We are months into this recession and the discussion in now turning from the impending recession, to the impending recovery.
Managing a business during a slow down typically involves cutting costs. Victims of cost-cutting measures include travel, entertainment, benefits, salary increases, new hires, location closures, headcount, R&D, markets, and inventory. Each cost-cutting segment receives close scrutiny and involves managerial resources to evaluate and recommend the most effective means to survive the downturn.
Other businesses may take a different approach. These businesses see opportunity during a downturn to either gain market share through increased penetration and service, or through the acquisition of weaker competitors.
Regardless of the approach, each business must execute an effective strategy that achieves the goal set forth. Equally important, if not more so, is the effectiveness to which a business executes a strategy during an economic recovery. Entering new markets or gaining market share may require increasing headcount or opening new locations. It may also include inventory proliferation or realigning inventory levels to meet new challenges during the recovery.
The development of an effective strategy may also require an investment in business applications. Enterprise Resource Planning applications are perfectly capable of managing transactions (financial, accounting, orders, operations, etc). Where there is often a gap is being able to analyze and gain visibility of the data on an enterprise-wide, or business-segment scale. This type of functionality can be found through a business intelligence solution. Often these solutions can provide insight that was never before possible with prior resources.
Gaining intelligence about the performance of a business can help shape the strategy for either a slowdown or a recovery. The important aspect of this is that building a strategy is part art and science. The art is in the human-based knowledge that can not be quantified. The science is in the data. Being able to construct a strategy based on data is where a tool like business intelligence can play an important role.
Feel free to visit www.tclogic.com for additional information about inventory optimization and how to effectively reduce inventory while protecting critically high service levels.
Wednesday, March 25, 2009
Tuesday, February 10, 2009
Recessionary Times Require New Approaches to Inventory Management
With our economy in crisis, firms that hold large amounts of inventory are focusing efforts at squeezing as much cash as possible out of this valuable asset in order to improve the performance of working capital. While care must be taken to prevent cutting inventory with a hatchet, there are technology tools available to help use a scalpel to reduce inventory without negatively impacting service levels.
Inventory optimization is such a tool that takes in to account what drives and impacts the performance of inventory. These drivers are normally dynamic variables that can change on any given week or month. What's driving the performance of inventory is quite different among firms. One might be heavily dependent on lead times, another will be dependent on demand behavior.
Given the thousands of SKU's that are managed across a network of multiple loations, this can be a complex process. Luckily with inventory optimization, this solution can remove the levels of complexity that exist in a supply chain. At TCLogic, we like to say, "Inventory intelligence that gets results." The intelligence lies within the current business systems, or ERP. The results achieved are after the intelligence is harvested, analyzed, and optimized stocking strategies developed. Our customers often gain results such as reducing inventory by as much as 30% while achieving targeted service levels above 98%.
Feel free to visit www.tclogic.com for additional information about inventory optimization and how to effectively reduce inventory while protecting critically high service levels.
Inventory optimization is such a tool that takes in to account what drives and impacts the performance of inventory. These drivers are normally dynamic variables that can change on any given week or month. What's driving the performance of inventory is quite different among firms. One might be heavily dependent on lead times, another will be dependent on demand behavior.
Given the thousands of SKU's that are managed across a network of multiple loations, this can be a complex process. Luckily with inventory optimization, this solution can remove the levels of complexity that exist in a supply chain. At TCLogic, we like to say, "Inventory intelligence that gets results." The intelligence lies within the current business systems, or ERP. The results achieved are after the intelligence is harvested, analyzed, and optimized stocking strategies developed. Our customers often gain results such as reducing inventory by as much as 30% while achieving targeted service levels above 98%.
Feel free to visit www.tclogic.com for additional information about inventory optimization and how to effectively reduce inventory while protecting critically high service levels.
Tuesday, January 6, 2009
Northeastern Supply Selects TCLogic for Inventory Optimization
Leading Plumbing and HVAC distributor gains intelligence to realign their inventory that supports their reputation for high in-stock availability.
TCLogic, a leading provider of inventory intelligence and optimization solutions, announced today that Northeastern Supply, a leader in Plumbing and HVAC distribution, has chosen to implement TCLogic’s ROI+ inventory intelligence and optimization solution, setting the stage for improving their inventory investment return, while maintaining their high service levels.
