One of the capabilities GAINS is best known for is its Inventory Optimization solution. A core inventory management offering since its founding, it has been continually improved upon and regularly enhanced to take advantage of modern technology, including machine learning and Artificial intelligence. However, the foundation of the GAINS Inventory Optimization solution remains its proprietary algorithms designed to take into consideration a comprehensive set of cost and source variabilities, including:
- service-level goals
- demand plan error
- lead-time for every SKU by location across the enterprise
As one of the GAINS’ bedrock solutions, it has been academically vetted and field tested over several decades. The GAINS Inventory Optimization solution remains a viable and effective inventory management solution, even more so today; by managing variability and uncertain demand, GAINS customers have improved their inventory levels, service levels and reduced expediting while reducing inventory investments, minimizing operating costs, and maximizing profits.
A Jewelry Manufacturer
A recent example of the Inventory Optimization software’s effectiveness is a US-based fine jewelry manufacturer filling more than 4000 orders per day for its over 40,000 customers all over the world. This customer’s extensive portfolio is filled with a vast range of items, including customizable jewelry, packaging, and jeweler’s tools. Their considerable inventory includes millions of products and components sourced from more than 500 suppliers in over 50 countries, making demand planning and adhering to targeted service levels a complex undertaking.
Before GAINS, demand and inventory planning had become a taxing, burdensome manual task employing Excel spreadsheet calculations, resulting in inconsistent forecasting, a lack of agility, and high inventory costs. Consolidating demand and supply data from their various external data sources became a grueling task, taking over nine hours to complete. Lacking a dedicated Supply Chain Planning solution, the jewelry manufacturer found it was unable to scale its operations, including manufacturing, to improve its service levels, inventory levels, and further grow the business.
Seeking a Better Solution
After concluding that a Supply Chain Planning solution was necessary for their continued growth, a request for proposal process (RFP) was begun. An RFP was authored and the organization considered a few inventory management software providers, including Oracle Demantra, but ultimately chose GAINS based on its ability to provide:
- Inventory Policy Optimization using advanced algorithms to precisely achieve targeted service levels and comprehensively manage sources of planning error, including:
- demand plan/forecast error
- lead-time variation
- supply yield
- optimal ordering cycles
- Service Level Optimization automatically determining unique service levels for each item to achieve an aggregate target while minimizing or maximizing a business objective, such as:
- minimized total cost
- minimum inventory
- specific inventory turn targets
- maximum profits
- Sourcing Optimization determining suppliers who provide the lowest-total-cost supply, including:
- solving for the trade-off of unit cost
- purchase minimums
- lead time
- Network Flow Optimization ascertaining which supply route provides the lowest-total-cost supply, considering lead times, minimums (line-item and PO-level), handling, and transportation costs
- Multi-echelon/ Stocking Policy Inventory Optimization figuring out whether or not to stock an item and at what service level, solving for interdependencies among locations and/or within the bill-of-material (BOM) to devise postponement strategies and address customer expectations to minimize cost or maximize profit
Going Live and Launching the Inventory Management Solution
Combining the GAINS Supply Chain Performance Optimization Platform with its Proven Path-to-Performance Methodology (P3) allowed the manufacturer to achieve rapid onboarding while driving tangible results. After its swift eight-week implementation, the GAINS platform went live in the middle of the organization’s busiest season with little interruption to its day-to-day operations. The manufacturer realized immediate savings by transitioning to a cloud-based infrastructure from an on-premise software solution to eliminate its associated hardware cost and freeing up internal IT resources.
Facing The Pandemic with GAINS
At the start of the pandemic, the future was uncertain, prompting the manufacturer to ask: Would people still be interested in purchasing luxury items? Would excess inventory become an issue? Can their supplier network, spread over 50 countries, continue to operate under the burdens of staffing shortages and supply chain management issues now facing the world? How would the businesses maintain its standard of service, continue to excel in inventory management, providing same-day shipping for 98.5 percent of its products?
The manufacturer’s planning and procurement team began to work in tandem with their professional services team to run models in GAINS to develop an inventory management strategy around various scenarios considering the volatile shifts in demand, impacts of the rise in e-commerce volume due to the institution of stay-at-home orders, rapid swings in the global market for precious metals and gems, geopolitical risks due to border closings and transportation problems, and velocity of its safety stock levels etc. The manufacturer ran a host of different demand forecasting scenarios to prepare for the impact of the pandemic on their business and inventory levels and determine best practices. Using GAINS to develop models around different inventory management possibilities and providing much-needed data to their executive leadership team to help them make critical decisions on how the business should move forward.
GAINS was used to quickly spot and respond to inventory management trends and to develop:
New and Existing Partnerships- Enhanced existing partnerships in new ways as well as established new relationships to accommodate additional volume. These changes led to expanded production capacity at several of its facilities less affected by the pandemic to accommodate those which were harder hit.
An “Accordion” Capacity Model- Increasing capacity where existing standards of quality could be maintained at a favorable cost, allowing the production capacity to quickly flex up or down to match the demand for products without high levels of safety stock.
Digital Transformation- Continue and expand the use of the GAINS platform, making more extensive use of advanced analytics, machine learning, automation, and process transparency to improve service levels, control safety stock, reduce cost, boost agility and right-size inventory levels.
Results of Inventory Optimization
After instituting GAINS, demand planning times were reduced by about 80 percent, and precision increased to SKU location and inventory visibility. The manufacturer is able to evaluate a multitude of scenarios and continually re-optimize the business based on the most up-to-date inventory management information. The overnight processing of ERP data into GAINS went from being an 8-9 hour task using on-premise software to an hour to 30 minutes via the cloud. Using GAINS’ automated demand planning process, planners and inventory managers experienced immediate productivity improvement, enhancing attribute-based demand forecasting for new items and faster processing of its larger stock portfolio. The comprehensive forecasting capabilities of GAINS helped the organization achieve a 99.97 percent order fill rate and reduce its inventory levels by 30 percent, amounting to roughly $1 million a year.