Challenge: A global manufacturer of construction equipment needed to reduce inventory holding costs and improve response times for spare part deliveries to customers.
Solution: To evaluate alternate supply base strategies and determine the optimal safety stock placement, the company modeled sourcing strategies across its large component supply base. Inventory optimization software was used to evaluate daily order history and help the company better understand the relationships of demand variability in individual components and groups of components that make up spare part kits.
Results: By modeling various scenarios with differentiated sourcing structures the company was able to understand the trade-offs between inventory holding cost and service in the network, as well as determine the optimal safety stock targets for spare part components and component kits sold as finished goods to end customers. The modeling effort was able to identify 12-15 percent of potential cost savings in the supply chain.
About the Solution Provider: LLamasoft supply chain design software helps organizations worldwide design and improve their supply chain operations. LLamasoft solutions enable companies across a wide range of industries to model, optimize and simulate their supply chain network, leading to major improvements in cost, service, sustainability and risk mitigation.