Northeastern Supply has a dominant presence in the Mid-Atlantic distributing HVAC, plumbing and hardware materials through a network of 31 branches. They maintain an expansive inventory to support a reputation for high in-stock availability and are one of the largest privately-held distributors in the country for their industry.
When Northeastern began searching for a software tool, they looked for a company that would help realign their inventory throughout their network while helping them maintain their critically high service levels. According to Tony Goncalves, Director of Supply Chain for Northeastern, “during our search, it became clear that TCLogic understood how inventory impacts business results. They took the time to understand how we run our business.”
The financial impact of having excess inventory during a recession cannot be understated. “The right combination of inventory can free up available cash, reduce expenses and help businesses be more successful,” indicated Tom Uhrig, president, TCLogic. “Inventory intelligence provides insights that enable companies we work with see reductions in inventory of 10-30%, and increase or maintain their service level above 98% with a return of investment within 6-12 months.”
As a software solution, ROI+ is designed to enhance and supplement existing ERP applications, providing a comprehensive set of tools that build business intelligence and create strategies to improve the performance of inventory, helping businesses make more informed decisions about their inventory and purchasing practices.
During implementation, Northeastern soon discovered these benefits beyond realigning their network. “We were immediately able to make significant reductions to our surplus inventory by redeploying inventory through our network. We used to make decisions based on distribution folklore with little or no data,” comments Goncalves. “That has now all changed; I now have a tool to measure, analyze, and create inventory stocking strategies and support those decisions with inventory intelligence I didn’t have before.”
About TCLogic
Since 1997, TCLogic has helped manufacturers and distributors solve their inventory dilemmas and achieve bottom line results. TCLogic’s solution, ROI+, bridges the gap between corporate strategy and execution. It directly impacts a company’s balance sheet by reducing inventory carrying costs while meeting or exceeding a targeted customer service level. Please visit www.tclogic.com for additional information.
TCLogic, a leading provider of inventory intelligence and optimization solutions, announced today that Northeastern Supply, a leader in Plumbing and HVAC distribution, has chosen to implement TCLogic’s ROI+ inventory intelligence and optimization solution, setting the stage for improving their inventory investment return, while maintaining their high service levels.
Northeastern Supply has a dominant presence in the Mid-Atlantic distributing HVAC, plumbing and hardware materials through a network of 31 branches. They maintain an expansive inventory to support a reputation for high in-stock availability and are one of the largest privately-held distributors in the country for their industry.
When Northeastern began searching for a software tool, they looked for a company that would help realign their inventory throughout their network while helping them maintain their critically high service levels. According to Tony Goncalves, Director of Supply Chain for Northeastern, “during our search, it became clear that TCLogic understood how inventory impacts business results. They took the time to understand how we run our business.”
The financial impact of having excess inventory during a recession cannot be understated. “The right combination of inventory can free up available cash, reduce expenses and help businesses be more successful,” indicated Tom Uhrig, president, TCLogic. “Inventory intelligence provides insights that enable companies we work with see reductions in inventory of 10-30%, and increase or maintain their service level above 98% with a return of investment within 6-12 months.”
As a software solution, ROI+ is designed to enhance and supplement existing ERP applications, providing a comprehensive set of tools that build business intelligence and create strategies to improve the performance of inventory, helping businesses make more informed decisions about their inventory and purchasing practices.
During implementation, Northeastern soon discovered these benefits beyond realigning their network. “We were immediately able to make significant reductions to our surplus inventory by redeploying inventory through our network. We used to make decisions based on distribution folklore with little or no data,” comments Goncalves. “That has now all changed; I now have a tool to measure, analyze, and create inventory stocking strategies and support those decisions with inventory intelligence I didn’t have before.”
About TCLogic
Since 1997, TCLogic has helped manufacturers and distributors solve their inventory dilemmas and achieve bottom line results. TCLogic’s solution, ROI+, bridges the gap between corporate strategy and execution. It directly impacts a company’s balance sheet by reducing inventory carrying costs while meeting or exceeding a targeted customer service level. Please visit www.tclogic.com for additional information.
Tuesday, April 29, 2008
TCLogic Named a Top 100 Logistics IT Software Provider for 2008
Leading provider of inventory optimization solutions selected by Inbound Logistics Magazine for its annual review of software vendors.
TCLogic, a leading provider of inventory optimization solutions, announced today that it has been named by Inbound Logistics Magazine as a Top 100 Logistics IT Provider for 2008. TCLogic is listed among other best-of-breed and end-to-end solution providers for the supply chain technology market.
