Karen Hogan, global director of operational excellence at Southco, discusses the challenges of multi-echelon inventory optimization and how Southco has used solutions from LLamasoft to integrate IO into a monthly planning process.
Southco Inc. has facilities and distribution points in the Americas, Europe and Asia. It implemented the inventory optimization tool in LLamasoft’s Supply Chain Guru to more effectively position different products across these locations.
“We are optimizing where we put inventory throughout our global footprint in order to serve our customers better and improve on-time delivery,” says Hogan. “Previously we didn’t have this capability. Supply Chain Guru is a great optimizing tool to determine exactly what point in the world is best to hold inventory to meet required customer service levels.”
Southco built an automated system to pull all the critical data the optimization model needs from SAP and data warehouses. “This helps our global planners tremendously,” Hogan says. “That data collection would have been almost impossible to do manually.”
Early in this process, Southco discovered that it needed to optimize its entire portfolio of products, Hogan says. “We could not segment products into subsets because of the complexity of our supply chain. As we worked through this issue we decided to include all of our data.” The amount of data that this entailed created a few problems with the algorithm in our software package, Hogan says, but this issue was solved with help from the LLamasoft team.
LLamasoft’s advanced modeling and optimization capability helps Southco’s global planners analyze all the data available to them, says Hogan. “It has given us a leg up on how we analyze data and we are making better decisions as a result, which has led to better on-time delivery performance and a reduction in the amount of inventory Southco holds globally,” she says.
Southco now is looking at using Supply Chain Guru to optimize its network, Hogan says. “We have a pretty stable network at Southco, so we decided to focus on optimizing inventory first, which is the reverse of what a lot of companies do. Now we are going to go back and look at our network to see how we can potentially reduce transportation costs,” she says.