Mapping Your Inventory Optimization Journey
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10/22/2012
Mapping Your Inventory
Optimization Journey
Michael Martin, Stanley Black & Decker
Karin Bursa, Logility
Speaker Bio: Michael Martin
Michael Martin is responsible for Global Supply
Chain Strategy with Stanley Black & Decker. He
has ooverseen
erseen the global adoption of in
inventory
entor
optimization modeling since 2007 to identify
millions of dollars in savings on raw materials,
components, and finished goods.
Michael was named a 2012 Pro to Know by Supply & Demand
Chain Executive
Executive, and he has been interviewed by
SupplyChainBrain and Consumer Goods Technology on the
strategic benefits of optimization.
110/22/2012
Speaker Bio: Karin Bursa
• Karin Bursa is a vice president at Logility, a leading
provider of collaborative supply chain management
solutions She has more than 25 years of experience
solutions.
in the development, support and marketing of
software solutions to improve and automate
enterprise‐wide operations.
• Karin is often quoted in industry publications, speaks
frequently at industry forums and is an active
member of APICS,
APICS CSCMP,
CSCMP VICS and Women in
Technology. She also serves on the Board of the APICS
Atlanta Chapter
• Follow her industry insights at www.logility.com/blog.
DIRECTIONS TO YOUR GOAL
• Speaker Introductions
• Company Introduction
• Stages of Inventory Optimization (IO) and
Multi‐Echelon Inventory Optimization (MEIO)
• Importance of Optimization
• Tactics for Implementation
• Tool Selection
• Q&A
210/22/2012
A Diversified Global Leader
Stanley Black & Decker (NYSE: SWK)
2011 Revenue: ~$11.0B*
Market Cap**: $12.4B
Cash Dividend Yield: 2.2%
- Increased for 44 years
- Paid consecutively for 134 years
Security $3.3B*
• Convergent Security Solutions
• Mechanical Access Security
• Healthcare Solutions Security
CDIY CDIY $5.2B
• Power Tools & Accessories
Industrial • Hand Tools & Storage
• Consumer & Outdoor Products
Industrial $2.5B
• Industrial & Automotive Repair
• Engineered Fastening
• Infrastructure
Diversified End Market Exposures
*Pro Forma To Include Niscayah
**As Of Market Close 02/06/12, $74.10
Construction & Do it Yourself, $5.2B Globally
Power Tool
Accessories #1
Hand Tools, Storage
and Fastening
#1
#1 #1
Professional Power Consumer Power
Tools Tools, Outdoor
Products,
Home Products
* *
DIY Enthusiast Pros/Experts Residential Commercial Industrial
Construction Construction
*
*Additional Brands That Would Be Flagships Anywhere Else
310/22/2012
Road to Inventory Optimization
Leveraging MEIO Strategically
MEIO Modeling
Across the Supply
Inventory Chain
Optimization
Statistical Safety Stock
Rules of Thumb
No Defined
Method
Stages of Maturity
IO Optimizes the Entire Value Chain
This is a complete end‐to‐end process; it sets inventory targets from
Raw Materials to Finished Goods at one time, at all stages
Sub
Assembl
Assembly DC’s
Procurement
Final Assembly
Demand
Fulfillment
VMI
Full visibility reduces overall inventory and
improves ability to execute
410/22/2012
Pick the Right Vehicle
Real Value Stream for Four Related Finished Goods
Purchased &
Procured Bare Units & Finished
Components Subassemblies Packaging Goods at
Plant
Excel Can’t Do This!
Difference With MEIO
• Looks at the value chain holistically
• Accounts for more inputs to current process
• Accounts for complex interactions and
interrelationships within the value stream
• Optimizes inventory mix at each stage
• Optimizes across all stages
• Locks in ability to execute to goals
510/22/2012
Benefits of MEIO
• Inventory reductions of 20‐35% at each stage vs.
common Rules of Thumb
• Fill Rate/Service Level improvements
• Increased ability to execute to plan
• More effective S&OP planning
• Quantifiable network scenario planning
• Inventory error root cause analysis
• Focus on improvement areas with biggest benefit
• Visibility into your value chain and business processes
Getting Mobilized
• Know your culture. Will the business accept this?
• Assess your ‘change’ appetite. Do you need a crisis?
• What is the pain point‐ Inventory? Service? Both?