“The editorial staff worked long and hard to select 100 technology solution leaders from the 300+ candidate pool,” stated Felecia Stratton, Editor of Inbound Logistics. This is the first year that TCLogic has received this prestigious award.
“This recognition is further testament to the value we provide for our clients,” Tom Uhrig, president of TCLogic. “Especially in a down economy, companies are eager to identify and implement cost reduction opportunities. One of the best opportunities for reducing costs is through the reduction of inventory. We help companies gain a greater return on this valuable asset by providing intelligence about the performance of their inventory. With this intelligence, companies can make smarter decisions about where to invest their inventory dollars that facilitate the reduction of inventory while maintaining critically high service levels.”
TCLogic delivers web-based software solutions for inventory optimization and planning. TCLogic addresses the unique challenge of inventory management in distribution-intensive operations that enable clients to achieve the optimal balance between service level commitments and inventory levels.
About TCLogic
Since 1997, TCLogic has helped manufacturers and distributors solve their inventory dilemmas and achieve bottom line results. TCLogic’s solution, ROI+, bridges the gap between corporate strategy and execution. It directly impacts a company’s balance sheet by reducing inventory carrying costs while meeting or exceeding a targeted customer service level. Please visit www.tclogic.com for additional information.
TCLogic, a leading provider of inventory optimization solutions, announced today that it has been named by Inbound Logistics Magazine as a Top 100 Logistics IT Provider for 2008. TCLogic is listed among other best-of-breed and end-to-end solution providers for the supply chain technology market.
“The editorial staff worked long and hard to select 100 technology solution leaders from the 300+ candidate pool,” stated Felecia Stratton, Editor of Inbound Logistics. This is the first year that TCLogic has received this prestigious award.
“This recognition is further testament to the value we provide for our clients,” Tom Uhrig, president of TCLogic. “Especially in a down economy, companies are eager to identify and implement cost reduction opportunities. One of the best opportunities for reducing costs is through the reduction of inventory. We help companies gain a greater return on this valuable asset by providing intelligence about the performance of their inventory. With this intelligence, companies can make smarter decisions about where to invest their inventory dollars that facilitate the reduction of inventory while maintaining critically high service levels.”
TCLogic delivers web-based software solutions for inventory optimization and planning. TCLogic addresses the unique challenge of inventory management in distribution-intensive operations that enable clients to achieve the optimal balance between service level commitments and inventory levels.
About TCLogic
Since 1997, TCLogic has helped manufacturers and distributors solve their inventory dilemmas and achieve bottom line results. TCLogic’s solution, ROI+, bridges the gap between corporate strategy and execution. It directly impacts a company’s balance sheet by reducing inventory carrying costs while meeting or exceeding a targeted customer service level. Please visit www.tclogic.com for additional information.
Monday, February 11, 2008
Nationwide Distributor Selects TCLogic for Improved Inventory Management and Optimization
TCLogic, a leading provider of inventory optimization solutions, announced today that a nationwide distributor has chosen to implement TCLogic’s ROI+ inventory optimization and management solution, setting the stage for reducing their inventory, while maintaining their current high service levels.
The distributor has an extensive nationwide network that distributes product through modern facilities across the country. They maintain a large inventory investment and are one of the largest distributors in the country for their sector.
When the distributor began searching for a software tool, they looked for a company that would help reduce their inventory while also helping them maintain their already critically high customer service levels. According to the distributor’s project manager, they were most impressed with TCLogic and their staffs’ ability to push through the clutter to get to the heart of their business and work within the current business processes.
As a software solution, ROI+ is designed to enhance and supplement existing ERP applications, providing a comprehensive set of tools that analyze and create strategies to improve the monitoring and reporting functions of current inventory software, helping businesses make more informed and successful decisions about their inventory and purchasing practices.
The cost of doing business continues to increase; having the right stock, at the right time, in the right place and quantity is key to the success of a company’s business and their customers business. “The right combination can free up available cash, reduce expenses and help businesses be more successful,” indicated Tom Uhrig, president, TCLogic. “ROI+ is an ideal solution for companies that have unique and varied distribution networks. Many companies we work with see reductions of inventory by 10-30%, and increase or maintain their service levels to 98.5%+; all with a return of investment in 6-12 months.”
