Tory Bjorklund Bio
Tory Bjorklund is the CEO of Victoria Fide Consulting, a company that specializes in digital transformation readiness and implementation. His firm provides leadership with IT alignment and road mapping, as well as consulting, project execution, and training. As a former CEO, CTO, CIO, and Chief Software Architect, he has over thirty years of experience and has been involved in over two hundred digital transformations. In this Case Study article, Tory shares a client success story.
About the Customer
The client was a wheel manufacturer with over 50 million in revenue and 100 employees. As their business grew, so did their inventory. So much so, they found it necessary to have an offsite warehouse. But despite having plenty of inventory on hand, they still had long lead times, and they lacked the space to bring in additional needed inventory.
Too Much Inventory and Long Lead Times
The client assumed their inventory problems came from having too much raw material, so they tried canceling outstanding or reoccurring purchase agreements. They limited their staff to creating single purchase orders, not blanket orders. This only resulted in extra layers of red tape and cost.
The client then considered expanding their warehousing. But they quashed this idea when they realized how long existing materials were already sitting in their warehouse. They then considered using a Just-In-Time inventory approach. This required them to begin using Material Requirements Planning (MRP) technology. The client brought us in to help them “get a handle on their inventory.”
Better Forecasting Frees Up Warehouse Space
Naturally, the first thing we looked at is the number of turns for their inventory. Before implementing an MRP system, we questioned why they had so much raw material. We looked at their past purchase orders, purchase agreements, and sales cycles. But they didn’t have much visibility into their sales history.
We also asked how they forecast their demand. Not only didn’t they have forecasts, but they also thought it impossible to create them. We showed them, if they could forecast, they could free up warehouse space and shorten lead times.
We discovered their distribution partners were not only forecasting their demand, but they were also influencing it with their marketing and catalogs. The distribution partners were skilled in reading the market and featuring products that are most likely to sell.
It became clear that forecasting was possible by collaborating with their distribution partners. We proposed creating a forecast model based on what their distributors thought was going to sell, and then feeding this information into their MRP system to plan their supply requirements. The owner still needed to be convinced, so we sent one of his team to APICS training to learn about demand and supply planning. He used what he had learned to create a spreadsheet that proved our solution would work.
Predictable Inventory. Shorter Lead Times. 75% Less Inventory.
Our client was now able to add another two to three months to their demand planning because they could forecast with the help of their distribution partners. Furthermore, they no longer had to guess at inventory, meaning they could manage production at their plant. They closed an entire warehouse and cut their inventory by 75%. Our solution paid for itself within a year.