Steel and Pipe Supply Success with GAINS
Metals Distribution: A Steely Focus on Customer Service
“With GAINS, we’ve been able to maintain our excellent service to our customers, while getting better at managing our working capital. We have outperformed our peers on that metric in many instances.”
– Matt Crocker, CEO
Headquartered in Manhattan, Kansas, Steel and Pipe Supply is a leading carbon steel distributor with value-added processing, coil processing, and logistics capabilities. For over 60 years, this private company has been driving “to exceed our customers’ expectations in everything we do.” Steel and Pipe Supply has metals distribution and service centers in Kansas, Missouri, Oklahoma, and Texas.
The economic downturn of 2008 was a shock for the entire metals industry; demand dropped suddenly and inventories were difficult to lower to profitable levels. The crisis made it clear to Steel and Pipe Supply (SPS) that they needed a new software solution with specific Supply Chain Planning and Optimization capabilities relevant to their industry and with more sophisticated capabilities than its ERP (SAP) to manage inventory. SPS began a search for advanced planning and optimization solutions by evaluating several vendors. GAINS® was selected for its sophisticated optimization capabilities, ease of use, and forecast modeling.
The Business Case
During the evaluation, the expertise of the GAINSystems team in the metals distribution industry and the ability to build a specific business case for SPS were clear differentiators between GAINSystems and other software solution providers.
One of the key steps in the vendor evaluation was conducting an IIPSE (Inventory Investment Profit and Service Evaluation), during which an extensive set of SPS’ data was processed in GAINS. The results provided quantifiable value that GAINS could uniquely deliver.
[above] Months of supply decreased while maintaining both service levels and profitability.
GAINS identified numerous places for improvement across SPS’ entire supply chain, starting with multi-echelon inventory optimization (MEIO) and replenishment planning. While GAINS identified that the majority of items should have lower inventory levels, there were also many items recommended to have increased inventory levels in order to prevent stockouts or expediting, while maintaining profitability.
“With GAINS, we have a lot more data. We can see three years of sales history for each item. For items that have current demand, we have more flexibility. For example, if we are buying 40-foot beams and have demand for 20-foot beams as well, we can account for cutting, and roll it all into our 40-foot purchase order. We could not see that dependent demand with SAP, so GAINS certainly helped us out a lot. ”
– Jana Bishop, Senior Purchasing Agent
- Optimized Inventory: Going into the project, SPS felt that reducing forecast error would provide the largest share of the expected benefit. It became evident, however, that GAINS’ highest financial impact was due to its dynamic Inventory Policy Optimization. Over two-thirds of the Inventory Savings was attributable to GAINS Optimization. Service level improvements also enabled other savings such as reduction in out-of-territory expediting/transport costs.
- Improved Efficiency: Buyers and Planners now spend less time on regular ordering tasks by letting GAINS‘ exception based workflow deal with the typical “headaches,” and spend more time dealing with outliers, larger-impact areas, and customer service. “It definitely helps prioritize time and energy for the buyers. This system will tell you every day what items you need to replenish tomorrow, the emergency items. That’s a huge time saver,” said Pamela Jager, Manager of Financial Planning and Analysis. In the eight years using GAINS, SPS has not had to add any new buyers or planners, despite company growth.
- Ease of Use: GAINS continuously adapts to SPS’ processes. For example, planners and buyers can manage different parameters by item and supplier when sourcing an order. Once the preferred supplier is determined, GAINS is then used to identify key planning parameters such as lead time, minimum order quantity, order bundles, etc. This gives SPS flexibility and speed of response they did not have before.
After years of use, GAINSystems is counted on as a trusted partner of SPS and its solution is a key component of their company-wide planning infrastructure. The GAINSystems account team has guided SPS through its journey, improving inventory segmentation, and maintaining optimal service level and inventory targets. The Steel and Pipe Supply team has been continually improving their processes and their understanding of how to obtain ever-greater benefits from the system, both with the account team’s support and through GAINSystems-sponsored events, such as GAINS University and GAINS Research Group (GRG).