With four distribution centers currently utilizing ROI+, the distributor has plans to broaden implementation to their remaining distribution centers in the Midwest, California, Mexico and Puerto Rico. One of the main concerns for the distributor in implementing an inventory optimization solution was if they didn’t get it right the first time, their staff wouldn’t use the new system. But those concerns were completely put to rest as they worked with TCLogic and their staff during the implementation.
The distributor’s primary goal in implementing ROI+ inventory optimization was increasing inventory turns, but they soon discovered a secondary benefit after implementation. They found that with ROI+, their sales teams and material managers became more in sync with their company inventory needs, providing their sales team with less administrative work and more time to focus on sales.
TCLogic’s customer-centric approach worked well with the distributor, helping to customize the solution to fit the distributors individual needs and requirements. In addition, TCLogic’s staff has been on hand to quickly respond to questions and or issues relating to the software, and how it works with the distributor’s current business practices and rules.
About TCLogic
TCLogic, headquartered in Indianapolis, is a leading provider of solutions for inventory optimization and planning. TCLogic enables distribution intensive clients to achieve an optimal balance between customer service commitments and inventory levels. Since 1997, TCLogic has helped manufacturers and distributors throughout the country solve their inventory dilemmas and achieve bottom line results. For more information, visit www.tclogic.com or call 800.945.4877.
The distributor has an extensive nationwide network that distributes product through modern facilities across the country. They maintain a large inventory investment and are one of the largest distributors in the country for their sector.
When the distributor began searching for a software tool, they looked for a company that would help reduce their inventory while also helping them maintain their already critically high customer service levels. According to the distributor’s project manager, they were most impressed with TCLogic and their staffs’ ability to push through the clutter to get to the heart of their business and work within the current business processes.
As a software solution, ROI+ is designed to enhance and supplement existing ERP applications, providing a comprehensive set of tools that analyze and create strategies to improve the monitoring and reporting functions of current inventory software, helping businesses make more informed and successful decisions about their inventory and purchasing practices.
The cost of doing business continues to increase; having the right stock, at the right time, in the right place and quantity is key to the success of a company’s business and their customers business. “The right combination can free up available cash, reduce expenses and help businesses be more successful,” indicated Tom Uhrig, president, TCLogic. “ROI+ is an ideal solution for companies that have unique and varied distribution networks. Many companies we work with see reductions of inventory by 10-30%, and increase or maintain their service levels to 98.5%+; all with a return of investment in 6-12 months.”
With four distribution centers currently utilizing ROI+, the distributor has plans to broaden implementation to their remaining distribution centers in the Midwest, California, Mexico and Puerto Rico. One of the main concerns for the distributor in implementing an inventory optimization solution was if they didn’t get it right the first time, their staff wouldn’t use the new system. But those concerns were completely put to rest as they worked with TCLogic and their staff during the implementation.
The distributor’s primary goal in implementing ROI+ inventory optimization was increasing inventory turns, but they soon discovered a secondary benefit after implementation. They found that with ROI+, their sales teams and material managers became more in sync with their company inventory needs, providing their sales team with less administrative work and more time to focus on sales.
TCLogic’s customer-centric approach worked well with the distributor, helping to customize the solution to fit the distributors individual needs and requirements. In addition, TCLogic’s staff has been on hand to quickly respond to questions and or issues relating to the software, and how it works with the distributor’s current business practices and rules.
About TCLogic
TCLogic, headquartered in Indianapolis, is a leading provider of solutions for inventory optimization and planning. TCLogic enables distribution intensive clients to achieve an optimal balance between customer service commitments and inventory levels. Since 1997, TCLogic has helped manufacturers and distributors throughout the country solve their inventory dilemmas and achieve bottom line results. For more information, visit www.tclogic.com or call 800.945.4877.
Thursday, August 16, 2007
TCLogic featured in American Fastener Journal
Leading provider of inventory optimization discusses ‘Riding the Waves of Overseas Sourcing’.
TCLogic, a leading provider of inventory optimization solutions, was featured recently in the American Fastener Journal discussing the ‘ups and downs’ of overseas sourcing and how companies can ‘ride these waves’ for improved inventory management and optimization, ultimately coming out on top.
According to the article sourcing products from overseas suppliers can reduce costs. “More companies including those in the fastener industry are turning this direction to lower the costs of goods, reduce the amount of working capital needed to run the business, or simply find an available supplier for their products.”
“There are significant advantages to sourcing material from overseas,” the article explains. “And the rewards of overseas sourcing naturally come with risks. As companies begin navigating the waters of overseas sourcing, they can be successful by knowing what to expect and how to best manage those risks. Risks that include longer and more varied lead times, increased purchasing, changes in customer service levels, variable shipping components, and more.”