• Inventory Optimization is not “inventory reduction”
• Can you get the basic data inputs?
• Is there a LEAN initiative to link in to?
• Do you have management support?
If any of the above are a concern, start with
implementing statistical safety stock at each stage
610/22/2012
Check Your Mirrors
Consider your current state business situation
• Flexibility of manufacturing/supplier base
• Lead times & transit to distribution network
• Dependency on a forecast
• LEAN initiatives
• Customer
C t expectations
t ti
• Inventory investment costs vs. corporate goals
Page 13
Shifting Into Drive
Keys to a successful implementation
• Air cover‐
cover who will support you?
• Match your current state planning process
• Avoid the black box mentality
• Don’t be afraid to move fast
• Don’t
D ’t gett tied
ti d to
t ‘one
‘ system’
t ’
• Crawl, walk, run towards multi‐echelon
710/22/2012
Setting Cruise Control
Develop a consistent approach to targets
• Not ‘one size fits all’, but built on ABC classification
• Keep IO process as simple as is practical
• Invest to protect fill rate & planner productivity as needed
• LEAN out the high volume, runner SKUs with high total
stock $$
• Continuously test assumptions and delivery of results
• Build confidence in your approach; stability allows for
experimentation
Page 15
What We Learned About Inventory
Optimization
• Business‐driven, not IT‐driven initiative
• Start small
small, but think Multi‐Echelon
Multi Echelon (MEIO)
• Select a high‐impact starting point
• Define and measure key metrics and goals
• Not a long‐implementation project
g and locations
• Benefits accrue at all stages
• MEIO drives significant savings and product flow
810/22/2012
Mapping Your Inventory
Optimization Journey
Karin Bursa
Vice President, Logility
kbursa@logility.com
Goals for Inventory Optimization
Reduce lead time
to customers
12% Better serve
Reduce inventory customers and channels
carrying costs 34%
30%
Balancing Cost & Service
Improve perfect
order attainment
Minimize obsolete 9%
inventory
15%
Source: Logility and APICS
910/22/2012
Where does your Inventory
Optimization initiative focus?
Procurement Sub Assembly Production/Assembly Distribution Demand Fulfillment
Supply Variability Demand Uncertainty
Supply
Demand
Time
Supply Variability
Time
Supply
Time
Supply Variability Supply Variability Demand Uncertainty
Supply Variability
Supplier A Supply
Supply
Demand
Supply
Time Time Time
Time
Supply Variability
Supply
Demand Uncertainty
Time
Supply Variability
emand
ply
Supp
De
Time
Time
Suppliers ABC Sub Assembly Plant DCs Customers XYZ
Scenario Analysis
Quantify your Strategies
Step
p One
st
Total Supply Chain Cos
Focus on inventory “right-
sizing” with current policies
and parameters, structure,
evaluate transportation costs
Step Two
Starting
Point Identify, prioritize, and
implement high impact,
short-term opportunities,
execute best transportation
mode selection on daily basis
Step Three
Current Fundamental changes to the
Efficient Frontier supply chain structure or
New
Efficient Frontier
strategy
Optimized Strategy
Service Level
Source: Logility, 2012
1010/22/2012
2X More Effective Balance
with Multi Echelon Inventory Optimization
MEIO Users are 2X more able
28%
t costt effectively
to ff ti l balance
b l
Inventory and Service
Increase in inventory
turns with Multi
Echelon Inventory
Optimization Twice as likely to tie target
setting to S&OP process
Source: Aberdeen Group, Inventory Optimization – Impact of a Multi-Echelon Approach, 2012
Logility: Innovative Æ Reliable Æ Proven
• Global Provider of Collaborative
Supply Chain Software Solutions
– 40+ years of supply chain expertise
• Over 1,250 customers in more than
75 countries
• Comprehensive Best of Breed SCM
product suite
• Sample Customers
1110/22/2012
You’ve Arrived!
Questions & Answers
THANK YOU!
Michael Martin is based in Towson, MD. He
can be reached at michael.martin@sbdinc.com
or on LinkedIn for more information regarding
the use of inventory optimization to deliver
real‐world benefits!
Karin Bursa is based in Atlanta, GA and can be
reached at kbursa@logility.com or on LinkedIn
for more information regarding the use of
inventory optimization as well as broader
supply chain improvements for your business.
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