Thursday, July 26, 2007

W.W. Williams Company augments their ERP and identifies savings of 26% in just 6 weeks

WW Williams Company is a distributor for Detroit Diesel Corporation and Allison Transmission. The Company offers the most advanced and innovative diesel engines and automatic transmissions in the market today and operates twenty-five full service customer support centers in eight states.

When you are serving corporate customers in the fast-moving transportation industry, you have to be fast-moving yourself. This is even more true when your business is supplying parts and repair services to corporate vehicles that must get back in service as quickly as possible. In this business environment, time is critical and customer satisfaction is directly linked to how fast you can perform. And when performance depends upon having the correct parts, you need to be certain your internal systems are up to the task. That’s why W.W. Williams wanted to augment their existing ERP system with improved inventory management and optimization.

Filling in the Holes in ERP

Although W.W. Williams has implemented an ERP solution that they are pleased with, there are some key business elements and performance metrics that are missing. In particular, their ERP system tells them when to order but does not satisfactorily set parameters such as safety stock, order points, and line points. Furthermore, they were concerned that they were most likely overstocking fast-moving items.

With this in mind, W.W. Williams decided to implement an inventory optimization solution. With more than $10 million in inventory spread throughout 17 different locations in seven states, finding a tool to help their busy staff was important. “We do not have many Buyers on our staff”, states Wally Williams, Operations Analyst at W.W. Williams. “Many of our Parts Managers act as Buyers, and they do not have a lot of time. That’s why we chose an inventory optimization solution; provides our people with good analytical capabilities.”

Minimal IT Involvement

Because the inventory optimization solution is web-based, it requires only minimal involvement from W.W. Williams IT department. With only a small and very busy IT staff, implementation would have been delayed many months. But with help from TCLogic, data integration and process integration took only three weeks worth of effort spread over one and a half months.

Starting with a Few Selected Items

To begin implementation, W.W. Williams chose three of their mid-west locations. Although there are over 54,000 SKUs in these three locations, only 2,700 items were selected to be optimized. These 2,700 items represented almost one million dollars in On-Hand costs.

The results have been impressive. Within six weeks, a reduction in On-Hand costs from $938,000 to $695,000 was identified, resulting in a $243,000 savings. Inventory turns were projected to increase almost three fold, from 3.5 to 9.

Developing Business Rules and ‘What-if’ Scenarios

One of the great features of inventory optimization is the ability to develop special business rules that can be used to better reflect the company’s business processes. In W.W. Williams case, this included the capability of building special rules to handle engine ‘cores’, where a ‘core’ consists of two cost factors – a cost for the engine block itself and costs for ‘non-core’ items. Demand history in the ERP solution is based on ‘non-core’ items, but the new solution optimizes based upon both costs. Views were also configured within the solution to show all ‘frozen items’ and the reasons they are frozen (‘frozen items’ is a special feature within the ERP system).

W.W. Williams especially likes the ability to perform ‘what-if’ scenarios before they export data back into their ERP system. “In this way, we can see the result that different business assumptions will have on our inventory without impacting our ERP system”, comments Williams. “That’s important because $1 items are just as critical as $500 items. If we’re out of a $1 item, it can hold up a service repair and cost us the same amount of time as a $500 item.”

Improving Service Levels and Establishing Metrics

One of the key parameters that W.W. Williams will be using to establish inventory levels is the targeted service level to their customers. With inventory optimization, they are now certain that they are maintaining the minimal inventory levels to achieve their targeted service levels.

The Company will also utilize inventory optimization to help establish key metrics for monitoring performance. They are beginning to track forecast accuracy, something their current ERP system does not do. They will also institute metrics on item availability and plan on using ROI+ to monitor vendor performance over time.

To inquire more about inventory optimization, please contact TCLogic

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