So how does a company that is sourcing overseas take into account the increase in variability on factors, including lead-times, higher volumes and stocking strategies, while improving their performance?
Thomas Uhrig, president of TCLogic, an inventory optimization software provider based in Indianapolis, sees the need for companies to improve their inventory management. “As companies deal with increased volumes of overseas products, they must do a better job of managing the rest of their inventory or potentially risk running out of warehouse space or, even worse, draining their lines of credit,” said Uhrig.
“Inventory optimization can be a very effective solution to come up with the right mix,” added Uhrig. “Companies utilizing inventory optimization software solutions are far more capable of maintaining higher service levels for their customers, but doing so without overstocking their locations. And they are much more able to work through the longer and varied lead times and increased volume that comes with sourcing overseas. The results they can see are better business results, especially in markets where their peers are struggling to compete.”
To view the entire article, visit the American Fastener Journal.
About TCLogic
TCLogic, headquartered in Indianapolis, is a leading provider of solutions for inventory optimization and planning. TCLogic enables distribution intensive clients to achieve an optimal balance between customer service commitments and inventory levels. Since 1997, TCLogic has helped manufacturers and distributors throughout the country solve their inventory dilemmas and achieve bottom line results. For more information visit TCLogic or call 800.945.4877.
TCLogic, a leading provider of inventory optimization solutions, was featured recently in the American Fastener Journal discussing the ‘ups and downs’ of overseas sourcing and how companies can ‘ride these waves’ for improved inventory management and optimization, ultimately coming out on top.
According to the article sourcing products from overseas suppliers can reduce costs. “More companies including those in the fastener industry are turning this direction to lower the costs of goods, reduce the amount of working capital needed to run the business, or simply find an available supplier for their products.”
“There are significant advantages to sourcing material from overseas,” the article explains. “And the rewards of overseas sourcing naturally come with risks. As companies begin navigating the waters of overseas sourcing, they can be successful by knowing what to expect and how to best manage those risks. Risks that include longer and more varied lead times, increased purchasing, changes in customer service levels, variable shipping components, and more.”
So how does a company that is sourcing overseas take into account the increase in variability on factors, including lead-times, higher volumes and stocking strategies, while improving their performance?
Thomas Uhrig, president of TCLogic, an inventory optimization software provider based in Indianapolis, sees the need for companies to improve their inventory management. “As companies deal with increased volumes of overseas products, they must do a better job of managing the rest of their inventory or potentially risk running out of warehouse space or, even worse, draining their lines of credit,” said Uhrig.
“Inventory optimization can be a very effective solution to come up with the right mix,” added Uhrig. “Companies utilizing inventory optimization software solutions are far more capable of maintaining higher service levels for their customers, but doing so without overstocking their locations. And they are much more able to work through the longer and varied lead times and increased volume that comes with sourcing overseas. The results they can see are better business results, especially in markets where their peers are struggling to compete.”
To view the entire article, visit the American Fastener Journal.
About TCLogic
TCLogic, headquartered in Indianapolis, is a leading provider of solutions for inventory optimization and planning. TCLogic enables distribution intensive clients to achieve an optimal balance between customer service commitments and inventory levels. Since 1997, TCLogic has helped manufacturers and distributors throughout the country solve their inventory dilemmas and achieve bottom line results. For more information visit TCLogic or call 800.945.4877.
Friday, July 27, 2007
Riding the Waves of Overseas Sourcing
The results are in. Sourcing products from overseas suppliers can reduce costs. More companies, including those in the fastener industry, are turning this direction to lower the costs of goods, reduce the amount of working capital needed to run the business, or simply find an available supplier for their products.
According to a recent CAPS Research study, entitled Effective Global Sourcing and Supply for Superior Results, almost half of all goods will be purchased offshore by 2010. The study also indicated that total goods purchased from overseas sources represented 31 to 40 percent of all purchases in 2005.
There are significant advantages to sourcing material from overseas. The survey outlined that on average, companies with effective global sourcing strategies report cost reductions of 19 percent and a 12 percent reduction in total cost of ownership costs.
Mark Cloud, vp of sourcing for Wurth Service Supply, a fastener company located in Indianapolis, and one of 300 companies in the Wurth Group, a nine billion dollar company headquartered in Germany, indicates overseas sourcing is becoming extremely common in the fastener industry. “Many of our commonly used items are now only available through overseas markets, said Cloud.
