By today’s mega-company standards, Procurator isn’t especially large. But the Swedish provider of industrial safety products and janitorial supplies has a complex, multichannel supply chain.
With annual turnover of around $190m, Procurator is both a retailer and a wholesaler. It runs 17 stores plus wholesale cash-and-carry operations. And, like any company that wants to be successful today, it maintains an online presence for both sales channels.
In addition to its operations in Sweden, Procurator has business units in Denmark, Finland, Norway and Poland. Products include hardhats, glasses, shoes and clothing for personal protection in industries such as construction, as well as cleaning supplies and heavy equipment. The company has four distribution centers holding some 19,000 SKUs with highly variable order lead times. Sourcing ranges from Asia to local providers in Scandinavia.
A corporate merger in 2008 caused Procurator to reevaluate the way it was calculating inventory levels and customer demand. When the market tanked soon after, the company was left with large amounts of overstock from the acquisition, recalls purchasing director Anders Armandt.
Information technology was lagging as well. Procurator found itself trying to run a multichannel company with an old purchasing system, driven by its enterprise resource planning software. Forecasts were long in developing and inaccurate in practice. Proactive supply-chain planning had become an impossibility, Armandt says.
Meanwhile, Procurator was looking to consolidate inventory at fewer locations, closing some warehouses and moving stock to its main distribution center at the Malmo, Sweden headquarters. There was only one problem: “We didn’t have a clue what was in them,” says Armandt.
The ERP system proved inadequate to handle the job. The lack of visibility meant that Procurator’s buyers often had to scramble for product at the last minute in order to hit service goals. Forecasts were sales-driven, based entirely on historical data. The result was excess inventory for multiple items, coupled with poor customer service.
The One-Stop System
Procurator’s goal was to find one system that could efficiently handle both warehouse operations and purchasing, while giving it a better handle on product forecasts. It looked at three vendors of demand-forecasting, planning and replenishment software before settling on Marietta, Ga.-based Blue Ridge Inventory Group LLC.
Armandt was impressed by the flexibility of Blue Ridge’s technology, based on the provider’s years of experience in developing purchasing systems. Moreover, he says, Blue Ridge was able to come up to speed quickly. Procurator selected the vendor in June 2009, and implementation was underway by the following October. “We needed help fast,” he says.
Procurator’s data was in fairly good shape, says Blue Ridge chief executive officer Greg White. The problem was that its forecasting and replenishment processes were ineffective. Over-reliance on the company’s ERP system for planning was resulting in too much manual intervention. “Human emotion takes over where judgment and science should be in play,” White says.
Over a five-month period, data from around 450 suppliers was cleansed and inputted into the Blue Ridge system known as Clarity Replenish. Armandt says the benefits were already evident with onboarding of the first 10 to15 suppliers. At last, Procurator had at its fingertips precise details about what and how much had been purchased, along with order lead times and the service level for each item.
“I wanted the system fully updated,” he says. “I didn’t want anything in my purchaser’s head.”
With the help of Blue Ridge, Procurator was able to segment demand by customer, channel, location and item. In the process, it gained a more accurate picture of demand. “Most importantly,” says Armandt, “we could better understand the ‘why’ behind customer demand that a stochastic forecast could never show.”
Few companies with the complexity of Procurator are able to generate one forecast to cover all their needs. But Blue Ridge’s system can aggregate data from multiple forecasts to generate a single demand number. The combined result is subject to less variability, the company says.
Handling Multiple Channels
For the first time, Armandt was able to create a single purchase order to replenish multiple channels. “Additionally,” he says, “we no longer had to separate files of inventory for different channels, or the customers with whom we had a contract to supply a certain level of inventory. We could also carry out distribution from a central location, further enhancing logistical efficiency.”
As a result, Armandt could provide suppliers with purchasing forecasts months in advance, enabling the partners to work on cutting order lead times.
With one system handling multiple processes, Procurator could start to address the imbalance between sales and purchasing. Today, says Armandt, the latter has “significantly more influence within the company.”
Even so, Procurator faced a human-relations challenge when it moved to split product managers and purchasers into two departments. Fearing that their jobs were in jeopardy, some employees were reluctant to use the new application, even to the point of reverting back to the old system. Eventually, says Armandt, they came to understand that the new method of working saved time, freeing them up to focus on more accurate forecasting and lead-time calculation.
Hard benefits derived from the initiative were another strong selling point. In the first eight months of working with Blue Ridge, Procurator boosted its in-stock performance levels from 89 percent to 94 percent. At the same time, it reduced inventory levels from around $19.4m to $15.2m.
Subsequently, Procurator has further improved service to 97 percent, slashed inventory by 25 percent and increased turns from 2.9 to 6.5.
The company’s success prompted Armandt at the beginning of 2012 to make a bold commitment to top management: by year’s end, he would cut inventory by another $1.25m. When the target date arrived, he had actually achieved a further reduction of $2m.
With the Blue Ridge system fully up and running, Armandt is next planning to shift Procurator’s use of the Blue Ridge application to a hosted, software-as-a-service (SaaS) model. The change, he says, will allow for “more power in the system, and faster calculation for analyzing.” In addition, Procurator plans to expand its use of Clarity from the Malmo warehouse to additional locations, including the retail stores, so that it can shift overstock to wherever it’s needed.
The system gave Procurator the ability to address “organizational pitfalls,” says Armandt. “We are now a proactive, lean and efficient purchasing machine.”
Blue Ridge Inventory Group
Keywords: supply chain, supply chain management, inventory management, inventory control, global logistics, logistics management, warehouse management systems, WMS, logistics services, supply chain planning, sourcing solutions