts to know how we can help you address this challenge.
Top Challenges Faced by the Client
The client faced several challenges due to their inefficient inventory management processes that led to high inventory holding cost and stockouts. The fragmented nature of their inventory management process and the lack of analytical capabilities further leveraged the supply chain complexities and posed several roadblocks to their supply chain management initiatives. To address these challenges, they approached Quantzig to leverage its inventory management solutions to enhance supply chain visibility and optimize buffer inventory management.
Inventory Levels vs Customer Demands
Problem Statement 1
With fluctuating market demands and order volumes exceeding the buffer value, the client needed to adopt a robust inventory management process to determine the optimal buffer levels for different product categories.
Problem Statement 2
The client’s inventory management strategy failed to offer in-depth insights into their inventory management processes and buffer levels. To tackle this challenge the client was looking at deploying dashboards that would help determine the optimal buffer stock levels for each product and update the same based on daily fluctuations in demand in order to maintain optimal inventory levels in each distribution center.
Problem Statement 3
The third major challenge faced by the client revolved around their inability to meet order fulfillment objectives. By leveraging advanced analytics, the client was looking at gaining real-time insights into their inventory processes to achieve the best possible outcome for any given ship-from-store scenario.
Solutions Offered and Value Delivered
To gain the desired insights and to help the client address their challenges the inventory management experts at Quantzig adopted a comprehensive approach that focused on developing strategies to avoid inventory stockouts and excess inventory while maintaining appropriate buffer stock levels.
The initial phase of this inventory management engagement focused on performing univariate analysis to understand the impact of each factor on demand and inventory levels.
In the second phase, a dedicated team of inventory management experts and data analysts were assigned the task of developing a dynamic buffer stock formula based on standard deviation and excess inventory stocks.
The third phase of this supply chain analytics engagement revolved around developing a system dynamics-based simulation model to accurately predict high-risk scenarios.
Quantzig’s analytics experts gathered and analyzed data from disparate sources to help the client achieve their inventory optimization goals. The inputs from these sources provided relevant insights that helped tackle major challenges that curtailed their inventory management efforts. The inventory management dashboard not only helped the client to sharpen their demand prediction capabilities but also increased gross margin gains by reducing markdowns and avoiding inventory stockouts. As a result, the client realized a significant 15% increase in conversion opportunities from optimized ship-from-store order volumes. Moreover, the integration of a live dashboarding capability enabled the client to effectively track and monitor end-to-end buffer stocks for individual product categories across each distribution center.
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The inventory management dashboard also enabled the client to:
- Achieve a 3X improvement in their inventory forecasting ability
- Identify inefficiencies in the existing safety-stock calculation method
- Gain near real-time insights on inventory processes
- Identify critical nodes and high-risk scenarios
- Achieve a 48% reduction in inventory stockouts
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