Syncron's Retail Inventory Management Software
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Syncron's Retail Inventory Management Software

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Learn more about Syncron's Retail Inventory Management in Dealer Oriented Industries. Read about typical Retail Inventory Management/vendor managed inventory challenges and highlights of Syncron’s ...

Learn more about Syncron's Retail Inventory Management in Dealer Oriented Industries. Read about typical Retail Inventory Management/vendor managed inventory challenges and highlights of Syncron’s software solution designed to provide tangible results.

These results include improving customer service and over-the-counter availability, service part sales growth, reduced inventory levels and capital tied up in inventory, and more.

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Syncron's Retail Inventory Management Software Document Transcript

  • 1. Birmingham UK, 1 March, 2011 Syncron UK Ltd Baskerville House Centenary Square Birmingham B1 2ND United Kingdom PHONE: +44 121 503 2650 MOBILE: +44 121 503 2651 E-MAIL: info@syncron.com www.syncron.com Retail Inventory Management Aftermarket Inventory Management in Dealer Oriented IndustriesIssued by: Steven TonksVersion: 1.1Latest changed: 1 March, 2011
  • 2. 2 (6)High Level ChallengesFor many dealer organizations, successful aftermarket sales operations are ofvital importance to their long term financial health as whilst only 15% of theirrevenue is gained from aftermarket sales this activity accounts for more than50% of profit.Aftermarket sales profitability is increasingly under pressure from a numberof medium and long term factors: Increasing reliability of vehicles and equipment Increasing competition from independent operators Reduced service volumes directly related to reduced vehicle use or equipment sales during the recession. Increased complexity, cost and range of parts resulting from technology and marketing development including a desire to extend dealer relationship beyond warranty period.In addition, successful aftermarket sales operations have more than a directfinancial impact. With customers up to 50% less likely to consider themanufacturer in a future purchase if they have a poor repair experience, apositive aftermarket sales experience is vitally important in establishing along term relationship with the brand.However various surveys suggest dealers are typically only able to offer therequired part 65-75% of the time meaning as many as one in threecustomers experience the cost and inconvenience associated with vehiclesbeing off road for longer than is needed. This is in stark contrast to the highavailability levels at manufacturer central warehouses.Even though effective management of dealer inventory has a direct impacton profitability (as the second highest cost after personnel) and customersatisfaction, its importance is often overlooked.A dealer typically holds 5,000 parts in stock where as the manufacturer mayhold 200,000 or more lines in their central warehouse. However the dealeroften has little support to determine which of these products to hold in stock.This selection is often done by “rule of thumb” based on experience or gutfeel, and decisions can easily be influenced by recent experience or biasagainst more expensive parts.In the vast majority of cases this results in significant overstocking of anarrow range of parts at the expense of better availability across a widerrange of lines. Put simply, major improvements can be made by reducing thedepth of inventory held and increasing the range.The resulting control over end-customer service with predictable andconsistent results provides significant benefits to manufacturers and dealersalike.There are a number of ways to address this issue and achieve improvedover-the-counter availability whilst reducing costs: Larger dealers and Vertically Integrated Retailers can improve their own inventory management capability through implementing inventory management processes and techniques alongside their DMS and ERP applications. OEMs and Manufacturers can assist dealers by taking greater control in recommending stocking profiles and managing the inventory replenishment process.Issued by: Steven TonksVersion: 1.0Latest changed: 1 September, 2010
  • 3. 3 (6)Improving Dealer CapabilityFor many dealers with limited organizational resources, effectively managinginventory is a time consuming and difficult task. The high percentage of partswith slow erratic demand combined with the sheer number of parts that canpotentially be stocked means that strategic approach is rarely taken.Decisions regarding what and how much to stock are made on experience oreven worse delegated to staff without the appropriate knowledge or training.Multiple ways of working exist over multiple sites with each location followinga different business process. The resulting inconsistent supply chainperformance and lack of a consistent, repeatable model is a frequentfrustration to senior management. The limited systems support provided byERP and DMS applications further compounds the problem.DMS Solution BenchmarkingIssue ResultForecast is based on straight moving average Slow reaction to changes in demandbasis of the last six months demand Inventory shortages as sales grow, excess inventory as sales declineSeasonality not included in forecast calculation Inventory is not aligned with demand in the season resulting in lost sales and excess inventory at the end of the seasonLarge amounts of manual processing and Opportunity cost of time that could be morereview required effectively used elsewhere Sub-optimal decisions made due to large number of parts to be reviewedNo techniques available for management of Excess inventory for less important partsslow, lumpy and erratic products/ demand High risk of obsolete inventoryNo support for “What to stock” and “where to Sub-optimal inventory balance/ profile instock” decisions branch (lost sales opportunity, excess inventory)Stock levels determined by simple “min-max” Inventory balance is not ideal resulting in excess inventory in some products and shortages in othersLimited support for Demand Filtering Very difficult to exclude export and tender business from forecast calculation resulting in excess inventory being held against “one-off” events in the pastSupplementing the experience of the dealer staff with effective inventorymanagement tools enables accurate forecasts to be developed, consistentand frequent recommendations of parts that should be stocked, optimalservice level-driven stock levels to be determined, and replenishmentrecommendations automatically calculated. In addition, shortages and excessstock levels can be quickly identified allowing inventory to be redistributedbetween locations if appropriate.The level of automation that such tools deliver ensures a transparent,repeatable business process and has a further benefit in terms of the amountof time the parts manager is able to devote to adding value to the business,rather than spending time on administrative efforts.Issued by: Steven TonksVersion: 1.0Latest changed: 1 September, 2010
