Few people would think of an outboard motor as a fashion item. But new models come out every year, and manufacturers must take care not to get stuck with large inventories of suddenly obsolete product. Having to discount a warehouse full of old stock can cut deeply into profit margins.
Mercury Marine, based in Fond du Lac, Wis., is one of the biggest makers of outboards and other boating engines. When it came to accurately predicting demand and inventory, its old method, utilizing spreadsheets, simply wasn't getting the job done.
What was missing was real-world data. "We needed a tool that would allow us to do forecasting from historical demand," says Bruce E. Abraham, director of logistics planning and international distribution.
In addition, the company had no visibility of inventory at its 17 distribution centers worldwide. To rectify the problem for outboard products, it sought help in 1996 from Logility Inc., then a division of American Software.
Due to some management changes, Mercury didn't get the project moving until 1997, around the time that Atlanta-based Logility was spun off as an independent company. It spent the last half of that year implementing Logility's planning software for demand, replenishment and inventory.
"Mercury's challenge was to get greater control over inventory," says Karin Bursa, Logility's vice president of marketing. "It wanted the ability to do dynamic allocation based on geography, products and DCs."
Abraham had a lot to worry about at once. Simultaneously, Mercury was implementing a comprehensive enterprise resource planning (ERP) system (a project that still isn't complete). Its mainframe computer in the U.S., and standalone AS/400s at the international locations, didn't talk to each other, so data weren't being shared. And, with the new supply-chain software, the company was making its first foray into a client/server environment. It no longer had the programmers or expertise to support the antiquated mainframe.
Logility's demand, inventory and replenishment planning package, part of its Voyager family of products, achieved a number of goals for Mercury from the start. It determined the optimal balance of inventory to meet customer-service levels. It set up a replenishment cycle based on order commitments and inventory depletion, with the ability to make changes due to sudden shifts in demand. The Replenishment Planning features let Mercury run simulations on orders, inventory and production. As a result, the company could plan up to six months at a time.
The system feeds market intelligence into the forecasting process, allowing the user to predict customer demand for each of its DCs. In addition, Mercury has acquired Logility's Manufacturing Planning tool, which creates production plans built around specific business objectives. Mercury can now plot weekly production schedules, instead of monthly as before. And the software supports the company's entry into build-to-order manufacturing.
Yet another Logility module, Demand Chain Voyager, permits internal collaboration within Mercury. It gives all planners and manager access to the same numbers, with full visibility into product on a global basis. All of the Voyager modules were implemented over a period of 18 months, Bursa says.
Global inventory control was Mercury's initial goal in deploying the Logility software, but it quickly saw other benefits. Within a year, says Abraham, the $1.6bn company had reduced non-current stock by 53 percent, saving millions of dollars in inventory carrying costs. It also saw a 56-percent reduction in sales and operations planning time. And it cut the period during which a manufacturing schedule is locked into place by 60 percent.
Abraham will next focus on collaborative planning with external partners, an effort that got under way this year. Logility's Voyager Collaborator allows for the publication and sharing of forecasts with customers, Bursa notes. Mercury also intends to implement a tool for production planning based on system constraints. Currently, it must manually constrain its requirements planning process. "This will do it systematically," says Abraham.
As for Logility, it plans to add features to its sales and operations planning software, allowing for the input of data from multiple sources. The vendor also sells an event-planning product, helping users to distinguish baseline sales from peaks caused by promotions.
But Bursa says Mercury and other customers will be careful about purchasing new software for the moment. "Given where the global economy is," she says, "they're being conservative about investments."
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