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As its jingle says: “Ace is the place with the helpful hardware folks.” But in a store with frequent stockouts, customer service can only go so far.
Because its order replenishment tool was not optimal, that was a situation often faced by Ace Hardware's international arm. The solution used for several years often meant the chain's distribution centers in Ningbo, China; Dubai, United Arab Emirates; and Colon, Panama had too many slow-moving items and not enough of more popular wares. Management realized it was time to replace the replacement tool.
Ace turned to Blue Ridge Global, whose platform is designed to help retailers and distributors identify and deal with changes in customer demand.
The solution that Ace had relied on didn't allow analysts to account for variations in demand, says Brian Cronenwett, vice president of international supply chain, Ace Hardware. That resulted in frequently exporting data into spreadsheets and doing additional analysis before replenishment orders could be placed. Despite a worsening situation, Ace continued manually manipulating data for several years before managers got so fed up, a change was ordered.
Replacing the replenishment was actually part of a larger initiative that Ace planned, but it was a major part. Company heads knew they wanted to significantly improve fill rates. If they could save on inventory investment as well, that would be a tremendous bonus.
Blue Ridge promised just that, and Cronenwett, for one, was skeptical.
“One of the things that Blue Ridge told us, and I dismissed it as sales hype, was that we would reduce our time spent making replenishment buys by 80 percent,” he says. “But as it turned out, that was exactly what happened. When all that manual manipulation went away, the new tool was robust enough to cope with the circumstances we faced, and we did eliminate 80 percent of the time spent every week making routine replenishment buys.”
While that didn't lead to a reduction in headcount, Cronenwett says, it did allow “doing more forward-looking analytics and strategic stuff as opposed to fighting every week to get the replenishment buys done. We spent an inappropriate amount of time doing routine tasks as opposed to focusing on strategic initiatives.”
The number of SKUs handled by Ace's international operations is a small fraction of that moving through a U.S. distribution center, Cronenwett says, but the operation is highly complex in terms of geography covered and the time it takes to make shipments. U.S. DC operations, by the way, do not use the Blue Ridge solution.
Blue Ridge was among six potential vendors vetted for the contract. Its analysis revealed an imbalance in forecasting and replenishment that defeated Ace's efforts, says Rod Daugherty, vice president of product strategy at Blue Ridge.
“Ace International was certainly aware of their problem, that they were having some bad stock-outs on key items, and that they were not achieving the kind of customer service levels they wanted,” he says. “Part of the problem was they weren't doing a great job of forecasting the demand — and the inventory of the things they purchase and sell downstream to their dealer customers, those lines were out of balance.”
In his view, it's simply human nature for planners to fill up containers with too much of certain items and too few of others “and sail them around the world. So you get overstocks to go with out-of-stocks, and you end up upside down. They were suffering from that.”
The Blue Ridge tool seeks to balance the cost of achieving desired customer service levels with the most efficient and profitable inventory investment possible, Daugherty says.
Cronenwett says the tool does the “heavy forecasting and optimized lifting” before presenting actionable recommendations. Users can spend their time making better business decisions and not worrying about statistical problems.
Daugherty likens use of the tool to utilization a navigation app, such as Waze, versus reading a paper road map. One doesn't have to plot and figure how or where to go, he says. You simply tell the solution what is desired, and it essentially describes what needs to be done.
“A user can say, 'I need to achieve this or that service,' and the solution says how much it will cost. All the user has to do is approve it,” Daugherty says. “And then we will do multi-echelon forecasting and order and inventory optimization to maintain the proper inventory balance. That's done every time an order is placed so they can achieve the kind of service they want to see.”
The solution's dashboard informs users each each day of needed actions, such as exceptions and orders that need to be addressed. Users can determine the level of detail desired.
“They can approve orders and manage the exceptions at a very high level,” Daugherty says.
So what are the results? Stock-outs have been reduced by 40 percent, a significant improvement, and just what Ace was hoping for. In addition, overall inventory has been lowered by 20 percent to 25 percent, Cronenwett says.
Seeing such a reduction in stock-outs is simply another way to say that Ace improved service to its dealer customers while reducing inventory investment dollars. That's a win-win.
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