Growth through acquisitions meant overlapping product portfolios, internal communication struggles, lower customer fill rates and growing inventory levels.
Poor forecast accuracy
IPG wanted to increase forecast accuracy and quickly position inventory to meet customer demand.
Supply chain complexities
IPG was struggling with competitive pressure from imports, the rising costs of raw materials, increasing fuel prices and more retailers becoming private-label brand managers.
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IPG implemented Logility for demand planning to establish a forecast strategy for make-to-stock products, align build-to-order product lead times, minimize order quantities and identify products and business units that were out of scope. With Logility, IPG quickly created a multi-echelon forecast that empowered flexible analysis and scenario-based planning by products, channels, geography and financial metrics.
Logility helped IPG to greatly simplify the demand management process. IPG now creates item level simulations, reforecasts in the simulation model, generates a variance report between production and simulated plan and merges the demand forecast back into the live database. Logility also facilitates forecasting new product introductions (NPIs), new account onboarding and promotions. With a new demand planning process in place, IPG reduced the demand review cycle by 70% from 10 days to three days. With Logility, IPG has increased forecast accuracy (MAPE) by 30 points.
Due to acquisitions, IPG’s product portfolio included a number of unprofitable items that contributed to revenue loss and excess inventory. IPG used Logility Demand Planning to rationalize the product portfolio and gain insight into product performance for specific channels and items that were profitable and unprofitable. The process also identified products that could be discontinued.
“Before Logility, this type of product and channel analysis was clumsy and would take IPG a week or longer,” said Joe Tocci, senior vice president of supply chain for IPG. “With Logility, this analysis takes five to 10 minutes and is automatically calculated on a monthly basis.”
For IPG’s consumer product line rationalization, the initial stocked item count went down dramatically from 2,209 to 400 by either discontinuing items or converting slower moving resources to make-to-order. The industrial product line rationalization reduced the product portfolio from 1,063 to 800. Through the process, IPG identified 24% of its former stocked offering that could be either discontinued or converted to make-to-order.
With Logility, IPG can leverage time-phased inventory policies that align business seasonality with corresponding customer service goals. IPG defines inventory at the A-B-C level based upon cost by location and forecast error. Inventory planning profiles are based on ABC code, source type (make, buy, transfer) and stock vs. non-stocked. This enables IPG to streamline the management of its dynamic product portfolio, reduce inventory investments, avoid stock-outs and minimize obsolete inventory.
IPG also needed to focus on inventory planning for Regional Distribution Centers (RDC) and transition from a days-of-supply to service-level strategy. By more effectively managing inventory at the RDC, IPG knows how much inventory it needs to carry in each location. As a result, IPG achieved a $13 million year-over-year reduction in RDC inventory while increasing fill rates to 86% by the end of the first year. Today, IPG proudly maintains a 95% fill rate.
“The results we have realized have been phenomenal,” said Tocci. “We have achieved a multi-million-dollar inventory reduction, and the savings we gained in the first four weeks following implementation of Logility Inventory Planning more than paid for the cost of software and implementation.”
With the improvements gained in inventory planning, IPG opened a Consumer Distribution Center (CDC). “When we staged inventory for the CDC, our day-one in-stock inventory was 96%,” said Tocci. “Logility helped us quickly improve service without incurring an additional investment in inventory.”
“It is a combination of process, software and product line rationalization that helped us achieve these tremendous results,” said Tocci. “Logility helped us quickly gain visibility and become flexible. It used to take two people anywhere from 10 to 15 days to create a 12-month forecast. Now it takes one person three days to rollout a forecast that provides a more accurate foundation for inventory and replenishment planning across our business.”