Just as waves go up and down, there is another side to sourcing overseas. While unit costs may go down, the protective layer of inventory needed to buffer supply risk, longer global lead times and increasingly complex administrative processes can chip away at any working capital improvement.
With Rewards, Expect More Risks
The rewards of overseas sourcing naturally come with risks. As companies begin navigating the waters of overseas sourcing, they can be successful by knowing what to expect and how to best manage those risks.
First and foremost they should expect longer and more varied lead times. Every day counts working to have stock available for sale. While you can expect longer travel with longer distances, overseas sourcing can also add to other lead time components such as receiving and put away.
“We are seeing very different lead times with sourcing overseas,” according to Cloud. “Our domestic lead times for a special part may be about 12 weeks domestically, but we are seeing 24 weeks on average with overseas sourcing.”
In addition, more components, including oceanic transit routes, port capacity, customs clearance, and inter-modal transfers can make lead times more variable even when sourcing from the same overseas suppliers.
Next, expect the purchase volumes to increase. “Overseas manufacturers are geared today to produce a very high volume, that’s how they offer lower costs, and that’s the way they sell the product,” according to Cloud. “In some cases we may have to bring over our entire annual volume, creating one of the biggest challenges that we face.” Purchasing inventory in this manner can stress warehouse operations as well as working capital budgets.
A high customer service level, one of the most important goals for any organization, can be at risk. “When buying from overseas, you have to pay much more attention when confirming and expediting orders,” according to Cloud. “Because there are so many more opportunities for something to go wrong, considerations like longer lead times, administrative processes, customs clearing, all contribute to longer lead times and can affect our service levels.”
And, it can become even more challenging to maintain, let alone improve, high service levels to customers.
Better Inventory Management Required
So, how does a company that is sourcing overseas take into account the increase in variability on factors, including lead-times, higher volumes and stocking strategies, while improving their performance? Unfortunately, many times these issues are addressed with higher inventory levels.
The higher inventory levels are a result of utilizing traditional planning methods like days of supply and ABC analysis. While these methods were effective when supplier lead times and demand were more predictable and consistent, that is no longer the case in today’s global environment.
Sourcing overseas creates turbulent waters for attributes that impact how inventory is planned and how inventory performs. Attributes such as lead times, volume, and customer service levels become less predictable and are more difficult to manage with traditional planning theories.
An AberdeenGroup benchmark study released in 2006, entitled The Technology Strategies for Inventory Management Benchmark Report, and reported on Idustryanalystsreporter.com, finds that companies adopting new inventory management technology are able to better manage supply chain complexity and can reduce inventories by 20 to 30 percent while simultaneously increasing customer service levels.
The study also outlines that nearly 70% of the survey respondents say they have made or been asked to provide recommendations in the past six months to management on how to improve their inventory management technology. And fully 83% of companies say they have made or been asked to make process recommendations for inventory reduction strategy within the past six months.
Thomas Uhrig, president of TCLogic, an inventory optimization software provider based in Indianapolis, sees the need for companies to improve their inventory management. “As companies, deal with increased volumes of overseas products, they must do a better job of managing the rest of their inventory or potentially risk running out of warehouse space or, even worse, draining their lines of credit,” said Uhrig.
For planners this may involve purchasing other products more frequently, redistributing product amongst locations to obtain the optimal mix, realigning order points, safety stock, EOQ (Economic Order Quantity) or utilizing a postponement policy for purchasing new stock.
“Inventory optimization can be a very effective solution to come up with the right mix,” added Uhrig. “Companies utilizing inventory optimization software solutions are far more capable of maintaining higher service levels for their customers, but doing so without overstocking their locations. And they are much more able to work through the longer and varied lead times and increased volume that comes with sourcing overseas. The results they can see are better business results, especially in markets where their peers are struggling to compete.”
Sources:
CAPS Research
Industryanalystsreporter.com
AberdeenGroup
Tom Uhrig, president, TCLogic
Mark Cloud, vp of sourcing, Wurth Service Supply
According to a recent CAPS Research study, entitled Effective Global Sourcing and Supply for Superior Results, almost half of all goods will be purchased offshore by 2010. The study also indicated that total goods purchased from overseas sources represented 31 to 40 percent of all purchases in 2005.