  • 4. 4 (6)Retail Inventory ManagementRetail Inventory Management initiatives in the aftermarket business extendthe above with the manufacturer taking responsibility for determining theappropriate inventory profile, generating a forecast and makingreplenishments. In some instances the manufacturer allows the dealer toreview and change the recommendation, in other cases the manufacturertakes complete control.The complexity associated with integrating with many independentlyoperated systems across this extended supply chain has historically been achallenge. However new integration technology and recognition of the greaterbenefits for both manufacturers and dealers mean this is no longer asignificant barrier.The benefits to the manufacturer are clear. In addition to the increased partssales associated with an improved stocking profile, the visibility gained of thenetwork chain enables more consistent performance supported by reportsand KPIs.Demand is more stable resulting in reduced fulfillment and transportationcosts. In addition, the increased visibility provides a foundation for processessuch as direct delivery, distributed order management, and re-distributionbetween dealer locations. Most importantly the closer relationship andimproved dealer profitability supports retention and loyalty of dealers.For the dealer this closer connection between their processes and themanufacturer central warehouse supply chain also has benefits above andbeyond those mentioned in the previous section.The wider knowledge available to the manufacturer enables more informedstocking decisions to be made based on national profiles and part movement.This is particularly useful for new product introductions the new part can beadded to the stock profile before demand has materialized at the dealer onthe basis of demand elsewhere in the market. The further reduction inadministrative effort also yields benefits.Critical to such initiatives is a robust buyback process where themanufacturer agrees to take back excess inventory after a period of timethus reducing the dealers fear that unnecessary inventory will be supplied.This is less of a risk to the manufacturer as one might think, as studies haveconsistently shown that as a result of getting replenishment right first timethe percentage of returns is much lower than experienced in non-managedprocesses.Issued by: Steven TonksVersion: 1.0Latest changed: 1 September, 2010
  • 5. 5 (6)Business CaseThe investment in such initiatives whether dealer or manufacturer led isbased on increased sales and a reduction in inventory and fulfillment costs,either in terms of actual stock holding cost or a reduction in cost ofemergency purchases.The table below shows examples of measurable benefits from previousinitiatives: Branch/Dealer Central Control/ Managed Manufacturer ManagedOTC Availability 67% to 75% 94 to 96%Growth in Parts Sales 6% 16%Emergency Purchases 25% 15%Returns 6.2% 3%Time spent by dealer 90 min 10 minInventory -30%>Inventory Turns +10 to +25%Supply Chain Cost -15% to -40%>It is harder to measure improved service department productivity and partsdepartment efficiency and the direct impact on customer satisfaction andmarket reputation, although several manufacturers have directly linkedimproved customer retention for vehicles and new equipment to improvedparts availability.Finally, the improved visibility of network inventory provides a platform forfurther advances in supply chain execution. For example distributed ordermanagement, where the existing stock in the supply chain can be moreeffectively utilized and alternative routes to market can be used with aconsequent improvement in availability and reduction in lead times.Issued by: Steven TonksVersion: 1.0Latest changed: 1 September, 2010
  • 6. 6 (6)About SyncronSyncron has more than 10 years experience of helping leading companieswith complex supply chains to maximize their aftermarket performance bydelivering high availability to end-customers whilst balancing investment,resources and cost.Our ERP-independent software solutions for global inventory management,global order management, global price management and master datamanagement, are implemented faster and at lower cost than other solutions.Syncron clients are market-leading companies within the industries ofaerospace and defense, automotive, consumer and industrial products,industrial equipment, and mining and construction equipment.Aftermarket Retail Inventory Management is a specific area of our expertise,not only from a functional and technical perspective but also in theexperience of integrating many independent businesses into a transparentsupply chain. In service part Retail Inventory Management implementationsour expertise has been used to support the OEM in discussions with thedealerships to achieve the optimal approach and inventory profile.With users in 96 countries worldwide Syncron’s customers include: AtlasCopco, BAE Systems, Electrolux, JCB, Komatsu, Mazda, Metso, RenaultTrucks, Sandvik, Scania, Tetra Pak, Toyota, Trelleborg, Volvo ConstructionEquipment and Volkswagen Group.More information can be found at www.syncron.com Global Headquarter Local Offices Syncron International AB To find an office near you, please visit: Ö. Järnvägsgatan 27 www.syncron.com/contact S-111 20 Stockholm Sweden Phone: +46 8 410 802 00 Email: info@syncron.comIssued by: Steven TonksVersion: 1.0Latest changed: 1 September, 2010