There are significant advantages to sourcing material from overseas. The survey outlined that on average, companies with effective global sourcing strategies report cost reductions of 19 percent and a 12 percent reduction in total cost of ownership costs.
Mark Cloud, vp of sourcing for Wurth Service Supply, a fastener company located in Indianapolis, and one of 300 companies in the Wurth Group, a nine billion dollar company headquartered in Germany, indicates overseas sourcing is becoming extremely common in the fastener industry. “Many of our commonly used items are now only available through overseas markets, said Cloud.
Just as waves go up and down, there is another side to sourcing overseas. While unit costs may go down, the protective layer of inventory needed to buffer supply risk, longer global lead times and increasingly complex administrative processes can chip away at any working capital improvement.
With Rewards, Expect More Risks
The rewards of overseas sourcing naturally come with risks. As companies begin navigating the waters of overseas sourcing, they can be successful by knowing what to expect and how to best manage those risks.
First and foremost they should expect longer and more varied lead times. Every day counts working to have stock available for sale. While you can expect longer travel with longer distances, overseas sourcing can also add to other lead time components such as receiving and put away.
“We are seeing very different lead times with sourcing overseas,” according to Cloud. “Our domestic lead times for a special part may be about 12 weeks domestically, but we are seeing 24 weeks on average with overseas sourcing.”
In addition, more components, including oceanic transit routes, port capacity, customs clearance, and inter-modal transfers can make lead times more variable even when sourcing from the same overseas suppliers.
Next, expect the purchase volumes to increase. “Overseas manufacturers are geared today to produce a very high volume, that’s how they offer lower costs, and that’s the way they sell the product,” according to Cloud. “In some cases we may have to bring over our entire annual volume, creating one of the biggest challenges that we face.” Purchasing inventory in this manner can stress warehouse operations as well as working capital budgets.
A high customer service level, one of the most important goals for any organization, can be at risk. “When buying from overseas, you have to pay much more attention when confirming and expediting orders,” according to Cloud. “Because there are so many more opportunities for something to go wrong, considerations like longer lead times, administrative processes, customs clearing, all contribute to longer lead times and can affect our service levels.”
And, it can become even more challenging to maintain, let alone improve, high service levels to customers.
Better Inventory Management Required
So, how does a company that is sourcing overseas take into account the increase in variability on factors, including lead-times, higher volumes and stocking strategies, while improving their performance? Unfortunately, many times these issues are addressed with higher inventory levels.
The higher inventory levels are a result of utilizing traditional planning methods like days of supply and ABC analysis. While these methods were effective when supplier lead times and demand were more predictable and consistent, that is no longer the case in today’s global environment.
Sourcing overseas creates turbulent waters for attributes that impact how inventory is planned and how inventory performs. Attributes such as lead times, volume, and customer service levels become less predictable and are more difficult to manage with traditional planning theories.
An AberdeenGroup benchmark study released in 2006, entitled The Technology Strategies for Inventory Management Benchmark Report, and reported on Idustryanalystsreporter.com, finds that companies adopting new inventory management technology are able to better manage supply chain complexity and can reduce inventories by 20 to 30 percent while simultaneously increasing customer service levels.
The study also outlines that nearly 70% of the survey respondents say they have made or been asked to provide recommendations in the past six months to management on how to improve their inventory management technology. And fully 83% of companies say they have made or been asked to make process recommendations for inventory reduction strategy within the past six months.
Thomas Uhrig, president of TCLogic, an inventory optimization software provider based in Indianapolis, sees the need for companies to improve their inventory management. “As companies, deal with increased volumes of overseas products, they must do a better job of managing the rest of their inventory or potentially risk running out of warehouse space or, even worse, draining their lines of credit,” said Uhrig.
For planners this may involve purchasing other products more frequently, redistributing product amongst locations to obtain the optimal mix, realigning order points, safety stock, EOQ (Economic Order Quantity) or utilizing a postponement policy for purchasing new stock.
“Inventory optimization can be a very effective solution to come up with the right mix,” added Uhrig. “Companies utilizing inventory optimization software solutions are far more capable of maintaining higher service levels for their customers, but doing so without overstocking their locations. And they are much more able to work through the longer and varied lead times and increased volume that comes with sourcing overseas. The results they can see are better business results, especially in markets where their peers are struggling to compete.”
Sources:
CAPS Research
Industryanalystsreporter.com
AberdeenGroup
Tom Uhrig, president, TCLogic
Mark Cloud, vp of sourcing, Wurth Service Supply
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